This sums up much of my thinking - I hold a few and swing trade a few and even trade intraday sometimes ......

I think there is a lot of slack that management can cut out of the costs and would also anticipate sector consolidation ..... good value currently and have been holding their own in a falling market. Lot of US interest.

ains


Edited by Dominic White
(Filed: 08/02/2003)


Texting makes MmO2 sexy but it's also risky

More and more Britons are discovering the joys of textual intercourse. In the month of December, we fired off more than 50m mobile messages a day, and next Friday (that's Valentine's Day, folks, in case you'd forgotten) we'll send considerably more than that.



It emerged this week that the chief beneficiary of this craze is MmO2 . BT's former mobile phone division revealed that it gets a higher proportion of revenues from texting than any of the other three operators.

Revenue from messaging grew at its fastest rate ever in the last quarter, up 19pc, and data services as a proportion of MmO2 's revenue rose to 17.7pc from 15.6pc.

More good news was the rise in MmO2 's average revenues per customer. ARPUs, as nerdy analysts like to dub them, grew by 5pc to 243 in the UK and by 9pc in Germany to 212.

MmO2 now has 19.1m subscribers and in Britain it may be the smallest player, with 11.9m users, but it is growing faster than its rivals - testament to the success of its rebranding from BT Cellnet.

Only 114,000 of its 503,000 new UK subscribers were higher-spending contract customers, but MmO2 claims its pre-pay customers have started spending more than before.

Customer growth in Germany, which continues to be dominated by T-Mobile and Vodafone, is less impressive and the MmO2 share price ascribes little or no value to this part of the business.

That seems unfair, given the fact that the group has attracted higher-spending customers and has made a decent fist of turning the operation around. An eventual sale or merger is almost as inevitable as a disposal of the Dutch unit, which is losing customers.

MmO2 's larger rival Vodafone is trading on a free cashflow yield of 6pc, while at 49p this week, MmO2 's equivalent valuation remains negative. It might not have Vodafone's scale or profitability but there is room for upside. A risky buy.

I note oftel are looking into mobile charges again but say they will not be interfering in G3 charging

This looks like potential good news


May 15, 2003

Mobile operators may claim 4bn refund
By Dan Sabbagh TIMES



BRITAINs five mobile phone operators are considering launching a claim for a 4 billion refund of VAT. The Times has learnt that the companies believe the 22.5 billion they paid in the third-generation licence auction three years ago included VAT.
A claim, if launched, would be fiercely resisted by the Treasury, which used the windfall proceeds to make record debt repayments during 2000.

The Government says the sale of licences was VATexempt, a position that is now being challenged. If the operators could prove that VAT was part of the purchase price, then they could apply for a VAT refund worth 17.5 per cent of the total, or 3.9 billion, from Customs and Excise.

Most businesses do not pay VAT, although sometimes a company has to reclaim the sales tax back from the authorities when it has been forced to pay up on a purchase.

The search for a legal basis to challenge the Government remains at its early stages, but The Times has learnt that all Britains operators Vodafone, Orange, mmO2, Deutsche Telekoms T-Mobile and Hutchison Whampoas 3 have examined the issue carefully. None is yet ready to discuss the subject in public. But privately, one operator said: Our shareholders would expect us to look at this seriously, given the sums involved.

The background to any British claim comes from Germany, where third-generation licences were sold for 30.5 billion in 2000. VAT is harmonised across the European Union, and a ruling in Germany would have clear implications for the UK.

The Dutch group KPN said earlier this week that it was orchestrating a campaign of the countrys big four operators, which include Vodafone, and mmO2, to pursue a VAT refund which would be worth 5 billion. The Times has learnt KPN is demanding a VAT invoice from the German Government, which has refused to comply.

A spokesman for KPN said: There is no consensus amongst tax experts as to whether VAT was applicable on the licences. There are discussions ongoing in Germany, and legal action is always possible if the tax authorities are not willing to comply.

British tax experts believe that a claim for a refund would be optimistic but not impossible. Paddy Behan, a VAT specialist with the accountants Grant Thornton, said: Because of the amounts involved, it is very likely that the companies will press on.

The EUs Sixth VAT Directive, which governs the taxs basic principles, says VAT should not generally apply to public authorities. However, it also says that if a public authority engages in one of a list of specified activities, including telecoms, then VAT must be levied. Mr Behan said: The rules seem to be designed for when telecoms services are provided by state-owned providers, but the companies in these cases may try to argue that the licensing round was a telecommunications activity. If this were accepted they would get the result they want but it is a difficult argument to make.

A spokeswoman for Customs and Excise said: We are monitoring what is happening in Germany. But we will defend any attack on legitimate government revenues; in our view no VAT is due on regulated activities.

A sudden need to find 4 billion from the Treasurys coffers this year would be a headache for Gordon Brown. The demand would come at a time when the public finances are badly stretched by weakening tax revenues and extra public spending.

15 May 2003

Oftel publishes mobile call termination market review

Measures to promote competition and reduce the price of calling a mobile phone
have been proposed today by Oftel.

Action is necessary because consumers pay too much for making calls to mobile
phones as they have no choice but to incur the high connection charge set by the
operator of the network they are calling.

Oftel is reviewing the calls to mobile phones market as part of its work to
implement the new EC Directives on electronic communications networks by 25 July

This is a separate review from the recent Competition Commission investigation
into call termination rates, which was carried out under the current telecoms
regulatory framework. The Commission made recommendations for charge controls
over the next three years, but the introduction of the new Directives means
Oftel is required to carry out a fresh review under the terms and procedures of
the Directives, before reaching its own conclusions.

The key proposals set out Oftel's review of the calls to mobile phones market
are to:

protect consumers from excessive call termination charges through a
continuation of controls to reduce the amount mobile operators charge to
connect calls to their networks;

promote competition between operators by ensuring equal access and no
undue discrimination against other operators for terminating calls onto the
mobile networks; and

not impose regulation on the 3G market as these are new and innovative
services and regulatory controls would be disproportionate while the market
is developing.

David Edmonds, Director General of Telecommunications said today:

'Calls to mobile phones is a separate market from the mobile retail market and
has no effective competition, because consumers cannot choose between
terminating networks when they make a call to a mobile phone.

'Calling someone on their mobile phone is expensive because consumers have no
option but to pay the connection charge set by the operator of the network they
call.

'Oftel believes that measures are needed to require the mobile operators to
reduce their call termination charges, which should result in cheaper calls to
mobile phones.

'Oftel's proposals are in line with the Competition Commission's original
recommendations and consist of three annual cuts of around 15 per cent over the
next three years.

'In line with Oftel's earlier commitments, we do not to intend to place any
regulation on the 3G market. These are new and innovative services and
inappropriate regulation at this stage could damage the evolution of this new
market.'

The consultation period ends on 24 July 2003.

Oftel has also published today a consultation document on whether the current
requirement on O2 and Vodafone to negotiate an agreement with 3G new entrant
operator Hutchison 3G (3) to allow customers of 3 to roam over their 2G network
should continue. Under the new EC Directives all licences will be revoked which
means the current obligation on O2 and Vodafone to offer roaming will fall away.

Oftel believes that 3 will continue to need access to national roaming while it
is building its 3G network, so the obligation should therefore remain, and apply
to all four 2G mobile network operators.

L2 status now for VOD & OOM? Did you offload your holding yesterday. Wish I had holding.

I am still holding for now - should be a + day



Buy orders Sell orders
Num(%) Num Vol(%) Vol VWAP Vol Vol(%) Num Num(%)
1% (46.15%) 6 (68.21%) 964,960 56.16 - 57.02 449,686 (31.79%) 7 (53.85%)
5% (41.18%) 7 (66.54%) 1,146,798 56.06 - 57.24 576,686 (33.46%) 10 (58.82%)
10% (48.65%) 18 (68.67%) 1,895,987 55.47 - 57.82 865,086 (31.33%) 19 (51.35%)
15% (42.55%) 20 (50.65%) 1,935,411 55.41 - 59.15 1,885,359 (49.35%) 27 (57.45%)
50% (45.28%) 24 (61.62%) 3,107,854 53.60 - 59.30 1,936,051 (38.38%) 29 (54.72%)
100% (49.12%) 28 (61.81%) 3,132,874 53.48 - 59.30 1,936,051 (38.19%) 29 (50.88%)
all (48.28%) 28 (61.76%) 3,132,874 53.48 - 59.49 1,940,051 (38.24%) 30 (51.72%




Buy orders Sell orders
Num(%) Num Vol(%) Vol VWAP Vol Vol(%) Num Num(%)
1% (40.35%) 23 (40.73%) 4,438,276 121.77 - 123.06 6,459,042 (59.27%) 34 (59.65%)
5% (48.84%) 42 (41.45%) 7,518,022 121.20 - 123.49 10,619,442 (58.55%) 44 (51.16%)
10% (45.45%) 70 (42.51%) 11,548,260 119.96 - 124.61 15,620,231 (57.49%) 84 (54.55%)
15% (47.70%) 114 (45.05%) 16,989,956 118.28 - 126.27 20,727,624 (54.95%) 125 (52.30%)
50% (51.89%) 165 (45.68%) 18,635,030 117.21 - 127.03 22,160,636 (54.32%) 153 (48.11%)
100% (50.28%) 179 (45.72%) 18,871,528 116.91 - 127.36 22,404,624 (54.28%) 177 (49.72%)
all (49.31%) 179 (45.68%) 18,871,528 116.91 - 127.62 22,439,820 (54.32%) 184 (50.69%

Emblaze to power O2 video trials

London, May 14 2003, (netimperative)



by Susie Harwood

Wireless streaming developer Emblaze announced that it has been selected to provide technology and services to UK mobile operator O2 for its mobile video trial taking place this month.


O2 announced last month that it had chosen 350 customers to take part in a six-week mobile video trial using the O2 xda, Nokia 7650 and Nokia 3650 devices over its GPRS network, ahead of a planned commercial launch later this year. The trial focuses on three principal areas: streaming video, downloading clips and video messaging.

Emblaze said that O2 will use its EMplatform to offer customers a continuously updated range of services including news, weather, entertainment, music and movie trailers.

The company has set up a special WAP portal for O2, where trial customers can browse, select and download video clips. Trial customers will also be able to download EMplayer directly from the portal to their mobile phone.

Ericsson, UK's mmO2 Sign Europe-wide Frame Agreement
EDITED PRESS RELEASE
STOCKHOLM (Dow Jones)--Swedish telecommunications equipment maker Telfon AB LM Ericsson (ERICY) said Thursday it has signed a Europe-wide frame agreement with the U.K.'s mmO2 Plc (U.OOM) over the supply of its MINI-LINK microwave system..
No financial details were disclosed. The agreement covers all subsidiaries within the mmO2 group.
This agreement is a pan-European pricing framework and is the common base for all subsidiaries within the mmO2 group - i.e. O2 Germany, O2 United Kingdom, O2 Ireland, Manx Telecom (Isle of Man) and O2 Airwave (UK) - to enter local agreements and place orders.
"This agreement reduces the efforts for the local companies to negotiate everything from scratch. By this we increase efficiency in line with the mmO2 motto 'Do it once"', says Karl-Wilhelm Rohrsen, Chief Technical Officer of O2 Germany.
"For Ericsson this agreement once again shows that we are regarded as a reliable partner with an international presence and first class products. It is a further step in strengthening our business relationship with mmO2," says Sivert Bergman, Vice President & General Manager Transport and Transmission.
Ericsson's MINI-LINK portfolio is a microwave access solution.
Over half a million MINI-LINK radios have already been deployed in more than 125 countries, giving Ericsson a global market share of over 40% percent. MINI-LINK cost-efficiently connects base stations, switch nodes and offices, forming either single radio connections or complete microwave networks. Instant capacity needs in any geographical site is the main driver for microwave transmission both in 2G and 3G rollouts. The latest additions for the MINI-LINK portfolio are high capacity radios handling 155 Mbit/s and cost-efficient traffic nodes. MINI-LINK products are based on open standards, making them fully compatible with networks from all suppliers.

well outperforming the market this morning .... sector up 0.41%

L2 for VOD & OOM? Are you still holding from sub 53.5 or did you sell & Buy back.

I did trade a few ..... volumes are a little low today but we are still 2.23% up with whole sector improving ... US NAS futures up 1.5 points and still talks of rate cut possibility


ains



Buy orders Sell orders
Num(%) Num Vol(%) Vol VWAP Vol Vol(%) Num Num(%)
1% (57.89%) 11 (62.73%) 1,638,489 56.78 - 57.45 973,457 (37.27%) 8 (42.11%)
5% (45.16%) 14 (57.96%) 2,455,511 56.53 - 57.71 1,781,038 (42.04%) 17 (54.84%)
10% (43.40%) 23 (59.27%) 3,335,849 56.07 - 57.97 2,292,506 (40.73%) 30 (56.60%)
15% (46.88%) 30 (51.32%) 3,468,238 55.97 - 58.67 3,290,149 (48.68%) 34 (53.13%)
50% (48.57%) 34 (58.14%) 4,640,681 54.62 - 58.76 3,340,841 (41.86%) 36 (51.43%)
100% (51.35%) 38 (58.27%) 4,665,701 54.53 - 58.76 3,340,841 (41.73%) 36 (48.65%)
all (50.67%) 38 (58.24%) 4,665,701 54.53 - 58.87 3,344,841 (41.76%) 37 (49.33%)


Buy orders Sell orders
Num(%) Num Vol(%) Vol VWAP Vol Vol(%) Num Num(%)
1% (57.14%) 40 (48.24%) 5,957,328 122.04 - 123.17 6,391,595 (51.76%) 30 (42.86%)
5% (55.34%) 57 (42.30%) 8,136,701 121.71 - 123.61 11,098,621 (57.70%) 46 (44.66%)
10% (52.00%) 91 (46.36%) 13,961,996 120.34 - 124.68 16,156,784 (53.64%) 84 (48.00%)
15% (50.18%) 138 (47.32%) 19,554,216 118.73 - 126.49 21,766,252 (52.68%) 137 (49.82%)
50% (54.87%) 186 (48.21%) 21,148,936 117.78 - 127.05 22,720,536 (51.79%) 153 (45.13%)
100% (53.42%) 203 (48.28%) 21,435,790 117.49 - 127.37 22,964,524 (51.72%) 177 (46.58%)
all (52.45%) 203 (48.24%) 21,435,790 117.49 - 127.63 22,999,720 (51.76%) 184 (47.55%

O2 extends remote email to SME market

London, May 15 2003, (netimperative)



by Susie Harwood

UK mobile operator O2 is looking to tap into the small business market as part of a drive to boost revenues from data services.


The company said it would begin a trial next month that will see its email-on-the-move service extended to BlackBerry devices. It launched the service, which provides users with access to business email, calendar and contacts, on its xda handset several weeks ago.

O2 said that offering the service over BlackBerry devices would enable it to reach a wider audience. It is a stand-alone device that does not required a back-end server, making it ideally suited to the small business market, the company added.

It already provides a corporate BlackBerry email-on-the-move offering, and it is based on the success of this offering - the company claims to have sold 23,000 devices across the group and be the biggest provider of BlackBerry across Europe - that led it to launch a small business offering.

The trial will run in the UK initially, where 250 O2 customers will be given the device for two months, before being rolled out to other O2 territories.

O2 said it would target specific vertical sectors, including manufacturing, construction, business services, local government, wholesale and retail, with tailored mobile data services as part of its focus

L2 for VOD & OOM? Mkts improved after BOE announcement & EON inc 2003 forecasts.

Buy orders Sell orders
Num(%) Num Vol(%) Vol VWAP Vol Vol(%) Num Num(%)
1% (44.00%) 11 (55.95%) 1,996,489 56.53 - 57.50 1,571,740 (44.05%) 14 (56.00%)
5% (35.90%) 14 (51.30%) 2,777,823 56.38 - 57.71 2,637,065 (48.70%) 25 (64.10%)
10% (40.63%) 26 (55.35%) 3,931,871 55.95 - 57.90 3,171,227 (44.65%) 38 (59.38%)
15% (42.47%) 31 (49.17%) 4,032,071 55.88 - 58.47 4,168,870 (50.83%) 42 (57.53%)
50% (44.30%) 35 (55.23%) 5,204,514 54.70 - 58.55 4,219,562 (44.77%) 44 (55.70%)
100% (46.99%) 39 (55.34%) 5,229,534 54.62 - 58.55 4,219,562 (44.66%) 44 (53.01%)
all (46.43%) 39 (55.32%) 5,229,534 54.62 - 58.63 4,223,562 (44.68%) 45 (53.57%

Thanks. Can you provide L2 for VOD also. OOM is very strong. Your very fortunate.

Buy orders Sell orders
Num(%) Num Vol(%) Vol VWAP Vol Vol(%) Num Num(%)
1% (57.95%) 51 (51.51%) 8,619,687 122.86 - 123.93 8,113,201 (48.49%) 37 (42.05%)
5% (60.16%) 77 (56.33%) 11,664,314 122.51 - 124.07 9,041,972 (43.67%) 51 (39.84%)
10% (52.02%) 116 (56.27%) 18,264,060 121.40 - 125.32 14,194,100 (43.73%) 107 (47.98%)
15% (54.26%) 172 (57.06%) 25,471,044 119.65 - 127.05 19,166,402 (42.94%) 145 (45.74%)
50% (57.44%) 220 (57.34%) 27,065,764 118.86 - 127.67 20,133,986 (42.66%) 163 (42.56%)
100% (56.13%) 238 (57.32%) 27,352,628 118.61 - 128.02 20,366,276 (42.68%) 186 (43.87%)
all (55.22%) 238 (57.28%) 27,352,628 118.61 - 128.30 20,401,472 (42.72%) 193 (44.78%






Buy orders Sell orders
Num(%) Num Vol(%) Vol VWAP Vol Vol(%) Num Num(%)
1% (57.69%) 15 (60.18%) 1,830,620 56.78 - 57.56 1,211,241 (39.82%) 11 (42.31%)
5% (46.34%) 19 (53.95%) 2,709,659 56.54 - 57.77 2,312,419 (46.05%) 22 (53.66%)
10% (45.16%) 28 (58.74%) 3,589,997 56.11 - 57.91 2,521,849 (41.26%) 34 (54.84%)
15% (47.95%) 35 (51.40%) 3,722,386 56.02 - 58.58 3,519,492 (48.60%) 38 (52.05%)
50% (49.37%) 39 (57.82%) 4,894,829 54.72 - 58.67 3,570,184 (42.18%) 40 (50.63%)
100% (51.81%) 43 (57.95%) 4,919,849 54.64 - 58.67 3,570,184 (42.05%) 40 (48.19%)
all (51.19%) 43 (57.92%) 4,919,849 54.64 - 58.77 3,574,184 (42.08%) 41 (48.81%)

The US figs just released were quite bad, especially PPI Shows Biggest Drop In 56 Years. How has that affected L2 now for VOD & OOM? Hopefully mkts have recovered from initial shock inline with US Futures appearing to return to previous session highs. :)

US futures and out markets are improving .... talk tends to be bullish today. sector is up over 1.5%



Buy orders Sell orders
Num(%) Num Vol(%) Vol VWAP Vol Vol(%) Num Num(%)
1% (46.67%) 35 (47.56%) 7,604,179 123.37 - 124.25 8,384,544 (52.44%) 40 (53.33%)
5% (54.62%) 65 (55.01%) 12,073,912 122.91 - 124.49 9,876,439 (44.99%) 54 (45.38%)
10% (49.33%) 110 (54.47%) 18,772,896 121.86 - 125.92 15,690,357 (45.53%) 113 (50.67%)
15% (54.07%) 166 (58.33%) 26,869,928 119.94 - 127.19 19,196,676 (41.67%) 141 (45.93%)
50% (57.22%) 210 (58.54%) 28,434,252 119.19 - 127.79 20,142,060 (41.46%) 157 (42.78%)
100% (56.52%) 234 (58.55%) 28,779,264 118.92 - 128.14 20,374,348 (41.45%) 180 (43.48%)
all (55.58%) 234 (58.51%) 28,779,264 118.92 - 128.43 20,409,544 (41.49%) 187 (44.42



Buy orders Sell orders
Num(%) Num Vol(%) Vol VWAP Vol Vol(%) Num Num(%)
1% (54.17%) 13 (61.06%) 1,970,640 56.72 - 57.48 1,256,786 (38.94%) 11 (45.83%)
5% (43.59%) 17 (58.61%) 3,326,252 56.47 - 57.73 2,349,121 (41.39%) 22 (56.41%)
10% (43.33%) 26 (62.18%) 4,206,590 56.12 - 57.86 2,558,551 (37.82%) 34 (56.67%)
15% (46.48%) 33 (54.96%) 4,338,979 56.04 - 58.54 3,556,194 (45.04%) 38 (53.52%)
50% (48.05%) 37 (60.44%) 5,511,422 54.89 - 58.63 3,606,886 (39.56%) 40 (51.95%)
100% (50.62%) 41 (60.55%) 5,536,442 54.81 - 58.63 3,606,886 (39.45%) 40 (49.38%)
all (50.00%) 41 (60.53%) 5,536,442 54.81 - 58.73 3,610,886 (39.47%) 41 (50.00%)

Thanks. Can you provide L2 for OOM & VOD also. OOM is very strong! Your prediction?

58p + at this time



Buy orders Sell orders
Num(%) Num Vol(%) Vol VWAP Vol Vol(%) Num Num(%)
1% (54.46%) 55 (44.17%) 8,895,275 123.30 - 124.59 11,241,459 (55.83%) 46 (45.54%)
5% (55.63%) 79 (47.40%) 12,375,008 122.95 - 124.81 13,733,354 (52.60%) 63 (44.37%)
10% (48.80%) 122 (47.93%) 18,244,792 122.02 - 125.88 19,818,172 (52.07%) 128 (51.20%)
15% (53.29%) 178 (53.04%) 26,341,824 120.01 - 126.93 23,324,490 (46.96%) 156 (46.71%)
50% (56.35%) 222 (53.48%) 27,906,148 119.24 - 127.44 24,269,874 (46.52%) 172 (43.65%)
100% (55.88%) 247 (53.56%) 28,253,560 118.97 - 127.73 24,502,164 (46.44%) 195 (44.12%)
all (54.99%) 248 (53.52%) 28,253,560 118.97 - 127.97 24,537,360 (46.48%) 203 (45.01%



Buy orders Sell orders
Num(%) Num Vol(%) Vol VWAP Vol Vol(%) Num Num(%)
1% (55.56%) 15 (60.47%) 2,668,310 57.44 - 58.20 1,744,553 (39.53%) 12 (44.44%)
5% (57.89%) 22 (68.50%) 4,682,788 57.24 - 58.34 2,153,805 (31.50%) 16 (42.11%)
10% (53.97%) 34 (67.31%) 6,994,190 56.86 - 58.98 3,396,678 (32.69%) 29 (46.03%)
15% (60.00%) 45 (69.24%) 7,680,279 56.63 - 58.99 3,411,678 (30.76%) 30 (40.00%)
50% (60.49%) 49 (71.89%) 8,852,722 55.83 - 59.08 3,462,370 (28.11%) 32 (39.51%)
100% (62.35%) 53 (71.94%) 8,877,742 55.78 - 59.08 3,462,370 (28.06%) 32 (37.65%)
all (61.63%) 53 (71.92%) 8,877,742 55.78 - 59.19 3,466,370 (28.08%) 33 (38.37%)

the shares rose 1p to 56p after the influential US research house Sanford Bernstein upgraded to "buy" and set an 85p target price. After exiting the Netherlands, and securing a 3G network sharing deal in Germany, Bernstein reckons mmO2 is now a viable stand-alone business with a bright future.

As suggsted we closed at over 58p ..... which was nice and expect an attack on 60p today


This was first talked about yesterday ....



Mobile operator seeks VAT refund
By Dominic White (Filed: 16/05/2003)TELEGRAPH


At least one of Britain's five mobile operators has approached Customs & Excise saying it wants a VAT refund on its third-generation licence, after the Radio Communications Agency refused to provide it with a VAT invoice.

All five operators are considering launching claims for refunds totalling 3.9 billion because they think the 22.5 billion they paid in licence auctions three years ago included 17.5pc tax.

The Government has maintained that the sale of licences was VAT exempt, but the operators are attempting to use an obscure European tax directive to prove that VAT was in fact levied and they can claim it back.

Experts doubt they will be successful and say any claim could take years. Operators are bound to meet stiff opposition from the Treasury, whose finances are already stretched.

The operators are following similar moves elsewhere in Europe. In Germany, where the licence auctions raised 30 billion, Dutch operator KPN is calling on the government to provide a VAT invoice.

Paddy Behan, a VAT specialist at accountants Grant Thornton, said: "This will be difficult for UK players to get off the ground but, in practical terms, if the operators in Germany or Holland are successful the UK would probably have to follow it because VAT is harmonised across Europe."

No operators would comment but some are taking the possibility of a claim more seriously than others.

Europe's VAT principles say that VAT should not generally apply to public authorities such as the Radio Communications Agency, which received the money for the licence.

But it also says if an authority engages in certain activities, including telecoms, VAT must be charged. Experts say the debate will centre on whether the licence auctions constituted a "telecoms activity".