Italy's government and two of North America's corporate leviathans were last night shaping up for battle over Telecom Italia, the country's biggest telecoms group and a former state monopoly.

As the official spokesman of Romano Prodi's centre-left cabinet was insisting that "the decisions of the board are sacred", ministers said they would try to block the overtures from AT&T of the US and Mexico's América Movíl.

Shares in Telecom Italia rose more than 10% on the news as investors scented a clash that could push the share price beyond the implied bid level of €2.92.

AT&T and América Movíl offered a total of €4.5bn (£3bn) for a third each of Olimpia, the holding company that effectively controls TI. That drew a protectionist reaction from the Prodi government even before another foreign bidder, Aeroflot, joined the contest to buy a stake in Italy's flag carrier, Alitalia.

It was not clear whether the government was planning to revive efforts by banking groups Intesa Sanpaolo and Mediobanca to buy some of the 80% of Olimpia held by the tyre company Pirelli.

Yesterday, members of Mr Prodi's administration insisted that TI had to be kept out of foreign hands. The economic development minister, Pierluigi Bersani, who is meant to be spearheading a drive for greater liberalisation of the economy, said the US-Mexican bid was "disturbing". The infrastructure minister, Antonio Di Pietro, who scuppered the acquisition of Autostrade by Spain's Abertis, said the government intended to curb "financial shopping for fundamental assets".

The communications minister, Paolo Gentiloni, expressed "very great concern".