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BellSouth, KPN to acquire Germany's E-Plus
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December 9, 1999: 9:30 p.m. ET
Exercise of options and a $9.4 billion loan will thwart France Telecom
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NEW YORK (CNNfn) - BellSouth Corp. will join forces with Dutch firm KPN Telecom NV to acquire 100 percent of Germany's E-Plus Mobilfunk.
The deal between BellSouth (BLS)., the third-biggest U.S. regional phone company, and KPN (KPN) is designed to thwart a $9.33 billion bid by France Telecom for the German mobile phone operator.
Losing E-Plus would be a nasty blow to Paris-based France Telecom, which saw its move into Germany as a key counterstrike following the breakdown of its alliance with erstwhile partner Deutsche Telekom, which has itself moved into the French cellular market
BellSouth is one of the founding shareholders in E-Plus, with German utilities RWE and Veba and British mobile-phone giant Vodafone AirTouch.
BellSouth has a 22.5 percent stake in E-Plus and first refusal on acquiring the remaining shares, a position which put it in a good position to derail France Telecom’s agreement in October to buy out the RWE, Veba and Vodafone stakes for more than $9 billion.
BellSouth said it is taking a $9.4 billion loan from KPN to buy Vodafone's 17.243-percent stake and Veba's 60.25 percent stake.
Under the terms of the deal, KPN will convert its loan into a 77.493 percent share of BellSouth GmbH, the holding company that will own and operate E-Plus. Following the closing, BellSouth and KPN will share control of E-Plus.
BellSouth also agreed to make up to $3 billion of loans to KPN to be used for further wireless investments in Europe. In connection with these loans, BellSouth will get warrants to buy about 52 million additional shares of KPN.
"Our initial $150 million investment in E-Plus, currently valued at $2.4 billion, has now been turned into a $7.8 billion asset," F. Duane Ackerman, Chairman and CEO of BellSouth, said in a written statement. "This is great news for BellSouth shareholders because we have captured an incremental $5.4 billion in value that is not currently reflected in our stock price."
Mr. Wim Dik, Chairman and CEO of KPN said in a statement that the deal would speed his company's growth in the European mobile market. "We are convinced that we have found in BellSouth an experienced partner in modern telecom services with a progressive attitude to new developments."
KPN has said it was seeking alliances in France and Germany and has been linked with Cegetel, the French operator controlled by Vivendi. It has previously focused on expanding in central Europe but has a large cash pile after selling its stake in Ireland’s Telecom Eireann.
E-Plus, the third-largest German mobile-phone operator, is seen as a key prize because of the scope for growth in cellular subscribers in Germany with what is viewed as a comprehensive network. 
-- from staff and wire reports
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