Mexican billionaire Carlos Slim's America Movil has made a 7.2 billion euro ($9.6 billion) bid for the shares in Dutch telecoms group KPN it does not already own, challenging a rival offer for KPN's German business.
Spain's Telefonica last month made an $11 billion bid for KPN's crown jewel, German business E-Plus, casting doubt over the future of America Movil's expensive - and on paper currently loss making - investments in Europe.
European telecoms firms are looking to consolidate in a bid to cope with maturing markets, recession-hit consumers, tough regulations and expensive network upgrades. America Movil, which also has a stake in Telekom Austria, surprised analysts when it moved onto the continent because they tend to see greater opportunities for growth in emerging markets.
People close to the matter have said America Movil views Telefonica's bid for E-Plus as too low, forcing it to either take control of the 70 percent of KPN it does not already own, or try to extract a higher price from the Spanish firm which is a major rival in its Latin American markets.
"There is a significant risk they (America Movil) will now block the deal," said Espirito Santo analyst Will Draper, referring to Telefonica's planned tie-up with E-Plus.
America Movil said on Friday it would bid 2.4 euros ($3.21) per share in cash for the rest of KPN. That's a premium of about 35 percent over the average closing price of KPN's shares for the last 30 trading days, but just under a third of the 8 euros it paid in May last year when it started building its stake.
The offer values the whole of KPN at about 10.2 billion euros, compared with the 8.1 billion euros that Telefonica has bid in cash and shares for just E-Plus.
KPN shares were up 17.2 percent at 2.344 euros, while Telefonica's were down 0.1 percent at 10.84 euros. Telekom Austria was up 8.4 percent at 5.71 euros on speculation America Movil might also lift its stake in that company.
KPN said it was considering America Movil's offer and would look at all options open to it, while Telefonica was not immediately available to comment.
A person familiar with the situation said KPN shareholders could be attracted to America Movil's offer because it is all cash and does not have the regulatory and integration risks associated with Telefonica's offer for E-Plus.
The person said America Movil thinks there is too much uncertainty surrounding a Telefonica/E-Plus tie-up, but that it was not radically opposed to consolidation in Germany and could change its mind if Telefonica improved its offer.
ING analyst Emmanuel Carlier said America Movil's offer seemed fair, equating to an enterprise value (debt plus equity) of 4.9 times KPN's forecast core profit.
While that is much less than the approximate 9 times offered by Telefonica for just E-Plus, Carlier said that was to be expected because the Spanish firm could extract significant synergies from merging E-Plus with its existing German business.
America Movil said it had invited KPN's supervisory and management boards to meet "as soon as possible".
KPN has the option to block unwanted bids by handing preference stock to its "Stichting" or foundation.
Some analysts had not expected America Movil to make a full bid for KPN, saying it would stretch its finance and limit its ability to do deals elsewhere.