América Móvil’s KPN Interest: Sweep MNC Visions Aside, It’s About the Mobile Subscribers

Brian Washburn
Brian Washburn

Summary Bullets:

  • It is tempting, but probably wrong, to expect América Móvil’s bid for KPN to have a global MNC angle.
  • América Móvil’s track record shows preference for mobile subscribers; KPN’s divesting E-Plus with Telefónica likely spurred the proposed takeover.

Billionaire tycoon Carlos Slim Helú is known for making bold moves with strategic investments.  When Carlos Slim-owned América Móvil increased its investments in KPN and Telekom Austria in 2012 by investing billions of euros, the strategic business synergy seemed obvious. When it comes to serving multinational corporations (MNCs), América Móvil and Telefónica are rivals throughout Latin America.  Both competitors can go cross-border into North America easily enough, to extend services across North America.

Telefónica, however, utterly dominates over América Móvil for enterprises that need to link services across Latin America and Europe.  If América Móvil gets an entry point across Europe, it could counter Telefónica’s Europe-wide wireline network advantage; KPN’s pan-European network can provide that entry point.  This sort of strategic vision could explain why América Móvil would keep increasing its stake in KPN, to its present holdings of just under 30%, even as stock values continued dropping in the past 12 months from more than EUR 4 per share to a low point of EUR 1.39 per share.  América Móvil’s 21% stake in Telekom Austria saw its share values drop from more than EUR 7 to less than EUR 5 per share in the past year (both stocks have recovered somewhat from their troughs).

Still, thinking about the investment in strategic MNC business terms is probably wrong-headed.  That would be giving Carlos Slim the wrong type of credit.  True to its logo, América Móvil is about mobile subscribers first.  KPN has 36.7 million of them in the Netherlands, Germany and Belgium; Telekom Austria has almost 20.9 million mobile subscribers in Austria and (mostly) across Eastern Europe.  Elsewhere, América Móvil is already a competitor in U.S. wireless markets, albeit as a reseller through TracFone (an América Móvil subsidiary) and its sub-brands, which collectively had 23 million mobile subscribers in mid-2013.

Yes, América Móvil does offer regional enterprise services, led from its ownership of incumbent national wireline operators Telmex (Mexico) and Embratel (Brazil).  To date, however, the company has not pushed its enterprise services the way global operators have.  América Móvil’s enterprise alliance with AT&T lets the company participate in MNC services without having to invest big and push hard to build its own enterprise disciplines.

If América Móvil’s primary investment incentive is mobile subscribers, Carlos Slim’s bid to assume full control over KPN for EUR 7.2 billion makes sense.  It is a move to block KPN from selling mobile subsidiary E-Plus Germany to rival Telefónica in a proposed EUR 8.1 billion cash-and-stock deal, as this would divest a big chunk of mobile subscribers that were the reason why América Móvil invested in KPN in the first place.  Now the only question left is whether América Móvil will follow through on its bid to acquire KPN, as well as whether such a deal will be permitted to happen.  KPN’s independent foundation, which has the power to defend the Dutch carrier from a takeover, has raised concerns over the bid; so at this stage, the final outcome is still wide open.

One thought on “América Móvil’s KPN Interest: Sweep MNC Visions Aside, It’s About the Mobile Subscribers

  1. Amazingly, America Movil on 26 August agreed to back KPN’s sale of E-Plus to Telefonica, in exchange for a ~20% stake in the German mobile venture. I suspect America Movil found that it would not be able to block the deal, and the expanded investment stake was the best available compromise.
    America Movil and Telefonica remain major regional rivals. I can’t see either party settling in comfortably with this joint ownership arrangement for the long term.

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