Published on the 22/05/2006 | Written by Newsdesk

Are the costs of making a mobile phone call in New Zealand as far out of whack with the rest of the world as the government would have you think? Is the grass really greener? Is legislation really the right way forward? David McNickel crunches the numbers with some startling results…

It’s not often you find Vodafone and Telecom agreeing on anything, but there was no arguing between the two in May over the prospect of government intervention to force them to lower the Mobile Termination Rate (the wholesale fees mobile operators charge fixed providers to terminate calls on their networks).

The government’s goal in all this is to lower the cost of mobile phone calls, as the lower the termination fees, the lower the government thinks your call costs will be.

But both networks say the savings to consumers would be minimal if any, and point out that prices of mobile calls are already coming down thanks to commercial pressures. Speaking about the Commerce Commission’s Reconsideration Report, Telecom’s Bruce Parkes said “the Commission has in fact concluded that depending on the assumptions it uses, New Zealand as a whole could be worse off or only marginally better off as a result of the regulation.”

Meanwhile Vodafone’s David Sullivan details an even grimmer picture. “The Commission itself has acknowledged that mobile prices will go up by an average of $9.61 each year over the next five years, and predicts that 18,567 Kiwis will stop using their mobiles altogether over the same period – that’s equivalent to everyone in the town of Levin.” Both these statements were made before the government showed its hand on forcing Telecom to unbundle the local loop.

Is it cheaper anywhere else?
So are mobile phone calls here really that much more expensive than the countries we so often compare ourselves to? In mid-May, we checked mobile call pricing in New Zealand, Australia and the UK, but we also took the comparison one step further, by comparing what minimum wage workers in each country are paid, and how many minutes the lowest paid employees have to work to pay for a five minute mobile phone call. The results were not what we expected.

New Zealand
The minimum wage for a New Zealander over 18 is currently $10.25 an hour before tax which equates to $8.26 an hour after tax. Using either Vodafone NZ’s prepay Anytime plan or Telecom’s Anytime Go Prepaid plan, NZ callers will pay 89 cents a minute for a five minute call, which equates to $4.45.

This means a minimum wage worker in New Zealand would have to work for 32 minutes to pay for a five minute prepaid mobile phone call.

Australia
In Australia the minimum wage is $12.30 per hour before tax which equates to $10.46 an hour after tax. The cost per minute of Vodafone Australia’s Maxi Cap Prepaid plan is 60 cents plus a 25 cent connection fee. So a total cost of $3.25 for a five minute call. Thus a minimum wage worker in Australia would have to work for 18.6 minutes to pay for a five minute prepaid mobile phone call.

United Kingdom
In the UK the minimum wage (converted from pounds to dollars) is $15.07 an hour before tax which equates to $11.76 an hour after tax. The cost per minute of Vodafone UK’s Pay As You Talk Prepaid plan to a landline or other Vodafone mobile is (converted from pence to cents) 89 cents per minute, so a total cost of $4.45 for a five minute call. Thus a minimum wage worker in the UK would have to work for 23 minutes to pay for a five minute prepaid mobile phone call.

Summary
In this very basic comparison – not taking into account any specials or on account discounts etc – a five minute New Zealand mobile phone call was more expensive than an Australian one, but was exactly the same price as a UK one. If the call had only been for one minute, however, the call would have cost 85 cents in Australia, 89 cents in New Zealand and 89 cents in the UK – a negligible difference overall. What is really significant, however, is the difference in how long you have to work to pay for them. In which case New Zealand comes out the worst, and this has nothing to do with the mobile phone networks, and everything to do with the fact that New Zealand is a low wage economy – something that neither Telecom nor Vodafone can be held responsible for.

It’s a fact of life that purchasing power is different between countries – after all, if it wasn’t there would be no such thing as the Big Mac Affordability Index.