INTERVIEW-UPDATE 1-Thai TAC upbeat on 3G,tough competition ahead

* Optimistic 3G auction to happen by end of 2009

* Tough competition seen after 3G commercial launch

* Shares outperform, hitting five-week high (Adds details, context)

BANGKOK, Sept 2 - Thailand's Total Access Communication PCL (TAC) is optimistic that a long-awaited auction of 3G mobile licences will take place soon, enabling it to tap a new revenue source from mobile Internet.

While other developed markets like Singapore are already moving towards the next-generation mobile technology, Thailand has lagged behind other countries in Asia in issuing 3G licences.

"Thailand is unique and different," Chief Strategy Officer Roar Andreassen told Reuters in an interview on Wednesday, although he noted progress on the regulatory front to open up the telecoms market, especially in the Internet sector.

Licensing is a key step in reforming the $4.7 billion sector because firms will pay licence fees instead of paying a portion of their revenues to state-owned firms for the right to operate networks they have built themselves, as now.

Under the current concession system, which most of Asia has done away with, operators receive the right to operate networks from state-owned TOT PCL or CAT Telecom and transfer the networks to the government when the concession expires .

"3G has been discussed in Thailand for at least five years now. We hope it will happen this year or maybe next year. I'm more positive that it will happen soon," Andreassen said.

Once it got a licence, it could take around six to nine months for TAC , Thailand's number two mobile phone operator, to launch its high-speed Internet on a third-generation (3G) network, he said.

The telecoms regulator plans to announce the terms of the auction for the 3G licences by the end of this month, possibly paving the way for an auction by the end of the year.

Repeated delays to 3G licensing in the past have made investors cautious. Operators have scaled down their investments, especially as the telecom market has been hit by the economic recession and sagging consumer consumption.

TAC, controlled by Norway's Telenor , has more than 19 million customers, about 30 percent of the Thai market. Advanced Info Service has about 50 percent.

At 0917 GMT, TAC shares were up 4.4 percent at a five-week high of 35.75 baht, while the overall Thai stock market was 0.2 percent lower.

GROWTH POTENTIAL

After the commercial launch of broadband Internet on a 3G network, fixed-line operators, for whom Internet connection is a key source of revenue, will step up their efforts to retain broadband customers, Andreassen said.

"The competition will be very tough and it's very challenging for us. There will be more competition from fixed-line operators," he said, adding it was too early to say whether it would escalate into a price war.

Fixed-line operator True Corp , major shareholder of the country's third-largest mobile operator, True Move, is the main provider of high-speed broadband Internet in Thailand.

While the mobile penetration rate is reaching 100 percent, the number of Internet users in Thailand remains low, providing potential for growth for companies such as TAC, Andreassen said.

"We expect demand for Internet services on mobile broadband to be positive in Thailand," he said, adding TAC aimed to be a leader in providing mobile Internet, especially via small devices like the BlackBerry, iPhone and Nokia's smart phones.

Only 21 percent of the population of nearly 67 million surf the Internet and just 2 percent go online with broadband connections. In Vietnam, about 24 percent of people are Internet users. In Malaysia it's 63 percent and in Singapore 67 percent. ($1=34.00 baht)