Telia shares fell more than 12 percent to 43.70 kronor ($7.29) on the news when trading opening Monday morning on the Stockholm exchange.
"Despite favourable interest in the proposal, open dialogue with the board of TeliaSonera failed to come to an agreement on financial parameters" it said in a French-language statement.
It added that the attempt to acquire TeliaSonera was "not indispensible" in the context of its broader corporate strategy.
Earlier this month, France Telecom made a preliminary offer of €33 billion ($53 billion) for TeliaSonera in a bid to create the world's fourth-biggest mobile operator.
But the Nordic operator immediately rejected it as "significantly" undervaluing the company.
Citing people familiar with the talks, the Wall Street Journal reported on Monday that France Telecom had raised the price of the stock component of its offer, but it was still under 60 Swedish kronor per share.
France Telecom's earlier offer comprised 52 percent cash and 48 percent in shares, with the cash component pitched at 63 kronor ($10.4) per share and the share component at 56.2 kronor.
France Telecom had set an informal deadline of Monday for reaching a deal, the US-based business newspaper reported.