France Telecom proposed a $41 billion bid for TeliaSonera to create the world's third largest broadband operator and the number-four in mobiles, but the Nordic company rejected the offer.
France Telecom, seeking to save costs and expand in emerging markets, said it wanted to make a friendly approach.
TeliaSonera Chairman Tom von Weymarn called the cash and shares offer "significantly" below the group's real value.
France Telecom shares fell 5.1 percent to 18.25 euros in morning trading, while shares in TeliaSonera were up 6.5 percent at 57.25 crowns, above the bid value of around 55.2 crowns.
France's dominant fixed line and mobile company said the offer, worth 248 billion Swedish crowns ($41.1 billion) at current share prices, was at the right price and that it was not planning to change terms.
It gave itself two weeks to decide on whether it would launch a formal offer.
The long-awaited pricing of the approach comes as the industry undergoes a round of consolidation.
Deutsche Telekom last month clinched a deal with the Greek government that gives it a 25 percent stake in operator OTE, and U.S.-based Verizon Wireless is in talks to buy U.S. rural mobile service provider Alltel .
India's Reliance Communications and South Africa's MTN are also close to a tie-up.
Telecom Italia said on Wednesday it would cut 5,000 jobs in a cost saving move.
"The current context of consolidation appears unavoidable to have critical mass," France Telecom Chief Executive Didier Lombard said in a conference call.
France Telecom, which mainly trades under the Orange brand, said the combination would have 237 million clients in 30 countries.
Some analysts have however questioned France Telecom's pursuit of the Nordic operator, saying benefits from the combination were not clearly defined.
Government Ownership
"It may have been the case that the government ownership angle has caused France Telecom to pay up more than they would have liked to clinch the deal," said one analyst.
France Telecom, which used to be a government body and was privatized in the early 1990s, is still 26.69 percent-owned by the French government.
The Swedish and Finnish governments together control more than 50 percent of shares in TeliaSonera.
Under the offer, shareholders would receive three new France Telecom shares for each 11 shares in TeliaSonera and would be guaranteed a cash option of 63 crowns per share for the first 500 shares.
France Telecom Finance Director Gervais Pellissier said the telecoms operator expected free cash flow to be multiplied by three thanks to the TeliaSonera deal.
It said it would try to preserve its credit profile in spite of the deal, and vowed to also maintain its dividend policy.
Five-year credit default swaps on TeliaSonera and France Telecom were both 3 basis points wider, however, at 71 basis points and 93.5 basis points, respectively, a trader said.
"The combination is really creating strong and balanced platforms for growth," Pellissier said. It would only be a on a friendly basis."
France Telecom said the transaction would have to be approved by its shareholders.