America Movil and Telefónica have set aside years of rivalry in Latin America to salvage an $11 billion transaction in Germany, one of the biggest wireless mergers attempted in Europe in recent years.

Billionaire Carlos Slim’s America Movil said yesterday it will support Telefónica’s purchase of Royal KPN’s E-Plus unit after the Spanish carrier sweetened its bid by at least €450 million.

Representatives at America Movil, which owns about 30 per cent of KPN, and Madrid-based Telefónica held talks last week before agreeing on the revised terms over the weekend, said four people familiar with the matter, asking not to be identified because the deliberations are confidential.

At stake is $7 billion in potential savings and extra revenue from a merger of E-Plus with Telefónica Deutschland Holding to create a carrier with more than 43 million clients in Europe’s largest economy.

Telefónica, led by chief executive Cesar Alierta, and KPN didn't secure America Movil's backing before announcing the transaction on July 23rd, triggering Slim to bid for KPN shares he didn't own, people familiar with the matter said.

"It's surprising how Telefónica and KPN have turned around a deal that was almost headed for collapse after Slim's takeover bid for the Dutch company," said Francisco Salvador, a strategist at FGA/MG Valores in Madrid. "It's good news for Telefónica, and definitely great for its German unit, because otherwise it would have been left with no options to grow."

Under the revised terms KPN will get 20.5 per cent in the enlarged German entity, up from 17.6 per cent initially agreed. Telefónica also gets an option to buy a 2.9 per cent stake in the German business from KPN for €510 million after a year. KPN will also receive €5 billion of cash, as originally agreed. KPN, based in the Hague didn’t take part in the latest negotiations, according to people familiar with the matter. – (Bloomberg)