Many of Israel's largest companies are based in Tel Aviv

At least 15 Israeli firms have been implicated in the espionage plot, with 18 people arrested in Israel and two more held by British police.

Among those under suspicion are major Israeli telecoms and media companies.

Police say the companies used a "Trojan horse" computer virus written by an Israeli to hack into rivals' systems.

Interpol and the authorities in Britain, Germany and the US are already involved in investigating the espionage, which Israeli police fear may involve major international companies.

Hi-tech rivalry

"This is one of the gravest scandals in... industrial and market espionage in Israel," special fraud investigator Supt Roni Hindi told Israeli media.

Israel's investigation has been running since November, uncovering as it expanded an intricate web of alleged espionage among some of the nation's best-known companies.

It's a story of company fat cats who left their morals in their limousine

Sever Plotsker

Israeli newspaper pundit

The threats on the net Industry's dirty tricks

Bezeq now says the Trojan horse virus has been discovered on its own systems.

Police now suspect that another mobile phone operator ordered the spying against Bezeq, Israel's Haaretz newspaper reports.

Two rival car import firms are suspected of spying on each other, as are two of Israel's major satellite and cable television companies.

No charges have been brought so far and the companies at the centre of the police inquiry say they have done nothing wrong and are co-operating with the authorities.

Police fear that as many as 60 Israeli and international companies could be involved or affected.

Trojan horse viruses can infiltrate company servers

Police have arrested an Israeli man living in London, 41-year-old Michael Haefrati, on suspicion of writing the software and then selling it onto middle men acting for interested parties within the corporate sector.

Company executives, private detectives, and former members of the Israeli state security services are among others already arrested.

"Above all it's a story of company fat cats who left their morals in their limousine," said Sever Plotsker, a commentator in Israel's mass-market newspaper Yediot Ahronot.