KPN Widens Cost-Cut Target as Rivalry Hurts Mobile Prices

Royal KPN NV widened a cost-savings goal by 33 percent as competitors’ expansion puts pressure on the Dutch phone company’s mobile and broadband pricing.

Spending reductions in the three years through 2016 will total 400 million euros ($458 million) after some divisions met targets early, the Hague-based carrier said today. Adjusted earnings before interest, taxes, depreciation and amortization will be stabilized by the end of 2015, it said.

KPN is seeking to protect profit with a spending-reduction program as companies including Tele2 AB, Vodafone Group Plc and Liberty Global Plc add competing phone or online services in the Netherlands. Revenue growth in the fourth quarter was held back by sales promotions for broadband and Internet-protocol television, household and corporate mobile-service packages and Belgian sales of handsets, the Dutch company said today.

Gains in customer numbers last year probably won’t “translate into Ebitda growth in 2015,” Marc Hesselink, analyst at ABN Amro Bank in Amsterdam, said by phone.

KPN rose 1.9 percent to 2.85 euros as of 11:08 a.m. in Amsterdam. The stock has gained 8.4 percent this year, valuing the company at 12.2 billion euros.

Fourth-quarter Ebitda from continuing operations rose 19 percent to 691 million euros, KPN said. Profit exceeded the 625 million-euro average of analyst estimates compiled by Bloomberg. Sales increased 2.1 percent to 2.1 billion euros, also beating the consensus estimate.

Product ‘Investments’

“The investments in our customers, products and networks have resulted in growing customer bases,” Chief Executive Officer Eelco Blok said in the statement. “We will continue to build on solid fundamentals through strong customer focus, strengthening capacity of our networks.”

KPN widened a workforce-reduction target to a range of 2,000 to 2,500 jobs from an earlier cutback plan of 1,500 to 2,000 positions.

The company’s consumer fixed-mobile division added 116,000 subscribers in the quarter while the enterprise unit gained 44,000 multiplay users. Broadband and Internet-protocol television services gained 41,000 and 83,000 new customers respectively.

Telefonica Deutschland

The Netherlands is KPN’s main market after the sale of the German brand E-Plus to Telefonica Deutschland Holding AG in October. Blok said in November that he’ll mostly target small domestic takeovers, and he doesn’t foresee mobile-network consolidation in the coming three years.

The company hasn’t taken a decision yet on the 20.5 percent stake in Telefonica Deutschland that KPN obtained in the transaction, the CEO said.

“There hasn’t been a decision yet. The three options are to hold, sell or to distribute among our existing shareholders,” Blok said during a press conference in The Hague. “We think it’s a good investment. We truly believe that the German management is capable to realize the synergies they say they can realize and we also expect a dividend stream from Telefonica Deutschland.”

KPN can sell the stake from April. Telefonica Deutschland shares traded at 4.84 euros at 10:17 a.m. in Frankfurt, valuing the company at 14.4 billion euros and KPN’s stake at about 3 billion euros.

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