The deal will see BT take a $361m (£220m) stake in LG making it the second-largest shareholder - with 23.5% - in the mobile telephone operator.

It is the biggest foreign investment ever made in South Korea's telecommunications sector.

Despite the country's ailing economy and hard-hit telecoms sector, LG serves 1.5m customers and the industry has grown quickly in recent years to become the second-largest in Asia.

However, there is cut-throat competition on the local mobile phone market with South Korean firms either vying to dominate the sector or battling to survive.

LG, a mobile phone operator

BT's Asia-Pacific manager, Richard Slogrove, said his company "believes in Korea's economic future and the growth in the telecommunications market in the country and Asia".

The deal is part of a drive by LG to generate $6.5bn in foreign investment.

LG's chief executive Lee Moon-ho said in a speech at a signing ceremony for the deal: "LG will gain much from the reputation as well as the global experience and reach of BT while BT will benefit from the cutting-edge CDMA technology of LG."

South Korea is one of only a few countries in the world to have successfully launched commercial mobile telephone services using CDMA to transfer signals.

The BT deal has been approved by the Government which is overseeing the opening up of many closed markets under commitments to the IMF.