Media giant Vivendi has said it will acquire a controlling stake in French mobile phone firm Cegetel, seeing off a rival bid from the UK's Vodafone.

Vivendi said on Tuesday it would buy a 26% share of Cegetel currently held by BT for $4bn (�2.6bn).

The purchase will give Vivendi a 70% share of the French mobile operator.

Cegetel, a cash-rich and profitable business which owns France's second biggest mobile operator SFR, has also been pursued by Europe's leading mobile network Vodafone.

Ownership battle

Vodafone, keen to build up its presence in the French market, last month offered to buy the 44% of Cegetel that Vivendi already owns.

But Vivendi rejected Vodafone's bid as too low.

Vodafone is now expected to double its own 15% stake in Cegetel buy buying out a minority shareholding belonging to US telecoms firm SBC.

A Cegetel shareholders' agreement giving Vivendi first priority in buying the firm's stock precludes Vodafone from offering more money for BT's stake.

Vivendi founded Cegetel five years ago, and sold stakes to BT, SBC, and German telecoms giant Mannesmann - now part of Vodafone.

Fundraising

Vivendi is expected to borrow 1.3bn euros to fund the Cegetel purchase, raising the balance through bond issues and the partial sale of its Vivendi Environnement subsidiary.

Vivendi chairman Jean Rene Fourtou admitted that the purchase "might seem to be paradoxical for a company which this summer ... came close to financial collapse."

But he stressed the transaction would not affect Vivendi's plans to reduce its crippling debts.

The firm aims to cut its debts from about 14 billion euros to below 8 billion euros over the next two years by selling off some of its businesses.

Investors reacted cautiously, marking Vivendi shares down more than 5% to 15.6 euros by the close of trading in Paris.

Under former chief Jean Marie Messier, Vivendi borrowed heavily to fund an acquisition spree which transformed it from a staid French utility group into the world's second largest media company after AOL Time Warner.

But the company's debts began to weigh on its performance when the late 1990s boom turned to bust two years ago.

Mr Messier was forced to step down in July after the firm lost nearly 60% of its market value in the first half of the year.