KPN Business Q4: end to fall in sales not yet in sight

Wednesday 10 February 2016 | 16:20 CET | Background

KPN's business division has always been its problem child. While the Consumer Residential division has started to take market share from cable, and Consumer Mobile has brought to an end a long period of contraction, KPN Business continues to report sharply lower revenues. And the end of its problems is still not in sight. 

The erosion in revenues remains significant, with a 10 percent fall in the fourth quarter of 2015. Costs are not yet falling as fast, suggesting KPN needs to put in a bit more effort (even if cost savings are slightly ahead of schedule at the group level). The company is investing in new services and simplifying the organisation, leading to pressure on margins.

The various revenue components developed as follows in Q4.

  • Voice & Internet. Revenues fell 13 percent. On a rolling 12-month basis, the decline was 15 percent, weaker than previous quarters. The same as in the preceding quarters, KPN lost between 30,000 and 40,000 fixed lines, a decline not fully compensated by the migration to VoIP. The total number of lines has halved since the end of 2009 to 719,000. Revenues from traditional telephony are contracting and are now double those of internet and VoIP, compared to a ratio of 3:1 in mid-2014. The revenues also appear to be coming more from access than usage. ARPU was stable at EUR 51.
  • Data network services. Again a sharp fall in revenue, of 12 percent.
  • Mobile. Revenues fell 5.9 percent, and service revenue was down 5.4 percent. This is driven by:
    1. A drop of 4,000 in (postpaid) subscribers to 1.8 million, while M2M connections increased by 223,000 to 1.5 million.
    2. Usage: KPN only reports total data traffic. If we consider M2M traffic insignificant in order to simplify things, we calculate an average of 2.8 GB per user per month. This is almost double the 1.5 GB a year ago.
    3. ARPU. The ARPU for standalone (single-play) mobile subscriptions is on the decline and fell 11 percent in the latest quarter to EUR 33. KPN talks of 'repricing', in other words lowering tariffs in order to remain competitive.
  • IT services and other revenue (mainly hardware). Revenues fell 5.7 percent at IT and were down 27 percent at 'other'.

KPN Business also reports multi-play revenues of EUR 33 million, up 57 percent. This comes from work stations that include a mobile subscription (+42,000 in the quarter to 472,000) and mobile subscribers that also take fixed services (+41,000 to 377,000). However, this revenue is already included in the above four components. Given the development in these revenues, it is still too early to talk of any stabilisation, not to mention a return to growth. 

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