Dutch incumbent operator KPN Telecom NV (NYSE: KPN) is the latest European national operator to attract acquisition attention after the government in The Netherlands announced today it had cut its stake in the carrier and would relinquish its "Golden Share," which currently gives it the right to veto any change of ownership.

The government cut its stake in KPN by half, to 8 percent, in line with its policy to reduce ownership in former monopolies, and is to sell its Golden Share to the carrier before the end of 2005. That, effectively, will put KPN in the shop window at a time when telecom M&A activity is rampant. (See Dutch State Lowers KPN Stake, Eurobites: Exit Strategies, Euro Altnets Step Up M&A, Eurobites: So Shrink Me, Telenor on Billion-Dollar Spree, Europe Catches M&A Fever, and Eurobites: M&A Special.)

KPN's situation is similar to that of TDC A/S (Copenhagen: TDC), the former Danish monopoly carrier, which opened itself up to bids earlier this year by scrapping its self-imposed restriction on external ownership. Now it's set to be acquired by a consortium of private equity funds. (See TDC Unveils $12B Offer.)

Will there be an appetite for KPN? Denmark's TDC was attractive to private equity bidders as it has a diverse set of largely mobile operations, had cut costs and staffing levels, and was growing revenues and profits. Not everyone is convinced that the Dutch incumbent, which has seen its market capitalization rise by about 25 percent since the middle of this year to around $21.2 billion today, makes an attractive target.

Frank Claassen, an analyst at Amsterdam-based Rabo Securities, notes that the sale of the Golden Share will remove a barrier to a potential takeover, and that acquisition speculation will likely push the carrier's share price up in the coming months. But, in his research note issued today, Claassen adds that KPN's lackluster growth potential doesn't make it an attractive target.

Analysts at stockbroker Petercam believe the Dutch state's sale at this stage signals that the government hasn't received any interest from potential buyers.

KPN has been linked to takeover talks before now, with Spanish giant Telefónica SA on several occasions during the past few years, and with its neighbor Belgacom (Euronext: BELG).

And while it hardly has a sparkling future ahead of it, KPN is taking drastic steps to cut costs and already has its migration to a more operationally efficient all IP network environment in motion. (See KPN Reports Mixed Q3 and KPN Lays Out IP Migration Plan.)

A move from Telefónica is highly unlikely, as the carrier has already acquired Cesky Telecom a.s. this year, is in the process of spending more than $31 billion on mobile operator O2 plc (NYSE/London: OOM), and is set to invest further in China Netcom Corp. Ltd. (NYSE: CN; Hong Kong: 0906). (See Telefónica Swoops In on O2, Telefónica Boosts Chinese Ties, and Telefonica Buys Cesky Telecom.)

The two carriers are already in cahoots, though, and in the current acquisition frenzy, nothing should be ruled out. (See KPN, Telefónica Link Up.)

Some members of Europe's carrier community see consolidation as inevitable. Talking this week at the FT World Telecommunications conference, Christopher Schläffer, corporate development officer at Deutsche Telekom AG (NYSE: DT), noted that the European market was becoming too small to accommodate as many individual national carriers as it has at present.

And what will the German giant's role be? Schläffer wouldn't be drawn on any specifics, but noted: "We are the biggest consolidated operator in Europe -- we can't be a victim of the consolidation process."

Another option is that KPN goes the way of TDC, and is acquired by private equity players, which might look to capitalize on KPN's mobile operations, particularly its E-Plus Mobilfunk GmbH business in Germany. That operator might make a tempting morsel for Telefónica, which might like to marry E-Plus with O2's German operations to make a creditable competitor to T-Mobile AG and D2 Vodafone.

— Ray Le Maistre, International News Editor, Light Reading