Roaming rates face the pressure

21 Mar 2006

While increased regulatory and consumer pressure on tariffs is expected to bring down the current exorbitant international roaming charges, Asian cellcos face little downward pressure due to a lack of substantial regional competitive pressure

Since the first roaming call was made in 1991 between Telecom Finland (now known as Sonera) and Vodafone UK, roaming has become a ubiquitous service for GSM networks. Today, global roaming remains a key revenue generator for cellcos, which BIS Shrapnel says accounts for almost 15% of mobile operators' total revenues.

In tariff terms, however, the research firm says global roaming only accounts for some 2% to 3% of total traffic. This is mainly due to the high tariffs charged by operators for global roaming, which discourage many consumers from using roaming service when the travel aboard.

In fact, for years a number of consumers groups have complained about overcharging end-users for international roaming services, making the issue the subject of much debate. While mobile operators decline to reveal special details of their roaming profitability due to commercial reasons, analysts suggest international roaming has delivered above-normal profits to cellcos.

BIS Shrapnel, for example, says that from 2003 to 2004 margins on inter-operator tariffs were between 75% and 90%, although they did drop slightly last year to between 70% and 90%. It estimates that margins will fall to 30-40% during the next few years due to increased regulatory and consumer pressure.

Exorbitant charges

After years of investigation on wholesale roaming prices, the European Regulatory Group (ERG) and the European Commission (EU) have concluded that retail charges are currently excessively high without clear justification.

According to the European bodies, this appears to result from both high wholesale charges levied by the foreign host network and, in many cases, from high retail mark-ups charged by mobile users' home network operators. Analysts point out that home network operators usually add a handling charge of 10-35% to the inter-operator tariff they pay to the visited operator.

Findings of the European bodies also showed that discounts at the wholesale level have begun to be implemented in the last couple of years between mobile operators, but so far it does not appear that the savings are being passed on to end-users.

On February 9, EU Information Society Commissioner Vivian Reding proposed to use legislation to cut the international mobile roaming charges in Europe to a level similar to national calls. The proposal came after the EU carried out an intensive study of roaming charges and set up a Web site that publishes a sample of international charges from operators in each of the 25 member states for European consumers.

According to the Commission, roaming charges vary widely across the EU. The highest rate found was m13.08 ($15.06) a minute charged to a Maltese consumer for four minutes roaming in Latvia. By contrast, the lowest roaming price was 20 cents euro for a four minute peak-time call made on a Finnish mobile contract while roaming in Sweden.

Although there is no similar regulator body to monitor the international roaming market in Asia, evidence shows that Asian mobile users also face excessive charges.

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