Osborne hit by £1.2bn shortfall from 4G auction

THE TREASURY will bank far less than expected from an auction of 4G spectrum, with bidding leaving a black hole of more than £1bn in George Osborne’s accounts.

After weeks of secret bidding, the UK’s four mobile operators, along with BT, will spend £2.34bn on airwaves to deliver the next generation of mobile services, far less than the £3.5bn Osborne had banked on.

However, the end of the auction does mean that after years of arguments and legal threats between communications regulator Ofcom and the operators, the UK will have widespread 4G coverage in the coming months, allowing mobile internet speeds around five times faster than current 3G levels.

Some attributed the smaller windfall from the auction to lower than expected bidding from EE, the UK’s largest mobile phone network. Ofcom gave EE clearance to use its 2G airwaves for 4G use last year, giving it a headstart on the rivals.

EE took a smaller amount of the higher-value 800 MHz spectrum – which allows coverage over longer ranges and indoors – than both its main rivals O2 and Vodafone. This also meant that the UK’s smallest operator, Three, walked away with a slice of the 800 MHz airwaves for the auction’s reserve price.

O2 and Vodafone will launch 4G networks at the end of Spring, with Three’s going live later in the year.

The lower-quality 2.6 GHz spectrum will be used to improve speeds in city centres. BT will use the spectrum to top up its wireless broadband offering.