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Brussels, 7 September 2009

Telecoms: European Commission urges Slovakian telecoms regulator to take stronger action on mobile termination rates

In a letter sent today, the European Commission has repeated its calls for the Slovakian telecoms regulator, Telekomunikačný úrad Slovenskej republiky (TÚSR), to bring mobile termination rates (MTRs) to more competitive levels in Slovakia. MTRs are the wholesale charges which mobile operators charge other operators for connecting calls on their networks. Already in a letter sent to the regulator earlier this year , the Commission highlighted the importance of moving to efficient MTRs as soon as possible and called on TÚSR to make sure that its transitional price control measures allow for important progress towards such an efficient cost level. This would in turn help a swift transition to the approach set out in the Commission's Recommendation on Termination Rates ( IP/09/710 ), which says that MTRs should be set at the level of the cost of an efficient operator in all Member States by 31 December 2012.

Mobile termination rates in Slovakia are amongst the highest in Europe. Although I am pleased that TÚSR is committed to reducing them, more substantial reductions are necessary," said Viviane Reding, the EU Telecoms Commissioner. " For consumers in Slovakia to benefit from lower prices for calls to mobile phones, it is imperative that charges for wholesale mobile termination services are set at the level of the cost of an efficient operator, and not above. I therefore hope that, following our letter today, the Slovak telecoms regulator will see the benefits for competition and consumers and answer the Commission's call for further reductions."

Competition Commissioner Neelie Kroes said, "I regret that the Slovak regulator did not opt for a cost model that reflects the true costs for the provision of this service by an efficient operator. This would have led to lower, symmetric termination rates for all operators, to the benefit of competition and Slovak consumers".

The Commission has today restated the importance of using long-run incremental costing methodologies for calculating the efficient costs of termination, rather than the fully allocated costing approach proposed by TÚSR. Although the latter is only a transitional measure until the implementation of the Commission's Termination Rates Recommendation, the Commission considers that TÚSR can already make now important steps towards an efficient MTR level in Slovakia. This can be achieved through a more robust application of TÚSR's proposed price control including benchmarking against only those countries where MTRs are already close to the cost of an efficient operator.

In addition, the Commission also expressed doubt that authorising, for a substantial time, a higher asymmetry for the new entrant than applied previously is an appropriate means of maintaining smaller operators' incentives to expand and become efficient over time.

On 7 August 2009, TÚSR notified the Commission of the details of the costing method to be applied by three mobile operators (Orange Slovensko, a.s. [Orange], T-Mobile Slovensko, a.s. [T-Mobile] and Telefónica O2 Slovakia, s.r.o. [O2]) when calculating mobile termination costs in Slovakia. In its draft measure, TÚSR proposes to regulate MTRs using a transitional cost model based on the operators' actually incurred costs (Fully Allocated Historic Cost, FAHC) and supplemented by benchmarking against the average MTR of 32 European countries.

This notified measure also follows provisional measures adopted by TÚSR as part of a dispute settlement on the level of MTRs in Slovakia. The provisional MTR (applicable from 1 August 2009) for the two largest operators (Orange and T-Mobile) is set at 7.92 eurocent/minute, while the third entrant O2 is allowed to charge a higher MTR at 9.25 eurocent/minute (representing a higher level of asymmetry than applied in 2008).

The Commission's letter urges TÚSR to re-consider its proposed transitional methodologies and the foreseen increase in asymmetry with a view to moving more swiftly to the efficient MTR level. This would in turn help avoid the need for sudden, sharp reductions in 2012 and facilitate a smoother transition to the efficient costing methodology set out in the Commission's Recommendation.

All EU national regulators should apply the common EU approach to termination rates by the end of 2012. Only regulators with limited resources may use different approaches for a limited period as long as they achieve a pro-competitive result.


The Commission's comments to TÚSR follow the so-called " Article 7 procedure ", under the Framework Directive of the EU telecoms rules ( MEMO/08/620 ). This procedure leaves some scope for regulators to achieve effective competition in their national telecoms markets, while ensuring consistency across the EU, and therefore requires them to notify the Commission of draft regulations. Where these concern market definitions and analyses of whether operators have significant market power, the Commission can require the regulator to withdraw the measure. Where they concern regulatory remedies – as in the present case – the Commission may make comments of which the regulator must take utmost account.

The Commission's letter sent today to the Slovak regulator will be published at the end of this week at:


Average MTRs in 32 European countries as of January 2009

Slovakia has the third highest level of mobile termination rates

Figures and graphics available in PDF and WORD PROCESSED

Source: European Regulators Group, MTR Benchmark Snapshot ERG (09) 23_final_090604

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