Finnish state to buy all of Sonera's rights issue

Sonera, the loss-making Finnish telephone operator, yesterday announced plans to stem its growing debt with a 1bn euros (£620m) rights issue.

Sonera, the loss-making Finnish telephone operator, yesterday announced plans to stem its growing debt with a 1bn euros (£620m) rights issue.

The company, which has more than 4bn euros of debts, also said it would concentrate on its profitable core, mainly domestic mobile operations. It intends to rein back spending on expensive European third-generation (3G) network licences, mainly in Germany.

The Finnish state, which owns 53 per cent of the company, has agreed to subscribe for all its shares in full and the balance will be fully underwritten. Sonera said it would set the issue price for up to 743.5 million shares next month but that it would be at a discount to current levels. Yesterday, Sonera gained 5.2 per cent to 4.24 euros.

Sonera has had its borrowing costs spiral after coming under pressure from credit rating agencies. The group had already embarked on an asset disposal programme in an attempt to reduce its debt to about 2.5bn euros by the end of the year.

Kim Ignatius, the finance director, said the rights issue would help the company focus on developing its strategy and running its businesses. "This assures that we reach our net debt targets and we don't have any liquidity issues for the next four years," he said.

Sonera will not invest any more in its German 3G operation and would limit its investments in Italy and Spain. The moves, which come two months after Harri Koponen became chief executive, are part of a new strategy intended to increase core earnings next year by more than one-third on this year. It said it would cut losses before interest, tax, depreciation and amortisation in new services to a maximum of 40m euros next year and break even in 2003.