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The UK telecoms regulator has told O2 that unless it meets the requirement to provide 3G coverage to at least 80% of the population, then the term of O2's licence will end on 31 August 2021 rather than 31 December 2021. Ofcom estimates that as O2 paid £4 billion for the licence, such a reduction in its lifespan would be equivalent to a penalty of £40 million.

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of the five holders of a 3G licence had been required to meet the 80% coverage target by the end of 2007. Four of the five licensees have complied - H3G, Orange, T-Mobile and Vodafone - but O2 only covered 75.69%, Ofcom says. This is a shortfall equivalent to approximately 2.5 million people.

"O2's strategy has been to roll out our 3G network in areas where there is the most demand, providing high quality, in-building coverage in those areas," an O2 spokesperson claims.

"We have rolled out our 3G network to over 75% of the population. Where we do have coverage it has consistently provided the best quality. We also have one of the larger 3G customer bases

"We accept that Ofcom is enforcing the terms of our licence. 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."