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* Czech Telefonica says conditions "far away" fromexpectations
* New auction under consultation stage
* Regulator cancelled previous auction after bids grew toolarge
PRAGUE, April 11 (Reuters) - Telefonica Czech Republic is unhappy with newly proposed rules for a plannedauction of mobile spectrum frequencies and is consideringwhether to challenge them, the company's chief executive said onThursday.
"We are really disappointed with the changes," Luis Malvidotold reporters. "We ... will give our input to the regulator butthis is far away from what we expected ... and this is damagingour business case."
The country's telecoms regulator has proposed setting asidea larger part of the spectrum for a new market entrant, whichcould put more competitive pressure on incumbent operators.
European countries are rushing to roll out superfast mobilenetworks based on LTE or fourth-generation technology that will allow faster mobile broadband access.
The Czech Telecommunications Office (CTU) opened thepreliminary phase of the process on Monday, following thesuspension of the previous auction designed to widen thespectrum of services on the market.
Malvido said the company, majority owned by Spain'sTelefonica, is considering its options with regard tofurther steps and said it would "be very difficult to see stronginvestment in this country with these kind of conditions."
"We are going to give all our feedback to this consultation.Then we are considering further steps," he said.
CTU has said the new proposed conditions would involvesetting aside a bigger number of frequencies for a new marketentrant that could challenge current operators, who includeT-Mobile and Vodafone as well as TelefonicaCR.
The fourth bidder in the auction is expected to be PPFMobile Services, a unit of the PPF investment group owned byPetr Kellner, the Czech Republic's richest man.
PPF has said it would only take part if the regulator sticksto the proposed conditions.
Malvido said he was surprised to see a private company"telling the government what to do ... This is like what PPF isdoing at this stage," he said.
PPF's spokesman was not immediately available for comment.
CTU spokesman Frantisek Malina said the conditions were notfinal. "There is a time for discussion," he said. "We willprepare recommendations from the different companies."
The regulator suspended the previous auction in March afterit said a rise in bids to more than 20 billion crowns ($1billion) in total threatened competitive pricing of services andthe speed at which they could start operating.
CTU Chairman Pavel Dvorak's term in office runs out at theend of April, so a new boss will oversee the new auction, whichcould start in June.
