Eircom bid the £125 million sterling (€1.6 million) reserve price yesterday as the battle began to win one of five lucrative third-generation mobile telephone licences on offer in Britain.

The company is chasing a licence reserved for newcomers to the UK market.

Eircom was one of five groups which bid for the licence - expected to fetch more than £1 billion. One group, TIW UMTS (UK), bid £170 million. The licence for newcomers generated the most interest of the five on offer.

The Radio Agency, which is running the competition, has put a new reserve of £178.5 million on the licence, known as the A licence. TIW will not be able to bid again until the new reserve is surpassed. The next round is at 9.15 a.m. today.

"Yesterday was really very much a case of testing the water," said Mr Hans Wagenaar, managing director of Eircom International.

He said he was not surprised by the size of the TIW bid. Some companies put in large bids initially, he added, but bidding would probably become tighter - move upwards more slowly - as the auction process proceeded. The process is expected to take several weeks.

Mr Wagenaar would not disclose whether Eircom might switch to bidding for a different licence at a later stage. But he said the company did not intend to make an early exit from the auction process.