Germany's cartel office has come under fire from the government for blocking Liberty Media's takeover of the cable assets of Deutsche Telekom.

The US cable firm, which is on an acquisition spree in Europe, offered 5.5bn euros (�3.4bn; $4.8bn) for six regional cable operators belonging to Germany's biggest telecoms provider.

But the cartel office blocked the deal due to concerns over the size of the empire Liberty Media was building.

Alfred Tacke, state secretary at the economics ministry, said it respected the ruling but expected the watchdog to be more open to cable investors' interests in the future.

"If you want more competition, you have to enthuse investors about investing in Germany," Mr Tacke told Reuters on the sidelines of a conference in Berlin.

"They [cable companies] have got to have a chance of making a profit,"

Network improvements

The six systems would have given Liberty 10 million subscribers, or about 60% of the German market.

"The transaction would have considerably worsened the competitive structure in the German cable market," said president of the cartel office Ulf Boege.

The cartel office signalled it might have approved the deal if Liberty had committed to upgrading the network.

Liberty Media said it would upgrade the network, but not as fast as the cartel office wanted.

The upgrade was also a priority for the government.

"The upgrade of the broadband cable is too important...if there are no new investments we are in danger of missing out on the future," said Mr Tacke.

Rival buyer?

The blocked deal is seen as a heavy blow for Deutsche Telekom, even though it was widely expected.

Deutsche Telekom has come in for mounting criticism from shareholders, who accuse it of having a muddled strategy and ineffectual management.

The firm has moved to sell off peripheral divisions, as part of a programme to pay off its debt.

Deutsche Telekom said it regretted the decision but would seek another buyer.

Compere Associates, a little-known London-based venture capital firm, has already stated its willingness to step in.

Meanwhile, the German government is rumoured to be pushing for the Liberty deal, and could overturn the cartel office's decision.

And Liberty will have the option of an appeal, sending the decision into the lap of Economy Minister Werner Mueller.