KPN is selling E-Plus for 8.1 billion euros ($10.7 billion), including 5 billion euros in cash and a 17.6 percent stake in the newly merged company - which KPN valued at 3.1 billion euros.

It is the latest in a flurry of telecoms deals that offer some relief for mergers and acquisitions (M&A) bankers in Europe, where takeovers across all sectors are down 41 percent this year. Companies remain reluctant to do deals against an uncertain economic backdrop.

Global M&A fees in the first half of the year were $8.3 billion, down 16 percent from a year ago, Thomson Reuters data showed.

The global telecoms sector has been a bright spot, bringing in fees - for advisory and other services such as equity and bond issuance - of $1.7 billion this year, up 60 percent on a year ago, the data show. That is on the back of 354 telecoms deals worth $52.8 billion by July 18, up 20 percent on the year.

KPN enlisted JPMorgan, Goldman Sachs and ABN Amro to advise it on the German sale and those banks will potentially share a fee pot of $30 million to $40 million, Freeman Consulting estimated.

Spanish group Telefonica hired Morgan Stanley, Citigroup and HSBC. Its German subsidiary Telefonica Deutschland called upon Bank of America Merrill Lynch and UBS.

Those five banks could share a pool of between $25 million and $35 million, Freeman estimated.

The advisers could top up their earnings from financing around the deal.

Telefonica said it would need to raise 4.1 billion euros, including about 3.7 billion euros from a rights issue at Telefonica Deutschland, to which Telefonica will subscribe for 2.84 billion euros.

The banks can expect to earn arrangement fees of between 0.5-1.5 percent for syndicated loans, 0.3-0.8 percent for bond issues and 1-3 percent for equity issues, Freeman estimated.

($1 = 0.7580 euros)

(Editing by Tom Pfeiffer)

By Anjuli Davies