Royal KPN NV (KPN), the Netherlands’ largest phone company, said it is reviewing the future of its Belgian mobile-phone unit, a business that may fetch 1.8 billion euros ($2.3 billion) in a potential sale.
KPN has started “a comprehensive review” of the BASE division, the company said today. BASE, Belgium’s third-largest mobile-phone operator, will probably attract interest from private equity firms such as Apax Partners LLP, according to people familiar with the situation who declined to be identified as the plans are private. KPN shares rose 0.94 percent to 7.12 euros at the close in Amsterdam. The stock trades without rights to the latest dividend today.
“BASE used to be one of the core assets of the company and this no longer seems to be the case,” said Frank Claassen, an Utrecht-based analyst at Rabobank International. The Hague-based “KPN definitely could use the proceeds to strengthen the balance sheet and invest more in the future -- for instance, in fiber networks and the spectrum auction that is coming up.”
Europe’s biggest telecommunications operators are shedding assets and slashing jobs as they grapple with stagnant revenue and the cost of building next-generation networks to handle the data demand of devices such as Apple Inc. (AAPL:US)’s iPhone. France Telecom SA (FTE), the country’s former phone monopoly, in December agreed to sell its Swiss mobile-phone business to Apax for about $2.1 billion after the buyout firm beat rivals including EQT Partners AB and Providence Equity Partners Inc.
Last year, KPN sold its Simyo France brand to Bouygues Telecom and the company is in talks to divest its Simyo brand in Spain.
Deliberations on BASE are at an early stage, and no formal auction process has been established, the people said. Initial information may be sent to potential buyers in May, one of the people said. KPN reported mobile service revenue of 687 million euros in Belgium in 2011, with 4.13 million customers.
“It will be tough to find strategic buyers for these assets as Belgian operators will face regulatory hurdles, and companies like, for instance, Telefonica SA (TEF) would see little synergies,” said Jeffrey Vonk, an analyst at ING. “It is more likely private equity will show interest in these assets.”
KPN said in January that it would accelerate a restructuring program that will cost between 4,000 and 5,000 jobs after it predicted lower profit and cash flow this year. Its shares declined 18 percent since this year through April 13, compared with a fall of 3.4 percent for the Bloomberg Europe Telecommunications Index, as KPN struggles to maintain profits and invest in its domestic network.
The company, which is still increasing its dividend payout in 2012, may face new competition as the Dutch government reserves some space for new market entrants in an auction of mobile frequencies. The arrival this year of a fourth full- service mobile operator in France, Iliad SA (ILD), has eroded sales for larger competitors.
KPN and France Telecom aren’t the only European phone companies struggling as consumers depend more on services such as the Skype Internet calling software and WhatsApp, a free instant-messaging client.
Telefonica SA, Spain’s largest phone company, in December cut its dividend forecast for the first time in a decade, citing “significantly” changed market conditions. Deutsche Telekom AG (DTE), which last year failed to sell its U.S. business to AT&T Inc. (T:US) after regulators opposed the $39 billion deal, in February forecast a decline in 2012 profit.
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