Merger of Telenor and Telia on brink of collapse

The deputy chairman of Telia-Telenor, the Scandinavian telecoms group, yesterday called for the $50 billion (€49.8 billion) merger to be scrapped, dealing a new blow to political efforts to save it.

Mr Arnfinn Hofstad, a Norwegian, said: "If we don't stick to our demand for the merger to be dissolved, we will be trapped."

His comments, which included an attack on the company's Swedish chairman, Mr Jan-Ake Kark, reflect widespread Norwegian fears that Telia, the Swedish telecoms group, will dominate the merger.

These fears intensified last week with the decision to site the group's prestigious mobile division in Stockholm.

Mr Hofstad's call came as Mr Bjorn Rosengren, Sweden's industry minister, agreed to meet Mr Dag Jostein Fjaervoll, the Norwegian minister for transport and communications, for discussions in Oslo today.

"My ambition is that the merger will be carried out," said Mr Rosengren, who was summoned to crisis discussions in the Swedish parliament.

His strategy is understood to involve extensive senior job cuts in an attempt to clear the poisoned atmosphere at the top of the company.

Mr Tormod Hermansen, the embattled Norwegian chief executive, and Mr Kark will almost certainly have to be sacrificed, but some analysts believe all those with voting rights on the board - four Swedes and four Norwegians - will go.

Other senior managers, such as Ms Marianne Nivert, a Swede and second vice-president, might also be forced to step down, after she called for Mr Hermansen's departure.

Analysts warned cuts might not be enough to save the merger and could seriously weaken the expertise within the company.

"Any new board members and executives would have to be seen to be independent and commercially-driven," said one banker.

He suggested credibility would only be restored ahead of next year's planned initial public offering if neutral appointments were made.

The governments are working to produce a solution before Telia-Telenor's extraordinary board meeting on Friday.

Senior managers at Telia and Telenor are against the merger, and morale is low. Several opposition political parties in Sweden are also against it.

The merger, signed in October and effective from January 1st, 2000, has been dogged by nationalistic bickering from the outset.