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Nordic phone deal cleared
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October 13, 1999: 9:39 a.m. ET
EU approves Telia-Telenor merger to create $48B firm; IPO planned
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LONDON (CNNfn) - European regulators gave the green light Wednesday to the planned merger of Sweden's Telia and Norway's Telenor to form Europe's sixth-largest telecom company.
However, the pair had to make tough concessions, including the sale of their cable TV assets in Scandinavia and Ireland.
The deal is the first cross-border combination of state-owned telecom assets in Europe and highlights the ability of Scandinavian companies to broker international deals following a wave of mergers in the financial sector among Norwegian, Swedish and Finnish banks and insurers.
Shareholders will meet next Monday to approve the deal, which will create a telecom with combined 1998 revenue of 75.2 Norwegian kronor ($9.67 billion) and a market capitalization estimated at $48 billion.
The deal, first agreed to in January, has been held up by officials at the European Commission, the Brussels-based executive arm of the European Union. Sweden is a member of the 15-nation organization but Norway isn't.
The two companies had squabbled for weeks over how to meet the conditions spelled out by the Commission after a three-month inquiry. Telia will be hardest hit, as its cable network was claimed to be the second-largest in Europe.
The Commission also demanded that both companies open their local telephone networks and divest other over-lapping businesses in the cellular and Internet arenas.
The merger terms agreed to last month will give Sweden control of 60 percent of the enlarged group and Norway the balance. Both governments had committed to cut their stakes to 33.4 percent each through an initial public offering scheduled for next year.
The sale of a 15 to 25 percent stake for up to $12 billion is being considered in what would be the Nordic region's largest-ever IPO.
Telia is the larger of the two firms, with 1998 revenue of 47.4 billion kronor and a net profit of 6.5 billion. Telenor earned 2.2 billion krona on revenue of 27.8 billion.
Telenor chief executive Tormod Hermansen will become president and CEO of the new firm, which has yet to be named. Telia CEO Jan-Ake Kark will be chairman.
While the merger initially was viewed as defensive to protect the companies' domestic market positions, Hermansen said 50 percent of revenue will come from outside the region within a few years. 
-- from staff and wire reports
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