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. Last Updated: 07/27/2016

Nordic Neighbors Sign Deal Merging Telecoms

STOCKHOLM, Sweden -- The Swedish and Norwegian governments signed an agreement early Tuesday to merge state-owned telecoms operators Telia and Telenor, overcoming an 11th hour hitch that stalled the deal.

The agreement was signed by Sweden's industry minister, Bjorn Rosengren, and Norway's transport and communications minister, Dag Jostein Fjaervoll, early Tuesday after all-night negotiations to get the $47 billion deal back on track.

"Now we are in agreement in writing. Now we have sealed the whole thing," Rosengren told reporters.

The merger will create Europe's sixth largest telecoms group and lead the Nordic region's largest ever float with the first tranche of the new group expected to be sold next April.

The deal has been problematic since the outset and brought to the surface underlying, historic national rivalry that exists between the neighbors, with Norway wary of being the underdog.

The relationship was not helped last month when Rosengren had to make a public apology to Norway after off-camera comments calling Norway "the last of the Soviet states" and "incredibly nationalistic" were broadcast live.

But after the merger received approval from the European Union competition authorities last week on condition Telia and Telenor sell certain overlapping units, it seemed all differences were settled.

However, just two hours before an official signing ceremony in Stockholm on Monday, the Norwegians sent a brief message saying they would not be coming as "more work and clarification" was needed.

Sources close to the merger said power games were the real problem with Norway unhappy about Telia chairman Jan-Ake Kark becoming chairman and chief corporate adviser in the new group with a high wage of 5.4 million Swedish kroner ($660,000). This was seen as challenging the chief executive role of Telenor's Tormod Hermansen.

Fast behind-the-scenes work - reportedly involving Norway's Prime Minister Kjell Magne Bondevik - managed to get Fjaervoll and key Telenor executives on a plane to Stockholm and the two sides were locked in talks overnight.

Hours of negotiations around three points - Kark, the valuation of the new company and union representation on the board - put the merger back on track.

The two sides agreed on a capital evaluation for the new company that will make an initial public offering in April next year worth up to 100 billion Swedish kroner ($12.26 billion).