A tower sharing agreement between KPN’s E-Plus and Telefonica’s O2 in Germany could significantly increase the value of an IPO of Telefonica’s German unit, analysts at Bernstein Research suggested. The view comes shortly after reports appeared that…
A tower sharing agreement between KPN’s E-Plus and Telefonica’s O2 in Germany could significantly increase the value of an IPO of Telefonica’s German unit, analysts at Bernstein Research suggested. The view comes shortly after reports appeared that Telefonica has mandated JP Morgan and UBS to handle the initial public offering of O2 Germany.
Separately, it was suggested said that KPN considers selling about 18,000 towers in Germany.
Telefonica said in late May it was preparing to list the German unit as part of broad-ranging plans to cut debt, and both Bloomberg and Reuters cited unnamed sources as saying the telecoms group plans to hold the IPO this year.
Telefonica is considering selling about 20% of the German unit’s shares for about €1.5bn (US$1.8bn), the Bloomberg report cited a person with knowledge of the plans as saying, adding that other banks may be enlisted to help out.
Announcing preparations for the German IPO, Telefonica said it was also considering listing some of its Latin American businesses in an effort to reduce net debt which, at the end of March, stood at €59.1bn. In early June, the company halved its stake in China Telecom to 5%, netting €1.1bn (US$1.4bn) in the process. And this month Telefonica confirmed it was evaluating offers for its Spanish call centre Atento.
Telefonica and Dutch telco KPN, which owns E-Plus in Germany, are widely believed to have discussed combining their German operations earlier this year.
But on 20 June KPN conceded attempts to “unlock superior value” for company shareholders via in-market consolidation in Germany have proved futile.
Shortly afterward, Carlos Slim’s America Movil (AMX) secured its target 27.7% stake in KPN, enabling it to influence key decisions.
However, reports that KPN has hired UBS to sell about 18,000 E-Plus towers have led to renewed speculation that the Spanish and Dutch telcos may combine their German assets.
In Bernstein Research analysts’ view, a network sharing agreement similar to those recently adopted by other European operators is the most likely outcome.
“Despite the apparent collapse of merger/acquisition talks between KPN and Telefonica, there may still be some solution open to merge 02 and E-Plus in Germany (the most attractive option for value creation in the eyes of Telefonica),” the analysts said in a recent report.
“In our view, the most likely outcome would be a network sharing deal which, once in place, would then make an IPO substantially more valuable.”
