EC clears Liberty Global, Base merger, KPN to return €630m to shareholders

The European Commission (EC) has approved cable giant Liberty Global’s €1.325bn (US$1.49bn) acquisition of Belgian mobile operator Base from Dutch telco KPN. It set a condition that the parties must sell part of their customer base to a new MVNO.

The European Commission (EC) has approved cable giant Liberty Global’s (NASDAQ:LBTYA) €1.325bn (US$1.49bn) acquisition of Belgian mobile operator Base from Dutch telco KPN (AMS:KPN). It set a condition that the parties must sell part of their customer base to a new MVNO.

Commissioner Margrethe Vestager said the conditions imposed on the merger, first announced on 20 April 2015, are designed to ensure that it “will not reverse the trend of declining mobile prices in Belgium in recent years”.

The commission said its in-depth investigation of the merger between Liberty Global’s local unit Telenet, which has provided mobile services via an MVNO model, and Base would significantly reduce competition without effective commitments, and potentially lead to higher prices and less choice for consumers.

As such, Liberty Global has committed to selling Base’s share in local MVNO Mobile Vikings to broadcaster Medialaan and transferring customers of Base’s JIM Mobile brand, another MVNO, to Medialaan.

Liberty Global has also agreed to give Medialaan access to Base’s mobile network under conditions the EC says will allow the broadcaster to compete effectively as a full MVNO.

“The remedies adequately address the commission’s concerns since they ensure that a new MVNO will enter the retail mobile market to compensate for the loss of competition resulting from the exit of Telenet as an independent MVNO,” the EC said.

The deal is expected to be completed in the coming days.

JPMorgan advised KPN, while Goldman Sachs worked on the Liberty side.

KPN to return €630m of proceeds to shareholders

KPN said in its own statement that, after compensating for the loss of EBITDA from Base, €900m (US$1.01bn) of the €1.25m raised from the sale is considered “excess cash”. The Amsterdam-based telco said it would distribute 70% (€630m, US$706.62m) of this excess cash to shareholders in the form of a capital repayment.

This cash distribution will be combined with that related to KPN’s sale of 150 million shares in Telefoncia Deutschland in November 2015. As such, shareholders will receive a total €1.2bn (US$1.35bn) in the form of a capital repayment, equal to €.0.28 (US$0.31) per share, subject to shareholder approval at an AGM on 13 April.

The local mobile market is led by incumbent Belgacom’s Proximus, while the converged player would have a similar number of subscribers as Orange-owned Mobistar.