Norwegian telecoms group Telenor has said it will not be selling its 45 per cent shareholding in Esat Digifone, the second mobile phone operator. This follows official confirmation yesterday that Telenor is to merge with Swedish telecoms group Telia.
The deal means that both Telenor and Telia have competing interests in Ireland. Telia owns 8 per cent of Telecom Eireann and has an option on buying a further 15 per cent stake, with Dutch telecoms group KPN. A Telecom Eireann spokesman said it and the other shareholders (KPN/Telia which currently hold a 20 per cent stake in Telecom) would be reviewing the implications of the merger.
It is thought that Telia may be reviewing its options regarding Telecom Eireann. It will have to decide before 35 per cent of Telecom Eireann is floated in June.
However, Telenor seems intent on keeping its existing interests in Ireland. "We are very happy with our investment in Digifone," a Telenor spokesman said last night. Meanwhile, shares in Esat Telecom, which owns 45 per cent of Digifone, were in heavy demand on Wall Street yesterday. The share reached an all-time high of around $54. Analysts said it was driven partly by speculation that the Telia/Telenor merger would have implications for its stake in Digifone.
Digifone's chief executive, Mr Barry Maloney, said that, as of now, business was as usual. He said Telenor had told them the merger would take at least six to nine months to bed down. A Telecom Eireann spokesman said strategic alliances, mergers and acquisitions had become "part of the fabric of the telecoms industry".
"We at Telecom, along with all of the other parties involved, will clearly assess the implications of this latest development," he added.
A Telia spokeswoman said it was too early to say what the impact of the merger would be for Telia's Irish shareholding. "We see it as complementing rather than competing," she said.
She pointed out that both Telia and Telenor had subsidiary companies in each other's countries, and already compete against each other in this way.
Opinion in industry circles was divided yesterday on which company might exit its shareholding. Some analysts said KPN, which has a 12 per cent stake in Telecom, was the more active of the two alliance partners in the Irish company.
However, others suggested that Telia would be loathe to go, on the grounds that it would send out the wrong signals prior to the Telecom road-show to institutional shareholders.
Minority stakes valued at 100 billion Swedish kronor (#11 billion) in Telia are to be sold. Initially, the Swedish state will own 60 per cent and the Norwegian state 40 per cent of the new entity.
The two governments plan later gradually to cut their stakes to 33.4 per cent each, while the remaining third, 33.2 per cent, is to be privatised. The Telia-Telenor merger is the biggest deal the Swedish state has ever done, and it creates a telecommunications company similar in size to Ericsson which is one of the biggest Swedish companies.
(# - Euro)
