KPN reports 32% fall in third-quarter profits; blames price competition in Germany

23 Oct 2012

KPN Telecom, or Royal KPN as it is also known, has reported a 32% slump in net income to EUR250 million (USD326 million) from EUR368million in Q3 2011, blaming renewed price competition in Germany, where it owns wireless operator E-Plus, and declining mobile subscription revenue as the primary reasons. The Hague-based company, which is now part-owned by Carlos Slim’s America Movil (AM) group, fell short of analyst expectations which had expected net profits of EUR326 million, in a poll compiled by Bloomberg. Revenue for the three months to 30 September dipped by 6.5% y-o-y to EUR3.05 billion, it said.

Commenting on the poor performance, KPN’s chief executive Eelco Blok said: ‘Against an uncertain and challenging macro environment we have seen mixed performance across the group’. The CEO predicts that whilst KPN is on course to hit its full-year market-share targets for 2012 in the Netherlands, it will see a slowdown in Germany as price competition intensifies. The carrier has confirmed its 2012 outlook for earnings before interest, depreciation and amortisation (EBITDA), excluding restructuring costs of between EUR4.7 billion-EUR4.9 billion, with free cash flow of EUR1.6 billion-EUR1.8 billion. Blok’s firm also reiterated its outlook for a 2012 dividend of EU0.35 per share. KPN reported that Q3 2012 EBITDA (excluding restructuring costs), fell to EUR1.17 billion from EUR1.33 billion in Q3 2011.

2012 has been a particularly difficult one for KPN which, in a bid to shore up its balance sheet, attempted to sell off its Belgian asset BASE earlier this year. In August though, it was forced to pull the plug on the plan when it failed to attract enough interest in the unit. Commenting on the decision to abandon the sale of BASE – the smallest of Belgium’s three main operators behind Belgacom and Mobistar – the telco said: ‘Current difficult financial market conditions are reflected in unsatisfactory non-binding offers for BASE.’ In the meantime, Blok has ramped up job cuts and confirmed he plans to eliminate as many as 5,000 positions in the Netherlands by the end of 2013.

Netherlands, BASE Company, E-Plus Group, KPN