Italia board backs Deutsche merger

THE BOARD of Telecom Italia last night agreed to a takeover offer by Deutsche Telekom after Germany pledged not to meddle in the management of the new company, a board member of Italy's former phone monopoly said. The agreement may thwart Olivetti's $65bn hostile bid for Telecom Italia, write our City staff.

The move, which still needs acceptance by 90 per cent of Telecom Italia investors, would combine Italy's and Germany's top phone companies into the world's biggest by value at $190bn (pounds 118bn). The companies will hold a press conference in London at 11am today, attended by both chief executives.

The agreement's announcement, originally scheduled for yesterday afternoon, was delayed because of problems connected with potential tax liabilities, sources said. The Italian treasury ministry said the Italian government was holding negotiations with Germany about creating "parity'' in the transaction. The new company will be managed on the basis of "parity'' and its stock will be traded in Milan, Frankfurt and New York, Telecom Italia said.

Under its pledge, Germany will not limit the voting rights on its 72 per cent of Deutsche Telekom, but will not interfere in management after the takeover.

With that commitment in hand, Telecom Italia is set to call a shareholders' meeting to approve the offer. Pending this, Telecom Italia pledged not to have talks with other foreign phone companies.

Telecom shares, which were suspended for two days in Milan, rose 0.57 per cent to 9.912 euros. Deutsche fell 1.4 per cent to 36.08 euros. Olivetti shares rose 3.8 per cent to 2.994 euros.