Olivetti Wins Big for Telecom Italia

After months of merger discussions with German telecommunications giant Deutsche Telekom, time ran out for Telecom Italia, allowing Olivetti Spa to move forward in their
$65 billion hostile takeover of the former state monopoly. How the Olivetti
takeover will effect Italy’s Internet service is yet to be seen.

Already, however, the acquisition has created a ripple effect in other
sectors; some of which investors are calling positive, while others
negative. Rupert Murdoch’s News Corp Europe, for example, has purchased 35
percent of Stream, the Telecom Italia-owned cable TV service.

Olivetti, through its subsidiary, Infostrada, offers long-distance voice
service to over 1.75 million customers in Italy. They have also positioned
themselves as a major ISP, with nearly 200,000 clients. This figure
accounts for a 57 percent increase in users over the past year, making
Infostrada the fastest growing telecommunications backbone for ISPs in the
country.

Telecom Italia, the world’s sixth-largest telecommunications company,
controls 100 percent of Italy’s local telephone business, while sharing
long distance service with Infostrada and a handful of minor carriers.
Under the former monopoly’s umbrella of services are also Telecom Italia
Mobile (TIM), the national mobile phone network, Telecom Italia Network
(TIN) Internet service, and the recently added cable television operation,
Stream.

Under the company assets, Olivetti also owns Omnitel, Italy’s
second-largest cellular phone service. To avoid antitrust action, Olivetti
established an agreement with the German company Mannesmann AG to purchase its share of
both Infostrada and Omnitel for an estimated $8.67 billion.

The official acquisition — unprecedented in Europe — took place in the
last weeks of May, giving Olivetti ownership of more than 50 percent of
Telecom Italia stock.