They were right, but what they didn't anticipate was that it would be not Deutsche, but its chief German rival, Mannesmann. The victory late on Friday by Olivetti in its hostile takeover bid for Telecom Italia doesn't just topple the proposed merger of the Germany and Italy's former monopoly phone companies. It also upsets the balance of telecoms power in Europe, leaving no clear leader among the incumbent carriers, and turning Mannesmann, Olivetti's ally in Italy, into a new heavyweight at the heart of the Continent. "Mannesmann is the clear winner from all this, the laughing third party," said Holger Grawe, an analyst at WestLB Panmure in Duesseldorf.
Mannesmann will now pay Olivetti 14.9bn marks (pounds 5bn) for Olivetti's stakes in the fast growing mobile carrier Omnitel Pronto Italia and the fixed line, long-distance carrier Infostrada.
The company, which was already a partner in Omnitel and Infostrada, ends up with majority holdings in both ventures.
Omnitel and its German counterpart, Mobilfunk, are Europe's second and third largest cellular carriers behind Telecom Italia Mobile. Mannesmann also has a stake in the French group SFR and a mobile licence in Austria.
Mannesmann Arcor is Deutsche Telekom's biggest long-distance rival, while Infostrada is No 2 in Italy. Mannesmann also has minority stakes in the second-largest mobile and fixed-line carriers in France. At 131 euros, Mannesmann shares have nearly quadrupled in 24 months.
None of this is good for Deutsche Telekom. Its planned merger with Telecom Italia would have lifted it into the telecom elite. But its Italian romance poisoned relations with France Telecom, previously a key ally, leaving its international strategy in tatters at a time when intense competition is eroding German market share. German newspapers have already speculated that Ron Sommer's job as chief executive might be in jeopardy.
"This purchase of Olivetti's telecommunications assets will leave Mannesmann with an unrivalled pan-European footprint and leadership in two of Europe's three largest wireless markets," Mannesmann's chief executive designate said in a statement. The company expects the acquisitions to contribute to the group's 1999 profit growth.
Another possible loser in Olivetti's win is Rupert Murdoch's News Corporation, which recently agreed to take a minority stake in Telecom Italia's pay TV company, Stream. "That will be up for negotiation", an Olivetti spokesman said yesterday.
Stabbed in the back by their own shareholders, Telecom Italia managers on Saturday cleared their desks to make way for Olivetti's victorious team after its dramatic takeover triumph.
Staff said the former state monopoly's Rome headquarters was largely empty as the reality sank in that the upstart former typewriter maker had won one of Italy's corporate crown jewels. "Maybe I made some mistakes, but I'd do it all again", Telecom Italia's managing director Franco Bernabe said after Olivetti snapped up 51.02 per cent of Europe's fourth biggest telecoms group.
The big-name allies he had boasted were right behind him on the eve of the deadline began to jump ship one by one on Friday - including the IFIL holding company of his former boss Gianni Agnelli of Fiat, who had previously vowed to have nothing to do with Olivetti's offer.
In the end, all but one of the so-called core shareholders assembled at the time of Telecom's privatisation in 1997 defected to Olivetti. "They stabbed us in the back." said one source close to Telecom Italia. "It's shameful."
A spokesman said Mr Bernabe planned to keep a low profile for a few days, but there was no word on when he would quit. "We'll have to see what happens on Tuesday," he said.
Olivetti's managing director, Roberto Colaninno, has made clear he will run the show himself and there was no place for the 50-year-old manager, who had been parachuted in to save the company just six months ago.