KPN shareholders approve sale of German E-Plus unit to Telefónica

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KPN shareholders approved the €8.55 billion ($11.6 billion) sale of its German unit, E-Plus, to Telefónica Deutschland late on Wednesday, paving the way for KPN to resume paying dividends for 2014 and sharpen its investment focus on Belgium and the Netherlands.

The sale, which is still subject to regulatory approval, will also allow Telefónica to strengthen its position on the important European market of Germany, where it already operates under the O2 brand. The combination of O2 and E-Plus will create the market's largest operator by customers and provide a stronger rival to Vodafone Germany and Deutsche Telekom.

The deal is also being closely watched by market players across Europe; if approved by German and European regulators it could spark what Orange CEO Stephane Richard recently called an "M&A earthquake" in Europe.

"This deal will be a significant litmus test in gauging European regulatory and competition authority willingness to help or hinder M&A deals resulting in local market consolidation," Current Analysis analyst Emma Mohr-McClune told FierceWireless:Europe.

However, Mohr-McClune noted that the European Commission's recent track record in facilitating similar deals "isn't great," pointing out that this time last year, the EC "created quite a laundry-list of previously unheard-of conditions in exchange for its approval of 3 Austria's acquisition of local market competitor Orange Austria," which had the effect of stringing negotiations out for months.

For its part, the European Commission told Bloomberg that it has not yet received notification of the deal and would therefore not make any determinations on the deal. This followed reports that EU Competition Commissioner Joaquin Almunia had told reporters he had "no concerns" about the deal.

"The commission never has any a priori bias about any mergers before investigating them," Antoine Colombani, a spokesman for Almunia, told Bloomberg. "Our investigation will determine whether we identify any competition concerns regarding this proposed acquisition."

KPN CEO Eelco Blok has said he is confident that regulatory approval would be won by mid-2014, adding that the deal represented a significant development for the European market. "This is a very important deal for the industry," Blok said, according to Bloomberg. "It's the first really large deal in the largest economy in Europe, so it will be important for the future of the telcos in Europe."

KPN will receive €5 billion in cash and own 20.5 per cent of the enlarged German mobile operator. "The proceeds of E-Plus are of such a magnitude that we can continue to invest in our company," Blok added.

Reuters also noted that during the press conference to announce the approval of the E-Plus deal, KPN executives refused to answer repeated questions about the status of negotiations with América Móvil. The Mexican group has made a €7.2 billion bid for the Dutch operator but has so far faced considerable opposition in the Netherlands, particularly from the KPN foundation, which holds almost 50 per cent of KPN.

Recent reports have indicated KPN is now demanding an increase in the offer price because it recently agreed to a €3.7 billion ($5 billion) loss on the sale of E-Plus to cut tax. Negotiations have also not been helped by the surprise resignation recently of KPN CFO Eric Hageman.

Reuters added that the foundation abstained from voting on the E-Plus deal on Wednesday. Carlos Slim's América Móvil had already given its blessing to the sale of E-Plus after Telefónica raised its offer.

For more:
- see this KPN release
- see this Reuters article
- see this Bloomberg article
- see this separate Bloomberg article

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Report: América Móvil and KPN hit road bump over price
Carlos Slim gives thumbs up to Telefónica's improved E-Plus offer
Orange CEO Richard sees M&A 'earthquake' if German merger goes ahead
KPN, Telefónica to merge German units in survival plan, but hurdles lie ahead

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