UPDATE 1-France Telecom withdraws TeliaSonera offer

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PARIS, June 30 (Reuters) - France Telecom (FTE.PA: Quote, Profile, Research, Stock Buzz) withdrew its $40 billion offer for Scandinavian telecoms group TeliaSonera (TLSN.ST: Quote, Profile, Research, Stock Buzz), saying on Monday it could not reach an agreement on the financing of the deal.

"Following its proposal for a friendly combination with TeliaSonera announced on 5 June, France Telecom has today decided not to submit a firm offer to TeliaSonera's shareholders," the French group said in a statement.

"Notwithstanding the interest shown in the project, the dialogue opened with the board of directors of TeliaSonera was unable to reach agreement on its financial conditions," it added.

The company also said TeliaSonera was "not essential to the pursuit of its strategy."

France Telecom had made an indicative cash-and-share offer worth roughly $40 billion.

On June 5, it unveiled an offer whereby shareholders would receive three new France Telecom shares for each 11 shares in TeliaSonera and would be guaranteed a cash option of 63 crowns per share for the first 500 shares.

The cash portion made up 52 percent of the offer and the shares account for 48 percent.

However, France Telecom's offer was immediately rejected by TeliaSonera's board. TeliaSonera Chairman Tom von Weymarn said the offer significantly undervalued his company.