BT has denied that it is planning to spoil the flotation of Yellow Pages owner Yell by setting up a rival business.

The Sunday Telegraph newspaper said BT was poised to launch a classified advertising and directories business in direct competition with Yellow Pages.

But a spokesman for BT told BBC News Online that it was all "rumour and speculation".

BT sold its Yell subsidiary to the venture capitalists Apax Partners and Hicks Muse Tate & Furst for �2.1bn last year.

It had an agreement not to compete, but this is due to expire in a few months time.

No plans for directories

Options being considered by BT were reported to include forming joint ventures with Thomson, or buying some of the assets of the struggling directory business Scoot.com.

But BT's spokesman said that although it was no secret that BT looks at various opportunities, there were no plans to move into directories.

Yell is planning to float on the London stock market this summer.

It is hoping to raise �750m, most of which will be used to pay existing debt.

In the UK it owns Yellow Pages, Business Pages and Talking Pages.

It also operates in the United States where its businesses include the Yellow Book and the independent directories publisher, McLeod.