Dutch telecoms group KPN, which plans to sell its 21 per cent shareholding in Eircom, has linked with Hutchison Whampoa of Hong Kong and Japanese tele com giant NTT DoCoMo for a major assault on the European third generation (3G) mobile phone market.
In an initial move, the Japanese group is poised to pay about €1.6 billion (£2.26 billion) for a 20 per cent stake in Hutchison's British UMTS (universal mobile telecommunications system) joint venture with Canada's TIW. KPN will take a 15 per cent stake in TIW UMTS and pay around €1.2 billion, one source said.
The three companies then plan to initiate joint bids for further coveted UMTS licences in Germany, France and Belgium - possibly by the end of the week.
Hutchison owns 90.1 per cent of TIW UMTS, which bought a British UMTS licence in April for £4.4 billion sterling (€7 billion) in a high stakes auction that raised £22.5 billion for five licences - far more than forecast.
"Together with NTT DoCoMo and Hutchison, we are looking at possibilities in the UMTS field in a number of European markets and Britain is one of those," KPN spokesman Mr Bram Oudshoorn said.
Eircom has also expressed interest in becoming involved in the British third generation licences - by leasing space from one of the successful licence holders.
Since Hutchison sold its controlling stake in British mobile phone company Orange last year, it has become the industry's wild card. Abandoning Orange as its European telecoms investment vehicle, Hutchison sold its stake to Mannesmann in October, helping to trigger a record hostile bid for the German group by British mobile phone giant Vodafone. The subsequent takeover battle left Hutchison with a fat profit for European expansion and a stake of around 3.5 per cent stake in Vodafone, which has a market value of around £164 billion sterling.
The €1.2 billion KPN is expected to put into the joint venture is almost the same as the value of KPN's 21 per cent stake in Eircom, and this will fuel speculation that KPN plans to sell its stake in Eircom as soon as possible and by next September at the latest. KPN has been lining up a secondary offering of its Eircom stake but has been frustrated by the uncertainty over Telia's plans for its own 14 per cent stake in Eircom.
It had been expected that Telia would also sell its Eircom stake, but the Swedish group said last month it had no immediate plans to sell, an uncertainty that has sent the Eircom share down to record lows around €2.70.
It has also meant that the price KPN could expect for its stake has fallen almost by the day to the extent that if KPN were to sell now, it would suffer a loss on its investment.
Both Eircom and KPN have been putting pressure on Telia to make a formal statement of its intentions, and the expectation is that by the end of this week Telia will agree to a six-month "lockup" period for its 14 per cent stake, a move that would allow KPN to go ahead with the sale of its own 21 per cent stake.
Meanwhile, telecom shares across Europe came under strong selling pressure yesterday after the STOXX index said its indexes would in future be re-calculated to closer reflect the free float - the actual number of shares available for investors as opposed to the total number of shares in issue.
Such a change would affect negatively companies such as France Telecom and Telecom Italia, which have less than 60 per cent of their shares publicly traded and also companies like Deutsche Telekom.
Both Deutsch Telekom and France Telecom fell 4 per cent yesterday while Telecom Italia was 2 per cent lower.
The STOXX changes do not affect smaller companies such as Eircom which are too small to be included in the indices.
