Dusseldorf - Vodafone AirTouch, the world`s largest wireless communications company, agreed to buy Mannesmann for $203,8 billion in stock and assumed debt, making it the biggest merger deal ever.
The news sent phone company shares higher on expectations of more mergers.
"This intensifies the pressure on others to act and supports the trend towards size," said Holger Grawe, an analyst at WestLB Panmure in Dusseldorf. "With 10 percent of the worldwide market in terms of customers, the company is state-of-the-art - that`s unbeatable."
The new Vodafone, with more than 42 million customers, will force rivals to form alliances and make acquisitions to compete.
The most obvious target is Orange, the British mobile phone company owned by Mannesmann that Vodafone has said it will sell. Orange shares rose 106 pence, or 4,3 percent, to P25,66, giving it a value of P30,82 billion.
Mannesmann`s supervisory board approved the agreement, which ended a three-month campaign by Chris Gent, Vodafone`s chief executive, for control of Germany`s largest cellular company.
The new group will be Europe`s biggest phone business and, with about 10 percent of the world`s mobile phone customers, will also dominate mobile Internet services.
Vodafone will exchange 58,96 shares for each Mannesmann share, giving the German company 49,5 percent of the combined group.
Asked whether Rupert Murdoch`s News Corp is a potential partner, Gent said News International, News Corp`s British unit, already provided some content to Vodafone Interactive in Britain.
"We would welcome talks regarding expanding that relationship on a wider basis," Gent said.
Vodafone expects to spin off Orange and establish a new stockmarket listing for the shares, which will be distributed to the enlarged group`s shareholders.
The German company succeeded in getting Vodafone to increase its offer from 53,7 shares for each Mannesmann share, to keep the German company`s traditional phone businesses in Germany and Italy, and to give it five seats on the new company`s board.