Ofcom has given O2 a deadline to widen its 3G coverage or lose its licence earlier than expected.

The regulator said that it will censure the company by June unless it increases the coverage of its 3G network to over 80 per cent of the UK population as required under the terms of its licence.

"Ofcom has now issued O2 with a notice under the procedure in the Wireless Telegraphy Act for licence breaches," said the regulator.

"This proposes that, if O2 has not met the rollout obligation by the end of June 2008, Ofcom will shorten the term of its 3G licence by four months."

Ofcom said that four out of the five licensees (Hutchison 3G, Orange, T-Mobile and Vodafone) have fulfilled their obligations, but only 75.69 per cent of O2 customers can access the high speed network. This leaves 2.5 million customers without 3G.

Cutting the licence term would mean O2 losing the rights to the network on 31 August 2021 rather than 31 December 2021.

The company paid £4,030m for the licence in 2000 and the fine would cost the company around £40m in Ofcom's estimation.