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Liberty Media has withdrawn its application, submitted to the Federal Cartel Office in Germany yesterday, after the office said it would probe Liberty's planned £3.4bn purchase of Deutsche Telekom's cable TV operation.

Liberty had planned to acquire a minority stake in KirchPayTV from News Corporation. Further complicating the move was opposition from Kirch itself.

Liberty, which is headed by John Malone, is expected to have to make a number of concessions to win approval from the German competition watchdog for its Deutsche Telekom deal, which will see it buy six of Germany's regional cable television networks.

Liberty has refused to comment on the reasons behind the withdrawal of its offer to take a stake in the company and has said only that it feels a commercial relationship with KirchPayTV was "more appropriate" than making an investment in the company.

It is not known if the withdrawal of the Kirch offer will be enough for German regulators who are concerned about Liberty owning both the network and content.

The German Cartel Office is understood to have met with Malone's lawyers and told them that it would have difficulty in approving the deal because of competition laws which prevent a single telecom company from owning the network's backbone and the last mile.

The regulators are said to have invited Malone to provide further information by the end of the year in support of Liberty's case.

It is thought that the Cartel Office might reconsider, however, if Malone can prove that the deal would increase competition in areas such as telephony and broadband internet access.

It is understood that Liberty CEO Robert Bennett and Miranda Curtis, head of the group's international operations, will meet officials from the Bonn-based regulator on Thursday.

According to Reuters, German magazine Teleboerse said on Wednesday that Germany's Deutsche Bank was preparing to lead a consortium to acquire Deutsche Telekom's cable assets if Liberty's bid was blocked by Germany's cartel office. The report said Deutsche Telekom was preparing to merge its Telecolumbus unit with cable operators Primacom and EWT/TSS. Bosch Telecom would also join the consortium, it said.

Deutsche Telekom is an important part of Liberty's strategy to build a European cable empire. It already owns Europe's largest cable operator UPC.