The merger of Sonera and Telia is only the first step on the path of the new Nordic telecommunications giant. This was assured on Tuesday by Sonera and Telia management, as well as the companies' principal shareholders, the Finnish and Swedish states. The new company will seek more partners from among mobile operators in the near future.

   

The union of Sonera and Telia is the first such crossborder merger of state-held telecom companies. The new company has 34,000 employees, a strong standing in the Nordic region, and lucrative growth prospects in Eastern Europe.

   

The financially solid Telia has long had its eyes set on Sonera. The Finnish company’s problems with its heavy debt load accelerated the merger talks.

The merger involves an exchange of shares,

with each Sonera shareholder receiving 1.5144 Telia shares. Sonera shareholders will have a stake of 34 percent in the new company, with Telia paying a premium of 16 percent over Friday’s Sonera share price.

   

Ninety percent of Sonera shareholders must accept the exchange offer in order for the deal to go through.

   

As the new company will be headquartered in Stockholm, Finnish Sonera shareholders will no longer enjoy the benefit of tax-free dividend earnings. Under the Finnish avoir fiscal system, dividend income from a Finnish company is not taxed, as the company has already paid taxes once itself before distributing the dividend.

   

The share of the new company will be listed primarily on the Stockholm Stock Exchange, but it will seek a secondary listing in Finland and the United States, allowing Finnish investors to trade with the new shares in Helsinki.

Sonera Chairman of the Board Tapio Hintikka

will be the Chairman of the new company as well. Hintikka will hold the chair at least until 2005. It was agreed that no state officials or politicians can hold seats on the Board of the merged company.

   

Sonera President and CEO Harri Koponen will be the Deputy CEO of the merged entity. “I am excited to join in as the Deputy CEO, and to start to plan for the integration of these two fine companies”, commented Koponen.

   

According to the information of Helsingin Sanomat, Ericsson executive Einar Lindqvist was due to head the new company, but withdrew at the last moment citing family reasons. A CEO for the new company will now be sought from outside of Sonera and Telia.

Minister of Transport and Communications Kimmo Sasi

explained the timing of the merger by pointing out that the Sonera share has doubled in value over the winter, but the upward trend has waned of late.

   

Sasi believes the value of the state’s holding in Sonera will now grow, as the merged entity is a larger and better company. Both the Finnish and Swedish states agreed to decrease their holdings in the new company over the next five years, and to refrain from attempting to influence the operations of the company.

   

All the Ministers in the Finnish government reportedly backed the deal. Opposition leader Mauri Pekkarinen observed that the Swedish side seemed to gain more in deal, noting that the Swedish state will own 45 percent of the new company, compared to the 19-percent stake of the Finnish state.

   

Both the Sonera and the Telia share fell during trading yesterday. The Telia share suffered much more, falling over eight percent. The Sonera share was up by six percent in early trading, but the merger news reversed the direction of the price. The Sonera closing price was 2.6 percent lower than on Monday.