Tuesday, December 17, 2013

KPN in 2014: focus on Belgium for growth?

What's up with KPN in 2014?

  • KPN Business and IT Solutions will be integrated from Jan. 1, as probably will NetCo and Reggefiber when the final options are exercised. It will leave Reggeborgh with cash to expand in Germany (or indeed other countries where the incumbent has a VDSL strategy, such as UK and Belgium).
  • America Movil could return with an offer for KPN in April. Orange too was interested. But don't count on anything. America Movil will most likely sell its KPN stake.
  • The KPN foundation will give up its preference shares at the Jan. 10 EGM.
  • The sale of E-Plus to Telefonica Deutschland, if approved, will leave KPN with cash (EUR 5bn) and a stake in the latter (20%). America Movil could get out of KPN (30%), take over the Telefonica Deutschland stake and aim for the German market. It remains to be seen why KPN needs EUR 5bn (apart from paying for regular dividends), after it raised EUR 5bn in a rights and convertible issue this year.
  • One option would be to buy both Ziggo and UPC NL to create national, regulated, open infrastructure. KPN would reap huge synergies and could share these with the Ziggo and UPC shareholders. Passive infrastructure could be spun off to help pay for the deal.
  • There's a settlement on its way over KPNQwest, for EUR 50m.
  • There may be more alliances, as KPN already has with Reggeborgh (to be bought out), FON (to launch April 2014), Spotify, RTL/Videoland and Universal Music.
  • Will iBasis be sold? It doesn't add much to the portfolio.
KPN Consumer Residential
  • Competition increases from Tele2 and Vodafone, as both will unbundle FTTH. Also from combined efforts from CanalDigital and Online.nl.
  • If Ziggo and UPC NL merge, competition will not change. Perhaps even to the contrary, as these quite different cablecos will require a lengthy and costly integration process.
KPN Consumer Mobile
  • LTE will be nationwide by March 2014. FON (WiFi) to be added immediately after. There are trials for small cells and soon a LTE-Broadcast trial will commence.
  • Tele2 NL will launch its LTE network probably towards the end of 2014. Since it is already an MVNO, competition will not immediately increase. It will not price LTE at a premium but as it migrates from the MVNO/3G/T-Mobile network to its own LTE network, it may gradually reduce prices to discount the cost advantages.
  • Will Ziggo follow Telenet and beef up its mobile strategy and become a full MVNO?
  • Base will expand its LTE network and add LTE-800, for which it targets nationwide coverage at the end of 2014.
  • Will Belgium (a small part of the KPN group) be sold or will KPN step up its efforts? It could be the prime reseller and competitor of both Belgacom and cable (Telenet, Voo, etc.), especially now that there's an open cable regime. Snow (the resold Belgacom 3P) apparently isn't very successful, but over time the sales process may be smoothened. Perhaps Base could even engage in local FTTH projects for the longer term (compare Vodafone and Orange in Spain, Italy etc.).

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