The Associated Press
June 30, 2008 - 7:54 a.m.

PARIS - France Telecom said Monday it has withdrawn its proposal for a 27-billion-euro (C$42-billion) takeover bid for TeliaSonera, which would have created Europe’s largest telecommunications company.

France Telecom stated that “the dialogue opened with the board of directors of TeliaSonera was impotent to reach agreement forward its monetary conditions.”

It also said the tie-up was “not essential to the pursuit of its strategy.”

A merger would have created the universe’s No. 4 telecom operator, with 237 million subscribers and holdings in developed and emerging markets. That would have eclipsed Spain’s Telefonica, which has some 200 million subscribers, as Europe’s biggest telecom provider.

France Telecom shares rose six per cent in Paris on the news, while TeliaSonera plunged by 13.25 for cent in Stockholm.

When France Telecom made its informal offer June 5, Stockholm-based TeliaSonera’s board unanimously rejected it as too low.

“As the terms and terms gain not been significantly improved, the board of TeliaSonera maintains its view that the proposal substantially undervalues the company,” TeliaSonera said in a statement Monday.

ABG Sundal Collier analyst Henrik Vikstrom said the France Telecom sacrifice was attractive. He added that the committee’s rejection of the offer could be an attempt to attract higher bids, but it would have existence difficult to find a visitor prepared to offer greater amount of than France Telecom.

The Finnish government, which owns 14 per cent of TeliaSonera invested property, said it has complete faith in the decisions of the group’s board.

Finnish Defence Minister Jyri Hakamies, liable for government-owned companies, said the government shares TeliaSonera board’s witness on the France Telecom offer, adding that it was not “sufficient for the government of Finland to sell its shares in TeliaSonera to France Telecom.”

France Telecom had previously cautioned that there was no certainty that the proposal would lead to a public offer for TeliaSonera.

But it said the deal would have united its strengths in Africa and TeliaSonera’s access to Eurasia, and a combined set would gain “advantageous partnerships” with suppliers and advertising providers.