Swisscom fined over mobile connection charges

Swisscom Mobile has been fined for charging its rivals' customers too much to access its network Keystone

Switzerland's competition watchdog has fined telecommunications provider Swisscom for overcharging its rivals' customers on mobile phone connections.

The company has already rejected the charge and has promised to fight the SFr333 million ($269 million) fine in the Federal Administrative Court, saying the accusation that it had abused its dominant position on the market was unfounded.

The Federal Competition Commission (Comco) said on Friday that Swisscom Mobile had breached cartel rules between April 2004 and May 2005 when it forced non-Swisscom customers to pay a termination fee of SFr0.335 per minute to call into its network.

Termination fees are the prices telecommunications operators charge for channelling calls from rival operators through their own networks.

The commission described Swisscom Mobile as “dominant” because it was not exposed to strong competitive pressure from consumer markets. This was not the case for its rivals Orange and Sunrise, as their market position was weaker and they entered it later.

To determine whether Swisscom had been overcharging, Comco looked at benchmark prices and termination costs in similar markets abroad. It reached the conclusion that the company was overcharging and exploiting its competitors’ customers.

The commission said the fine, handed down four years after its investigation was launched, reflected the severity and type of violation committed by Swisscom’s mobile unit. It added that the company has widely benefited from charging higher termination fees, making it an aggravating factor.

Before the final decision was reached, Comco had suggested the fine could be as high as SFr489 million.

Legal challenge

Swisscom, which is majority-owned by the state, has rejected the charge and said it would seek to overturn the fine in court. It argued that it was being unfairly singled out and had received no warning that it might be breaching competition rules.

“The company will appeal the ruling before the Federal Administrative Court and, if necessary and as a last resort, before the Federal Court,” it said in a statement.

Swisscom considers this last outcome as unlikely and has made no provisions for the fine.

The former monopoly still has a two-thirds share of the mobile phone market in Switzerland, but it says the commission’s view that it has a dominant position cannot be upheld.

“This is inconsistent within the European context, where all providers … were assumed to have a dominant market position on the basis of call termination in their network,” said Swisscom.

The company also complained that the ruling was again inconsistent with Comco’s earlier finding that its rivals also had a dominant position.

swissinfo with agencies

Key facts

Swisscom Mobile turnover (2005): SFr4.1 billion (-4.3% on 2004)
Swisscom turnover (2005): SFr9.7 billion (-3% on 2004)
Swisscom Mobile is the country’s leading provider in mobile telephony.
Swisscom Mobile customers are Europe’s biggest spenders with average monthly bills of SFr78.

In brief

The fine inflicted on Swisscom Mobile is the second ever handed out by the competition commission under Switzerland’s revised cartel law, but also the most severe.

The competition commission had threatened to give Swisscom a SFr489 million fine.

The first fine inflicted by the commission (SFr101,000) was given to the operator of Zurich airport, Unique, for its monopolistic management.