UPDATE 1-Thai telecom shares up on 3G hopes, led by AIS

* AIS leads strong gain after 3G investment plan

* Brokers upgrade sector

* Chances high that 3G auction will finally happen in Sept (Adds details, analyst comments)

By Khettiya Jittapong

BANGKOK, July 22 (Reuters) - Shares in Thailand's top three mobile phone operators jumped on Thursday on renewed optimism about third-generation mobile phone services, with a long-awaited auction for 3G licences now due in September.

Analysts said market leader Advanced Info Service ADVA.BK and second-ranked Total Access Communication DTAC.BK (TACC.SI) stood the best chance of winning licences because of their strong financial positions.

At 0430 GMT, AIS shares were up 5.1 percent at 92.25 baht after surging more than 6 percent to a nine-month high of 93.50 earlier. It was the most active stock with turnover of 1.92 billion baht ($59.5 million).

The overall Thai stock index .SETI was 0.5 percent higher.

TAC (TACC.SI) climbed 4.8 percent to 43.25 baht, while True Corp TRUE.BK, which controls unlisted True Move, Thailand's third-largest mobile operator, rose 1.6 percent to 3.82 baht.

AIS stock has risen 3.5 percent over the past month but has lagged sharp gains in its rivals. TAC shares have gained 13 percent and True 18 percent.

Late on Wednesday, AIS Chief Executive Wichian Mektrakarn told Reuters his company planned to spend 45 billion baht ($1.4 billion) over three years to install a 3G network after it won a licence. [ID:SGE66K0JN]

Some brokers raised their recommendation on the sector to "overweight" from "neutral", seeing a high possibility now that the 3G auction will finally go ahead this year.

"We have a more positive view on the auction, that it should go ahead as planned," Finansia Syrus Securities analyst Pornsook Amonvadekul said in a note.

The 3G licensing is a crucial step in the reform of the $4.7 billion sector because it should lead to changes in the way companies pay fees to the government, analysts say.

The telecoms regulator plans to hold an auction in the third week of September for 3.9 generation mobile services, bypassing 3G, which has never got off the ground in Thailand because of repeated delays to licensing for at least five years.

The auction is expected to generate at least $1.2 billion for the state.

The new licences will enable operators to tap new revenue through music, video, picture and data services in a saturated market where the penetration rate is nearly 100 percent. ($1=32.28 Baht) (Reporting by Khettiya Jittapong; Editing by Alan Raybould)