Auction of 4G could fall short by billions
Dec 16, 2012 (Financial Mail on Sunday - McClatchy-Tribune Information Services via COMTEX) --
GEORGE OSBORNE faces a big hole in the public finances as it emerged this weekend that the auction of the fourth-generation radio spectrum may raise little more than one third of the pounds sterling 3.5 billion he predicted.
Ofcom, which is running the 4G auction, is understood to have put a reserve price of pounds sterling 1.2 billion on the sale. The media regulator declined to comment.
Controversially, the Chancellor has already begun spending the proceeds from the auction of 4G, used to supply superfast internet access to mobile phones, even though not a penny has yet been raised.
In his Autumn Statement, he quoted an estimate from the Office for Budget Responsibility -- the independent public finances forecaster -- that pounds sterling 3.5 billion was due from the sale.
However, it has emerged that neither the Treasury nor the OBR discussed with Ofcom how much the sale was likely to raise.
If the returns turn out to be considerably less than pounds sterling 3.5 billion, Osborne will have a hole in his budget.
Osborne said he is spending the money on schemes to help small businesses and to fund capital investment in further education colleges and schools.
Under his plans, the receipts from the auction will be booked in full in January, even though the auction itself is not scheduled to end until March.
The OBR said it took soundings from a number of sources and looked at how much similar auctions had raised abroad.
It spoke about the timing of the auction with Ofcom, but did not discuss the total sum likely to be raised. The OBR said it was aware of Ofcom's estimated reserve price. It admitted: 'We did not ask Ofcom how much was likely to be raised by the auction.'
The Treasury, meanwhile, said the OBR was wholly responsible for the forecast used by Osborne.
Bidders notified Ofcom of their interest in the auction last week and the regulator could reveal the names of bidders this week.
Though the auction of the 3G spectrum in 2000 provided a windfall for the Labour Government of pounds sterling 22.5 billion, 4G is expected to be very different.
Accountant KPMG has noted that most telecoms companies are strapped for cash because of the harsh economic climate and it has pointed out that the recent 4G auction in Germany brought in considerably less per head than the British Government is expecting.
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