Deutsche Telekom's bid to merge with Telecom Italia collapsed horribly over the weekend, leaving the German giant's strategy apparently in ruins. Olivetti, which had been mounting its own hostile bid for Telecom Italia, squeaked acceptances of 51.02 per cent at the eleventh hour, leaving DT to return to its tent. Which former ally France Telecom is now pissing into. The French and German companies have run a long-term alliance in Europe, and are also partners with US Sprint in the Global One venture. France Telecom was incandescent that DT had mounted the Italian job without even consulting it, and began suing for billions of Euros last week. The French view was that DT's move had effectively ended the alliance, and it's going to be difficult to pick up the bits of this one. Olivetti meanwhile has performed what it must hope is at least its penultimate conjuring trick (because making the deal work long term is going to have to be an even better one). Telecom Italia is far larger than Olivetti, which is going to pick up huge debts in order to finance the deal. Olivetti has been busily transforming itself into a telecoms company in the past few years, but will now sell its holdings in Infostrada, a fixed line challenger in Italy, and Omnitel, which competed with Telecom Italia on the mobile front. So Olivetti is effectively switching horses from upstart to establishment. The mayhem the company has created in European alliances is however one of the most significant aspects of the deal. The Deutsche Telekom-France Telecom axis had been the most redoubtable in Europe, while although Global One's performance has been less than stellar, the international version had been seen by many analysts as a blueprint for international telecoms alliances. So if the whole thing does fall apart in acrimony the alliance music can start again, with the outfits that didn't get the best partners last time coming back for another go. BT, AT&T and C&W will no doubt be open for deal-making, and someone new may well dance with France Telecom. But having blotted its copybook once already, Deutsche Telecom may have trouble finding new friends to grapple with behind the bike shed. ®