KPN announced first quarter results, with revenues down 1.4 percent year-on-year to EUR 3.19 billion. EBITDA increased by 13 percent to EUR 1.10 billion while the operating profit declined 21 percent to EUR 564 million. Earnings per share amounted to EUR 0.20. Results were in line with management guidance, with little surprise for investors. The outlook for 2012 is unchanged. EBITDA is expected at EUR 4.7-4.9 billion, capex at EUR 2.0-2.2 billion, free cash flow at EUR 1.6-1.8 billion and the dividend at EUR 0.90 per share.
Capex for Q1 lifted 20 percent from the year earlier to EUR 460 million, with the free cash flow sinking 81 percent to EUR 37 million. The ratio of net debt to EBITDA was at 2.4 at the end of March, against 2.3 the year before, well within KPN’s self-imposed range of 2.0-2.5. Nevertheless, KPN said that the company’s current financial performance was “not in line with our ambitions over the medium term".
KPN described 2012 as a year of transition year and wants to structurally improve performance by investing in networks and the company’s portfolio, as well as by reducing costs. Network investments would include both fixed network and mobile networks in the Netherlands, Germany and Belgium. In Germany, the mobile broadband network will have to cover 80 percent of the population by the end of this year. Distribution capacity for the company at large will also be expanded and Consumer Home (fixed) will move towards a regional market approach, taking into account local differences in the quality of the copper network and the presence of fibre (FTTH).
In order to reduce costs, the company will accelerate its previously announced plans to scrap 4000-5000 jobs. KPN will seek to complete the process by the end of 2013, two years earlier than originally planned. The operator will bring down costs by 30-40 percent at headquarters. It has also made a number of management appointments. KPN is aiming for “a sustainable level of profit from end 2012” in the Netherlands. Market shares in the country (consumer mobile, consumer and business broadband market) must be stabilised by then.
