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* 4G licenses sell for less than 3.5 bln forecast
* All existing operators plus BT win licences
* Regulator Ofcom says result will speed 4G roll-out
By Paul Sandle
LONDON, Feb 20 (Reuters) - Britain's mobile operators werethe winners and the government was the loser in an auction of 4Gairwaves that raised a less than expected 2.3 billion pounds($3.6 billion).
Telecoms regulator Ofcom had designed the sale to maximisethe availability of 4G services, after the previous 3G auctionin 2000 delivered 22.5 billion pounds to the state but left theindustry indebted and unable to roll out new services for years.
"This is a positive outcome for competition in the UK, whichwill lead to faster and more widespread mobile broadband, andsubstantial benefits for consumers and businesses across thecountry," Ofcom Chief Executive Ed Richards said.
All four existing network operators picked up blocks ofairwaves for between 791 million pounds and 225 million, as didnew entrant BT Group, the regulator said on Wednesday.
Yet the Treasury had penciled in proceeds of 3.5 billion andalthough the total will rise slightly - after a final stage ofbidding to allocate the bands of airwaves - it will still fallfar short of what finance minister George Osborne had wanted.
The forecast, which the Treasury said had come from theindependent Office for Budget Responsibility, had helped Osborneconfound expectations in December by predicting governmentborrowing would not have to rise this financial year.
The opposition Labour party said the result showed Osbornewas wrong to bank the cash to flatter his borrowing figures.
"He couldn't bring himself to admit that borrowing was up sofar this year, but the trickery has now badly misfired," saidRachel Reeves, shadow chief secretary to the Treasury.
BNP Paribas economist David Tinsley said the shortfall wasnot a huge deal in the context of Britain's deficit, with 1billion pounds being less than 0.1 percent of GDP, butnonetheless it was more bad news for the public finances.
"It is certainly not going to help recent perceptions of theUK in terms of the fiscal position," Tinsley said.
By contrast, there will likely be widespread relief amongmobile operators that the amount paid is a fraction of the sumthey were asked to cough up during the 3G licensing process,said analyst Matthew Howett at telecoms consultancy Ovum.
"The fact they didn't have to pay billions more is withoutdoubt a positive thing," Howett said. "The costs of rolling outa network are significant."
The operators' outlays for spectrum licences in Britain arealso not to be as painful as those of a recent Dutch auctionthat raised 3.8 billion euros, well above the 800 millionanalysts had predicted.
GOLDEN FREQUENCIES
Next-generation 4G services deliver speeds more than fivetimes faster than 3G services, enabling smartphone and tabletusers to make video calls and consume more and more content.
Services will be launched on the new airwaves from thesummer, helping Britain, which got its first 4G service latelast year, catch up in the superfast broadband race.
Ofcom - which reduced the degree of competitive biddingpartly by reserving some frequency for a fourth operator - saidsuperfast mobile broadband would deliver economic benefits of atleast 20 billion pounds to British consumers over the next 10years. It said almost all of the population would be able toreceive 4G mobile services by the end of 2017 at the latest.
The airwaves, some of which became available after theswitch-off of analogue television signals, were sold in blocksof 800 MHz spectrum, the so-called golden frequencies suitablefor widespread coverage indoor and outdoor, and 2.6 MHzspectrum, to deliver higher capacity in urban areas.
Vodafone the country's third-ranking operator, paidthe most, some 790.8 million pounds, to win a five blocks ofairwaves, Ofcom said.
The operator's UK chief Guy Laurence said it had secured thelow-frequency spectrum to support the launch of its 4G servicelater this year. "It will enable us to deliver services wherepeople really want it, especially indoors," he said.
The biggest operator, EE (owned by France Telecom and Deutsche Telekom ), which has already launched 4Gservices in major British cities using its existing airwaves,paid 588.9 million pounds to buy more to extend coveragecountrywide, Ofcom said.
O2, owned by Telefonica, paid 550 million poundsfor two 800 Mhz tranches.
Ofcom reserved airwaves for a fourth operator in order tokeep the market competitive. Hutchison 3G, theoperator of fourth-placed Three, paid 225 million pounds to winthe bands, Ofcom said.
BT bid 186.5 million pounds to pick up three blocks ofspectrum. Managed networks provider MLL Telecom and HKT (UK), asubsidiary of Hong Kong-based PCCW, were both unsuccessful.
A final stage in the process will determine where in thebands each winning bidder's spectrum will be located, butanalysts said this would not significantly raise the total.
