Bloomberg News

KPN Cuts Dividend Forecast After Earnings Trail Estimates

July 24, 2012

KPN Lowers Dividend Forecast After Net Income Misses Estimates

A pedestrian passes a store for the Dutch phone company Royal KPN NV in The Hague, Netherlands. Photographer: Jock Fistick/Bloomberg

Royal KPN NV (KPN), the Dutch phone company partly owned by Carlos Slim’s America Movil (AMXL) SAB, cut its dividend forecast by 61 percent after profit trailed analysts’ estimates as demand in its home market shrank.

Net income dropped 24 percent to 315 million euros ($382 million) from a year earlier, compared with the 328 million-euro estimate of analysts surveyed by Bloomberg. The 2012 dividend will be 35 cents a share, down from 90 cents projected in January, The Hague-based KPN said today in a statement.

The Dutch former monopoly joined Telefonica SA (TEF) and Telecom Italia SpA (TIT) in reducing shareholder payouts as the companies seek to conserve cash while the debt crisis in Europe hurts telecommunications revenue. During the quarter, KPN unsuccessfully tried to stop Mexico City-based America Movil from increasing its stake in the phone company to 28 percent.

“KPN has moved from being the most generous company only two years ago to one of the least,” said Javier Borrachero, a Madrid-based analyst at Kepler Capital Markets. “The interesting thing is to what extent America Movil is behind the decision. Were they simply forced to cut the dividend or is America Movil trying to change the strategy?”

Slim’s Stake

The shares fell as much as 2.8 percent to 7.12 euros and traded at 7.14 euros as of 11:55 a.m. in Amsterdam. They had declined 21 percent this year through yesterday. America Movil pushed through its 8 euro-a-share tender and expanded its holding in KPN for about 3.07 billion euros last month.

The decision to lower this year’s dividend payment was taken independently by the board of management and supervisory board, Chief Executive Officer Eelco Blok told reporters on a conference call today. “America Movil is one of the shareholders and we communicate with this shareholder in the same way as we do with the other shareholders,” Blok said.

Telenor ASA (TEL), the Nordic region’s second-largest phone company, said today it plans to buy back 3 percent of shares after second-quarter profit excluding some items dropped 8.3 percent amid tougher conditions in Denmark and Bangladesh. The shares rose as much as 3.5 percent.

As of yesterday, KPN’s dividend yield of 11.45 percent compared with European telecommunications companies’ average yield of 8.8 percent, according to data compiled by Bloomberg.

Dividend Savings

The dividend for 2013 will be at least 35 cents a share, KPN said today. The company will save about 1.6 billion euros this year and next, Borrachero said.

KPN will save 780 million euros in cash this year by the dividend cut, Chief Financial Officer Eric Hageman said.

The Dutch operator this month began a sale of its Belgian mobile-phone unit Base after ending discussions on a potential merger involving its E-Plus wireless unit in Germany. Base may fetch 1.8 billion euros, people with knowledge of the matter have said.

If a party is interested in buying E-Plus and the price is right, the business may still be sold, CEO Blok said today, adding that the company’s focus in Germany remains on implementing its strategy and continuing growth. The Base sale proceeds will be used to increase KPN’s financial flexibility, Hageman said.

Separately, funds managed by EQT Partners AB, the Swedish private-equity firm partly owned by the Wallenberg family, and Macquarie Group Ltd. (MQG) are among companies considering bids for E- Plus’s mobile-phone towers, people familiar with the matter said. A deal may fetch about 300 million euros, they said. Blok declined to comment.

Job Cuts

Blok has accelerated job cuts and plans to eliminate as many as 5,000 positions in the Netherlands by the end of 2013. Second-quarter earnings before interest, taxes, depreciation and amortization and excluding restructuring charges fell 9.9 percent to 1.19 billion euros. Revenue and other income dropped 3 percent to 3.19 billion euros. KPN confirmed its full-year Ebitda forecast.

“The economic prospects in the Netherlands continue to be difficult and we are outside our financial framework range,” Blok said in a statement. “Today, it is even more important to strike the right balance between a prudent financial framework, continued investments and sustainable shareholder remuneration.”

Mexican billionaire Slim’s America Movil is establishing footholds in Europe as the continent’s debt crisis hurts the value of phone companies in the region. America Movil acquired 21 percent in Telekom Austria AG (TKA) alongside the KPN purchase last month.

To contact the reporter on this story: Jonathan Browning in London at jbrowning9@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net


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