KPN Q3 2006: mobile is key growth driver
KPN reported its Q3 2006 results this morning. Revenues increased 3.5% year-on-year to €3.028bn. EBITDA increased by 4.4% year-on-year to €1.198bn, whilst the EBITDA margin remained relatively flat at 39.5%. Free cash flow came in at €728m, a decrease of 5.9%. Mobile remains the key growth driver for the group, with revenues and other income up 16.6% year-on-year to €1.689bn. In contrast, revenues and other income from fixed operations fell by 3.8% over the period, to €1.63bn.
Comment: The company has successfully entered the VoIP segment by pushing its naked DSL and VoIP solutions. KPN’s retail share stands at around 25%, which is quite an achievement given the high level of competition it faces in the market. By the end of the Q3 2006, the company had over 270,000 VoIP subscribers, capturing 45% of gross additions in the market. The company has adopted the same multi-branding approach here as it has in other areas of its operations, enabling it to target a wider potential market.
KPN managed to slow net customer declines across its fixed operations during the period, with net line loss in Q3 2006 totalling 140,000, down from 165,000 in the previous quarter. Fixed revenues and other income fell by 3.8% year-on-year, to €1.63bn, with 2.5% due to regulatory MTA tariff reductions. The company’s plans for an all IP next-generation network (NGN) appear to be on track, having entered into an agreement with Lucent regarding network integration and project management in August 2006.
Mobile revenues and other income increased by 16.6% overall, to €1.68bn, boosted by the consolidation of the Telfort acquisition. The company delivered market leading growth of 28.8% year-on-year in its Dutch operations, providing further evidence that its multi-branding strategy is beginning to pay off. The company’s German mobile operations, E-Plus outperformed the market during the period, with service revenue growth of 11% year-on-year. Focus in the Netherlands remains on the more lucrative postpaid segment, and the company captured 50% of postpaid gross additions during the period.
Despite strong competition in the broadband market, the company increased its ADSL subscriber base by 105,000 during the quarter, bringing its total customer base to just over 2 million by the end of September 2006. Having agreed to acquire Tiscali’s Dutch operations (totalling 276,000 broadband customers), the company is set to achieve further (organic and inorganic) growth in the future.
Overall, KPN continues to deliver a sound performance, despite operating across some of the most challenging markets in Europe. Undoubtedly part of the company’s success is its willingness to meet its challenges head on. As we have commented on previous occasions, the company has earned its position as one of the most dynamic players in the industry, and its combination of forward-looking, innovative portfolios and sound financial management should stand it in good stead for the challenges it is likely to face in the future.
Source- http://www.ovum.com
