KPN Earnings Miss Estimates on Mobile Markets Price Pressure
Royal KPN NV (KPN), the biggest Dutch phone company, reported first-quarter earnings that missed analysts’ estimates as price pressure in mobile operations continued and the corporate market declined.
Earnings before interest, taxes, depreciation and amortization fell 22 percent from a year earlier to 624 million euros ($863 million), The Hague-based carrier said in a statement today. That compared with analysts’ 628 million-euro average estimate compiled by Bloomberg.
Plans to eliminate as many as 2,000 jobs announced in February will be “mostly focused” on the corporate business, Chief Executive Officer Eelco Blok said on a call with reporters. According to the CEO, the workforce cuts won’t fully compensate for a fall in corporate revenue, although he predicted an improving trend for the business.
KPN is facing intensifying competition in the Netherlands with cable operator Ziggo NV (ZIGGO) set to join forces with Liberty Global Plc (LBTYA)’s UPC this year. Together Ziggo and UPC will control about 90 percent of the Dutch cable market. KPN and Ziggo compete in television and Internet services as well as in mobile services, which Ziggo started offering last year. Ziggo said last week it reached a mobile subscriber total of 63,000 at the end of March.
KPN shares fell as much as 2 percent and were trading 1.5 percent lower at 2.47 euros as of 11:42 a.m. in Amsterdam. The stock has gained 5.6 percent this year.
“Operationally the results are below expectations,” Stefaan Genoe, an analyst at Petercam SA, said by phone. “It’s striking to see that 7,000 broadband customers have left, which underscores the new efforts by Ziggo and UPC since the end of last year.” The improvement in post-paid mobile customers in the Netherlands stands out positively in the results, Genoe added.
Blok said on the call he isn’t too concerned regarding KPN’s consumer business, because the average revenue per user of new customers is above the current average.
KPN is in the process of securing European Commission approval for the sale of its German brand E-Plus to Telefonica SA. The commission has postponed its ruling on the 8.55 billion-euro sale to June 23 from May 14. KPN has said it will resume dividend payments from 2014 as soon as the sale of E-Plus is finalized.
“We are confident we will obtain regulatory approval in June and that the sale will complete shortly thereafter,” Blok said in the statement.
America Movil SAB, which withdrew a takeover bid for KPN last year after disagreeing on the price and corporate governance, in the past few months has decreased its stake in the Dutch company to 24.8 percent on April 16, from 29.8 percent at the time the Mexican company announced its intention for the offer. Although a Dutch deal has so far failed, billionaire Carlos Slim’s company agreed this week to share control of Telekom Austria AG with the Austrian government.
Blok said he followed the Austrian developments with interest, but didn’t want to speculate on the implications this has on America Movil’s interest in KPN. There has been talks between KPN and the two supervisory board members of the Mexico City-based company, but these were “solely operational” prior to publication of the first-quarter results, the CEO said.
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