Mobile operators must pay £2.3bn for the extra bandwidth they need – but George Osborne had been pencilling in £3.5bn

The 4G auction – the biggest sale of British airwaves in a decade – has raised just £2.3bn for the public purse, a third less than the Treasury was counting on to keep its borrowing in check.

Chancellor George Osborne had hoped to secure £3.5bn in payments from capacity-crunched mobile phone companies vying for more bandwidth, and controversially included this estimate in the last autumn statement in order to show government borrowing would not rise this financial year.

The sum raised is a fraction of the £22.5bn handed over by mobile phone networks in 2000, when the government auctioned the airwaves used for today's 3G services. However, 4G could bring a £20bn boost to the UK economy over the next decade, according to telecoms watchdog Ofcom, which organised the auction.

Matthew Howett, telecoms regulation analyst at Ovum, said the result of the auction was good news for the mobile operators: "Despite all the noise being made about the UK's 4G auction, what you can't hear is the sound of champagne corks popping over at the Treasury … For the mobile operators there must be widespread relief that the amount paid is a mere fraction of the £22.5bn they were asked to cough up during the 3G licensing process."

The Treasury said the number used in the budget was a estimate which had been certified by the Office for Budget Responsibility, and that the actual receipts would be worked into the final calculations when the financial year ends in April. It added that the £1.2bn shortfall on what 4G had been forecast to raise was a fraction of the £1.3tn of spending and tax receipts passing through the Treasury.

But BNP Paribas economist David Tinsley said while the sum was small in context: "It is certainly not going to help recent perceptions of the UK in terms of the fiscal position."

Rachel Reeves MP, Labour's shadow chief secretary to the Treasury, said the debacle showed "how foolish and short-termist the chancellor was to bank this cash in the autumn statement to make his borrowing figures look less bad" and that "his trickery has now badly backfired".

In a surprise result that could redraw the power balance between the UK's four mobile phone networks, each has come away with a slice of the most valuable airwaves in the lower frequency bands needed to provide coverage beyond towns and cities and into rural areas.

Everything Everywhere, O2, 3 and Vodafone will use the spectrum for fourth generation wireless internet services, meeting demand for faster connections on smartphones and tablets, at speeds comparable to the average fixed-line broadband service.

Out of seven bidders, the fifth and final winner was BT, which does not intend to launch a mobile phone network but will use its spectrum for 4G connections at fixed locations.

Vodafone, the third largest UK network by customers, spent more than any other bidder, handing over £791m, and is the only existing network to have increased its share of all spectrum used for mobile services as a result of the auction.

Everything Everywhere, which is the largest with nearly 27 million customers, has committed £589m and settled for a smaller-than-expected share of 800 spectrum. O2, which is paying £550m, has won a portion which comes with a public service obligation to extend coverage to at least 98% of the UK population indoors, and ensure a signal to 95% of people in England, Northern Ireland, Scotland and Wales.

Post auction, the share of all mobile spectrum now held by Everything Everywhere is 36%. Vodafone has the second largest holding at 23%, O2 has 15%, 3 has 12%, and new entrant BT has secured 9%.

"This is a positive outcome for competition in the UK, which will lead to faster and more widespread mobile broadband, and substantial benefits for consumers and businesses across the country," said the Ofcom chief executive, Ed Richards. "We are confident the UK will be among the most competitive markets in the world for 4G services."

All four networks have won spectrum in the low frequency 800MHz band, including 3, the UK's newest and least profitable carrier, which is paying the reserve price of £225m after winning special protection from Ofcom, which was keen to ensure four viable networks emerged from the auction. O2 and 3 were the only bidders not to win spectrum in the less expensive, higher frequency 2.6GHz band.

The winners have until Thursday to pay for their spectrum, and the new 4G services are expected to launch in early summer.