27th February - Ofcom issued O2 with a deadline for meeting its 3G rollout obligation and what steps it proposes to take should the mobile phone operator still not be in compliance.

The obligation requires each of the five holders of a 3G licence to rollout their networks to enable the provision of 3G services to at least 80 per cent of the population from 31 December 2007.

Ofcom has now completed its assessment of compliance with the obligation. Four of the five licensees have complied, but O2 only covered 75.69 per cent of the population. This is a shortfall equivalent to approximately 2.5 million people.

Ofcom has now issued O2 with a notice under the procedure in the Wireless Telegraphy Act for licence breaches. This proposes that if O2 has not met the rollout obligation by the end of June 2008, Ofcom will shorten the term of its 3G licence by four months.

Notes

1. O2 has until 30 June 2008 to make representations to Ofcom and to demonstrate that it has complied with the obligation. Ofcom will publish a statement on the matter after that date.

2. If Ofcom decides to reduce the term of O2's licence it would end on 31 August 2021 rather than 31 December 2021.

3. O2 acquired its 3G licence in 2000 for £4,030m. Ofcom estimates that a reduction of the licence term by four months would be equivalent to a significant financial sanction of at least £40 million.

4. 3G technology enables consumers to watch video and television and access the internet via their mobile phones as well as offering conventional voice and text services.

5. The five 3G licence holders in the UK are H3G, O2, Orange, T-Mobile and Vodafone.

6. Ofcom is the independent regulator and competition authority for the UK communications industries, with responsibilities across television, radio, telecommunications and wireless communications services.