Italian telecoms giant to merge with leading search engine

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ROME--In a move to diversify that will help legitimize Italy's fledgling Internet sector, national telephone giant Telecom Italia is planning to merge its Internet unit with the country's largest search engine, Seat-Pagine Gialle.

The new company will have the largest number of registered users among Italian Internet companies and will be the second-largest company in thesector in terms of value after Tiscali.

Prior to the merger with Telecom Italia, a former state-run monopoly, the Internet sector had been dominated by start-ups with little namerecognition.

"Telecom is the first well-established company to participate in the Internet sector in a big way, and by merging [with Seat-Pagine Gialle] they're really jumping in with both feet," says Marco Seminario, a technology analyst with the Turin-based polling and consulting firm CIB. "Thiswill make some more traditional business players sit up and take notice."

Seat-Pagine Gialle, which until 1998 was best known as the publisher of the yellow pages telephone directory in most major Italian cities, operates, Italy's largest search engine.

The move comes amid a period of rapid change in the sector. At least nine Italian Internet-related initial public offerings have been scheduled for the first half of this year, and Tiscali, the country's highest-valued Internet company, recently announced ambitious plans to create a pan-European Internet juggernaut that it says will battle better established U.S. companies for market share in Europe.

Silvio Scaglia, the chief executive of Internet rival E.Biscom, says of the merger: "The Seat transaction sends a message that there is going to be increased integration between media, telecommunications and Internet," says Mr. Scaglia.

Copyright February 2000, Crain Communications Inc.

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