Telecom giants set for $200bn merger

DEUTSCHE TELEKOM and Telecom Italia are expected to join forces to announce details of the world's biggest ever merger in London this morning.

The exact terms of the $200bn merger were still being hammered out by the boards of the two giant telecommunications businesses yesterday evening, but sources said plans were being made for a joint news conference in London today.

Meanwhile, Roberto Colaninno, chief executive of the Italian industrial group Olivetti, which has tabled a rival $65bn bid for Telecom Italia, insisted the company would go ahead with its offer, which is due to be formally tabled by the end of the month.

The Italian Prime Minister, Massimo D'Alema, made it clear on Monday that the government would only be happy with an alliance between Telecom Italia and Deutsche Telekom based on an equal partnership.

However, the German business daily Handelsblatt suggested in a report on Monday that a planned share swap to create the new merged company could mean 60 per cent of shares going to Deutsche Telekom shareholders and 40 percent to Telecom Italia's. A source also told Reuters a 60:40 ratio could be on the table.

"We look with interest on the idea of a new European company. At the same time, we have to understand on which basis this agreement will be reached... The agreement has to be of equals," Mr D'Alema told reporters. Italian politicians have also raised objections to Telecom Italia being merged with a company in which the German state holds a 74 percent stake.

The German government has, however, given assurances that it is committed to reducing its stake in Telekom from 2000.

Asked specifically about the 60:40 split, Mr D'Alema said: "I cannot discuss rumours, especially with the markets open."

In Berlin the German finance ministry said a merger was a business decision and not a political one. Finance ministry spokesperson, Torsten Albig, said: "We haven't been officially informed. When we are informed by Telekom, and if Telekom views it positively, then we will go along with that."