Telecom Italia Mobile (TIM) has made a bold charge into Brazil's mobile phone market, snapping up two out of the three new operating licences on offer.

TIM paid 1.5bn Brazilian reals ($758m; �521m) for two regional licences that cover the populous and economically powerful Sao Paulo state and an area from the southern end of the Amazon river to the Argentine border.

The third licence went to Telemar, a local operator, who paid 1.1bn reals for a licence covering the 16 states where it provides fixed-line services.

Despite a lack of competition for the so-called Band D licences - TIM's bids were unopposed - analysts regard the sale as a relative success for the Brazilian government.

Premium achieved

Earlier this year, an attempt to sell Band C licences had flopped when no bidders came forward. That sale has yet to be rescheduled.

The 2.6bn reals raised for the Band D licences represented a 19% premium to the minimum prices set. It will also lead to a fresh influx of foreign investment, as TIM builds up its network.

After the sales were announced, the real inched up against the US dollar, while the Sao Paulo Stock Exchange's Bovespa index climbed more than 1%.

A third licence auction - for Band E licences - is due to be held on 13 March.

Analysts said Telecom Italia - aiming to develop a national network - was again likely to be among the bidders but others were uncertain to emerge.

Investor gloom

Brazil had hoped to generate about $3.4bn this year from selling nine licences to a string of major international operators.

But potential bidders melted away amid increasing investor gloom over prospects for telecoms companies.

Notable absentees included Spain's Telefonica and Portugal Telecom, which earlier this year joined forces in Brazil to become the country's biggest wireless operator.

Vodafone of the UK, the world's biggest mobile phone company, was also known to be following the Brazilian licence sale closely.

Licence costs justified?

Many operators have built up huge debts acquiring new licences, particularly in Europe. Analysts are now questioning whether revenue streams from new services will justify that spending.

Depressed market conditions have also left operators unable to rely on share issues as a means of raising new funds for reducing debt.

Brazil had about 15 million mobile phone users in 2000, a number that is expected to grow to about 58 million by 2005.

The country's new licences are for second-generation services but will allow operators to offer improved roaming and faster internet access from mobile phones.