The cost of calling mobile phones from other networks and landlines is set to become cheaper after Ofcom announced it will impose a reduction in charges.

The regulator ruled today that termination charges, the amount mobile phone companies bill rivals for handling calls from their networks, will fall 80% over the next four years, starting from April 1.

The big three mobile operators, O2, Vodafone and Everything Everywhere, which includes Orange and T-Mobile, currently charge 4.18p per minute to connect calls from other phone companies.

But this will be reduced to 2.66p next month and will fall to 0.69p by April 2014.

Ofcom says it expects landline operators to pass on the cost savings to customers and for mobile operators to offer more choice to customers.

Mobile phone operator 3 UK can currently charge up to 4.48p per minute, slightly more than the other big operators, but its cap will fall in line with its bigger rivals from the start of next month.

The changes are expected to benefit smaller mobile phone operators, which will be able to offer more competitive prices.

Archna Luthra, consumer products analyst, says: "This is welcome news from Ofcom, though it has been a long time coming.

"Mobile networks and home phone providers now have no excuse to charge sky high prices for calls to mobiles, letís hope they pass on these savings straight away."

Termination rates have already declined by 35% since 2007 when Ofcom last imposed caps on the rates.

The regulator says that while mobile phone companies will lose money from the reduction in charges, they are gaining from a growing trend towards customers using data services, such as text messaging and accessing the internet from their mobile phones.

Data traffic has more than doubled in the past year and now accounts for the majority of traffic over mobile phone networks, says Ofcom. Revenues from data increased by 90% between 2007 and 2009 and are set to grow further.

The termination rate caps apply only to calls, which are likely to account for a less significant proportion of mobile phone companies' revenues over the next four years, adds Ofcom.

Further reading/Key links

Slash call costs: Home Phones, Cheap Mobiles