CHINA is preparing to issue its first third-generation (3G) mobile phone licences ahead of the 2008 Beijing Olympic Games, in a move that will trigger tens of billions of pounds of investment by network equipment makers.

The long-awaited green light for 3G could come as early as the end of this year as China comes under pressure to have the technology running in time for the Olympics.

The move by Beijing comes as Britain’s mobile operators, for which the much-hyped 3G technology so far has proved a costly flop, brace themselves for a decision on whether they can reclaim £3 billion in VAT from the £22.5 billion licence auction in the UK in 2000.

The operators — Vodafone, Orange, T-Mobile, O2 and 3 — have been told that an advocate-general of the European Court of Justice will issue an opinion on the long case on September 7. The decision could allow operators across Europe to save some face in the embarrassing saga in which they overpaid for a technology that has failed to deliver the hoped-for returns.

The operators argue that the £22.5 billion that they spent in total on 3G licences in 2000 included VAT. Since most businesses can deduct the VAT that they pay from the VAT that they charge customers, they should be eligible for a repayment, they argue. The Government says that it auctioned the licences in its role as a public body and so the auction was not within the scope of VAT.

The advocate-general gives an opinion to assist the court. His status is equivalent to that of a judge. His opinion is followed in about 80 per cent of cases.

Ericsson and Nokia, which already sell kit for 2G networks in China, are among those likely to invest in China when the 3G rollout begins. Motorola, the US mobile group, which already has a partnership with Huawei, the Chinese technology group, is also expected to compete for work.

The delay in issuing licences is thought to have been caused in part by a wrangle over a localised technology standard.

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