KPN reported second-quarter results in line with market expectations and maintained its outlook. The company also announced lay-offs of 2,000 to 2,500 at its IT unit Getronics, with a restructuring charge to follow in the second half of the year. This is part of the earlier announced plans to cut up to 5,000 jobs in the Netherlands. KPN's quarterly revenues fell 1.9 percent to EUR 3.29 billion, and EBITDA dropped 5.6 percent to EUR 1.31 billion. The group was hurt by mobile termination rate cuts, a continued loss in fixed lines which could not be fully compensated by growth in the TV market, and the ongoing substitution of voice and SMS services with VoIP and chat applications. KPN also saw tough competition on the low end of the mobile market for its unit Telfort, price pressure in the business market with higher subscriber acquisition costs, and difficult market conditions for Getronics, with little demand for managed services and cautious customers.
KPN's net profit was down 11 percent from a year ago to EUR 414 million, and EPS fell 3.4 percent to EUR 0.28. Free cash flow increased 12 percent from a year ago to EUR 792 million, while net debt was at EUR 12.5 billion, up from EUR 11.8 billion in Q1 due to the ongoing share buyback and dividend payments. At 2.4 times EBITDA, debt is still within KPN's target range of 2.0-2.5. The company's outlook for 2011 remains EBITDA of at least EUR 5.3 billion, capex of less than EUR 2 billion, higher free cash flow and a dividend of at least EUR 0.85 per share. For 2012, the company forecasts free cash flow of EUR 2.4 billion and an increase in the dividend to EUR 0.90.
The company outlined measures underway to improve results, including its recently announced new mobile plans launching in September, "brand improvement" at Telfort, more upselling in the Dutch mobile business for customers exceeding their monthly bundle, cost reductions, customer retention initiatives at KPN Business, quality improvements in customer services and the workforce reduction which included a charge of EUR 13 million in Q2. New products planned include multi-room TV with a free second decoder, TV sales started at XS4ALL and to follow at Telfort, extension of VDSL to 40 percent of homes with over 40Mbps by the end of this year, and the launch later in 2011 of FTTH at 500Mbps.
