MMO2, Britain’s third-ranked mobile operator, last night said that it had spurned a takeover offer from the Dutch group Royal KPN that is thought to have valued the company at almost £10 billion.

KPN, the former Dutch telecoms monopoly, is understood to have approached mmO2 this week with a proposal for a merger or takeover that the mmO2 board rejected yesterday. KPN is believed to have offered a share-based deal that would have valued mmO2 at about 110p a share.

The UK company issued a statement after the close of trading saying: “The board of mmO2 notes recent speculation about a possible transaction. MmO2 confirms that it has received and considered a proposal, but discussions have now ceased.”

KPN confirmed the approach, but declined to say whether the offer was for all or part of mmO2. A spokesman said: “We were in discussions with mmO2 and these discussions were recent. I can confirm we made a proposal.”

No further details were available and mmO2 declined to comment further. Its shares had closed 1p off at 91¾p.

MmO2, which boasts about 20 million customers in the UK, the Irish Republic and Germany, has been the subject of takeover rumours for months.

Analysts said the market had been swept by fresh speculation yesterday that KPN had been interested in buying mmO2, the sixth-largest European mobile phone company, which at last night’s close had a market value of £7.95 billion.

MmO2 and KPN were reported earlier this week to be in initial talks about a possible merger, with discussions being held at the “highest level” in London, Brussels and The Hague, where KPN is based.

KPN, which has 14.1 million subscribers, has said that it is interested in particular in mmO2’s German business, which would boost the market share of its own German unit, E-Plus, creating a stronger rival to the market leaders Deutsche Telekom and Vodafone.

But both sides have said repeatedly that they remain far apart on the price of any deal. Observers of mmO2 said that in order to succeed, any bid would have to value it at more than £1 a share, or about £8.6 billion, and take on its debt of almost £500 million.

KPN, whose plan to merge with Telefónica was rejected by the Spanish company in 2000, has cut its net debt from €23 billion in 2001 to about €8.6 billion (£5.8 billion).

The company, whose shares have lost 87 per cent of their value since the peak of the telecoms bubble in March 2000, is to report fourth-quarter results on Monday.

Analysts expect it to unveil net profits of €1.3 billion, boosted by a profit of €1.08 billion from an agreement with the Dutch tax authority, on group sales of about €3.11 billion.

MmO2 last month said it added 430,000 UK customers from October to December.