Dutch operator KPN reported second-quarter sales of EUR 3.348 billion, down 1.8 percent from a year earlier. EBITDA improved 4.8 percent to EUR 1.386 billion, and the net profit rose to EUR 465 million from from EUR 370 million a year ago. Capex in Q2 was roughly stable year-on-year at EUR 380 million, while free cash flow dipped 4.3 percent to EUR 707 million. KPN reiterated its outlook for 2010 and 2011, saying its on track for stable revenues this year and will continue to focus on costs, customer value and market share in the Netherlands. The company will pay an interim dividend of EUR 0.27 per share, on the way to 80 cents for the full year. In its home market, quarterly sales fell 2.3 percent year-on-year to EUR 2.393 billion. Consumer sales dropped 5 percent to EUR 990 million, business revenues fell 4.3 percent to EUR 604 million, and wholesale and operations revenue declined 2.8 percent to EUR 704 million. The IT services arm Getronics faced a difficult market and saw sales fall 10 percent to EUR 479 million, while international wholesale carrier iBasis improved sales 34 percent to EUR 237 million. EBITDA at the Dutch division rose to EUR 970 million from EUR 937 million, while the margin improved to 52.2 percent from 50.2. The lower cost base there was helped by another 1,000 job cuts in the quarter and over 2,000 since the start of the year. The International division showed even stronger EBITDA growth of 7.9 percent to EUR 422 million, and revenues up 1.4 percent to EUR 1.038 billion.
In the mobile market, KPN's Dutch consumer acitvies generated service revenues of EUR 448 million, down 6.1 percent from a year earlier due mainly to regulatory price cuts. A focus on profitable customers led to a decline in voice minutes, which was not totally compensated by data services. Data volume was up 50 percent from a year earlier among smartphone users and 30 percent by laptop customers. KPN lost a net 81,000 prepaid and 6,000 postpaid customers in the quarter, for a total 5.992 million custoemrs at end-June, down 11.8 percent from a year ago. ARPU of EUR 25 was up from EUR 23 in Q1 and the year-earlier period, with non-voice services accouunting for 34 percent fo the total versus 27 in Q2 2009. KPN said it plans to introduce new data plans in the second half, which will better support investments in expanding its mobile network. These will be differentiatied on price, volume and speed, going from occassional users to heavy users and business plans. At the company's consumer fixed-line activities, the number of TV customers grew by 55,000 in the quarter to 1.088 million, with Digitenne up by 9,000 to 895,000 and Interactieve TV up by 46,000 to 193,000. The number of broadband customers fell by 26,000 to 2.568 million, while fixed line loss was in line with previous quarters at 72,000 and VoIP susbcribers rose by 10,000. KPN said the number of IPTV customers has been growing more quicly since May, with around 4,000 additions per week, helping to stabilise the broadband base. KPN said it completed the upgrade to VDSL in April, and since then 80 percent of homes can receive its IPTV service and 70 percent HDTV. The next step is expanding VDSL to exchanges further out, to offer IPTV to 88 percent of the footprint. FTTC will not be expanded further, with FTTH the favoured long-term option. At the end of Q2, KPN had 26,000 homes activated on the Reggefiber FTTH network and passed in total 288,000. The total Reggefiber network had around 659,000 homes passed, although KPN does not offer services to all of these. KPN said it plans to further extend its footprint in this area, although activating lines takes time. Currently the service offering is not good enough and not presented effectively to potential customers given the strong competiion, the operator said. As a result, the customer base has been less than desired in the roll-out phase. The operator has lowered prices, expanded sales channels and streamlined the activation process to help increase numbers.
In the business market, KPN said it suffered from the continued economic weakness. Revenues of EUR 604 million were down 4.3 percent from a year ago, and EBITDA fell 6.6 percent to EUR 197 million. Revenues from fixed-line services fell 7.8 percent to EUR 342 million, with the number of acess lines down to 1.414 million from 1.533 million a year earlier and 1.446 million in Q1. Business DSL grew by 20,000 from a year ago and 5,000 from Q1 to a base of 150,000. VPN connections increased, but on the less-profitable unmanaged market. Business mobile service revenues were stable year-on-year at EUR 246 million. The mobile customer base increased by 3,000 from Q1 to 1.715 million, of which 50 percent had mobile data plans. ARPU declined to EUR 48 from EUR 51 a year ago, while SAC/SRC was also down sharply by around EUR 100 to EUR 215. The IT services arm Getronics faced a difficult market and saw sales fall 10 percent to EUR 479 million, while the EBITDA margin improved to 8.4 percent from 6.1 in Q1 as cost reductions continued and restructuring costs lessened. KPN said that while the Dutch market is recovering more slowly than the rest of Europe, Getronics is on track for a full-year EBITDA margin of 8 percent.
