KPN sells BASE Belgium to Liberty Global's Telenet for €1.33B

KPN said it has agreed to sell its Belgian mobile unit BASE to Liberty Global's Telenet for €1.325 billion ($1.4 billion) in cash, noting that the move would create a new fixed and mobile player in Belgium.

The transaction, which is subject to merger approval from the relevant competition authorities, would combine the market's third-largest mobile operator and largest cable operator and also mark the Dutch operator's exit from the Belgian market. Jefferies analysts said regulatory approval "should not be a major issue as it creates an integrated operator that should be able to provide more competition to incumbent [Belgacom]."

Telenet has operated a mobile virtual network operator (MVNO) on Mobistar's network in Belgium since 2006, and reported a mobile subscriber base of 895,000 at year-end 2014. The company said the acquisition of BASE, which has nearly 3.3 million mobile subscribers and adjusted revenue of €690 million for 2014, aligns well with Liberty Global's mobile strategy in Belgium, "because this would allow Telenet to continue to provide ubiquitous connectivity for its and BASE Company's customers."

The cable operator further noted that it plans to invest around €240 million in upgrading BASE's network and integrating the company with its own operations in the next few years. It intends to finance the acquisition of BASE through a combination of €1 billion of new debt facilities and existing liquidity.

KPN plans to use the proceeds of the sale to create maximum value for shareholders, adding that a further announcement on the use of proceeds will be made on completion of the transaction. The company, which also sold its German E-Plus unit to Telefonica Deutschland last year, said it would now focus on its fixed-mobile products in The Netherlands.

"We are pleased to have reached an agreement with Telenet on the sale of BASE Company. Over the years, BASE Company has been very successful as a challenger in the Belgian mobile market. This transaction not only shows our commitment to realise an attractive return for our shareholders, but also positively contributes to BASE Company's market positioning," said Eelco Blok, CEO of KPN.

The acquisition should enable BASE to better compete with Belgacom, which already has a strong convergence play. BASE had previously provided fixed services under a triple-play offering called Snow, but in December last year said it would stop marketing fixed services on the Belgian market at the end of June 2015.

Once the transaction is completed, Jefferies analysts warned that Orange's Mobistar--which had also been seen as a target of Telenet--would be the only mobile operator without fixed assets until it is able to implement a strategy of reselling cable services.

"Beyond that strategic position, the company is due to lose Telenet's wholesale business, which contributes 4 per cent-5 per cent to its Belgian mobile service revenues with high margin, on our estimates," the analysts added.

The merger of BASE and Telenet also reflects the wider European trend towards fixed and mobile convergence, as mobile operators buy up fixed assets and fixed operators either establish MVNOs or buy mobile networks. Liberty Global, which operates cable networks in 14 markets, noted that it would focus primarily on its existing MVNO arrangements and Wi-Fi networks elsewhere in Europe. It reported 5 million mobile subscribers across nine countries at the end of 2014.

For more:
- see this KPN release
- see this Liberty Global release

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