Telecom Italia will this week seek to repair its damaged defences after Italy's bourse watchdog gave the go-ahead to Olivetti's €63 billion hostile bid. It is make-your-mind-up time for the market as the bloody corporate war boils down to the battle of the business plans.
Bourse regulator Consob waved through what has been dubbed "the mother of all public bids" after Olivetti revamped its original offer, rejected by Consob as incomplete.
Delighted at the Consob verdict, Olivetti's managing director, Mr Roberto Colannino - the brains behind Italy's biggest-ever corporate bid - said he would press on with presenting an industrial plan "centred on increasing Telecom Italia's value".
Mr Franco Bernabe, Telecom's baby-faced but battle-hardened chief, is working flat-out on his own business plan after his board on Thursday mandated him to study merging Telecom with its cellphone unit Telecom Italia Mobile (TIM). A merger would make the takeover more costly and could push the world's 11th-largest telecoms group out of Olivetti's reach.
Despite its bloody nose, Telecom clearly retains the stomach for a fight. However, Italian corporate governance laws mean it is now tussling with one hand tied behind its back. The Consob green light forbids Telecom from making defensive moves, such as merging with TIM, unless approved by the holders of 30 percent of its stock - no mean feat for a former state monolith with an estimated 1.5 million shareholders.
Time is tight for Telecom as it vies with Olivetti for the hearts and minds of shareholders. Many expect it to call an extraordinary shareholders meeting, perhaps as soon as at this week's board meeting, to vote on merging with TIM.
Olivetti - five times smaller than its prey - must now present an offer prospectus to Consob, which then has 15 days to examine and approve it. The bourse watchdog ruled on Saturday that the offer itself must start by the end of April.
The Italian Treasury, which sold Telecom in 1997 in what was billed as the "mother of all privatisations", remains the main shareholder with 3.4 per cent, though it is to sell that soon.
Italian media said yesterday that the government - which has pledged to stay neutral in the battle, despite owning a "golden share" with which it could block the bid - would now move even faster to sell the 3.4 per cent to avoid having to take sides.
Olivetti's reworked bid proposes a cash-paper offer price of 10 euros per share, a five trillion lire ($2.85 billion) capital increase and the sale to Germany's Mannesmann of its interests in Italy's second mobile phone operator Omnitel and fixed-line service Infostrada.
Analysts say Telecom may need a "white knight" or alliance partner to fend off Olivetti's unwanted advances. British Telecom, Cable & Wireless, Bell Atlantic Corp and AT&T have all been mentioned but have denied interest or declined comment.
As the takeover tussle that has sent shockwaves through the clubby corridors of Italian capitalism enters its second week, eyes will also be on Italy's new operator Wind, a fixed-line and mobile venture whose cellphone service is being launched today. Wind, a joint venture between Italian state-run electricity group ENEL, France Telecom and Deutsche Telekom, aims to lure up to 1.5 million users in 1999 - more food for thought for embattled Telecom.
