TeliaSonera has turned down a $42bn offer from France Telecom, owner of the Orange brand, after the board decided unanimously that the company was worth more than that.

This belief is in stark contrast to France Telecom shareholders, who sent the company's shares down 3.4 per cent when the offer became public, reflecting a belief that TeliaSonera was being overvalued.

While owning the largest operator in Sweden would no-doubt be a nice thing, and the economies of scale favour growth, the target's holdings in Russia and the rest of eastern Europe are the real attraction. TeliaSonera has operations in the Ukraine, Turkey, Tajikistan and Estonia to name just a few, and most of the European operators are looking to expand in that direction.

The TeliaSonera board may have rejected the initial offer, but France Telecom is planning to spend a couple of weeks considering its position and negotiations will continue. The final decision will depend on the Finnish and Swedish governments, which between them own a controlling interest in TeliaSonera, but neither will comment for the moment. ®

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