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UK mobile phone providers could be in line for up to £300m in refunds after the Court of Appeal backed their challenge to sharp increases in the fees they pay to use spectrum for wireless services.
Ofcom, the regulator, quadrupled the annual licence fee in 2013, boosting the total annual bill paid by EE, O2, Vodafone and Three, the big British operators, to the government by £200m.
EE, now owned by BT, mounted a legal challenge in 2015 and lost. But it then took the appeal further.
On Wednesday, the appeal court came down squarely on the side of the telecoms groups, ruling that the annual fee rise was inconsistent with EU laws on infrastructure investment. The court also found that Ofcom had misinterpreted a 2010 instruction from the UK government ordering it to review the levy and reflect the fact that the market value of spectrum had risen due to rising smartphone usage.
If the ruling stands, the UK Treasury would probably be required to return the money collected through the higher tariff during the past two years. Two people briefed on the situation said that sum is estimated at between £200m and £300m.
Lord Justice Patten has given Ofcom permission to appeal against the decision if it so chooses.
An Ofcom spokesman said: “This case raised an important point of law concerning the government’s spectrum direction to Ofcom. We are considering the judgment carefully.”
EE said the funds should be returned to the telecoms companies to invest in their networks. “We’re happy with the outcome as we’ve always supported the view that the trebling of spectrum fees was excessive and would harm network investment,” a spokesman said.
BT shares closed up 2 per cent to 250.65p.
Aaron White, a lawyer at Herbert Smith Freehills, said: “The decision will be welcomed by industry as it comes at a time when operators’ margins continue to be squeezed amid decreasing traditional revenue streams while they are still being required to invest significant amounts of capital.”
The ruling is the latest in a series of showdowns between BT and Ofcom. They faced off in court this year over business connectivity measures and will do so off again in December over the impending 5G spectrum auction rules.
Matthew Howett, founder and principal analyst with research company Assembly, said the case shows the UK government is not acting clearly when it comes to mobile network expansion. The higher fees for mobile phone providers, which in effect reduce their profits and ability to invest in their networks, came at a time when the government was trying to improve coverage.
Indeed, the Budget included a £160m pledge by the government to invest in boosting the UK’s prospects in 5G network development.
“A couple of years ago Germany committed money that had been earned during a recent spectrum auction to be poured back into rural broadband initiatives. It’s about time the UK government started thinking in a similarly joined-up way,” he added.