Mobile termination fees will decrease in early 2007

According to the NCAH Board decision all three mobile carriers in Hungary have to decrease their termination fees to cost level by 1 January 2009. According to NCAH's own cost model the cost-based termination fee, that is independent of the time of day, will be HUF 16.84 per minute.

Dániel Pataki declared that NCAH's resolution applicable for the next three years will make the market processes foreseeable and transparent, continues the consistent reduction of termination fees started in 2005 and gradually eliminates the gaps between prices applied by operators with significant market power.

The reduction rate decided by the Board is identical with what was published in the draft resolution at the end of June. The concerned parties gave their opinions on the draft resolution, then the draft was approved by the European Commission too.

According to the resolution now published the operators can within 40 days prove with the submission of their own cost models if according to their cost calculation the cost-based price differs from the level determined by the Board.

If the operators accept NCAH's calculations and do not submit a cost calculation, or if they submit it but it is not acceptable for the Board the cost-based prices determined by the Board will enter into force on 1 January 2009.

If the operators can prove with their own cost calculations in compliance with NCAH's requirements that their cost-based prices differ from the HUF 16.84 level determined by the Board then such fee will enter into force on 1 January 2009.

According to the resolution the termination fees will reach the cost-based level in three steps. The first step will be taken in February 2007 when the termination fee will reduce in Magyar Telekom's network from the current average HUF 27.17 / minute to HUF 23.17 / minute, in Pannon's network from HUF 29.44 / minute to HUF 24.44 / minute, in Vodafone's network from HUF 32.61 / minute to HUF 26.16 / minute.

Reduction of the termination fees will continue on 1 January 2008 and 2009. Calculating with the cost-based prices determined by NCAH's Board Magyar Telekom has to decrease its termination fees by 14.74 percent, Pannon by 16.99 percent and Vodafone by 19.77 percent.

NCAH's Board adopted this resolution under a market definition and market analysis procedure required by the Electronic Communications Act and the EU and at the same time imposed, in addition to the application of cost-based prices, an obligation of transparency, equal treatment, ensuring access and accounting separation on the operators.

According to current laws NCAH has to conduct market definition and market analysis of the communications sector broken down to 18 markets. The Authority completed the first round started in 2004 very fast in comparison to other European regulatory authorities and was among the first to start the second round of market analysis which produced as a first result the very important resolution published now.

BACKGROUND

Call termination means a network service that carries the call from the interconnection point to the called subscriber' network access point. Telecommunications operators pay for this service, the use of the other operator's network, to each other. The termination fee is paid by the operator from whose network the call was originated to the operator in whose network the call is terminated.

At the end of 2002 the termination fees of mobile carriers in Hungary were around HUF 38 / minute.

First the termination fee of Magyar Telekom (then Westel) was regulated. By the end of 2003 the termination fee in the company's network reduced to HUF 33.37 / minute. The fee in Pannon's network, that was still not regulated at that time, decreased to HUF 36.15 / minute, in Vodafone's network, similarly not regulated, it increased to HUF 38.84 / minute.

The first decision of NCAH, that was established in early 2004, was to reduce Pannon's termination fee by 9.2 percent and T-Mobile's termination fee by 8.7 percent and with this measure reduced the gap between the termination fees of the two carriers to 4.8 percent. At the end of 2004 the then not yet regulated Vodafone's average termination fee was HUF 39.05 / minute, while Pannon charged HUF 32.85 / minute, T-Mobile HUF 31 / minute.

In the first market analysis NCAH's Board designated all three mobile carriers in Hungary as operators with significant market power and with this measure Vodafone became also regulated. The Board required all three operators to reduce their termination fees from 25 May 2005. At that time T-Mobile and Pannon had to reduce their termination fees charged for calls terminated in their networks by 10.38 percent in comparison to the average termination fees charged in December 2004, while Vodafone by 16.48 percent. With this decision the Board reduced the highest gap between the termination fees of the three carriers to 20 percent and this resolution was the first to declare that the termination fee determined will apply to all calls terminated in the network, whether it is originated in fixed or mobile network.

In 2005 NCAH's Board determined the average fees on the basis of EU benchmarks, while in this resolution they made efforts to reach cost-based fees with the application of a cost model.