By Ian Walker

LONDON--The U.K. Office of Communications, or Ofcom, said Thursday that annual license fees payable by mobile network operators should be cut by 10% to 223 million pounds ($340.24 million) a year, as it believes they will incur higher costs to meet their new coverage obligations.

EE, H3G, Telefonica and Vodafone agreed with the U.K. government last December to provide geographic voice coverage across 90% of the U.K. landmass by the end of 2017, and this was implemented through a variation of the mobile network operators' licences in January.

Ofcom said its initial view is that while there could be incremental costs incurred by the mobile operators in meeting the coverage obligation, it is unlikely to have a material effect on the market value of the spectrum.

However, the regulator said it is open to considering alternative views before reaching a final decision. It has therefore published a consultation on the matter which closes on April 17. Ofcom will then make a final decision on the revised annual licence fees, which are likely to come into effect later this year, it said.

The Government directed Ofcom in 2010 to revise fees paid for the 900 MHz and 1800 MHz spectrum bands to reflect full market value, after completion of the 4G auction in February 2013. The two bands are used to provide voice and data services using a mix of 2G, 3G and 4G technologies.

Write to Ian Walker at ian.walker@wsj.com; @IanWalk40289749

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