1. Mobile market review: summary The market is not yet effectively competitive but competitive pressures are growing intend to remove Market Influence obligations from Vodafone & BT Cellnet but SMP designations to remain on both no change (in addition to call termination) in formal regulation of Orange and One2One

2. The good news  prices are among the cheapest in Europe  evidence of long-term trend of falling prices  high consumer satisfaction  competition on quality evident  expected increase in competition  continued competition between existing 4  entry of Hutchison 3G as 5th operator  likely countervailing power from providers of content & mobile Internet services

3. So obligations relaxed  Formal consultation on MI removal: Oct 01  current undue focus on regulated ISP model  reasonable demands of service providers can be met by the market  but if the market does not deliver, MI can be re- triggered as relevant licence conditions retained also note no change in policy on MVNOs: not mandated

4. But market power remains  Vodafone and Cellnet pricing above the competitive level  Vodafone profits persistently/significantly exceed cost of capital, with no major change expected in next 2 years  BT Cellnet’s prices also clearly above Orange’s  so SMP obligations (including IA) continue

5. Other Oftel concerns  high prices for some call types  off-net/on-net price differences probably inefficient  international roaming: wholesale market & consumer awareness problems  consumer awareness  poor advice, and awareness lagging penetration  excessive switching barriers  MNP: full benefits yet to be realised  SIM-locking: switching and equity concerns

6. How to tackle concerns ?  off-net: new call termination cap, rather than addressing at retail level  international roaming: supply-side work with other NRAs/Commission  MNP: continued pressure/monitoring  SIM-locking: co-regulation to remove it or reduce its impact  promote increased consumer awareness, focusing on point of sale

7. Further information  Next mobile market review to be conducted following introduction of new European Directives  Contact for further questions/information  Nic Green 020 7634 8891