UK mobile operator Three calls for spectrum cap to rein in EE

LONDON (Reuters) - Britain's smallest mobile network operator, Three, wants the regulator to rein in market leader EE (BT.L) by setting a 30 percent cap on the proportion of airwaves an operator can own.

Such a move would boost competition in a market that delivers "mediocre" service to customers, it said on Tuesday.

The operator, owned by Hong Kong's CK Hutchison Holdings , said it needed more spectrum to grow its customer base and offer bigger bundles of data, a strategy it is pursuing after its merger with Telefonica's (TEF.MC) O2 was blocked by EU regulators in May.

EE (BT.L), owned by BT, has 42 percent of the spectrum currently available, while Vodafone (VOD.L) has 29 percent and O2 and Three have 14 percent and 15 percent respectively, Three said.

British competition authorities waved through BT's acquisition of EE in January without making BT sell any of its combined spectrum, to the surprise of some in the industry.

Three UK's Chief Executive David Dyson said he wanted regulator Ofcom to impose the 30 percent cap at the next auction, expected next year, as it would provide better balance in a market with four operators.

"All operators other than EE-BT are below that 30 percent cap right now," he told reporters on Tuesday. EE should not be precluded from bidding, he said, but it should be required to sell some of its existing portfolio if it wanted to buy new spectrum.

Dyson also said EE and Vodafone were not using all the spectrum they owned, which he said indicated that they bought the airwaves in order to deny Three or O2 capacity.

Vodafone, however, said Three had not faced any barriers in buying spectrum.

"These are some pretty surprising comments from an operator which has been in the UK market for more than 15 years and has had ample opportunity as well as the financial resources to bid for spectrum when it's become available," a Vodafone spokesman said.

EE, which unveiled faster network technology for the latest smartphones on Tuesday, said it used all its spectrum to the benefit of customers.

"We pioneered 4G and we are a leader in network speeds," a spokeswoman said.

"We are unique in our commitment to expand 4G coverage to 95 percent of the UK's landmass by 2020, further than any other UK network has done, and will continue to ensure the UK stays at mobile technology's leading edge."

An Ofcom spokesman said the regulator planed to publish a consultation in the autumn, which would set out its plans for the next auction of spectrum, of 2.3-3.4 GHz.

Dyson said Three was performing as well as it could with the assets it had, pointing to a 12 percent rise in first-half earnings to 348 million pounds and a 2 percent rise in customer numbers to 9.16 million.

"The industry we are operating in is pretty mediocre, and therefore if we can perform in that environment then we should take market share," Dyson said.

(Reporting by Paul Sandle; Editing by Susan Fenton)