January 29, 2020 / 7:26 AM / 2 months ago

Dutch telecom KPN reports fourth quarter profit rise, 2020 outlook disappoints

ROTTERDAM (Reuters) - Royal KPN NV, the largest Dutch telecommunications company, on Wednesday reported better than expected fourth quarter earnings but disappointing growth guidance for 2020 knocked its shares lower.

CEO Joost Farwerck, who took the top job in October amid a wider overhaul, said he will continue with plans to cut costs while investing in fibre optic and 5G networks.

Competition from the likes of T-Mobile and Vodafone-Ziggo were “reflected in lower net (subscriber) adds in Consumer and some pressure in mobile” revenue during the quarter, he told reporters in Rotterdam.

KPN’s earnings before interest, taxes and depreciation (EBITDA) for the quarter ended Dec. 31 rose to 598 million euros (504.41 million pounds) from 571 million, topping the 572 million forecast by analysts in a company-compiled poll.

But the company said it would see growth in free cash flow of just “mid single digits” in 2020.

KPN’s shares were 6.1 percent lower at 2.53 euros by 0842 GMT.

That guidance “is in our view clearly underwhelming” said ING analyst David Vagman in a note, “Consensus was looking for a very strong rebound,” in 2020, with 14% growth, he said.

KPN has faced shrinking sales for the past decade, as consumers adopted smart phones and began using data services such as WhatsApp rather than more expensive voice services.

Fourth quarter sales fell 3% to 1.39 billion euros. Farwerck told reporters that a return to sales growth was not immediately on the cards, although the company is building a base with investments in fibre optic networks.

“You’ll see the growth in operating profit first” he said. “It will take some time before you see sales growth at KPN.”

KPN is spending 1.1 billion euros annually on capital expenditures through 2021, including adding a million fibre optic connections aiming to reach 40% of Dutch households.

Farwerck clarified on Wednesday that costs from buying 5g licenses at auction were not included in that figure.

The government said in December it expects to raise at least 900 million euros from auctioning one set of 5G licences before June 30.

KPN is the country’s largest mobile operator, with an estimated 44% share of the retail market, followed by 32% for T-Mobile and 24% for Vodafone, estimates published this week by Telecompaper showed.

KPN’s stock has languished since a 2.40 per share takeover attempt by Carlos Slim’s America Movil was blocked in 2013. They are up 5.9% over the past year to 2.69 euros.

Reporting by Toby Sterling; editing by Jason Neely, Kirsten Donovan

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