Telefonica eyes German network sharing deal

26 Oct 2012

Spanish telecoms company Telefonica is considering sharing the mobile network of its German subsidiary with E-Plus, the local unit of the Netherlands’ KPN, in a bid to cut costs. ‘When people were looking at a potential coming together of Telefonica Deutschland (O2) and E-Plus, there was some significant analysis of potential network synergies,’ Bloomberg cites Rachel Empey, chief financial officer of Telefonica Deutschland Holding, as saying to investors on a conference call. The executive added: ‘Quite a lot of those synergies might be available through network sharing.’ The potential deal involves the sharing of O2’s 2G and 3G infrastructure, although the firm said that a deal probably won’t be reached before early next year. It follows the collapse of talks between Telefonica and KPN over a possible merger of their respective German units earlier this year; at the time, KPN was fending off an unsolicited offer by Mexico-based America Movil (AM). However, in June 2012 KPN announced it had failed to find a buyer for E-Plus, citing ‘adverse conditions in financial markets’ as the reason behind the collapse of talks, and shortly after AM succeeded in its bid to increase its stake in the Dutch telco to 28%.

In separate but related news, Telefonica has reportedly given a narrower indicative price range to investors for the listing of its German unit, a person close to the process told Reuters. Earlier this month Telefonica said it plans to list up to 23.17% in its German unit at between EUR5.25 and EUR6.50 (USD6.8-USD8.4) per share, but according to the source, the Spanish firm is now looking for a listing at between EUR5.50 and EUR6.00 per share. A total of 225 million shares in Telefonica Deutschland Holding will be offered to the market, and the lead banks will have the option to buy up to 33.75 million additional shares. Telefonica, which is struggling to cut its debt burden amid falling revenue and profit in its domestic market, said that the offer period is scheduled to end on 29 October, with trading to begin on the Frankfurt Stock Exchange the following day.

Germany, E-Plus Group, Telefonica, Telefonica Deutschland Holding