France Telecom makes $42-billion bid for TeliaSonera to become Europe's No.1

05 June 2008

The telecommunications industry is seeing quite a bit of action in recent months. First there was the ongoing drama in South Africa starring MTN and two of India's largest companies Bharti and Reliance Communications, followed by Vodafone's proposal to increase its stake in joint venture Vodacom and Verizon Wirelesss making  a $27-billion bid for the fifth-largest US mobile operator Alltel.

Now comes the news that Europe is next on the list of churning in the industry as France Telecom makes an unsolicited bid to buy Sweden's TeliaSonera AB for 252.5 billion kronor ($41.9 billion) in cash and stock to become Europe's biggest telephone company.

In a statement, France Telecom said its informal bid offers is made up of 52 per cent cash in euros and 48 per cent shares based on an exchange ratio of 3 newly issued France Telecom shares for 11 existing TeliaSonera shares. A cash guarantee option would be available to all shareholders for their first 500 shares tendered.

The bid values Stockholm-based TeliaSonera at 56.23 kronor a share, 26 per cent higher than the price on 15 April, the day before France Telecom's interest in a deal became public. Since then, the latter has lost 16 per cent in Paris trading on concern it would pay by issuing new stock. (See: France Telecom looking to acquire TeliaSonera in $38 billion deal)

As of now, France Telecom is the third-largest communications entity in Europe, after Germany's Deutsche Telekom and Spain's Telefonica SA. However, a successful acquisition can catapult France Telecom to the top of the heap with 237 million subscribers, of which 168 million would be mobile-phone users and 69 million would be fixed-line customers.

Buying TeliaSonera would be France Telecom's biggest deal since it bought Orange for £27.8bn ($55.1bn) in 2000.