KPN shares drop on dividend cut, costly licenses

Mon Dec 17, 2012 8:04am EST
 

By Sara Webb

AMSTERDAM (Reuters) - Shares in Dutch telecoms group KPN, now part of Mexican tycoon Carlos Slim's empire, plunged as much as 15 percent after it cut its dividend for this year and next to meet the higher-than-expected cost of new mobile licenses.

A new player, Sweden's Tele2, also won licenses in Friday's Dutch auction of 4G wireless spectrum, a move likely to increase competition in one of Europe's most lucrative telecoms markets as the winners roll out faster services that allow users to watch video and surf the Internet on the move.

"This is negative news for KPN as we estimate KPN generates about 15-20 percent of group EBITDA (core earnings) from its mobile business in the Netherlands," ING analyst Emmanuel Carlier said on Monday.

The fallout from the auction is the latest blow for KPN after cut-throat competition in text messaging and slowing European economies led it to cut profit and dividend forecasts, its chief financial officer abruptly left and competition authorities launched a probe into possible price fixing.

Some analysts also questioned whether the dividend cut would be enough, suggesting the group might have to sell assets or raise capital to fend off credit rating downgrades.

At 7:30 a.m. ET, KPN shares were down 13.7 percent at 3.997 euros, the second-biggest fall by a European blue-chip stock. The stock briefly touched 3.9 euros, matching a 10-year low hit in November.

The Dutch spectrum auction raised 3.8 billion euros ($5 billion) for state coffers, well above the 800 million euros or so that analysts had predicted.

"This has negative implications for all mobile players in the market," Exane BNP Paribas analysts said in a research note, adding it would raise concerns about the cost of ongoing and upcoming auctions in the rest of Europe.   Continued...

 
The logo of Dutch telecoms group KPN is seen in Haarlem May 31, 2012. REUTERS/Paul Vreeker/United