Roaming Charges: Mobile Phone Operators Warn That Price Caps Hinder Investment

Europe's mobile phone industry will today mount a last-ditch effort to ward off strict price caps on text messages and data downloads within the EU by warning that heavy regulation is cutting capital spending and profit margins.

With Viviane Reding, EU telecoms commissioner, poised to propose a new round of price caps this month, mobile operators claim their capital spending has already slipped from 13% of revenues in 2005 to 11% last year - and could fall further.

The GSM Association - the global trade body representing more than 750 GSM mobile phone operators - citing data from a study by management consultants, says the industry's return on capital employed was as low as 7% in 2007 or less than half that of other significant sectors such as steel and software.

Sources said this gives the lie to Reding's claim that it is making excessive profits from "roaming" services in the EU.

Reding's deadline for the operators to supply her with convincing evidence that they have cut or plan to cut text and data charges for subscribers traveling within the EU ran out on Monday. She is threatening to propose new caps on top of the year-old limits on phone calls within the next three weeks.

It is understood that only two-thirds - 64 out of 95 - of operators responded to a letter she sent last month asking chief executives to provide public details of retail roaming prices for texts and data downloads and confidential information on wholesale charges from July 1. Some operators said it would take months to provide such details.

Reding has also urged the industry to introduce specific measures such as warnings to prevent "bill shocks" for data roaming services such as downloading videos when traveling overseas.

The GSMA says that several operators have substantially cut prices for data roaming, with T-Mobile UK slashing charges by 80% from July 1, for instance, and Vodafone reducing the price per megabyte by 45%. It is acknowledged that some roaming text charges are too high.

The telecoms commissioner, who insists she is reluctant to regulate, is said to be ready to intervene again, preparing to cut roaming text charges by up to two-thirds and impose strict caps on the price of data downloads which now cost on average €5.24 (£4) a megabyte.