KPN to record tax book loss of 3.7 billion euros on E-Plus sale

Dutch telecoms incumbent KPN says it has reached an agreement with tax authorities to record a tax book loss of €3.7 billion ($4.94 billion) after completing the sale of E-Plus to Telefonica.

The loss would offset KPN’s (The Hague, Netherlands) taxable income in the Netherlands in future, starting in 2014, and could make the operator more attractive to America Movil (Mexico City, Mexico), the Latin American telecoms giant that has offered €7.2 billion for the 70% of KPN it does not already own.

Dutch telecoms incumbent KPN says it has reached an agreement with tax authorities to record a tax book loss of €3.7 billion ($4.94 billion) after completing the sale of E-Plus to Telefonica.

The loss would offset KPN’s (The Hague, Netherlands) taxable income in the Netherlands in future, starting in 2014, and could make the operator more attractive to America Movil (Mexico City, Mexico), the Latin American telecoms giant that has offered €7.2 billion for the 70% of KPN it does not already own.

“Having reached an agreement with the Dutch tax authorities gives certainty about our tax position for the coming years,” said Eelco Blok, the chief executive of KPN. “It is another important step for KPN to continue to invest in its operations and the latest technologies in the Netherlands.”

In July, KPN agreed to sell its German mobile subsidiary E-Plus to Telefonica (Madrid, Spain) in an €8.1 billion deal, but the Spanish operator subsequently improved its offer to €8.55 billion, after which America Movil threw its support behind the takeover.

Telefonica plans to merge E-Plus with its own German subsidiary to create the country’s biggest mobile operator by customer numbers.

Although the combined entity would still be smaller than either Deutsche Telekom or Vodafone (Newbury, UK) when it comes to revenues, it could have a considerable advantage in terms of its distribution network and spectrum resources – although German regulators will probably require the operators to give up some of their airwaves before allowing the transaction to go ahead.

Despite Europe’s tough operating conditions, America Movil – owned by Mexican billionaire Carlos Slim – has been eager to build up its presence in the region, having acquired stakes in both KPN and Telekom Austria (Vienna).

Slim may be eager to play a role in future market consolidation, but last week’s European Commission (EC) proposals on telecoms reforms may have dampened his enthusiasm.

Besides failing to table a plan for a European super regulator that would be able to override the region’s national regulatory authorities, the EC has proposed tough measures on roaming that could wipe billions of euros off the revenues booked by leading operators in years ahead.