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Friday, March 5, 1999 Published at 10:56 GMT

Business: The Company File

Capitalism 'Olivetti-style'

Olivetti is not the only firm to see telecommunications as the future

The BBC's Rodney Smith reports on the Olivetti-Telecom Italia deal which is being billed as the key to changing the face of European capitalism and catapult Europe into the cut-and-thrust commercial culture which has reshaped so many businesses in the US.

The 53bn euro bid by Olivetti for Telecom Italia; initially blocked by the Italian securities regulator, now freed to make its play.

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There is much admiration for Olivetti's brass balls. This former typewriter manufacturer which, under thrusting chief executive Roberto Colaninno, has recovered from the shame of abandoning the laptop computer business which was strangling it three years ago, and transformed itself into a successful mobile phone company.

Its aggression in lunging at its huge rival (Telecom Italia is five times its size) will almost certainly change the face of European business, whether it succeeds or fails.

It is showing that old alliances no longer work. It is showing that Europe's comfortable old state monopolies, often still close to being comfortable private sector monopolies, are vulnerable. So are traditional family ties. The Agnelli family, owners of FAT and Italy's most powerful, are big shareholders in Telecom Italia; the family bank, Mediobank, is advising Olivetti.

Raising the money

Can Olivetti, a company with turnover of less than 4bn euros last year, raise the money? Both it, Mediobanca, and Wall Street experts Lehman Brothers think it can.

Under the plan (and with European Commission permission, still to come) it will sell its mobiles and landline interests to Mannesmann of Germany - like Olivetti, another swift transition operation, recently a car parts company, now a booming telecoms business - and borrow the rest.

But 53bn euros? That's more than $58bn, and way up among the biggest deals in the world - certainly Europe's biggest ever.

The answer is that like the UK's Vodaphone, which it may even be copying, Olivetti can see a future which is opaque to many financial traditionalists; a future in which not information itself, but the transfer of information, will be the force driving economies, politics, social behaviour, the world.

Vodaphone's $56bn deal to buy Airtouch creates a transatlantic mobile phones giant. That has a price no one has quantified yet. But Olivetti wants to be part of it, and sees Telecom Italia as the gateway.

Opinion divided

Italian financiers are divided on the merits of the deal. The fact that Olivetti has got so far is indication enough that it has some powerful backing. But international investment adviser Fabio Basagni of Actinvest thinks Olivetti will simply not manage to raise the cash.

The result, he says, is that Olivetti will have opened the door to someone else bigger and more powerful to brush past and take the bride.

His bet is BT, British Telecom, because it already has a presence in Italy, has been active in the Italian market for two years, knows it and is known within it.

Good reasons. But what if Olivetti does win?

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