NZ telcos slash mobile termination to stave off regulation

Stuart Corner
Monday, 05 October 2009 02:27

IT Industry - Strategy

New Zealand's three mobile operators - Telecom NZ, Vodafone and 2 Degrees - have all submitted new undertakings on mobile termination rates after the Commerce Commission rejected their initial undertakings and threatened to set rates by regulation.

Telecom NZ has also proposed that termination rates for text messages be switched to a bill-and-keep basis, a move that it says is in line with industry feedback.

TUANZ CEO, Ernie Newman, welcomed the changes saying: "These offers represent major progress. They show that the process the Commerce Commission is using, as defined in the Telecommunications Act 2006, is working. They also illustrate clearly the enormity of the gulf that has existed between the charges the carriers have been levying to receive calls from each other's networks, and the actual cost of doing so.

"As examples, Telecom has offered to reduce the termination charge for voice calls by 24 percent from the offer it made just three months ago, and also to cease charging a one-minute minimum which makes the drop even greater. Even more dramatically, Vodafone has offered a reduction of 87.4 percent on the charge it levies to receive incoming text messages."

Cheaper than Australian termination rates
Announcing Vodafone's new undertaking, general manager of corporate affairs, Tom Chignell, said: "Our undertaking provides wholesale termination rates of 1.2 cents on TXT and 12 cents on voice from April 2010 with a glide-path down to three cents for voice. This will take our rates well below those in Australia, the UK and Ireland. The TXT rate is dramatically lower than most OECD markets...The reduction in price for TXT is an 87 percent drop and in voice is 20 percent in the first year and a further 12.5 percent in the following nine months, building to a massive 80 percent drop in voice termination rates by year five.

"This reduces our wholesale revenues by $50m in the first year, growing to more than $450 million over five years against prevailing rates. This is a material reduction for any business to absorb and will impact on Vodafone's ability to invest in solutions for our customers."

Retail price reductions unlikely

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