The Ministry of Defence (MoD) has confirmed plans to sell part of its radio spectrum currently reserved for military purposes.
The sale of the airwaves - used to support superfast 4G mobile broadband - will be the first of its kind by a Government department.
It could bring in around £1bn for the Treasury, The Financial Times reported, although the MoD would not comment on the amount for commercial reasons.
The spectrum up for sale will be below 15 gigahertz - a valuable part of the radio spectrum because of its wide range of applications including radio, television, and data.
Around half of these airwaves are currently controlled by the Government, with the MoD holding around three quarters of this for defence purposes.
Mobile network operators are likely to bid for the spectrum, which will give them the opportunity to launch fourth-generation mobile services.
The announcement follows the Autumn Statement in which George Osborne said he planned to raise a total of £3.5bn from auctioning off other 4G spectrum.
But the Chancellor’s decision to add the anticipated income to the nation’s accounts was criticised for helping him avoid a rise in UK national debt .
The Minister for Defence Equipment, Support and Technology, Philip Dunne, said he welcomed the move to free-up the "much-needed" spectrum.
"We hope that the sale will help drive the roll-out of new generation networks and universal access to broadband, both of which are vital to the UK’s prosperity," he added.
The auction is expected to be completed by the summer of 2014, after the Government's planned sale of other spectrum at the beginning of next year.
Last month, the telecoms regulator Ofcom set a reserve price of £1.3bn for the January sale, although the final figure could be much higher.
In 2000, the auction of 3G brought in more than £22bn for the Treasury, when the reserve price was £500m.
The then Chancellor Gordon Brown also used the proceeds to pay down national debt.
To date, EE, which owns Orange and T-Mobile, is the only mobile network to launch 4G products in the UK.
Its network, which offers speeds up to five times faster than 3G, is now available in London, Bristol, Birmingham, Cardiff, Leeds, Sheffield, Edinburgh, Glasgow, Liverpool, Southampton and Manchester.