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America Movil will not buy more KPN; ponders current stake

The logo of Dutch telecom company Royal KPN is seen in their headquarters in The Hague October 2, 2013. REUTERS/Phil Nijhuis
The logo of Dutch telecom company Royal KPN is seen in their headquarters in The Hague October 2, 2013. REUTERS/Phil Nijhuis

By Tomas Sarmiento and Elinor Comlay

MEXICO CITY (Reuters) - America Movil, the phone company controlled by billionaire Carlos Slim, on Wednesday said it would not go ahead with a plan to boost its stake in KPN, and has not yet decided whether to keep its current position in the Dutch telecom company.

The announcement on Wednesday was - at least in the short term - a setback to the expansion plans of America Movil, Latin America's biggest phone company, which made its first foray outside of the region with its acquisition of stakes in KPN and Telekom Austria last year.

America Movil said it has not yet made a decision on what to do with its equity stake in KPN, whose share price is well below what America Movil paid. "We haven't made that decision," Arturo Elias, a spokesman for Slim and also his son-in-law, told Reuters.

The company, which had accumulated nearly 30 percent of KPN, saw that stake effectively chopped in half by a foundation set up to protect KPN shareholders' interests, which in August executed an option to acquire almost 50 percent of KPN's voting stock.

America Movil, which has never made an unsolicited offer, was taken aback by the KPN foundation's surprise move in August. Elias said at the time that America Movil had been shown "a total lack of respect.

"I think they ran out of patience," Andres Audiffred, an analyst with Ve Por Mas, said of America Movil.

The foundation, and KPN, sought a better price than the 2.40 euros America Movil offered and negotiations foundered as the Mexican company refused to budge on its offer. KPN shares closed at 2.43 euros on Wednesday.

On average, Slim's telecoms giant paid about 3.24 euros a share for its Dutch stake, including stock bought as part of a rights issue by KPN earlier this year.

KPN's independent foundation said it had not intended to scupper the deal and it was studying America Movil's latest statement.

"We have never aimed to block the deal, but to get the two parties to the negotiating table to come to a merger protocol in a suitable way," a spokesman for the foundation said.

KPN in a statement noted that America Movil "has not improved or shown any willingness to improve the intended offer" in spite of efforts made by the Dutch company.

"From the outset KPN has stated to America Movil that, in the view of the KPN Boards, the Intended Offer did not reflect sufficient value for securing a positive recommendation from the Boards," said KPN's statement.

SHORT-TERM RELIEF?

America Movil investors appeared to welcome the news, since it prevented a planned outlay of at least 7.2 billion euros ($9.52 billion). America Movil's shares soared more than 6 percent immediately after the announcement before closing 3.16 percent higher at 14.01 pesos.

The shares have been under pressure this year as investors question the value of Slim's expensive European foray.

Still, some analysts said they would not rule out a deal happening at a later date.

"The deal is unlikely to be dead. It just reached a temporary dead end," Robin Bienenstock, senior analyst at Sanford C Bernstein in London, said in an email, adding "AMX shareholders celebrated too soon".

The mobile operator is cash rich and its appetite for acquisitions is not likely to be long-dented by the KPN setback, several analysts and investors said.

America Movil has a presence in 18 countries in the Americas and more than 260 million wireless subscribers. It had turned to Europe as it began reaching expansion limits in the Americas.

The company is also facing a telecom reform effort in Mexico, which accounts for almost half of America Movil's core profit, that could shake its dominance in fixed and mobile phone services.

The company is also hoping that one potential benefit of the reform in Mexico is that it could open the way for America Movil to offer pay-TV in Mexico, something that it is currently blocked from doing.

Asked in an interview last week if America Movil was confident it will be able to enter the Mexican pay-TV market, Elias said: "I think so, I think the law is very clear. The law refers to specific obligations ... and that in fulfillment of these obligations there will be a concession."

(Additional reporting by Simon Gardner, Gabriel Stargardter and Noe Torres in Mexico City; and Robert-Jan Bartunek in Brussels; Editing by Leslie Adler and Bob Burgdorfer)

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