'New' Telefónica Deutschland emerges as mobile market leader

Telefónica Deutschland has assumed the position as the leading mobile operator in Germany with 41 million subscriptions, after formally completing the acquisition of 100 per cent of E-Plus from KPN on Wednesday.

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From the left: Thorsten Dirks, Rachel Empey and Markus Haas

The move comes after Telefónica Deutschland carried out a capital increase to partly fund the acquisition: the company said in early September that it would raise €3.62 billion ($4.56 billion) through this measure.

Spain-based parent company Telefónica SA will continue to hold a stake of 62.1 per cent in the enlarged German business, while Netherlands-based KPN owns a 20.5 per cent stake. The remaining shares are in free float.

The new German operator has a total of 47 million fixed and mobile subscriptions and pro forma revenue of €7.9 billion (in 2013). The merger is also expected to produce synergies of around €5 billion. Thorsten Dirks, CEO of E-Plus, has now relinquished his position on the KPN management board to become CEO of Telefónica Deutschland. Markus Haas is COO and Rachel Empey CFO of the newly merged operator.

"Our clear goal is to create the leading digital communications company in Germany," said Dirks in a statement released on Wednesday. The company competes with network operators Deutsche Telekom and Vodafone Germany on the mobile market, as well as with other mobile virtual network operators (MVNOs).

E-Plus customers, who are currently served under various brands including Base and Simyo in Germany, will not notice any changes for the time being. Telefónica Deutschland said further details will be provided in the coming months on the implementation of the new company's operational strategy.

KPN also confirmed that it has now sold and transferred 100 per cent of its interest in E-Plus to Telefónica Deutschland for €5 billion on a cash and debt free basis and a 20.5 per cent stake in Telefónica Deutschland.

The Dutch operator said it will use the majority of the cash proceeds to invest in its businesses in the Netherlands and Belgium.

KPN also provided details on its dividend strategy, saying that it would pay an interim dividend in respect of 2014 of €0.02 per share, or €85 million in total. KPN intends to pay a dividend of EUR 0.07 per share for 2014, and also said it expects to pay a higher dividend for 2015.

The final transfer of shares in E-Plus to Telefónica Deutschland brings to an end a process that started on July 23, 2013. The merger was regarded as something as a watershed in Europe because it was expected to reveal the European Commission's future stance on cross-border mergers in the European Union.

Telefónica Deutschland received final clearance from the Commission for the €8.6 billion acquisition on Sept. 1 after it was deemed that a mobile wholesale agreement previously announced with German company Drillisch complied with the agreed conditions for the deal. Drillisch is to acquire 20 per cent of the capacity of all mobile networks that will be under the control of Telefónica Deutschland following the completion of the E-Plus acquisition.

Conditions to secure EU approval of the E-Plus acquisition included a commitment by Telefónica Deutschland to sell up to 30 per cent of the merged company's network capacity to up to three mobile virtual network operators (MVNOs), and to divest spectrum and some assets to a new full network operator.

For more:
- see this Telefónica release

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Telefónica Deutschland's E-Plus buy tipped to boost European MVNOs
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