KPN Slashes Dividend as Net Profit Falls
July 24 2012 - 2:43AM
Dow Jones News
Ailing telecommunications operator Royal KPN NV (KPN.AE) Tuesday
posted a significant drop in profit and slashed its dividend,
saying it continues to be squeezed by tough market conditions in
its Dutch home market.
Net profit fell to EUR315 million ($382 million) in the three
months to June, from EUR414 million a year earlier, hurt by weak
margins, especially in its Dutch mobile consumer business. KPN's
sales were down 3% to EUR3.19 billion.
With smartphone penetration in the Netherlands higher than in
most other European countries, at more than 50%, KPN's traditional
revenue from voice calls and text messages is being eroded by
Internet services like WhatsApp, a smartphone messaging service, or
Microsoft Corp.'s (MSFT) Skype, which offers free Internet phone
calls.
As some investors already feared, KPN will drastically lower its
dividend for 2012 to EUR0.35 per share. It previously intended to
pay EUR0.90 a share for 2012, more than the EUR0.85 a share for
2011.
"We don't take this preemptive step lightly," Chief Executive
Eelco Blok said in a statement. "The economic prospects in the
Netherlands continue to be difficult. Today, it is even more
important to strike the right balance between a prudent financial
framework, continued investments and sustainable shareholder
remuneration. This will support our credit ratings and enhance our
financial flexibility," he added.
To counteract falling revenue and profit Mr. Blok is slashing
costs and plans to cut 4,000 to 5,000 jobs by the end of next year.
KPN competes with Vodafone Group Plc (VOD) and Deutsche Telekom
AG's T-Mobile in the Netherlands, but it also has a lucrative
mobile operation E-Plus in Germany and another in Belgium.
Last month, Mexican telecommunications giant America Movil
raised its stake in KPN to 27.7% from 4.8%, investing invested more
than EUR2 billion in the company. The Mexican company said last
month it will also raise its stake in Telekom Austria AG (TKA.VI)
for an estimated EUR747 million.
"We will continue a constructive dialogue with our new large
shareholder, America Movil. We will explore diligently any
potential areas of cooperation that are viable, value accretive, in
line with our strategy and in the interests of all shareholders and
other stakeholders," Mr. Blok said.
KPN's mobile operations abroad, Base in Belgium and E-Plus in
Germany, did well, with E-Plus revenue up 4.9%, while Base posted a
6.7% increase in sales.
Still, KPN intends to sell Base and also tried to sell E-Plus to
Telefonica SA (TEF) in an unsuccessful attempt to thwart America
Movil's bid which management said under-valued the company. America
Movil has 246 million mobile subscribers in 18 countries.
Tuesday, KPN, said it is on track to hit its targets for 2012
for a free cash-flow between EUR1.6 billion and EUR1.8 billion and
earnings before interest, taxes, depreciation and amortization, or
Ebitda, in a EUR4.7 billion to EUR4.9 billion range, excluding the
cost of shedding 4,000 to 5,000 jobs.
Write to Archibald Preuschat;
archibald.preuschat@dowjones.com
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