Eyes on German Prize in Telco Battle

Mexico's América Móvil and Spain's Telefónica are fighting a battle via the Netherlands. Investors shouldn't forget the real prize is in Germany.

Shares in Telefónica's German unit Telefónica Deutschland have fallen 6.5% since an €8.1 billion ($10.8 billion) deal to buy Royal KPN's German wireless carrier E-Plus was announced in late July. Shareholders in Telefónica Deutschland face a cash call, which won't come until regulators have completed their review of the deal, potentially a year away. But KPN's shares were up 25% before América Móvil made an offer for the company last week. That disconnect shouldn't last. Telefónica Deutschland investors' may be worried that the E-Plus deal fails either at the hands of KPN shareholders or regulators. But voting against the E-Plus deal looks risky for KPN shareholders. América Móvil's offer Friday for the 70.2% of KPN it doesn't own isn't conditional on the E-Plus deal failing. The Mexican operator's offer is also non-binding, meaning it can be dropped at any time.