Bloomberg News

Billionaire Slim Claims European Victory With KPN Stake

June 22, 2012

Billionaire Slim Claims Victory in Europe With 21% KPN Stake

Mexican billionaire Carlos Slim, chariman emeritus of America Movil Sab de CV, which controls 70 percent of Mexico's mobile-phone business, speaks at a news conference in Mexico City. Photographer: Susana Gonzalez/Bloomberg

Billionaire Carlos Slim succeeded in his quest for an influential stake in Royal KPN NV (KPN), more than doubling his shares after the former Dutch phone monopoly failed to persuade investors to refuse his advances.

America Movil SAB (AMXL), Slim’s wireless carrier, yesterday disclosed a 21 percent stake in KPN, up from 8.7 percent the previous day. KPN earlier ended talks on a combination of its German business with a rival, a deal the company had sought to convince shareholders would provide greater value than Slim’s offer of 8 euros a share.

Slim, who agreed to acquire 21 percent of Telekom Austria AG (TKA) last week, is taking advantage of bargain prices in Europe to expand America Movil’s assets beyond Latin America, where it’s the biggest carrier. America Movil said yesterday it wants a long-term partnership with KPN and is ready to begin working with its executives.

“KPN is going to have to accept that the Mexicans have arrived,” said Martin Lara, an analyst at Corp. Actinver SAB in Mexico City. He recommends buying America Movil shares. “They can’t spurn a shareholder that has 21 percent and soon will surely exceed 27 percent.”

KPN’s stock has traded below the 8-euro offer price since early April. It fell 4.4 percent to 7.15 euros at the close in Amsterdam. America Movil was unchanged at 17.45 pesos in Mexico City.

Last Resort

America Movil’s 2.6 billion-euro ($3.3 billion) offer, which expires June 27, is for a stake in The Hague, Netherlands- based KPN of as much as 28 percent. KPN has “taken note” of America Movil’s share purchases, it said yesterday.

“We will see at the end of the tender period,” said Maryse Ducheine, a KPN spokeswoman.

As a last resort, KPN could get help from its independent foundation, which has responsibility for defending the company from “influences that may threaten the continuity, independence and identity” of the company by issuing shares that carry voting rights. The foundation continues to monitor developments, spokesman Walter Samuels said yesterday.

Along with the stake in Telekom Austria acquired from investor Ronny Pecik, the KPN investment will give America Movil a window into markets that can be very different than its own, with higher levels of mobile voice and data use, Chief Financial Officer Carlos Garcia-Moreno said yesterday on a conference call.

Different Market

“For us it’s important to exchange experiences,” he said. “They have gone through some issues we will likely have to confront in Latin America as the industry matures.”

KPN and Telekom Austria, which has welcomed Slim’s investment, will get access to handsets and other communications equipment at lower prices because of America Movil’s purchasing power, Garcia-Moreno said. The Mexican carrier has 246 million wireless subscribers, while the two European companies have a combined 57 million.

America Movil’s appetite for European investments is whetted for now because it needs to keep debt under a certain threshold to maintain its credit ratings, Garcia-Moreno said.

The two transactions would increase America Movil’s net debt to $27.8 billion, or 1.4 times its earnings before interest, tax, depreciation and amortization for the past 12 months. Moody’s Investors Service would revise its America Movil rating of A2, or five levels above investment grade, if that ratio exceeded 1.5 for a “sustainable period,” Garcia-Moreno said.

The carrier had net debt of $23.1 billion on Dec. 31, according to data compiled by Bloomberg.

Failed German Talks

KPN ended discussions on potential market consolidation in Germany because of “adverse conditions” in the financial markets, the company said June 20, without naming any other party. KPN and Telefonica SA (TEF) were evaluating options, including a merger of KPN’s E-Plus unit with Telefonica’s O2, the two smaller of Germany’s four wireless operators, people familiar the matter said this month.

The failed talks left KPN Chief Executive Officer Eelco Blok with few options to counter America Movil’s unsolicited offer. Blok and Chief Financial Officer Eric Hageman have been visiting KPN investors in the past weeks to ask them not to tender their shares.

KPN also plans to sell its Belgian mobile-phone division. The carrier completed a strategic review and will begin the sale process next month for the BASE unit, which people familiar with the matter previously estimated may fetch about 1.8 billion euros.

The Dutch government said yesterday that the minister of economic affairs is in touch with KPN on its latest developments. The interests of KPN clients, shareholders and employees must be prioritized, the government said on its website.

To contact the reporter on this story: Crayton Harrison in Mexico City at tharrison5@bloomberg.net

To contact the editors responsible for this story: Nick Turner at nturner7@bloomberg.net; Kenneth Wong at kwong11@bloomberg.net


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