América Móvil (AMX) has terminated its relationship agreement with KPN, which opens the way for América Móvil to increase its stake in the Dutch telecom group. The agreement kept América Móvil from holding more than 30% of KPN: América Móvil currently owns 29.8% of KPN. Now Carlos Slim’s company, which counted 262 million wireless subscribers as of June 30, can grow its shareholding to the level that would take over KPN, the Netherlands’ biggest telecom operator by sales.
The stake increase is subject to mandatory offer and other statutory requirements. The two América Móvil designees in KPN’s supervisory board will remain in place as long as América Móvil holds 20% or more of KPN’s share capital, and at least one designee, as long as América Móvil holds 10% or more.
The announcement was made less than a week after Telefónica agreed to buy KPN’s E-Plus for $6.64 billion in cash. As part of the deal, KPN will hold a 17.6% stake in Telefónica Deutschland after the transaction. It is expected that the transaction will reach $10.7 billion. The deal is still subject to approval from European antitrust officials as well as shareholders.
E-Plus is Germany’s smallest mobile operator with 23.9 million customers and $4.5 billion in revenue last year. Telefónica plans to combine E-Plus with its O2 in Germany, the country’s third-largest network operator.
Commenting on the acquisition, Emeka Obiodu, principal analyst in Ovum’s telco strategy team, said that the German market was becoming too much of a headache for both players, and the announcement was in line with expectations that consolidation was inevitable. “As the third and fourth players, O2 and E-Plus did not have the scale to adequately compete in a market where ferocious price competition has led to declining revenues and profits for telcos,” Obiodu said.
KPN said that after the transaction, it will focus on its core geographies with a clear top position across all segments in The Netherlands. It will also look to continue its growth as a mobile challenger in Belgium. KPN intends to use the majority of the cash proceeds from the deal to further increase its financial flexibility and recommence dividend payment to shareholders for 2014.
