KPN, the Dutch incumbent telecoms operator, said on Wednesday its cost-cutting efforts were beginning to bear fruit as it forecast flat earnings, rather than further attrition, in its main Netherlands business for the year thanks to fewer fixed-line subscriber defections.
Hundreds of thousands of subscribers have cancelled their domestic phone connections in the last few years, switching to cable television providers or mobile phones. The firm said it cut the number of cancellations to 40,000 in the second quarter from 70,000 in the first quarter, the fifth successive decline.
That allowed it to forecast that earnings before interest, tax, depreciation and amortisation for the Netherlands, excluding acquisitions and restructuring costs, would be at least flat at €3.31bn for the year, compared to previous guidance that it would drop by €100m.
KPN’s upgraded outlook contrasted starkly with cuts to revenue forecasts by both Vodafone and Telenor, the Norwegian operator.
Along with further strong performance at its German E-Plus mobile phone subsidiary, where it gained 780,000 customers in the quarter, the new outlook fuelled a recovery in KPN’s share price which traded up 5.7 per cent by midday in Amsterdam at €10.72.
“We believe KPN is well-placed to weather the storm,” analysts at ING, who rate KPN “buy”, said.
KPN has sought to fight its eroding Dutch customer base by investing in a cheaper, internet protocol-based network and offering its own cheaper voice-over-internet protocol telephone lines to price-sensitive customers.
It has also branched out into digital television and runs one of the big domestic mobile phone networks under various brand names. An announcement by the Dutch telecoms regulator last week that it was likely to deregulate retail pricing and open up cable television networks to competition was seen as positive for KPN.
KPN’s net profit for the second quarter fell to €353m from €400m a year earlier. Earnings per share dropped to €0.20 from €0.22. The company also said it had already completed 80 per cent of a €1bn share buy-back programme for this year.
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