KPN Blames Telefonica for Death of Merger

LONDON (05/08/2000) - Blame for the failed merger talks between Dutch and Spanish telecommunications operators Koninklijke KPN NV and Telefónica SA belongs solely to Telefónica and its shareholders, KPN's top spokesman said today.

Negotiations were called off late Friday evening after Telefónica shareholders and Spanish government officials expressed concern over the fact that the Dutch government has a 43.5 percent stake in KPN, said Marinus Potman, KPN's chief press officer in a telephone interview. [See "Telefónica, KPN Merger Talks Called Off," May 5.]"But this could never have been an issue," Potman stressed.

The Dutch government had offered to sell its stake in KPN within 18 months after the merger in order to speed up the deal, Potman said. It had been estimated that, were the Dutch government allowed to hold its stake in KPN, it would have resulted in a share in the combined Telefónica-KPN of as much as 17 percent.

"We think that Telefónica used the Dutch government issue as an excuse for other reasons. We believe that those reasons were political ones within the Spanish government and within Telefónica. But we cannot speculate on those issues," Potman said.

Telefónica refused to comment in detail on the failed merger.

Potman said that KPN is continuing merger and/or partnership talks other companies, though he declined to name any companies or give time lines. "We are hoping to be able to make an announcement soon, though," Potman said.

Telefónica shares fell today on both the Frankfurt and Paris stock exchanges.

By late afternoon, Telefónica shares had fallen by 6.49 percent to 24.50 Euros (US$21.98) on the Frankfurt exchange, and on the Paris exchange, Telefonica share values were down 7.39 percent to 24.44 Euros per share.

KPN took less of a hit on the Frankfurt stock exchange, losing just 0.058 percent of its value to close at 119.5 Euros per share. KPN's value did not change on the Amsterdam stock exchange today, closing at 119.50 Euros per share.

KPN, in the Hague, the Netherlands, can be reached at +31-70-343-3379, or at http://www.kpn.com/. Telefónica, in Madrid, can be reached via the Web at http://www.telefonica.com/.

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