Tuesday, August 01, 2006

EARNINGS://KPN's cool leverage still there

KPN shows dramatically expanding margins, resulting from E-Plus (low revenue growth but finally meaningful operating income), KPN Mobile NL (high revenue growth because of Telfort acquisition), cost savings (ahead of target: 40% of FTE's at Fixed from 2004 to 2009) and Telfort integration (just started; to be completed 2008).

Meager 1% revenue growth (negative growth without acquisitions, no doubt!) translated into 10% higher EBITDA, 20% higher operating income and doubling net profit and EPS, although from a low base, helped by tax rate and share buy-back. Cool cost savings and leverage. Maintaining a good track record. FCF TTM still growing.

Mobile almost the same size of fixed now by revenue. Looks like it will be bigger from next quarter. By now 18% of households is mobile-only. Within Fixed, voice is still twice the size of internet by revenues. Dial-up revenues have almost disappeared (EUR 11m).

Going forward:
  • More MTA cuts and international roaming cuts.
  • Investing in Mine, start of All IP network
  • Cost cutting will become more dificult as time passes, but Telfort integration effects still to come.
  • Probably more smart acquisitions, mainly in ICT.

  • Line loss record 253k qoq. Dual play 'InternetPlusBellen' doubles to 153k qoq (nu numbers yet for Slim, the no-frills VoIP product). Net line loss accelerated to 165k qoq. Gains in dual play over line loss increases to 33%. Access revenues and traffic revenues down a record 12% and 13%.
  • Market share maintained in traditional telephony (65%), but dropped by 5 pp qoq (!) including VoIP.
  • By 2007 Digitenne (DTT) will be available nationwide and KPN will start marketing Mine (IPTV) in October. Coverage of the ADSL2+ network has not been extended the last few quarters and will remain at 57%. It remains to be seen how the new All IP network (FTTC build-out starts 2007 in 28k towns) will offer open access.


  • Sales growth decelerated further (partly for drop in handset revenues), but EBITDA exploded (Telfort, lowered SACs/SRCs, improved ARPU and churn, volumes up), resulting in decent margins.