One2One sues DTI over phone auction

The mobile phone licence auction that landed the Government a £22 billion bonus looks like landing them in court.

Phone firm One2One plans to sue the Government over its handling of the sale because it claims that its rivals, Vodafone and Orange, are being allowed extra time to pay.

One2One claims that the extra 180 day payment time granted to the other two bidders means that they will save millions of pounds in interest.

The extra 180 days came about because British firm Vodafone bought German mobile giant Mannesmann earlier this year. Mannesmann owned Orange and this meant that both Vodafone and Orange were part of the same company. To placate competition watchdogs Vodafone agreed to sell Orange as soon as possible.

Both firms, which already have British mobile licences, were allowed to bid in the recent auction because they agreed not to take up the licences until they were separated.

The Department of Trade and Industry agreed to a delay in payment for 180 days to allow for the separation, so Vodafone is not stuck with a double bill.

Vodafone bid almost £6 billion for its licence, while Orange and One2One offered just over £4 billion.

One2One says the delay will save the rival companies £2 million a day in interest. This could work out to as much as £360 million.

Another licence bidder, BT, has expressed concern at the concession to Vodafone, but has so far stopped short of threatening legal action.

One2One said it would serve a writ on Trade Secretary Stephen Byers in the next few days.

The firm said it will pay its entire bill on the due date, which is tomorrow, but its legal action will seek compensation for the interest cost of having to pay earlier than Vodafone or Orange.

Robin Saphra, public policy director at One2One, said: "We have tried hard to reach agreement with the Government over the discrepancy in payment terms between ourselves and Vodafone and Orange.

"We are disappointed that we have had to make the decision to take legal steps, in the interests of both our customers and our shareholders, to ensure a fair and level playing field."

A spokesman for the DTI said: "The Government is fully satisfied that the auction rules are fair to all parties and that they comply with domestic and European law."

The licences allow companies to use a new standard of mobile technology called UMTS which will bring full Internet access, email and even video services to mobile phones.