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Why UK slid £150m to tax-exempt phone-mast master Arqiva

Private biz bags taxpayer handout? Thank George Osborne

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How does one fairly distribute £150m to extend Blighty's mobile coverage? Give the whole lot to a private company that has paid no corporation tax for four years and effectively holds a monopoly.

That company is Arqiva, which owns the vast majority of the UK's TV, radio and mobile phone transmitters. It will get £150m of taxpayers' cash with which to extend its network of sites, which are rented out to broadcasters and phone operators. We're told the money will extend coverage to 60,000 premises and "sections of road", but it will certainly help Arqiva maintain its billion-pound annual revenue.

Not that the revenue leads to profit, thanks to a system of loans and repayments that ensure shareholders make money and the company avoids paying UK corporation tax - as revealed by a Financial Times investigation last year.

There is no suggestion of any wrongdoing. John Cresswell, Arqiva’s CEO, told the FT: "Arqiva has invested heavily in the UK’s infrastructure, including £630m in the digital [TV] switch-over. In recognition of this considerable investment in the UK’s communications infrastructure, the government has agreed a tax exemption* for Arqiva from 2009."

Meanwhile, said government has thrown a pot of public cash at improving the nation's mobile internet connectivity, showering Arqiva with the gold. But how else was it going to distribute the money without upsetting the mobile industry? The network operators would have taken the cash and complained bitterly about the amount the other operators were given, and Arqiva's dominance means there isn't really anyone else who could use the nine-figure sum.

When the funding was announced by Chancellor George Osborne, back in October 2011, even the network operators said they weren't interested in the cash, but instead wanted planning laws relaxed to allow the construction of bigger and beefier phone masts and the trenches of cabling needed to serve them.

In rural areas, the trenches are generally the expensive bit: the technology keeps getting cheaper but the cost of digging across someone's land costs an arm and a leg. Microwave links can reach anywhere with line of sight, but there's still power cables and access for regular maintenance which can involve building roads and all sorts.

The Mobile Operators' Association pulled up extreme examples - £350,000 to connect one Welsh base station, for instance - but pegged typical costs of delivering power to a site on a farm at £25,000, making it the most expensive part of the process.

But the association was more concerned with planning laws, and how to mitigate them. Fortunately that appeal was also heard and existing masts can now be hoiked up to 20m and fattened up by a third without additional planning permission.

That enables Arqiva to stick antennas for multiple operators onto the same set of steel, which is important with 4G networks rolling out as network operators combine their 3G systems and strip redundant radio gear from masts.

Giving £150m of government cash to a private company to extend its near-monopoly may seem weird, but really the Ministry of Fun had little other option once Osborne had made his 2011 promise. ®

Bootnote

* Arqiva got in touch after this article was published to say that "exemption" was the wrong word to use. According to a spokesman, the CEO meant to say: "Arqiva is in constant dialogue with HMRC and our tax affairs are fully compliant with UK regulations."

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