Outlook: Italian farce

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The Independent Online
Outlook: Italian farce

RON SOMMER, chief executive of Deutsche Telekom, must be cursing the day he ever heard the name of Telecom Italia. Not only does it now look all too possible he'll lose out to Olivetti in the battle for control of the Italian communications leviathan, but the whole escapade seems pretty much to have destroyed his reputation.

This, it ought to be said, is largely his own fault. Many doubted the wisdom of becoming involved in this Italian farce in the first place. But he couldn't resist. When his opposite number at Telecom Italia, Franco Bernabe, came cap in hand looking for a white knight to see off the unwanted Olivetti assault, Mr Sommer was only too happy to oblige.

Unfortunately, the only people he thought to consult were representatives of his majority shareholder, the German government. Gerhard Schroeder was quick to give his blessing, which was hardly surprising. The German government has much to gain from this monstrously misconceived merger, even if no one else does. According to some tax experts, the get together would involve sufficient a net transfer of revenues to the German jurisdiction as to yield the German government an extra pounds 1bn in tax.

Two organisations Mr Sommer failed to consult were France Telecom and the Italian government. As a result, his international alliance with France Telecom lies in tatters, damaged possibly beyond repair. France Telecom is threatening to sue for breach of contract. If Mr Sommer loses Telecom Italia as well, he'll be left without any European partner at all.

The Italian government is scarcely better pleased with events. Under the terms of the merger, the Germans would have control of what is still Italy's biggest telecoms company by far, and worse still, the German government would effectively end up with 40 per cent. We're all meant to be cooperative Europeans now, but there are limits.

In summary, the luckless Mr Sommer seems to have alienated almost everyone in his quest for ever greater size. Even Telecom Italia isn't backing him wholeheartedly any longer, nor could it; Olivetti's cash and shares bid is now worth more than Deutsche's all share offer. Instead, Mr Bernabe seems to be falling back on that traditional line of defence - we're worth a lot more than Olivetti is bidding. All of which rather begs the question of why he agreed even lower terms from Deutsche. All jolly amusing.

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