BURLINGTON, 22/06/06 - KPN is bringing its international activities in the area of delivery and throughput of telecom traffic under the US company iBasis. The Dutch telecom concern will in exchange receive a 51 percent stake in the new company, KPN announced yesterday.

With combined sales of 1.1 billion dollars (872 million euros), the two companies say they will be among the top 5 providers of speech services to other telecom companies. Currently, they are both outside the top 10. KPN and iBasis expect to complete the merger before the year-end.

"It is a matter of activities with narrow margins. Scale is therefore important," a KPN spokesman explained. In the medium term, over 10 million dollars (8 million euros) of cost savings are targeted.

The two parties have also agreed that KPN will pay iBasis' sitting shareholders 55 million dollars (44 million euros) because the US company has a higher valuation and is growing much faster than KPN. Ibasis also already has an advanced Internet-based platform for telephone traffic and has been able to attract clients such as Yahoo and Skype as a result. KPN is now investing heavily in this technology.

The KPN unit employs 80, and iBasis, 230. The spokesman was not yet able to say whether the merger would affect the staff. KPN is supplying two of the seven executive directors and will propose two candidates for the post of independent non-executive director.