Dutch operator KPN reported third-quarter results showing sales down 8.8 percent to EUR 3.33 billion while EBITDA rose 4.4 percent to EUR 1.33 billion, pushing the EBITDA margin to 39.9 percent from 36.3 percent the year before. The operational profit, or EBIT, lifted 7.3 percent to EUR 752 million, while the net profit increased 12 percent to EUR 395 million and earnings per share added 25 percent to EUR 0.25. KPN said it is on track with its 'Back to Growth' strategic plan and maintained its guidance for 2009 and 2010. The quarterly results were roughly in line with market expectations. Market watchers forecast sales at EUR 3.43 billion, EBITDA at EUR 1.33 billion, a net profit at EUR 390 million and EPS at EUR 0.24. Sales were fractionally below expecations, while the EBITDA was higher.
The sales decline was partly attributed to a number of Getronics business unit disposals. Excluding these disposals, sales fell 5.1 percent from the year before, and EBITDA rose 4.4 percent. Group sales also slid as a result of government policy over MTA rates, and the economic crisis, with the latter affecting Getronics in particular. The crisis seems to have had little effect on KPN’s Consumer division, where profit growth came about largely due to lower operational costs, which came down by 13 percent. Group EPS growth at 25 percent reflected the effect of KPN’s most recent share buy back programme.
KPN’s net debt, at EUR 11.7 billion at the end of the quarter, translated into a stable net debt to EBITDA ratio of 2.3, well within the operator’s target range of 2.0-2.5. The number of FTEs was reduced in the quarter by 952 to 34,550. At the end of last year, KPN had a total of 36,702 FTEs. At end-September 2009, there were 21,666 FTEs in the Netherlands, against 23,504 at the end of 2008. Siince 2005, KPN has scrapped 7,352 jobs. Getronics cut 1,651 jobs this year alone.
Free cash flow for Q3 came out at EUR 827 million, a 78 percent rise from the year before. The figure includes a one-off tax benefit. KPN guided for a free cash flow at EUR 900 million for Q4.
KPN maintained its guidance for 2009 and 2010. The operator forecast 2009 sales at EUR 13.6-13.8 billion, EBITDA at around EUR 5 billion and EPS at EUR 0.60-0.80. For 2010, sales are seen flat from the year before, with EBITDA at EUR 5.5 billion, and EPS at EUR 0.80. The capex budget for both 2009 and 2010 is expected to reach EUR 2 billin and free cash flow is estimated at around EUR 2.4 billion in 2009 and EUR 2.4 billion in 2010.
Regarding the pension deficiency question, KPN said that it wil not have top-up payments after 2009. The coverage ratio is at 109 percent, above the legally required 105 percent threshold. In April, KPN signed an agreement to pay an additional maximum of EUR 390 million in the years from 2009 up to and including 2012. KPN said it now only has to pay EUR 90 million in 2009.
Results by business units showed Consumer NL reporting sales down 3 percent to EUR 1.02 billion, EBITDA up 17 percent to EUR 265 million, and an EBITDA margin at 26 percent from 21.5 percent the year before. KPN lost 56,000 mobile clients this quarter, mainly through churn as a result of the migration of former Debitel subscribers. Data saw sales advance 25 percent, with its sales making up 29 percent of total mobile service revenue. Fixed telephony lost a net 55,000 lines. The broadband market share, including AOL subscribers, was stable at 44 percent. KPN’s IPTV product Interactieve TV will from the second quarter of next year offer FTTC on a large scale. The copper network is therefore getting an upgrade. KPN is aiming for 1 million TV clients in 2010.
Business NL recorded sales 5.6 percent lower to EUR 602 million, EBITDA up 4.3 percent to EUR 192 million, and an EBITDA margin at 31.9 percent, from 28.8 percent the year earlier. KPN will reorganise the division in the last quarter of 2009, scrapping 500 jobs. Mobile data contributed about one-third to mobile sales. KPN said it did not expect recovery in this segment, with the order flow proving a disappointment.
At Getronics, sales for continuing operations decreased by 9.2 percent to EUR 485 million, EBITDA soared 36 percent to EUR 31 million, while the EBITDA margin went to 6.4 percent from 3.6 percent the year before. The crisis was felt in the division, but cost cuts limited the damage. In 2010, the margin goal was set at 8 percent. Getronics won in the quarter a substantial contract from Enexis, worth EUR 70-80 million.
Sales at Wholesale & Operations, including iBasis, fell 9.7 percent to EUR 844 million, EBITDA declined 7.8 percent to EUR 439 million and the EBITDA margin rose to 52.0 percent from 50.9 percent. The sales decline was mainly due to lower wholesale rates and a weak iBasis, which saw revenue sink 25 percent. KPN reached over 450,000 FTTC homes passed and 460,000 FTTH homes at end-September. The operator experienced some operational problems connecting FTTH clients but still went forward. A new FTTH service portfolio is set to launch in the first quarter of next year. Reggefiber, KPN’s FTTH joint venture with Reggeborgh, expects to attract external financing in the first half of next year. Until then, KPN and Reggeborgh have extended bridge credit. FTTC and FTTH trials in ten cities will be evaluated at the end of this year.
At E-Plus in Germany, sales slipped 2.5 percent to EUR 819 million, EBITDA went 3.3 percent higher to EUR 347 million and the EBITDA margin lifted to 42.4 percent from 3.3 percent. Organic sales growth, excluding regulation effects, was up 3.6 percent. In the quarter, the division recorded net adds of 477,000 clients. On a yearly basis, the E-Plus client base rose 10 percent to reach a total of 18.7 million. Sub-brands contributed 70 percent to client numbers.
At Base in Belgium, sales rose 4.7 percent to EUR 200 million, while the EBITDA margin went up to 32.5 percent from 30.4 percent. Organic growth was at 7.7 percent. Base added 73,000 clients in the quarter to reach a total of 3.6 million.
