KPN posts 12% drop in Q1 earnings, cancels dividend

Dutch operator KPN said it will cancel its dividend for 2013 and 2014, at the same time confirming plans to press ahead with a €3 billion rights issue that was approved by shareholders earlier this month as a measure to reduce debt.

CEO Eelco Blok had previously said that he wanted to see what the reaction would be to the company's first-quarter results before detailing plans of the share issue. The operator posted a 12 per cent decline in first-quarter EBITDA to €1.01 billion, and has decided to cancel plans to pay a dividend of €0.03 for both years, conserving between €40 million and €45 million in cash instead, Reuters reported.

Bloomberg noted that the decision to cancel the dividend stems from the plan to sell stock to existing investors and quoted Blok as saying: "It would be weird to firstly raise capital from our shareholders, and after that return a part of that money to them."

Reuters added that KPN has outstanding debts of €14.4 billion ($18.8 billion) and has already sold a €2 billion hybrid bond and disposed of various assets to keep its debts under control.

KPN has been hard hit by fierce competition, an expensive spectrum auction in the Netherlands and the increased use of over-the-top applications that impact revenues from text messages, for example. Reuters reported that the company's first-quarter earnings were particularly hard hit by a 34 per cent drop at its international mobile unit, notably in Germany, where KPN operates E-Plus and sells mobile services under the Base brand, among others.

KPN said German service revenue should rise in 2013 despite a decline in the first quarter, Reuters reported. The operator has around 24 million customers in Germany.

It has also been speculated that Telefónica is interested in reopening talks with KPN on ways to bring their German businesses together, but the Spanish operator told Reuters that no talks are currently in progress.

"There are no active discussions with KPN on that subject right now," Eduardo Navarro, Telefónica 's director of strategy and alliances, told reporters in Sao Paulo, according to Reuters. "In Germany we have a competitive advantage over KPN, which is our 4G network. So any arrangement would have to preserve that advantage."

Some industry observers had expected that a network-sharing deal would be established for Telefónica's O2 Germany units and KPN's E-Plus in an effort to reduce costs.

For more:
- see this Bloomberg article
- see this Reuters article
- see this separate Reuters article

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