VETERAN midfielder Tugay will be staying on at Blackburn Rovers next season after signing a new contract.

The former Turkish international has finally ended all speculation regarding his future by agreeing a new one-year deal with the club.

"We are delighted to have reached an agreement with Tugay," said Rovers' chief executive John Williams.

"He's been great for us since he signed from Rangers three years ago and he's a player who Graeme holds in the very highest esteem."

Tugay initially held out for a two-year deal but Rovers stood firm on their offer of a one-year contract, although they now have the option to extend it by a further year next summer should they want to.

In the meantime, Rovers could face competition from Celtic in the race to sign Leeds United defender Dominic Matteo.

Several sources have claimed the Glasgow giants are interested in snapping up the Scottish international on a free this summer.

But Rovers have still not given up all hope of luring the 30-year-old to Ewood, despite the fact his wages remain a potential stumbling block.

Williams held further talks with Leeds and the player's representatives over the weekend but a deal will only be possible if Matteo lowers his demands.

"We've had further dialogue over the weekend but it's a difficult situation," said Williams.

"He's got a very good contract at Leeds and there's two years still to go on it which makes it very difficult indeed for us."

As I understand it, Matteo picks up around £40,000 a week and even if Leeds waived a transfer fee that still means the former Liverpool star would cost Rovers around £2 million a year based on his current pay-packet.

Graeme Souness has also been linked with a fresh move for Manchester United midfielder Nicky Butt but the Rovers boss would have to off-load several players in order to make a serious bid for the England star, who would cost around £4 million.