Eelco Blok has been in service hardly one year and much a rumbling has been heard on the corporate level at KPN. Appointments, acquisitions and divestments are almost the order the day (see our background article: Eelco Blok one year later: a 'grand plan' for KPN starts to take shape, 19 March). Recent nieuws on this front:
- Appointments: a Chief Cyber Security Officer and a Chief Procurement Officer have been appointed. A former TDC man has been appointed Director of Consumer Home (Fixed).
- Acquisitions/divestments: the acquisition of Caiway has been rejected, i.e. abandoned. KPN can buy the assets of Reggefiber (Lijbrandt Glashart Media, Reggefiber Wholesale) but a license is required to take overr the assets of Reggeborgh (XMS, Edutel, Concepts ICT, Kick XL). In addition, Base has been put up for sale.
That KPN can buy the Reggefiber assets should not come as a surprise. After all, an option agreement was signed to take over the rest of Reggefiber, so that had already been in the operator's line of fire. It becomes another story for the Reggeborgh ISPs. Here, competition will come under pressure, especially in those FTTH areas where only Vodafone Netherlands and Solcon provide significant competition, in addition to all the KPN brands. Still, the NMa will probably approve the purchase, because KPN's market share has been higher in the past. The four ISPs collectively have around 100,000 subscribers (source: Telecompaper), pushing KPN's market share by only 1.5 point to 41.4 percent (including the Lijbrandt effect). Moreover, there remains competition from cable and from the unbundlers on DSL (Tele2 Netherlands and T-Mobile Online). FTTH has not been defined as a separate market by Opta.
A green light for the takeover of Reggeborgh’s assets would be too bad in a sense, as it would only damage competition. It is undeniably unfortunate that Vodafone NL, Tele2 NL and T-Mobile Netherlands have again let this happen and were apparently not prepared to come out with a successful bid. And really, it is also unfortunate that Reggeborgh simply went for KPN instead of excluding the operator as a buyer. An exclusion would have boosted competition on the FTTH market -and the all-important occupancy figure- by pitting KPN against another strong market player.
As far as Base is concerned, there is no doubt a sale will take place. Synergy with KPN is minimal (apart from the fact that the Base brand found its way to Germany) and in absolute terms, Base remains very small on the KPN scale of things. Free cash flow in 2011 accounted for only 5 percent of the whole. The Belgian press is putting the name of Apax forward as a candidate. Telenet may also be interested. The operator already has spectrum in the 900, 1800 (from 2015) and 2100 MHz bands, through its cooperation with Tecteo/Voo. As in Chile, Liberty Global would be able to quickly expand into the mobile sector with the acquisition of Base. Mobistar (France Telecom) looks like a far shot, because that would put the market back into the hands of two players, even though the combination Mobistar + Base would not be much larger than Proximus. We have recently seen a similar attempt flounder in Greece (Vodafone + Wind Hellas). As a Proximus parter, Vodafone is not the first choice as buyer and as far as other international operators (Telefonica, Deutsche Telekom), Belgium is probably too small potatoes, quite apart from the debt problems at these companies. A more realistic option is the newcomer on the Belgian market, the one which bought a 2.6 GHz license in November 2011: BUCD, which seems to have to support of an Asian partner.
Conclusion: the 'grand plan' of Eelco Blok is getting more impetus. Growth on the Dutch broadband market is priority number 1 (see our commentary: KPN forced to search for other growth opportunities in broadband) and Base has no place herein. After the sale of Getronics International, Ortel and iBasis are still active internationally. And that immediately raises the question: why is there room for these companies, and for German unit E-Plus, in KPN’s portfolio? E-Plus is providing growth, but contributes a small share (23% in 2011) to free cash flow.
