UPDATE 1-Thai 3G auction may be delayed yet again -regulator

* Auction may be delayed at least one month from Feb

* More time needed for clarity on legal issues

* Brokers downgrade sector, shares fall (Adds quotes, analyst comments)

BANGKOK, Nov 5 - Thailand's auction of third-generation mobile phone licences could be delayed yet again by at least one month from next February, a regulatory official said on Thursday, citing the need to clarify legal issues.

Telecom share prices fell on news of this latest delay and at least one broker downgraded the sector.

"It's possible that the auction will be delayed from what we expected, February," Settaporn Kusripitak, one of the members of the National Telecommunication Commission (NTC), told reporters.

Settaporn said the NTC would send a letter to the Council of State next week to ask whether the NTC had the authority to hold the auction after questions raised by politicians and state telecom companies.

The selection of four new NTC members after recent resignations was another problem, he added.

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

Thailand has been struggling with telecoms deregulation since before the 1997-1998 Asian economic crisis.

Progress has been slow because of political obstacles and changes of government, but progress on 3G looked possible earlier this year and the NTC said it could auction the licences in mid-December, before that was pushed back to January or February.

Telecoms operators are keen to receive 3G licences on the new 2.1 GHz spectrum and the auction is expected to generate around $1.2 billion for the state.

MORE HEARINGS

The Senate would start selecting the four NTC replacements on Nov. 23 and they would need time to study legal issues before deliberating on the 3G auction, Settaporn said.

The NTC also planned a second public hearing on the draft terms of the auction on Nov. 12, when issues such as subscriber migration and bidder qualifications could be raised.

Perhaps more seriously, the government has asked the regulator for a legal ruling on whether it has the authority to oversee the auction before the setting-up of a new regulator, the National Broadcasting and Telecommunications Commission (NBTC).

It would take until the end of 2010 for the NBTC to be set up, Deputy Prime Minister Korbsak Sabhavasu said on Wednesday, so if the NBTC has sole authority to hold the 3G auction, as stipulated by the 2007 constitution, the auction could be put off for a year or more.

Mindful of the repeated delays to 3G licensing over the years, some analysts are downgrading the sector.

"Since several new issues have been raised, the risk of delay to 3G licences looks larger," said Kim Eng Securities analyst Solaya No Songkhla, who has cut her short-term view on the sector to negative from positive.

Kim Eng also revised down its probability assumption of a start to 3G services by late 2010 to 50 percent from 90 percent.

At midsession, shares in top mobile phone operator Advanced Info Service <ADVA.BK> were down nearly 1 percent at 84.50 baht, while the overall market <.SETI> was down 0.63 percent.

Second-ranked Total Access Communication <DTAC.BK> <TACC.SI> slid 2.6 percent to 37.25 baht, and True Corp, major shareholder of number three True Move, eased 2.2 percent to 3.50 baht.

The 3G technology, which allows users to surf the Internet and download music with mobile handsets at faster speeds than current systems, would enable operators to tap new revenue sources in a market where almost everyone has a mobile phone. ($1 = 33.40 Baht)