EU regulators fined Telefonica €151 million (£103 million) today, claiming the Spanish telecoms company unfairly squeezed rivals by setting wholesale internet prices too high to allow them to make a profit.

EU Competition Commissioner Neelie Kroes said the high penalty - second only in EU monopoly abuse fines to the landmark €497 million fine on Microsoft - reflected the fact that Telefonica knew it was breaking EU rules.

"Telefonica's price structures raised its competitors' costs, restricted competition on the retail market, and made consumers pay the price," Ms Kroes said.

The company said it would appeal the EU decision because it was "unjustified and out of proportion."

Spain's former national monopoly controls the fixed line telephone network used for 80 per cent of all ADSL broadband Internet connections. Rivals need to buy wholesale access from Telefonica to offer competing retail services.

The European Commission said these wholesale prices on regional and national networks were set so high from 2001 to 2006 that they held back the rollout of broadband Internet in Spain.

As a result, the EU said consumers there use the Internet less and pay a fifth more than other western Europeans.

"When consumers and businesses are harmed in such a major market, the entire economy suffers," Kroes said. "Consumers have been put off from exploring the new services that broadband Internet allows."

The fine is far higher than other antitrust fines on telecom companies in similar cases, such as a €12.6 million penalty on Deutsche Telekom €10 million fine against France Telecom’s internet arm Wanadoo.

Kroes said these fines had not been big enough if they had failed to deter Telefonica from also trying to cripple rivals.

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