The proposed merger between Deutsche Telekom and Telecom Italia will not be a good move for either company or for end users, according to David Neil, vice president of telecoms and IT consultants Gartner Group.
Speaking at a telecoms industry conference, Neil estimated that the merger had a 50 per cent chance of going through, but said IT and telecos group Olivetti, which last month launched a hostile takeover bid for Telecom Italia, is "coming back."
"We describe the proposed merger as two dinosaurs coming together - both Deutsche Telekom and Telecom Italia are fairly slow and bureaucratic in their operations. The concern with such an operation is that the operators will become more arrogant and complacent," said Neil.
"I don't think the merger will give users more choice than they have now. A merger will not deliver more services, and the two companies are not leaders in the price market either," he said.
Neil said he had more reservations over Olivetti's plans for the merger and said the nature of its bid had raised concerns in the market. He said he could see only investment benefits coming from the takeover.
Gartner Group research director Nigel Deighton said that Deutsche Telekom was a company with large risks, with debts of $60 billion and services deployed on an old generation network.
"Deutsche Telekom will have to maintain its old network, which will be a tremendous drain on resources. I can't see how its situation can improve by joining with Telecom Italia. Deutsche Telekom is heading towards the danger zone where its revenues could drop below its costs," he said.
He said the merger was purely a defensive move, and if it succeeded, it would not be a smooth trip for either company.
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