It’s not a happy new year at Dutch operator KPN.

The company has been left reeling by the news yesterday that its CFO has decided to depart unexpectedly.

Carla Smits-Nusteling (pictured) said she does not agree with “the internal governance of the company in the new executive structure”, which was launched on 1 January this year.

Two things are odd about this: first, the reasoning is rather vague – one suspects there is much more hidden behind the corporate language firewall and, second, as CFO Smits-Nusteling would surely have played a major role in defining the new corporate structure in the first place.

It would not be surprising to learn that there has been something of a power struggle at the top and the CFO did not come out as the winner, but this is pure speculation at this stage.

In a statement, the chairman of the supervisory board, Jos Streppel, said: “We regret Carla’s departure. Since her appointment as CFO, Carla has performed as well as we had expected.”

If that sounds cutting, he did at least follow it up by saying that Smits-Nusteling had “acted as a highly professional and engaged board member and CFO”.

The crux of the issue remains the new executive structure, which was first unveiled last May as part of a wider strategic review entitled “Strengthen, Simplify, Grow”.

It is designed to give direct control of the operational activities to KPN’s executive committee under the supervision of the management board.

However, since it was announced, another management board member has also departed. Baptiest Coopmans, who led the firm’s entire Dutch telco activities, left by mutual consent in November.

So either it is driving good people away or it is clearing some dead wood.

As a public company the market is KPN’s ultimate arbiter and its view is clear: since May, KPN’s share price has fallen 10 percent.

But the decline is not only because of issues regarding top management.

The company mishandled the OTT threat by reacting to Dutch consumers’ preference for services such as WhatsApp and Skype by trying to charge them for using them.

This became untenable in June when the Netherlands became the first country in Europe to enshrine net neutrality in law.

KPN was the first of several operators to raise mobile prices and cut data allowances. However, in December, the Dutch competition authorities launched an investigation into whether price fixing has gone on. This is ongoing.

Frost and Sullivan senior industry analyst Saverio Romeo poured further fuel onto the flames.

“If you add to this that the company is planning to reduce its workforce from 5,000 to 4,000 employees through 2015, the future does not look bright at KPN,” he told European Communications.

The CFO roles will be shared between two interim managers, with KPN promising to find a permanent successor “at the shortest possible notice”.

Focus now shifts to the company’s Q4 and full year results, which will undoubtedly reflect continued revenue and profit decline.

“KPN’s core voice and messaging revenue remains at risk despite its recent attempts at tariff rebalancing,” Analysys Mason principal analyst Stephen Sale told European Communications.

“The simple fact is that the Dutch use voice and SMS less than most of their European peers and pay more per minute/per message.”

The company’s best hope appears to be in broadband. “Its share of broadband lines in service (including wholesale) was 45 percent at Q3 2011, while success in FTTH and in upselling IPTV services means that broadband ARPU is holding up well – it is currently at €33,” added Sale.

Clearly, KPN cannot afford to lose any more top brass. Warned Romeo: “If a third board member leaves the markets will really start to worry about KPN.”

 

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This document was created using a Contractology template available at http://www.freenetlaw.com.

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