Talk of mergers and acquisitions stirred up European shares yesterday, with UK cellphone firm mmO2 soaring but Dutch rival KPN down as its failed bid approach stoked speculation of a takeover battle.

Wanadoo was another star performer, up 15.5 per cent as parent France Telecom launched a bid to acquire full control of the French Internet services provider.

Weakness in selected technology issues like Dutch chip equipment maker ASML trimmed market gains late in the session, as worries share prices in the sector had hit lofty levels after last year's surge hit the Nasdaq Composite.

But telecom equipment makers and tech bellwethers Nokia and rival Ericsson gained 1.5 per cent and 2.5 per cent respectively as Merrill Lynch raised its estimates for 2004 and 2005 mobile handset sales by roughly five per cent. The FTSE Eurotop 300 index of pan-European blue chips ended 0.19 per cent higher at 1,013.13 points, off an earlier session-high of 1,017.21, but still within a whisker of last week's 19-month high of 1,019.34 points.

Shares in mmO2 jumped 16.6 per cent on talk of a possible takeover battle, even though KPN Chief Executive Ad Scheepbouwer said his company had no plans to make a hostile bid. KPN shed four per cent as investors shrugged off news it had turned to a big profit in 2003 to focus on its overtures to mmO2.

Equity markets have been rife with M&A buzz in recent weeks, fired up by drug maker Sanofi-Synthelabo's hostile bid for rival Aventis and Vodafone's failed attempt to take over US rival AT&T Wireless.

The growing number of mergers and acquisitions talk, which all but disappeared during lowest months of a three-year market downturn, mark a return of confidence in equities fundamentals and prospects, strategists said.