Copy and paste (OUD) WSJ 20 JUNI 2012
By
ARCHIBALD PREUSCHAT
AMSTERDAM—Dutch telecommunications company Royal KPN NV KPN.AE +8.28% has lost its best option for warding off a partial takeover by Mexican mobile giant America Movil AMOV +0.63% SAB after talks with Spain's Telefónica SA TEF.MC +0.15% over merging their German assets failed.
Combining KPN's E-Plus, Germany's third-biggest mobile operator and its most profitable, with Telefónica's O2, Germany's smallest player, would have created a formidable competitor for markets leaders Deutsche Telekom AG DTE.XE +0.45% and Vodafone VOD +0.34% PLC and the No. 1 operator in terms of customers.
KPN had been hoping that selling the asset would unlock its full value and deter shareholders from accepting America Movil's €8 a share cash offer which expires June 27.
In its statement late Wednesday, KPN didn't mention Telefónica but people familiar with the matter said the two have been in informal talks for some weeks.
KPN said only that adverse conditions in financial markets have meant that no agreement could be reached at this point in time, and talks have been terminated.
Telefónica declined to comment.
America Movil, controlled by billionaire Carlos Slim, wants to raise its stake in KPN to roughly 28% from 8.5% at present, paying roughly €2.5 billion. KPN has recommended that its shareholders don't accept America Movil's offer, which it deems too low. Instead it said it was evaluating all possible options for E-Plus with the aim of unlocking its inherent value for the benefit of shareholders who have seen their shares fall 21% within the past year.
The KPN bid was Mr. Slim's first significant foray into Europe and brings his longtime Latin American rivalry with Telefónica into the Spanish company's own backyard. America Movil and Telefónica are Latin America's No. 1 and 2 telecom companies, competing fiercely in markets like Mexico and Brazil.
Mr. Slim's earlier attempt to expand in Europe was thwarted by Telefónica when the Madrid-based company outbid the Mexican company to buy a minority stake in Telecom Italia in 2007.
Earlier Wednesday, KPN was close to a deal to selling E-Plus to Telefónica in a part cash, part share deal, for just over €10 billion but Telefónica failed to secure the necessary funding, a person familiar with the matter said.
Telefónica is suffering from the harsh economic conditions in its domestic market and is heavily debt burdened. Its €57 billion net debt now exceeds its market capitalization of €43.2 billion after shares lost 40% of their value in the past 12 months.
E-Plus has a market share of roughly 16% in Europe's largest economy. It contributed €3.24 billion to KPN's revenue in 2011, or a quarter of the total, and is likely to one of the main lures for Slim's interest in the ailing Dutch incumbent.
America Movil has said it is looking to widen its footprint after its expansion within the Americas has given it stable profits and cash flow. It has been eyeing the falling value of European telecom companies which are facing heavy regulation as well as expensive network upgrades on top of the weak economic conditions.
Last week, America Movil said it has agreed to buy 21% of Telekom Austria AG to raise its stake to about 23%. In contrast with KPN, Telekom Austria Chief Executive Hannes Ametsreiter welcomed the move, saying that America Movil's substantial holding is a positive development for the company.