Les Echos articles - Telia Sonera “Non” to France Telecom

Interesting read from French paper Les Echos (translated)

TeliaSonera did not want to merge with France Telecom?  “Too bad, we shall start by taking modest actions, which will not be on the front page of newspapers but rather in page 25″……Invited yesterday to a conference organized by Les Echos, the CEO of France Telecom, Didier Lombard, described how bad luck exceeded their wholehearted attempts in the failure of their acquisition project. He explained how basically, without the merger occurring, the French group is going to pursue a strategy consisting of smaller steps, which will be done more carefully to ensure new acquisitions, which will focus on emerging countries.  With respect to their financial criteria: France Telecom’s current net debt (38 billion euro) cannot exceed the level of double its short-term gross operating income…

Current Consolidation
If not Teliasonera, what will be the company’s next targets?  “The board of directors for France Telecom examined for hours possible operators that could be of interest to us”, answered Didier Lombard, without revealing any possibilities. The only indication that was given by the CEO emerged when he was quoted as saying: “we continue to look at emerging countries “, such as Vietnam or Ghana … For the boss of France Telecom, the consolidation of telecom operators is inevitable.  In the United States , the ATT was recreated before the liberalization and there are no longer more than two major operators.” He reminded that ATT also had foreign ambitions. Last year, the American company was interested in Telecom Italia, before severing its ties with Telefonica, thus becoming a shareholder of the Italian company.  As for the Dutch Telecom, they set their heart on the former Greek operator. The interest held by France Telecom in the Scandinavian TeliaSonera exemplifies the global movement of the industry. However, the board of directors of the Scandinavian operator “did not find our deal < acceptable > > although the French operator seems to have all of its 32 billion euro, including its debt, which was offered. “I believe that the price sought by Teliasonera corresponded with their desire for an offensive position with major restructuring. This was not what I was hoping for”, explained Didier Lombard fatalistically, but not taken aback. Anyway, “in this state of the markets, it was fairly difficult to continue” the boss of the historic operator admitted. In addition “our shareholders were a bit ragged and we did not have a right not to bring them back to better luck, he concluded, hinting at the fall of the share price of France Telecom, which followed the announcement of their interest in TeliaSonera. 

Interest of the shareholders
 Thus remains the road towards emerging countries: implanted well in the Middle East ( Egypt , Jordan ) and in Africa ( Senegal , Ivory Coast , Cameroon ), the French company aspires to place its Orange flag in Maghreb and in Southeast Asia . In a study published yesterday, Standard and Poor notes that this renewal of interest for mergers and acquisitions in telecoms is proof of “the strong capacity of the sector and its confidence in its ability to obtain capital, first on behalf of the banks, and to quickly generate sufficient cash-flows in order to confront the interest charges of their increasing debt”.  Certainly, shareholders have other expectations. For HSBC given there being few opportunities for acquisitions in Europe and strong competition in acquiring assets in emerging countries, France Telecom could instead use its financial surpluses to increase its level of distribution of its profits to its shareholders.  As such, a program of repurchasing shares seems more likely than the event of an exceptional dividend”. Satisfying the shareholder in the short term is not a strategy per say, but Didier Lombard will certainly have to keep this in mind before the re-launch of big plans.       

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