BASE on the block ends turbulent week at KPN

It’s been a busy last seven days at Netherlands-based operator KPN.

As CEO Eelco Blok completes a turbulent first year in charge, the changes just keep on coming.

altOn Monday, KPN announced it was conducting “a comprehensive review of the strategic options” for its Belgium-based mobile outfit BASE.

In other words, it is looking to sell.

Revenues at BASE, the third largest mobile operator in Belgium, fell 0.5 percent to €781 million in 2011.

KPN blamed this decline on the divestment of its Belgian B2B and carrier business in 2010 and regulation.

However, it predicted that BASE offered strong growth opportunities in data going forward and pointed to the impressive 6.8 percent y-o-y growth it registered in Q4.

So why is it looking to sell, particularly as Blok has promised to keep investing internationally?

In common with many other operators, KPN is struggling – 2011 group revenues decreased 1.8 percent to €13.2 billion while profit fell 14 percent to €1.5 billion.

It decreased its outlook for 2012 and news of this potential sale just one week before it announces results for the first three months of this year suggest they will add further gloom.

Short-term financial reasons therefore seemed to have trumped strategic ones.

Unless that is, KPN intends to reinvest the profits to bolster its rest of world business unit – the performance of which provided one of the few bright spots last year.

It registered a 15 percent increase in sales to €307 million during 2011.

KPN’s main play here is Ortel Mobile, which competes with Lebara and Lyca Mobile to provide prepaid mobile services to the multi-cultural communities across various European markets.

However, with such a competitive, limited market it is unlikely that this segment will grow to rival what the Belgian unit currently brings in.

Indeed, the sale of it’s France subsidiary in Q4 for just €10 million suggests these businesses may be more short- than long-term projects.

There is clearly scope for further acquisitions internationally, but there is no indication as to what or where these might be.

Should KPN go down this path, it will hope for a better outcome than it achieved with the second significant piece of news.

Last Tuesday KPN announced it was abandoning its proposed acquisition of regional Dutch operator CAIW Holding (Caiway).

It first announced the deal for Caiway, which provides TV, broadband and telephony services via cable and fibre, back in May 2011.

However, KPN said it was pulling the plug given the Dutch competition authority concerns that it would get a dominant position in the areas that Caiway operates in.

It was particularly disappointing for KPN given it had promised to provide “open access” to other operators and service providers should it get hold of Caiway.

Equally, the group has been making positive strides in this area – net IPTV additions were up significantly last year while its TV market share increased two percent to 17 percent.

KPN needs to hammer home the advantage it holds in this area, so this is most certainly a setback.

Perhaps the final piece of news will bring about a change in fortune.

Last week KPN also announced two senior management appointments.

Peter van Bommel joins the supervisory board from semiconductor equipment provider ASMI where he was CFO.

He is likely to fill that same position at KPN, from which Carla Smits-Nusteling unexpectedly quit in January.

Pieter Swarts also joins as chief procurement officer and has been charged with establishing a new procurement organisation to strengthen KPN’s cost leadership position.

These appointments will hopefully bring some much-needed stability to a boardroom that is presiding over a share price that has already plummeted 20 percent this year alone.

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