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Mobile termination rates in the EU15 European jurisdictions: recent developments Key points • European mobile termination rates (MTRs) for 2007 range from 5.89 euro cents per minute (cpm) (9.87 Aust. cpm) in Sweden to 11.72 euro cpm (19.63 Aust. cpm) in Spain. • Mobile termination rates in the EU15 are declining at 15% per year on average. Between 2006 and 2008 European regulators reduced MTRs in all jurisdictions for which new rates have been announced. • The following table gives average published MTRs for 2006, 2007 and 2008 for all mobile operators in each of the EU15 jurisdictions (with operator rates weighted by number of subscribers). Note that not all countries have published rates for 2007 and 2008. Mobile Termination Rates: European Jurisdictions A$ cents per minute 30 25 20 2006 15 2007 2008 10 5 Lu xe Ita l m y Ne bo th urg er la n Po d s rtu ga EU 15 Sp l W ai EI Un S n G ite we HT d de K ED in n AV gd o E m AU RA S T GE RA LI A Au st Be ria lg De ium nm a Fi rk nl an Fr d a G nce er m an G y re ec Ire e la nd 0 • The current MTR in Australia (12 Aust. cpm) is below average EU15 rates. The weighted average rates for all regulated operators in the EU15 are as follows: o 2006: 11.08 euro cpm (18.56 Aust. cpm) o 2007: 9.37 euro cpm (15.70 Aust. cpm) o 2008: 7.93 euro cpm (13.28 Aust. cpm) • European regulators are increasingly using ‘bottom-up’ cost models to determine MTRs. o Regulators in the Netherlands and Sweden are now using ‘bottom-up’ models. MTRs in these countries are below average. In Sweden the 2007 MTR is 9.87 Aust cpm. In the Netherlands, the 2008 MTR (for large operators) is 10.75 Aust cpm. o Regulators in the UK and Norway are currently developing draft models. Bottom up models are at early stages in Austria, Germany, Belgium. o In January the ACCC released a new bottom-up cost model for Australia. The model calculates a termination cost of 5.9 Aust cpm for its central scenario Country averages The following table shows average published MTRs for all mobile operators in each EU15 country converted to Australian currency at an exchange rate of 1 euro : A$1.68.1 It also shows average MTRs for EU15 countries and the Australian MTR for comparison. Country Average Mobile Termination Rate (Aust cpm) Austria Belgium Denmark Finland France Germany Greece Ireland Italy Luxembourg Netherlands Portugal Spain Sweden United Kingdom EU15 WEIGHTED AVERAGE EU15 AVG. (regulated operators) AUSTRALIA 2006 17.60 24.67 18.99 13.23 16.41 18.64 26.07 19.10 21.13 21.39 17.52 20.43 22.23 11.63 15.86 18.89 18.56 15.00 2007 14.30 17.72 17.09 11.54 13.06 15.23 19.36 2008 12.23 14.20 14.69 16.70 19.16 14.47 18.43 19.63 9.87 15.31 15.97 15.70 12.00 14.42 15.24 11.43 16.66 14.63 13.52 13.28 Larger operators Average mobile termination rates for the larger operators in each country are generally lower than the average rates across all operators since the smallest operators often have a higher termination rate. The rates for larger operators are likely to be more relevant to Optus. The following table shows the average mobile termination rate for the largest two operators (by subscribers) in each country in Australian currency. Country Average Mobile Termination Rate: Top 2 Operators (Aust cpm) Austria Belgium Denmark Finland France Germany Greece Ireland Italy Luxembourg Netherlands Portugal Spain Sweden United Kingdom 1 2006 16.28 22.68 18.88 12.57 15.91 18.03 25.65 18.32 19.52 21.19 16.89 19.68 22.43 11.63 14.91 2007 13.16 16.22 17.09 11.54 12.56 14.71 18.91 2008 11.65 12.97 14.69 16.32 18.77 13.82 18.43 19.95 9.87 14.58 14.20 14.85 10.75 8 year average exchange rate, sourced from RBA official historical rates. 17.13 14.14 PPP Exchange Rates The following table and chart give Australian dollar MTRs, converted using PPP exchange rates.2 Country Average Mobile Termination Rate (Aust cpm) Austria Belgium Denmark Finland France Germany Greece Ireland Italy Luxembourg Netherlands Portugal Spain Sweden United Kingdom AUSTRALIA 2006 17.14 24.05 14.12 11.55 15.36 17.81 31.21 15.96 20.63 19.43 16.89 24.43 24.16 9.86 14.43 15.00 2007 13.93 17.28 12.71 10.07 12.22 14.54 23.18 2008 11.91 13.85 10.92 16.31 17.40 13.95 22.03 21.34 8.36 13.93 12.00 14.08 13.85 11.01 18.11 13.31 Mobile Termination Rates: European Jurisdictions 35.00 A$ cents per minute 30.00 25.00 2006 20.00 2007 15.00 2008 10.00 5.00 xe Ital y m N bo et u he rg rla n Po ds r tu ga l Sp a i U ni Sw n te e de d K in n AU gd S om TR A LI A Lu Au st r Be ia lg i D um en m a Fi rk nl an Fr d an c G er e m an G y re ec e Ir e la nd 0.00 2 PPP (purchasing power parity) exchange rates are widely used by international organisations as an alternative to monetary exchange rates when making international economic comparisons. They are, in effect, “real” exchange rates, based on a comparison of the relative purchasing power of each country’s currency. Purchasing power parities equate the purchasing power of different currencies. This means that a given sum of money, when converted into different currencies at the PPP rates, will buy the same basket of goods and services in all countries, thus eliminating differences in retail price levels between countries.