Business Notes TELECOMMUNICATIONS

One of Italy's most famous antiquities is surely its telephone system. But now AT&T aims to help bring it into the 20th century. Last week Italtel, an Italian telecommunications equipment maker, said it has chosen AT&T as its partner in a five-year, $27 billion government-subsidized mega-project to rebuild the country's cranky telephone system virtually from scratch. As one of the main contractors on the project, Italtel will supply most of the basic equipment, while AT&T will provide the know-how, software and supercomputers that will make Italian phone lines hum efficiently. The job may be worth several billion dollars to Ma Bell.

The deal, which is expected to be approved by the Italian government, was a coup for the U.S. firm. AT&T triumphed over a homegrown bid from Fiat, as well as proposals from French, West German and Swedish competitors. The Italian project will help give AT&T a strong foothold in the fast-growing European telecommunications market. Italtel, for its part, hopes to parlay its new association into expanded phone-equipment exports.