America Movil seeks European foothold
Latin American giant bids to increase its stake in the Netherlands' KPN, possibly seeking German asset swap with O2
Published: 9 May, 2012
Latin American telecoms giant America Movil has signalled its interest in expanding beyond its home region, with a bid to raise its stake in Dutch incumbent KPN to 28%.
The Mexico-based company, which is owned by billionaire Carlos Slim and incorporates Telmex, has 246m mobile suibscribers in 18 countries but is clearly looking to spread its wings further, chasing the scale and reach of its main Latin American challenger, Spanish operator Telefonica. America Movil already owns 4.8% in KPN and is offering €8 a share in a cash deal worth up to €2.64bn, and the markets are speculating the Mexican firm could bid for more stakes in future.
KPN's main bases are in the Netherlands, Germany and Belgium, but it is under intense profit pressure, like many Europe-only providers, as its markets saturate and it suffers from eurozone crises and over-the-top competition. KPN's market capitalization shrunk by 40% in the 12 months prior to America Movil's offer.
A larger share of KPN would be a fairly small prize for a company of the scale of Movil, but many are seeing it as the stepping stone towards a greater European presence. Like Telefonica, Movil could mount a challenge to more entirely Europe-focused majors by leveraging the growth rates and procurement power of its international businesses. Slim has even been linked with possible asset swaps with Telefonica itself, whose O2 Germany unit has long been expected to merge with KPN's German subsidiary, E-Plus.
"The most obvious place to create value within KPN is through the sale or merger of its sub-scale German business with the assets of Telefonica", Bernstein Research said in a client note quoted by Reuters. An asset swap would be attractive, the analysts added, as "it is hard to see how Telefonica can pay in cash, to access the incremental synergies that would result from that sort of combination."
America Movil said its expansion within the Americas has given it stable profits and cashflow and it is now looking to widen its footprint and gain a "relevant position in European markets". CFO Carlos Garcia Moreno said on a conference call that the Mexican company examined various European options and considered KPN to be the best, but claimed there were no plans to raise its stake beyond 28%. A KPN spokesman said the Dutch operator is "moderately positive about the offer".