KPN books 63% fall in Q4 profit; lowers outlook, scraps buyback

24 Jan 2012

Dutch incumbent operator KPN Telecom, or Royal KPN as it is also known, has reported a 63% year-on-year decline in net income for its fourth quarter ended 31 December 2011, attributable to competition in its home market and the impact of impairment charges related to its IT services business Getronics. The telco has reacted to the weak results by lowering its outlook for FY2012 – a period it sees as one of transition in an unstable macroeconomic climate.

The Netherlands’ biggest telecoms company by subscribers and revenue reported net profit of EUR176 million (USD227.9 million) in Q4 2011, down from EUR475 million in the corresponding year-ago period, impacted by a EUR298 million charge on Getronics. Fourth-quarter revenue of EUR3.38 billion was also down from EUR3.39 billion last time, and earnings before interest, taxes, depreciation and amortisation (EBITDA) fell 3.2% year-on-year to EUR1.32 billion, hampered by restructuring costs of EUR22 million. The telco also fell short of its target of generating EBITDA of over EUR5.3 billion in 2011, having already trimmed its full-year guidance from the EUR5.48 billion figure achieved in FY2010. The EBITDA results also exclude the costs related to its plan to cut between 4,000 and 5,000 jobs at the group between 2011/15.

Despite the weak Q4 results, KPN said its full-year performance was in line with expectations and that taken overall, its objectives were achieved. The group’s domestic results however, were below par and although it reported some success in the TV and fibre segments, its mobile arm struggled as a result of large numbers of customers reducing traditional voice call and SMS usage in favour of internet-based alternatives such as Skype and WhatsApp. On a more positive note, the group’s German and Belgian businesses fared well last year, helping maintain KPN’s full-year revenues at EUR13.16 billion, down 1.8% y-o-y. Full-year EBITDA declined 6.2% y-o-y to EUR5.13 billion and including the impairment charge, net income fell 14% to EUR1.54 billion. In 2012 the Dutch group is forecasting free cash-flow in a range of EUR1.6 billion-EUR1.8 billion, down from its previous target of around EUR2.4 billion. EBITDA is seen also down from 2011 levels in a EUR4.7 billion-EUR4.9 billion range. KPN is also scrapping its 2012 share buyback programme it said, and instead will expand its investment strategy to reverse its fortunes in its home market. Finally, KPN also said it will sell the international division of Getronics – which booked sales of EUR565 million last year and employs 4,900 staff.

Netherlands, KPN