According to weekend reports, France Telecom has hired Morgan Stanley to advise it on a counteroffer for Telecom Italia (TI).

The UK’s Times newspaper and Italian daily, La Repubblica, said the French giant has hired the financial services firm on the potential acquisition of Olimpia, which is owned by Pirelli.Pirelli has an 18 per cent stake in TI.

Shareholders in the Italian incumbent are believed to be holding a meeting later today to vote on a new board and consider the firm’s bid from AT&T and its Mexican partner American Moviles who are attempting to secure a 66 per cent stake in Olimpia.

The future of TI drew further comments from Italy’s prime minister at the weekend with Prime Minister Romano Prodi saying Saturday: “”I have repeatedly said that telecoms are of vital importance for the country. Therefore, if there are Italian investors that can manage it, the government can only be happy about it.”

More as this story develops