KPN forced to search for other growth opportunities in broadband

Thursday 12 April 2012 | 12:32 CET | Market Commentary

After its takeover of CAIW was blocked due to competition concerns, KPN's goal of increasing its broadband market share to 45 percent by 2015 will be more difficult to achieve. 

KPN said in its press release that the acquisition falling through will not have an impact on its targets. According to Telecompaper's latest report on the Dutch broadband market, the incumbent had 39.9 percent of the market at the end of 2011. KPN's market share has been in decline since the third quarter of 2007, when it reached a peak of 44.3 percent after the takeover of Tiscali. 

KPN announced the goal of 45 percent market share in May 2011, as part of its 'Strengthen, Simplify, Grow' strategy, which focuses first on organic growth but does not rule out takeovers. KPN announced the agreement to acquire CAIW from CIF shortly thereafter. In September 2011, a second takeover followed, to acquire a number of fibre service providers from Reggeborgh and Reggefiber, including around 100,000 broadband customers. This takeover must still be cleared by the competition regulator NMa and could stand a better chance of going ahead now that the CAIW deal was canceled. 

If both acquisitions had gone ahead, KPN's market share pro forma for the end of 2011 would have increased by around 2.7 percent points to 42.6 percent. Without the CAIW customers but including the fibre providers, this would of been just 41.4 percent.

Further growth in its market share will likely have to come from organic growth, and KPN has been struggling with this. In the past seven quarters, the total number of broadband customers has been falling, as growth in subscribers over fibre networks has not been enough to offset the decline in DSL customers.

In a press release of 11 April on the appointment of Jesper Eriksen as head of the residential consumer activities, KPN repeated its strategy for 2012: accelerated investments to strengthen its position on the consumer market and bring a halt to the decline in broadband market share this year.  Earlier at its fourth-quarter report, KPN said that the accelerated investment would mean spending on the expansion of fibre/copper networks. In addition, this can mean more local marketing activity in areas where fibre is already available and where Reggefiber is running demand assessments among residents. 

The question is whether KPN's increased investment can deliver the desired result in the near term, given that the big cable operators have already completed their network upgrades to Eurodocsis 3.0, and can now concentrate completely on marketing to grow their shares of the broadband market. KPN has at least taken up the challenge. 

Telecompaper is organising on 20 June in Laren the conference Breedband 2012.

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