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Telefonica in advanced talks to buy KPN's German network E-Plus

Telefonica is in advanced talks with KPN to takeover the company's German mobile network, E-Plus, according to a number of sources close to the negotiations.

Talks are ongoing but a deal could be announced early this week, sources have told the Financial Times (opens in new tab).

One possible scenario being discussed is Dutch telecom giant KPN receiving cash and a small number of shares in Telefonica Deutschland as part of the deal.

A combined network of E-Plus and O2 would become the biggest mobile operator in Germany, overtaking both Vodafone and T-Mobile. E-Plus is currently the third largest network in the country whilst O2 is the fourth.

Telefonica will pay around $6 billion (£3.9bn) for E-Plus, according to the FT's sources. There is a risk that the EU's competition authority could block the move, although the firms are likely to offer concessions to ensure it can go ahead.

A merger would bring the number of mobile operators in Germany down from four to three, not just reducing competition but also choice for consumers.

A source has told Bloomberg that the companies did in fact reach a pre-agreement to merge their German operations - which will save the companies billions of euros - last year, before talks broke down.

"A deal makes sense for both KPN and Telefonica because Vodafone and Deutsche Telekom have such a strong position in the country," Emmanuel Carlier, a Brussels-based analyst at ING Groep NV told Bloomberg (opens in new tab).

"This could save a lot of operational costs and capital expenditures as the market is only getting more competitive."

Both Telefonica and KPN have declined to comment.

Tomas is co-founder of Lucky Pilgrim, a team of journalists, photographers and art directors who connect brands to audiences through words, imagery and design. He was formerly editorial director at Chapel and managing editor at Courier magazine, and was a writer for ITProPortal as well as The Independent, EastLondonLines, The Sunday Times Magazine, and Croon.