MOBILE operators are preparing to fight for tax rebates worth more than £3 billion on third-generation (3G) licences they bought at the height of the telecoms boom.

The European Court of Justice has written to inform operators including Vodafone and O2 that an oral hearing over their right to seek tax rebates on the licences will take place in February, The Times has learnt.

The court said that a decision on the case, which is likely to have precedent-setting importance for operators across Europe, could come from the Advocate-General as soon as the middle of next year.

Industry sources say that, whatever the court’s ruling, they are unlikely to give up the fight for the money that they believe is due to them.

“So long as there is a viable chance, and provided all the operators feel the same way, they will not give in over this,” one industry source said.

The five licence-holders — Vodafone, Orange, T-Mobile, O2 and 3, owned by Hutchison-Whampoa — first brought their case before Britain’s VAT tribunal in 2003. They argue that the £22.5 billion they spent on 3G licences in 2000 included VAT.

Since most businesses can deduct the VAT they pay from the VAT they charge customers, the companies argue, they should then be eligible to reap tax windfalls from the Treasury. They believe that they are entitled to rebates totalling about £3.35 billion.

The UK VAT tribunal asked the European Court last year to clarify six points of law.

After the European hearing the case is likely to be thrown back to the UK.

Though some experts privately express doubt about the operators’ chances of winning the case, analysts say that the continuing failure of 3G phones to seduce consumers has made it even more critical for the operators to fight their corner.

The new technology, which was hyped to the hilt by the phone companies, was initially beset with technical glitches.

Five years on from the auction, the long-awaited “3G Christmas” has yet to materialise and phone operators are only now beginning to sell the phones — which allow users to watch television, make video calls and download e-mails — in earnest.

As their costs grow — Vodafone has spent £5.1 billion in the past financial year alone marketing its 3G network — they are desperately seeking to secure a healthy return on their outlay.

And the operators concede privately that they have a duty to shareholders to make every effort to retrieve as much as possible of the billions of pounds spent on licences.

So far the Government has refused the mobile companies’ requests for a VAT invoice on the basis that it auctioned the licences in its role as a public body. VAT is not levied on transactions done on that basis.

It is not known exactly how much the operators have spent on legal fees in fighting the case so far.

Five mobile operators in Austria are also seeking to obtain a reimbursement of part of the sums they spent on securing 3G licences.

COST BURDEN

Vodafone spent £5.1 billion in the 2005 financial year on expanding its 3G network around the world