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KPN will walk away from the €1.1bn ($1.4bn) acquisition of Telfort, its fast-growing domestic mobile rival, if the Dutch regulator intervenes, Ad Scheepbouwer, chief executive, said on Tuesday.

Mr Scheepbouwer insisted he was optimistic that the watchdog would approve the takeover, which will lift KPN's share of the Dutch mobile market to 43 per cent, but he told the FT that any demands for “major remedies” would force him to abandon the deal.

Mr Scheepbouwer believes the regulator should base its deliberations on the number of mobile competitors in the market rather than KPN's overall market share.

Vodafone, Orange and T-Mobile all operate in the Netherlands along with a number of virtual network operators, who chiefly piggyback on Telfort's network.

A decision is expected by November.

The Dutch regulatory environment is one of the toughest in Europe. Opta, the telecoms regulator, is conducting a review of the sector and has already upset KPN with draft proposals for further regulation of its fixed-line business.

KPN said on Tuesday it would challenge proposals to regulate its stand-alone broadband telephony offering, which it introduced as a flat-rate product in May and is designed to help compensate for the loss of traditional fixed-line revenues.

It would also appeal against the proposed pricing model for a wholesale line rental product it would have to make available to competitors, Mr Scheepbouwer said.

The comments came as the Dutch incumbent cheered investors by increasing its forecast for the year and announcing plans to buy back a further €250m shares. The shares rose 3.4 per cent to €7.30. KPN said it expected earnings before interest, tax, depreciation and amortisation (ebitda) to fall by mid-single digits in percentage terms this year, having guided for a high single-digit decline this year. It said the decline in the first six months stood at 3.8 per cent.

Ebitda fell to €1.16bn in the second quarter to the end of June, down from €1.21bn a year earlier, but ahead of forecasts. The company also defied expectations on revenues, reporting a rise to €2.95bn from €2.91bn.

There were signs of margin improvement in the fixed-line business and at E-Plus, its struggling German mobile subsidiary.

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