UPDATE 1-German court blocks Liberty Global's takeover of KabelBW
* Court refers decision back to cartel office
* UnityMedia says will use all legal means to fight decision
DUESSELDORF, Germany, Aug 14 (Reuters) - A German higher regional court overturned an approval by the country's cartel office for Liberty Global's 3.16 billion euro ($4.2 billion) acquisition of KabelBW, throwing the deal into doubt.
The court in Duesseldorf ruled that the German antitrust regulator will have to look at the case again, to either block or approve the deal under stricter conditions than previously.
"The merger implies that KabelBW as the only potential competitor has been taken out of the market," the court's presiding judge Juergen Kuehnen said. "Potential competition has been eliminated."
The ruling rattles a sector already undergoing major changes. Vodafone in June agreed to buy Kabel Deutschland for 7.7 billion euros ($10 billion) and Dutch telecoms group KPN last month agreed to sell its German unit to Telefonica for 8.1 billion euros
The cartel office, which said it would study the ruling before deciding about any next steps, had approved the acquisition at the end of 2011 only after imposing far-reaching conditions because Liberty already owns Germany's second-largest cable operator UnityMedia.
Germany's biggest telecoms group Deutsche Telekom had challenged the approval decision. The court had already voiced concerns over the deal in a June hearing.
The court did not allow for an appeal of the decision, but UnityMedia can file a complaint with a higher court, Germany's Federal Court of Justice, to be allowed to appeal.
UnityMedia said it would use all legal means available to fight the court's decision.