Market Insight

KPN sells Belgian mobile unit BASE to Telenet for €1.3 billion

April 20, 2015  | Subscribers Only

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KPN has agreed to sell its Belgian mobile unit BASE to cable operator Telenet for €1.33 billion ($1.43 billion), significantly enhancing Telenet’s multiplay operations in the country.

  • Telenet, owned by Liberty Global, plans to raise some €1 billion in debt to help finance the takeover.
  • The cable operator says it will invest €240 million in BASE in the coming years, while it expects to gain around €150 million in annual synergies from the takeover.
  • Telenet already operates an MVNO in Belgium, with some 895,000 subscriptions at the end of 2014, while BASE is the third largest network operator with 3.3 million subscribers.

Our analysis

The deal - which will have to be approved by regulators - with allow Telenet to offer a full range of mobile, fixed voice, broadband, and pay TV services in Belgium. The operator is already the second-largest operator in Belgium behind incumbent Belgacom, holding a 24% subscription market share of fixed voice, 38% of broadband, and 43% of pay TV. KPN’s BASE, meanwhile, holds a 25% share of mobile connections, behind Belgacom's Proximus (40%) and Orange unit Mobistar (35%). Mobistar is chiefly a mobile operator, but is currently in the process of trialling a new fixed broadband and TV offering.

Telenet currently offers a full triple-play service via its Whoppa offering, while it already has close to 900,000 mobile subscribers via its MVNO, which uses Mobistar’s network. 

The acquisition of BASE – which IHS expects will be migrated to the Telenet brand within a few years – gives Telenet an opportunity to launch a full-scale assault on the quad-play sector.

Currently only Proximus offers true quad-play in Belgium via its Start, Comfort and Maxi offerings, while Telenet offers mobile discounts to its triple-play subscribers, but has struggled to build its mobile market share without its own network. The acquisition of BASE will give Telenet greater control of its mobile operations, while simultaneously hurting rival Mobistar through a loss of MVNO revenues. The acquisition will also allow Telenet to offer mobile services beyond its current cable footprint, which covers some 2.9 million (over 60%) of Belgian households, chiefly in the Flanders and the Brussels regions.

Telenet won a mobile licence in the 2,100 MHz band in 2011 with fellow cable operator VOO, but the operators dropped plans to launch a 3G network in 2014, citing changing market conditions and difficulties securing permission to deploy wireless towers. The partners were now expected to return the licence to the regulator, but the acquisition of BASE now opens up the possibility that Telenet may want to retain the spectrum, buying out VOO’s share. Telenet’s mobile ambitions appeared to be over when the operator announced it was dropping out of the bidding in the Belgian digital dividend auction in 2013. However, BASE has 2G, 3G, and 4G networks, giving Telenet an ideal platform to move into the mobile and quad-play sectors. 

The disposal of BASE sees the end of KPN’s international activities, following the sale of German mobile unit E-Plus to Telefonica Deutschland in 2014. KPN had previously stated that BASE needed a partner in Belgium to grow its market share, as the mobile operator struggled with increasing competition, poor macroeconomic conditions, and an inability to compete in the multiplay sector. KPN also made an unsuccessful bid to enter the Belgian TV market with the launch of IPTV operation SNOW in February 2013, which it plans to close in June 2015 after the service had only attracted 35,000 customers by the end of 2014. BASE blamed this on an unfavourable climate for new entrants in the Belgian fixed line market.

The sale of BASE still requires approval from competition authorities, and KPN says it has agreed a €100 million break-up fee with Telenet if the deal does not receive clearance. However, given Telenet’s relatively small presence in the mobile sector, and the European Commission’s new appetite for consolidation, IHS does not expect the deal to be blocked.

The acquisition of BASE marks the first buyout of a mobile operator by Telenet parent Liberty Global. Liberty has stated it plans to continue to focus on offering MVNO services to provide mobile access in its other markets, such as with Virgin Media in the UK. However, the current wave of consolidation in Europe coupled with incumbent operators such as KPN, Telefónica, and Orange looking to offload operations in mature markets could see Liberty making further mobile acquisitions as it seeks to grow its multiplay share.

 

Geography
Belgium
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