Government denies allegations of secret 3G talks

Britain is still on course for a successful roll out of third-generation mobile networks, say officials

The government denied on Monday that it has been conducting secret meetings with mobile network operators to discuss ways of rescuing them from their 3G debt burden

Newspaper reports over the weekend claimed that representative from Vodafone, BT and One2One have asked the government to assist them while they attempt to roll out third-generation (3G) mobile phone networks in the UK. Many industry experts believe that the £22.5bn paid for the UK's 3G licences was too great, and that some mobile phone companies face collapse or takeover as they struggle to make money from 3G services. According to the Sunday Independent, the companies have asked for the 20-year licences to be extended and for the conditions regulating network rollout to be relaxed.

A spokesman for the Department of Trade and Industry (DTI) said on Monday that while e-minister Patricia Hewitt met regularly with mobile phone companies, suggestions that she was conducting confidential talks over 3G were false. "There is no truth in the suggestion that we've been having secret meetings to discuss this. I don't think this issue has been raised," he said.

The government auctioned off five 3G licences last spring. Vodafone, BT, One2One, Orange and Canadian company TIW-backed by Hutchinson-Whampoa -- each paid between £4bn and £5.96bn for a 3G licence. 3G phones will allow users to surf the Internet, download email, access multi-media services at speeds three times faster than GPRS (General Packet Radio Service) technology. UK Chancellor Gordon Brown announced in last week's budget that the £22.5bn raised would be spend on paying off the national debt.

Harris Jones, managing director of One2One, said last week that One2One would not see a return on its 3G investment until 2011.

Many analysts believe that the price paid for UK 3G licences was much too great. A report from Forrester research claimed in January that European mobile phone network operators will fail to generate sufficient revenue from third-generation (3G) networks and are facing a steep decline in earnings by 2005.

Lars Godell, telecoms analyst at Forrester, has warned that most mobile network operators will be faced with a choice of merging, or going bust. "UMTS will be remembered as the trigger that imploded Europe's mobile industry, We expect that consolidation will leave only five groups serving all mobile users in Europe by 2008," he said in the report.

However, the UK government refuses to take any blame for the high price paid in its 3G auction, which was originally only expected to raise around £5bn in total. "We never placed a value on the licences. These companies are highly sophisticated, and have great advisors," the DTI spokesman said on Monday.

He added that the government was confident that 3G would roll out successfully. "Now that they've paid for the licences, they have an incentive to roll out 3G networks as soon as possible. We're hoping that the UK will be the first European country to launch a 3G network."

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