--KPN halts sale process for Base in Belgium
--Says non-binding bids were unsatisfactory
--Company will now keep Base and develop it
(Rewrites throughout.)
By Archibald Preuschat
AMSTERDAM--Royal KPN NV (KPN.AE) said Wednesday that it had
decided not to sell its Belgium mobile network provider Base as the
non-binding bids made for it weren't satisfactory, prompting
speculation that it may now cut even further its planned
dividend.
The Netherlands' largest telecom operator put the unit up for
sale in June, just days before Mexico's America Movil SAB (AMX,
AMX.MX) increased its stake in KPN to just under 28%.
But non-binding offers received "did not take the strong
position and outlook of Base into account", KPN said, adding that
it will now develop the business. Base, with 4.4 million customers,
has a market share of around 19% in terms of service revenue in the
Belgium market.
Last month, in a bid to trim its massive debt, KPN said it will
cut its dividend this year to EUR0.35 a share from the EUR0.90 a
share it had previously forecast. Its net debt stood at EUR12.4
billion at the end of the second quarter, which is 2.6 times Ebitda
and exceeds the company's market capitalization of roughly EUR10
billion.
ING analyst Jeffrey Vonk said a sale of Base could have
increased KPN's financial flexibility, but now its debt level will
rise due to planned network investments. He said he sees potential
for another dividend cut to EUR0.20, which would equal an annual
saving of EUR200 million. ING rates KPN stock at hold with a
EUR7.50 target.
Vonk estimates Base's value at EUR1.57 billion ($1.94 billion),
5.3 times estimated earnings before interest, taxes, depreciation
and amortization, or Ebitda, in 2012. Various media reports have
estimated the value in a range of EUR1.4 billion to EUR1.7
billion.
Analysts at Rabobank say KPN had a price tag of "at least EUR1.8
billion in mind", but point out that there is "probably not much
more value to unlock in Base, as it is already a lean company".
Earlier this year, America Movil put in an EUR8 per share bid
for KPN, which the Dutch company's management considered too low.
It advised shareholders not to accept the offer and instead
promised to unlock value in the company, partly through selling
Base. In June, it also tried to sell its German E-Plus operations
to Spain's Telefonica SA (TEF), but the deal collapsed due to
financing issues.
In fact, the Mexican telecom firm, controlled by billionaire
Carlos Slim, has been offered most of the KPN shares outside the
tender offer for a slightly lower price than EUR8, and it
successfully raised its stake in June to just under 28% for an
amount of more than EUR2 billion.
America Movil said in the past that it's satisfied with KPN's
footprint, which includes major operations in the Netherlands,
Belgium and Germany.
With smartphone penetration in the Netherlands at 50% of the
population, one of the highest in Europe, KPN's traditional revenue
from voice calls and text messages is being eroded by Internet
services such as WhatsApp, a smartphone messaging service, and
Microsoft Corp.'s (MSFT) Skype, which offers free Internet phone
calls. To counteract falling revenue, KPN is slashing costs and
plans to cut 4,000 to 5,000 jobs by the end of next year.
At 0908 GMT, KPN shares traded 2.1% lower at EUR6.52. They've
lost 30% of their value so far this year, while the benchmark index
AEX has gained 6%.
Write to Archibald Preuschat;
archibald.preuschat@dowjones.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires