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June 10, 2012 10:15 pm
An announcement on a move is likely within two weeks, according to people familiar with the situation.
The Dutch group is expected to table options as alternatives for its shareholders to the offer from América Móvil, the people said.
A spin-off could open the way for E-Plus to ultimately link with O2, the German mobile subsidiary of Telefónica, which the Spanish telecoms group announced last week it was seeking to divest.
The possible spin-off is KPN’s latest strategy to convince its shareholders not to sell to América Móvil, which last month launched an offer to buy up to 28 per cent of KPN’s shares at €8 a share.
KPN has treated the bid as an hostile offer, saying it undervalues the company and would give the Mexican group, owned by billionaire Carlos Slim, significant influence over decision-making.
Meanwhile, KPN and Telefónica are continuing discussions over a possible co-ordination between E-Plus and O2, and there is “enough movement between parties” to keep the exploration promising, a person familiar with the situation said.
A spin-off of E-Plus at a higher price would siphon off shareholder interest and make KPN’s shares less attractive to the Mexican group, which is seeking a foothold in Europe. Analysts say a co-operation between E-Plus and O2 could also unlock some €4bn in annual synergies in the German mobile market, provided it was approved by regulators.
E-Plus is the third-largest operator by subscribers in the German mobile market, with a 17 per cent market share.
Telefónica is known to have long been interested in acquiring it but is burdened with heavy debt and announced last week that it would not bid for any part of KPN.
That, however, does not rule out a co-ordinated spin-off or joint venture. Such a move could also help Telefónica reduce its debt, at a high level for the sector of 2.5 times earnings before interest, tax, debt and amortisation.
“A merger of E-Plus and O2 Germany would add enough value to KPN’s share price to deter investors from accepting AMX’s bid – and may even force an increase – in which case management would be able to argue it had acted resolutely for shareholders,” Espirito Santo wrote in a note.
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