The European Commission, European lawmakers and governments agreed to reform mobile roaming fees, allowing consumers to pay less for calls, texts and mobile Web services when travelling abroad, in a measure that could hit telecom industry profits.
The deal announced on Wednesday is expected to be approved by the European Parliament in May and would take effect in July.
The reform, which had been hotly opposed by many of Europe's biggest telecom groups such as Telecom Italia
But perhaps more significantly, it also aims to increase competition by allowing consumers to choose their mobile operator when they cross borders. In effect, European policy makers are trying to create a new market for roaming services instead of requiring people to use their home-country operator.
To do so, they have slashed by 50-90 percent the wholesale rates that operators charge each other to rent network access in the hope that this spurs some to create mobile voice and data offers aimed at customers travelling across borders.
Stephane Beyzian, a telecom analyst at investment bank Raymond James, said he was not sure major operators would be eager to offer such roaming deals since they would eat away at a lucrative source of profit.
It's not at all clear that this new roaming market will materialise, he said. The operators may try to hold the line on this.
Paul Lambert, an analyst at consultancy Informa, agreed that the success of the competition approach was hard to gauge, but he predicted big changes ahead.
European mobile users will benefit from a radical shake-up of the roaming market, but operators will suffer, he said.
EU lawmakers haggled for nine months over how much they could reduce roaming costs. The final prices are much lower than initial Commission proposals made in July.
The GSMA trade association representing telecom operators said in a statement that the new price caps went too far and that it preferred the earlier suggestions for their balance between price controls and pro-competition measures.
Under the new deal, starting in mid-2012, charges on calls made while travelling in other EU countries cannot exceed 29 cents per minute, and calls received while abroad should cost no more than 8 cents per minute.
Sending a text message while away will be capped at 9 cents.
These price caps will be ratcheted down by almost another third by 2014.
European officials will also limit for the first time the prices operators can charge consumers surfing the Internet on smartphones and tablet computers to 70 cents per megabyte in 2012 and 20 cents in 2014.
Raymond James' Beyzian said operators might be more inclined to offer such data bundles when roaming.
We welcome the attempt to move away from price cap regulation after 2014, Vodafone said in a statement. We have always said that competition, not regulation, will serve customers better.
The Stoxx Europe telecoms index fell 0.66 percent on Wednesday, compared with a 1.06 percent decline in the broader European index <.STOXX>.
(Editing by Rex Merrifield, David Holmes and James Regan)