Telefonica is likely to win its German prey, KPN’s E-Plus subsidiary, having increased its offer price and gained approval from America Movil, the Dutch telco’s largest shareholder and would-be acquirer. However, it still has to convince German competition regulators that its plan would create a more viable player and therefore greater consumer choice.
There had been speculation that Mexico-based Movil would try to block the merger of E-Plus with Telefonica’s O2 Germany, especially once it made its own move to take full control of KPN. If it does succeed in buying the rest of the Dutch operator, it will not have the valuable asset of a stake in Europe’s largest market, and even worse, that jewel will have gone to its biggest rival in its Latin American heartlands, Telefonica of Spain.
However, the deal will provide KPN with a welcome financial boost, especially now the price has gone up ‘ the revised offer is valued at about €8.55bn and gives KPN a larger holding in the new merged German entity, at 20.5% (including 2.9% that KPN can exercise one year after the sale takes place). The original proposal was valued at €8.1bn and would have given KPN a 17.6% share in the new company.
The proposal must now gain KPN shareholder approval in October ‘ highly probable ‘ and leap some regulatory hurdles in Germany. Combined, O2/E-Plus would have a customer base of about 43m, making it the largest cellco in the country, ahead of Deutsche Telekom’s T-Mobile on 37m and Vodafone on 32m. European competition authorities have often been wary of allowing the number of cellcos to drop from four to three, even though many economists think more than three profitable cellcos is unsustainable in most of the region’s saturating markets.
Andreas Munt, the head of the Bundeskartellamt, Germany’s federal competition authority, recently said in an interview that the merger would have ‘significant consequences’ because of the reduction in competition.
America Movil is currently offering €7.2bn to gain majority ownership of KPN, whose main markets are in The Netherlands and Belgium, and in which it currently holds 30%.