Vodafone paid €44.4 million to the telecoms regulator yesterday to secure a third-generation mobile phone licence, and said it would invest €1 billion to roll out the new technology in the Republic.

The payment is the first tranche of a €114 million licence fee due over 10 years. It follows a one-month review by Vodafone that evaluated whether it should invest in the technology in the Republic.

The company's decision to take up the licence will save the Government and the telecoms regulator considerable embarrassment as just two of the four mobile licences on offer here had been accepted until yesterday.

Third-generation mobile technology enables firms to offer a range of multimedia and video services at high speeds to mobile phones and handheld devices. Initially viewed as the next big thing in telecoms, recently the industry has become more sceptical about the potential for the technology.

O2 and the Hong Kong-based firm, Hutchison Whampoa, have both accepted licences and made initial payments to the regulator.

But no bidder has emerged for a fourth licence on offer, reducing the anticipated inflow to the exchequer by €114 over 15 years.

Vodafone Ireland chief executive, Mr Paul Donovan, said the firm had decided that the right decision for its business, customers, employees and partners was to accept the licence.

He said the review had enabled it to consider how current uncertain economic and regulatory conditions in the Republic would affect its proposed investment. Technological issues and Vodafone's ability to meet licence conditions were also reviewed by the firm, he said.

The 3G competition ranked companies on a series of criteria, including the speed of rolling out the service and the strength of their financial guarantees.

Mr Donovan said the way the competition was structured - with new entrants automatically being awarded extra marks - meant Vodafone had to bid more than the minimum criteria. But he declined to comment on the additional commitments the firm made in its bid.

Minimum requirements already outlined in the competition will force firms to launch some type of third-generation service by January, 2004. Firms will also have to build a network giving at least 33 per cent population coverage by about 2006, the tender shows.

Mr Donovan said large numbers of mobile subscribers would not use third-generation services until 2005. Handset costs of up to €800 would initially limit uptake of third-generation services, he added.

He said the fact that Vodafone Ireland's business had held up well despite the current economic environment was a factor in deciding to accept a licence. The resilience of mobile showed that it was no longer a luxury for people, he said. Vodafone also considered how the possibility of "excessive future regulation" in the Republic's telecoms market and a Government plan to grant-aid fixed internet technologies in the regions would affect its plans.

Despite negative comments about third-generation mobile technology, confidence in the new technology was high across the Vodafone group, said Mr Donovan.

Several European firms have written off the value of their investments in third-generation mobile technology. Other firms, such as Vodafone and Hutchison, have already delayed the launch of the new technology in Europe.

Vodafone will pay the remainder of its €114 licence fee to the regulator over 10 years.