Telefonica Deutschland -
) German unit - has won
America Movil S.A.B. de C.V.
) support to pursue the acquisition of Royal KPN N.V.'s German
subsidiary, E-Plus. The agreement puts Telefonica one step closer
to its entry into Europe's biggest economy.
The America Movil nod came on the back of a 6% higher bid of
$11.4 billion (€8.55 billion) by Telefonica. The new deal and
will also give KPN a 20.5% stake in the combined entity than
originally against 17.6% agreed earlier. Nevertheless, Telefonica
will get a chance to buy back a 2.9% stake in the combined entity
for $510 million after a year. Notably, in Jul 2013, KPN had
agreed to sell its prized German asset to Telefonica in two
phases. KPN was expected to get a combined value of around $10.8
billion (approximately €8.1 billion) via the cash and stake
America Movil, which has a 30% ownership in KPN, initially
supported the proposed deal. However, the Mexican giant itself
offered $9.6 billion (€7.2 billion) for a 70% stake in the Dutch
incumbent operator. It was expected that America Movil's entry
into the frame will pose significant threat to Telefonica as the
former could block the deal to extract a higher price for
Reportedly, Deutsche Telecom AG and
Vodafone Group Plc.
) are the biggest operators in Germany with 37 million and 32.4
million customers, respectively. The united entity of
Telefonica Deutschland and E-Plus will have a customer base of 43
million coupled with a 38% market share. However, the deal needs
to get the shareholders' approval and the consent of the European
antitrust officials, as the merged entity will reduce the choice
The agreement clears a major hurdle for Telefonica. The
Spanish behemoth plans to complete the transaction by mid-2014
and expects to have cost and revenue synergies of around
$6.7-$7.4 billion (€5-5.5 billion).
The decision to acquire E-plus is a welcome change for
Telefonica as it has been divesting its non-core assets to reduce
its mounting debt. On successful deal closure, Telefonica will
largely benefit as Germany offers higher mobile profit margins
than several other large European nations. However, the
additional amount of the deal could further pressurize its
Telefonica currently carries a Zacks Rank #3 (Hold). Another
stock worth considering within the same sector is
Turkcell Iletisim Hizmetleri AS
) which currently carries a Zacks Rank #2 (Buy).
AMER MOVIL-ADR (AMX): Free Stock Analysis
TELEFONICA S.A. (TEF): Free Stock Analysis
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VODAFONE GP PLC (VOD): Free Stock Analysis
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