The government is denying that its auction of Broadband Fixed Wireless licences has flopped.

The first week of the auction for all 42 licences - three in 14 regions – has seen three companies, Firstmark, Unica and Winstar, withdraw from the bidding. Also, many of the less-populated regions have yet to receive a bid from any of the companies taking part.

It means that only half of all the licences up for sale will be sold off, and that the auction will earn less than a tenth of the predicted revenue of £1 billion.

At the start of the auction, ten companies lined up to bid for the licences. The winners receive the right to offer potentially lucrative high-speed wireless services to homes and businesses.

But a Department of Trade and Industry spokesman told BBC Online that it had been expecting companies to drop out: "It's an auction, and companies will bid for what they can afford, or drop out.

"The only thing that is certain at the moment is that we will not sell every licence."