BT set to re-enter mobile market with licence bid

BT is poised to re-enter the UK mobile market five years after it split from O2 to offer advanced mobile broadband services.

The telecoms regulator Ofcom has unveiled plans to auction off a huge chunk of spectrum - the frequencies that carry mobile signals - over the coming year. It said the spectrum will be sold in two lots and is appropriate for a wide range of services including mobile television, advanced mobile services like 3G, and mobile broadband access via technologies like WiMax.

It is the largest release of spectrum ever in the UK, although it is unlikely to command anything like the £23bn that mobile operators shelled out at the turn of the century for 3G.

BT was one of the five telecoms companies that purchased a 3G licence, but it was forced to demerge its Cellnet division - later re-branded O2 - to reduce its crippling debt levels in 2001. The company has since concentrated its efforts on IT services, broadband and , more recently, internet-based television. It offers business and residential customers mobile services via a wholesale network agreement with Vodafone.

The company has also invested in building wifi networks that offer wireless broadband access when within range of a "hotspot".

BT is interested in offering the wider-ranging WiMax technology but does not currently own appropriate spectrum to roll out the service. A BT spokesman said: "We are naturally interested in the potential of this spectrum and we continue to assess its possible uses, including the possibility of Wimax."

The auction also raises the prospect of new companies entering the UK mobile telecoms market as multiple licences will be available.

Companies that successfully bid for the spectrum will not be tied to offering specific technologies over the frequency. That contrasts with the 3G licences that were sold with specific conditions about use of the spectrum. Mobile operators like Vodafone have started lobbying Ofcom to allow a relaxation of initial licence conditions to use existing spectrum for a variety of services.

BT's potential move into the WiMax space has implications for smaller telecoms provider Pipex. Pipex is one of only two companies that owns spectrum that can be used for the mobile broadband technology.

Bridgewell Securities analyst Dan Gardiner said that the new spectrum is more suitable for providing WiMax coverage.