Telecom Italia yesterday unleashed a massive defence against Olivetti's $58 billion (€54 billion) hostile takeover bid in a move analysts said could scupper the audacious takeover plan in its current form.

The defence, under which Telecom Italia will merge with its cellphone unit TIM via a share swap offer, includes a proposal to buy back up to 10 per cent of the outstanding shares in Telecom Italia at a maximum of 15 euros (£11.81) per share.

The highly complex plan also includes converting Telecom Italia savings shares into ordinary shares, and the company hopes to tap international financial markets by up to 10 billion euros to finance its buyback.

Telecom said in a statement the plan would be examined at a shareholders' meeting by April 16th. Under Italian stock market rules, a defence plan such as this must be approved by at least 30 per cent of shareholders.