Ofcom is to delay the planned auction of 2.3GHz and 3.4GHz radio spectrum currently used by the Ministry of Defence (MoD) after Telefnica and Hutchison put in a legal bid to halt proceedings.
The firms, which run O2 and Three, want the regulator to wait until after a decision is made about plans to merge the two phone networks.
In total, 190MHz of spectrum was scheduled to be auctioned to networks, comprising 40 MHz from the 2.3 GHz band and the remaining 150MHz from the 3.4GHz band. This all forms part of the Public Sector Spectrum Release programme, which pledges to free up public sector spectrum for commercial use.
But Telefnica and Hutchison both wrote to Ofcom to say they would be seeking a judicial review if the regulator went ahead with plans to sell off the spectrum before an EU ruling on whether the networks they own could merge.
"After careful consideration, given these specific circumstances, we have decided for reasons of good public administration to delay commencing the auction process," Ofcom said in a statement.
"Ofcom will not now commence the auction process until the European Commission has taken its decision as to whether the proposed merger between Telefnica UK Limited and Hutchison 3G UK Limited is compatible with the common market."
O2 and Three welcomed news of the delay.
"Proceeding with a major spectrum award immediately before the conclusion of two significant competition investigations would have created uncertainty in spectrum valuation," said an O2 spokesman in a statement. "This would have risked an inefficient auction outcome that could have harmed competition, increased costs and prevented best use of the spectrum, ultimately leading to disadvantages for customers."
Ofcom unveiled plans to sell off parts of the UK's 2.3GHz and 3.4GHz spectrum, earlier last month, as it takes steps towards rolling out 5G mobile networks.
The regulator said it will sell portions of the frequencies next year, allowing for mobile phone providers to start planning their strategies for faster mobile broadband.
At the moment, the 3.4GHz band is being used to provide European countries with 4G connections, although the surplus will become available by 2020 after the Ministry of Defence vowed to free up much of the spectrum being used by the government. The 2.3GHz band is being used by 4G networks in China, India and Australia.
To stop prices going too low, Ofcom will set a reserve price on the portions of spectrum, ensuring it raises at least 70m from the bidding. It's thought the reserve price will be 10m for a 10MHz slice of the 2.3GHz band and 1m for a 5MHz section of the 3.4GHz frequency.
There won't be any limits on how much spectrum each mobile network can buy, meaning some of the bigger, richer players could potentially buy the smaller suppliers out of the market.
