Late hitch a threat to Telia/Telenor merger

The plan to merge Telia and Telenor, the Swedish and Norwegian state-owned telecommunications operators, faced crisis yesterday when the Norwegian communications minister cancelled his appearance at the signing ceremony.

The Norwegians gave their Swedish hosts just two hours notice, saying they had serious last-minute concerns about the structure of the agreement.

The merger, if it goes ahead, has been expected to trigger the sale of Telia's 14 per cent shareholding in Eircom. This is because Telenor owns 49.5 per cent of Esat Digifone, which competes with Eircom subsidiary Eircell in the mobile phone market. Under the terms of EU approval for the deal, one of the stakes must be sold if the merger goes ahead and the Telia stake in Eircom was the one likely to be disposed off.

However, now the merger is again in doubt. Yesterday's move underscored the bitter nationalistic rivalries that have dogged negotiations between the Swedish and Norwegian governments. One merger agreement collapsed last year, and a new accord made in March has repeatedly been under strain because of rows over valuation, management structure and strategy.

Representatives from both countries were meeting in Stockholm last night to try to iron out their differences.

The European Commission approved the deal last week, Europe's first cross-border telecoms deal involving two state-owned groups.

The Norwegians said they were concerned about the role of JanAke Kark, the Swede who will chair the new group, believing he intends to play a more active role in running the company than originally envisaged.

A second concern is whether the group is valued at book or market value when the two companies' shares are combined. The Norwegians are understood to favour market value, the Swedes book.

France Telecom yesterday agreed to pay €7.4 billion for a 60.25 per cent stake in E-Plus Mobilfunk, Germany's third-largest mobile phone group. The French group would acquire the holding from RWE and Veba, the German utilities. Yesterday's announcement came just two weeks after it paid €1.7 billion for Vodafone AirTouch's 17.24 per cent E-Plus stake.