US telecoms firm BellSouth may have found a partner in KPN Telecom of the Netherlands in its ambition to frustrate France Telecom's bid for German mobile phone operator E-Plus.
KPN's announcement yesterday that it might take a stake in E-Plus, Germany's third-largest wireless operator, sent its stock surging by more than 10 per cent but hit France Telecom's share price.
Banking sources said on Wednesday they expected KPN - which is selling its 21 per cent stake in Eircom - to announce a tie-up with BellSouth to buy a stake in E-Plus in an attempt to block France Telecom's €9.1 billion (£7.2 billion) bid.
In order to support BellSouth's blocking move, KPN was preparing a €13 billion loan, which would allow it to strike a side deal with BellSouth to buy a stake in E-Plus, they said.
"KPN is in discussions which may or may not lead to it taking an interest in German mobile operator E-plus. A further announcement will be made if and when appropriate," the Dutch former monopoly phone provider said in a statement which gave no further details. A spokesman declined to elaborate.
KPN shares - the bourse's most actively traded - soared to a record high of €69, up 10.22 per cent, before falling back to €67.10.
Shares in France Telecom fell for a second day running, shedding more than 4 per cent in early trade, but recovering to to trade virtually unchanged.
A London-based analyst said the announcement was "an outstanding development for KPN".
In the unlikely event of KPN eventually buying BellSouth's stake in E-Plus, it would probably sell off part of the stake to a sector peer such as France's Vivendi in a swap for other European mobile interests, so as to expand its footprint in Europe's major markets of France and Germany, he added.
Over the past few days KPN has been subject to speculation that it would strike an alliance with France's Cegetel SFR, the mobile phone arm of Cegetel, which is 44 per cent-owned by French conglomerate Vivendi.
Another possibility would be for KPN and BellSouth to combine their stakes in other mobile phone operators, leading to a merger of E-Plus, Denmark's second-largest GSM operator Sonofon, Dutch KPN Mobiel and KPN Orange Belgium, the analyst said. KPN Orange is a 50-50 joint venture of KPN and Britain's Orange.
A possible purchase of a stake in E-Plus would fit into KPN's strategy for its division KPN Mobiel, for which it said it was considering an alliance with one or more mobile phone operators, particularly in Germany and in France.
Analysts said they see KPN's strategy as defensive, preventing it from being taken over by a telecoms giant in a rapidly consolidating market where competition is fierce.
E-Plus is for sale as shareholders Vodafone AirTouch and German utilities Veba and RWE must sell their stakes as conditions of pending mergers.
BellSouth, which has preemptive rights to match any bid from a third party if another shareholder wants to sell, also has the option to accept France Telecom as a shareholder.
J.P. Morgan, ABN-Amro Bank and Warburg Dillon Read are expected to take leading roles in the new loan, banking sources said.
