KPN closes iBasis chapter - will Proximus follow?

Thursday 8 March 2018 | 17:36 CET | Market Commentary

KPN has sold its international wholesale unit iBasis for an undisclosed amount. This is something we predicted some years ago, as iBasis adds little to the Dutch company. It may be a moment for Proximus to think about parting ways with BICS as well. 

KPN acquired iBasis in 2009, after a long battle in which iBasis' management repeatedly rejected KPN's offers. In the end, KPN acquired the remaining 44 percent for USD 93 million, giving the company a total value of USD 211 million. The question remains why KPN was even interested in iBasis. Likely it was part of an exit strategy, to first strengthen iBasis by integrating with KPN International Carrier Services and then selling the unit. 

There is of course some value in owning iBasis to strengthen the company's own activities, but this is a competitive market and the advantage is small. This is underlined by the steady fall in revenues at iBasis. It reached a peak of EUR 264 million in Q3 2012 and has been falling almost continuously since then. By Q4 2017 it was at just EUR 146 million, down 30 percent from a year earlier. Even more important, profitability was low. The sales of EUR 146 million generated EBITDA of just EUR 6 million, a margin of 4.1 percent, while it also required capex of around EUR 2 million per quarter. 

This doesn't suggest anything great in terms of proceeds from the sale. Undoubtedly KPN will report a book loss. EBITDA over the full year 2017 was EUR 24 million. Given the contracting results and low margin, a low multiple was likely. The new owners may be hoping for increased scale from the merger. 

Proximus could be interested in selling its unit BICS. That also appears increasingly like a millstone, with revenues falling since the end of 2015, to reach EUR 339 million in Q4 2017 (-6.6% YoY). Its margin is better, at 10.9 percent, but still low. 

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