Shares in German mobile firm Mobilcom surged by 18%, after a report that parent France Telecom is planning a buy-out.

France Telecom is in dispute with Mobilcom chief executive and minority shareholder Gerhard Schmid over strategy.

The increasingly bitter row began as a disagreement over the German mobile operator's plans to invest heavily to expand its network.

Debt-burdened France Telecom has made it clear that it wants greatly to slow down the pace of investment.

As a result, the two sides have been unable to agree on a business plan.

Deal on table?

According to the Financial Times, France Telecom has now offered Mr Schmid shares in Orange, its European mobile holding, in return for his 33% stake.

The French firm admitted that it was in talks with Mobilcom, but denied that any accord had been reached.

"In the interest of Mobilcom, which is a fine company, a solution needs to be found as rapidly as possible," France Telecom spokesman Bruno Janet told Reuters news agency.

France Telecom's shares closed down 3% in Paris at 33.98 euros.

By 1800 GMT, Mobilcom's shares were trading up 12% at 15 euros, off their session peak but still significantly higher.

Generous price

The reported buy-out offer values Mobilcom at 22 euros a share, well above Monday morning's price of about 16 euros.

France Telecom shareholders have been worried about the dispute, since a takeover of additional shares in Mobilcom could trigger an offer to take over the whole company, adding to the firm's mounting debt burden.

But a takeover offer is expected to satisfy Mr Schmid's demands.

Frustrated in his attempts to persuade France Telecom into an aggressive expansion strategy, Mr Schmid said over the weekend that he would use the courts to force a buy-out.