A big telecoms consolidation deal is moving forward. Dutch group KPN has confirmed it is selling its German mobile phone division, E-Plus, to Spain’s Telefonica Deutschland, which operates as O2 there.
The price is 8.1 billion euros, made up of five billion euros in cash and a 17.6 percent stake in the merged company.
It would hold a share of about 30 percent of Germany’s mobile service revenue and would be better armed to take on Deutsche Telekom and Vodafone, currently with 35 percent each.
Because of its size and cross-border implications, the European Commission’s competition regulator will closely scrutinise the deal.
Despite that analyst Fidel Helmer with Hauck & Aufhaeuser in Frankfurt believes there will be more consolidations: “I think that all the mobile providers are going to have to restructure. They have to reduce costs. There’ll be more movement in this market. I’m not sure that in the future we’ll have even the three large mobile providers that there’ll be after this deal, but rather just one.”
In both Berlin and Brussels, however, competition watchdogs will want assurances about the merger’s impact on consumers and network quality in Germany.
In recent deals – such as in Austria where operators sought to take markets from four to three players – regulators demanded concessions.
However the fact that the European Commission is keen to see more cross-border consolidation could work in its favour.
For Telefonica, which has been selling assets for the past two years to cut its debts, the deal is a bold bet on Germany, a market where despite recent intensified competition profit margins remain high compared with Britain and Spain.
The deal is the latest in a spate of acquisitions in the global telecom sector, which is reshaping an industry struggling in Europe but flourishing in the United States and Asia where prices and profits are higher.
Telecoms M&A is up 20 percent year-on-year. Japan’s Softbank, Vodafone and cable group Liberty Global have all recently done deals.
Also on Tuesday Vivendi agreed to sell a controlling stake in Maroc Telecom to Gulf operator Etisalat.