Ofcom says competition key to 4G mobile sales

The UK government will sell the next generation of mobile internet licences relatively cheaply as it concentrates on ensuring competition in the market.

Regulator Ofcom said yesterday that it would impose caps on the amount of "4G" spectrum any one operator can buy in its 2012 auction, even though that could raise just a tenth of the 22 billion windfall generated by the sale of 3G services in 2000.

The system will ensure at least four service providers emerge, protecting the smallest operator, Three, which might otherwise have been muscled out by larger rivals Everything Everywhere, O2 and Vodafone.

Matthew Howett, an analyst at Ovum, said: "Ensuring at least four operators can obtain spectrum after the auction is a clear admission that Ofcom values Three's disruptive nature and role in developing a competitive mobile market."

Kevin Russell, chief executive of Three UK, said the firm had already lost out in a reallocation of Britain's 2G spectrum in January and Ofcom's proposals would re-balance that.

"Against a background of consolidation in the UK and US this is a clear and strong commitment from Ofcom and the UK government that will stimulate investment in mobile broadband and protect UK consumers," he said.

The auction in 2000, at the height of the dotcom boom, turned into a bidding frenzy, raising far more than expected for the Treasury but sending shares in major telecoms firms plunging as they vastly overpaid.

Next year's auction is expected to raise between 2bn and 4bn.

The provision of fourth-generation services for mobile browsing, e-mail and the updating of social networks has already been hotly delayed by the threat of legal action from operators jostling for the best assets.

Ofcom boss Ed Richards said he hoped the operators would now engage in the auction process, as Britain faces falling behind other European countries in rolling out 4G networks.