KPN targets further savings of €300M a year by end-2019

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KPN unveiled a new strategy designed to reduce capex and opex by a further €300 million ($329 million) a year by the end of 2019, bringing total cost savings to at least €750 million by that point compared to 2013.

The Dutch operator said it is already on track to realise €450 million in annual savings by the end of 2016 under its previous strategy for the 2013-2016 period. The company noted that the additional savings "will primarily be realised through further simplification and rationalisation of back-end IT processes and systems, and network infrastructure."

The "second-wave" cost saving plan forms part of a wider strategy unveiled by KPN CEO Eelco Blok for the coming three to five years, as the operator seeks to keep pace with rising data traffic and a surge in connected devices.

"To stay ahead, we are evolving our strategy to the next level which we call simplify - grow - innovate," said Blok. "Based on this strategy, we will maximise value for our shareholders and all other stakeholders while maintaining a solid financial profile."

KPN added that consumer revenues are expected to grow further supported by increasing fixed-mobile penetration and growing revenues per household. It also expects to improve profitability and stabilise revenue in the business segment.

Overall, the company said the "improving revenue trajectory" combined with the new cost-reduction programme will benefit profitability, with the adjusted EBITDA margin for the Netherlands expected to increase by at least three percentage points in the medium-term compared to 2015. Capex is also expected to be lower at 15 per cent to 17 per cent of sales in the medium-term.

"Together, these trends will result in strong free cash flow growth potential, also supported by lower interest payments and limited cash taxes in the Netherlands," KPN added, noting that it expects to "distribute a large part of excess cash to its shareholders while remaining committed to an investment grade credit profile."

The company is set to face more competition in future after Vodafone and Ziggo owner Liberty Global said that they intend to combine their respective mobile and cable forces in the Dutch market.

For more:
- see this KPN announcement

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