ISLAMABAD, April 14: Pakistan on Wednesday issued two cellular phone licenses for $582 million ($291 million each) in an open bidding organized by the Pakistan Telecommunication Authority (PTA).

The licences were given to Syrian-based Space Telecom Pakistan and Norway's Telenor Mobile Communications after the two companies made offers higher than those of seven other bidders in marathon five-hour two-stage auction at a local hotel. Warid Telecom, a local company, was the last to drop out from the competition as it could not increase its last offer of $280 million.

The two new entrants in Pakistan's expanding mobile telephone sector will compete with four existing cellular companies - Mobilink, Ufone, Paktel and Instaphone. "This is a great day for Pakistan as the open and transparent bidding fetched a good amount which is beyond our expectation," PTA chairman Shahzada Alam Malik told reporters after the auction.

The two successful companies will now have to bring a total investment of $1 billion within two to three years for infrastructure development that will also generate a lot of employment and cut down tariff substantially, the chairman said. pace Telecom finished the bid by offering $291 million, after which Telenor also matched the offer from earlier $290 million.

Mr Nader Kalai, Chief Executive Officer of Syriatel, the operator of M/s Space Telecom, said his company took part in the bidding for good reason because there was a lot of potential of cellular expansion in Pakistan.

Mr Arve Johanson, chief representative for M/s Telenor Mobile Communication said his company would require at least 9 to 12 months to start operation in Pakistan, but said the money which they have to submit was more than the target they had set earlier.

"It's a high price and we want to make good operation as we also have experience in this region," he said. Telenor has mobile phone operations in more than 10 countries including Thailand Malaysia Bangladesh, Hungary, and Ukraine. Similarly Space Telecom is backed by investors from Syria and the UK.

Nine companies submitted bids out of 33 national and multinational companies that initially expressed interest for the grant of licence. The prospective bidders were required to deposit earnest money of $10 million to participate in the bidding. In the first round, nine bidders, which have deposited the earnest money were asked to drop their sealed bids in a transparent box.

The members from the audience were then asked to open the sealed envelops for the announcement of the bids. The bidding in the first round started with a figure of $101 million and ended at $161 million. WorldCall Communications, Fauji Foundation-AWT-Spell Telecom, Telenor Mobile Communications and Warid Telecom participated in the first round.

In the second round, the five qualifying parties were asked to participate in the bid through an open outcry. The second round moved at a slow pace with bidders improving their bid by $1 million only. However the monotony was broken when Telenor took two jumps by offering bids with a difference of $9m and then $10 million each - the last being the decisive factor after which Warid withdrew from the process.

Later, the PTA chairman said the bidding was a challenging assignment for the authority and reiterated that the authority would support and ensure that companies could succeed in the mobile business adding that Pakistan offer great potential in this sector with a current teledensity of 2.4 per cent in a country of 149 million people.

He was of the view that the mobile phone users were expected to grow by 10 per cent by 2008. He also thanked the government for letting the authority complete freedom to hold the bidding without any interference and said with the successful bidding, the rumours and speculation about the lack of transparency in the process had come to an end. He also appreciated the role of President Pervez Musharraf. The process had also established and reinforced the role of the regulators, he said.