Tesco Mobile in trouble

Tesco’s mobile phone arm is under threat following network shake-up plans from telecoms regulator Ofcom.

It has been claimed that Ofcom wants to make some of the 900MHz radio spectrum, currently used by Vodafone and O2 for second generation calls and text services, available for other operators. Parts of the spectrum could be put up for auction in 2009.

Tesco Mobile, which is a 50/50 joint partnership with operator O2, has told Ofcom any reduction in the amount of wireless available would leave its service ‘severely downgraded’.

The no-frills-pay-as-you-go business has approximately 1.4 million customers. In a letter to the regulator, Tesco said its joint venture with O2 may have difficulty in remaining a viable force in the UK market as the services its customers currently enjoy can only be received on competitors networks.

The retailer added that the proposed changes could see its customers defect to rival operators and that costs would also increase considerably under the regulator’s move and were ‘probably not bearable’.

Ofcom announced its spectrum licensing proposals in a paper issued in September. It said it hoped other operators would take up some of the 900MHz spectrum to expand their third-generation mobile services, which provide internet and video access.

Ofcom added that the 900MHz spectrum was most suitable for expanding the 3G services into rural areas primarily because fewer masts would be required compared to high frequency spectrum.

Ofcom said liberalisation is likely to lead to significant benefits for consumers and citizens in terms of provision of mobile broadband services.

Last year, the UK mobile phone market was worth a total of £16.5 billion.

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