Swisscom, Telekom Austria end merger talks

European incumbent telephone companies Swisscom AG and Telekom Austria AG said Thursday they broke off merger talks.

Desperate to leverage its strong balance sheet, Swisscom had repeatedly expressed interest in a deal with Telekom Austria in recent months. Earlier this week, the Swiss operator finally confirmed talks.

But in a terse statement released Thursday, Swisscom said that while both parties agree on the advantages of a merger, under the current circumstances, “they do not consider it possible to find a solution that would serve the interests of all concerned.”

Swisscom is almost 63 percent owned by the Swiss government, with no immediate plans to lower state ownership. By comparison, the Austrian government, which still owns about 47 per cent of Telekom Austria, said in May it plans to sell another 17 per cent.

Selling out to a state-controlled rival would have been politically difficult for the Austrian government, which is fully committed to a full privatization of Telekom Austria by 2006.

“It was a political decision (on the part of the Austrians) not to continue talks,” said Swisscom Chief Executive Officer Jens Alder, in an afternoon conference call with journalists. “We regret the decision.” Financially, the deal would have been an acquisition, with Swisscom taking a controlling stake in Telekom Austria, Alder said, but technically, it would have seen both companies merge their employees and management teams to “take advantages of the expertise in both companies.”

Asked whether Swisscom would take another stab at Telekom Austria at a later time, Adler said: “You should never say never in this business but I would say no in the foreseeable future.”

Adler said he doesn’t see any other investment opportunities for Swisscom to expand at the moment. The operator, he said, will continue to invest in its domestic business.

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