The Nordic telcos would fit together well. Telia’s international expansion has been half-hearted, while Sonera’s has been over-ambitious – but combining them would create a company well placed to fight the threat from Orange and Vodafone in Scandinavia. The main problem is political: government interference has stopped previous Telia merger plans.
Sweden’s Telia and Finland’s Sonera are in merger talks.
The Finnish prime minister has confirmed that Sweden’s incumbent telco, Telia, is in merger talks with Finland’s incumbent telco, Sonera. Merging the part-privatized firms would create a $15 billion company, which would dominate in two of the world’s most advanced mobile phone markets.
Telia currently has almost three times Sonera’s sales: its 2001 revenues were over $6 billion, compared with Sonera’s $2.19 billion. It also has a stronger balance sheet: while Sonera invested heavily in 3G mobile operations in the rest of Europe, Telia took a much more cautious approach. The flipside of this, however, is that Telia’s international operations are small and consistently lose money.
A deal would boost both companies’ scale in their core Nordic markets, allowing them to compete more effectively against the threat from multinational operators such as Vodafone and Orange, as well as improving their position in the nearby and under-exploited Baltic region.
They would also be in a better position to exploit Sonera’s 3G investments elsewhere in Europe. Sonera has put its Spanish 3G venture on hold due to lack of funds, and is trying to reduce its stake in Germany’s Group 3G. Telia’s cash should eliminate the need for a fire sale, allowing the company to wait until prices pick up.
However, it’s worth sounding a note of caution. There have been various on-and-off discussions between the two companies before, none of which have come to fruition. Telia also attempted to buy TeleDanmark last year, which would have been a good strategic move. That deal was scuppered by the Swedish government’s reluctance to dilute its Telia stake.
It will be good news for the industry if the Swedish and Finnish governments allowed this deal through – but whether it happens will depend largely on domestic politics.