KPN eyes €4bn capital raising KPN, the Dutch telecoms group that Mexican billionaire Carlos Slim took a stake in last year, was finalising plans on Monday to raise as much as €4bn in new capital. Several people familiar with the proposal said the group was likely to seek to raise €2bn to €4bn in the form of a rights issue, in a move that would help boost its financial flexibility. However, one of the people cautioned that other financial instruments could also be used to raise the funds and said talks were continuing. Capital raising plans are likely to be made alongside KPN's scheduled fourth-quarter earnings announcement Tuesday. The size of the raising could represent more than half KPN's equity value. The company's management told investors it was considering a rights issue at the end of last year, given its relatively high debt levels. Several analysts have said that the group could have difficulties in persuading its largest shareholder, America Movil, the Latin American telecoms group controlled by Mr Slim, to support the move. America Movil has already lost more than €1bn in the value of its shares after acquiring a 27.5 per cent stake in KPN last year. It paid around €7.7 a share, according to analysts - almost twice the €4.1 the shares are currently trading at. It was unclear Monday whether America Movil would back the rights issue or face the risk of having its stake diluted by the capital raising. "There is ongoing dialogue," said one of the people familiar with the matter. Several analysts anticipated a capital raising by KPN, but in the form of a hybrid bond issue - debt instruments that have equity like characteristics. The higher than expected cost of buying crucial spectrum in the Netherlands brought the company closer to needing to fix its balance sheet through an equity raising, according to those familiar with the group. The increased cost of €1.4bn has already spurred KPN to cut its dividend, and it faces a potential junk downgrade. . Due to its dense cable coverage, the Netherlands is one of the most competitive markets in Europe. Robin Bienenstock, analyst at Bernstein, said in a note on Monday: "Given that KPN is pretty much at rock bottom, this is the time for it to make longer term economic decisions." Bernstein estimates that KPN would need some €5bn of new convertible debt in order to fix its balance sheet, but that a deal that size would be simply too big to get done. The risk of a rights issue is already partly discounted by the market. KPN declined to comment. Additional reporting by Matt Steinglass in Amsterdam