France Telecom pays $2.25 bn in Swiss merger

France Telecom SA, Europe’s third largest phone company, agreed to merge its Swiss unit with that of Denmark’s TDC A/S, paying 1.5 billion euros ($2.25 billion) for control of the combined entity.

France Telecom will own 75 per cent of the company formed by the merger of its Orange Switzerland unit with TDC’s Sunrise Communications SA, and has an option to buy the rest for about 1.2 billion euros, the Paris-based operator said in a statement. The new company will be Switzerland’s second-largest mobile-phone operator behind Swisscom AG. The deal catapults France Telecom from the third spot in the Swiss market, and mirrors a similar move by the company to gain market share and cut costs in Britain. The French company this year merged its mobile-phone unit in the UK with that of Deutsche Telekom AG. For France Telecom, the Swiss merger comes a year after it bid unsuccessfully for TDC’s Sunrise.

“The combination of the two businesses has been the subject of long-term speculation as it would provide a much stronger alternative to Swisscom,” Jonathan Moore, an analyst with Evolution Securities Ltd in London, wrote in a note.

France Telecom rose as much as 1.9 per cent in Paris, and advanced 1.2 per cent to 17.26 euros at 10:13 am, giving the French company a market value of 45.9 billion euros. TDC rose as much as 24 kroner, or 11 per cent, to 250 kroner ($50.45), and traded at 245 kroner as of 10:20 am in Copenhagen.