Telefónica to Buy KPN's German Unit in $10.7 Billion Deal

KPN NV agreed to sell its E-Plus German mobile business to a unit of Telefónica in an €8.1 billion ($10.7 billion) deal that would create Germany's largest mobile-phone operator.

The Dutch telecommunications company would receive €5 billion in cash and a 17.6% stake in Telefónica Deutschland Holding AG, which would issue new shares to finance the deal. Telefónica's stake in Telefónica Deutschland would fall to 65% from 77%. The deal should help KPN and Telefónica compete with Germany's two top operators, Deutsche Telekom AG and Britain's Vodafone Group PLC. Competition is set to intensify further as Vodafone is buying the country's largest cable operator, Kabel Deutschland Holding. The new Telefónica Germany would have 43 million customers and annual revenue of €8.6 billion, KPN and Telefónica said. They forecast cost and revenue benefits of €5 billion to €5.5 billion under the deal. The transaction requires regulatory clearance, and getting antitrust approval might offer another challenge. Citigroup said that if the deal went through, Germany would move from the second-most competitive market to the least competitive among the five biggest European telecom markets.