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KPN considers options for Belgian unit

by Renee Cordes in Brussels | Published April 16, 2012 at 9:31 AM

Dutch telecommunications giant Royal KPN NV said Monday, April 16, that it is reviewing options for its Belgian wireless services unit, paving the way for a transaction potentially worth about €1.8 billion ($2.4 billion).

"KPN is continuously reviewing its alternatives in respect of executing its strategy," the company said in response to a press report. "In this respect, KPN is conducting a comprehensive review of the strategic options in respect of its mobile operations in Belgium," the division known as BASE.

Investors welcomed the news, pushing KPN shares up 2.3% to €7.20 on the Euronext Amsterdam exchange by early afternoon Monday. At that price, KPN, of the Hague, has a total market value of just above €10.3 billion. However, shares have lost more than 22% since the start of this year.

KPN declined to give further details, but reportedly has not yet launched a formal auction process.

BASE, Belgium's third-largest wireless services provider, is expected to attract interest from private equity firms including Apax Partners LLP, which picked up Orange Switzerland from France Télécom SA earlier this year for Sfr2 billion ($2.2 billion).

Analysts predict that a deal with a telecom would be more difficult, given potential regulatory hurdles with a sale to Belgian market leader Belgacom SA or to the country's second-largest wireless services company, Mobistar SA.

"That would leave Telenet [SA] as the only potential strategic buyer," wrote analyst Victor Baneño of SNS Securities NV in Amsterdam, referring to the Dutch cable operator controlled by John Malone's Liberty Global Inc. However, he also noted that Liberty Global "may have other investment priorities," such as consolidation in the German cable market. The estimated price of about €1.8 billion for BASE would imply a multiple of six times forecast Ebitda for 2012.

"This looks reasonable given the strong track record of BASE," the analyst added, reiterating his 'reduce' rating on KPN shares with a target price of €7.50.

In recent months, KPN and its peers have been shedding assets to reduce costs and keep up with growing customer demand for more and faster data services. KPN agreed last December to sell its French mobile operations to Bouygues Télécom SA for an undisclosed amount, and in January agreed to sell its Getronics International operations in two separate transactions for undisclosed terms.

In January, KPN CEO Eelco Blok predicted that 2012 would be a year of transition, with lower group profit and cash flow in its home market.

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