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Telekom Austria, KPN Agree on Joint Business-Service Work

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Aug. 13 (Bloomberg) -- Telekom Austria AG and Royal KPN NV, the two European phone companies part-owned by Carlos Slim’s America Movil SAB, said they’re combining corporate-services networks in a bid to improve services for large customers.

The operators’ networks carrying data for businesses are geographically complementary, Vienna-based Telekom Austria said in a statement today. The deal also encompasses common marketing and sales activities, it said.

“Because of our common shareholder, this cooperation was obvious,” Alexander Kleedorfer, a spokesman for Telekom Austria, said by telephone. In an industry with declining margins, “you naturally look at what’s possible and what makes sense,” he said. “This was the first concrete step.”

America Movil said on Aug. 9 that it plans to buy the 70 percent of the Hague-based KPN that it doesn’t yet own for 7.2 billion euros ($9.5 billion), stirring speculation on a possible bid for Telekom Austria. A second deal is unlikely in the near term because of Mexico City-based America Movil’s high debt level, analysts at Berenberg Bank and Societe Generale SA have said.

“Being in an alliance is important,” Hannes Ametsreiter, Telekom Austria’s chief executive officer, said in a Bloomberg Television interview. While intense competition and regulation are weighing on earnings, companies need scale to invest in infrastructure, he said.

Telekom Austria reported second-quarter profit yesterday that missed analysts’ estimates because of sluggish economic growth in eastern Europe and widening competition in its home market. The company predicts sales will fall 5 percent in 2013.

KPN rose 0.2 percent to 2.33 euros at 3:48 p.m. in Amsterdam. The stock has gained 3.6 percent this year. Telekom Austria was trading down 0.1 percent at 5.63 euros. The company is 23.7 percent-owned by America Movil, and Slim holds an additional 3.14 percent through his Inmobiliaria Carso SA holding company.

To contact the reporter on this story: Alexander Weber in Vienna at aweber45@bloomberg.net

To contact the editor responsible for this story: Mariajose Vera at mvera1@bloomberg.net

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