Ofcom threatens O2 over 3G coverage failure

Telecoms regulator Ofcom has threatened to shave months off O2's 3G licence term after the mobile operator failed to meet a coverage deadline.

O2 was obliged by the terms of its 3G licence to achieve 80 per cent overage of the UK population by the end of December last year - but Ofcom said O2 has only reached 75.69 per cent coverage, a shortfall of around 2.5 million people.

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The regulator has now given O2 a deadline of 30 June to meet its coverage commitments. Failure to do so could result in the term of its 3G licence being shortened by four months - meaning the licence would end on 31 August 2021, rather than 31 December 2021, Ofcom warned. This would be equivalent to "a significant financial sanction" of at least £40m, it added.

An O2 spokeswoman told silicon.com the reason it had missed the December deadline was down to its strategy of prioritising 3G rollouts in areas of high demand - and because it wanted to ensure high quality, in-building coverage in those areas.

The spokeswoman said the coverage shortfall is equivalent to around 100 masts but she said O2 expects to have these in place by the June deadline.

An O2 statement said: "We have rolled out our 3G network to over 75 per cent of the population. Where we do have coverage it has consistently provided the best quality. We also have one of the larger 3G customer bases.

"We accept that Ofcom is enforcing the terms of our licence. However we are fully committed to growing our 3G coverage and customer base with the best quality 3G service and are confident that we will have met Ofcom's requirement before June 2008."

O2, which paid £4bn for its 3G licence in 2000, is the only one of the UK's five 3G licence holders not to meet its coverage obligations. The other four licence holders are H3G, Orange, T-Mobile and Vodafone.

Speaking to silicon.com earlier this month, Ben Dowd, O2's head of business sales, said the company plans to "invest heavily" in 2G - as it expects voice traffic to grow by between 30 and 40 per cent in the next couple of years. He added that its 3G network will be fully HSDPA-enabled by the end of this year.