KPN mulls rights issue as Telefónica eyes German tie-up

KPN said it may launch a €3 billion (US$3.9 billion) rights issue following its first-quarter results as the Dutch operator seeks new funding to support its future operations and reduce debt.

Also as part of ongoing cost-saving efforts, Telefónica is interested in reopening talks with KPN on ways to bring their German businesses together, according to a report in the Financial Times.

Like many large European incumbents, both KPN and Telefónica are looking at various ways to underpin their network business while also reducing their heavy debt burdens. KPN has recently raised €2 billion from the sale of hybrid bonds, and said the proceeds of the capital raise will increase its "financial and strategic flexibility and "enable KPN to continue to invest in its operations and to reduce its net debt level", according to Bloomberg.

KPN, which is 28 per cent-owned by Carlos Slim's America Movil, has until 30 June to launch the rights issue after shareholders approved the measure on Wednesday.

Details on the sale including price and number of shares will be announced after first-quarter results are released on 23 April, although Reuters reported that KPN CEO Eelco Blok needed to see the market's reaction to its first-quarter results first.

Meanwhile the FT reports that Telefónica has again approached the Dutch group about a possible merger or network-sharing deal for their respective German operators, E-Plus and O2 Germany, in a bid to reduce costs. The Spanish group is also believed to be considering a number of options to help it reduce debt, ranging from a partial listing of its Colombian business to the sale of its Czech or Irish units.

According to Bloomberg, Blok said KPN is not currently in talks with Telefónica, but the company still thinks a merger with its O2 unit could generate synergies of as much as €5 billion.

Telefónica also indirectly owns a share in Telecom Italia, which has announced it will consider a proposed tie-up with the 3 Italy unit owned by Hutchison Whampoa. Bloomberg noted that Telefónica's willingness to sell its stake in Telecom Italia has also renewed speculation on future consolidation in the German mobile market.

For more:
- see this Bloomberg article
- see this Financial Times article (sub. req.)
- see this Reuters article

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