April 16 (Bloomberg) — TeliaSonera AB, Sweden’s largest phone company, rose the most in more than five years in Stockholm trading after a report France Telecom SA is studying a possible takeover offer.

France Telecom has French government backing to buy TeliaSonera and would pay with stock to create Europe’s largest telecommunications company, Le Figaro reported, without saying where it got the information. France owns 27 percent of France Telecom. TeliaSonera rose as much as 10 percent, the most since October 2002. France Telecom shares fell as much as 6.8 percent.

TeliaSonera has a market value of about 219.6 billion kronor ($37.2 billion), and buying the company would be France Telecom’s largest deal since its 2000 purchase of Orange Plc for 27.8 billion pounds ($54.5 billion). The Swedish government has said it plans to sell TeliaSonera shares. Sweden holds 37.3 percent of TeliaSonera and Finland owns 13.7 percent.

“We’re surprised, as France Telecom said it would favor emerging markets to reinforce growth,'’ said Benoit de Broissia, an analyst at Richelieu Finance, which manages $6.3 billion including France Telecom shares. “From a strategic point of view, the stock market isn’t welcoming this. It would indicate an offer in stock, which would be strongly dilutive.'’

TeliaSonera spokesman Ola Kallemur declined to comment and referred questions to Sweden’s government. Sweden’s Financial Markets Ministry spokeswoman Mia Widell declined to comment.

Emerging Markets

France Telecom’s policy is “dynamic management of our business portfolio'’ with the goal of a greater presence in emerging markets, strengthening businesses in Western Europe and adding competencies in key areas, said Beatrice Mandine, a spokeswoman for France Telecom. She declined to comment directly on the report.

France Telecom “will not undertake any initiative which will not create value for shareholders, or which could modify the commitments made regarding our mid-term debt-to-Ebitda ratio and cash-return policy,'’ Mandine said.

Luc Chatel, a spokesman for the French government, declined to comment. The government “will communicate when the time comes,'’ he told reporters in Paris today.

TeliaSonera rose 4 kronor to 48.8 kronor as of 12:35 p.m. in Stockholm. Before today, the stock had lost 22 percent this year. France Telecom fell 1.18 euros to 21.02 euros in Paris, adding to a 9.8 percent slide this year before today.

Lars Nyberg, TeliaSonera’s chief executive officer, is seeking growth in Eurasian countries including Kazakhstan to add to assets in countries including Spain, Turkey and Tajikistan.

Turkcell, MegaFon

The Swedish company is in a legal dispute over control of Turkey’s Turkcell Iletisim Hizmetleri AS, in which it owns 37 percent, with shareholders Cukurova Group and Russia’s Alfa Group. TeliaSonera is also in a dispute with Alfa over control of Russia’s OAO MegaFon, Russia’s third-biggest mobile-phone company in which it has a 35.6 percent stake.

Sweden’s coalition government plans to sell state assets worth at least 200 billion kronor by the end of 2010 to cut debt and reduce government intervention in the economy. Holdings earmarked for sale include stakes in Nordea Bank AB, TeliaSonera and real estate company Vasakronan AB. Sweden raised 18 billion kronor selling an 8 percent TeliaSonera stake last year.

“Operators that have the guts can do interesting transactions in this market,'’ said Rob Goyens, an analyst at Dexia Securities, in a telephone interview.. “It might not be totally illogical but it may not be quite the acquisition that everyone expected.'’

A takeover would dilute the French government’s stake in France Telecom, while the Swedish and Finnish governments could join the company’s board, according to Paris-based Le Figaro. The deal hypothetically couldn’t happen other than on a friendly basis, the newspaper said.

Regulatory Standpoint

“From a regulatory standpoint there wouldn’t be a lot of bottlenecks because there’s not a lot of geographical overlap,'’ Goyens said. “What would make it more difficult are the various parties around the table, not only the French government but also the Swedish and Finnish ones.'’

France Telecom in the past two years expanded in emerging markets and Internet services to make up for a slump in fixed- line phone sales in its home market, buying assets in Kenya and Jordan as well as Spanish Internet-access provider Ya.com.

“This doesn’t seem to fit with the merger and acquisition goals of France Telecom,'’ Goyens said. “It is not a pure emerging-markets play.'’