The second day of bidding for third-generation mobile telephone licenses ended yesterday with Orange taking the lead as the highest bidder, offering some £186.7m for the single licence being targeted by its parent company, Vodafone AirTouch.

The bidding moved slowly in the second day of the auction as the prices offered for each of the five licences inched only slightly higher than those set as reserve levels.

Orange put in the highest offer on licence B at £186.7m, followed by Vodafone, BT and the Virgin-led SpectrumCo consortium, which each offered £185.4m. Licence B is the largest of the four licenses for which the existing mobile phone operators can compete.

Industry observers are bemused by Vodafone's strategy, given that it is selling Orange later this year as part of the conditions of its acquisition of German-based Mannesmann.

If Orange - Britain's third largest mobile carrier - fails to win a licence, it would affect the sale price Vodafone would achieve for it.

But some analysts believe Orange could yet be sold to a new entrant in the third-generation mobile market.

NTL Mobile overtook Canadian cellular group TIW in the battle to win licence A, which is reserved for new entrants.

NTL bid £178.5m against TIW's £170m. Telefonica, 3GUK and One2One emerged as the highest bidders for the remaining three licences.

The auction of the operating licences - which will run on the universal mobile telecommunications system - are expected to raise as much as £5bn for the treasury's coffers.

The licences are due to come into effect in 2002.