UPDATE 2-Five groups to bid in Czech 4G telecom auction

* Three incumbents, 2 newcomers to take part in Nov auction

* Czech Telefonica will bid, but challenges conditions

PRAGUE, Sept 30 (Reuters) - Five companies signed up toprovide next-generation mobile telephony services in the CzechRepublic via an auction of radio frequencies in which bandwidthwill be reserved for a new entrant to boost competition.

They include the three existing providers - Telefonica CzechRepublic, T-Mobile and Vodafone -as well as two newcomers, telecommunications regulator CTU saidon Monday after the deadline for applications expired.

Expected to take place in mid-November but still dogged bylegal challenges, the sale of frequencies for high-speed 4Gwireless networks has already been aborted once.

Bids for the previous auction in March were so high thatthey risked inflating the price of the services and delayinglaunch, the regulator said.

Governments across Europe are rushing to roll out networksbased on 4G's LTE (long-term evolution) technology, whichenables faster mobile broadband access.

Earlier on Monday Czech investment group PPF, owned by thecountry's richest man Petr Kellner and a possible new entrantthat participated in the March sale, said it would not join inthis time.

Czech Telefonica's share price rose more than 3 percentafter the announcement, though PPF also said it had recentlysold its telecoms division. That business will compete asRevolution Mobile under new ownership.

The auction faces challenges against some of the conditionsthe regulator set out, including the plan to reserve space for anew entrant, which has angered the incumbents.

Czech Telefonica, a unit of Spain's Telefonica,said on Monday it had filed a lawsuit with the Prague municipalcourt against that stipulation and two others.

A company spokesman said the firm would still take part inthe auction. T-Mobile, which appealed to the European Commissionover the issue, would also participate, a spokeswoman said.

The Czech Republic's three existing operators have all saidguaranteeing frequencies for a new player would leave them at adisadvantage.

The regulator has reserved space on the 800 and 1800 MHzbands for a new entrant. It said the fifth applicant was anothernewcomer, Czech group Tasciane.

It said it would open applications on Tuesday and expectedthe electronic auction for frequencies to start on November 11.