Dutch telecom carrier KPN has reached an agreement to acquire rival Dutch mobile operator Telfort for $1.2 billion on a debt and cash-free basis, eliminating a player in the highly competitive Dutch wireless market.
Depending on specific performance criteria, the purchase price could be increased by up to $169 million. As part of the acquisition, KPN will acquire net operating losses amounting to more than $1.1 billion, representing a net present value of about $217.5 million.
The acquisition will be financed from KPN’s existing financial resources, but will remain within KPN’s self-imposed financial framework of a maximum net debt earnings before interest, taxes, depreciation and amortization ratio of two times and a minimum EBITDA net interest ratio of six times, the carrier said.
KPN said the transaction will allow it to serve the complete subscriber spectrum of the Dutch mobile market, including higher-growth customer segments that are complementary to its existing customer base. The deal will allow both companies to realize marketing, operational and network savings over the medium term, KPN added.
Telfort has 2.4 million subscribers in a fiercely competitive market with five wireless carriers. KPN is the market leader and would boost its market share with the acquisition. Vodafone Group plc, T-Mobile International and Orange plc also operate in the country, according to the RCR Wireless New International Mobile Carrier Database.
“This transaction will enable us to faster achieve our stated goal to obtain a revenue share in the Dutch market of more than 40 percent,” KPN Chief Executive Ad Scheepbouwer commented. “This will improve our competitive position vis-à-vis the strong European players that are active in the Dutch market and strengthen our ability to compete internationally.”
KPN said the Telfort brand will be retained as part of KPN’s multi-brand portfolio, and Telfort and KPN will benefit from the mutual transfer of know-how and best practices on distribution, customer retention and customer life cycle management. Wholesale activities will be fully integrated, and KPN plans to integrate Telfort’s network.
Market watchers noted the high price for the acquisition, but said KPN likely would benefit from the buy.
“The deal would not only add to KPN Mobile Netherlands’ subscriber base and boost its market share, it would allow KPN, which has a high-end brand recognition, to better target the low-end segment with a separate brand(s),” said Dan Bieler, research director at U.K.-based consultancy Ovum. “These aspects would alter KPN’s relative market positioning in the Dutch mobile market significantly. This in turn should be good news for the company, which has struggled over recent quarters to retain its market share and to stop margin decline in light of increasing subscriber acquisition and retention costs.”
The acquisition is subject to approval by the Dutch Competition Authority.
