Carphone has plans for Spain's fixed-line telecoms market

Carphone said it would pay an additional 12.2m euros over the next two years if Xtra met profit targets.

Carphone said the deal would provide it with a solid basis for a move into the Spanish fixed-line telecoms market.

The UK group currently sells mobile phones and other services from more than 1,100 outlets across Europe.

Residential service

Carphone chief executive Charles Dunstone said: "The Spanish market is particularly attractive as our first fixed-line step abroad."

The company said it planned to launch a residential fixed-line service in Spain using the Xtra network within the next six months.

Carphone said it anticipated that the acquisition would be "earnings neutral" in the year to March 2005 - taking into account the likelihood of start-up losses from the new residential service.