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Telefónica obtains the support of América Móvil for the acquisition of German operator E-Plus from KPN


- The agreement facilitates the approval of the sale of E-Plus to Telefónica Group at the Extraordinary General Meeting of shareholders of KPN, to be held on October 2.
- América Móvil, as main shareholder of KPN with a stake of 29.77%, commits itself to vote in favour of the resolution to sell E-Plus recommended by the Dutch Company’s Board.
- Following the agreement, the transaction remains unchanged in its first phase, which implies Telefónica Deutschland buying 100% of E-Plus from KPN via a 3.7 billion euros rights issue plus a 24.9% stake of the resulting company. In the rights issue Telefónica will subscribe 2.84 billion euros, in proportion to its current stake in the company of 76.8%.
- In the second phase, once E-Plus is integrated in Telefónica Deutschland’s capital, Telefónica will buy a 4.4% stake of the combined entity from KPN for a total of 1.3 billion euros. As a result, Telefónica will hold a final 62.1% stake in the new company, KPN will have 20.5% (instead of 17.6% initially planned) and the remaining shares will be free float. Included as part of the price, Telefónica has the option to acquire an additional stake of up to 2.9% of Telefónica Deutschland to reach a final 65% stake in the company.
- The total cash payment for Telefónica remains at 4.14 billion euros, excluding the exercise of the option.
- The transaction will generate expected synergies valued between 5 and 5.5 billion euros and will make Telefónica the second largest European operator.

Madrid - The Telefónica Board of Directors has approved an agreement with América Móvil, the main shareholder of KPN with a stake of 29.77%, by which the Mexican company commits itself to support the acquisition by Telefónica Group of KPN’s German mobile operator E-Plus.

The transaction is subject to obtaining both the relevant regulatory approval and clearance at KPN’s and Telefónica Deutschland’s Extraordinary Shareholders’ Meeting. The transaction will result in a new strong player in the German mobile market with 43 million mobile customers and combined pro forma revenues of €8.6 billion euros.

KPN recently convened an Extraordinary General Meeting of shareholders, which will vote on the resolution on 2 October, 2013. KPN, the parent company, has recommended its shareholders to vote in favour.

The transaction provides significant synergy potential, particularly with respect to distribution, customer service and network services. The total value of the synergies expected from the transaction is estimated in between 5 and 5.5 billion euros net of integration costs. Net savings will be positive from year 2.

The acquisition of E-Plus by Telefónica is divided into two phases, as agreed with KPN in July. In the first phase, that remains unchanged following the agreement with América Móvil, Telefónica Deutschland will undertake a rights issue to raise €3.7 billion euros of which Telefónica S.A. will subscribe 76.8%, in proportion to its current stake, corresponding to 2.84 billion euros. KPN will receive these 3.7 billion euros in cash plus a 24.9% stake in the new Telefónica Deutschland.

In the second phase, for a total of 1.3 billion euros Telefónica S.A. will acquire a stake of 4.4% in Telefónica Deutschland from KPN and will get an option to acquire an additional stake of up to 2.9% of the capital. As a result, at the end of the two phases and excluding the purchase option Telefónica SA and KPN will hold 62.1% and 20.5% of Telefónica Deutschland, respectively, instead of 65% and 17.6% initially planned. The remaining percentage will be free float. The purchase option will allow Telefónica to raise its stake up to 65% as it was planned in the agreement reached with KPN in July.

The total amount required by Telefónica S.A to finance this operation remains unchanged at 4.14 billion euros, excluding the purchase option for a stake of up to 2.9% of Telefónica Deutschland. As announced in July, it is estimated that only between 10% and 20% of this amount will increase debt to Telefónica.

América Movil’s support facilitates the approval at the Extraordinary General Meeting of KPN of an operation that benefits the shareholders of both companies and has obtained a positive feedback in the markets.

With this agreement, Telefónica comes closer to the objectives announced at the end of July in reference to becoming Europe’s second largest operator and obtaining a leading position in the largest and one of the most dynamic mobile markets in Europe. In addition, thanks to this agreement, the company will also become the leading operator in terms of number of accesses, network quality and distribution network in three of its main markets: Germany, Brazil and Spain.

Creating a leading, sustainable and innovative Digital Telco focusing on mobile data and LTE development in Germany is a natural strategic step for Telefónica. This announcement follows a decisive year in Telefónica’s transformation process, fostered by a series of initiatives that have allowed a significant strategic shift in the company. Twelve months ago, Telefónica set itself the strategic objective of increasing its financial flexibility and reducing leverage via several initiatives, which included the proactive management of its asset portfolio.

As a result of this, the company has reduced net debt by 10 billion euros since June 2012, including the sale of Telefónica’s affiliate in Ireland in June. This process has enabled the company to resume dividend payments, as approved at the AGM last May, giving continuity to the shareholder policy of dividend payment year after year.

Finally, it is important to highlight that this transaction will mainly be financed via financial instruments, which won’t have a significant impact on Telefónica’s leverage ratio. In this respect, Telefónica reiterates its objective to place net financial debt below 47 billion euros by the end of 2013.


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