Unexpected tax windfall for 3G operators

EUROPEAN 3G OPERATORS may have struck lucky over a disputed VAT bill. Their case has just been forwarded to the European Court of Justice. If they win, will the money be spent on shiny new base stations, then?

The operators paid $ billions to various European governments for their 3G licenses and some clever accountant decided to argue that the fees should have included VAT - so they should be able to offset 17.5 per cent of the total against their VAT bills. Until now, nobody seriously thought they'd win this case but suddenly it looks like they may well win.

The question is - what will they do with all that money? If The INQ was a European government, it would be looking very closely at the small print of the issued 3G licenses which require roll out parameters to be met. So a sensible UK operator would be looking to meet its obligation to cover 80 per cent of the country's population by December 2007 with its 3G network. That could be why when O2 recently showed The INQ a chart showing five phases of its roll-out plans, Phases 3 to 5 had no dates.

Perhaps O2 is plotting to speed up the roll out if it gets a big VAT refund? The infrastructure vendors - Nokia, Siemens-NEC and Ericsson must be rubbing their hands. µ