The decision by the UK telecom regulator Ofcom to allow spectrum refarming has prompted the owners of 3UK, Hutchison Whampoa, to alert the government that this move could distort the market and lead to further consolidation.
The company issued a statement warning that, while it planned further investment in the country, this was with the understanding that its businesses, particularly telecoms, were allowed to compete fairly.
"Ofcom and the government are jeopardizing the whole competitive environment that the 3G auction in 2000 started to establish," said Kevin Russell, CEO of Hutchison's 3UK unit. "If the government and Ofcom get this wrong, further consolidation could result."
This outburst has been caused by 3UK's worry that the Ofcom move not to reallocate 2G spectrum for 3G services across all UK operators would create an uncompetitive market that would disadvantage 3UK. Such a decision would also impact Everything Everywhere.
The company wants Ofcom to establish auction rules that would cap the amount of spectrum that any operator can hold. Unless this is achieved, 3UK fears that O2 and Vodafone could end up holding the bulk of the spectrum available at around 900MHz.
3UK has suggested to the government that it address the issue in the upcoming spectrum auction planned for early 2012. A failure to do this, maintains the company, would create higher prices for UK consumers and could stall mobile broadband network expansion.
This threat to the future of its UK investments has triggered market speculation that, if 3UK fails to get the refarming rules changed, it could become a takeover target for Vodafone or O2--albeit that Ofcom might resist such a move.
Unsurprisingly, Vodafone UK's CEO, Guy Laurence, welcomed Ofcom's decision. "We welcome this change to our spectrum licence. It will bring significant benefits to our customers in the form of faster and better mobile broadband with wider rural coverage and stronger in-building signal," he said.