U.K. mobile operator O2, a major investor in mobile music and live music, has been attacked by telecoms regulator Ofcom for failing to meet its obligations to roll out 3G (third-generation high-speed) services.

Industry experts believe the availability of 3G networks, with their broader bandwidth, could help boost sales of downloadable entertainment. Access to larger digital files for music videos, TV programming and the Internet is also easier via 3G services.

O2's 3G services currently reach only 75.69% of the U.K.'s population, when Ofcom says they should have reached 80% by December.

"This is a shortfall equivalent to approximately 2.5 million people," Ofcom said in a statement.

If the operator fails to achieve the 80% Ofcom requires by June 30, the regulator will reduce the term for O2's license by four months to Aug. 31, 2021, from Dec. 31, 2021.

"Ofcom estimates that a reduction of the license term by four months would be equivalent to a significant financial sanction of at least £40 million ($79 million)," the regulator added.

O2 responded in a statement: "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."

As the multi-million dollar sponsor of the hugely successful O2 Arena, Live Nation's O2 Wireless Festival, and a music-content retailer via its O2 Active portal, O2 has declared ambitions to be a major mobile-entertainment provider.

The 3G penetration of its four rivals, Vodafone, H3G, Orange and T-Mobile, has already hit the 80% mark.

U.K. music industry trade body BPI estimates that currently only 10-12 per cent of all chart sales are via mobile channels, although the U.K. has the most advanced mobile-music market in Europe.