KPN launches €3B rights issue in bid to reduce debt

Details of KPN's much anticipated €3 billion (US$3.9 billion) rights issue have finally emerged, as the debt-laden Dutch operator seeks ways to prop up its balance sheet in the face of tough competition in its home mobile market and elsewhere.

The operator is issuing 2.84 billion new ordinary shares in the 2-for-1 rights issue at €1.06 per share, which The Wall Street Journal noted represented a 62 per cent discount to the closing share price ahead of the rights issue announcement. The exercise period runs to 15th May 2013.

Carlos Slim's América Móvil, which owns a 29.77 per cent stake in the Dutch operator, has committed to subscribing to the issue. Indeed, analysts noted that the discount practically makes it an imperative for shareholders to subscribe.

"The deep discount is basically forcing all shareholders who still own KPN shares to subscribe," Bloomberg quoted Corne Aben, a fund manager at Optimix as saying. "If you don't take part, you will face a huge dilution of your stake and lose quite a lot of money."

The rights issue forms part of KPN's efforts to strengthen its balance sheet and maintain its position in a highly competitive European mobile market. The company also recently decided to scrap planned dividends for 2013 and 2014. Reuters has estimated the company's outstanding debts at €14.4 billion, while The Wall Street Journal said the debt pile is around €12.5 billion.

The WSJ also warned that extra capital would not be enough on its own to resolve KPN's problems. Although it noted that net debt would fall to 2.2 times EBITDA from 2.8 times, the operator is planning to make a considerable investment in Germany, where it operates the E-Plus network, and also faces a new competitor, Tele2, on the Dutch mobile market.

For more:
- see this Reuters article
- see this Bloomberg article
- see this Wall Street Journal article (sub. req.)

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