On Wednesday, America Movil announced that while it has received the necessary approval from the Netherlands Authority of Financial Markets to make a public cash offer for KPN, it will not proceed with the deal given KPN’s Independent Foundation is blocking the deal.

Back in late August, the foundation chose to exercise its options to acquire 50% of KPN’s voting stock in order to impede the takeover. After trying to hammer out a deal that could work for both sides, America Movil has chosen to move on. We were not in favor of America Movil making this move in the first place, and believe the market will see the deal being nixed as a net positive for its investment case.

KPN has a negative economic moat trend and its near-term revenue and earnings are projected to decline. America Movil has its hands full already in Latin America given its regulatory pressures in Mexico, and its operational challenges in Brazil. We believe the firm could put its free cash flow to better use.

Despite the headwinds, we remain bullish on the firm’s long-term prospects. However, we do not plan to revise our fair value estimate at this time.