One2One, the mobile phone operator, is to sue the government over the handling of payments for the third generation mobile phone licences which have recently been auctioned.

It will serve a writ on Stephen Byers, the embattled trade and industry secretary, in an attempt to get a judicial review of the payment process.

German-owned One2One has to hand over the £4bn for its licence today but two other licence winners - Vodafone AirTouch and Orange - have been given up to 180 days in which to pay.

This is because the two operators cannot receive their licences until they have become separately owned companies.

Shortly before the auction for the five licences started, Vodafone acquired Mannesmann, the German company which owned Orange.

To get clearance for the Mannesmann deal from the European competition authorities, Vodafone agreed to sell Orange. But this could not be done by the time the auction for the new licences started.

Under the rules, no group was allowed to bid for more than one licence. But an exemption was made, allowing both Vodafone and Orange to bid separately.

One2One, which is now owned by Deutsche Telekom, believes that Vodafone and Orange will earn about £360m in interest by delaying their £10bn payment.

It wants compensation for the arrangement which, it claims, gives the other two companies an unfair financial advantage.

The government will collect a staggering £22bn for the four licences - but the DTI has turned down One2One's suggestion that its £4bn payment be held in an escrow account until Vodafone and Orange pay up.

During this time, One2One said, it should be paid the interest on the payment.

Robin Saphra, One2One's public policy director, said: "We have tried hard to reach agreement with the government over the discrepancy in payment terms between ourselves and Vodafone and Orange.

"We are disappointed that we have had to make the decision to take legal steps, in the interest of both our customers and shareholders, to ensure a fair and level playing field amongst UMTS licence winners."

When it comes into operation in 2002, the third generation universal mobile telecommunication system will offer mobile phone owners many more features including high-speed internet access and video pictures.

British Telecom, one of the other successful bidders, is also unhappy about the payment arrangements.