Sept. 3 (Bloomberg) -- European Union regulators proposed cutting mobile phone text-messaging fees charged when customers travel abroad by more than 60 percent, a move that may reduce revenue for Vodafone Group Plc and Telefonica SA.

The European Commission in Brussels will propose that the retail charges for texts, also known as short message services, should be capped at 11 euro cents ($0.16), down from an average price of 29 euro cents in the 27-member EU, according to a document obtained by Bloomberg News. Wholesale charges will be capped at 4 cents, the document said.

``Sending text messages or downloading other data via a mobile phone while being in another EU country will not be substantially more expensive than at home,'' a memo summarizing the proposal said.

The proposal will be officially released in the coming weeks. It would be the second time in about a year that mobile-phone service providers in the EU faced price regulation. The EU capped prices for voice calls made abroad in June 2007, slicing revenue in the 8.5 billion euro a year roaming market.

Viviane Reding, the EU's telecommunications commissioner, Reding told companies in February that rates should decline to 12 cents by July. Companies' attempts at self-regulation have ``failed'' and the price of sending an SMS while abroad, known as roaming, remains 10 times higher than the domestic rate, she said.

The commission's plans are ``well known since July,'' said Martin Selmayr, Reding's spokesman. ``However, the final text of the regulation needs to be adopted by the commission as a whole and this hasn't happened.''

Voice-Roaming Extension

The commission also proposed extending the voice roaming regulation three years until 2013 and setting new caps for wholesale charges, the document said. The measure must be approved by European governments and the European Parliament to become law. It would take effect on July 1, 2009, according to the proposal.

In addition, the executive proposed that mobile operators ensure that their clients are informed of the charges that apply to downloading music and video files when they go abroad. By July 1, 2010, companies must allow customers to set a ``cut-off limit'' that gives them the chance to specify a maximum limit for these services.

The measure also calls for a ``safeguard mechanism'' that sets a maximum wholesale fee of 1 euro per megabyte of data that operators can charge each other. One megabyte allows about 200 e-mails without attachments, less than an hour of Internet browsing time or one minute of MP3 compressed music, the commission said.

Finally, the commission said that operators shouldn't charge customers by the minute for phone calls. By billing users on a per-minute basis instead of the actual call duration, companies can charge about 24 percent more for calls made and 19 percent more for calls received, the European Regulators Group, which represents national telecommunications authorities, said in a report last month.

Price Caps

The commission said operators must have per-second retail billing after the first 30 seconds of a call. At the wholesale level, billing per second should apply.

Companies have fought price caps, arguing they've reduced fees voluntarily.

The GSM Association, which represents mobile-phone operators, said the fees for data roaming have fallen as much as 38 percent in the past nine months.

``The commission has a tendency to set prices and micro- manage the market,'' David Pringle, a spokesman for the GSM Association, said by telephone. ``The commission wants to delve into the details of the market in a way that investors weren't expecting them to.''

Costs for text messages are ``very transparent and customers know what costs they can expect'' when sending messages from abroad, Vodafone spokesman Simon Gordon said by phone today.

In addition to extending retail voice roaming caps, which will fall to 40 cents in 2010, 37 cents in 2011 and 34 cents in 2012, the commission is decreasing wholesale charges. The regulator will cap wholesale roaming fees at 23 cents in 2010, 20 cents in 2011 and 17 cents in 2012, according to the proposal.

Reductions in wholesale and retail fees were made because prices are ``clustering at or close to'' the capped rates, the commission said.

To contact the reporter on this story: Matthew Newman in Brussels at Mnewman6@bloomberg.net.

Last Updated: September 3, 2008 12:45 EDT