UK telecommunications regulator, Oftel yesterday accused BT Cellnet, a unit of British Telecom, of hampering competition unfairly in the mobile communications market. Oftel issued a draft directive requiring BT Cellnet to stop cross-subsidizing its own retail service providers.

BT Cellnet rejected the accusation of unfair practices.

Due to their dominant market positions in the UK, mobile network operators BT Cellnet and Vodafone AirTouch are required to sell wholesale airtime to independent retail service providers. Both companies also operate their own retail services. An Oftel spokeswoman said BT Cellnet has been pricing its wholesale airtime unfairly, to the extent that its own retail services would make a loss if they were not subsidized.

"Reducing the wholesale prices for airtime would be a good way of promoting more competition, so that independent service providers aren't being squeezed," said the spokeswoman, who requested anonymity in accordance with Oftel policy.

She added that Vodafone had also been investigated, but was not found to be unfairly pricing its airtime.

In a statement, BT Cellnet accused Oftel of using an outdated formula to determine whether a company is cross-subsidizing. In addition, it said Oftel made its calculations based on one quarter's market data, which the company called "wholly unreasonable in the highly competitive and changeable mobile phone market".