The two biggest mobile phone operators, Vodafone and O2, may be forced to reduce their prices by the Commission for Communications Regulation (ComReg).

The regulator, which until now has not been able to regulate prices in the mobile sector, yesterday gave the firms just two weeks to review their "termination rates" or face intervention.

Termination rates are the charges that mobile phone firms levy on rival companies to terminate a call. Fixed-line operators have consistently argued that these fees have been set too high, unfairly pushing up their prices.

ComReg has been reviewing mobile phone firms' accounting strategies over the past four months in the run-up to July 25th, when new EU regulations will bring mobile termination rates under regulation.

Yesterday ComReg issued a paper outlining that it would give O2 and Vodafone - which together hold 96 per cent of the market - two weeks to review its rates.

"ComReg will monitor developments in the area in the next two weeks. If it judges that insufficient progress is being made, it... may make a direction on cost orientation," concludes the paper.

O2 and Vodafone have come under scrutiny recently due to the extremely high average revenue per user generated from Irish consumers. Subscribers to the firms spend more on mobile services than users from any other European Union state.

Both firms say Irish users talk and use mobile services more than other Europeans, justifying the high profit margins. But critics, such as the fixed-line telecoms lobby group ALTO, have claimed that the mobile phone firms are ripping consumers off.

Responding to the paper from ComReg yesterday, O2 said it had already submitted a proposal to the regulator outlining a cut in mobile termination rates. An O2 spokeswoman said the firm was awaiting a reply from ComReg and wanted to voluntarily cut rates rather than by regulation.

But Vodafone Ireland - which recently reduced its own mobile termination rates - said its rates were already set at cost-orientated levels and were currently among the lowest in Europe.

"There is no question of our mobile termination rates being lowered in the next two weeks," said a Vodafone spokeswoman.

Meteor, the third Irish mobile phone firm, is not affected by the issue because it is not judged as being dominant in the market.

Meanwhile, a similar ruling by the British regulator OFTEL reducing mobile firms termination rates was upheld yesterday in the British courts. Vodafone, T-Mobile and Orange lost their judicial review of OFTEL's decision, which should reduce the cost of calling a mobile from a landline by 30 per cent. The cost of calling a mobile from a mobile should fall by 20 per cent, according to research by OFTEL.