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Fitch: America Movil's KPN Purchase Likely to Boost KPN's Rating

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Fitch Ratings says that if America Movil's acquisition of KPN completes, it will be positive for KPN's credit profile and KPN's ratings are likely to be upgraded by multiple notches. However, Fitch notes that there are a number of uncertainties surrounding the transaction and wishes to wait to see how these get resolved before taking any rating action.

Fitch notes that AMX's current proposal is only an intention to make an offer. AMX will have to submit an offering memorandum to the Netherlands Authority for the Financial Markets for approval and, once all documentation has been approved, expect to release the offering memorandum in September.

Fitch notes that the KPN board have not yet indicated whether or not they support the suggested offer. Fitch also notes the presence of the Foundation Preference Shares B KPN, which has a call option to acquire preference shares in KPN if the foundation believes that the continuity, independence and identity of KPN is being threatened. While Fitch has no knowledge of the foundation's view of the transaction, if such a move was used, it is likely to at least delay AMX gaining full control of KPN. Fitch believes that the preference shares can be issued for no longer than two years.

Also, while the Dutch government does not own a stake in KPN and does not have a golden share, the purchase of the national incumbent telecoms provider by a foreign entity is likely to be of interest to the government. Given the strategic importance of telecoms to any country, the government is likely to want to ensure that any prospective owners are committed to the Dutch telecoms market and that there is no other alternative motive for the transaction.

Fitch added that it will wait a few weeks before the uncertainties detailed above are clearer, at which time a formal rating action is likely.

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Tags: america movil  kpn  Netherlands