4G auction signals revenue dip

Mid Devon Star: The 4G spectrum auction has raised less than expected The 4G spectrum auction has raised less than expected

Chancellor George Osborne was dealt a blow after the auction of superfast 4G airwaves raised a smaller-than-expected £2.3 billion.

All the major mobile phone companies - EE, Hutchison 3G, O2 parent Telefonica and Vodafone - were successful in the bidding process, while a subsidiary of BT also picked up a licence from Ofcom.

The regulator had placed a reserve price of £1.3 billion on the 4G sale, but the total is still much less than the £3.5 billion estimated by the Government's tax and spending watchdog in the Autumn statement. The previous 3G auction raised £22.5 billion for the Treasury in 2000.

The bidders in the 4G version competed to buy airwaves in two separate bands - the higher frequency 2.6 GHz and lower frequency 800 MHz - with 28 lots up for grabs.

After more than 50 rounds of the auction, Vodafone was the highest bidder paying £790.8 million for a mixture of the lower and higher bands.

EE, formed from the merger of Orange and T-Mobile, already has access to 4G and was the first to offer a 4G network in the UK. It was the second highest bidder paying £588.9 million for its airwaves.

Vodafone UK chief executive Guy Laurence said: "We've secured the low frequency mobile phone spectrum that will support the launch of our ultra-fast 4G service later this year. It will enable us to deliver services where people really want it, especially indoors. This is great news for our customers."

Under the deal O2's Telefonica has won a spectrum which must provide mobile broadband services for indoor reception to a least 98% of the UK population, and at least 95% of the population in each of the UK nations - England, Northern Ireland, Scotland and Wales - by the end of 2017 at the latest.

Ed Richards, Ofcom chief executive, said: "This is a positive outcome for competition in the UK, which will lead to faster and more widespread mobile broadband, and substantial benefits for consumers and businesses across the country. We are confident that the UK will be among the most competitive markets in the world for 4G services."

Culture Secretary Maria Miller insisted that the auction would deliver a "significant economic boost" to the UK. She said: "Spectrum use is worth more than £50 billion to the UK economy and 4G mobile broadband is a key part of our digital growth strategy so I am delighted the auction has been completed."

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