Malaysia's two biggest telecom firms, Telekom Malaysia and Maxis Communications, have won the country's first third-generation (3G) mobile phone licences.

The government announced in May that it would award three 3G licences, which allow high-speed internet access and the ability to download music and video to mobile phones.

However, the Malaysian Communications and Multimedia Commission said on Tuesday that only two companies had met the necessary criteria.

State-controlled Telekom Malaysia is the country's leading fixed-line operator, while Maxis Communications is the number one mobile provider and serves almost a third of the country's 7.4 million mobile phone users.

3G investment costs

Neither company has yet said how much it will spend on building the 3G network, but analysts are predicting they will each spend 2.5bn-3.5bn ringgit (�420m-590m) over the next two years.

Malaysia is selling the licences for 50m ringgit each, only a fraction of the price paid by European operators when enthusiasm for 3G's potential was at its height.

Maxis and Telekom Malaysia have six months to put together a detailed business plan outlining how they intend to roll out and develop the services with 3G.

If the plans do not meet six key criteria, the government has said it will withdraw the licences.

The networks are expected to be ready for roll-out by early 2004 at the latest.

Europe hesitates

Enthusiasm for 3G has softened in Europe because of poor sales, the high cost of building the network and the slow development of appropriate handsets and applications.

However, the Malaysian Communications and Multimedia Commission said on Tuesday: "After seeing what happened in Germany and the UK, we decided to take our own time but in November 2001 we took steps to begin the spectrum assignment process."