The European Commission granted Swedish telecommunication company Telia AB conditional clearance to buy its Finnish rival Sonera Corp. on Wednesday, marking the first European Union competition ruling on a merger of two former state-owned telephone carriers.
The Commission said in a statement that the deal could go ahead on condition that Telia sells its mobile phone business in Finland and its domestic cable TV operation, and only if it creates a legal separation between its remaining fixed line and mobile phone services.
"Today's decision will enable the new entity which will arise from the merger of Telia and Sonera to be more competitive on the European scene and, at the same time, takes care to guarantee that business customers and households in Finland and Sweden will not lose out as a result," said Competition Commissioner Mario Monti.
The Commission, the executive body of the E.U., imposed the conditions because it feared the deal would create anticompetitive overlaps in the Swedish and Finnish markets. In addition to mobile operations in Finland, the Commission was concerned that the two companies would dominate the market for wholesale international roaming and wireless LAN services.
These overlaps "have been remedied by the parties' commitment to divest Telia's mobile communications business in Finland, including its wireless local area network services," the Commission said.
Telia offered 1.5 of its own shares for each Sonera share in late March in a bid worth 7.4 billion (US$7.35 billion) at the time. The offer valued Sonera at a 16 percent premium to the market price.
But sharp falls in the value of telecommunication stocks in recent weeks slashed the value to 4.8 billion earlier this week, with the premium paid for Sonera shrinking to about 6 percent.
The deal will result in Telia shareholders owning 64 percent of the combined company, and Sonera shareholders holding the remaining 36 percent.