George Osborne Auctions Off 4G Airwaves For £1.2bn Less Than Expected

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

Labour said the auction showed how "foolish and short-termist" it had been for the Treasury to rely on the large sum from the sale.

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 Wednesday's total is still much less than the £3.5 billion estimated by the Government's tax and spending watchdog in the Autumn statement.

osborne

The auction was predicted to raise £1.2bn more than it was expected to by the Government and George Osborne

Rachel Reeves MP, Labour’s shadow chief secretary to the Treasury, said: “This is yet another blow to George Osborne’s failing economic plan. It shows how foolish and short-termist the Chancellor was to bank this cash in the autumn statement to make his borrowing figures look less bad.

"He couldn’t bring himself to admit that borrowing was up so far this year but his trickery has now badly backfired."

Culture Secretary Maria Miller said: “Today's announcement will deliver a significant economic boost to the UK. 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.

"We worked hard through the autumn to make sure that the operators would be able to use this spectrum six months earlier than expected. The benefits will been seen in the UK from the summer onwards as mobile operators deliver competitive high speed mobile broadband services."

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.

He said: "4G coverage will extend far beyond that of existing 3G services, covering 98% of the UK population indoors - and even more when outdoors - which is good news for parts of the country currently under-served by mobile broadband."

The news comes after Tuesday's announcement of EE'S pre-tax loss of £249 million , but bosses remain confident for 2013.

Everything Everywhere, which runs Orange and T-Mobile in the UK and is jointly owned by Deutsche Telekom AG and France Telecom, added 201,000 contract customers in the fourth quarter of 2012, after launching Britain's first superfast 4G mobile broadband service.

A number of cheaper 4G packages are planned for the coming months, and the 4G rollout is expected to continue; speaking to Sky News, chief executive Olaf Swantee said 65 cities and 55% of the population were expected to be covered by the fast service by June this year.

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