Telefonica in talks to buy KPN’s German mobile-phone business E-Plus

Spanish telecom giant Telefonica SA is in talks to buy Dutch telecom company Royal KPN NV's German mobile-phone unit E-Plus, in a deal potentially valued at around €5 billion ($6.6 billion).

Responding to media reports, both companies separately confirmed that they are in talks, but did not divulge any further information.

Telefonica and KPN had come close to a deal year, but talks on merging Telefonica's O2 with KPN's E-Plus fell apart because of differences in valuation.

A deal would add more debt to Madrid-based Telefonica, which in recent years has been selling assets with the goal of bringing its net debt below €47 billion in 2013.

Since 2011, it sold its Central American assets to Guatemala's CMI for $500 million, disposed off its Atento call centre to US private equity firm Bain Capital for $1.3 billion, its stake in China Unicom for $1.4 billion, its UK broadband and fixed telephony business to BSkyB for $270 million, and last month agreed to sell its O2 Irish business to Hutchison Whampoa Ltd's wireless communication unit called Three, for $1 billion.

The merger of O2 with E-Plus would create Germany's largest mobile operator with a 38 per cent market share, ahead of current leaders Deutsche Telekom and Vodafone.