April 20, 2015 / 5:41 AM / 4 years ago

Liberty Global's Telenet to buy KPN's Belgian unit for $1.43 billion

AMSTERDAM/BRUSSELS (Reuters) - Cable telecoms company Liberty Global’s (LBTYA.O) Belgian subsidiary Telenet (TNET.BR) said on Monday it has agreed to buy local mobile network operator Base from Dutch group KPN (KPN.AS) for 1.325 billion euros ($1.43 billion).

Belgian cable operator Telenet Chief Executive John Porter addresses a news conference at the company's headquarters in Mechelen April 20, 2015. Cable telecoms company Liberty Global's majority-owned Belgian affiliate Telenet said on Monday it has agreed to buy local mobile network operator Base from Dutch group KPN for 1.325 billion euros ($1.43 billion). REUTERS/Francois Lenoir

For Liberty Global, Europe’s biggest cable operator, the acquisition marks a departure in strategy, having said in the past that it is not interested in buying or building its own mobile phone networks instead of renting capacity from rivals as a mobile virtual network operator (MVNO).

However, the deal will create a much stronger operator in Belgium’s mobile market as fixed and mobile telecom services converge, with the combined company having estimated sales of 2.4 billion euros and adjusted operating earnings of 1.1 billion euros, Telenet said in a statement.

“We fully support Telenet’s acquisition of Base, which represents a cost-effective and unique opportunity to expand Telenet’s mobile and fixed business in Belgium,” Mike Fries, chief executive of Liberty Global, said in a statement.

“Elsewhere in Europe we will continue to focus primarily on our existing MVNO arrangements and rapidly developing WiFi networks to provide seamless mobile voice and data services to our customers,” he added.

Liberty owns 56.67 percent of Telenet, according to Thomson Reuters data.

As a result of taking over Base’s network, Telenet will no longer need to buy wholesale capacity from Belgium’s second-largest network operator, Mobistar MSTAR.BR, which is 52.91 percent owned by France’s Orange (ORAN.PA). Analysts estimate that its business with Telenet accounts for some 20 percent of Mobistar’s core profits (EBITDA).

Conversely Mobistar does not have its own fixed line network to offer residential broadband or telephony and has pressed for the Belgian regulator to open up Telenet’s network to wholesale access.

Shares in Mobistar were down 14 percent at 15.06 euros by 0827 GMT, while KPN’s were up 2 percent at 3.24 euros and Telenet’s were up 4.6 percent at 54.91 euros.

“It’s bad news for Belgian consumers but an opportunity for regulators to make cable opening a success,” Mobistar’s chief executive Jean Marc Harion said on Twitter about the Base deal.

Telenet has been one of the winners of a 2012 law that limited the maximum duration of Belgian telecoms service contracts to six months. That led many mobile users to switch operators, causing prices to tumble.

The group, which is mainly active in the Dutch-speaking north of the country, has about 900,000 mobile subscribers, while Base has 3.3 million.

Analysts expect the merger of Telenet and Base to reduce competition in the Belgian market and create two similar sized mobile players, Telenet and Mobistar, behind market leader Proximus BCOM.BR.

Telenet said it expected annual savings of around 150 million euros as a result of the deal and would invest 240 million euros to upgrade Base’s network.

The company logo of Dutch telecoms group KPN is seen on the headquarters in the Hague February 4, 2014.

On a conference call, Fries said he expected to be able to persuade many Base customers to switch from pre-paid subscriptions to more profitable post-paid service packages.

For KPN, which last year sold its German subsidiary E-Plus to Telefonica Deutschland (O2Dn.DE), the sale of the Belgian unit marks a complete retrenchment from foreign consumer markets. It still sells wholesale access internationally.

KPN said the Base deal announced on Monday was secured with 100 million-euro break-up fee but was still subject to regulatory approvals.

Editing by Philip Blenkinsop and Greg Mahlich

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