November 11, 2015 / 6:57 PM / 4 years ago

KPN would consider merger as it faces new threats at home

BARCELONA (Reuters) - KPN (KPN.AS), the largest Dutch telecom operator, is open to merger opportunities outside its increasingly competitive home market having largely divested its international operations, its CEO said on Wednesday.

Dutch telecoms group KPN CEO Eelco Blok speaks during the presentation of the KPN annual report in the Hague February 4, 2014. REUTERS/Michael Kooren

Chief Executive Eelco Blok played down the threat at home from Liberty Global (LBTYA.O) and Sweden’s Tele2 (TEL2b.ST) which are launching new services, but said his company would in theory be open to “cross-border consolidation.”

“When somebody wants to have discussions with us, we will be open for a discussion,” he said at the Morgan Stanley technology and media conference in Barcelona. “But so far nobody knocks on our door.”

Reuters reported in January that Deutsche Telekom explored a possible buyout of KPN in 2014. On Wednesday, sources said Deutsche Telekom is now seeking offers to sell its T-Mobile Netherlands arm.. T-Mobile NL’s strong market position poses a major hurdle to any tie-up with KPN, as the pair together hold two-thirds of the Dutch mobile market.

“Could cross-border consolidation deliver value? Under certain conditions yes,” Blok said.

Sweden’s Tele2 announced on Wednesday it will begin offering Dutch consumers mobile data via its 4G network on Nov. 12, with a package significantly below KPN’s current prices.

Liberty Global unit Ziggo, which has a 55 percent share of the Dutch TV market to KPN’s 30 percent, said it will introduce an exclusive paid sports channel, also on Nov. 12.

Analyst Marc Hesselink of ABN Amro, who rates KPN shares a hold, said KPN will find it difficult to respond to Ziggo’s exclusive content.

“A content arms race with a far larger competitor is an investor’s nightmare,” he wrote in a note.

“We estimate that every one percentage point fixed residential market share loss will cost up to 2 percent of KPN’s group EBITDA of 2.4 billion euros.”

Blok said in Barcelona it is too early to see whether Ziggo “will have a major impact.”

Tele2 said it would offer 24 gigabytes of mobile data, plus unlimited calling and text messaging, for 35 euros a month.

That compares with KPN’s package of 10GB for 32.50 euros/month.

CEO Blok said he doesn’t expect “major disruptive” changes to the Dutch pricing landscape but acknowledged “in mobile there’s some uncertainty given the launch of Tele2.”

He said that in the long term he does expect some structural changes to the Dutch market.

“From a strategic point of view it makes sense Liberty and one of the mobile operators would merge, to be able to offer a fully converged portfolio” of services, he said.

“But that’s not the case today and we don’t know when it will happen.”

KPN is the largest Dutch mobile operator with a 43 percent market share according to Telecompaper, followed by Vodafone (VOD.L) with 30 percent, T-Mobile with 22 percent and Tele2 with just 3 percent prior to the launch of its own network.

Reporting by Toby Sterling; Editing by Elaine Hardcastle

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