BT defends 3G licence bid

BT has defended its decision to opt for one of the weaker licences in the UK's third generation (3G) mobile phone auction.

The telco secured licence C in the auction that ended this morning, losing out on the bidding for the licences which offer the broadest spectrums - A and B.

UK mobile operator Vodafone won the battle for licence B with a £5.96bn bid, while Canadian group TIW won licence A for £4.38bn. Licence A has slightly more spectrum than B, but was reserved for a newcomer to the UK mobile market.

BT said that by winning licence C at a "substantial discount" to the price paid for licence B it has minimised the overall cost of bringing 3G mobile to its customers without compromising the range or quality of its services.

The telco said the only benefit of licences A and B over the remaining three licences is that they may be cheaper to build a network for. But BT said the savings are way below the premium that licence B attracted.

John Matthews, an analyst at researcher Ovum, said: "I expect that all bidders are satisfied to have secured a licence. BT would have liked licence B, but the bidding became very high. It can now invest a bit more into its services."

Vodafone said it intends to offer customers commercial services on its 3G network in 2002. Chris Gent, chief executive at Vodafone, said: "In winning licence B we have secured the amount of spectrum that we need to deliver the highest capacity of any UK mobile operator and to maintain our market leadership."

UK mobile operator Orange, which made a successful £4.095bn bid for licence E, said it is delighted to have acquired the licence. The company said it now has one of the largest amounts of spectrum of any UK mobile operator and "substantially more spectrum than the two incumbent mobile operators".

Opting for a licence with a lower spectrum will not make much difference in the short to medium term, said Tim Sheedy, an analyst at researcher IDC. But in the long term it is possible that those with smaller licences may have problems with network congestion, he said.

Also today, TIW said it will join forces with Hong Kong based Hutchinson Whampoa. The joint venture will carry on a national UK universal mobile telephone system (UMTS) as a "mobile virtual network [MVN] operator".

TIW will build a national UMTS network in the UK and will make the network capacity available to the MVN operator.