NEW YORK-Until it goes public in a partial privatization planned for late this year, Telecom Finland Ltd. will not take part in merger talks with Telenor AS of Norway or Telia AB of Sweden, said Ausis Salin, chief executive officer of Telecom Finland.
Salin’s remarks followed Telenor’s late January announcement it would immediately resume merger talks with Telia. Telenor and Telia began merger talks last year. However, the Norwegian government, which owns Telenor, initially vetoed the negotiations, saying it needed more time to evaluate the opening of European telecommunications markets to competition in 1998. After protests from the Norway Parliament, Prime Minister Kjell Magne Bondevik lifted the veto last month.
Senior executives from Telenor and Telia, along with Norway Industry Minister Lars Sponheim, met late last month with Karel Van Miert, European Union Competition commissioner to discuss, among other things, the possibility of a merger. As a watchdog agency for the EU, the commission is empowered to impose conditions on mergers or even to block them if it finds they would impede fair competition. By early February, Telenor and Telia had not filed for regulatory clearance for their proposed merger, according to the EU Competition Commission.
Telecom Finland, owned by the Finnish government, is to be split off from the Suomen PT Group, which also owns the country’s postal service. In connection with the spin-off, the Finnish government has said it plans to sell publicly a stake of 15 percent to 20 percent in Tele, as the carrier is known. The goal is to raise between $363.2 million and $726.4 million in the initial public offering, with the shares listed on the Helsinki Stock Exchange.
“Only after the listing has been carried out can we consider new actions that affect the value of the company,” Salin said, referring to Tele’s possible merger with Telenor and Telia. In his opinion, the negotiations between the Norwegian and Swedish carriers are tough enough without a third party, Salin added.
Since Sweden’s Telia and Norway’s Telenor already operate in Finland, their merger would not have an immediate impact on Telecom Finland, said Tele’s communications officer, Jari Jaakkola. Telecom Finland already has put a greater emphasis on “new activities” like mobile telephony and Internet-based value-added services, Jaakkola said.
“We are not negotiating any merger at the moment,” Jaakkola said, adding that Telecom Finland is more interested “in another kind of cooperation in the Nordic area.”
Telia, Telenor and Tele already cooperate on a limited basis in Estonia and Latvia, and they jointly own North-West GSM, the fastest growing wireless carrier in Russia.
Moody’s Investors Service and Standard & Poor’s Corp. both said they are monitoring closely the merger talks between Telenor and Telia.
Moody’s said a merger between the two companies “could create a strong, regional Scandinavian alliance and promote additional operating strengths for the enterprise.”
However, the rating agency also said a number of obstacles exist to the merger, including possible opposition by the federal governments. Furthermore, Telia is a member of the Unisource alliance while Telenor belongs to the Telenordia alliance, so there may be conflicting interests on the part of other alliance members.
Moody’s has not indicated how a merger would affect its investment grade ratings of Aa3 on Telia and Aa2 on Telenor.
Standard & Poor’s said “possible ratings changes are not likely to be dramatic … Were an actual merger to come through, the new entity would likely receive [an investment grade] rating in the medium to high AA category.”
S&P has accorded the long-term debt of both carriers with a AA+ rating. While it accords the short-term debt of both companies an A-1+ rating, the agency has given Telenor’s a negative outlook and Telia’s a stable outlook.
