Must KPN remain in Dutch hands?
On NU.nl I read the report that the Mexican telecom company América Móvil, owned by the billionaire Carlos Slim, is abandoning a bid for the Dutch company KPN. The report reads: “The company refers in a statement to the Mexican stock exchange authorities to the barrier that the Stichting Preferente Aandelen B KPN [Foundation for KPN B Preference Shares] has thrown up and to the discussions it has held with the Dutch company. These have shown according to América Móvil that it would be impossible to obtain more than 50 percent of the KPN shareholder voting rights. Therefore, according to the company, there was no point in continuing with the bid.”
After the bid became known a few months ago there were almost immediately reactions from politicians. The Socialist Party leader Emile Roemer, for example, was particularly delighted at the action of the Stichting Preferente Aandelen B KPN in exercising a call option whereby the Foundation acquired 49.9 procent of the total voting rights (this was a protective manoeuvre, but also regarded as a poison pill). According to Roemer, KPN is such an important industry that it must remain in Dutch hands.
Why in fact? And which hands is Roemer referring to? I suspect that he means state hands, or at least hands controlled by the state. The argument that a controlling equity interest in a big company specialized in telecommunications must remain in the hands of the Dutch state is based on a misconception. I shall elucidate my proposition below. For the sake of convenience I am referring to KPN as a state-owned company.
The state (the government) has various tasks and also wears different hats. One of the state’s tasks, for example, is to ensure that basic needs (water, bread, electricity) continue to be affordable as far as possible. The (Dutch) Minister of Economic Affairs, Agriculture and Innovation can, if the cabinet agrees with him, set maximum prices under the Prices Act when – as a consequence of the sudden occurrence of an emergency in the national economy, caused by one or more shock developments – inflation rises so rapidly that it becomes necessary to take such a measure.
Suppose that such an emergency arises, the Minister can then, for example, set maximum prices for bread. The state therefore does not need to nationalize bread production (or to take a controlling equity interest in it) in order to guarantee that this first necessity of life remains affordable, but it can do so by means of price control. We are also familiar with price control, for example, in the care sector.
And with that example we arrive at the core of my argument. What activities must the state regard as its tasks (and in what form) and what can be left to the market (with or without regulation)? Where public interests are at stake they must be safeguarded through legislation, subsidies, concession conditions, etc., and not through the exercise of shareholders’ rights, and not at all when that occurs with a certain degree of secrecy. If the telecoms sector is regarded as a very essential ‘industry’, then the state need only employ public law to achieve the necessary regulation, and the state need not have any (direct or indirect) equity interest in the biggest player in that market.
That special situations can sometimes arise we have seen with the banking crisis, in which the Dutch state became a shareholder in ABN Amro Bank and Fortis Bank Nederland (which merged in 2010). But the assumption here is that the state will again eventually dispose of these shares. There is no reason to keep these shares in the hands of the state for years to come.
In my opinion state companies should be governed and controlled in a businesslike manner, i.e. commercially. As I have said, the state has the instrument of legislation for protecting the public interest, into which moreover the necessary procedural guarantees have been built and openness is a guiding principle. If the state, just to take an example, takes a hand in controlling prices, it should do so through legislation and not through the instrument of shareholdership. As far as the latter is concerned, the only ‘public’ element of state shareholdership is that it ultimately involves ‘public funds’.
The foregoing does not affect the fact that the state as a shareholder, like every other shareholder, can of course exercise an influence on the policy of a public limited company, for example, in order to put general government policy into practice. It is conceivable, for example, that the state will have included in the description of the purpose of the public limited company that it should perform its activities as far as possible from the perspective of ‘corporate social responsibility’ or ‘corporate sustainability’.
The fact that KPN is found so important for the Netherlands does not justify in my view the drawing of the conclusion that KPN must therefore remain in “Dutch (shareholders’) hands”. This kind of ‘nationalism’ does not belong to this age.
Attorney (Lawyer) / Partner
(21 October 2013)
I refer to A.W.A. Boot, ‘Overheid als aandeelhouder: een economisch perspectief’ [The government as shareholder: an economic perspective], in: Kenniscentrum for Ordeningsvraagstukken; D. Blokland [et al.] (red.) Publieke belangen en aandeelhouderschap: essays over the borging van publieke belangen door publiek aandeelhouderschap [Public interest and shareholdership: essays on the safeguarding of the public interest through public shareholdership], The Hague: Ministry of Economic Affairs 2006, pp. 48-70.