Telefonica Deutschland closes €8.6bn acquisition of E-Plus
After over a year of negotiations and some substantial concessions to regulators, Telefonica Deutschland announced on Wednesday that it had completed its €8.6bn acquisition of KPN's German mobile operator, E-Plus.
According to Telefonica, the combined entity will be one of Germany's largest mobile operators, serving about 4.7 million customers across E-Plus and Telefonica's German O2 network, and will have pro forma revenues of almost €8bn. The merged entity will have a market share comparable to that of Germany's two other largest mobile operators, Vodafone and Deutsche Telekom.
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Under the terms of the acquisition, Telefonica will hold a 62.1 percent stake in the new carrier, while KPN will hold 20.5 percent; the rest of the shares will be free float. E-Plus becomes a 100 percent subsidiary of Telefonica Deutschland, and customers should initially notice no changes.
E-Plus CEO Thorsten Dirks will become CEO of the new entity, while Telefonica's Markus Haas and Rachel Empey will fill the COO and CFO roles, respectively.
Dirks said that the acquisition signals "a radical change of the entire telecommunications industry".
Indeed, due to the size of the deal, it was scrutinized closely by regulators, both in the country and in Brussels. Shortly after the deal was initially announced, Andreas Mundt, the president of Germany's anti-cartel office, expressed concern about its effects on the country’s consumers, since it would essentially shrink the mobile marketplace from four main competitors to three.
The European Commission’s antitrust regulator expressed similar concerns and began a review of the merger in September 2013. For the deal to pass muster, the regulator found, Telefonica had to agree to initially sell off 20 percent of the combined network capacity to Drillisch, a mobile virtual network operator. Additionally, Drillisch maintains the option of acquiring another 10 percent in the future.
The deal was initially valued at €8.1bn, but Mexican business Mogul Carlos Slim, who owns about 30 percent of KPN, threatened to block the sale. Telefonica subsequently upped its offer to about €8.6bn.