The largest telephone company in the Netherlands, KPN NV, has dented hopes of a revival in the fortunes of the telecoms sector, after warning that it expects pre-tax profits and even revenues, to decline next year.
KPN blamed the downbeat projections on the Dutch telecoms watchdog, which recently ordered a cut in charges from fixed lines to mobile phones. Until then, fixed-line calls to mobile networks in the Netherlands were over 20% more expensive than the EU average.
KPN’s bleak outlook has rattled investors and analysts, who were predicting a recovery in the telecoms sector. The shock is even more acute, as KPN had seemingly put its financial troubles behind it, after it came close to collapse two years ago, when like most other European carriers, it racked up record losses and huge debt.
At its height, KPN had a debt burden of more than 22bn euros ($26.9bn), which triggered asset disposals, disposing of a third of its workforce, plus a 5bn euros ($6.1bn) rescue share issue in November 2000. The debt level is expected to reduce further to around 8.6bn euros ($10.5bn) by the year-end.
KPN warned its pre-tax profit next year would be below that it expects in 2003. Shares in the operator fell 8.7% to $7.32 on the New York Stock Exchange, as of 4.30pm GMT Wednesday.
The operator said ahead of a presentation to analysts that pre-tax profit would fall from approximately 1.5bn euros ($1.8bn) in 2003 to about 1.4bn euros ($1.7bn) next year, before climbing above 1.5bn euros ($1.8bn) in 2005. However, KPN then later backtracked and said that its initial projection was conservative and the 2004 pre-tax profit figure could amount to 1.7bn euros ($2bn) before rising to 1.8bn euros ($2.2bn) in 2005.
Revenues for 2003 are expected to remain flat with the 12.2bn euros ($14.9bn) it made in 2002. For 2004, KPN estimated zero growth at best, with a 2% decline at worst.
Mobile sales are expected to slow from an expected 9% this year, to between 5% and 7% in 2004, and at least 7% in 2005. Fixed-line revenue is expected to fall 5% to 7% in 2004, and 3% to 5% in 2005, after flat sales in 2003.
KPN’s management is counting on the uptake of broadband as the key to future revenue growth. It expects 1 million ADSL customers by the second half of 2004, compared to existing broadband client base of 710,000. It also hopes to expand its German and Belgian businesses.
This article is based on material originally produced by ComputerWire.