Industry regulator Ofcom is to begin a consultation on how best to sell off the rights to the next generation of mobile wireless networks, known as 4G.
The auction of the fourth generation spectrum is expected to start in the first quarter of 2012. It will be equivalent to three quarters of the mobile spectrum in use today.
With the rapid rise in popularity of smartphones, there has been a squeeze on the bandwidth available.
The additional spectrum being sold off at 800MHz and 2.6GHz – freed up by the switch from analogue to digital TV – should mean faster download speeds for data such as music and movies to mobile phones.
"The auction is not only critical to the future of the UK mobile telecommunications market but it is also of significant importance to the wider economy. It will support a wide range of data services that are fast becoming essential features of the modern world," said Ofcom chief executive Ed Richards in a statement.
The last time Ofcom held an auction, for 3G in 2000, it raised a record £22.5bn for the Treasury.