Olivetti managing director, Mr Roberto Colaninno, warned Telecom Italia shareholders yesterday that his group would wage a fierce competition war if they refused its $65 billion offer.

In his bluntest warning yet, as Telecom Italia stepped up a campaign to persuade shareholders to vote through a defence strategy, Mr Colaninno cautioned investors that they would regret their decision if they sided with former state monopoly Telecom.

The spotlight falls on Telecom Italia shareholders this weekend at a crucial meeting when they will vote on a plan to convert cheaper non-voting savings shares into ordinary stock - a move that would make the company more expensive.

Olivetti has said it will cancel its bid if shareholders approve the plan which also includes a share buyback.

The comment follows signs that Telecom is ready to invoke a bylaw capping its predator's voting rights at three per cent, something analysts say could provoke a lengthy legal battle.

This clause would not apply in the case of a 100 per cent take-over, which Olivetti ideally wants to achieve. But it is not clear what would happen if Olivetti received less.