KPN reports 98% drop in net income

European operator group KPN reported a whopping 98 per cent year on year drop in net income for the quarter to the end of March. The operator blamed intense competition in its mobile markets leading to decline in ARPU and competitive pressure in the business environment for the steep decline in profitability.

Net income for the quarter stood at just €3m, compared with the €152m recorded in the year-ago quarter.

Revenues for the quarter also fell 8.2 per cent year on year, from €2.18bn in 1Q13 to €2bn in 1Q14. The operator reported that service revenues remained under competitive pressure in its home market of the Netherlands. It blamed the impact of the Dutch market shifting towards SIM-only, no frills deals, for putting pressure on its prices. However, it reported that its retail postpaid customer base grew in the market. It added that its retail postpaid net adds increase by 26,000 subscribers across its footprint.

KPN’s sale of its German subsidiary E-Plus to Telefonica Deutschland is pending regulatory approval and is expected to be complete by June 2014. The Dutch group reported that adjusted revenues from the business increased 2.5 per cent year on year during the quarter. In Belgium, revenues dropped by 3.3 per cent year on year.

The operator also reported that its addressable business market continued its decline as a result of “ongoing customer rationalization and optimization” as well as due to the impact of a difficult macroeconomic environment. Revenues from the business segment fell 11 per cent year on year from €824m in 1Q13 to €730m in 1Q14. EBITDA for the unit also fell by 22 per cent.

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KPN’s roaming services subsidiary iBasis also saw adjusted revenues drop by 6.6 per cent year on year, which it said was due to lower traffic, continued pressure in the international wholesale traffic market and a negative currency effect.

“We have completed the roll-out of 4G in The Netherlands and are substantially ahead of the competition. These investments can now be scaled back leading to lower capex levels, also supported by the phasing out of the handset lease model and the first results of our Simplification program,” said CEO Eelco Blok.

“Our financial results in the first quarter were impacted by the competitive environment in our mobile markets, leading to continued decline of ARPUs, and pressure on the total market size in Business.  Corporate customers remain cost constrained, leading to continued rationalization and optimization. To improve the performance of our Business segment we focus on de-risking our revenues by flat fee propositions, growing revenues from multi play and new services, and continue to execute on our cost saving plans.”

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