Telefónica UK Ltd. 's failure to meet its 3G license obligation to cover 80 percent of the U.K. population could cost the operator £40 million (US$80 million), according to a warning issued by U.K. regulator Ofcom today. (See Ofcom Warns O2.)

Ofcom's analysis shows that O2 is the 3G coverage laggard in the U.K. Four of the five licensed 3G operators have met the obligation to cover 80 percent of the population by the end of 2007. O2 has only covered 75.69 percent of the population, which amounts to a coverage shortfall of about 2.5 million people.

Ofcom today gave O2 a deadline of June this year to meet this coverage requirement or have its 21-year 3G license shortened by four months. The sanction may sound like just a slap on the wrist, but Ofcom estimates that the four-month reduction in the license is equivalent to a fine of £40 million ($80 million) for O2, which paid £4.03 billion ($8.02 billion) for its 3G license in 2000.

An O2 spokeswoman says that the company will "easily" meet the June deadline. "We're only talking about another 100 sites to roll out," she says.

In a statement emailed to Unstrung, the spokeswoman said: "We accept that Ofcom is enforcing the terms of our license. However we are fully committed to increasing our 3G coverage and customer base with the best quality 3G service and are confident that we will meet Ofcom's requirement before June 2008."

O2 is the only operator without a 3G site sharing partner in the U.K. Last year, Vodafone UK and Orange UK teamed up while Three UK and T-Mobile (UK) joined forces for 3G network sharing. (See Vodafone, Orange Revamp Network Share Deal, and 3 & T-Mobile Share 3G in the UK.)

When asked whether O2 would consider joining one of these network sharing groups, the O2 spokeswoman said, "Absolutely not," adding that the operator has ruled out such partnerships.

"We would not be willing to relinquish control over our network," said the spokeswoman.

In another tussle with the U.K. regulator, O2 is urging Ofcom to reconsider plans to take back some of its 900 GHz spectrum so that it can be auctioned off to other operators to use for 3G services. (See UK Operators Brace for Spectrum Struggle.)

— Michelle Donegan, European Editor, Unstrung