The sale, which generated a DM2.6bn paper profit for Veba, was carried out yesterday morning through ABN Amro and Cazenove, the stockbrokers, in a so-called bought deal.
The brokers bought the shares from Veba for 724.2p each and placed them with institutional investors at 735p, making a pounds 26.5m profit in the process. It is understood that demand from investors was so strong that the placing was completed just 10 minutes after the market opened.
News of the placing, which was carried out at an 11 per cent discount to C&W's closing share price on Friday, dragged C&W shares down by 79.5p to 751p yesterday.
Other telecoms shares, such as British Telecom and Telewest, were caught in the crossfire as institutional investors sold out to help fund their purchases of C&W shares.
Analysts also viewed the placing as a signal that telecoms stocks might have hit their peak. Last month Hutchison Whampoa, the Asian group, sold a 5.1 per cent stake in Orange, the mobile phone operator.
C&W is thought to have been kept fully informed about the sale and even offered advice to Veba. The co-operation between the two was underlined by the selection of ABN Amro and Cazenove, both of which are brokers to C&W.
Veba bought the stake for DM2.5bn in early 1995 when C&W took a stake in Veba's telecoms subsidiary, Vebacom, and the two companies set up a joint venture for an attack on European telecoms markets outside Germany. However, the alliance unravelled in 1997, leaving Veba as a passive shareholder.
Veba's move is bound to heighten speculation that it is poised to raise its shareholding in the German mobile operator E-Plus. Following its merger with Airtouch, Vodafone has put its 17 per cent stake in the German operator up for sale. Veba also has a shareholding in o.tel.o, an aggressive fixed- line operator that is taking on Deutsche Telekom.