2nd UPDATE: KPN 3Q Up 12% But Economy Weighs On Business
October 27 2009 - 8:42AM
Dow Jones News
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.)