KPN Q1 profits up, sales down; a taste of things to come for European operators?

Dutch incumbent KPN, which is the first out of the blocks among European operators in reporting its first-quarter results, announced a strong rise in net profits, albeit on declining sales.

But the prospects going forward do not look so rosy. In common with operators elsewhere in Europe, the Dutch operator faces a series of tough commercial scenarios to contemplate going forward. In addition to which KPN has said it does not expect an improvement in economic conditions.

The company's CEO Ad Scheepbouwer acknowledged "feeling topline pressure as a result of the economic conditions in the business markets and regulation."

KPN announced a net profit of €449 million for the three months to the end of March compared to €317 million in the same period in 2009. But first-quarter revenues declined by 3.5 per cent to €3.28 billion compared with 2009. Margin growth came through cost cutting. The company reiterated its earlier financial targets for 2010 and 2011.

Like other operators, KPN must contend with higher costs resulting from a series of national spectrum auctions that are kicking off in Europe. KPN is involved in the current German auction. Other auctions will follow in European markets over the next 1-2 years as operators fight over the spectrum they want for LTE-based services.

Also, despite the economic conditions, the number of competitors does not seem to be decreasing, rather the reverse. KPN faces the possibility of two new entrants to the Dutch mobile market.

Finally, regulatory intervention by national authorities and the European Commission has chipped away at traditional sources of revenue. The termination rates that mobile operators are paid for delivering calls to phones are in steady decline, thanks to the intervention of the European Commission

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Total Telecom

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