France Telecom said Monday that it has withdrawn its proposal for a EUR 27 billion (US$42 billion) takeover bid for TeliaSonera, which would have created Europe's largest telecommunications company.
France Telecom said in a statement that "the dialogue opened with the board of directors of TeliaSonera was unable to reach agreement on its financial conditions." It also said the tie-up was "not essential to the pursuit of its strategy."
A merger would have created the world's No. 4 telecom operator, with 237 million subscribers and holdings in developed and emerging markets. That would have eclipsed Spain's Telefonica, which has some 200 million subscribers, as Europe's biggest telecom provider.
France Telecom shares were up 6.13 percent at EUR 18.53 ($29.18) in mid-morning trading in Paris. Shares in TeliaSonera plunged by 13.25 percent to 43.20 kronor (US$7.23) in Stockholm.
When France Telecom made its informal offer June 5, Stockholm-based TeliaSonera's board unanimously rejected it as too low. France Telecom had offered 56.225 Swedish kronor (EUR 6.03; US$9.36) a share, which would have valued TeliaSonera at about 252 billion Swedish kronor (EUR 27 billion; US$42 billion).
"As the terms and conditions have not been significantly improved, the board of TeliaSonera maintains its view that the proposal substantially undervalues the company," TeliaSonera said in a statement Monday.
ABG Sundal Collier analyst Henrik Vikstrom said the France Telecom offer was attractive. He added that the board's rejection of the offer could be an attempt to attract higher bids, but said it would be difficult to find a company prepared to offer more than France Telecom.
The Finnish government, which owns 14 percent of TeliaSonera stock, said it has complete faith in the decisions of the company's board.
Finnish Defense Minister Jyri Hakamies, responsible for government-owned companies, said his government shares TeliaSonera board's view on the France Telecom offer, adding that it was not "sufficient for the government of Finland to sell its shares in TeliaSonera to France Telecom."
France Telecom had previously cautioned that there was no certainty that the proposal would lead to a public offer for TeliaSonera.
But it said the deal would have united its strengths in Africa and TeliaSonera's access to Eurasia, and helped the joint company gain "advantageous partnerships" with suppliers and advertising providers.
Aside from the Nordic and Baltic countries, TeliaSonera has operations abroad, including its 37.3 percent stake in Turkcell, whose main operations are in Turkey and Ukraine, and a 43.8 percent holding in MegaFon in Russia.