UK taxpayer 'fleeced' in spectrum selloff windfall

British taxpayers are bailing out Europe again. This time, it isn't aid to the basket-case Euro economies of Greece or Ireland, says MP Tom Watson, but a spectrum windfall that the taxpayer should pocket... only won't.

Watson can't understand why profits from the sale of spectrum originally gifted to mobile operators in 1991 should be pocketed by the private sector. The owners of the beneficiaries include Telefonica, which owns O2, and France Telecom and Deutsche Telecom, who own Everything Everywhere - the merged Orange and T-Mobile. Whose spectrum is it anyway?

Yesterday, at the first of two Commons Media select committee hearings into spectrum, Watson doggedly questioned representatives of Everything Everywhere on why the venture's French and German owners should benefit, but not the UK taxpayer.

It made for good TV, by parliamentary TV standards.

Watson reckons that the spectrum being sold by Ofcom - as a condition of the Orange/T-Mobile merger - may be flogged for around £450m. Neither Richard Moat, EE's CFO and Nick Ott, VP of strategy, would be drawn on a figure.

Watson sounded incredulous.

Moat confirmed Everything Everywhere was paying £33m a year in spectrum fees to Ofcom. Didn't this leave a profit of around £290m, then, asked Watson?

"You're about to get a third of a billion quid dividend from it - a surplus for a piece of spectrum you were given for free?" he asked.

"These licences were awarded between 20 and 30 years ago," complained Moat. EE said that money raised from the windfall will benefit UK users.

"So the profit will be ring-fenced for investment in the UK network?" asked Watson.

"Ah, not ring-fenced," admitted EE.

"Do you not think the public should get a share of the profit you're making?"

"That was taken by the authorities when it approved of the merger. It was not our decision to sell it in the first place," replied Moat.

Ott pointed out that the company, and its predecessors, had invested in £58bn over 20 years in adding value to that spectrum. Without the capex, it wouldn't be worth very much at all. Everything Everywhere also said they'll be left out of pocket once expenditures start on building the 4G networks.

Watson has a point, though. Why do companies think that once gifted stewardship of a public resource, they think it's theirs for life?

It's O2's turn in the firing line next. ®