UK mobile operators lose £3.3 billion claim

Huge tax claim rejected by European Court of Justice

UK mobile phone companies have lost a legal battle to get tax refunds of around $3.3 billion. The UK mobile operators claimed that the tax had been paid to the British Government when they won auctions for the UK's 3G licences in 2000.

The European Court of Justice ruled that the companies, which include Vodafone , O2 , Orange and T-Mobile, had not paid VAT on the auctioned licenses. The decision by the court is final, with no further appeal process available for the UK operators.

The auctions for 3G licenses were won by the four established UK network operators, plus newcomer Hutchison 3G - now the 3 mobile service. The five operators spent £22.4 billion in total on the licences after the bidding wildly exceeded government expectations.

The money paid to the British Government for the 3G licenses did not constitute an economic activity on which tax was paid, the European Court of Justice ruled. Most UK mobile operators have had to write down huge sums to cover losses in the value of their 3G investments, owing to delays in introduction and slow take up of services.