Norwegian Telenor and Swedish-Finnish TeliaSonera are likely to merge in coming months, after TeliaSoera rejected Franc-Telecom’s $42 billion deal, this was revealed in Norwegian Parliament last week.
Chairman of TeliaSonera, Ola Borten Moe also told Reuters that it was up to Telenor to evaluate the possibilities and initiate any talks. His comments sent Telenor shares plummeting just before market close on Monday, with analysts sceptical of the financial logic behind any such tie-up. The stock closed down 4.2 percent at 103 crowns, valuing the group at nearly $36 billion.
France Telecom unveiled a bid worth about $41 billion on June 5 for TeliaSonera and said it aimed to reach a “friendly” deal, but the Nordic group’s board rejected the cash-and-stock offer as too low.
The move by France Telecom has also sparked speculation that state-controlled Telenor could launch a counterbid that would keep TeliaSonera in Nordic hands.
“It could be a good industrial solution for Telenor to buy TeliaSonera,” Moe told Reuters in an interview.
“They were close to being merged several years ago, and there clearly remain interesting synergies between the two companies,” said Moe of the Centre Party, a junior partner in the government.
The Norwegian government owns 54 percent of Telenor. The Swedish government holds 37.3 percent of TeliaSonera but has said it is eager to sell as part of a privatisation push, and Finland owns 13.7 percent of the group created by the 2002 merger of Sweden’s Telia and Finland’s Sonera.
So far the Norwegian government has declined to say what it would think of a Telenor bid for TeliaSonera. Telenor has also declined to tip its hand.
Moe said he was “fundamentally positive” towards a link-up between the groups after efforts to merge them failed in 1999. “There would have to be an initiative from Telenor,” Moe said. “They will not get an instruction from us to buy.”
“They must themselves consider if it is interesting and at what price. And then it could become necessary for them to turn to us to hear what we think, and the need for capital,” Moe said. “I do not see that we would reduce our stake.”
Analysts were cool towards the idea, which could require a hefty capital increase, saying that the two already overlapped on many markets in the Nordics. Also, the Swedish-Finnish group has weaker growth prospects because of its lower exposure to emerging markets, they said.