FRANCE Telecom said yesterday that it has proposed a merger with TeliaSonera, hoping to create the world's fourth-largest telecommunications operator, a plan quickly rejected by the Swedish operator.
France's dominant telecom operator stopped short of a formal offer, but suggested terms that would amount to a 39-percent premium on shares of TeliaSonera based on their April 15 closing price ?? the day before the first information of the planned deal was published, France Telecom said in a statement.
France Telecom said it had sent the "indicative proposal" to the board and the two largest shareholders of the Swedish company. The proposal would involve cash ?? equivalent to 63 Swedish kronor (US$10.42) per share ?? and stock based on an exchange ratio of three newly issued France Telecom shares for every 11 TeliaSonera shares.
France Telecom cautioned that there was no certainty that the proposal would lead to a public offer for TeliaSonera. Stockholm-based TeliaSonera responded by saying its board had unanimously rejected the proposal, which the Swedish company said amounted to 56.2 kronor per share. That "substantially undervalues the company," TeliaSonera said.
France Telecom shares fell 4.1 percent to 18.44 euros (US$28.41) in the Paris trading yesterday, while TeliaSonera shares rose almost 7 percent to 57.75 kronor in Stockholm morning trading.
In April, France Telecom said it was considering possible Nordic acquisitions, including TeliaSonera and Norway's Telenor.
A French newspaper report at the time said a deal with TeliaSonera would have the backing of the French government, which holds 27.4 percent of France Telecom.
The Swedish government owns 37.3 percent of TeliaSonera, and has announced plans to sell its stake.
A merger, if completed, would create the world's No. 4 telecom operator, with 237 million subscribers and holdings in both developed and emerging markets, France Telecom said.
Benefits from the "resulting combination of nimbleness and scale" would include "advantageous partnerships" with software, hardware, content and advertising providers, according to the company.
France Telecom said the transaction, if it goes ahead, would boost earnings per share starting in 2009 and then increase free cash flow starting two years later.