Dutch telecoms giant KPN considers acquiring MMO2

23 Feb 2004

Less than a week following the dramatic bidding war between Vodafone and Cingular, it has emerged that Dutch telecoms giant KPN is considering a takeover of UK mobile giant MMO2.

MMO2, Europe’s sixth biggest mobile operator and owner of O2 in Ireland, the UK and Germany, saw its shares soar 20pc this morning on the back of speculation.

Despite the news that MMO2 has turned down KPN’s initial advances during the course of secret talks, the company’s shares reached an unprecedented 111p on the London Stock Exchange as a result of KPN’s stating that it felt the logic for a merger remained intact, prompting speculation that a takeover battle is looming.

MMO2 was formed following the demerger of UK telecom group BT’s mobile business in 2001.

A successful move by KPN would provide the firm with a foothold in the UK market as well as a major boost in Germany where the market is currently dominated by Vodafone and domestic heavyweight Deutsche Telekom.

KPN bounced back into the black in 2003 with net profit of €655m, compared with a loss of €163m in 2002. KPN has 13.4m mobile customers in Germany, the Netherlands and Belgium.

MMO2 has about 20m customers and has long been a takeover target, mainly because analysts believe it is too small to survive on its own. It has been described as a minnow compared to UK-based Vodafone with 130m customers worldwide.

It is understood that Japan’s DoCoMo is also mooted to be lining up a bid for MMO2, which has a market value of £19.5bn sterling.

It is also understood that KPN’s initial bid for MMO2 was mainly in the form of stock. In the past the Dutch telco was mainly interested in MMO2’s German unit. Speculation about a looming takeover battle has not been helped by chief executive Ad Scheepbouwer announcing this morning that the company was definitely considering acquisitions in Germany and other key markets. He said the company’s main interest for expansion was Western Europe, and that KPN was ruling Eastern Europe for now.

MMO2 owns O2 in Ireland, the second biggest network operator in the Irish market with 1.37m Irish customers. The Irish subsidiary of MM02 signed up 96,000 new customers in the final months of 2003, compared with 68,000 signed up by competing mobile operator Vodafone in the same period. In the Irish market revenue from data services, excluding text messaging, rose to 21.1pc of total revenue, exceeding the group average of 19.8pc. Some 91,000 of the new customers signed up for prepay mobile services, with the remaining 5,000 signing up for post-pay mobile services.

By John Kennedy