Telecoms feast for investors

Two massive telecoms share issues, aimed at raising as much as pounds 3bn, will severely test investor appetite in coming days.

KPN, the Dutch telecoms operator, launches its retail issue today in Amsterdam, with the final price being set by the end of the month. The Dutch government expects to sell just over 20 per cent of KPN for about 5bn guilders (pounds 2bn), which will take its stake to below 50 per cent.

The Spanish government, meanwhile, hopes to raise about pounds 1bn through a sale of a 12 per cent slice of Telefonica, the Spanish telco. The half available to private domestic investors was yesterday five times over- subscribed at a maximum price of 1730 pesetas a share. The other half of the shares will be marketed internationally, with London investors targeted for the major slice. The final price is to be set next Monday.

Advisers to the two governments concede that the timing of the issues might cause some mild indigestion in the international market, although both are believed to be aggressively priced.

KPN is favoured by many investment analysts, although Telefonica, which is a higher risk, is still favoured for potentially higher gains and strong dividend growth, because of the lower level of development in the Spanish telecoms market.

The European telecoms industry is going through a major restructuring, in advance of the deadline of 1 January, 1998 which was set by the European Commission for the deregulation of voice telephony.

In addition to the ongoing privatisations in the Netherlands and Spain, the giant Deutsche Telekom is expected to tap equity markets next year.

Some analysts believe that even France Telecom, which is not currently on the French government's list of state assets to be privatised, will be sold to the public by the end of the decade.

The privatised companies are expected to provide sharper competition to BT in the European market, particularly for business services.

Foreign companies, are also expected to become far more active in Europe as deregulation continues.

AT&T, which has just announced a massive restructuring plan, confirmed yesterday that it planned to enter the UK residential market by next year and would use its international partners, including KPN and Telefonica, to expand on the continent. AT&T's equipment arm is also expected to benefit from Oftel's decision yesterday to end BT's "unfair" pricing of its telephones and fax machines.

Meanwhile Francesco Caio, chief executive of Omnitel Pronto of Italy, the private sector competitor to Telecom Italia's mobile arm was in London yesterday for a roadshow to raise pounds 700m to help complete its digital mobile network.

Omnitel is 41 per cent owned by Olivetti, the struggling Italian computer company, and 11 per cent by Bell Atlantic, the US phone company

Italy has Europe's fastest growing cellular market with about 3m subscribers, virtually all of them customers of Telecom Italia. Omnitel-Pronto aims to have 2.5m subscribers within 5 years.

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