British Telecom to reduce cost of calls to mobiles

British Telecom is to slash the cost of some phone calls on its network by more than 10 per cent from tomorrow.

It will separately announce a 12 per cent cut in the cost of calling customers on the Cellnet and Vodafone mobile networks. This move follows a reduction in the wholesale charges the two operators levy on BT to pass on calls to mobile users.

This will be seen as an attempt by the mobile operators to head off further criticism from the telephone industry watchdog.

Oftel has strongly urged Cellnet and Vodafone to bring their charges closer into line with those imposed by rivals Orange and One 2 One, and is due to give its ruling at the end of this month.

In the first BT price reductions since a new four-year price cap imposed by regulator Oftel came into force last month, the price of long-distance national calls made during weekday evenings and nights is to fall by just over a tenth from 1 October. The cost of calls will drop by 0.5p a minute to 4.2p per minute.

This means a five-minute trunk call made between 6pm and 8am will cost 21p instead of 23.2p.

Including these latest price cuts, national evening and night-time calls will have fallen in price by 28 per cent this year. Last October they fell from 5.9p a minute to 4.7p.

The latest reductions will knock pounds 31m off BT's revenues this year, though only pounds 12m of this decline is due to the new set of price controls. The price regime, which began on 1 August, keeps bills 4.5 per cent below inflation until 2001.

The new price package set by Oftel will benefit BT's residential customer base. Though the previous price regime appeared tougher, setting call charges at inflation less 7.5 per cent and knocking pounds 417m off BT's revenues last year, it was targeted mainly at higher-spending homes and business customers.

The new round of price cuts is likely to be warmly welcomed by Oftel as a sign that intense competition will also force BT to reduce phone charges which are not now subject to price controls.

Oftel has said it expects competition to take the place of price regulation after 2001.

However, the cuts in the cost of calling the Cellnet and Vodafone networks look sure to intensify BT's row with Oftel over the high cost of calling mobile phones from the fixed operators.

The two mobile networks are understood to have reduced the wholesale price they levy on BT to pass on the calls to their customers from 22.8p a minute in the daytime to 19p.

BT will say tomorrow that it will pass on that reduction, which will cut the retail price charged to its customers by 12 per cent, from 36.5p a minute to 32p.

The reductions by Cellnet and Vodafone, which will significantly reduce their revenues, are much smaller than the cuts suggested by Oftel in a strongly worded consultation document in March.

Oftel said the appropriate wholesale charge to BT should be 10p-14p for Vodafone and 13p-18p for Cellnet.

Orange and One 2 One, which use different digital technology, last year raised their wholesale charges to 15p and 13p respectively.

Oftel is considering responses from Vodafone and Cellnet to its proposals.

The final ruling on the cost of calling mobiles is due at the end of this month, with a decision yet to be taken by Don Cruickshank, the regulator.