Telecom Ramblings

Carl Icahn isn’t the only majority shareholder of a telecom looking to take advantage of the market downturn.  Dutch PTT KPN (NYSE:KPN - chart, news) has now bid for the 44% of international VoIP wholesaler iBasis that it doesn’t already own.  The proposed price of $1.55 per share was a 19% premium above Friday’s close of $1.30, but since then the price has risen to $1.71 at today’s close.  Apparently traders think KPN will have to raise its bid for IBasis (NYSE:KPN - chart, news).

KPN became iBasis’s majority shareholder when it merged its international wholesale voice business with the company back in 2007.  Back then the stock traded in the $8-10 range, but with the collapse of the economy its valuation has come down a lot.  So much in fact that KPN’s bid would require just $48.6M, an amount that coincidentally matches iBasis’s cash balance at the end of the first quarter. I can see the attraction – iBasis is one of only a few international wholesale voice carriers with the scale to truly compete in a tough business.  By doing this, in the space of three years KPN will have leveraged what was one of their weaker units into a relative powerhouse of an international voip carrier for very little money.

Needless to say, iBasis shareholders aren’t much happier with the prospect of selling at the bottom than those of XO Holdings (OTCBB:XOHO.OB - chart, news, filings) are right now.  On the bright side for iBasis diehards though, KPN’s hold on the company isn’t as dominant, nor is it known for ruthlessness on the scale of a Carl Icahn.  On the darker side, the international voice business is one of low margins and economic sensitivity, it’s hard to say how the second quarter went for them.  Even if it went well enough, we probably won’t hear for a while yet and that uncertainty may give KPN’s bid a boost.