UPDATE 2-KPN steps up debt battle with German tower sale
* KPN will rent back use of towers
* KPN's debt to core profit ratio stood at 2.7 in Q3
* Analysts expect further dividend cut
* Shares fall 4 percent in Thursday trading
AMSTERDAM/BRUSSELS, Nov 15 (Reuters) - Dutch telecoms group KPN, stepping up its battle to keep debt under control, on Thursday agreed to sell some of its German mobile towers for 393 million euros ($500 million).
The group, hit by changes in customers' mobile habits and Europe's lacklustre economy, breached its debt targets in the second quarter and had already cut its 2012 dividend.
The deal with U.S. group American Tower Corp, which will lead to a book gain of 100 million euros, comes on top of a decision in late October to sell its Dutch mobile phone towers for a book profit of 66 million euros.
The group has said it does not need to own such towers, which support its own network as well as competitors', and will rent access from the new owners.
KPN's net debt to EBITDA (core profit) ratio, which it aims to keep between 2.0 and 2.5, stood at 2.7 at the end of the third quarter.
Ratings agency Moody's has a negative outlook on KPN's Baa2 debt rating, which is still an investment grade level.
On Wednesday, KPN's CEO told investors he would be willing to accept a lower credit rating if it meant the group could continue investing, a departure from its earlier position when it said it was committed to keeping its credit ratings.
The shares of KPN, in which Mexico's America Movil holds a 27.5 percent stake, were 4 percent lower on Thursday, having already more than halved in 2012 and reaching 10-year lows.
The group is likely to need some of the funds from the sale for an ongoing spectrum auction in the Netherlands, leading some analysts to expect further cuts in shareholder payouts.
Robin Bienenstock at Sanford Bernstein, who on Thursday downgraded the shares to "underperform" from "market-perform", told his clients that even with the tower sale and a further dividend cut, KPN was likely to remain above its debt targets.
"If anything consensus EBITDA estimates will have to come down for 2013 as incremental lease costs will need to be factored in," she wrote.
The sale was reported by Reuters on Nov. 6.
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