KPN profit growth in 2015 masks underlying declines in revenue, EBITDA

KPN CEO Eelco Blok said the operator will focus on increasing consumer revenues and expanding its service offerings during 2016 after it recorded a steep fall in earnings in 2015.

Blok said 2015 had been a success in terms of increasing subscriber numbers in its fixed and mobile businesses, but noted that the Netherlands had proved a "challenging business market" throughout the year as "customer needs are changing from traditional to new services."

Earnings figures released on Wednesday show KPN increased net profit from €261 million ($285 million) in 2014 to €524 million in 2015, while the figure for the fourth quarter increased from a €16 million loss in fourth-quarter 2014 to a profit of €254 million in the recent quarter.

However, KPN's profits came amid declines in revenues, EBITDA and operating profit.

Full-year revenues declined 5.4 per cent to €7 billion and were down 9.7 per cent year-on-year in the fourth quarter at €1.7 billion. EBITDA declined 19 per cent year-on-year to €2.3 billion in the full year and 12 per cent in the fourth quarter to €578 million. Full-year operating profit of €708 million in 2015 was 42 per cent lower than 2014, while the figure for the fourth quarter declined 7.6 per cent year-on-year to €582 million.

Average analyst estimates for fourth quarter revenues were €1.79 billion, Bloomberg reported.

The operator's consumer mobile division fared better than the overall group, with full-year revenue up 3.8 per cent at €1.4 billion and EBITDA growing 42 per cent year-on-year to €272 million. In the fourth quarter, the mobile business increased revenue 4.3 per cent year-on-year to €367 million, with EBITDA growing 21 per cent to €47 million.

In contrast, KPN's business division saw 2015 revenue decline 8.9 per cent year-on-year to €2.6 billion and EBITDA fall 26 per cent to €439 million. Fourth quarter figures showed a similar pattern, with revenue down 11 per cent year-on-year at €672 million and EBITDA falling 23 per cent to €112 million.

Blok stated that KPN "achieved strong customer base growth in consumer in 2015 as a result of our focus on delivering an excellent customer experience".

Increasing customer satisfaction is one of the operator's key goals for its business division during 2016, Blok said. "We are rationalising and standardising the business organisation" to improve customer experience, "capture growth in new services and support profitability going forward," the CEO explained.

In 2016 the operator aims to maintain adjusted EBITDA at around the same level as the €2.4 billion achieved in 2015, and to achieve free cash flow of at least €650 million. The cash flow figure excludes an anticipated dividend relating to the sale of 5 per cent of KPN's holding in Telefónica Deutschland, which took place in the fourth quarter of 2015.

For more:
- see KPN's earnings announcement (PDF)
- read this Bloomberg report

Related articles:
Liberty Global and Vodafone consider Dutch joint venture
KPN teams with Rabobank to launch Android-smartphone NFC mobile payment service
Report: Dutch multi-play revenue nears €1B in Q3
Vodafone NL sues KPN for delaying its multi-play ambitions
América Móvil COO steps down from KPN board as part of stake sale plan

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