KPN, Telefonica Merger Talks Break Down

Merger talks between KPN Telecom and Spain’s Telefonica collapsed, but the Dutch carrier is poised to strike a rival deal with Japanese cell phone giant NTT DoCoMo, sources said. “Expect something next week,” said one industry source, declining to provide details of a deal that could bring Japan’s largest mobile phone company, which has been flirting with Europe for months, onto the continent for the first time. The Telefonica talks broke down over Spanish government demands that the Dutch government sell its 43.5% KPN stake in one month, and complications over KPN’s U.S. partners, BellSouth Corp. and Qwest Communications, sources said. The Dutch company blamed failure of the talks on a small but powerful minority on Telefonica’s board, which had spent Friday in a marathon discussion of a proposed full or partial merger. KPN’s American depositary receipts lost $1.06 to close at $106.94, while Telefonica’s ADRs fell $2.63 to $67.55, both on the New York Stock Exchange.