UK third-generation (3G) mobile services face being priced out of the market if the current bidding war demands that prospective operators pay "silly money" for licences.

Experts are worried that this and high set-up costs will lead operators to charge extortionate prices when the services are launched.

The 3G hopefuls, including the four UK incumbent mobile operators and nine newcomers, have already paid £50 million to enter the 3G auction in March. The five licences are expected to sell for up to £5 billion, and analysts predict that each operator will need to spend about £4 billion to build the network.

"The cost of the service will be reflected in the price," said Bill Meiran, chairman of user group the Telecommunications Users Association. "We've never agreed with the principle of the highest bidder. Applicants should be judged on how they will affect competition, instead of how much money they have.

"The prices will probably be really expensive to start with, but hopefully they will come down once popularity grows. Operators could begin by targeting corporates with bundled services, charging a lot less for voice than data. If this doesn't fit into a corporate business case then 3G has no future."Val Jervis, principal consultant at telecoms consultancy Netcom, warned that existing mobile incumbents could fail to win a licence, despite being under pressure to do so. "In similar auctions in the US, companies paid silly money for licences and then couldn't afford to build the network. I hope the UK bidders have learnt from this lesson," she said.

Bidders, including NTL and One2One, declined to comment.

The new players are:
3G:owned by Irish telco Eircom
Crescent Wireless: shareholders have significant interest in Global Crossing
Epsilon Tele.com: subsidiary of Japanese bank Nomura
NTL Mobile: owned by NTL and France Telecom
One.Tel Global Wireless: owned by Australian telco One.Tel
SpectrumCo: includes Virgin, Nextel, Sonera, EMI and Tesco
Telefonica UK: subsidiary of Spanish telco Telefonica
TIW UMTS: owned by UK radio network operator Dolphin
WorldCom Wireless: owned by MCI WorldCom