The troubled merger between telephone operators Telia of Sweden and Telenor of Norway - which are bidding for Esat Telecom - descended into open warfare yesterday when a senior executive publicly demanded the resignation of Mr Tormod Hermansen, chief executive.

Ms Marianne Nifvert, second vice-president of Telia-Telenor, provisionally known as Newtel, said Mr Hermansen had acted unprofessionally and was destroying the value of the company.

She accused Mr Hermansen, a Norwegian, of having a nationalist agenda and of not making decisions on commercial grounds.

Ms Nifvert, a Swede, was joined in her call by the labour union representing the Swedish white collar employees.

The crisis is one of many to have beset the Nordic region's largest merger and again highlights the infected relationship between the Norwegian and Swedish sides.

Yesterday, political and media pressure was mounting in both countries to abandon the merger, with senior bankers warning that Telia-Telenor's credibility had been seriously damaged in the run-up to the planned partial privatisation and flotation of the company.

The Telia/Telenor £1.25 billion (€1.58 billion) bid for Esat Telecom is proceeding as expected under the normal stock exchange schedule. However, clearly the merger will have to be completed if the bid is to be carried through. Telenor already owns 49.5 per cent of Esat Digifone.

The latest dispute has been sparked by Wednesday's decision to place the headquarters for the rapidly growing mobile division in Stockholm. Mr Hermansen had proposed that the unit be located in Norway, but the Telia-Telenor board split on the matter along national lines.

Mr Hermansen's proposal was defeated when Mr Jan-Ake Kark, the group's Swedish chairman, used his casting vote in favour of Stockholm.

However, Mr Hermansen has refused to accept this and claims the decision is not valid under the terms of the merger agreement. This states that, in certain matters, at least one representative from both countries must vote in favour of a measure for it to be passed. The other side claims this refers to relocation of units and not their initial location.

Mr Kark said an emergency meeting of Telia-Telenor board has been called for next week to discuss Mr Hermansen's position, adding that he regarded it as a serious matter that Mr Hermansen was prepared to block a decision by the board.

The chairman said he had spoken to Mr Hermansen about recent events but, despite being pressed by journalists, would not pledge his support for his embattled chief executive, instead refusing to discuss the matter.

Mr Kark defended the decision over the site for the headquarters, saying it was commercially motivated and valid under the company's rules. Mr Bjorn Rosengren, Sweden's industry minister, and Mr Dag Jostein Fjaervoll, Norway's minister for transport and communications, will meet in Stockholm on Monday to discuss the problems.

"This is a complete disaster. It is a ridiculous mess. Something very radical must happen if this company is to be floated in the spring," one senior banker said.