Mannesmann, which produces trucks and runs Germany's second-largest telecoms business, said both companies would be listed in the Dax index on the Frankfurt exchange after 2001.

The plan aims to capitalise on the growing market for private telecommunications networks as the big state monopolies, like Deutsche Telecom, are opening up to competition.

Takeover bid?

The move was seen by analysts as paving the way for a bid from a major mobile phone company, perhaps the UK's leading operator, Vodafone.

One trader said: "We were expecting an announcement on a Vodafone takeover bid."

But he pointed out that a mobile phone company would not want to buy the automotive operations of Mannesmann, so the announcement was broadly positive.

Shares in the group were up 8% at 153 euros after the announcement.

Split good for business

The company said Mannesmann Engineering and Automotive aims to become the global leader in all sectors and continue to increase its profitability.

And Mannesmann telecommunications will use its strong bases in Germany and Italy to become the leading private telecoms group in Europe.

Splitting into two "strong, ambitious and focused units will guarantee optimal motivation for both management teams and employees," the group said.

"Mannesmann's strategy regards its business portfolio as a dynamic, not fixed one. And that will remain the strategic goal of the two new companies. Building up two separate units is the key for further accelerated growth of the company's value."

Bayerische Landesbank analyst, Volker Nitsch, said the move would be "very positive for Mannesmann's telecoms business because it will enable them to act more independently."

The telecoms business is one of the biggest earners and strongest assets of the entire group.