Orange & Telia Sonera?

Thomas Husson | April 16, 2008, 02:53 PM

According to French daily Le Figaro, Orange is contemplating buying Telia Sonera.

TeliaSonera (merger of the 2 Swedish and Finnish incumbents) is still partly owned by the Nordic States (37.3% stake from the Swedish State and 13.7% from the Finnish State). Needless to say this would mainly be a complex financial story based on company valuations, management risks, incremental growth and potential synergies. The information has not been confirmed so it clearly is a rumor at this stage.

However, it it were to happen and from an industry perspective only, such an acquisition should be viewed in the context of a renewed consolidation wave which has never really stopped (see here). The difference here is that this is not only a Pan-European consolidation approach. Despite the fact that TeliaSonera is a clear leader in the Baltic countries and in Scandinavia (n2 in Norway), it is much more than that (see below). Out of the 103 mobile subscribers reported end 07, only 14M are from the Nordic/Baltic region. Like competitor Telenor, TeliaSonera is a truly international company with strong local brands (in Turkey via Turkcell and in Eurasia).

For Orange, this could be a major growth engine in developing countries. In a period where telcos are increasingly competing with Internet / media leaders and manufacturers, this would also be a way to leverage scale and scope and to be able to have a stronger negotiating power with the likes of Nokia and Google.

UPDATED: Apparently this information has been confirmed by the CFO to the FT, precising the discussions are at an early stage and that other options could be considered. It is however a clear sign that Orange is ready to make a significant investment.

- given TeliaSonera does neither fully owned Megafon in Russia (44% stake) nor Turkcell (37% stake), the turnover in emerging countries "only" represents slighty more than 10% of the total turnover. The group is still dependent on its core mature business in the Nordics, but the value clearly is in the complementary geographical coverage the combined group would have.