Having forced TeliaSonera to a make decision, the bid of US$42 billion made by France Telecom (FT) has been rejected by the Scandinavian operator as insufficient. The share price of FT rose by over seven per cent on the news.
The bid, which financial analysts had questioned from the outset, would have created Europe's largest telco with nearly 240 million subscribers. However, TeliaSonera management decided the deal was unacceptable claiming that the cash-and-share proposal was not high enough. However, there was a strong political angle to the success of the offer given that the Swedish government wanted a price that at least matched the IPO terms--a level closer to 60 to 65 kronor rather than the 54 to 55 area that FT is understood to have made.
But where now for FT?
Trying to put a brave face on the future, FT management said the decision not to increase the offer for TeliaSonera was in line with its 'strategic criteria for external growth and financial rules.' Instead, FT is now thought to be looking at smaller deals--Algeria and Vietnam are said to be top of the list, or to rekindle a deal with the Egyptian operator, Orascom, which has cell phone networks in Pakistan and Bangladesh and has been actively casting around for a larger partner.
Meanwhile, TeliaSonera, whose share price dropped on the news by over 10 per cent following FT's decision, remains in a state of flux given that both the Swedish and Finnish governments are trying to sell their stakes. The board of TeliaSonera have indicated they remain open to offer at a richer price.
For more on this story:
- go to The Telegraph, Cellular News and New York Times
Related stories:
France Telecom pushes TeliaSonera for deal. FT story
Orascom looks for emerging markets, hints at FT merger. Orascom story