By Gilbert Kreijger and Elinor Comlay
AMSTERDAM/MEXICO CITY, July 29 Dutch telecom
group KPN's biggest shareholder, billionaire Carlos Slim's
America Movil, has ended an agreement to keep its holding below
30 percent, a sign that it may bid for the whole company.
America Movil was entitled to end the agreement after its
regional rival Telefonica bid 8.1 billion euros ($10.7
billion) for KPN's prized German unit E-Plus, casting doubt over
the future of America Movil's European investment.
America Movil now may increase its shareholding to the level
that would trigger an offer for the whole of KPN, but it is not
clear that the Latin America-focused company is ready to take
such a big step in Europe.
That America Movil ended the standstill and shareholder
agreement was to be expected, said a person close to the
situation, but it does not shed much light on what Slim plans to
do about his reported opposition to the E-Plus deal.
"America Movil is trying to telegraph its opposition and
signal that he wants to wring out a higher price from Telefonica
for the Germany deal," the person said.
"It's possible that Slim could bid for the whole of KPN, but
I think that's unlikely, and KPN and Telefonica should call his
bluff. There will be a lot more of these types of moves from now
to October, when the KPN/E-Plus (deal) is put to shareholder
KPN shares closed up 4.59 percent at 1.98 euros,
while America Movil shares fell as much as 2.7 percent
to 13.43 pesos on concern the company might bid for all of KPN,
which would take it over its target leverage limits.
"We believe that the termination of the relationship
agreement, in combination with widely reported rumours that AMX
(America Movil) finds the sale price of E-Plus too low, could
increase the likelihood of AMX preparing a bid for KPN," ING
analyst Emmanuel Carlier said in a note to clients.
Some analysts said that a full takeover would be a stretch
for America Movil, with its net debt to expected 2013 core
profit (EBITDA) of around 1.6 times at the end of June and a
share buyback plan in progress.
The initial investment in KPN "was predicated on the basis
that we would not risk the credit ratings that we had from the
rating agencies, and that obviously has not changed," America
Movil Chief Financial Officer Carlos Garcia Moreno said on a
conference call on Friday discussing second-quarter results.
Slim's flagship could alternatively sell its KPN stake, but
only after E-Plus was sold, boosting KPN's share price. America
Movil paid an average price of 3.24 euros per share to build its
KPN stake, according to Sanford Bernstein analysts.
"They can now increase their stake but I don't see it
happening in the short term. I think they'll wait and see how it
ends with E-Plus. It's possible that they are interested in the
Dutch operations of KPN, and that they want to take it over in
the medium term," said Christopher Ho, analyst at AFS Brokers.
Ho said he did not rule out America Movil selling its stake
in KPN, but he did not expect that to happen soon.
America Movil might also consider a joint bid for KPN's
E-Plus, perhaps with a partner such as AT&T, which has a
stake in America Movil. But analysts at Bernstein said they
believe such a venture would be unlikely since part of the value
of the E-Plus sale is that its combination with Telefonica's
German unit will create a market player with more weight to
compete in Germany.
America Movil, whose own shares are down 22.7 percent over
the past 12 months in spite of an aggressive buyback program,
said on Friday it was still deciding whether to back KPN's
proposed sale of E-Plus, regarded as its crown jewel. Germany is
Europe's biggest mobile market, and Telefonica is a big Latin
American rival of America Movil.
The Mexican company, which has lost about 2 billion euros on
its KPN investment since last year, around half of its total
investment, declined to comment on Monday, except to say that it
would keep its two seats on KPN's board.
America Movil, which also has 24 percent of Telekom Austria
, has said it views its holdings as long-term
investments and is not concerned by the share price losses.
A KPN spokesman said America Movil had not communicated its
The two companies agreed their cooperation deal in February,
at the time of KPN's 4 billion euro capital increase, including
a rights issue to which America Movil subscribed.
In theory, this agreement was indefinite, with a two-month
notice period. KPN said on Monday that America Movil was
entitled to break the deal without notice after the E-Plus