Swisscom AG, the Swiss incumbent telco, has confirmed it has broken off merger talks with Telekom Austria AG.
Swisscom will not make an offer to the shareholders of Telekom Austria, the Swiss carrier said in a terse statement.
Both parties agree on the advantages of a possible merger. Under the current circumstances, however, they do not consider it possible to find a solution that would serve the interests of all concerned.
Earlier this week Swisscom had for the first time confirmed it was in merger talks with Telekom Austria. For years there had been speculation of a merger between the two operators, as cash rich Swisscom looked to expand out of its home market. However, political hurdles and differences of prices overshadowed the talks, which hit a deadlock last year.
Yet a merger finally looked like it was on the cards after Swisscom revealed it was in talks with the Austrian government agency OIAG, which currently holds a 25.2% stake in the carrier. Earlier this year, the OIAG decided to sell a 17% stake to domestic and foreign institutional investors, lowering its previous 47.2% stake.
Although the merger made strategic sense, it proved to be deeply unpopular with a lot of people. Most Austrians were not keen to see their national phone company fall into the hands of their Swiss neighbor, especially given the fact that Swisscom is still controlled by the Swiss government with its 62.7% stake.
However the centre-right Austrian government is committed to privatizing state holdings, despite demonstrations from unions over job losses. More than ten Austrian politicians (including two senior members of the Freedom Party, a partner in the coalition government) were opposed to the sale stating it would hurt the nation’s stock market. They were concerned a sale may affect Telekom Austria’s listing status on the Austrian stock exchange, where the company makes up a fifth of the ATX index.
The OIAG said in a separate statement that it would give details of the failed talks later on Thursday.