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By Jason Sinclair
Of DOW JONES NEWSWIRES
MADRID -(Dow Jones)- Telefonica SA (TEF) said Thursday it agreed to buy Telecom Italia SpA's (TI) German broadband unit Hansenet in a move to improve its foothold in the competitive German telecommunications market.
In a filing to the Spanish market regulator, Telefonica said the deal values Hansenet at EUR900 million and that it would be done in cash.
At 1454 GMT, Telefonica shares traded 1.7% higher at EUR19.19.
Madrid-based Telefonica has been looking to bulk up its high speed Internet offer in the competitive German telecommunications market, where at the end of June it had only 253,000 Internet customers.
Hansenet will give Telefonica an influx of roughly 2.2 million broadband customers, the company said.
Telefonica added the acquisition still needs approval from competition authorities, and is likely to be completed in the first quarter of 2010.
The deal puts Telefonica's 02 German unit on equal footing with rivals Vodafone PLC (VOD), United Internet AG (UTDI.XE), which compete with incumbent Deutsche Telekom AG (DT) in the German market.
The German telecoms market has become increasingly competitive in recent years, with strong price pressure as a result of the launch of promotional rate plans and the strengthening of Deutsche Telekom's return strategy.
Telecom Italia put Hansenet on the block as part of a plan to dispose of non-core assets for up to EUR3 billion.
Telefonica is Spain's largest telecommunications company by market value and customers. The company has most of its operations in Europe and Latin America.
The Spanish operator recently decided to remain as a strategic investor in Telecom Italia, having renewed its shareholder pact for a further three years.
It holds a 10% indirect stake in Italy's largest telecoms operator through holding company Telco.
Company Web site: http://www.telefonica.com
-By Jason Sinclair, Dow Jones Newswires, 34 913958127, jason.sinclair@dowjones.com
(Archibald Preuschat and Giada Zampano contributed to this article.)