O2 mulls compromise on UK spectrum deadlock

O2, the UK's biggest mobile phone operator and part of Telefonica Europe, says it is considering a compromise that would end a bitter dispute over access to radio spectrum, according to the Financial Times .

Matthew Key, chief executive of Telefonica Europe, O2's owner, said it would be best if the mobile operators could find a solution to their dispute over spectrum. The UK government fears the dispute could endanger its plan for every home to have access to at least 2Mbps broadband internet by 2012.

It would be too expensive to roll out fixed line broadband to remote areas, so the government is hoping the mobile operators will fill in the gaps.

Stephen Carter, the communications minister, last month told the mobile operators to find a solution to their disagreement over spectrum by the end of April. He warned the government would impose a solution if the industry failed to find one.

O2 and Vodafone have strongly opposed a 2007 proposal by Ofcom, that they give up some of their original 900Mhz, 2G spectrum so that it could be allocated to T-Mobile and Orange for 3G services. The lower frequency requires fewer base stations because it can cover greater areas and so would improve coverage in rural areas, for example.

The Digital Britain report, published last month, indicated that the government is hoping the operators will end their dispute by trading some of their spectrum holdings.

The compromise could involve Orange and T-Mobile giving up some of their 1800 MHz spectrum, which they currently use for 2G services, to enable their competitors to improve 3G network capacity in urban areas.

Vittorio Colao, Vodafone's chief executive, has also hinted a willingness to reach a compromise over spectrum.

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