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Posted by Dan Bieler on July 23, 2013
KPN has agreed to sell E-Plus to Telefónica Deutschland for an implied valuation of €8.1 billion. The transaction will combine the No. 3 and No. 4 carriers in the German mobile market to create the new No. 1 carrier based on a subscriber market share of 37% and 43 million subscribers (although only a No. 3 based on a 32% revenue market share).
While the deal brings a variety of opportunities, Telefónica will still face an assortment of challenges:
It is hardly news that carriers face massive challenges as their business model remains under attack. It is high time for them to radically rethink their approach to customer data analytics, customer experience, and innovation. Who will survive this challenging environment? Only those carriers that become much leaner and much faster moving. At this stage, I am not convinced that many carriers can manage this transition successfully. Scale is only a small part of needed adjustments. Changing “telco culture” to more resemble the retail, financial services, entertainment, and IT services industries in terms of customer experience is the much larger and urgent task. And this can’t be addressed by simply combining two carriers.
The deal represents a 9.0x multiple on E-Plus’ EBITDA FY 2013. KPN will retain a 17.6% stake in the combined E-Plus and Telefónica Deutschland. The transaction is expected to close in mid-2014, following clearance from the relevant authorities.
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