Spain's telecoms watchdog cut the fees mobile operators can charge each other for connecting calls on Monday, which is likely to lower customer phone bills in a nation battling recession.
Competition in the Spanish market has heated up in recent months for operators Telefonica (Madrid, Spain), Vodafone (Alcobendas, Spain), Orange (Pozuelo de Alarcon, Spain) and Yoigo (Alcobendas, Spain) as they struggle to cling on to customers in the country, where 27 percent of the workforce is unemployed.
When a customer of one operator calls someone who has a different provider, the second network charges the first a fee for connecting and terminating the call on its network - known as a termination fee.
The European Union is pushing telecom regulators across the bloc, who set limits on these rates, to force networks to lower them in an attempt to cut bills for consumers, though progress is at different stages across countries.
Spanish regulator the CMT said mobile termination rates would drop by about 75 percent to 1.09 cents a minute from 4 cents in April 2012, when the process of lowering rates began. For no.4 player Yoigo, the price will fall to 1.09 cents from 4.98 cents in April last year.
The change in Spain means its rates are below the European average of 2.53 cents a minute, according to the CMT.
The European Commission, which is concerned by disparity across EU member states, last week asked Germany to withdraw plans that could result in termination rates more than 80 percent higher than in most EU states.
The CMT said although operators in Spain tend to charge users the same price for making calls across networks, the termination rate reduction paired with the highly competitive market was likely to bring prices down.
"Although companies are not obliged to reduce prices for end-users as a result of the wholesale rate cuts put in place by the regulator, regulatory action combined with an improvement in competitive conditions in the market (fewer entry barriers and more operators) has the effect of bringing end prices down in the medium term," the CMT said in a statement.
The CMT did not elaborate on what "medium term" meant, but in the past reductions in termination fees have resulted in cheaper prices within a matter of months. For example, the average termination rate fell to 3.6 cents a minute in 2012 from 4.6 cents in 2011, and the average call rate also dropped to 11.2 cents from 12.6 cents.
In April, all four Spanish mobile operators lost thousands of clients in the increasingly cut-throat competitive environment. ($1 = 0.7693 euros)
(Reporting by Clare Kane; Editing by Pravin Char)