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KPN eyes up O2 Germany
LONDON, England (Reuters) -- Dutch telecoms group KPN said on Tuesday it would be interested in buying its smaller German rival O2 Germany to expand in Europe's largest telecoms market, but added that there were no current bid talks. "We have said that we want to strengthen our position in Germany -- either by organic growth or by an acquisition,'' a KPN spokesman said. ``That would be O2 there.'' But he added: "There are no talks with O2 at the moment.'' The comments sent shares in O2 Germany's parent, mmO2 Plc, jumping over five percent and KPN's stock sliding two percent. Some analysts value O2 Germany at roughly 675 million pounds ($1.0 billion), according to net asset multiples, although valuations vary widely. Analysts have long called for a merger between the German units of KPN and British-based mmO2, which operate in a market 80-percent controlled by heavyweights Deutsche Telekom's T-Mobile and Vodafone Group Plc. A deal would help beef up KPN's German unit E-Plus, which is the third-largest operator in Germany but losing market share. Although its smaller rival O2 Germany has been gaining ground on its rival, there has been persistent speculation that its UK parent might sell the loss-making unit -- for the right price. MmO2 said all options remained open in Germany. But it added it was happy with the progress of its subsidiary, which has won around 7.8 percent of the market and generated its first EBITDA (earnings before interest, tax, depreciation and amortisation) six months ahead of guidance. "We're impressed with the performance (of our business) in Germany...however the door is not shut and we continue to review options,'' a mmO2 company spokesman said. As MmO2 stock settled at 46-1/4p, a rise of 3.4 percent and KPN stood 1.4 percent lower at 5.80 euros, analysts said they were not holding out for any quick deal. "For any deal you need two willing parties to talk. It ultimately comes down to price and there is no reason to expect any bid to be just around the corner,'' said one analyst. Bond traders said the yields on KPN's euro bonds slipped between one and two basis points, in line with the wider market. ``It's ongoing speculation so we're not seeing much of a reaction,'' said a trader at a European bank. ``I think what we'll probably see is KPN waiting until O2 will sell cheaply.'' But MmO2 is under little pressure. Its German business, which is rolling out a costly third-generation (3G) mobile phone network, has extended a network sharing deal with Deutsche Telekom's T-Mobile mobile unit which will help cut costs. In a further sign of its commitment to Germany, mmO2 announced earlier it had appointed Rudi Groeger, the chief executive of its German operation, to the company's board. Nevertheless, MmO2 is one of the top restructuring stories in Europe's mobile phone sector. It has already put its loss-making Dutch unit O2 Netherlands up for sale, although it stresses it is also examining other options in the Netherlands.
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