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Last updated: February 5, 2013 6:35 pm
Mexican billionaire Carlos Slim is nursing a €1.7bn paper loss on the stake he took in KPN last year, after the stock slid to its lowest price ever following confirmation the Dutch telecoms group will stage a €4bn rights issue.
The decline in the share price means Mr Slim’s America Movil group, which fought KPN management last year to acquire a 27.5 per cent share in the company, has seen the value of its investment fall 57 per cent, according to analysts at Bernstein.
Eelco Blok, KPN chief executive, said the rights issue was needed to cope with “rising debt levels combined with increased commercial investments”.
The company announced the move alongside its 2012 annual results, which showed revenues fell 3.5 per cent year-on-year to €12.7bn while earnings before interest, taxes, depreciation and amortisation fell 12 per cent to €4.5bn.
The company’s net debt to ebitda ratio reached 2.7, up from 2.3 the year before, although that figure did not include the unexpectedly high €1.35bn KPN paid in a spectrum auction in December for bandwidth to roll out its 4G mobile services.
Including the bandwidth auction and without the rights issue, net debt would breach three times ebitda. It could reach 3.2 times ebitda in the second half of 2013, when KPN expects to consolidate an expensive joint venture to extend fibre-optic cable to private households.
KPN said the rights issue would allow it to keep net debt to ebitda under 2.5 times at the end of 2013.
KPN has struggled for several years with falling revenues and margins due to intense competition and the switch of its customers from traditional calling and messaging to data. The company said margins had fallen in each of its three markets of the Netherlands, Germany and Belgium.
Shareholders will vote on the rights issue at an extraordinary meeting on March 19. Analysts have speculated Mr Slim may fight the rights issue rather than suffer further losses from the dilution of his stake.
KPN shares closed down 16 per cent at €3.45 against a 0.3 per cent drop in the AEX index. The shares are now at their lowest point since the company listed in 1994.
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