Three tells Ofcom to cut BT down to size in spectrum auction

Mobile operator Three calls on Ofcom not to let BT and EE dominate in 4G auctions later this year

Mobile operator Three, thwarted in its aim to acquire O2 just last month, has called on the telecoms regulator Ofcom to rein in the power of BT and its EE mobile subsidiary in the forthcoming 4G spectrum auctions planned for later this year.

Three believes that BT should be limited in terms of how much it can buy in order to prevent the UK's mobile market from being dominated by a single telecoms behemoth.

The demand for mobile data in recent years has fuelled the power of incumbent operators across Europe, as the need for ever-more bandwidth has swung the market in favour of companies with access to national fibre data networks.

Three CEO David Dyson told The Financial Times that the firm is concerned that BT will use its strength to buy even more spectrum and that this will limit the ability of Three and other networks to remain viable competitors in the market.

"The combination of BT and EE is incredibly strong financially. It has the ability to outcompete everyone in the market in how much they are willing to pay," he said.

"Potentially, given how much spectrum they are already sitting on, BT is incentivised to strategically bid in the next auction to restrict the other operators in the market from increasing their spectrum portfolio. That could make life difficult."

Ofcom should bring in "fairly significant restrictions" on BT to stop this happening, according to Dyson.

The auction of the new spectrum is expected to take place later this year. It was originally intended for early 2016 but was delayed by Ofcom owing to the potential merger of O2 and Three at the time.

The spectrum up for grabs is significant, as it represents around three-quarters of the amounts issued in 2013 for the first 4G spectrum auctions, which helped kick start 4G coverage in the UK.

The spectrum sits in the 2.3GHz and 3.4GHz bands and is ideally suited to mobile broadband 4G services. Vodafone and EE use the 2.6GHz band to deliver some of their 4G services. The new spectrum was released by the Ministry of Defence.

Dyson's comments from come after Three's proposed acquisition of O2 was blocked by the European Commission due to concerns that only having three dominant operators in the market would limit competition, raise prices and harm consumers.

Dyson explained that the company is disappointed with the decision, but will move on and find new ways to compete.

"You have to move forward and make the most of the cards you're dealt even if you disagree with the decision. We have a challenger DNA in the business," he said, although he added that investment is not always easy with the smallest customer base.

"At the right valuation, Hutchison will invest but as the smallest [operator] we have few customers to recoup the investment."