Rumour mill: E-Plus future in doubt

Having failed to win any of the crucial 800MHz spectrum in the German auction, industry analysts are beginning to question the viability of KPN's German mobile subsidiary, E-Plus.

The company, which has dismissed concerns that its failure to gain entry to the 800MHz band would stop it from becoming a player in the high-speed mobile data market, was hoping to access this spectrum by partnering with O2 Germany.

While this might have been a route forward in the recent past, O2 Germany managed to gain 800 MHz spectrum at a lower than expected cost, and is now said to be less keen on partnering with E-Plus.

Any idea of O2 Germany merging with E-Plus was quashed by BPI analyst Pedro Pinto, claiming that KPN's defeat in the auction meant it really had lost some of its attraction for Telefonica as a possible acquisition target. "Any possible merger with KPN is now on the back burner."

Having been left without an 800MHz option, Informa analyst Dario Talmesio believes E-Plus has positioned itself to be sold. A sale "would be better now than later for KPN. Later is risky because their business would deteriorate."

However, the revenues generated by E-Plus are key to the overall profitability of KPN's international mobile operations--generating a quarter of KPN's first quarter €3.3 billion revenue and a third of core profit.

This level of success has prompted some financial commentators to state that KPN is not considering any sale of E-Plus. At a recent analyst meeting, KPN's CEO, Ad Scheepbouwer, gave no indications of plans to sell the company's German mobile operations.

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