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A bid to create the largest telecom company in Europe reportedly fell through today, as France Telecom withdrew its proposed $42 billion takeover of TeliaSonera (News - Alert).

 

The company said in a public statement that although it couldn’t reach a deal with TeliaSonera’s board of directors, that the effort was “not essential to the pursuit of its strategy.”

 

According to the Associated Press, the new, combined company would have been the world’s fourth-largest telecom operator, with 237 million subscribers and holdings.

 

The telecom colossus would have become Europe’s largest provider, eclipsing Spain’s Telefonica, which has about 200 million subscribers, according to the AP.

 

France Telecom (News - Alert) shares rose 6.13 percent to 18.53 euros ($29.18) in trading in Paris, according to the news service. Shares in TeliaSonera plunged by 13.25 percent to 43.20 kronor ($7.23) in Stockholm.

 

When France Telecom made its informal offer earlier this month, Stockholm-based TeliaSonera’s board unanimously rejected it as too low. France Telecom had offered 56.225 Swedish kronor ($9.36) a share, which would have valued TeliaSonera at about 252 billion Swedish kronor ($42 billion).

 

“As the terms and conditions have not been significantly improved, the board of TeliaSonera maintains its view that the proposal substantially undervalues the company,” TeliaSonera said today in a written release.

 

Analysts had given a frosty reception to France Telecom’s move, saying the deal may not have helped either company. According to Marketwatch, analysts especially criticized the transaction because they say it would’ve brought little exposure to fast-growing emerging markets.

 

Marketwatch interviewed Martin Mabbutt of Nomura Equities, analyst it says had been vocal about his disagreement with France Telecom’s strategy, said its decision to walk away would come as a “relief” to many given “the lack of understandable logic” accompanying the bid.

 

“The fact that France Telecom was not sucked into paying more for TeliaSonera will also be seen as a sign of a vigor previously lacking in many transactions in which France Telecom was involved,” Mabbutt is quoted as saying.

 

Yet according to ABG Sundal Collier analyst Henrik Vikstrom, the AP says, the France Telecom offer was attractive. Vikstrom said that the board’s rejection of the offer could be an attempt to attract higher bids, but said it would be difficult to find a company prepared to offer more than France Telecom.

 

The Finnish government, which owns 14 percent of TeliaSonera stock, said it has complete faith in the decisions of the company’s board, according to the AP.