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Telecoms tie-ups: Over $10 billion to change hands

Passengers pass a Royal KPN NV internet centre at Schiphol airport in Amsterdam, Netherlands.
Jock Fistick | Bloomberg via Getty Images
Passengers pass a Royal KPN NV internet centre at Schiphol airport in Amsterdam, Netherlands.

Over $10 billion is set to change hands in the world of telecommunications as two key merger and acquisition (M&A) deals were announced on Tuesday.

French media and telecoms conglomerate Vivendi has entered into exclusive talks to sell its majority stake in Maroc Telecom to Dubai-based Etisalat for 4.2 billion euros ($5.54 billion) in cash, it said on Tuesday. The talks are hoped to be completed by the end of the year and talks with a consortium of Moroccan investors who could also invest in the company were also announced.

Meanwhile, Spanish telecoms firm Telefonica and KPN have announced they are to combine their German mobile businesses. That would help them compete with bigger competitors Deutsche Telekom and Vodafone.

Under the terms being discussed, Dutch telecoms operator will sell its German unit E-Plus to Spain's Telefonica which will pay 5-5.5 billion euros ($6.6-7.3 billion) in cash. KPN would get a 17.6 percent stake in the newly-created company. KPN shares were over 11 percent higher in early deals.

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KPN said the transaction is still subject to regulatory and shareholder approval.

E-Plus and Telefonica's O2 Deutschland are vying for third place in Europe's biggest mobile market and both are facing tough competition from their larger rivals. E-Plus cut its prices in January in an attempt to gain market share.

For KPN and its backer Slim, the world's richest man, a merger would help keep it competitive in Germany. It has smaller mobile spectrum holdings and weaker coverage than its competitors.

For Telefonica, the deal would improve profitability in its third-biggest market in Europe after Spain and Britain. Combining the two businesses could bring synergies - cost savings and revenue gains - of 4 billion euros or more, according to analysts.

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Both companies also need more firepower to invest in fourth generation wireless networks - KPN is in an especially weak position because it has none of the best spectrum in 4G.

Telefonica already listed part of O2 Deutschland last year in a drive to cut debt and raise cash as the group suffered from its exposure to Spain's recession-hit economy.

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