America Movil, which is seeking up to 28 percent of KPN, said it sees the move as a long-term investment that would give it a presence in Europe at a time when the Mexican group has run out of opportunities to expand at home, its chief financial officer said on Tuesday.

KPN shares surged more than 20 percent to their highest since early April, having earlier this month slumped to their lowest in seven years. KPN welcomed the offer, saying it was "moderately positive" and showed the undervaluation of its shares.

America Movil, the biggest mobile operator in Latin America, is a major cash cow for Slim, ranked by Forbes magazine as the world's richest man, who built his empire by purchasing troubled companies and turning them around.

"América Móvil is a long-term investor, we think if the company (KPN) executes (its strategy) well, it will perform well. It's a company that should benefit for the long term," Carlos Garcia Moreno, CFO of América Móvil, said on a conference call to journalists.

Moreno said it was too early to say America Movil would do any other deals in Europe, but suggested KPN would allow it to get a closer look at the European markets.

"KPN is the target for our first investment. Europe is facing some times which are economically challenging. We have a long-term investment horizon. We've taken our time. This one seems to make a lot of sense," Moreno told reporters.

"The company (KPN) is a solid company (which offers) in the long term a good return on investment. This is a market we do not know. Being closer to the action through the likes of KPN can give a better view for us."

Moreno said the Mexican company had few opportunities to expand in Latin America, while Europe appeared attractive because of a similar cultural identity.

UNDERPERFORMER

KPN shares jumped as much as 22 percent before trading up 16.7 percent at 7.55 euros by 0714 GMT.

Based on Monday's closing price of 6.48 euros, KPN shares had fallen 39 percent over the past 12 months, compared with a 11 percent fall of the STOXX Europe 600 telecoms index.

"There has been one conversation about cooperation," KPN spokeswoman Maryse Ducheine said, adding that the discussion with the Mexican group was about issues such as shared purchasing and roaming.

KPN, the largest telecommunications provider in the Netherlands, has been hit by a string of problems in recent months under its new chief executive, Eelco Blok, who took the helm in April 2011, and has faced criticism from analysts, regulators, politicians and the public.

KPN's chief financial officer unexpectedly quit in January, citing disagreements over internal governance.

America Movil, which said it already owns 4.8 percent of KPN's stock, said it would make a cash offer of 8 euros per share for the additional stock, a premium of roughly 23 percent to Monday's closing KPN share price.

Analyst Ulrich Rathe at brokerage Jefferies in London said KPN had underperformed the sector on a total return basis by 29 percent over the past year.

"That is relative to a sector which has suffered a lot," he said. "On that basis you have a strategic investor who has been eyeing Europe for a long time, according to media reports, saying this is my opportunity."

Analyst Frank Claassen at Rabobank said that unlike other European telecom groups, the state was not a large stakeholder in KPN and was therefore an easier target.

LOSING MARKET SHARE

The Dutch telecoms regulator in December put KPN under close supervision, saying it may have broken the law to the detriment of consumers and competitors.

KPN and other mobile phone operators in the Netherlands are also under investigation by the country's competition authority, the NMA, for possible price-fixing.

The company has been struggling to reverse a decline in revenue, profit and market share in its fixed-line and mobile operations as it faces intense competition on its home turf.

Maurice Mureau, asset manager at Dutch brokerage and asset management firm Keijser Capital, said he did not expect a rival offer to appear.

"At this price, this is a good moment to say goodbye to KPN shares, so we are selling half our stake this morning," Mureau said. "KPN's business model is under pressure. They are losing share in the traditional telephone market and the new business in internet is not fully compensating for that.

"The competition is only getting tougher and things could go any direction," Mureau added. "All-in-all a good time to get out of the stock."

The 28 percent stake is worth 3.21 billion euros, based on 1.43 billion KPN shares outstanding on March 31 according to KPN's first-quarter report.

The deal would be the second major move on a Dutch-based company in recent months by an acquirer based in the Americas, after United Parcel Service Inc announced plans to buy TNT Express for 5.2 billion euros.

Mexican investments in the Netherlands include a deal sealed in February for plastic pipe maker Mexichem to buy Wavin for 531 million euros.

($1 = 0.7663 euros)

(Aditional reporting by Anthony Deutsch, with Robert-Jan Bartunek in Brussels, and Ioan Grillo, Tomas Sarmiento and Dave Graham in Mexico City; Editing by Richard Pullin and David Holmes)

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