KPN turns big profit, eyes mmO2
 |
Story Tools
|
AMSTERDAM, Netherlands (Reuters) -- KPN, the Netherlands' leading telecoms group, said on Monday it turned to a big profit in 2003, but its shares fell as the results were overshadowed by its overtures to British cell-phone group mmO2.
KPN reported 2003 net profit of 2.73 billion euros ($3.46 billion), thanks to deep cost cuts and including a 1.08 billion euro windfall from a tax deal with the Dutch authorities, and said it would hand back surplus cash to shareholders.
The previous year the operator had a record net loss of 9.54 billion due to hefty writedowns on mobile assets, especially its German unit E-Plus.
But KPN shares fell 2.7 percent to 6.65 euros in early trade after the mmO2 news.
KPN said at the weekend it had not ruled out a hostile offer for mmO2 after on Friday it confirmed making a bid proposal which Europe's number six-mobile phone operator had rebuffed.
"That mm02 story means that shareholders start to think; No, not again! Especially as there are more bidders, there are worries KPN could pay too much,'' a share trader said, adding he did not believe KPN would make such a bid, however, because it had announced plans to hand money back to shareholders.
KPN did not say whether it had offered to bid for all of mmO2 or just its German unit, to build up the position of its own division in Europe's largest mobile market. It made no fresh comment about its plans in the results statement.
"KPN might consider a new offer on MmO2 plc, but in that case we believe there is a risk of overpaying. MmO2 according to (our) estimates already is overvalued,'' analyst Danny van Doesburg at F. van Lanschot said.
Mm02 has a market capitalization of some $14.8 billion while KPN has a market value of $21.3 billion.
KPN resumes pay-outs
KPN, which just two years ago stood at the edge of financial disaster, said it would pay out a regular dividend of at least 20 eurocents annually. It had last paid a dividend in 2000.
For 2003, KPN will pay a dividend of 0.12 euros, but will also hand back an additional 13 cents per share after it reached a deal with Dutch authorities last week on tax breaks related to the restructuring of its mobile unit.
"The special dividend for 2003 is a nice surprise and most of the figures are in line with expectations. But the mmO2 situation is what's on everybody's mind,'' said Frank Claassen, analyst at Rabo Securities.
Analysts had expected a net profit of 1.33 billion euros, excluding the income from the tax agreement. Revenues came in at 12.21 billion euros while analysts had expected this to rise by 1.1 percent to 12.3 billion.
KPN reiterated its 2004 pre-tax profit outlook of between 1.4 to 1.7 billion euros.
The company, which had developed a record of raising its outlooks over the last two years, shocked investors two months ago when it warned its pre-tax profit could be as low as 1.4 billion euros in 2004 and 1.5 billion in 2005 because of a slowing fixed-line business.
But it quickly added both figures could be as much as 300 million euros higher.
On Monday, KPN said it expected overall revenues flat to two percent lower this year. It sees mobile sales up five to seven percent, but expects revenues at the fixed-line division down by a similar percentage.
After two years of deep costs cuts and asset sales, KPN has slashed its net debt to 8.3 billion euros, down by nearly two thirds from its 2001 peak.
KPN said it had no intention of holding surplus cash balances and that it would return surplus cash to shareholders through special dividends and share buybacks.
The company now seeks to contain its net debt to no more than twice its core profit and keep a core profit net interest cover of at least six times.
Copyright 2004
Reuters. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
