Europe could witness the biggest merger ever if telephone operators Deutsche Telekom and Telecom Italia emerge successful from ongoing talks to combine their businesses.
Both operators confirmed yesterday that they are evaluating a merger, but gave no further details. The combined company's market capitalisation would be almost $200 billion - making the deal the largest in history.
The deal would tower over the pending $73.7 billion merger of oil giants Exxon and Mobil - the largest merger to date.
However, the regulatory hurdles facing any merger between the operators would be immense. Clearance would be required from the European Commission, as well as the German and Italian governments, both of whom remain stakeholders in their respective former monopolies.
Deutsche Telekom would likely be forced to review its partnership with France Telecom and its involvement in the Global One joint venture with the French operator and US operator Sprint.
Several thousand redundancies could follow a merger of the operators. Combined, they would employ around 350,000 staff. Olivetti has said it would axe 13,000 Telecom Italia staff if its merger attempt were successful.
Deutsche Telekom meanwhile has been streamlining its workforce since 1995 when it started a program to lose 60,000 staff by 2000.
In almost identical statements, the operators said they are examining, "a potential industrial alliance, the elements of which are still under evaluation."
"In the event that an agreement is reached, it shall be resolved upon by the competent corporate bodies. No further details can be provided at this stage," the statements said.
Reports emerged Friday that Deutsche Telekom chief executive Ron Sommer and Telecom Italia's chief executive, Franco Bernabe had been in merger talks. Italy's stock market regulator Consob ordered Telecom Italia to make a statement before the market's opened Monday.
A merger would rescue the Italian operator from its $65 million hostile takeover bid by Olivetti. Telecom Italia's attempts to stave off the bid have so far failed. (see Newswire 12 April)
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