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Last updated: October 3, 2005 7:26 pm

KPN rises on talk of offer from Telefónica

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KPN shares rose 7 per cent to a four-year high on Monday following a report that Telefónica, the Spanish telecommunications group, was considering offering about €20bn ($23.8bn) for the Dutch operator.

Both companies denied they were in talks after Monday’s Wall Street Journal said Telefónica executives had approached their counterparts at KPN about beginning talks, and the companies were assembling teams of advisers as a first stage in
preparing for negotiations.

KPN denied the report. KPN said: “There is nothing going on that we are aware of. There are no talks.” KPN shares rose to €7.98 – their highest level since June 2001.

Officials at Telefónica refused to comment on the report. “We never comment on speculation,” the company said.

However, people who know the company said executives were constantly studying  “possible reconfigurations” of the European telecommunications

The Dutch government, which owns 14.2 per cent of KPN and can veto bids, said it had not been approached by Telefónica. However, it has often stated it has no objection in principle to foreign takeovers.

A bid at the price suggested would represent a 15 per cent premium to KPN’s market capitalisation of €17.4bn, based on Friday’s close.

Analysts said a bid could trigger a wave of pan-European telecom consolidation. It would be the biggest European telecoms sector deal since 2000. 

It would also revive negotiations that fell apart five years ago.

In 2000, Juan Villalonga, then chief executive of Telefónica, proposed a merger with KPN, but failed to win the backing of his board.

Subsequent mobile licence acquisitions in  Germany, Switzerland and Italy resulted in heavy write-offs after the company failed to develop local networks.

Early this year, Telefónica bought control of Cesky Telecom from the Czech government, signalling the start of a fresh expansion campaign in Europe.

Executives said at the time they were interested in further deals in eastern and central Europe, and were also eyeing possibilities around the Mediterranean.

However, in April it pulled out of the contest for Turkey’s state-owned fixed-line carrier, dealing a blow to the government’s privatisation plans and raising questions about Telefónica’s next move in Europe.

More recently, the company was forced by the Spanish stock market regulator to respond to rumours about its plans to bid for O2, the UK mobile network operator, amid a flurry of speculation about consolidation among European telecoms groups.

KPN too recently revealed it had held talks with Deutsche Telekom about a possible bid for O2, which collapsed when they could not agree a price for the UK operator’s German unit.



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