CABLE and Wireless, Britain's second largest phone company, warned it would cut 700 jobs after agreeing the takeover of Energis in a deal worth £594m.

The telecommunications company, which overcame a surprise challenge from Thus Group on Monday, has also agreed to pay as much as £80m more in shares or cash in three years.

The deal will add a number of corporate customers, including the BBC, RAC and Royal and Sun Alliance, and strengthen C&W's position in the highly competitive telecoms market.

C&W warned the combination of the two businesses would result in the loss of 700 jobs by March 2008, as it looks for £80m in annual savings.

The takeover was nearly derailed as Thus, which is based in Glasgow, surprised the industry by tabling a counter proposal on Monday that was worth £800m.

It is a quarter the size of Energis, but had raised £600m in cash, with the rest set to be paid in shares.

However, the company's board decided to accept the proposal from C&W after rejecting the counter offer from Thus for "reasons of value, uncertainty and deliverability".