Will the 4G mobile auction meet the £3.5bn target?

4G is being introduced to ultimately replace existing 3G coverage, and will give smartphone users faster data downloads, reports The BBC.

While the EE mobile phone network (formed by the merger of Orange and T-Mobile) has already been able to launch 4G, the rest of the required frequency bands are now being made available.

Following the passing of Tuesday’s deadline for applicants, the auction will start next month, with licences granted in February and March and services set to be launched in May and June.

All four of the current mobile phone networks are expected to participate in the auction – Vodafone, O2, Three and EE. Analysts say EE will take part so it can gain additional frequency bands to expand its 4G service.

No new entrants are expected because of the sky-high cost of setting up a new mobile phone network in the UK.

James Barford, mobile analyst at Enders Analysis, said the auction may struggle to raise £3.5bn.

“Auctions are always very difficult to predict,” he says.

“What I would say is that if you look at the European auctions of 4G and expect the same prices in the UK, ours should raise about £2.5bn.

“I wouldn’t say £3.5bn is beyond the realms of possibility, but it is a little hard to see. It was the same mobile phone companies, or least their parent firms, who participated in the European auctions as will do so in the UK.”

By contrast, Shaun Collins, chief executive of CCS Insight, which studies the mobile phone industry, said the auction could raise more than £3.5bn.

“At the end of the day, it is an auction, it has been structured to maximise the return to the government. So £3.5bn may be a little modest,” he says.

The £3.5bn target figure originally came from the Office for Budget Responsibility, the agency set up by the government to independently monitor public sector finances.

Dan Worth, news editor of technology website V3 said it was “slightly odd” that George Osborne and the Treasury were publicly agreeing with this figure.

“The government should be wanting to make as much money as they can, with the operators caught in a bidding war. The government putting a figure on how much it wants to raise doesn’t help do this.”