Some of Europe's largest mobile phone companies are facing another battle with regulators after the Spanish competition watchdog opened an investigation into possible collusion over recent price increases.
Spain's National Competition Commission will investigate whether Vodafone, Orange and Movistar – the Spanish mobile division of Telefonica, which also owns O2 – colluded when raising tariffs in March. The three operators raised connection charges by 25 per cent to offset the impact of new regulations that banned rounding up charges to the nearest minute.
Spanish operators, which must now charge on a per-second basis, as is the case in the UK, denied that the decision to raise connection charges amounted to collusion, arguing that they had to change their pricing structures at the same time due to regulatory intervention. Francisco Roman, the chief executive of Vodafone's Spanish division, told reporters at a press conference in Spain that the tariff increases by the three companies was a coincidence, denying that it was anti-competitive behaviour.
The formal investigation could result in fines equating to about 10 per cent of revenue – which in Telefonica's case amounts to about €1bn. But that is a worst-case scenario, according to analysts at UBS, the Swiss investment bank. "[It] seems unlikely such a fine would be imposed but opening [an] investigation seems to indicate potential wrong doing," analysts at the bank said, before noting that regulatory action over termination rates – the interconnect rates that mobile phone operators charge each other – is not expected until 2009.
Analysts said that while the impact of the current investigation in Spain should be immaterial, it illustrates the regulatory threat to the mobile phone industry, which is already fighting price deflation.