America Movil To Raise Stake In KPN In EUR2.6 Billion Bid

05/08/2012| 08:00am US/Eastern

Recommend:

0

--Mexico's America Movil makes EUR8 offer to raise its stake in KPN to 28%

--KPN's share soar on the news

--America Movil had already a 4.8% holding in KPN

--Deal triggers speculation on possible further transactions in Germany

By Anthony Harrup and Archibald Preuschat

Of

Mexican telecommunications heavyweight America Movil SAB (AMX) said Monday it wants to raise its stake in Dutch telecommunications operator Royal KPN NV (>> KPN KON) to 28% as it sets its sights on international expansion.

America Movil, owned by billionaire Carlos Slim, is Latin America's largest wireless service provider, with 246 million mobile subscribers in 18 countries. It already owns 4.8% in KPN and is offering EUR8 a share in a cash deal worth up to EUR2.64 billion.

The news lifted KPN's shares as investors speculated on further stake buys. At 1124 GMT, KPN share were trading 20% higher at EUR7.78.

KPN, the former monopoly in the Netherlands, provides fixed-line and mobile services, including phone, Internet and television and has major operations in the Netherlands, Germany and Belgium. But its profits are under pressure, especially in its Dutch home market, as customers switch from traditional voice calls and text messages to competing Internet services like WhatsApp, a smartphone messaging service, or Microsoft Corp.'s (MSFT) Skype, which offers free Internet phone calls. KPN's market capitalization shrank by 40% in the 12 months prior to the Mexican offer.

Slim's interest in the ailing KPN has prompted speculation among investors that the Mexican company may be eyeing asset swaps, possibly with Spanish telecom giant Telefonica SA (TEF).

KPN owns E-Plus, Germany's third-largest mobile operator, after T-Mobile and Vodafone (VOD) and E-Plus is seen as natural merger partner for Telefonica's O2, the fourth mobile operator in Germany to create strong third competitor for the two market leaders.

The companies have denied they are in merger talks.

"The most obvious place to create value within KPN is through the sale or merger of its subscale German business with the assets of Telefonica", Bernstein Research said in a note, Bernstein rates KPN underperform with an EUR6 target price. But with Telefonica facing increased European regulation and a crippled Spanish economy, "it is hard to see how Telefonica can pay in cash, to access the incremental synergies that would result from that sort of combination," it said. Instead, an asset swap could be another way out, Bernstein added.

America Movil said its expansion within the Americas has given it stable profits and cash flow and so now it is looking to widen its footprint further.

The offer would give it a significant stake in a company with a "relevant position in European markets," America Movil said, adding that it hopes to build and develop "a lasting relationship" with KPN management and shareholders.

Financial chief Carlos Garcia Moreno said in a conference call that the Mexican company looked around Europe and considered KPN as best suited, but he said the company isn't aiming to raise its holding above 28%. America Movil is offering shareholders a 23.5% premium on Monday's closing price of EUR6.48 and says the cash offer isn't conditional on achieving any minimum threshold of shares tendered.

A KPN spokesman said the Dutch operator is "moderately positive about the offer."

-By Archibald Preuschat, Dow Jones Newswires; +31 20 5715 218; archibald.preuschat@dowjones.com

0