Sunday, August 11, 2013

The World's Wealthiest Man Bids for Dutch Phone Company KPN

The New York Times reports that America Movil, a Mexican telecommunications company owned by Carlos Slim, the wealthiest man in the world with a net worth of $73 billion,  offers to buy the remaining 70% stake in the Dutch phone company KPN that it did not already own for $9.6 billion. The stage seems to be set for an economic battle with globalization showing its power: Mexican entrepreneurship, international shareholders, the possibility of a competing bid by a Spanish telecom company and all of this complicated by Dutch political and strategic interests.

The New York Times states:

"The prospective deal is the culmination of more than a year of planning by Mr. Slim, and may set off a flurry of deal activity as rivals position themselves ahead of a major revamping of Europe’s telecommunications sector.

“Valuations for a lot of companies are very cheap, and that creates an opening for people to take advantage,” said Emeka Obiodu, principal analyst in the telecommunications strategy team at the consultant Ovum in London. “It represents an appetizing target.”

The offer to buy KPN represents América Móvil’s largest takeover effort ever outside Latin America, and comes after a deal last year to increase its stake in Telekom Austria, another European operator, to 23 percent."

One reason why América Móvil might be making this offer, is to block the takeover of KPN owned E-plus, a German mobile phone operator by Spanish telecom company Telefonica. América Móvil and Telefonica are each other's biggest competitors in the Latin American telecom market. 

Besides the economic arguments of this deal for América Móvil and the KPN shareholders, other issues may play a key role as well for Dutch interests.

One of the Dutch labor unions, De Unie,  already has voiced concern that this bid is just the prelude to a break-up of KPN in mobile and land-line business units , which would be a threat to the employment of many. 

Former Dutch assistant-minister of finance, Willem Vermeend, social democrat who was part of the Dutch government responsible for the privatization and IPO of KPN in the 1990s has said that the Dutch government should stop the takeover of KPN. He believes that the various phone, Internet and cable assets of KPN are crucial to Dutch infrastructure, and Dutch defense and security, and therefore should not become foreign owned. Vermeend also acknowledges that he and the Dutch government made a mistake at the time of the privatization of KPN not to prohibit foreign ownership, something that Germany and France have incorporated in their laws. 

Henk Kamp, Dutch minister of economic affairs, and from the right-wing Dutch liberal party, offered a different view. First stating (the obvious) that KPN will have to abide by its current agreement with its customers, and follow Dutch law, no matter who its shareholders are. He also emphasized that the sale of KPN shares to América Móvil is a matter for the shareholders to decide and not a matter for the Dutch government.

It will be fascinating to see how this saga will develop, and in the end who the winners will be.

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