France Telecom withdraws TeliaSonera offer

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The announcement, coming after press and market speculation that a deal could be imminent, caused France Telecom shares to surge while TeliaSonera shares slumped.

"Following its proposal for a friendly combination with TeliaSonera announced on 5 June, France Telecom has today decided not to submit a firm offer to TeliaSonera's shareholders," the French group said in a statement.

"Notwithstanding the interest shown in the project, the dialogue opened with the board of directors of TeliaSonera was unable to reach agreement on its financial conditions," it added.

The company also said TeliaSonera, which is the Nordic region's biggest telecoms operator, was "not essential to the pursuit of its strategy."

France Telecom did not say how much it had offered in a raised bid but a source close to the company said it was consistent with the ceiling on debt published by France Telecom - something that still proved unacceptable to the TeliaSonera board.

UNDERVALUED

France Telecom shares were up 7 percent at 18.63 euros in early morning trade, having at one point risen by as much as 8.9 percent to 19 euros. The stock had fallen by around 20 percent since French paper Le Figaro first reported its interest in TeliaSonera in April.

"In the short term, it's positive for France Telecom. It will boost their treasury and it should allow them to refocus on their strategy of making acquisitions in emerging markets," said Frederic Hamm, a fund manager at Agilis Gestion. Agilis holds France Telecom shares.

TeliaSonera shares were down 12 percent at 43.80 crowns.

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