The wholesale prices a mobile network operator charges for providing services to customers from other network operators should be significantly reduced, the New Zealand Commerce Commission said Thursday.

The commission said wholesale prices for voice calls to a mobile network should be set at a cost-based benchmark, starting at a rate of 4.6 cents per minute.

"The Commission recognizes that this represents a substantial immediate reduction in the termination rate for voice calls, but believes that this is justified because of the unique market conditions in New Zealand, and is necessary to remove a significant, long-standing and growing barrier to efficient expansion by a small mobile network operator," it added.

Mobile termination charges are a significant contributor to the retail prices of calls and text messages to mobile phones. Earlier this year, the watchdog recommended the communications minister accept undertakings from Telecom (TEL.NZ) and Vodafone Group PLC (VOD, VOD.LN) as an alternative to regulation, but this was rejected after a new product was offered by Vodafone that highlighted competition concerns already identified.

New Zealand's mobile market is currently dominated by Telecom, holding a 46.6% market share, and Vodafone, with a 49.6% share, latest Commerce Commission data showed in May. New entrant 2degrees Mobile Ltd., which launched its service last August, had a 3.8% share.

The Commerce Commission now seeks submission on the draft determination with a final determination due in March.

-By Lucy Craymer, Dow Jones Newswires; 64-4-471-5990; lucy.craymer@dowjones.com
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