UPDATE 1-Numericable, Virgin out of French mobile auction

* Says regulatory conditions on licence are unworkable

* Says uncertain about cost, pace of building network

* Leaves only one declared bidder for French 3G licence

* Bids due Oct. 29

By Leila Abboud

PARIS, Oct 22 (Reuters) - Cable television operator Numericable and virtual mobile operator Virgin Mobile said they would not apply for France's fourth mobile phone licence, citing unfavourable regulations and uncertainty on the project's costs.

Their exit leaves French Internet service provider Iliad (ILD.PA) as the only declared applicant for the 240 million euro ($358.4 million) licence. French telecom regulator ARCEP will receive bids until Oct. 29.

Iliad declined to comment on the Numericable [YPSOFN.UL] and Virgin (VIV.PA) withdrawal.

"We spent a lot of time and a lot money to examine this opportunity, and talked to the three existing operators," Numericable Chief Executive Pierre Danon said on Thursday during a joint conference call with Virgin Mobile.

"Given the conditions on the licence, we think it will be very difficult for the holder of the fourth licence."

The new entrant will have to build a network to cover 25 percent of the French population before it can reach a roaming accord with other operators.

The question is how long and what cost it will take to reach that 25 percent level, Danon said. The newcomer will need some 1,000 antennas to reach that threshold, he said. It would have to install the antennas at new locations or on the sites of existing operators.

Even though the existing operators are supposed to share their sites, the risk is that this process will not go smoothly, thus pushing up the overall cost of the project.

"The business case for the project could entirely fall apart," said Danon. "The level of uncertainty is very high."

Numericable, which is held by private equity funds, and Virgin Mobile said their financial backers had agreed to put in 300 million to 400 million euros for the project.

"Our withdrawal is not a question of money," said Danon.

The rest of the build-out would have been financed by a telecom equipment vendor, which the firms declined to name.

The entry of a fourth operator into the nation's 28 billion euro mobile market has been hotly debated in France, and is opposed by the existing three operators France Telecom (FTE.PA), SFR (VIV.PA), and Bouygues Telecom (BOUY.PA). [ID:nLK374445] [ID:nLG310334]

The operators have filed complaints to European Union authorities and France's highest administrative court, the Conseil d'Etat, arguing that the terms and price offered to the fourth entrant are unfair. [ID:nLL684469]

Critics of the plan to introduce a fourth operator argue that it will disrupt the market, drag down prices and discourage investment in telecom infrastructure.

Supporters argue that France's mobile prices are too high, and more competition would be a good thing for consumers. ($1=.6697 Euro) (Editing by Karen Foster)