Grocer wants to scupper O2 MVNO venture

IN ANOTHER strategic leak to the FT, O2's new CEO – Matthew Key – has revealed that Tesco Mobile has objected vehemently to an Ofcom proposal to claw back 900 MHz spectrum.

Before stepping up to CEO of O2 Europe, Key was, of course, credited with building up Tesco Mobile for O2 as a highly successful MVNO with around 1.4 million customers.

Back in September 2007, Ofcom suggested that it would be a jolly good idea to steal some bandwidth in the 900 MHz spectrum back the UK's two oldest operators – O2 and Vodafone.

The idea was that this spectrum could be re-allocated to offer 3G services in more rural areas. However, Key revealed that Tesco has condemned the move as a 'regulatory diktat'.

The company had also hinted that such a move would probably cripple its business model. Why should that be?

Well, O2 is using spare capacity at 900 MHz to provide a cheap service to Tesco, It's major competitor, however, is Virgin Mobile which borrows capacity from T-Mobile. Since that capacity is at 1800 MHz, it isn't threatened by Ofcom's move.

At the time of Ofcom's announcement, the INQ suggested that all of the options haven't been fully explored. There's largely unused spectrum which could be used to operate mobile broadband services.

Especially since the spectrum – known as UMTS TDD – is already used for mobile broadband in many geographical regions.

The INQ isn't sure about the validity of Ofcom's request, anyway. If Ofcom wants to force operators to better use their allocated spectrum, it could force O2 and Vodafone to give up their 1800 MHz 2G allocations; hand that to Orange and T-Mobile and then force the latter pair to give up some 3G spectrum for cheap usage.

That's about as daft a plan as Ofcom's 900 MHz proposal, anyway. µ

See Also
Ofcom wants to sell off 900 MHz spectum
FT story

L'INQs
Tesco Mobile
Ofcom