Mobile Merger Wave Hits Nordic Shores

STOCKHOLM (06/28/2000) - As elsewhere in Europe, mobile phone operators in the Nordic region are scrambling to find merger partners to create economies of scale. Often, the resulting frenzy pits Nordic operators against each other in bidding wars over the relatively few takeover targets in the region.

To date, most of the merger activity has been taking place within the Nordic area, but at least one operator, Finland's Sonera Corp., is already looking beyond the region in its quest to become a more global player.

The region's largest telecommunications operator, Sweden's Telia AB, this week found itself in a tug-of-war with Copenhagen-based Tele Danmark AS for ownership of Norway's second-largest mobile operator, Netcom ASA.

Telia announced last Friday that it had acquired rights to 51.5 percent of shares in Netcom, allowing it to take control over the company, and extended a mandatory offer to purchase the remaining Netcom shares for 470 Norwegian krone (US$53.72) per share in cash. [See "Telia to Acquire Norwegian Mobile Operator Netcom," June 23.]Most of those remaining shares, however, are owned by Tele Danmark and its biggest foreign shareholder, San Antonio, Texas-based SBC Communications Inc., which each hold approximately 20 percent stakes in Netcom, bringing their combined ownership in the Oslo-based operator to more than 40 percent. Tele Danmark, as recently as May, offered to purchase the remaining shares in Netcom for 310 Norwegian krone each and is now indicating that it plans to hold on to its current stake.

"We have no intention to sell our shares in Netcom, but we do welcome Telia as a partner," said a Tele Danmark spokeswoman.

Telia Chief Executive Officer Jan-Ake Kark, meanwhile, in a teleconference call on Monday, had little to say about how the company plans to solve the dilemma of having a major rival as the second-largest shareholder in Netcom.

"This is the question we have to think about," Kark said. "We have more than 51 percent of the shares in Netcom, so we are in control of the company. I can't comment on any discussions we will have, or have already held, with the other owners."

Netcom President Terje Christoffersen, in the same teleconference call, tried to quell rumors about a management walkout following Telia's purchase of a controlling stake in the company. "I don't know of anyone leaving," Christoffersen said.

Through its controlling stake in Netcom, Telia will be taking on its former merger partner, Norway's state-owned Telenor AS, only six months after the planned merger fell apart. Telenor, in turn, earlier this month acquired a majority 53.5 percent stake in Sonofon, Denmark's second-largest mobile operator, with around 900,000 subscribers, in a deal valued at 13.1 billion Danish krone (US$1.7 billion). The remaining 46.5 percent stake in Sonofon is held by Atlanta-based BellSouth Corp.

Following the Netcom deal, Telia now can, and does, boast of being the only Nordic mobile operator with networks throughout the Nordic countries of Denmark, Finland, Norway and Sweden. One of the region's most closely watched mobile operators, Helsinki-based Sonera, has already set its sights further afield, however, and is now actively searching for a merger partner that could allow the company to play a role in the global wireless arena.

"Sonera wants to be an active player in the international consolidation process, not a prey," a Sonera official said in an e-mail response to questions.

Sonera is looking for global, rather than local or Scandinavian, solutions and partnerships in order to ensure and support the growth of its value-added mobile services businesses, such as the Zed portal site and Sonera SmartTrust Ltd., a subsidiary that develops security systems for mobile transactions, the Sonera official said.

Separately, Sonera on Tuesday announced that it has agreed to acquire Stockholm-based ID2 Holding AB, a developer of PKI (public key infrastructure) security products. Sonera said it plans to transfer ownership of ID2 to its wholly-owned SmartTrust subsidiary, which it plans to float within the next ten months.

The Finnish parliament last week made Sonera, which already is known as a very advanced mobile operator, an even more attractive partner by passing legislation that allows the country's government to lower its ownership in Sonera from the current 53 percent level to zero.

Sonera's biggest problem in finding a suitable merger partner may, in fact, be its own success. With a current market capitalization of around 40 billion euro (US$38 billion), a prospective merger partner needs to be a sizeable player in its own right if it would like to hold a controlling stake in a combined entity.

Telia, in Stockholm, can be reached at +46-8-713-6255 or via the Web at http://www.telia.com/. Netcom, in Oslo, is at http://www.netcom.no/. Telenor, in Oslo, is at +47-22-77-60-60 or at http://www.telenor.com/. Tele Danmark, in Copenhagen, is at +45-80-80-80-80 or at http://www.teledanmark.com/. Sonera, in Helsinki, is at +358-20401 or at http://www.sonera.com/.

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