Dutch operator KPN has presented its new strategy for the period 2021-2023 under the name 'Accelerate to Grow'. The focus is on continued expansion of its fibre network, cost savings and a progressive dividend. Building on the wider fibre coverage, KPN aims to grow the subscriber base while also simplifying its organisation further.
The target is to take FTTP coverage to 50 percent of the country in 2023 and 65 percent in 2025, compared to around a third now. The roll-out will accelerate to 500,000 new premises passed per year from 2021. This should drive growth in service revenues from the consumer, SME and wholesale segments by the end of 2021, thanks to more customers as well as better services.
Fibre is seen as a way to improve the quality of service, build customer loyalty, increase prices and reduce maintenance costs. It will gradually replace DSL in the last-mile network. Together the targeted 'mass market' for growth accounts for 75 percent of revenues and 90 percent of adjusted EBITDA at KPN. A recovery in the large business segment is expected to take another two years.
Lower costs, higher investments
At the same time, the digitisation and simplification of the group will continue. The pandemic has started a drive to implement more remote working and changes in office space. The current cost savings programme will be expanded to EUR 375-400 million and another EUR 250 million in savings targeted over the period 2021-2023.
KPN is increasing the capex budget slightly, to EUR 1.2 billion from the current EUR 1.1 billion. In 2021, spending on the fibre roll-out will increase to EUR 450-500 million from EUR 270-290 million this year. For 2022 and 2023, the total capex budget is set at EUR 1.1-1.2 billion.
Guidance: growth in EBITDA, free cash flow, dividend
KPN reiterated its outlook for 2020 results, reintroduced a forecast for 2021 and provided new targets for 2023:
- 2020: adjusted EBITDA after leases of EUR 2.32 billion, capex EUR 1.1 billion, free cash flow EUR 750 million, dividend 13 cents per share.
- 2021: higher EBITDA, capex EUR 1.2 billion, free cash flow EUR 750 million, dividend growth of 3-5 percent.
- 2023: EBITDA of EUR 2.45 billion, capex EUR 1.1-1.2 billion, free cash flow at least EUR 870 million, dividend growth 3-5 percent.
In 2021, the company aims to limit its tax bill to EUR 50-60 million by making use of tax-deductible losses and consolidated group benefits. The payments will increase to EUR 150 million in 2022, as changes in Dutch tax law will limit the annual deduction of losses. In terms of debt, KPN will target leverage of less than 2.5x.
