24 Jul 2012
Under pressure Dutch telecoms operator KPN Telecom (or Royal KPN) has reported a sizeable fall in net income for the three months ended 30 June 2012, forcing it to slash its dividend to EUR0.35 (USD0.42) per share in 2012, down from the previous figure of EUR0.90 a share; it paid a dividend of EUR0.85 in fiscal 2011. Amid fierce conditions in its home market, the Dutch carrier booked net profit of EUR315 million in the three months under review, down sharply from EUR414 million is the corresponding period of 2011, impacted by weak margins – particularly in its home mobile (consumer) business. In its first results since Carlos Slim’s America Movil acquired a roughly 28% stake in the European carrier, KPN said that turnover for the April-June quarter fell 3% year-on-year to EUR3.19 billion, with KPN noting that the wider proliferation of smartphones in the country (>50%) means that users are using IP-based services such as Skype and smartphone messaging service WhatsApp, to the detriment of its traditional core voice/SMS revenues.
Commenting on the decision to slash the dividend, KPN chief executive Eelco Blok said the pre-emptive move was not taken lightly, adding: ‘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’. Blok’s management team is implementing a cost-cutting plan to counteract falling sales and profits, including measures to shed between 4,000 and 5,000 staff by end-2013. It is also understood to have started the process to sell its Belgian unit BASE.
Despite the pessimistic results, KPN says it is on course to achieve its FY12 target for free cash-flow of EUR1.6 billion-EUR1.8 billion, and EBITDA in the EUR4.7 billion to EUR4.9 billion range, excluding the costs related to its job rationalisation plan.