Current top bids

Licence A: TIW: �2.87bn Licence B: Vodafone: �3.6bn Licence C: One2One: �2.54b Licence D: NTL: �2.71bn Licence E: Orange: �2.51bn

The huge prices being paid by companies for the 'third generation' mobile phone licenses - which will give mobile phone users full internet capability, including video conferencing - is a reflection of the belief that the mobile phone will become more important than the personal computer in the future for web users.

But the cost of the licenses - and the associated investment in new networks - could well mean higher costs for mobile phone users in the future.

Bidding wars

A fierce bidding war is continuing between BT Cellnet and Vodafone Airtouch for control the largest license, which will give the winner more capacity in the future than its rivals.

They have emerged as the only serious bidders for the largest of the five licences available to the existing mobile phone operators in the UK, and have already pushed the price for the plum licence B past �3.5bn.

There were no signs of either side being willing to accept defeat as each trumped the other's bids during a day of tension in the marathon poker game.

Both want the licence offering the greatest capacity for handling the vast range of data and functions expected for the mobiles of the future.

Meanwhile, another complex battle is emerging between cable operator NTL - backed by France Telecom , One2One, owned by Deutsche Telekom, MCI WorldCom and Canada's TIW, which is backed by Hutchinson Whampoa.

One license is reserved for new entrants to the UK mobile telecoms market, and one of the existing mobile phone operators (Orange) is now owned by rival Vodafone and will have to be sold in the event of a successful bid.

Bid stakes escalate

This next wave of mobiles (third generation, or UMTS) are expected to be able to show good quality videos and audio on handsets and allow full browsing of the internet in addition to existing phone functions.

Because of the way the auction is structured - rival bids have to be a certain percentage higher - the size of the bids is escalating at an increasingly rapid rate.

Last week the bids for the sought after licence B rose by more than �600m in a single day.

Many experts expect this week to be the knockout blow, with more bidders dropping out as prices escalate.

Neither BT Cellnet nor Vodafone can afford to lose, and the betting is that One2One has the deep pockets to keep its franchise.

But there is little doubt that the new licenses will be fiercely fought over, as companies try to settle old scores or forge new alliances.