ITouch, the mobile services firm that is 50 per cent owned by Independent News & Media, said yesterday it would buy a Spanish rival for a maximum of €60 million in cash and shares.

The London listed firm also issued annual results showing it made a pre-tax loss of £46.6 million sterling (€68.5 million) in the year to the end of December 2002, up from £16.1 million in 2001. This amounts to a loss per share of 16.2 pence and includes an exceptional write-off of £30 million.

ITouch announced a takeover offer for Movilisto, a provider of premium SMS applications and services in Spain and Portugal. The cash and share offer includes a €25 million earn out over two years if certain targets are met.

The deal is conditional on the approval of iTouch shareholders. It involves the issue of €20 million new shares at a price of 18p, and the payment of €5-€15 million in cash, depending on the amount of working capital held by Movilisto at the time of the closure.

Independent News & Media and iTouch's founding directors, who own 68.4 per cent of the firm, have committed to voting in favour of the deal at an extraordinary general meeting in May.

The issue of €20 million shares by iTouch - which has a market capitalisation of about £50 million - will significantly dilute existing shareholder's holdings.

Unaudited figures provided by iTouch show that, in 2002, Movilisto made €12.9 million earnings before interest, tax, depreciation and amortisation (EBITDA) on revenues of €30.8 million. The Spanish mobile firm was set up in 2001. Its customers include Telefonica, Repsol and Coke.

Mr Avi Azulai, managing director and co-founder of iTouch, said the deal would make the firm the number one wireless application service provider in Europe.

Ms Bernie Lardiner, an analyst with the company's Irish broker, Davy, said the acquisition was expected to be earnings enhancing. It should also transform iTouch into an EBITDA-positive business with immediate effect, if the earn out targets are met by the company.