shareholders in the UK's biggest telecom business are being asked to help it wipe billions from its debt.

British Telecom (BT) is hoping to raise £5.9bn under the biggest rights issue seen on the London Stock Exchange.

More than 1.7 million private investors will be offered three new shares for every ten they own, at a heavily discounted price of 300p.

The bulk of the cash will be raised in the City, from BT's key institutional shareholders.

BT announced the record-breaking rights issue as it pressed ahead with a widely-expected restructuring plan.

The firm is demerging its mobile phone division BT Wireless, including BT Cellnet and subsidiaries across Europe.

Its Yellow Pages arm, Yell, could also be sold off as part of the shake-up, as BT focuses on its core fixed-line business.

The group hopes its actions will help wipe more than a third off of its debt mountain, which it put at £28bn.

It is also axing its dividend payout for a year.

BT got into the debt crisis after splashing out on third generation mobile phone licences and overseas expansion.

Chairman Sir Christopher Bland said it required determined and rapid action to transform the group.

He said: "We have made a good start. The culture is changing, and I am confident that we can complete the process in the best interests of our shareholders, customers and staff."

BT sold its core assets in Japan, Spain and Malaysia last week, raising almost £5bn.

The group's chief executive, Sir Peter Bonfield, said the sales and the rights issue would enable BT to meet its goal of wiping £10bn off its debt by the end of the year.

The rights issue is not being underwritten by BT, which should save the group millions, Sir Peter said.

BT brought forward publication of its results to release them with its break-up plans.

The group made a pre-tax loss of £1bn after a £3bn charge to reflect reduced expectations at German subsidiary Viag.

Turnover rose to £20.4bn from £18.7bn the year before.