UK watchdog orders mobile termination rate cuts

* Mobile termination rates cut by up to 21 pct in real terms

* Vodafone, O2 avg mobile termination rate cut to 4.71p/min

LONDON, April 2 (Reuters) - Mobile phone companies operating in Britain must cut the rates they charge each other for connecting calls to their networks by up to 21 percent in real terms starting Friday, watchdog Ofcom said on Thursday.

In a statement setting price controls for the next two years, Ofcom said Vodafone (VOD.L) and Telefonica's (TEF.MC) O2 must cut their average mobile termination rates to 4.71 pence per minute, a cut of 8.4 percent adjusted for inflation.

Deutsche Telekom's (DTEGn.DE) T-Mobile and France Telecom's (FTE.PA) Orange, which have fewer subscribers in Britain, will have to cut their rates to 4.84 pence per minute, a cut of 11.1 percent in real terms.

Third generation-only operator 3, the UK's smallest operator, owned by Hutchison Whampoa (0013.HK), will have to cut its rate to 5.83 pence per minute, an inflation-adjusted reduction of 20.9 percent.

Mobile termination prices represent important revenue streams for those operators with more incoming calls than outgoing, and significant expenses for those whose balance is the other way around.

Ofcom aims for all the operators to charge the same rate by the end of March 2011 by cutting their prices they charge each other by a constant percentage per year.

The sliding scale is calculated from 2007, but the cuts ordered by Ofcom will not be retrospective.

The maximum average rates ordered on Thursday apply until March 31, 2010. Similar percentage cuts should apply the following year, if the operators comply as expected. (Reporting by Georgina Prodhan; Editing by Andrew Macdonald)