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KPN Plans FTTx, Cuts More Staff

Dutch incumbent unveils its plans, including more job cuts, an FTTx rollout, and aggressive earnings forecasts

February 5, 2008

3 Min Read
KPN Plans FTTx, Cuts More Staff

KPN Telecom NV (NYSE: KPN) unveiled its medium-term financial and network plans this morning, including significant investment in a new fiber access network, further headcount reductions, and aggressive earnings forecasts for the next few years.

The plans were outlined as the Dutch incumbent reported its fourth-quarter and full-year results, which were roughly in line with analysts’ expectations. (See KPN Reports 4Q07.)

KPN has just generated full-year revenues of €12.6 billion (US$18.5 billion) and earnings before interest, tax, depreciation, and amortization (EBITDA) of €4.9 billion ($7.2 billion). But the carrier believes it can do much better. With a leaner operation and revenue contributions from its recently acquired IT services and international VOIP operations, KPN forecasts full-year 2010 revenues of more than €15 billion ($22 billion) and EBITDA of more than €5.5 billion ($8.1 billion), ahead of financial analyst expectations. (See iBasis Snacks on Danish, IBasis Merges With KPN, KPN Plans $1B IT Acquisition, and KPN Completes Getronics Buy.)

And KPN’s strategy has found favor with investors, as its share price rose by more than 2 percent to €12.61. The Dutch operator was a finalist in the "Best Investment Potential" category of last year’s Leading Lights Awards. (See Leading Lights Finalists .)

Fiber rollout plan
KPN has long been planning a migration to an all-IP network -- it first outlined its plans in March 2005 -- and its fiber-to-the-home (FTTH) and fiber-to-the-curb (FTTC) strategies are part of that shift to a next-generation infrastructure. (See KPN Lays Out IP Migration Plan.)

The carrier says that, starting this year, it will deploy a mix of FTTC, with VDSL2 connections making the final link to the home, and “selective regional FTTH initiatives, partnering with building corporations and municipalities.” KPN says it’s already working with local authorities in Almere and Enschede, with a view to hooking up around 100,000 households this year.

As a result, KPN forecasts its annual capital expenditure to rise from €1.7 billion ($2.5 billion) in 2007 to more than €2 billion ($2.9 billion) in 2010.

Municipal fiber access networks are already big news in the Netherlands. (See Dutch Feast on Fiber and Amsterdam Gets Active With FTTH, for example.)

KPN says the VDSL2 links will provide access speeds of up to 50 Mbit/s, while its FTTH rollouts will deliver up to 100 Mbit/s.

Cutting costs, simplifying operations
As it rolls out its new broadband network, KPN plans to simplify its network operations, increase its installation and service quality, and simplify its service marketing and customer support operations. The carrier believes this will result in better margins (starting in 2009) and “significant cost reductions” that will be reinvested in initiatives such as IPTV, broadband, and enterprise IP services.

KPN also plans to cut more jobs. In addition to the 8,000 reduction in employees it announced in 2005, KPN says it will cut a further 2,000 full time jobs and 1,300 contract positions between now and 2010 (not including any reduction in Getronics NV staff). The carrier, which currently employs 43,500 staff (including about 18,000 Getronics employees) believes this will result in annual savings of €240 million ($352 million) a year by 2010.

— Ray Le Maistre, International News Editor, Light Reading

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