KPN has abandoned plans to sell its Belgian mobile unit Base. The offers for Base were too low, which KPN said was due to the current financial crisis. Telenet already announced earlier that it was not looking to do any big takeovers soon, essentially eliminating the most likely candidate to buy Base. KPN appears to prefer holding on to Base rather than selling it at what the Dutch operator sees as too low a price. Its unclear if KPN's new major shareholder America Movil played any role in the process; earlier reports suggested it was against the sale of Base.
KPN is left with a problem. Its balance sheet is weaker than it would like, with net debt at 2.6 times EBITDA versus a target of 2.0-2.5. A sale of Base could have brought that down to 2.4 (see out commentary 'KPN picks good time to sell Base'). KPN's credit ratings are currently rated 'negative', so a downgrade could come soon. At the same time, KPN faces a number of bills to pay in the coming months and years (see our article 'KPN driven to invest'), and the Dutch mobile market remains difficult (see our article 'KPN in Q2: turnaround nearing in broadband, mobile not yet').
KPN already abandoned a possible sale of its German unit E-Plus, as the most likely buyer, Telefonica, was not interested. Instead E-Plus is looking at selling its mobile towers, while Telefonica is planning an IPO for O2 Germany. The low offers for Base are likely not just the result of the difficult economic climate, but also the situation on the Belgian market. Belgacom dominates the market, and Base has only a modest position, without a LTE plan or fixed-mobile strategy. KPN may also have overestimated Base's prospects when it set out to achieve a higher price for the company. In that case reality will catch up with KPN and the management may well be sorry it didn't accept a lower bid.
