4G bidding war starts as Ofcom opens auction

BIDDING for the UK’s 4G mobile airwaves kicked off yesterday, with communications watchdog Ofcom hosting an auction that is expected to hand George Osborne a multi-billion pound windfall.

Seven parties are now vying for a slice of spectrum that will enable them to deliver the next generation of mobile internet, promising speeds around 10 times faster than current 3G connections.

Ofcom chief executive Ed Richards said the auction is “a very significant milestone for the UK’s communications sector”. The bidding is expected to take several weeks before winners are announced, with 4G set to go live in late spring or early summer.

The UK’s four mobile operators – O2, Vodafone, EE and Three – are expected to snap up most of the spectrum available, while the three other bidders – BT, Hong Kong’s PCCW, and MLL – will be looking to buy less desirable parts of the airwaves to improve their wireless broadband offerings.

The auction follows years of attacks and legal threats between the regulator and the telecoms firms, which came to a head in the summer when Ofcom controversially allowed EE to use its current spectrum to deliver 4G, giving the company a six-month headstart on its rivals.

EE has heavily marketed its 4G service since its launch, but consumers have criticised the price and data limits imposed on users. EE reduced some prices this week in response.

The auction takes place over several rounds, with many different combinations of lots on offer at a fixed price. The price of a lot is then raised if there is more than one party prepared to meet the previous cost, until there is only one bidder left. The auction has been specially designed to extract maximum value for the Treasury. George Osborne has pencilled in £3.5bn, although recent auctions in Ireland and the Netherlands have beaten expectations.