German mobile phone and engineering group Mannesmann has boosted its defences against a hostile takeover from the UK's Vodafone group.

Mannesmann says its shares are worth far more than Vodafone is offering and that it is planning to float both its mobile phone and internet arms on the stock market.

It says its internet business, with 2.6m customers in Germany and Italy, is the third biggest in Europe.

Mannesmann chief executive Klaus Esser told a press conference that Mannesmann was a "bright star" and Vodafone a "sinking sun" as he urged shareholders to place their faith in his company.

"Do nothing. Do what you've always done. Keep your Mannesmann shares. Don't go in for the offer. You don't have to get involved in any paper work. Throw (the offer) in the bin," he said.

Biggest hostile takeover

Vodafone's 135bn euro (£85bn) offer is the world's biggest contested takeover bid, and it is causing considerable hostility in Germany, where most mergers are agreed in advance.

In a formal defence document, Mannesmann says that based on the potential value of its internet and mobile phone businesses, using the comparable value of other internet service providers, the Vodafone bid is far too low.

Mannesmann reiterated that Vodafone's final bid of 258 euros per share was "fully inadequate and hides considerable risks".

It suggests that 350 euro per share would be closer to its true value, and it urges shareholders to reject the bid as "insufficient and offering no premium".

Mannesmann forecast its profits would grow by 30% annually. It argued that growth prospects in Europe were bright, and its integrated online and telephone services would give it a huge advantage.

It warned that regulatory delays in approving any deal with Mannesmann could cripple the group during a year of fast-moving developments in telecommunications, putting the company in the "deep freeze".

It said the future of Orange, Mannesmann's fast-growing UK mobile phone company, could be put at risk by the deal.

Shareholders holding back

Mannesmann announced it was reshuffling its management and launching an incentive scheme linked to the company's share price.

Mannesmann shares reached a new record in Frankfurt of 249 euros, but it is still trading below the Vodafone offer price.

"You could say Mannesmann's share price performance reflected well on Vodafone, but there is nothing in this bid yet to get shareholders really committed," said one fund manager.

Mannesmann's problem is that the majority of its shareholders are no longer German, but large international institutions.

Vodafone has already won the support of the US advisory body, Institutional Shareholder Services, which has told its clients to back the bid.

Both groups have taken out full page advertisements in the financial press to argue their case.

Vodafone hits back

Vodafone immediately hit back at the Mannesmann statement, saying it had failed to address the real issues and that its approach was "desperate".

"It is time for Mannesmann to address the real commercial and strategic issues presented by the Vodafone AirTouch offer," said Vodafone chief executive Chris Gent.

Vodafone questioned whether Mannesmann could have a leading role without having a base in the US. Vodafone has a strong presence in the US, as it owns Airtouch and has a deal with Bell Atlantic covering mobile phones.

Vodafone, the world's largest mobile phone company, is keen to strengthen its position in Europe through the deal.

Mannesmann is a major mobile phone operator in Germany, Italy and France. It said it might seek telecoms partners in the US.