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Vodafone & rivals face EU roaming fine

Staff for the European Commission, the EU\'s executive arm, have written a draft ruling that may also lead to fines against Vodafone Group Plc, the world\'s largest mobile phone operator\'s German unit, the UK\'s O2 Plc and Deutsche Telekom AG\'s T-Mobile International, according to four people who declined to be identified because the draft isn\'t public. „An antitrust case is an additional point of pressure,” Michelle de Lussanet, an analyst at Forrester Research Inc. in Amsterdam, said in an interview. „There are other challenges such as regulation cutting roaming fees and more price competition.” The penalties would follow France\'s record €534-million fine ($678 million) last year against the mobile-phone units of France Telecom SA, Vivendi Universal SA and Bouygues SA for colluding on prices over a six-year period. The EU typically fines companies from 2% to 3% of annual sales. The largest monopoly fine was €497 million levied against Microsoft Corp.

The commission is stepping up its push to lower so-called roaming charges, the fee that one operator pays another to allow its clients to make calls outside the home market. In July, the agency proposed rules that would force companies to cut the fees by as much as 70%. About 147 million EU citizens pay roaming charges that average five times the cost of providing the service, according to the Brussels-based commission. A final decision on the fines will be made by the commission as early as next month, the people said. Under EU law, the commission can fine companies as much as 10% of their annual sales. Jonathan Todd, a commission spokesman, said, „We have an ongoing antitrust investigation.” Jon Earl, a spokesman at Vodafone, declined to comment. David Nicholas, a spokesman at Telefonica SA\'s O2, said the company has filed a complaint about the commission\'s probe to the European Ombudsman, which reviews complaints by EU citizens and companies about administration at public institutions. „The nature of the investigation has changed a number of times,” Nicholas said. „The way the investigation has been conducted by the EU hasn\'t been proper.” Christian Schwolow, a spokesman for T-Mobile, said the company shares O2\'s concerns.

„The process isn\'t very transparent,” he said. „We can\'t understand why this investigation isn\'t finished.” Vodafone shares fell 1 pence to 126.25 pence in London. Deutsche Telekom\'s shares rose 2 cents to €12.62 in Frankfurt. Madrid-based Telefonica\'s stock rose 2 cents to €13.73. The ruling will cap an investigation that has lasted more than five years. EU investigators raided the offices of Vodafone and eight competitors in July 2001, searching for evidence that they violated cartel rules by fixing prices on calls between networks in Germany and the UK The commission didn\'t find evidence of illegal collusion between network operators. The probe then shifted to possible abuse of monopoly positions in national markets. In July 2004, Mario Monti, the former competition commissioner, charged Vodafone and O2 with „unfair and excessive prices.” The commission said at the time that the two companies\' international roaming charges contrast „sharply” with the rates used on domestic calls.

In February 2005, the regulator said Vodafone and T-Mobile made international travelers pay „unfair and excessive prices” to connect calls in Germany. „It is clear that the outcome of these two investigations will have far-reaching effects for all mobile operators in Europe and should send a clear message to all operators whose wholesale roaming prices may also be excessive,” the commission said then. The alleged infringement of antitrust law covered 1999 to 2003, the people said. A key point in the probe was how the commission defined the market. The commission\'s argument is based on a legal theory - untested in an EU court - that each mobile operator is a monopoly unto itself because roaming users have little choice of connections and networks don\'t compete on price, the people said.

Regulators determined that when a network provider was indispensable for a foreign operator to have roaming in a country, then that nation was considered a separate market, the people said. Under those circumstances, the agency found that the operators dominated their national markets. Foreign operators were forced to sign up with all national companies to get the best coverage. The commission determined that the national operators overcharged the foreign companies for that service, the people said. Charlie McCreevy, the EU\'s internal market commissioner, will rule on the case because Neelie Kroes, the top competition official, excused herself because she was formerly a board member at O2. Kroes was a director at the company from 1998 to 2004. In March 2005, O2 changed its name from MMO2. Telefonica, Spain\'s biggest phone company, bought O2 in 2005 for £17.7 billion ($22.5 billion). (Bloomberg)