Telefónica, the Spanish telecom led by César Alierta, is reviving negotiations to buy the German subsidiary ePlus from the Dutch company KPN ten years after initial talks. It looks like a deal is close to closing, with Telefónic paying 4.5 billion euros in cash and stocks for the German telecom.
Telefónica assures that this payment structure will allow the company to keep its goal of reducing its debt load to 47 billion euros this year without having to divest of its business interests in Italy and China or risk its credit rating.
Telefónica wants to end up with the bulk of the company emerging from the merger, valuated initially at 16 billion euros, and become a leader in the German telecommunications market. The number of major telecoms operating in Germany will drop from four to three.
Alierta and the Mexican telecom mogul Carlos Slim, who is CEO of América Movil and a leading shareholder in KPN, are battling for global market share, and Alierta just won the lattest content in Europe. Telefónica has picked up 80 million more customers that will bring the company twice the revenue per customer as it currently earns in Spain.
The German market is safe and will be profitable from day one, making Telefónica the second-largest telecom in Europe. The company?s shareholders are going to pay close attention to how this deal affects their dividend policies and how Alierta is going to manage this decision. Yesterday markets were up significantly across the entire telecom sector on news of Telefónica?s deal, which could open the door to future mergers in the sector.
