The Hague, Netherlands-based KPN is to pay approximately 980m euros ($1.18bn) for Telfort on a debt and cash-free basis. Under terms of the deal, KPN will acquire net operating losses of more than 900m euros ($1.08bn), and it could pay up to 140m euros ($169m) more based on Telfort’s performance.
The move will allow KPN to eliminate a local competitor and will add more than 2.4 million customers to its existing customer base of 17.7 million mobile customers spread across Germany, the Netherlands, and Belgium.
The Dutch mobile market is almost completely saturated, and the acquisition will enable KPN to extend its market lead. It has recently been aggressively cutting prices and sacrificing margins to pursue market share. This has helped it raise its customer base while most of its largest rivals including Vodafone Group, T-Mobile International, and Orange have shed customers.
This transaction will enable us to faster achieve our stated goal to obtain a revenue share in the Dutch market of more than 40%, said CEO Ad Scheepbouwer. This will improve our competitive position vis-a-vis the strong European players that are active in the Dutch market.
Amsterdam-based Telfort was the fifth largest mobile operator in the Netherlands and was growing more than three times faster than KPN’s mobile unit. Telfort employs 613 people, but it is not yet clear what will happen to the workforce, although Telfort is expected to remain a separate company under the KPN umbrella.
For the year ending March 31, Telfort posted net income of 166.8m euros ($201.5m) up from 30.1m euros ($36.3m) the previous year. Sales rose 20% to 509m euros ($615m). KPN’s mobile unit posted a 6.2% sales rise last year to 5.2bn euros ($6.28bn).
Telfort used to be known as 02 Netherlands, but in 2003 it was purchased by Greenfield Capital Partners for 25m euros ($30m) from UK mobile operator O2 Plc. In 2004 the Dutch millionaire Marcel Boekhoorn bought a 52% stake in Telfort.
Telfort’s network acts the backbone for a number of mobile operators in Holland, and it remains to be seen what impact this acquisition will have on these NVO agreements. The acquisition is subject to regulatory approval.
KPN operates fixed-line services in the Netherlands, as well as mobile phone services across the Netherlands, Germany, and Belgium. It almost went bankrupt in 2001 after it ran into financial difficulties when it paid too much for acquisitions and mobile phone licenses. It was saddled with a massive debt burden of more than 23bn euros ($30.32bn) in the first quarter of 2001, but managed to stave off insolvency by issuing shares, cutting jobs, and selling subsidiaries to cut debt. Debt levels are now at 7.9bn euros ($10.41bn) from 8.3bn euros ($10.94bn) as of year-end 2003.
