German utility groups Veba and RWE said they would sell their 60.25% stake in E-Plus to France Telecom for 7.4bn euros ($7.9bn).

The French telecommunications group had already said earlier this month it wanted to buy the 17.24% stake in E-Plus held by UK firm Vodafone AirTouch.

With cross-border competition heating up in Europe's recently liberalized telecommunications market, France Telecom said it intended to use E-Plus to help it expand into the German telephone and internet markets.

France Telecom's plan to form a global partnership with Deutsche Telekom was dealt a severe blow after the German carrier pursued an ill-fated attempt to merge with Telecom Italia in May.

"When we were allied with Deutsche Telekom, we didn't need to expand into the German market, because they were already there," said France Telecom chief executive officer Michel Bon.

"Now that the partnership doesn't exist any more, we need to branch out into each others' countries," he said.

Major player

E-Plus is one of Germany's biggest mobile telephone operators, holding a 16% market share with 3.2m customers. Sales in 1998 were 920m euros ($984m).

The firm, with 3,100 employees, will remain based in Düsseldorf, the companies said.

The former French telephone monopoly said it would be selling its stake in US-based Sprint Corporation, worth about 8.7bn euros ($9.3bn), and its 2% stake in Deutsche Telekom, worth about 2.3bn euros ($2.5bn).

A break-up of the French company's Global One joint venture with Deutsche Telekom and Sprint has been expected since MCI Worldcom's announcement earlier this month that it was acquiring Sprint for $115bn.

Deutsche Telekom also holds 10% of Sprint and is pondering what to do with its stake.

The E-Plus deal depends not only on regulatory approval but also on the consent of US operator BellSouth Corporation to waive its pre-emptive rights, France Telecom said.