The government-appointed Office of Telecommunications, also known as Oftel, said the companies were overcharging by as much as 40 percent for calls from fixed lines to cell phones, and for calls from rival cell phone networks.
Oftel's head, David Edmonds, told the cell phone companies Vodafone, O2, T-Mobile and Orange to cut the cost of calls from fixed lines and rival operators to phones on their own networks by 15 percent by July 25.
The cuts for calls from fixed lines alone would save callers 190 million pounds ($307 million) a year, he said.
Edmonds added that Oftel would order additional cuts of up to 15 percent for each of the next three years, based on new rates to be introduced in July.
Oftel said the cost of a typical call from a land line to a cell phone would drop from 20 pence (32 cents) per minute to 13.5 pence (21.8 cents) per minute by 2006 as a result of the combined cuts.
"Consumers are being overcharged for calls to mobile phones, and the mobile operators must reduce their charges to a fair level," Edmonds said in a statement. "There is no real incentive for operators to reduce their charges, which means that call ... charges have remained much higher than cost."
Edmonds said cell phone companies would reduce the amount they charge fixed line operators, who will pass on the savings to callers. He said cell phone operators would still make a "fair return" on the reduced charges.
Oftel based its decision on a report by the Competition Commission, a government-appointed business watchdog.
"The commission has agreed with Oftel that the operators are acting against the public interest," Edmonds said.
Reacting to Oftel's announcement, Vodafone _ Europe's largest mobile phone operator _ said it would go to court to challenge the findings of the commission's report. Vodafone described it as "fundamentally flawed" and suggested the company would have to charge its customers more to finance the cuts.
"We think it is wrong that our customers will be forced to pay more as a result of this report," said Gavin Darby, chief executive of Vodafone UK.
Orange and T-Mobile said they were considering whether to follow Vodafone's lead, but O2 spokesman Simon Gordon said his company was not inclined to do so.
However, O2 said it would defer reductions of some charges, trim subsidies on handsets and delay the launch of its next generation of services as a result of the commission's proposals.
Britain's mobile phone market is "highly competitive" and gives customers "choice and value for money," said Peter Erskine, chief executive of parent company mmO2.
Orange UK executive vice president John Allwood described the commission's report as "odd."
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