Dominique Leroy's decision to move from CEO of Proximus to heading KPN has raised speculation the two operators could be closer to a merger. We expect that is unlikely to happen any time soon, even if there is the possibility of synergies between the Dutch and Belgian companies, as there are too many complicating factors in the way.
Since KPN sold its Belgian unit Base and international arm iBasis, there is little to no overlap with Proximus' operations, apart from services for multinationals. KPN generates quarterly sales of EUR 1.36 billion, and Proximus EUR 1.08 billion excluding its international wholesale arm BICS. Together they would be the sixth-largest former PTT, behind Germany, the UK, France, Italy and Spain.
Blok positive, Leroy negative
Speculation over a merger has emerged regularly over the years. Most recently in May 2015, former KPN CEO Eelco Blok said he could see the advantages of such a deal in the long term, while Dominique Leroy said she saw no such advantages. Cross-border synergies could be found in procurement, best practices, product development, international roaming and the large enterprise market. Blok may know a bit more about telecom (Leroy was originally from Unilever), but Leroy is now in the position to decide.
Obstacles
Another obstacle is Proximus' partnership with Vodafone, which runs until 2022. Not to mention the Belgian state's 54 percent stake in Proximus, which mainly helps maintain employment at Proximus. Another complication is the possible takeover of KPN by Brookfield and pension funds, rumours of which emerged in January. If KPN is taken private, structural separation is the likely next step, given the investors' preference for this model. It's unclear what this would mean for potential synergies.
More Belgian-Dutch providers
A driver for the merger is the emergence of other Belgian-Dutch players on the business market, such as EDPnet and Destiny. And if the shareholders of VodafoneZiggo decide to change their holdings from 2020, it could lead to a merger with Belgian operator Telenet, also controlled by Liberty Global.
The idea of a merger was rejected from the start with the appointment of Leroy and any possible talks between a party like Brookfield and the Belgian government appear difficult. Much time will pass before a merger is firmly on anyone's agenda.
