UPDATE 2-France Telecom taps banks for big bid loan-sources

(Adds TeliaSonera comments, background, updates shares)

LONDON/PARIS, May 29 (Reuters) - France Telecom FTE.PA has approached banks seeking to arrange a 10 billion euro ($15.6 billion) loan facility to finance an unspecified acquisition, banking sources told Reuters on Thursday.

One banker whose bank had been approached to participate in the loan told Reuters he believed the money would be used to finance a bid for Nordic telephone group TeliaSonera TLSN.ST in the next few months.

France Telecom, which owns the Orange mobile telephone brand, declined to comment. TeliaSonera said it would evaluate any bid that came but declined further comment.

The company revealed in April it was interested in a possible bid for TeliaSonera.

Chief Financial Officer Gervais Pellissier said last week that a decision on whether to bid would be made within weeks, although on Tuesday the company denied it was in negotiations with TeliaSonera.

TeliaSonera shares, which had been trading down slightly before the initial Reuters report, rose 3.8 percent to trade at 54.25 Swedish crowns at 1341 GMT. France Telecom shares fell slightly, trading down 0.77 percent at 19.38 euros.

Investors and analysts have reacted coolly to France Telecom’s expression of interest in TeliaSonera, fearing the lack of geographic overlap in their operations would limit synergies and because of France Telecom’s lacklustre record on overseas acquisitions.

Nonetheless, a deal could boost the Paris-based group’s purchasing power with mobile handset makers and with suppliers of media content, an area expected to become more important in the future.

Some analysts said TeliaSonera’s 43.8 percent stake in Russia’s MegaFon and 37.3 percent stake in Turkey’s Turkcell could also give France Telecom access to fast-growing markets.

However, one banker said the fact these were minority holdings would make it hard for France Telecom to use them as a springboard to a material position.


France Telecom initially approached a group of around five banks for the loan but is now in talks with a larger pool of lenders as it seeks to achieve better terms, another banker at one of the five banks initially approached told Reuters LPC.

Pricing for investment-grade credits has roughly doubled since the start of the credit crunch and banking sources said that the French group could face an additional acquisition premium.

Pellissier told the Reuters Technology, Media and Telecoms Summit in Paris last week that France Telecom’s investments in German mobile and Internet group Mobilcom and British cable operator NTL had failed and that the purchase of Spanish mobile operator Amena had turned out somewhat disappointing.

Nonetheless, some industry executives believe more consolidation is inevitable.

The head of Deutsche Telekom’s mobile business T-Mobile, Hamid Akhavan, told the same Reuters Summit he believed scale mattered and that in 15 years, Europe would be dominated by a few big telecoms groups.

But he added: “You still have to put it in perspective how much you pay for something. It’s not at any price that getting bigger is better.”

Benefits of expansion could include buying power over hardware makers, a better position to negotiate content deals and improved branding, Akhavan said. (Additional reporting by Alasdair Reilly, Astrid Wendlandt in Paris, Sven Nordenstam in Stockholm, Niclas Mika in Amsterdam and Tessa Walsh and Eleanor Wason in London) (Editing by Quentin Bryar, Paul Bolding)