PARIS (AFP) — France Telecom said on Monday it was abandoning a bid to create the world's fourth-biggest telecom group through an offer for Nordic operator TeliaSonera based on a valuation of 33 billion euros.
France Telecom indicated that its attempt had fallen through over the price it was prepared to pay, and TeliaSonera explained it was not looking for a partner and that the offer price was not right.
France Telecom said: "Despite favourable interest in the proposal, open dialogue with the board of TeliaSonera failed to come to an agreement on financial parameters."
It added that the attempt to acquire TeliaSonera was "not indispensible" in the context of its broader corporate strategy.
Shares in France telecom rose sharply, by 7.02 percent to 18.68 euros. Since France Telecom first announced its interest, its shares had fallen by 8.0 percent, but this was less than the overall fall of the CAC 40 index of 10.5 percent during the same period.
In Stockholm, the price of shares in TeliaSonera slumped by 13.45 percent to 43.10 euros in initial trading. The overall Swedish market was showing a fall of 0.7 percent.
The communications director for TeliaSonera, Cecilia Edstrom, told AFP that the two companies had not reached agreement because France Telecom had not improved its terms.
TeliaSonera was not looking for a partner and was trying to focus on its own strategy of being a leader in northern Europe and the Baltic countries, and of growing in Asian markets, she said.
The Finnish government issued a statement expressing confidence in the company.
Analysts have suggested that Norwegian group Telenor might be interested in TeliaSonera, but Telenor declined to comment to AFP after France Telecom had made its announcement.
In Paris, brokers Credit Mutuel-CIC commented that: "By abandoning, France Telecom is showing that its policy is not to get bigger at any price."
Analysts at Aurel brokers took a similar line. "France Telecom has not failed by taking a conservative line and preferring to pull out rather than bid up," they said.
However, the decision left questions about the group's strategy in western Europe.
Dexia Securities commented: "In the medium term... there is cause for some concern because France Telecom is clearly in a phase of takeovers."
Dexia analyst Rob Goyens said that more interesting takeover targets were available, and he mentioned Egyptian company Orascom Telecom. France Telecom might also try to enter the Algerian market where licences for third-generation services were being attributed.
Earlier this month, France Telecom made a preliminary offer of 33 billion euros (53 billion dollars) for TeliaSonera in a bid to create the world's fourth-biggest mobile operator.
But the Nordic operator immediately rejected it as "significantly" undervaluing the company.
Citing people familiar with the talks, the Wall Street Journal reported on Monday that France Telecom had raised the price of the stock component of its offer, but it was still under 60 Swedish kronor per share.
France Telecom's earlier offer comprised 52 percent cash and 48 percent in shares, with the cash component pitched at 63 Swedish kronor (6.7 euros, 10.4 dollars) per share and the share component at 56.2 kronor.
France Telecom had set an informal deadline of Monday for reaching a deal, the US-based business newspaper reported.
TeliaSonera was born of a tie-up in 2002 between Swedish group Telia and Sonera of Finland. The Swedish state owns 37.3 percent of the shares and the Finnish state 13.7 percent. Swedish institutions and companies own 18.2 percent.
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