Mobile phone competition under threat, says Three boss

The head of the mobile phone network Three warned that auctioning off Britain's radio frequency spectrum could destabilise "fragile" competition in the UK and potentially see his company drop out of the market altogether.

Ofcom, the telecoms watchdog, is currently drawing up plans to sell off the spectrum which will be crucial for mobile providers to offer fourth-generation (4G) services, and the mechanism for doing so has been hotly debated by the rival UK operators.

Kevin Russell, the outgoing chief executive of Three, told MPs on the Commons Culture, Media and Sport Committee yesterday: "This decision on spectrum fundamentally sets up the competitive structure for the UK mobile market for the next 10 years."

Should the auction structure be wrong following the merger of Orange and T-Mobile, he warned, "the danger is that five operators goes to four, then goes to three in a very short period of time". Without access to the spectrum "we cannot grow as quickly as we need to", Mr Russell added.

He said the impact of Orange and T-Mobile merging to create Everything Everywhere had "yet to be felt" but the move meant "there will be a degree of competitive tension that comes out of the marketplace". He warned the MPs: "There is a fragility to the competitive dynamic of the UK marketplace."

Mr Russell said Three was also angry that its rivals O2 and Vodafone had been able to use "re-farmed" spectrum for 3G services from the start of this year without having to pay a higher fee. He said: "That, to Three, does not seem fair."

Everything Everywhere's deputy chief executive, Richard Moat, agreed that O2 and Vodafone's "significant advantage" over their rivals was unfair to other operators.