Telecom Italia Gives Provisional OK to Deal
Telecom Italia on Tuesday agreed to be taken over by Deutsche Telekom provided that the German government will limit its voting rights in the resulting new company. The new entity, with a market value of $190 billion, would be the world’s largest phone company.
The German government, which owns 72% of Deutsche Telekom, is expected to respond today, a Telecom Italia board member said. If it agrees, the board of the Italian phone company will then meet to seal the accord, which may thwart Olivetti’s $65-billion hostile takeover bid for Telecom Italia.
The transaction will still need the approval of Telecom Italia shareholders. It may be that those shareholders will deem Olivetti’s offer more attractive than a stake in what would in effect be two former monopolies in the wake of market deregulation last year.
“Two bids are better than one,” said Peter Schoenfeld, chairman of PSAM, a New York asset management firm that specializes in mergers. “Strategically, Deutsche Telekom and Telecom Italia make sense in the European framework.”
The offer from Deutsche Telekom, Europe’s largest phone company, is the latest twist in a two-month battle between Telecom Italia and Olivetti, which is seven times smaller than its prey. Speculation that Telecom Italia would scramble to arrange a higher rival bid intensified after Chief Executive Franco Bernabe earlier this month failed to win shareholder support for his plan to thwart Olivetti.
Telecom Italia, in announcing the provisional agreement, did not include details of any financial terms.
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