To secure approval for the takeover, Telefonica committed to reserving up to 30 percent of its network capacity for MVNOs. It earlier announced an agreement to provide the network capacity to Drillisch. The wholesale agreements will be charged based on an upfront fee for bandwidth, rather than the current model prevalent in the MVNO market of pay-per-use. This is expected to make it easier for virtual operators to compete on price, reducing the EC's concerns that the elimination of E-Plus would reduce competitive pressure on the bigger operators.
In addition, Telefonica will offer to sell spectrum and certain other assets to a new network operator or MVNO using the reserved capacity, in order to facilitate the entry of a fourth player on the market. The spectrum sale may be coordinated with the upcoming auction planned by the German regulator. Telefonica said the agreement includes 2.1 and 2.6 GHz band spectrum, base stations, a roaming agreement and sharing of passive network infrastructure for the new operator.
In addition, Telefonica will extend all the existing O2 and E-Plus wholesale agreements until 2025 and offer 4G access to these customers. It will also make it easier for wholesale customers to switch network provider.
First announced almost a year ago, the takeover will see KPN receive EUR 5 billion cash and a 20.5 percent stake in the merged company. The Dutch operator is exiting the German market in order to focus more on its home market. KPN said it will use part of the proceeds to pay a dividend of EUR 0.07 per share for 2014, a third of which will be paid out in August as interim dividend.
Telefonica will hold 62 percent in the German subsidiary after the acquisition, while the remaining shares are listed on the stock market. The operator reiterated the expectation that the merger of O2 and E-Plus will result in synergies of at least EUR 5 billion. The takeover is expected to close in the third quarter, after completion of a rights issue by Telefonica Deutschland. Thorsten Dirks, the current CEO of E-Plus, has been proposed as CEO of the new company after the merger is completed. He has served as CEO of E-Plus since 2007 and worked at the company since 1996.
