Dutch telecom company Royal KPN NV (KPN.AE) Tuesday said its business-to-business operations aren't showing any signs of recovery, but cost cutting and solid profits from its international mobile operations helped it report a 12% rise in third-quarter net profit.

The company, which earns about one third of its revenues from business customers, said the economic downturn had hit revenues from the sector and there was no sign of recovery yet. However, its consumer businesses are faring better, with its Netherlands market proving resilient and international mobile operations still showing solid profits.

Still, it said it will continue to focus on costs and will also cut back its capital expenditure plans in response to continued economic weakness. It reiterated its targets for 2009 and 2010.

Kicking off the earnings season for Europe's telecommunication companies, KPN said net profit for the quarter ended Sep. 30 was EUR395 million, up from EUR353 million a year earlier. Earnings before interest, taxes, deprecation and amortization, or Ebitda, the measure KPN focuses on, totaled EUR1.33 billion, up from EUR1.28 billion a year earlier.

However, revenue fell 8.8% to EUR3.33 billion, from EUR3.65 billion, partly due to disposals. On a comparable basis sales declined by 5.1%.

It is still targeting revenues of EUR13.6 billion to EUR13.8 billion in both 2009 and 2010, down from EUR14 billion in 2008, and it reiterated that it wants to make a "meaningful step" this year toward its 2010 Ebitda target of more than EUR5.5 billion. KPN's Ebitda was EUR5 billion in 2008.

It is also targeting free cash flow of around EUR2.4 billion in 2009 and wants to exceed this level in 2010. 2008's free cash flow was EUR2.6 billion.

The company said it cut a further 952 full-time staff from its workforce in the third quarter, meaning it has cut 2,152 fulltime positions so far this year. It now has 34,550 staff, 21,666 in the Netherlands.

KPN said it will cut capital expenditure this year to between EUR1.8 billion and EUR1.9 billion, from about EUR2 billion previously, in response to lower-than-expected traffic growth.

Chief Executive Ad Scheepbouwer said KPN would restrict its rollout of a fiber optic network in the Netherlands to urban areas with the highest demand, rather than a nationwide rollout.

Scheepbouwer declined to say anything about his plans for KPN's E-Plus, Germany's third- biggest mobile network in terms of customers.

The German government will auction new mobile spectrum next year, and market observers fear KPN could miss out because demand in the most valuable 800 megahertz spectrum is expected to be higher than the offer, resulting in high prices for the frequencies.

The CEO declined to say whether KPN was considering collaborating with Telefonica SA's (TEF) O2, or whether it might consider selling E-Plus in case it can't secure sufficient frequencies in the 800 megahertz band, needed to build up a faster fourth generation mobile network.

At 1202 GMT, KPN's shares were trading up 1.4% at EUR12.22, outperforming an 0.23% rise in the AEX index.

-By Archibald Preuschat, Dow Jones Newswires; +49 211 13872 18; archibald.preuschat@dowjones.com

(Harm Luttikhedde in Amsterdam contributed to this story.)