April 24 (Bloomberg) -- Royal KPN NV, the largest Dutch phone operator, said it will reach a workforce-reduction target two years early after “making progress” with job cuts. Its shares jumped the most in almost eight months.
KPN now plans to eliminate as many as 5,000 positions in the Netherlands by 2013, when it has a “tough but achievable” goal of cutting costs at headquarters by 30 percent to 40 percent, the Hague-based company said today in a statement. First-quarter profit dropped 51 percent because of the increased costs of reorganization as well as investment spending on its struggling domestic mobile operations, KPN said.
“At the end of the year we hope to have achieved a sustainable profit level in the Netherlands,” Chief Executive Officer Eelco Blok said in a conference call today. Earnings and cash flow will probably improve in the second half of the year as cost savings and new mobile-phone subscription models will start to have an effect, he said.
Phone companies such as KPN, Deutsche Telekom AG and Vodafone Group Plc are struggling with changing consumer behavior as customers increasingly communicate with calling software such as Skype or the WhatsApp messaging technology on smartphones. In the Netherlands, competition may widen as the government reserves some space for new operators in an auction of mobile frequencies later this year.
KPN rose as much as 5 percent to 6.90 euros, the biggest intraday gain since Sept. 6, and traded up 2.9 percent as of 12:34 p.m. in Amsterdam. That pared the stock’s decline this year to 26 percent.
Net Income Falls
First-quarter net income dropped to 288 million euros ($379 million) from 591 million euros a year earlier. Profit missed the 311 million-euro average of 10 analyst estimates compiled by Bloomberg. Revenue and other income declined 1.4 percent to 3.19 billion euros.
“Investors are still counting on a dividend increase in 2013 and for this year the dividend is still guaranteed at 90 cents -- that’s what the market seems to be focusing on given the weak results,” Jos Versteeg, an Amsterdam-based analyst at Theodoor Gilissen Bankiers, said by phone.
KPN may raise its dividend to 94 cents for 2013, according to a Bloomberg estimate. Operators including France Telecom SA and Telefonica SA have cut dividend targets.
Earnings before interest, taxes, depreciation, amortization and excluding restructuring charges decreased 12 percent to 1.12 billion euros. For the full year, KPN is targeting Ebitda of 4.7 billion euros to 4.9 billion euros.
Blok predicted at the start of the year that profit and free cash flow will decline in 2012 as the company accelerates Dutch investments to ensure “suitable” earnings.
KPN said April 16 that it has started a review of the future of its Belgian mobile phone unit BASE, which people familiar with the matter estimated may fetch about 1.8 billion euros in a sale. The company said today that the results of the review are “not yet clear.”
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