M&A - Europe

UPDATE 3-KPN eyes Germany for auction, Phone House clients

* KPN to enter German auction of mobile frequencies

* Says open to partnerships after auction

* KPN plans to acquire German clients on E-Plus network

* KPN shares down 0.6 pct after results

(Adds KPN comment, updates shares)

AMSTERDAM/DUESSELDORF, Jan 26 (Reuters) - KPN KPN.AS will enter a German auction for mobile phone frequencies and may buy mobile clients from The Phone House to cement its base in Europe's biggest market, the Dutch group said on Tuesday.

But its investment appetite has been tempered by the scars it bears from one of the most expensive telcoms auctions a decade ago.

Chief Executive Ad Scheepbouwer said KPN would likely bid for 800 mhz frequencies or others in the German auction scheduled for April 21.

Chief Financial Officer Carla Smits-Nusteling said KPN had set itself a maximum bid price but declined to give details.

“It is no use in getting the licences at all costs,” she said, adding KPN’s plans for a 1 billion euro ($1.4 billion) share buyback was a sign that for KPN “it is business as usual and by no means will we go crazy on the auction”.

Although parties are not allowed to submit offers jointly KPN will be open to partnerships after the frequencies are obtained, KPN Mobile International executive Eelco Blok told analysts, without naming any potential partner.

“We are open to partnerships to share our networks with other parties after the auction,” Blok said.

Prices had skyrocketed during the previous auction in 2000.

At the time, six top telecoms players spent 51 billion euros on licences for 3G mobile telephony in Germany, but only four incumbent mobile operators were able to carry out their plans amid a crash in telecoms shares in 2002.

E-Plus had formed a consortium with Hutchison Whampoa 0013.HK and paid 8.36 billion euros for two frequency blocks. KPN Mobile then bought Hutchison's interest in the E-Plus Hutchison consortium.

This time the sale, which will also include additional UMTS licences, is estimated to generate up to 5 billion euros in proceeds for Germany’s stretched federal budget.

Germany’s telecom regulator said last week it had received six requests to take part in the country’s biggest digital frequency auction.

It has not named the potential bidders but Deutsche Telekom DTEGn.DE, Vodafone VOD.L and Telefonica's TEF.MC O2 Germany are expected to be among the applicants apart from KPN's German unit E-Plus.

The auction centres on licences for spectrum that will be freed up in the switchover from analogue to digital terrestrial television -- also known as the digital dividend -- and will help speed the rollout of broadband communications.

KPN is also looking into buying mobile phone customers in Germany from The Phone House, owned by a joint venture between Britain's Carphone Warehouse CPW.L and U.S.-based Best Buy Co Inc BBY.N.

A KPN spokesman said it would only purchase clients which are already on its E-Plus network. He could not say how many The Phone House clients were on E-Plus’ network “but I would be surprised if it were more than a million”.

Shares of KPN, which also reported fourth-quarter earnings and said it would buy back 1 billion euros in shares this year, were down 0.6 percent by 1455 GMT, slightly underperforming the DJ Stoxx European telecoms index .SXKP. [ID:nLDE60P06Z] ($1=.7097 Euro) (Reporting by Harro ten Wolde in Amsterdam, Nicola Leske in Munich and Matthias Inverardi in Duesseldorf; Writing by Michael Shields)