T-Online's share price has plummeted since its market debut

The move has been criticised by many small shareholders who bought into the stock at the height of the internet bubble and now stand to lose money.

Deutsche Telekom, Europe's biggest phone firm, is offering 8.99 euros for every T-Online share it does not own.

The stock debuted at 27 euros in April 2000, hitting a record of 47.70 in May. A year later it was down at 4.95 euros.

DSW, a group representing the rights of small shareholders, called Deutsche Telekom's purchase "unacceptable" and "a slap in the face", according to press reports.

Its members have complained that they are being forced to give up their holdings just as the business environment is showing signs of improvement following the recent downturn in the global technology industry.

Different landscape

The company said that changing market conditions had prompted it to make the offer, adding that customers are confused by the current structure.

At present, anyone wanting to get online has to order part of the service at T-Online, and another portion from the fixed-line phone company T-Com.

The two divisions also have launched services, such as music downloading, which compete with each other.

"The internet is losing its status as a separate, independent business segment," said Deutsche Telekom's chief executive Kai-Uwe Ricke.

"Customers want products and services from one source, that are totally compatible with each other. The answer to this is integrated offerings."

Rival France Telecom, Europe's second biggest phone provider, already has taken back control of its internet business.

Go ahead

Deutsche Telekom is expected to get the 75% majority from shareholders needed to push ahead with its plans.

It has warned that anyone who ignores its current cash offer risks getting even less money once the deal goes through in the middle of next year.

Deutsche Telekom said that those investors wanting to take up the offer could liquidate their holdings immediately.

Those who prefer not to sell will be able to swap their T-Online shares for Deutsche Telekom stock at some time in the next year. The German phone firm says it hopes reabsorbing T-Online will boost its own stock price.

Separately, German state-owned lender KfW Group said it will sell shares in Deutsche Telekom worth as much as 4bn euros ($5bn).

It is offering the stock at between 15.05 euros and 15.20 euros, and will use the cash to help bring its budget deficit back within European Union limits.

Shares of Deutsche Telekom dropped 1% to 15.09 euros in Frankfurt. T-Online rose 1.7% to 9.13 euros.