Olivetti hailed the deal as solving its immediate cash problems and enabling it to invest heavily in Italy's rapidly deregulating telecommunications business. It sold its personal computer arm in the spring and intends now to concentrate on telecommunications.
Mannesmann will pay DM1.1bn (pounds 383m) for an initial 25 per cent stake in a venture incorporating Olivetti's stake in mobile telephone operator Omnitel and fixed network Infostrada. Later, Mannesmann will pay DM1.3bn for an additional 24.9 per cent of the venture.
News of the joint venture was greeted with elation in Italy, where it was seen as the key to salvation for the struggling Olivetti group and an important contribution to open competition in the fiercely contested cellular phone market.
Although shares in Olivetti were suspended on the Milan bourse ahead of the joint venture announcement, prices for the related holding companies Cir and Cofide soared.
Olivetti's shares were suspended at 725 lire. Monte Paschi Mercato SIM analyst Marco Torre said that, following the deal, he valued Olivetti at 900 to 1,000 lire, based on the price Mannesmann would pay for its stake. Olivetti has gained sharply in the past few weeks from an all-time low of 583 lire in July as traders speculated a shake-up was afoot.
Union leaders concerned about possible job losses at Olivetti described the deal yesterday as a "nice catch", and even the company's competitors in the telecommunications market welcomed the move as a healthy development for all concerned.
Piero Serra, leader of the national union Uil, welcomed the fact that Olivetti now no longer depended on its previous business partners, Bell Atlantic and France Telecom, but had picked a company with a strong record plenty of spare cash to help reduce the company's debts.
"After the accord, there is one strong partner, Mannesmann, which will bring in money and keep a close eye on company development given its heavy commitment. The fact that telecommunications are not the core business of the German group means Olivetti will not, at least for the moment, be losing control," he said.
Olivetti has been hoping for some time that telecommunications will be its salvation following the successive collapses of its traditional trade, first in typewriters and then in computers.Reuse content