2008 Year in Review: TeliaSonera escapes France Telecom's grasp

Despite attempts to keep the deal under wraps, the government-supported bid by France Telecom (FT) for Sweden's largest telco, TeliaSonera, surfaced in press reports during April. The deal, then valued at €34 billion, would have created Europe's largest provider of telecoms services and taken FT into the global league by having both fixed and mobile operators in Europe, Africa, Asia and other regions.

FT attempted to justify this huge acquisition by claiming size was an essential element, even more so when looking to compete with the likes of Google and Nokia. However, these claims failed to stop its share price from plummeting--having already been hit hard by the overall economic downturn, as industry analysts failed to understand how FT could squeeze the synergies out of such a €34 billion merger.

The bid also caused the Swedish Army to raise concerns over the foreign ownership of the TeliaSonera network. "An owner that is not trustworthy could use its knowledge to damage Sweden," said a military spokesman.

Still maintaining it was not holding talks with TeliaSonera, it was revealed FT had approached a consortium of five banks to raise US$10 billion to finance the acquisition.

A few weeks later the company finally admitted it had made a bid, only to be lambasted by the analyst community for pitching the price much too low. The company responded by saying it was prepared to walk away unless there was a positive answer from TeliaSonera within 15 days. 'We have other options', said FT CEO, Didier Lombard.

The deadline was soon forgotten, and FT began hinting publicly it might increase its bid, albeit not by much. Having argued over where the headquarters of the merged company might be located, the bid was finally rejected in late July by TeliaSonera management as undervaluing the company. FT's share price rose 7 per cent on the news.

Significance: This attempt by FT to lift itself into the big time was seen by many as ill-timed and mismanaged. In hindsight, FT is probably hugely relieved the bid was not accepted by TeliaSonera given the ensuing financial upheavals that have since rocked the markets around the world. The company has gone ahead and made investments in Africa and Asia on a minor scale, whilst TeliaSonera has continued with its expansion in Asia, most notably with a start-up in India. Most analysts now expect these mega-bids are a thing of the past, and are unlikely to reappear in the near to mid term.

Related articles:
France Telecom mulls €34B TeliaSonera bid
France Telecom up against Swedish Army over TeliaSonera sale
France Telecom builds acquisition war chest
France Telecom needs to up its bid for TeliaSonera
FT and TeliaSonera--the next episode
France Telecom fails to win TeliaSonera, looks for smaller fish

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