Vodafone 2007 Annual Report Download - page 27

Vodafone Group Plc Annual Report 2007 25
cases, Vodafone has responded in writing and in oral proceedings to both
statements of objections, as subsequently amended.
The Commission’s proposed findings are that Vodafone has monopoly
power over its wholesale customers in both the UK and Germany. Vodafone
UK and Vodafone Germany are alleged to have engaged in excessive or
unfair pricing. The Commission alleges that the abuse occurred from 1997
to at least September 2003 in the UK and from 2000 to December 2003 in
Germany. In the event the Commission finds that there has been a breach of
competition law, it may impose a fine on any addressee who had committed
the breach.
Separately, the roaming market is one of the relevant markets in the
Recommendation. In view of the proposed roaming regulation the
Commission has proposed that this market be removed from the list during
the review.
Regulation in Vodafone’s Markets
Europe
Germany
Vodafone Germany has been found to have SMP in the call termination
market and the NRA has set Vodafone’s termination rate at 8.79 eurocents
per minute. In April 2007, an administrative court ruled that the NRA
decision is invalid insofar as it provides for ex ante regulation as a
consequence of the SMP decision. This decision is under appeal.
The NRA has recently notified to the European Commission its findings that
no operator had SMP in the access market.
The NRA has concluded that it will harmonise the expiry of all 2G licences in
2016 and on 15 May 2007 extended Vodafone’s licence accordingly. The
NRA is also consulting on proposals to licence spectrum at 2.6 GHz (“the 3G
extension band”) and unused spectrum at 1.8 GHz and 2 GHz (“core 3G
band”) during 2008.
In May 2007, the Commission issued a reasoned opinion, which was the
second stage of infringement proceedings against Germany. This opinion
alleged that new provisions in German law could grant Deutsche Telekom
an exemption from regulation, in spite of a finding that it had a dominant
position in the fixed broadband market.
Italy
The NRA has concluded that all mobile network operators have SMP in the
call termination market and has imposed obligations on Vodafone Italy,
including price controls, and the NRA foresees further reductions on both
1 July 2007 and 1 July 2008 of 13% below the retail price index from the
rate of 11.20 eurocents currently charged. The NRA has also decided to
impose a cost orientation obligation to a competitor, Hutchison Italy, but is
still considering at what level and over what time period.
The NRA concluded its review of the access market in February 2006 and
found that no operator had SMP but has said it will keep the market under
review and has indicated that it will commence a further market review. In
addition, the NRA sought to find SMP in the market for wholesale access to
premium rate and non-geographic services but subsequently withdrew this
proposal. In March 2005, the National Competition Authority (“NCA”) in Italy
conducted unannounced inspections of the offices of mobile network
operators in Italy, including Vodafone Italy, seeking evidence of collusion
following complaints by resellers and potential MVNOs about alleged anti-
competitive conduct. Vodafone Italy submitted undertakings to the NCA in
2007 which are currently under consideration and which, if accepted, would
resolve the issues without further action. If the NCA were to decide that
there had been a breach of competition law, it would be able to impose a
fine on any operator who had committed the breach.
A new law announced in January 2007 has prohibited the application of
fees or other charges in addition to airtime for prepaid services and has also
introduced transparency measures to enable consumers to terminate
subscription contracts without penalties.
Spain
In 2006, the Spanish NRA found all mobile network operators to have SMP
in the call termination market and imposed obligations including non
discrimination, cost orientation and accounting separation on Vodafone
Spain. Vodafone Spain expects to reduce rates from 10.48 eurocents to
7 eurocents in six monthly reductions up to April 2009.
In February 2006, the NRA found that all three mobile network operators
held a position of joint SMP in the access markets. This decision was
reviewed by the European Commission and the NRA was allowed to
proceed. The NRA has the power to impose wholesale network access terms
facilitating the entry of firms including MVNOs, although it has not done so
to date. Vodafone has appealed against the decision of the NRA to find
Vodafone as holding SMP in the Spanish courts and has appealed the
decision of the European Commission to allow the NRA to proceed to the
Court of First Instance at Luxembourg.
United Kingdom
The NRA found that all mobile network operators have SMP in the call
termination market in respect of calls conveyed over both 2G and 3G
networks. Vodafone’s average termination rate is set at 5.7p per minute for
the financial year ending 31 March 2008. Rates then decline by 3.2% below
the retail price index in the 2009 financial year and 2.5% below the retail
price index in the 2010 and 2011 financial years. The NRA is considering a
modification to the charge controls on mobile termination rates to remove
the effect of number portability on effective termination rates.
The NRA is currently investigating a complaint from BT plc about the level
of Vodafone’s termination rates from September 2004.
The NRA is assessing whether to liberalise the use of 2G spectrum. The NRA
is proposing to auction the so called 3G extension bands by the end of 2007
and to auction the spectrum released by digital switchover in the second
half of 2008.
Albania
In March 2006, the NRA issued for consultation to the operators its analysis
of the mobile market in Albania, where the NRA proposed to designate the
mobile network operators, including Vodafone Albania, as having SMP in
two markets: the call termination market and “the market of mobile
services to end users”. As a result, the NRA proposes obligations of
transparency, non-discrimination and access obligations. The NRA may also
impose retail price controls.
Vodafone Albania has submitted its comments and objections on the NRA’s
market analysis. In April 2007, the NRA decided to extend Vodafone
Albania’s SMP status to October 2007. Vodafone Albania is evaluating the
decision. In addition, the Competition Authority commenced an
investigation and has reached the preliminary conclusion that during the
period from 2000 to 2005 Vodafone Albania was dominant in the mobile
market and abused the dominant position by charging unfair and/or
excessive prices. Vodafone Albania will respond in a hearing set for
June 2007. In the event the decision is confirmed, Vodafone Albania faces
the risk of a fine.
Greece
The NRA has found all firms to have SMP in the call termination market.
Vodafone Greece will reduce its rate from 11.74 eurocents to 10.71
eurocents in June 2007.
In March 2006, the three largest mobile network operators were found by
the NRA to have colluded in the setting of retail SMS prices and were fined
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