More than a dozen companies are joining a race to operate the next generation of mobile phones in the UK.

The country's four well-known cellphone groups - Vodafone Airtouch, BT Cellnet, Orange and One2One - are submitting bids.

Others which have submitted bids include US carrier MCI Worldcom, cable giant NTL and SpectrumCo Ltd - a consortium led by Richard Branson's Virgin Group.

Some 13 bids have been received so far. Also included in the race are Spain's Telefonica, Crescent Wireless and Ireland's Eircom, which has set up a company called 3G.

They all hope to win licences for mobile phones which will be able to receive e-mail, video, and the internet.

Any businesses which bid must put up £50m for the privilege - and the licences themselves may go for up to £500m each.

The government hopes to raise around £1.5bn from the auction - enough for a penny cut off income tax. It is making five licences available for the next generation of mobile phones.

That will allow at least one new mobile phone company to enter the UK market.

The big four are prepared to pay substantial sums to ensure that they can continue to operate in the UK.

Price 'too high'

The auction will be the last chance for an overseas buyer to gain access to the valuable UK mobile market.

At the end of the year, the number of mobile phone users soared to 24m - more than the number of households, and 40% of the UK's population.

The value of the UK licence was shown by the fact that two German companies were prepared to pay between £10bn and £20bn each for the two smallest operators, Orange and One2One last summer.

But some companies have been deterred by the high price of a new licence.

United News and Media, the owner of the Express and Anglia Television which is currently in merger talks with Carlton, has decided not to bid.

"We think it's an exciting technology and are keen to be involved as a content provider but we will not be involved in a bidding consortium," the company said.

Other major foreign telecoms companies expected to bid include Telecom Italia Mobile and France Telecom. Energis, the UK telecoms operator spun off from the National Grid, may also be interested.

New technology

The new generation of mobile phones will allow the convergence of the internet with hand-held communications.

The new technology will allow data to be sent at 200 times the rate of existing GSM digital phones, making 'on-the-move' online gaming, video conferencing, and banking a reality.

The cost of upgrading the existing digital networks to the new standard is estimated at around £2bn, although a new entrant - which need not be a telecoms company - could end up having to spend £5bn to build a transmission infrastructure.

Web developers and mobile phone companies are already developing standards which allow limited internet access for existing mobile phone users, using a system called Wireless Application Protocol (WAP).

BT Cellnet has launched a service called Genie, while Vodafone has launched a basic service allowing e-mails, news headlines and share prices.

"There will be a huge explosion of web content aimed at mobiles," said Greg Ellard of Lucent Technologies.

With companies rushing to bring out mobile internet products using intermediate technology, there is a question as to how attractive the new, high bandwidth mobile phones will prove to be.

But most major telecoms operators are still prepared to bet up to half a billion pounds on their future.