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Dutch telecom firm KPN issues profit warning

Dutch telecom firm KPN issues profit warning

April 21st, 2011 in News

AMSTERDAM (AP) - Royal KPN NV, the largest telecommunications company in the Netherlands, warned that profits this year will be below expectations as the rapid adoption of smart phones is hurting some of its most lucrative businesses.

In response, the company said Thursday it is planning to cut 5,000 jobs by 2015, around one in six of its workforce.

The heart of KPN's problems lie in the fact that the number of its customers that access the Internet via mobile phones is approaching 50 percent .

That means consumers are limiting their text messages, communicating instead via social media websites such as Facebook or Twitter. They are also substituting voice calls for cheaper Internet-based calls.

KPN's business customer margins are also suffering given the heightened level of competition.

"In this environment, businesses are watching every penny," chief executive Eelco Blok said on a conference call.

KPN released a condensed form of its earnings ahead of schedule, saying sales were down 1.3 percent to 3.23 billion ($4.69 billion) from the same period a year ago, while operating profits were down 10 percent to 712 million.

Net profit actually rose 32 percent to 591 million due to a much lower tax bill in Germany: 61 million versus 327 million in the first quarter of 2010.

The company lowered its primary financial target of operating earnings before depreciation and amortization of goodwill, or EBITDA, from 5.48 billion ($7.95 billion) to less than 5.3 billion this year.

One bright spot though was that KPN said its business in Germany, where it is the third-largest mobile services provider, has not yet been affected.

Blok said the company would aim to reduce staff by "outsourcing and offshoring" many of its functions.

He added that KPN is also planning to introduce new mobile internet subscriptions, but did not explain how that would compensate for lost revenues.