A NEW auction of “third generation” (3G) mobile licences will net only one tenth of the £22.5 billion secured in the first auction, the Government’s own advisers have predicted.

Quotient Associates, which advised ministers on the 3G licence sell-off at the height of the dot-com boom, believes the Treasury will reap at most £2.5 billion in a second auction proposed for 2007.

The forecast, which comes ahead of a consultation paper this week from Ofcom, the telecoms regulator, is likely to infuriate the five established mobile operators.

It provides official confirmation that careful restriction of the original number of licences forced the operators in 1999 to pay well over the odds for the right to use the technology, which enables users to download video clips and music and use other high-speed internet services.

During frenzied bidding Vodafone, Orange, mmO2, T-Mobile and 3 paid a total of £22.5 billion for licences to operate third-generation services. At the time, 3G was heavily promoted as the make-or-break service that would guarantee continued revenue growth for the fortunate few mobile companies.

The cost and time of developing the technology, which has been plagued by setbacks, means most operators have yet to see any return on their investment. Vodafone, Europe’s largest mobile player, only launched 3G phones in November. T-mobile and mmO2 have yet to launch their services.

Their fear now will be that a new licence is offered at a knockdown price enabling a new operator to set up in competition far more cheaply.

Chris Davies, director of Quotient, said: “The whole industry incorrectly estimated the price of the initial licences. Everyone was carried along.”

This week Ofcom will release a consultation paper detailing plans for the sought-after piece of spectrum, known as the 3G expansion band, and how it will be allocated and regulated.

Though the auction is unlikely to take place before 2007, advisers are already queueing up to bid for the work.

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