T-Mobile Netherlands Slashes Roaming Fees

T-Mobile Netherlands has taken a huge step towards eliminating the roaming charges that customers pay when using their mobile phones abroad.

New tariffs unveiled by the Dutch subsidiary of Germany's Deutsche Telekom AG (NYSE: DT) will mean that calls made in other parts of the European Union (EU) count against a subscriber's monthly bundle of minutes up to a maximum of 120 minutes.

Once subscribers reach that threshold, they will have to pay the usual per-minute, out-of-bundle rates. Customers will also be able to receive calls as well as send and receive text messages for free, according to the operator's statement.

The offer will cover all countries within the EU as well as Iceland, Norway and Switzerland.

"Operators across Europe keep each other in a stranglehold," said Mark Klein, T-Mobile Netherlands ' CEO, implying that commercial arrangements rather than technological barriers have been primarily responsible for driving up roaming charges. "We want an end to this and to make it possible to call from your own bundle in the European Union."

The new plans do not appear to have any bearing on the usage of mobile data services, although T-Mobile claims its "Travel & Surf" tariffs already allow customers to use data services at one-fifth the cost of the EU's regulated prices.

The European Commission has been waging a war for several years against the roaming fees that operators levy on subscribers traveling to other parts of the European Union. In July last year, the retail price of downloading one megabyte of data outside a customer's domestic market was capped at just €0.20 ($0.24), from a previous level of €0.45, with the cost of making a phone call lowered from €0.24 to €0.19. (See Eurobites: Red-Letter Day for Roaming Charges.)

Figure 1: European Commission's Roaming Caps

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The authority's ultimate aim, however, is to eliminate roaming charges entirely by 2016 -- a development it believes will permanently boost GDP by 1% per year. (See EU Telecom Market, Sans Roaming Charges.)

Some operators have previously warned that "roam like at home" legislation could open up enormous arbitrage opportunities for mobile virtual network operators (MVNOs) in low-income markets.

In 2013, Vodafone Group plc (NYSE: VOD) CEO Vittorio Colao told analysts during a company earnings presentation that legislation could discourage investment and prompt the emergence of a value-destroying "European maxi-MVNO".

Opponents of further regulation in this area have also argued that operators will be forced to increase the price of other telecoms services if roaming rates are scrapped. Yet this increasingly sounds like a hollow threat -- most telecoms markets in Europe are so competitive that prices have continued to fall even as roaming caps have been lowered.

In the postpaid sector, T-Mobile's average revenue per user fell to €32 per month in the July-August quarter, from €33 in the third quarter of 2013. Rival Vodafone Netherlands ' dropped from €34.8 to €33.6 over the same period, while that of incumbent KPN Telecom NV (NYSE: KPN) was down from €31 to €28.

T-Mobile's move to eliminate roaming charges seems likely to meet with a response from its competitors, and raises the possibility that other Deutsche Telekom subsidiaries will unveil similar deals in the near future.

— Iain Morris, News Editor, Light Reading