Rome Probes Alleged Insider Trading At Tel Italia - Sources

ROME (MF-Dow Jones)--The Rome prosecutors' office, which recently opened a preliminary inquiry into Telecom Italia, is focusing on allegations of possible insider trading, people familiar with the matter said Tuesday.

As of yet, no one has been placed under investigation, the people said. Such exploratory probes are routine in Italy and don't necessarily lead to full-blown investigations.

Rome prosecutors are investigating the reorganization plan recently announced by Italy's largest telecommunication company to determine whether someone used privileged information on the company's strategy for personal profit, the people said.

As a part of the preliminary probe, prosecutors have already asked stock market watchdog Consob for information on the regulatory activity it has carried out recently on Telecom Italia.

Telecom Italia has been under the spotlight since Sept. 11, when then-Chairman Marco Tronchetti Provera approved a controversial reorganization plan to spin off the company's mobile-phone assets and fixed-line network into two separate companies. Tronchetti Provera resigned a few days later amid criticism over the plan.

The plan was seen as an abrupt U-turn for Telecom Italia, coming less than two years after the company acquired the part of the mobile unit it didn't already own.

The proposed breakup drew angry reactions from Telecom Italia's unions and Italian politicians, who saw it as the first step to the sale of the mobile unit TIM, the only one of the four Italian mobile phone companies that is domestically owned.

Press reports of conflicting statements by the prime minister's office and Telecom Italia about the strategic shift have prompted the Rome prosecutors' investigation.

A separate investigation in Milan into an alleged wiretaps scam has led to the arrest of about 20 people, including the former head of security at Telecom Italia.

-By Eva Palumbo, MF-Dow Jones and Giada Zampano, Dow Jones Newswires; +39 06 678 2543; giada.zampano@dowjones.com

(END) Dow Jones Newswires"

Posted to the site on 17th October 2006