S&P raises KPN ratings from BBB+ to A- and stable outlook due to improvement of the company's financial profile

January 29, 2004

1 Min Read

LONDON -- Standard & Poor's Ratings Services said today it raised its long-term corporate credit and senior unsecured debt ratings on the Netherlands-based telecommunications services provider Koninklijke KPN N.V. (KPN) to 'A-' from 'BBB+' due to an improvement of the company's financial profile. The outlook is stable.

At the same time, Standard & Poor's raised its long-term subordinated debt rating on KPN to 'BBB+' from 'BBB', and affirmed its 'A-2' short-term debt rating on the company.

"The upgrade reflects KPN's further achievements in deleveraging its balance sheet in the second half of 2003," said Standard & Poor's credit analyst Michael O'Brien. "This included the generation of very substantial free cash flow to reduce net debt, while simultaneously reducing gross debt through intermittent bond buybacks." At Sept. 30, 2003, KPN had lease-adjusted net debt of €10.6 billion ($13.2 billion).

Furthermore, Standard & Poor's believes that KPN's operational performance efficiencies and measured financial policies have locked in a capital structure that is sustainable for the foreseeable future. Future free cash flow generation ability, combined with the company's manageable debt maturity profile, should allow KPN adequate financial flexibility with regard to future returns to shareholders.

Standard & Poor's expects KPN to maintain a capital structure commensurate with the ratings, at least similar to its current capital structure, combined with a prudent financial strategy. This includes a controlled strategy with regard to dividend policy, potential acquisitions, and share buybacks. At the same time, the company is expected to maintain its strong position in its core fixed and mobile markets and adequate performance in Germany.

Standard & Poor’s

KPN Telecom NV

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