Sonera, Telia to merge

Sonera and Telia yesterday announced plans to merge into one cross-Scandinavian carrier based in Stockholm. The merger would be the first among two of Northern Europe’s state controlled carriers after several aborted attempts to form a pan regional carrier.

According to the preliminary agreement, Sweden’s Telia and Finland’s Sonera would exchange 1.5144 shares of Telia stock for each share of Sonera stock, a deal which officials with both companies said puts a 16% premium on Sonera’s shares. The combined company would not only control the Finland and Sweden’s 7.6 million fixed lines but a substantial share of the Northern European mobile market. The two carriers have a combined 8.1 million mobile subscribers domestically, and have an additional 14.6 million customers through investments and subsidiaries.

While not approaching the size of Western Europe’s mammoth carriers such as British Telecom and Deutsche Telecom, the yet unnamed carrier would gain significantly more sway among its larger peers. In addition, the merger could mark the beginning of a larger consolidation spree among Nordic carriers, looking to protect themselves from acquisition, Sonera chairman Tapio Hintikka said at press conference today.

“The combined company will be in a very strong position to play an active part in the possible future consolidation of the sector,” he said.

Hintikka will be chairman of the new venture. Telia Chairman Lars-Eric Petersson will become deputy chairman, while the CEOs of both companies will step down to make way for a new chief executive chosen from outside the carriers’ ranks.

The merger is definitely not a given, analysts warned. While the two companies and the governments of their respective country’s have signed agreements supporting the deal, there are still financial and political stumbling blocks that could derail the merger, said Mike Cansfield, principal consultant at Ovum in London.

“There will be a lot of politics involved,” Cansfield said. “If these were private companies, there is not much politicians could do, but as both companies are majority-owned by their governments the issues facing this merger won’t just be political.”