France Telecom said yesterday it has proposed a merger with Sweden’s TeliaSonera, hoping to create the world’s fourth-largest telecommunications operator.
France’s dominant telecoms operator stopped short of a formal offer, but suggested terms that would amount to a 39 percent premium on shares of TeliaSonera based on their April 15 closing price — the day before the first information of the planned deal was published, France Telecom said in a statement.
The “indicative proposal” has been sent to the board and the two largest shareholders of the Swedish company, France Telecom said. It would involve a mix of cash and shares — with the cash part equivalent to 63 Swedish krona (US$10.43) per share, and the stock portion based on an exchange ratio of three newly issued France Telecom shares for every 11 TeliaSonera shares.
France Telecom cautioned that there was no certainty that the proposal would lead to a public offer for TeliaSonera.
In April, France Telecom said it was considering possible Nordic acquisitions, including TeliaSonera and Norway’s Telenor.
A French newspaper report at the time said a deal with TeliaSonera would have the backing of the French government, which holds 27.4 percent of France Telecom. The Swedish government owns 37.3 percent of TeliaSonera, and has announced plans to sell its stake. Finland’s government owns 13.7 percent of TeliaSonera.
A merger, if completed, would create the world’s No. 4 telecom operator, with 237 million subscribers and holdings in developed and emerging markets, France Telecom said. Benefits from the “resulting combination of nimbleness and scale” would include “advantageous partnerships” with software, hardware, content and advertising providers, it said.
Citing “market consensus forecasts,” France Telecom said the deal would boost earnings per share starting next year and increase free cash flow starting two years later.
Separately, Telecom Italia said it plans to cut 5,000 jobs domestically by 2010 to help achieve cost savings of 300 million euros (US$465 million) per year.
It said the plan would involve additional restructuring charges of about 250 million euros, in addition to the 100 million euros already included in this year’s business plan.
These charges will mainly impact this year’s results and the relative targets announced in the March plan but will be will be more than offset by savings expected in the next two years, it said.
The company also said it was setting up a new domestic market operations division which will integrate management and control of its fixed, mobile and top client businesses.
Telecom Italia had 67,000 employees in Italy at the end of last year.
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