Telecom Italia recently awarded BNP Paribas and West LB the mandate to structure a possible E4 billion ($3.8 billion) securitization program and to underwrite the first issue. If the project is successful, TI would be the first European telecoms company to try its hand in the asset-backed market.

West LB's participation for the project was already a certainty after it lent Olivetti - now TI's parent company - E2 billion to enable it to make its E22 billion acquisition of TI in March last year. Competition for the other mandate was fierce and Paribas beat off the challenge of banks that were said to include Morgan Stanley Dean Witter, Salomon Smith Barney and Merrill Lynch, among others.

It is understood that, for the first issue at least, any deal would primarily be backed by TI's charges to customers, on both domestic phone bills and corporate bills. Should these prove positive, TI would then look at other areas of its business that it could securitize.

Adrian Carr, head of Paribas' syndicate desk, was understandably pleased that the company won the joint-mandate. "This deal will add strength to our armor," he said. "It should help to put us in a position where we want to be in the European market."

Carr would not confirm reports on the actual size of the program or the first issue. "The specific amount has not yet been finalized," he said. "And we'll have to work with the rating agencies to structure in the necessary collateral."

Carr did say that the project would probably take place in stages and expects the first issue to be completed in the first half of this year.

TI's willingness to use securitization as a means of raising finance could open the doors for other European utilities. With many state-owned telecoms, energy and water businesses being privatized and exposed to fierce competition, an alternative to government finance will need to be found.

Carr certainly thinks so. "There is logic in this sort of deal for utility firms who are now venturing into the private sector. I expect to see more of these transactions in the future."

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