KPN Royal Dutch Telecom, the largest Dutch telephone company, and
U.S.-based BellSouth announced yesterday that they have formed an alliance to
take control of German wireless carrier E-Plus in a deal built on a series of
Dusseldorf-based E-Plus, the third largest wireless carrier in Germany, provides a stronger presence for the companies in the much-coveted German wireless market, one of the largest in Europe and with potential for growth.
KPN, based in The Hague, loaned Atlanta-based BellSouth $9.4 billion to purchase Vodafone's and Veba's stakes. KPN will then convert the loan into a 77.49 percent share of BellSouth, the holding company that will own and run E-Plus.
BellSouth, as a 22.51 percent owner of E-Plus, first exercised its
right-of-first-refusal to purchase Vodafone's 17.24 percent share and German
utilities firms Veba and RWE's 60.25 percent share of E-Plus.
"KPN is an aggressive competitor with multiple wireless properties in
Europe," said F. Duane Ackerman, chief executive of BellSouth. "We expect to
have a very successful partnership that creates additional options for
BellSouth in Europe."
Upon the closing, BellSouth and KPN will share control of E-Plus. The
alliance stymies France Telecom's attempt to gain a foothold in the German
wireless market. The French teleco earlier offered to buy the E-Plus stakes
owned by Vodafone, Veba and RWE.
In more financial moves, BellSouth has the option to convert its stake in
E-Plus into a 19 percent ownership interest in KPN or a stake in KPN Mobile
of equivalent value. KPN Mobile is a holding company for all of KPN's
wireless investments, and is expected to go public in the first half
BellSouth also has agreed to make up to $3 billion of loans to KPN to be used
for further wireless investments in Europe. Related to the loans, BellSouth
will receive warrants to purchase approximately 52 million additional shares
BellSouth said it may consider giving more loans of up to $5 billion to
provide KPN financing for acquisitions of wireless carriers in Europe. These
additional loans, if made, would be convertible into shares of KPN Mobile.