KPN CEO confident despite 98% drop in profit in the first quarter

KPN remains confident its financial performance will stabilise toward the end of 2014, despite a near 100 per cent drop in net profit in the first quarter of the year.

The Netherlands-headquartered operator's net income fell from €152 million ($210 million) in the opening quarter of 2013 to €3 million in the recent period, as revenues and EBITDA fell 8.2 per cent and 22 per cent respectively year on year.

KPN's free cash flow also dropped dramatically--down from €110 million in the first quarter of 2013 to minus €292 million in the 2014 period. The operator said the figure was impacted by intra-year phasing, the drop in EBITDA, and a €50 million payment as part of a settlement relating to its KPNQwest joint venture.

The company blamed fierce competition in its mobile markets, and a decline in its business market for the drop in revenues and EBITDA. Other factors cited include the phasing out of a handset leasing scheme on the company's KPN and Hi brands.

Chief executive, Eelco Blok, remained bullish despite the drops. "In the first quarter of 2014 we have made good progress with the execution of our strategy. We have completed the rollout of 4G in the Netherlands and are substantially ahead of the competition. These investments can now be scaled back leading to lower capex levels," he said.

Blok noted the operator saw "high postpaid net adds" in the opening quarter of 2014, and "continued good IPTV net adds in the consumer market."

KPN said it now has over 1 million 4G subscribers in its domestic market, and 62,000 IPTV subscribers--equivalent to a 26 per cent share of that market. Triple-play penetration hit 46 per cent during the quarter, and the company added 62,000 quad-play customers.

Operations in Belgium proved challenging, with revenue down 3.3 per cent year on year, and EBITDA declining 11 per cent. The operator's German business, E-Plus, provided a bright spot, however, with EBITDA up 14 per cent year-on-year, and revenues growing 2.5 per cent.

Blok said the company is confident a €8.5 billion deal to sell E-Plus to Telefónica Deutschland will be cleared by the European Commission in June. "This will allow us to pay a sustainable and growing dividend, combined with a solid financial profile," he noted.

For more:

- see KPN's earnings [PDF]

Related Articles:
German regulator wants merged Telefónica, E-Plus to cede spectrum
Report: EU to raise objections to Telefónica's E-Plus deal
EC keeps grip on Telefónica Deutschland, E-Plus probe
KPN says on better terms with América Móvil
KPN shareholders approve sale of German E-Plus unit to Telefónica

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