KPN CEO: Merging with O2 Germany makes sense

KPN CEO Eelco Blok said merging with O2 Germany would make business sense as part of a much-anticipated phase of consolidation in the European mobile market.


Blok, speaking at the Morgan Stanley Technology, Media and Telecoms conference in Barcelona last week, said that a merger in Germany between O2 and KPN's E-Plus could prove attractive in a region where both operators are struggling to compete with the much larger Vodafone and Deutsche Telekom's T-Mobile.

Adding weight to Blok's ambition, Telefónica has given notice that it will consider selling underperforming assets to reduce debt and bolster investors' confidence after sales in Spain fell and growth in Brazil stumbled. However, speaking at the same conference in Barcelona, Telefónica CFO Angel Vila ruled out selling off its operations in Germany, Mexico and the Czech Republic, or its 9.7 per cent stake in China Unicom.

Vila said that the company was examining its non-core or underperforming assets that might be divested. "No one thing will have a multi-billion impact. It's going to be an addition of several smaller efforts."

Blok accepted that a merger is not actively being discussed, but "if the price is right and Telefónica are willing to sell, then it could be an interesting scenario. We have the management in Germany that has proven that it can run an asset far better than the others."

According to Reuters, Blok made plain that he was not interested in selling its highly profitable E-Plus, and might look elsewhere if Telefónica was against a sale of O2 Germany.

Top of the list is buying the Dutch assets of Swedish telecom firm Tele2, albeit that it has no mobile operation in the Netherlands, but is considering bidding for mobile spectrum when the government auction goes ahead next summer. Blok said Tele2 would be "an ideal target" for KPN, according to Dow Jones Newswires.

For more:
- see this Bloomberg article
- see this Reuters article
- see this Dow Jones Newswire article

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