BERLIN -- The German auction for third-generation wireless licenses came to an abrupt and unexpected end late Thursday, as six bidders were poised to add 50.52 billion euros ($46.22 billion) to the government's coffers.

Observers had been expecting the auction to bring in far less after a number of big-name contenders such as

WorldCom

(WCOM)

dropped out before the bidding began. Ever since the U.K. third-generation auction brought in a staggering $35 billion last spring, telcos have been reassessing how much they would be willing to pay for Continental UMTS (universal mobile telecommunications system) licenses, which will allow them to offer all manner of mobile connectivity.

But for an event that had been anticipated to be a real snoozer, the German auction began to give even the country's biggest mobile operators,

Vodafone's

(VOD) - Get Report

Mannesmann

and

Deutsche Telekom's

(DT) - Get Report

T-Mobil

, feelings of vertigo as the costs continued to climb. Until Thursday afternoon, both had been bidding for bigger capacity licenses, which would have left room for three more successful bidders to build smaller capacity networks.

But Deutsche Telekom and Vodafone eventually relented and accepted smaller capacity networks. Also acquiring licenses:

Viag Interkom

, which is being taken over by

British Telecom

(BTY)

;

E-Plus

, backed by

KPN

(KPN)

and

Hutchison Whampoa

;

MobilCom

, shored up with support from

France Telecom

(FTE)

; and the

3G

consortium made up of Finland's

Sonera

(SNRA)

and Spain's

Telefonica

(TEF) - Get Report

. 3G had been expected to be the next to bow out after

Swisscom's

(SCM) - Get Report

German unit

Debitel

blinked last Friday.

Following the conclusion of the auction, which pulled in slightly less per capita than the British auction, investors will have plenty to contemplate. For Telefonica and Sonera, considered the weakest of the bidders, the question is clearly whether they have the means to pay for the license and build a network from scratch on their own. Both may now be considered even likelier merger or takeover targets than they had been before. Upon hearing that 3G had gotten a license for 8.41 billion euros, investors bailed out of both companies. Telefonica fell 5.3% to 23.90 euros, while Sonera dropped 3.9% to 42 euros.

The auction would have ended sooner had "the Telefonica-Sonera group not bid more than what we consider economically reasonable," says Frank Wellendorf, an analyst for

WestLB Panmure

in Duesseldorf. "According to our calculations, they are paying double what a newcomer can afford to pay -- they've got the worst starting position." WestLB has an investment banking relationship with Deutsche Telekom.

For Deutsche Telekom and Vodafone, investors will have to figure out the implications of the smaller capacity networks and an added competitor. On Thursday, the market initially cheered Deutsche Telekom's decision to end the race, with its shares rising 0.41 euros, or 0.9%, to 47.36 in Frankfurt, but Vodafone fell 11.5 pence, or 4.1%, to 270 ($4.05) in London.

"I'm rather relieved

Deutsche Telekom and Vodafone decided to hold back a bit and that the prices didn't go any higher. Vodafone will be one of the best-positioned pan-Europeans in any case," says Rosemary Sagar, who heads the international investment division at

U.S. Trust

and manages the

(UMINX)

Excelsior International Fund, which holds Vodafone, Telefonica and Sonera, as well as a smaller position in Telekom. Sagar also remains sanguine on Telefonica and Sonera despite the costs they will incur because it should speed consolidation in the sector. "It should accelerate things -- I think it's pretty clear they're for sale."

So for the moment, the auction has a happy end for all bidders, but how quickly Telefonica and Sonera executives' joy from obtaining a UMTS license translates into sheer terror at the prospect of being taken over may end up being measured in weeks rather than months.