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Confident KPN raises 2022 outlook

KPN CEO Joost Farwerck conceded that the Dutch operator will not be immune to inflationary effects "in a challenging macro-economic environment" this year, noting that higher wages and rising energy costs will affect its ability to keep costs down.

However, Farwerck said KPN is confident that "mitigating measures" will allow it to maintain healthy margins and increase free cash flow. "As a result of the progress made to date and the solid performance we have shown in the first half of the year, we raise our 2022 guidance for EBITDA and free cash flow," he said.

KPN is now expecting adjusted EBITDAaL of more than €2.4 billion (US$2.43 billion) and free cash flow of about €850 million ($862 million) for 2022, with capex remaining stable at €1.2 billion ($1.22 billion). The telco also intends to pay a dividend of 14.3 euro cents per share over 2022. It is currently running a share buyback program of €300 million ($304 million) that will be completed in mid-August.

KPN's headquarters in Rotterdam. (Source: KPN)
KPN's headquarters in Rotterdam.
(Source: KPN)

In addition, KPN reiterated its 2023 targets set out at its strategy update in 2020. These include adjusted EBITDAaL of over €2.45 billion ($2.48 billion) and free cash flow of more than €870 million ($882 million).

"We launched our accelerate to grow strategy in November 2020 and are now halfway through the execution of our ambitious three year plan," Farwerck said. He noted that "significant progress" has been made on its three main ambitions to expand networks, increase the customer footprint, and simplify and streamline the operating model.

Most growth

In the second quarter (Q2) of 2022, KPN was able to increase group service revenue overall. Adjusted revenue increased 1.4% to €1.3 billion ($1.3 billion) while adjusted EBITDAaL rose 1.1% to €595 million ($603 million). Net profit was down 77% at €186 million ($189 million), which KPN attributed to a net effect of €649 million ($658 million) related to the creation of the Glaspoort fiber joint venture with Dutch pension provider APG in Q2 2021.

At the end of Q2 2022, net debt amounted to €5.38 billion ($5.46 billion), which is €238 million ($241 million) higher compared to the end of Q1 2022. KPN noted that the increase was mainly driven by dividend payments and share buyback programs.


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In terms of its network development, KPN said it passed 3.39 million homes with its fiber network by the end of Q2, up 102,000 from the first quarter. Notably, the number of retail fiber customers exceeded copper-line customers the first time, at 51% of the base. Together with Glaspoort, KPN now passes 44% of all households with fiber. This is expected to increase to 80% by the end of 2026.

In terms of mobile network developments, KPN switched on its 5G network in July 2020 and has tended to focus on providing premium 5G services to business customers. Like its rivals VodafoneZiggo and T-Mobile NL, KPN is still awaiting the Dutch auction of spectrum in the 3.5GHz band.

This auction is now expected to take place in late 2023, with around 300MHz to be made available. Inmarsat is still using some of these frequencies for satellite services, but an independent advisory body has recommended that Inmarsat relocates to Greece when its license expires.

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— Anne Morris, contributing editor, special to Light Reading

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