KPN on the mend, despite record 2002 loss

4 Mar 2003

Financially troubled Dutch telco KPN [NYSE:KPN] claimed to be on the road to recovery yesterday, after posting a healthy net profit for the fourth quarter of 2002. Although full year losses reached 9.5 billion, the highest in Dutch corporate history, profit after tax for the fourth quarter stood at EUR7 million, compared to a loss of EUR6.3 billion at the end of 2001, while EBITDA, excluding exceptional items, improved to EUR1.2 billion from EUR944 million. KPN Mobile reported revenues of EUR1.25 billion in the fourth quarter of 2002, up 15.1% on the previous year thanks to a restructuring of the unit in December 2002, although this has caused a slight decrease in subscribers in its domestic market. KPN’s debt – which stood at EUR23 billion at the peak of its financial problems – was cut from EUR15.74 billion at the beginning of 2002 to EUR12.35 billion by the end of the year, thanks to a series of cost cutting measures including around 4,000 forced redundancies. KPN says it plans to continue reducing its debt over the next few years, and has forecast EBITDA growth of around 5% for 2003.

As part of its new focus KPN, through its 85% owned subsidiary KPN Mobile, plans to invest significantly in its 3G networks across Europe during 2003, despite its 2002 loss being mainly attributable to write-downs of previous spending on the technology. The telco has said it will spend EUR1.4 billion on 3G by the end of 2005, focusing mainly on its German operation, E-Plus. After losing market share to dominant players Vodafone and T-Mobil in the German 2G mobile market, E-Plus has made a bid for the 3G assets of troubled rival MobilCom and is currently in talks with O2 Germany over a potential merger. KPN plans to launch commercial 3G services in Germany in early 2004 and says it will pilot the service in the Netherlands later on this year. At the end of 2002 KPN Mobile had 5.03 million cellular subscribers in its domestic market and 7.27 million customers in Germany.

CIT's Datafile of European Telecommunications