KPN cuts workforce by 25% as competition bites

The new CEO of Dutch-based KPN, Eelco Blok, said the company will cut between 4,000 and 5,000 jobs from now to 2015, and issued a surprise profit warning in the face of increased competition in its home market.

KPN blamed pressure from other mobile and cable operators for this shock forecast, and admitted that it faced lower than expected wireless revenues from the Dutch market as consumers changed their behaviour. The company pointed to the growing use of Facebook and Twitter, together with IM services such as WhatsApp or Research In Motion's Ping service, as contributing to this revenue decline.

Illustrating the problem, Blok told Dow Jones Newswires that the number of text messages sent last month had fallen by 10 per cent year-over-year, compared to a 10 per cent rise a year earlier. He also noted the severe impact on revenues from the enforced reductions in mobile termination rates.

Blok, who only replaced CEO Ad Scheepbouwer a few weeks ago, was expected to announce cost cuts and a new strategy for the company following his appointment.

"This is quite predictable. Scheepbouwer has left, and the new man makes a head start so he can report good results after the first year," Peter Jurgens, an analyst at the financial services firm Keijser Capital, told Reuters. "There is tough competition from many directions...In the past there only was direct competition from phone companies, but now you have all these cable companies," Jurgens added.

Blok told Reuters that the company will introduce new tariff bundles in the coming months in an effort to reverse the revenue losses over the longer term. On a more positive note, Blok confirmed that E-Plus, its German mobile operation, was "firmly on track with profitable growth," and that first-quarter revenues from the subsidiary rose 1 per cent.

KPN, which has been at the centre of merger speculations in the past, is due to announce a strategy update on May 10.

For more:
- see this Dow Jones Newswires article (sub. req.)
- see this Reuters article
- see this BBC article

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