KPN Gains on Optimism Over German Consolidation: Amsterdam Mover

Royal KPN NV had it biggest two-day rise in almost a year in Amsterdam as Telefonica SA’s willingness to sell its Telecom Italia SpA stake renewed speculation on future consolidation in the German mobile market.

Shares of the Hague-based KPN rose as much as 9.8 percent today, adding to yesterday’s 4.9 percent gain and making the shares’ two-day performance the best since May 2012.

Telefonica is willing to exit its six-year investment in Telecom Italia, two people with knowledge of the matter said yesterday, as the company plans to focus on European markets such as Germany and the U.K. and reduce debt to avert further cuts by rating companies. That may signal to some investors that Telefonica is also willing to make a deal in Germany with KPN’s E-Plus unit, said Marc Hesselink, an analyst at ABN Amro Bank NV in Amsterdam.

“The news around Telefonica’s plans to exit Telecom Italia is fueling some speculation around E-Plus and Telefonica consolidation in the longer term,” Hesselink said. “At the same time, KPN shares are very volatile at the moment, and there is a lot of speculative trading ahead of the shareholders meeting this afternoon.”

KPN rose 6.8 percent to 2.85 euros at 11:55 a.m. Amsterdam time, valuing the company at 4.1 billion euros ($5.4 billion).

Chief Executive Officer Eelco Blok will ask shareholders today to support a 3 billion-euro share sale, part of a capital increase to bolster the balance sheet. Carlos Slim’s America Movil SAB, which owns about 27.5 percent of KPN shares according to data compiled by Bloomberg, has already agreed to support the share sale, in return for nominating two people to the supervisory board.

Balance Sheet

KPN needs the money to strengthen its balance sheet after spending 1.35 billion euros on wireless spectrum in the fourth quarter. Investing in faster mobile networks is key for carriers as consumers increasingly use smartphones to surf the Web, download music and watch videos. KPN also faces increased competition in the Netherlands from Stockholm-based Tele2 AB.

Blok attempted unsuccessfully to defend KPN last year against a 2.6 billion-euro offer from America Movil for the stake in the company and failed to sell its Belgian mobile-phone unit Base. The company also ended discussions on a potential merger with Telefonica involving its E-Plus wireless unit in Germany.

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