Vodafone yesterday denied it bribed directors of German telecoms rival Mannesmann to seal its takeover of the company last year.

Investigators in Duesseldorf said on Monday they had expanded their investigation of the DM120 million (€61.36 million) paid to Mannesmann board members after the takeover to include Vodafone chief executive Sir Chris Gent.

"We had German lawyers look at the proceedings and we have been advised that everything was done in line with German law," said a Vodafone spokeswoman.

Vodafone, which took over Eircom last year, said it had to pay the bonuses as they had been agreed by Mannesmann directors after they agreed to the takeover, but before the deal was final.

The company paid DM60 million to the 18-member Mannesmann board, in addition to the DM60 million golden handshake paid to Mannesmann chief executive Mr Klaus Esser.

Other executives under investigation include Mr Klaus Zwickel, head of Germany's powerful steelworkers union IG Metall, and Mr Josef Ackermann, the man designated to take over at Deutsche Bank from the current chairman Mr Rolf Breuer.

If investigators prove the bonuses constituted a bribe used to "buy" approval of the takeover, executives at both firms could be prosecuted for breach of trust and embezzlement.

Although the money for the deal was paid by Vodafone, investigators believe the money actually came from Hong Kong conglomerate Hutchison Whampoa, which once owned a share in Mannesmann before selling to Vodafone. Hutchison Whampoa's share-holding in Mannesmann increased in value substantially during the three-month take-over battle.

Meanwhile, Deutsche Telekom shares entered freefall yesterday, continuing the slide that began two weeks ago when Hutchison Whampoa sold its 44 million shares in the company. Deutsche Bank sold the shares on behalf of Hutchison only a day after bank reissued its "sell" recommendation. Telekom shares fell to €17 yesterday after the news that Finnish telecoms company Sonera was planning to sell its 1.8 per cent stake in the company.

"We will reduce our entire shareholding in Telekom," a Sonera spokesman told the Financial Times Deutschland.

The newspaper reported that Telekom chief executive Mr Ron Sommer would hold a teleconference with Deutsche Bank chairman Rolf Breuer in the next few days after inconclusive lower level discussions.

Mr Sommer accused Deutsche Bank of "highly professional" misconduct in its handling of the share sale, and apologised to shareholders for the slump in share value.