FRANCE TELECOM has abandoned its $40 billion cash and share bid for TeliaSonera, leaving its plans to create Europe’s largest telecommunications company in tatters.

Negotiations at the weekend were terminated after France Telecom could not agree a price with the Nordic telecoms company or its main shareholder, the Swedish government.

The deal would have created a telecommunications giant with operations in continental and northern Europe, penetrating into fast-growing emerging markets such as Russia and Turkey.

But participants on both sides said that, in spite of a move by France Telecom to increase its offer, the final number did not match the level that could have secured the deal.

“I could not have signed a contract at the price that was available at the weekend,” said Mats Odell, Sweden’s minister for financial markets, who oversees the government’s 200 billion Swedish krone privatisation programme.

France Telecom’s failed bid involved an indicative cash and share offer that valued TeliaSonera at about 58 krone a share, a marginal increase on the indicative offer it made at the beginning of June.

Over the weekend, the group also agreed to increase the cash incentive for ordinary retail shareholders and maintain Telia- Sonera’s Swedish listing.

Bankers close to the deal said the Swedish government, which owns 37 per cent of TeliaSonera, had agreed with the company’s board to hold out for an offer that “began with a six”.

France Telecom yesterday said it had made clear there was little scope to increase the value of the offer – especially after its share price fell. The withdrawal of the offer raises the question of who will buy the Swedish government’s stake ahead of its 2010 deadline. – (Financial Times)