Among the companies it hopes may make a friendly offer are British Telecom, Deutsche Telekom, and US regional phone company SBC Communications.

Olivetti's $65bn takeover offer for Telecom Italia - five times its size - was boosted when Telecom failed to muster a quorum of shareholders for a meeting on Saturday about a defence plan that would have buried the bid once and for all.

"Before Saturday Olivetti had a 30-40% chance of winning; now I think its chances are at the top end of that," said one fund manager with a major US bank.

"But Olivetti still has other big hurdles to jump."

The move was a blow to Telecom Italia chief executive Franco Bernabe, who nevertheless vowed to fight on "to maximize the value of the company to its shareholders."

'Feeble offer'

Olivetti still needs to get its bid prospectus approved by stock market watchdog Consob by the end of April and must win over sceptical shareholders who have lambasted its 11.5 euro per share cash and paper offer as "feeble".

"Nothing has changed. The bid price is still too low and there is still the problem with the credibility of the management," said Davide Oddono, analyst at Actinvest.

Analysts said Telecom Italia could launch a legal onslaught given that it has little other means of defence now that official plans to fend off Olivetti have died.

Telecom Italia has hired a legion of lawyers, including former Telecom Italia and Consob chairman Guido Rossi, to pick through the bid details.

A statement issued by the company said: "Telecom will examine the Olivetti-Tecnost offer when there is an official document containing all the information required by law."

Major hurdles

Tecnost is the bid vehicle through which Olivetti is mounting its takeover offer.

Olivetti still has to submit two more legal documents, after which Consob has a maximum of 15 days to approve the prospectus.

Olivetti could also face another battle if it fails to secure a controlling stake in Telecom Italia, analysts said.

Under Telecom's statutes, no single shareholder can hold voting rights of more than 3%.

Olivetti, which has said it may accept a stake in Telecom Italia of as little as 35%, could only abolish this rule if it wins more than 50%.

Government backing

The Olivetti bid appears to have the tacit approval of the Italian government, which would like to shake up the corporate sector, in order to encourage more open markets.

The Italian Treasury owns 3.4% of Telecom Italia, with the Bank of Italy owning an additional 2.3%, and it also has a 'golden share' giving it veto rights over significant board decisions.

But the government declined to use its shares to support the Telecom Italia defence strategy, influencing other investors to stay away.

Salvatore Cardinale, the Communications Minister, said on Friday, "Let the best offer win."

The government could also block any foriegn takeover, but in the case of another European telecoms group, that could risk the wrath of the European Commission.