Mobile operators in the Netherlands have been handed a revenue reprieve by the Administrative Court in Rotterdam, which today ruled that the introduction of reduced fixed-to-mobile interconnection charges, as ordered by Dutch regulator OPTA, should be suspended (see Court Suspends Dutch Cap).
The operators had challenged the watchdog's ruling that the termination charges levied on calls from fixed networks should be reduced in three stages up to next July (see table below).
Table 1: OPTA's proposals for fixed-to-mobile termination tariff changes
Max. reasonable average mobile termination tariff for:
Tariffs as at 1 April 2002
Proposed tariffs as of December 1, 2002
Proposed tariffs as of April 1, 2003
Proposed tariffs as of July 1, 2003
KPN Mobile, Vodafone Libertel
Ben, Dutchtone, O2
Source: OPTA, amounts in euro cents/minute. NOTE: The "at cost" figure for KPN Mobile is believed to be about 11.30 euro cents.
The operators applied to the court for the ruling to be suspended. Although successful, today's decision is only temporary, and another court will decide in February whether OPTA has the legal right to impose tariff reductions.
KPN Mobile, which has 5.2 million subscribers, is "pleased" with the decision, though admits that the reductions may still be imposed in the future. The carrier is particularly opposed to the differentiation between the two groups of operators as seen in the table above. The regulator makes this distinction as the three smaller operators entered the market later and in a harsher competitive climate, and so need more revenues to recoup their network investments.
Those three operators are:
Dutchtone, part of Orange SA (London/Paris: OGE), which has just over 1 million subscribers.
O2 Netherlands, part of mmO2 plc, has 1.29 customers.
Vodafone Libertel N.V., which commands the number two slot in the market with 2.3 million users, is also "pleased" at the hiatus, and is damning of OPTA's efforts. "Vodafone Netherlands strongly objected to OPTA’s intervention in what is a very competitive market where regulation is not necessary," the operator says in a statement. "Vodafone Netherlands considers that OPTA’s policy on this matter is fundamentally wrong and that it will damage the dynamics of this highly competitive industry and, over time, prove detrimental to the overall interest of its customers. Vodafone Netherlands’ principal objections were that OPTA was acting outwith its scope and authority in this matter, and that it had based its recommended rates on incorrect benchmark data." The company has previously said it would increase its prices to customers to make up the revenue shortfall should OPTA's cuts be legally enforced. Analysts at Lehman Brothers say that "raising rates to customers would be a natural counterbalance."
KPN Mobile, which relies on incoming call revenues for about 15 percent of its total domestic revenue, says OPTA's proposed reductions, if implemented, would hit its 2003 revenues by €290 million ($288 million) and its earnings before interest, tax, depreciation and amortization (EBITDA) by €105 million ($104.4 million).
KPN Mobile also raised its hand in western Europe's 3G "distressed assets" auction today by saying that it is interested in relieving struggling German mobile reseller MobilCom AG of some of the sites it had secured for its now abandoned UMTS rollout. KPN owns German mobile operator E-Plus Mobilfunk GmbH. A KPN spokeswoman told the Reuters news agency that it would be interested in 800 of MobilCom's 3,300 sites.
— Ray Le Maistre, European Editor, Unstrung