Bloomberg News

KPN CEO Says O2 Germany Merger Has Potential to Save $4 Billion

November 17, 2011

Nov. 16 (Bloomberg) -- Royal KPN NV’s chief executive officer said the largest Dutch phone company might generate 3 billion euros ($4.05 billion) of “synergies” if it could merge its E-Plus division in Germany with Telefonica SA’s O2 unit.

“There is clearly value to be created in in-country consolidation,” Eelco Blok said today at a conference in Barcelona organized by Morgan Stanley. Telefonica, Spain’s biggest phone company, “is not willing to sell,” he said.

In October, Blok said KPN might consider an acquisition in Germany. “If something is available and the price is right we will look at it,” Blok said at the time, adding that there was nothing for sale at the moment. KPN’s German E-Plus wireless unit added 610,000 net customers in the third quarter for a total of 22.1 million. The unit’s market share in service revenue was stable at 15.9 percent.

In the Netherlands, the Dutch unit of Tele2 AB is an ideal target for “in-country consolidation,” Blok said today, adding that a combination with KPN might face regulatory hurdles.

The CEO announced plans in April to eliminate as much as 25 percent of KPN’s workforce in the Netherlands by 2015. The company gets almost 70 percent of revenue from its home market, where third-quarter revenue dropped 3.6 percent from a year earlier to 2.17 billion euros, according to Bloomberg data. Blok said today that he expects a turnaround for KPN’s Dutch fixed- line and mobile businesses, based on “key performance indicators,” in the second half of 2012.

“We believe that in Germany we have an asset which is set to compete effectively, to continue creating value,” Telefonica Chief Financial Officer Angel Vila said at the Barcelona conference. “We have no intention to sell, and we have the full intention to continue developing, organically, our German asset.”

--Editors: Robert Valpuesta, Simon Thiel.

To contact the reporters on this story: Cornelius Rahn in Barcelona via crahn2@bloomberg.net; Maaike Noordhuis in Amsterdam at mnoordhuis@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net


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