KPN chief bullish on full year despite Q3 losses

KPN failed to profit from subscriber growth in the third quarter, with the company slipping to a net loss during the period as group revenue fell.

KPN CEO, Eelco Blok

The Netherlands-headquartered operator generated a loss of €76 million ($96.8 million) in the recent quarter compared to a profit of €87 million in the third quarter of 2013, despite adding 84,000 postpaid users to its consumer mobile division in the recent period and increasing the number of converged fixed-mobile customers. Group revenue fell 4.9 per cent year-on-year to €1.9 billion in the third quarter.

Figures for the nine months to end-September show a similar trend. Net profit fell 31 per cent year-on-year to €276 million, and revenue declined 6.8 per cent to €5.9 billion.

Despite the declines, CEO Eelco Blok said KPN made "good strategic progress" in the third quarter. Gradual improvement in the company's financial performance leaves it "on track for growing free cash flow next year," Blok said, noting that the company will also benefit from lower interest payments in 2015.

Blok added that KPN expects to "benefit from substantial synergies and dividend payments" from the sale of its German mobile business E-Plus to Telefonica Deutschland--a deal that was completed during the third quarter.

"We have recommended dividend payments in respect of 2014, which we intend to grow in respect of 2015," Blok said, adding that a €2 billion bond tender announced on Tuesday "is an important step to align our financial profile with the new company profile."

Analysts at Jefferies International shared Blok's enthusiasm regarding KPN's earnings. In an e-mailed statement, the analysts note that the operator's third-quarter performance "shows ever more tangible evidence that the company is being successfully steered towards the promised stabilisation trends by year-end."

Jefferies noted that trends at KPN's consumer mobile division "are in-line with earlier indications for incremental stabilisation following a difficult 1H," and that its consumer residential (or 'fixed' division) generated strong growth in earnings before interest, depreciation and amortisation (EBITDA) as cost control measures began to pay off.

KPN's business division generated revenues 1.1 per cent higher than consensus during the third quarter, Jefferies added.

For more:
- see KPN's results statement
- read KPN's bond tender announcement

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