France Télécom confirmed today that it was considering buying Nordic telecom group TeliaSonera today but insisted that negotiations over a deal had yet to start.

The group said that the two companies shared a common strategic vision of the sector and both had accomplished a significant transformation of their business models.

The French telecom operator, whose share price has plunged by more than 10 per cent in recent days over fears that it was about to embark on a €33.6 billion (£26.8 billion) tie-up, said that it would finance the buy through cash and debt, although the proportion of cash had not yet been decided.

In a bid to reassure investors who have been concerned by talk of an all-paper deal, the company pledged to continue to increase its dividend but added that it was possible it might not meet its key debt target this year if it secured a deal.

France Télécom has previously said that it would keep its ratio of debt to gross operating margin under two, but that situation is likely to change if the deal goes ahead.

“In case of a tie-up with an operator of this size, we are giving ourselves the possibility of going over this ratio for a limited period,” Gervais Pellissier, the finance director of France Télécom, said.

Analysts have been criticial of the proposed deal, saying it would not create much in the way of savings.

TeliaSonera is 37.3 per cent owned by the Swedish state and 13.7 per cent owned by Finland.

France Télécom repeated its mergers and acquisitions strategy on Friday saying that it intended to "reinforce our footprint on emerging markets; strengthen as appropriate our activities in Western Europe; acquire complementary competencies in certain key areas".

Other acquisition options include a bid for Telenor, whose 174.7 billion Norwegian kroner market value puts it just behind TeliaSonera, which is worth 221 billion Swedish kronor.

The addition of TeliaSonera to France Télécom would add about 115 million clients, largely in Scandinavia. A combination of the companies would be valued at about $126 billion, larger than Germany's Deutsche Telekom but behind Telefónica of Spain and Europe's biggest telecom group, Vodafone.

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