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KPN Belgian Sale Said to Attract Xavier Niel, Bain, CVC

French telecom billionaire Xavier Niel, Bain Capital LLC and CVC Capital Partners Ltd. are among those that may bid for Royal KPN NV’s Belgian mobile phone unit, people with knowledge of the situation said.

Buyout firms Apax Partners LLP and Providence Equity Partners Inc. are also considering bids for the unit known as BASE, said the people, who declined to be identified as the preparations are private. KPN, the Netherlands’ largest phone company, this week said it was beginning a “comprehensive review” of the future of BASE, which people familiar with the matter said may fetch about 1.8 billion euros ($2.4 billion) in a sale.

Private equity firms are positioning themselves to take control of assets being sold by Europe’s former phone monopolies as the costs of new network technology and heavy regulation weigh on operators’ performance. Apax in December agreed to buy Orange Switzerland for $2.1 billion from France Telecom, which is trying to shed some European operations in favor of expansion in the Middle East and Africa.

Spokesmen for CVC, Apax, Bain and Providence declined to comment.

Room for Improvement?

Ultimately, interest from the buyout firms, which typically profit by cutting costs and streamlining operations at companies they acquire, may be lukewarm as KPN has run BASE effectively, leaving relatively little room for improvement, one of the people said. The unit is Belgium’s third-largest mobile operator, after Belgacom SA’s Proximus and France Telecom SA’s Mobistar.

Bidding for BASE would mark another major international foray for Niel, whose 61 percent stake in France’s Iliad SA, an operator of mobile and broadband services, is worth about 3.4 billion euros. He also made a bid for Orange Switzerland in partnership with Goldman Sachs Group Inc.’s private-equity arm.

Profit Erosion

KPN is struggling to maintain profits while investing in its domestic broadband network, forcing it to consider asset sales. The Hague-based company said in January it would accelerate a restructuring program that will cost 4,000 to 5,000 jobs after it predicted lower profit and cash flow this year.

It may also face new competition at home as the Dutch government reserves space for new entrants in an upcoming auction of mobile frequencies. The arrival this year of a fourth full-service mobile operator in France, the Free Mobile brand founded by Niel, has eroded sales for larger competitors.

In Germany, where KPN competes with companies including Deutsche Telekom AG, it is also under pressure after its E-Plus unit was the only one of four national mobile operators to fail to secure wireless spectrum in the coveted 800-megahertz band, meaning it will have to partner with rivals to expand service.

Like KPN, European phone companies including Deutsche Telekom and Telefonica SA are trying to cope with the impact of a consumer shift toward online services like Skype that reduce their share of revenue, and new European Union rules on roaming rates and other charges. Neelie Kroes, the European official responsible for telecommunications, in February told operators she would “not respond well to threats” after executives including the Vodafone Group Plc CEO Vittorio Colao criticized new roaming caps, and said the 27-nation body would push ahead with further regulation.

The Bloomberg Europe Telecommunications Index, a measure of the region’s largest phone operators’ stock performance, has declined 2.8 percent this year, compared with a 5.1 percent rise in the Stoxx Europe 600, which tracks large European companies in all sectors.

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