Deutsche Telekom yesterday evening confirmed plans to merge with Telecom Italia to give birth to the second-biggest telecoms operator in the world. Telecom Italia's board had earlier approved the tie-up after receiving guarantees from the German government, a bank source said in Milan.

A press conference will be held in London this morning to make the agreement public, sources added. Deutsche Telekom shareholders will receive shares in the new company on a one-to-one basis, while Telecom Italia investors will receive one share for every three of their own.