Royal KPN NV (KPN), the Dutch phone company that rejected an unsolicited 2.6 billion-euro ($3.2 billion) offer for a stake by Carlos Slim’s America Movil SAB, will conduct a strategy review of its German E-Plus business.
“Today, with the full support of the supervisory board, KPN announces a review of strategic options for E-Plus to unlock value embedded in the German business,” The Hague-based company said today in a statement.
E-Plus may be seeking to merge with Telefonica SA (TEF)’s O2 Germany, according to Robin Bienenstock, an analyst at Sanford C. Bernstein. The two units are the country’s two smaller wireless network operators, competing with Deutsche Telekom AG (DTE) and Vodafone Group Plc. (VOD) KPN Chief Executive Officer Eelco Blok said as recently as in November that a combination of the two operators could generate 3 billion euros in synergies, though Telefonica was not willing to sell.
“This seems to us to be a fairly pointed message to Telefonica,” Bienenstock wrote in a note to clients.
Telefonica said this week its board approved plans for an initial share sale for O2. KPN today said there’s “material synergy opportunity available through in-market consolidations,” according to a presentation to shareholders.
“The timing is interesting. Yesterday Telefonica opened their door, and today KPN did,” said Frank Claassen, an analyst at Rabobank International with a hold recommendation on KPN.
Claassen estimates E-Plus is worth about 8.5 billion euros, though with cost savings through a merger, that could rise to 10 billion euros.
KPN had 23 million mobile customers in Germany at the end of the first quarter. The company reported first-quarter revenue from Germany rose 2.7 percent to 794 million euros. Earnings before interest, taxes, depreciation and amortization in that market was 303 million euros, little changed from 301 million euros a year earlier.
On a conference call today, Blok declined to give a timetable for the strategic review. KPN is also evaluating the future of its Belgian and Spanish businesses. He said the company is exploring all options.
The former Dutch phone monopoly is putting on its defense as America Movil this week began its 8-euro a share offer to expand its KPN stake to as much as 28 percent. KPN said today the offer is “opportunistic.” Mexico City-based America Movil is unwilling to enter into a shareholder agreement with KPN and didn’t respond “positively” to the Dutch company’s proposal, Blok said today.
“We continue to have constructive discussions with America Movil on potential synergies,” the CEO said.
America Movil’s offer for KPN ends June 27. The purchase would be the biggest investment by Slim, the world’s richest man, outside his Latin American phone empire.
A spokeswoman for America Movil in the Netherlands didn’t immediately have a comment when reached by Bloomberg News.
KPN was unchanged at 7.65 euros at 11:10 a.m. on the Amsterdam exchange, valuing the company at 10.9 billion euros. The stock hasn’t closed above 8 euros since April 3.
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