UPDATE 4-America Movil threatens to abandon KPN takeover bid
* America Movil ready to cancel bid if foundation maintains stance
* Foundation said would move to block America Movil bid, wants "fair bid"
* KPN shares drop more than 3.4 percent
BRUSSELS, Aug 30 (Reuters) - America Movil threatened to abandon its 7.2 billion euro ($9.5 billion) bid for Dutch telecommunications group KPN after a company foundation told the Mexican firm to make a higher offer or it would veto the bid.
The foundation, an independent group of former executives from Dutch companies tasked with protecting the interests of KPN stakeholders, bought almost 50 percent of KPN's voting stock late on Thursday, blocking the deal.
Set up when the former state monopoly was being privatized, the foundation said it was protecting the interests of shareholders, employees, customers, trade unions and "Dutch society more generally," which it said were at risk because America Movil, Latin America's biggest phone company, had not consulted with KPN before making its offer.
"The soccer rules in Mexico and the Netherlands are the same, but taking over a large company is not soccer. We may have different rules for this here than in Mexico," said Jacques Schraven, an ex-president of Dutch Shell, who heads the foundation.
He told a news conference on Friday that the group wanted America Movil, controlled by Mexican billionaire Carlos Slim, to make a "fair" bid for KPN and to make binding arrangements with stakeholders such as KPN employees before officially launching its bid.
Slim's America Movil, which holds nearly 30 percent of KPN, denied its bid - at 2.40 euros a share - would put the company's interests at risk.
"We believe we can help make (KPN) into a better company, one that grows, creates jobs, is more competitive and ultimately is strong enough to remain a major player at home and abroad," America Movil said in a statement on Friday.
America Movil shares initially rose after the market opening as investors, concerned the deal could threaten the firm's credit ratings, were cheered by the new hurdles to the acquisition, analysts said. But the stock later pared its gains to trade at 12.93 pesos ($0.97) per share amid worries that there could be still room for more talks.
"It's a lot of volatility because you can interpret (America Movil's statement) both ways," said Valeria Romo, an analyst at brokerage Monex in Mexico City. She saw further negotiations and deal sweeteners from Slim, but no increase in the offer price.
On Wednesday, America Movil met KPN's labor unions, saying they would stick to the company's existing strategy.
The foundation said it had been in touch with America Movil this week and called for the company to open negotiations with KPN's board and the Dutch government.
"I think this is about a higher price and better conditions," a hedge fund investor in KPN said. "Maybe America Movil will raise its offer to 2.60 (euros), but if they withdraw the stock will trade between 2 and 2.10."
KPN shares fell 3.41 percent to close at 2.210 euros.
On average, Slim's telecoms giant paid about 3.24 euros a share for its Dutch stake, including stock bought as part of a rights issue by KPN earlier this year.
America Movil offered to buy the rest of the Dutch telecoms firm earlier this month and has since said that its financing for the bid was in place and expected it to proceed in September.
Slim, who began 2013 as the world's richest man, could try to fight the foundation's move in court.
"We wouldn't be surprised to see AMX go to (the European Union) to challenge the authority and legality of the foundation on the back of this move," said Imari Love, an analyst with Morningstar.
"It's clear the foundation is trying to keep KPN Dutch-owned by using this poison pill, which, in effect, has the same impact of golden shares, which are illegal."
Jorge Negrete, head of telecoms think-tank Mediatelecom in Mexico City, said: "This isn't about business. This seems to me to be clearly about protecting the European market."
There was no immediate comment from the European Commission.
The foundation said that in theory it could block the bid for up to two years, but that Dutch law called for any such measure to be proportional with the threat.
Foundations such as KPN's have been used to try and gain an advantage in high-profile corporate battles, including luxury goods maker LVMH's failed hostile takeover bid for Gucci in 1999 as well as efforts by hedge funds to replace the board and break up chip equipment maker ASM International in 2008.
A number of analysts believe America Movil offered to buy the rest of KPN to squeeze more money from Slim's great rival in Latin America, Spanish company Telefonica, which wants to buy KPN's German unit, E-Plus.
If so, the move paid off. Telefonica earlier this week raised its offer by 6 percent to 8.55 billion euros and it won America Movil's support for the deal.
The E-Plus sale will provide cash that will improve KPN's balance sheet, and, though it leaves the company without direct exposure to Europe's biggest mobile market, it makes America Movil's 2.40 euros-per-share offer less attractive, analysts said.
In a research note written before the KPN foundation's announcement, analysts at Sanford Bernstein said: "We think that KPN could be worth as much as 3 euros per share."