BT today announced that it has agreed to sell its 26 percent stake in French fixed line operator Cegetel to Vodafone for £2.5bn in cash.
Vodafone will also buy US-based SBC's 15 percent interest in the company for £1.5bn, giving it a 41 per cent stake in Cegetel.
Cegetel owns 80 percent of SFR, the number two mobile phone operator in France.
Sir Christopher Gent, chief executive of Vodafone, said: "Our investment in France, which began 14 years ago, is a long-term commitment and I am therefore pleased we have reached agreement to increase our ownership in Cegetel and SFR.
"I am confident that we can continue to build our existing relationship with Cegetel and SFR and help provide additional services to their customers. I believe this will enhance Cegetel's and SFR's positions in the French market and create long-term value growth for our shareholders."
Sir Christopher Bland, BT's chairman, said: "This is an excellent transaction for BT's shareholders. The price represents a return of around two and a half times our total investment in Cegetel."
He added: "This sale is a further significant step in the de-leveraging strategy laid out at the time of our rights issue last year. We are now close to realising our £10bn net debt target, giving BT one of the strongest balance sheets in the sector. This allows BT to focus on driving our core activities forward."
BT will recognise a profit of approximately £1.4bn on completion of the transaction.