Nordic tie-up creates telecoms giant

Sonera and Telia may, together, target Turkey

A new force in European telecoms is to be created, with the announcement that Sweden's biggest telephone firm, Telia, is to take over Finnish rival Sonera.

The tie-up between the two state-controlled firms will create a company with a market capitalisation of about $17bn (£12bn), putting it in the same league as Deutsche Telekom and British Telecom.

The new business, which will be 64% owned by Telia shareholders, will be based in Stockholm, with its shares traded primarily on the Stockholm stock exchange.

The company will employ 34,000 staff, although observers believe some posts may go as Sonera and Telia seek to achieve savings equivalent to 300m euros a year by 2005.

Talking Turkey

Analysts said the takeover, in an all-share 7.4bn euro deal, would provide Telia with a springboard for expansion in Turkey and the Baltic.

Sonera alone is seen as lacking the muscle to expand in a highly competitive European telecoms market.

Giants such as Vodafone are taking an increasing interest in the Nordic states.

"This transaction constitutes the first major step in the Nordic consolidation within the [telecoms] industry," said Telia chairman Lars-Eric Petersson.

"Through this we will be able to benefit from a larger scale operation in the Nordic and Baltic regions."

State backing

Tuesday's announcement, which will create a firm with about 8.1 million mobile phone customers and 7.6 million clients of fixed line services, followed continued merger speculation.

Telia has tried at least twice before to buy Sonera, with differences over company valuations sinking a deal last year.

The merger has the backing of both Swedish and Finnish governments.

The Swedish state will own 45-50% of shares in the merged firm, with Finland holding 20%, although both governments have pledged to reduce their stakes.

But the tie-up will require permission from European Commission trade watchdogs.

Telia shares fell 10.6% to 35.60 Swedish crowns on the news.

Sonera stock was down 2.0% at 5.70 euros in late trade.