Dutch telecom operator KPN announced on Tuesday that it had sold its German subsidiary E-Plus to Spain's Telefonica for five billion euros in cash and a 17.6-percent stake in Telefonica Deutschland.
The deal creates the biggest operator on the German market, as measured by subscribers, and ends a long effort by KPN to raise cash as it seeks to build up defences against a hostile takeover effort by Mexico's America Movil.
Following approval from the authorities, the sale should allow for 5.5 billion euros in efficiencies on the German mobile communications market, KPN said in a statement.
"KPN will use most of this money to increase its financial flexibility and intends to resume payments of dividends to stockholders for 2014," the company said.
KPN had been urgently looking to sell its German business as a way to fend off the takeover effort by America Movil, but had struggled to do so given a poor investment climate.
The Mexican giant, owned by tycoon Carlos Slim, owns 27 percent of KPN ever since it launched a hostile bid in 2012. America Movil approved the sell-off in exchange for two seats on the KPN board.
The announcement comes as KPN announced a 68-percent fall in net profit for the first half of 2013 to 108 million euros. Sales in the period were off 8.1 percent from the figure a year earlier to 2.93 billion euros, the company said.
"Conditions remained challenging in the first half of 2013, however we have further strengthened our market positions," chief executive Eelco Blok said.