Ofcom to name mobile bidders in 4G auction: Seven companies declare interest in competition Treasury expected to raise pounds 3.5bn from networks

(Guardian (UK) Via Acquire Media NewsEdge) Britain's mobile phone companies open their war rooms today for the long-awaited 4G spectrum auction, a process that is expected to generate a pounds 3.5bn windfall for the Treasury and could raise a further pounds 700m a year from existing bandwidth.

The final lineup of bidders will be confirmed today, with the telecoms watchdog Ofcom issuing passwords for the electronic auction system. Teams of lawyers, accountants, economists and network technicians will assemble in sealed rooms within their headquarters, from where they will manage their bids during the two-month competition.

After a series of training sessions, the 4G bidding is expected to begin on 23 January, with activity building to about six rounds a day as participants compete for their preferred lots. Winners could be announced in early March, with 4G services arriving in May and June.

The result will be one of the biggest injections of new money into the public purse this year. In addition to the one-off payment of pounds 3.5bn that the Treasury has budgeted to raise from the auction, the 4G prices will set a new benchmark for the annual licence fees for spectrum that mobile networks acquired in the 1980s and 1990s.

Networks pay rental costs of pounds 65m a year. If the 4G sale raises twice the reserve price set by Ofcom, the government could collect pounds 470m a year in rental fees, according to industry estimates based on Ofcom data. If the reserve price is trebled, the fees could rise to pounds 700m.

Ofcom's reserve price is pounds 1.3bn, but the government is budgeting that the auction will raise nearly three times that sum.

The prospect has prompted fierce lobbying by at least one operator. In a letter to civil servants published on the website of the Department for Media, Culture and Sport (DCMS), which oversees telecoms, Vodafone raised concerns about the "significant uncertainty" created by the forthcoming change in the way licence fees are calculated.

For Vodafone, annual licence fee payments could rise from pounds 16m to pounds 230m if the bidding is as competitive as it was in recent European 4G auctions such as in Ireland and the Netherlands. Seven companies have declared their intention to participate in the UK, with BT Group, the network supplier MLL Telecom and the Hong Kong telecoms conglomerate PCCW joining Vodafone, O2, Three and Everything Everywhere in the fray.

The impact of higher licences charges would be greatest on Vodafone and O2, which each own a large chunk of valuable 900MHz spectrum and a smaller slice of 1800MHz, originally awarded for 2G voice services but now available for 3G and 4G. After the 4G auction, Ofcom will calculate new fees for 900MHz and 1800MHz licences. The government has mandated Ofcom to "have particular regard to the sums bid for licences in the auction" so that the fees "reflect full market value".

pounds 1.3bn Reserve price set by Ofcom for the auction of 4G spectrum, but the Treasury expects it to fetch nearly three times that Captions: Initiatives are under way to create smartphones costing $50 for emerging markets Photograph: I Love Images/Rex Features (c) 2013 Guardian Newspapers Limited.

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