Telekom Austria and KPN International to Form a 'Backbone' Network

Telekom Austria, part-owned by Carlos Slim's America Movil, and KPN group announced a partnership deal to offer internet-based data services to wholesale and large business customers.

Both the groups are combining together to maximise large traffic and expand their presence in Europe. The joint venture will combine their infrastructure to create a "backbone" network connection across 35 countries in Europe and North America.

From the start of the deal, Telekom Austria could use KPN's network to access customers in western Europe and KPN could use Telekom Austria's network in central and eastern Europe.

The network connection will be established in Frankfurt with a back-up in Vienna, said the companies. The exchange point will be in Frankfurt, London, Amsterdam and Paris, stretching to North America.

The announcement comes a year after Slim's American Movil acquired stakes in both the European companies and promised to have come together.

A week beforehand, America Movil proposed a bid to fully acquire Dutch carrier Royal KPN as the Latin American billionaire looks to expand his telecoms empire in Europe.

América Móvil is offering about €7.2bn ($9.6bn, £6.2bn) or €2.40 per share for the 70% stake it does not own in KPN.

KPN, whose core business in fixed-line and mobile has been facing stiff competition in the domestic market, serves about 45.1m customers. The company reported revenues of €12.7bn in 2012.

The company's market value has come down significantly after América Móvil spent about $4bn increasing its stake in KPN last year, bidding €8 a share.

Furthermore, shares in Telekom Austria have also declined since Slim acquired a stake in the company last year.

Telekom Austria posted 1.2% year-on-year decline in the group revenues driven by regulatory burden and tough competition, at the end of the first half ending 30 June.