NOTICE UNDER SECTION 15(3) OF THE TELECOMMUNICATIONS ACT 1984
PROPOSED MODIFICATIONS TO THE LICENCES OF VODAFONE, 02, T-MOBILE AND ORANGE

1. The Director General of Telecommunications (the "Director"), in accordance with section 15(3) of the Telecommunications Act 1984 (the "Act"), hereby gives notice that, following his consideration of the report of the Competition Commission (the "Commission") of 31 December 2002 on two terms of reference made by him on 7 January 2002 under section 13 of the Act with respect to the charges made for terminating calls from fixed and mobile networks (the "References"), he proposes to make modifications to the licences granted by the Secretary of State for Trade and Industry under section 7 of the Act to Vodafone Limited ("Vodafone") on 9 December 1993, Telecom Securicor Cellular Radio Limited ("02") on 22 March 1994, Mercury Personal Communications Limited ("T-Mobile") on 9 May 1995, and Orange Personal Communications Limited ("Orange") on 27 July 1995, collectively referred to hereinafter as the "MNOs".

2. The effect of the modifications which the Director proposes to make is to reduce the charges that the MNOs make to operators of fixed or mobile public telecommunications systems for certain calls terminating on their respective networks ("GSM Termination Charges") by 15% in real terms by 24 July 2003 at the latest. Another effect of the modifications is that the MNOs must, by 2 May 2003, offer to amend their interconnection agreements so that their GSM Termination Charges accord with any reductions necessary to comply with their obligations achieving the above-mentioned effect. The proposed modifications take the form of inserting two new conditions to each of the MNOs' licences mentioned above, namely Condition 70A (Control of Interconnection Charges (Fixed to Mobile)) and Condition 70B (Control of Interconnection Charges (Mobile to Mobile), in the case of the licences of T-Mobile and Orange, and Condition 70B (Control of Interconnection Charges (Fixed to Mobile)) and Condition 70C (Control of Interconnection Charges (Mobile to Mobile), in the case of the licences of Vodafone and 02).

3. The reason for the proposed modifications is that it appears to the Director that they are requisite for the purpose of remedying or preventing the adverse effects specified in the report to the extent that it is possible to do so before 25 July 2003 in that the level of GSM Termination Charges would be reduced towards that of the fair charge (see further about this in paragraph 4 below) identified by the Commission. In reaching that view, the Director has also had regard to the findings by the Commission and their formal recommendations on licence modifications.

4. The Commission concluded in their report to the Director that the GSM Termination Charges of the MNOs currently operate against the public interest and that, in the absence of any charge control on them, such Charges may be expected to operate against the public interest. In particular, the Commission found that the amount by which those Charges would, in the absence of a charge control on them, exceed the fair charge would be contrary to the interests of consumers in the UK in respect of the prices charged for telecommunication services. The Commission made these findings because, in the absence of such control, they believe that the GSM Termination Charges would be set above levels that reflect a reasonable estimate of their costs (that is to say, their long-run incremental costs, including allowances for relevant network and non-network fixed and common costs, plus an allowance for externalities) and the Commission term the level of such Charges that reflects such costs 'the fair charge'.

5. The Director is required by section 15(3) of the Act to consider any representations or objections which are duly made and not withdrawn. Representations or objections may be made to: Selena Bevis, Oftel, 50 Ludgate Hill, London, EC4M 7JJ (telephone: 020 7634 8844, email: selena.bevis@oftel.gov.uk) by not later than 28 March 2003.

6. All confidential information should be clearly marked as such and separated out into a confidential annex. All representations and objections received by Oftel, with the exception of material market confidential, will be made available for inspection in Oftel's Research and Intelligence Unit and may be published.

7. Copies of the full text of the proposed modifications can be obtained from Oftel's Research and Intelligence Unit at the above address (telephone 020 7634 8761, e-mail infocent@oftel.gov.uk ). The Commission's report is available from the Stationery Office or Oftel's website at www.oftel.gov.uk.

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