KPN CEO pushes for network sharing with O2 Germany

KPN's CEO Eelco Blok is eyeing a network sharing partnership with Telefónica's O2 Germany to save on costs. Blok said a "good, full network sharing deal would be beneficial" for both companies, according to Dow Jones Newswires.

KPN and Telefónica got close to merging their German subsidiaries over the summer, with Telefónica failing to acquire KPN's E-Plus unit for a rumoured €11 billion after the Spanish company was downgraded by credit rating agencies.

The deal would have created savings of around €4 billion, Blok said at the time.

Undeterred, Blok said at the Morgan Stanley Technology, Media & Telecom Conference in Barcelona. that a good part of those savings could still be achieved through network sharing, though he failed to detail how the deal would achieve this. "The value is there and Telefónica knows that the value is there," Blok said, according to Dow Jones Newswires.

However, the likelihood of a network sharing deal being agreed has been downplayed by investors since América Móvil acquired a 28 per cent stake in KPN in June. América Móvil is controlled by telecoms mogul Carlos Slim, who has a long-standing rivalry with Telefónica's CEO Cesar Alierta, and both firms compete fiercely in major markets such as Mexico and Brazil.

However, Blok said that he thought it unlikely its key investor would block a cost-saving move. "I don't believe that América Móvil would block a good transaction, for instance in Germany," he said.

Separately, KPN sold nearly 2,000 towers belonging to its German network to American Tower for €393 million in cash. KPN said it will use the proceeds from the sale to improve its net debt position and accelerated its mobile network rollout in Germany, according to Bloomberg.

"We are very pleased with this transaction," KPN CFO Eric Hageman said in a statement. "It is in accordance with our strategy, as we do not consider the ownership and development of mobile towers to be a core part of our operations. It is also at an attractive valuation."

Last week, Sanford C. Bernstein analyst Robin Bienenstock downgraded KPN's shares to "underperform" from "market-perform," telling clients that even with the tower sale and a further dividend cut, KPN was likely to remain above its debt targets.

"If anything, consensus EBITDA estimates will have to come down for 2013 as incremental lease costs will need to be factored in," she wrote, according to Reuters.

For more:
- see this Dow Jones Newswires article
- see this Bloomberg article
- see the KPN statement
- see this Reuters article

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