France Telecom and TeliaSonera

France Telecom CFO says TeliaSonera offers good fit but no talks 'at this stage'

France Telecom said that in reaction to movements in its share price after a report this week claiming it is in talks to acquire Nordic operator TeliaSonera AB, it wants to 'clarify that these rumours do not reflect the current status of the situation'.

Echoing comments made to the Financial Times yesterday by chief financial officer Gervais Pelissier, the group said in a statement it is confirming its 'interest' in TeliaSonera but that that there are 'no negotiations at this stage.'

The group's shares have lost over 10 percent in the last two days since a report in Le Figaro Wednesday cited unnamed sources as saying a 33.6 billion euro mega-deal would be announced in the coming weeks.

In a conference call with journalists, chief financial officer Gervais Pelissier insisted that opportunities 'still exist' in both mature and emerging markets and that France Telecom and TeliaSonera are 'in fact two complementary groups' and that 'exploratory steps have been taken.'

He said such a deal could take the form of cash or shares or both. Le Figaro's source had described an all-paper deal which would leave France Telecom with three government shareholders rather than just the one.

The Swedish state owns 37.3 percent of TeliaSonera shares and Finland 13.7 percent while the French state's has a 27.3 percent holding in France Telecom.

Analysts described such an operation as lacking in synergies and carrying significant execution risks but Pelissier insisted that opportunities 'still exist' in both mature and emerging markets.

Analysts observe that while TeliaSonera is a profitable business, it relies heavily on the developed Nordic markets where little growth can be expected.

The company a deal 'could only occur with strict respect for France Telecom's commitments regarding its medium-term debt to gross operating margin ratio, and its cash dividend policy'.

It added that 'no decision in respect of such an opportunity is in the process of being taken'.

It once again reiterated its mergers and acquisition policy: 'Reinforce our footprint on emerging markets; strengthen as appropriate our activities in Western Europe; acquire complementary competencies in certain key areas.'

It added that it believes that there are 'still growth opportunities to be captured in emerging and in developed markets for well positioned players.'