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EDITORIAL

Buzz in the telephone market

América Móvil’s bid for KPN is a further step toward concentration in the cellphone market

The takeover bid recently announced by América Móvil, property of Carlos Slim, on the Dutch telephone group KPN, brings to an end a lengthy drought as regards large-scale corporate movements, purchases and acquisitions, owing to the world financial crisis and the persistent recession in some countries.

To be exact, the first big movement that indicated a change of trend was the offer to purchase E-Plus, the German subsidiary of KPN, by Telefónica; and it is this same operation that now becomes more complicated due to the América Móvil takeover bid. If the Mexican owner of América Móvil, Carlos Slim, gains control of 70 percent of KPN's capital before the sale of E-Plus to Telefónica is concluded, it is very likely that the purchase will not take place, or at least that the price will rise considerably.

The point of the bid has to do precisely with América Móvil's desire to stop the Telefónica operation. The market chiefly coveted by both operators is the German one; if Telefónica acquires E-Plus, the value of KPN for its shareholders and as a business will be substantially reduced. The nearly 30 percent of KPN's capital that Slim now has thus loses much of its strategic sense. The analysts appreciate, then, that the Mexican group's fundamental objective is to stop the Spanish bid, which will depend on whether the board meeting that decides on the sale of the German subsidiary is held before or after América Móvil arrives on the scene. But for the moment it is still premature to analyze the operation in terms of estimations of intent.

One of the reasons that counsel prudence is the fact that América Móvil, in accordance with Dutch legislation, is not obliged to actually go through with the takeover after having announced it. The strategic doubts are thus still unresolved. It is obvious that Slim's group sets great store by the opportunity to gain control of KPN; and that a withdrawal, after having publicly ventured on a takeover bid, would be a setback of some importance for the bidder.

América Móvil's takeover bid is also relevant for other reasons. Much has been made of the fact that it is the biggest operation (7.2 billion euros) between the American and European continents. Setting anecdotal aspects to one side, the important thing is that the bids by América Móvil and Telefónica confirm that in the telephone market the mode of corporate growth, characteristic of mature markets, is the purchase of shares. We are very probably going to be seeing more takeover bids and acquisitions in markets where there still exist, according to the analysts, an excessive number of operators. The inevitable trend in Europe is toward concentration.

An acquisition of this magnitude, however, needs to be examined by the competent authorities. The fact that the natural trend of growth is toward mergers and purchases does not mean that all of these will have the same consequences in terms of maintaining the necessary transparency in the market. Indeed, Slim's offer includes, as an explicit condition, that the pertinent regulatory authorizations have to be obtained.