The FTSE 100 Index has lost its early morning 44-point gain and is down 5.1 at 5146.8 at lunchtime.

NEC, Matsushita, KDDI and Japan Telecom are to merge internet service operations.

Analysts will be looking at the long-term prospects of Vodafone when it reveals its interim results next Tuesday.

Vodafone and Japan Telecom plan to form a single company to challenge NTT DoCoMo's dominance of the Japanese market.

Mobile phone giant Vodafone has bought British Telecom’s interests in Japan and its stake in Spanish mobile phone operator Airtel for £4.8bn, it was announced today.

Vodafone has confirmed it is in talks with British Telecom over the acquisition of both its share in the Japanese market and its stake in Spanish mobile phone operator Airtel.

Leading shares in London closed just off their intra-day lows after another erratic performance, with weakness in financial and 'old economy' issues preying upon early gains in the technology, telecom and media sectors - still buoyed by strong pre-weekend gains on the Nasdaq - dealers said.

Vodafone is reportedly close to securing a deal that would make it the third largest telecoms operator in Japan.