KPN looks to $5.4 billion rights issue to slash debts

Dutch incumbent KPN has announced plans for a €4 billion ($5.4 billion) rights issue as it strives to reduce spiralling debts with its profits and revenues in decline.

The company’s net debt soared to €12 billion for the fourth quarter of 2012 after it spent a whopping €1.4 billion on licenses to provide 4G services in a recent Dutch auction.

As a result, net debt now works out at more than three times earnings before interest, tax, depreciation and amortisation (EBITDA), up from a ratio of 2.3 in the fourth quarter of 2011.

Dutch incumbent KPN has announced plans for a €4 billion ($5.4 billion) rights issue as it strives to reduce spiralling debts with its profits and revenues in decline.

The company’s net debt soared to €12 billion for the fourth quarter of 2012 after it spent a whopping €1.4 billion on licenses to provide 4G services in a recent Dutch auction.

As a result, net debt now works out at more than three times earnings before interest, tax, depreciation and amortisation (EBITDA), up from a ratio of 2.3 in the fourth quarter of 2011.

Keen to maintain an investment-grade credit profile, KPN (The Hague, Netherlands) expects the rights issue to lower the ratio by 0.9 and is targeting a figure of 2–2.5 at the end of 2013.

The operator took the dramatic step of scrapping a dividend payout at the end of 2012 after spending several times what analysts had expected during December’s multiband spectrum auction.

It also raised €393 million from the sale of mobile towers in Germany, where it operates under the E-Plus brand.

For the final quarter of 2012, KPN suffered a 3% year-on-year fall in revenues, to €3.27 billion, and slid to a net loss of €160 million from a net profit of €176 million a year earlier.

Although the bottom-line figure was affected by impairment charges, KPN also blamed the weak economy and tough competition for its disappointing performance.

“In 2012, KPN continued to face a challenging environment,” said Eelco Blok, KPN’s chief executive. “The adverse macro-economic conditions continued to weigh on consumer confidence and on the investment plans of our business customers.”

KPN reported revenue declines in each of its three biggest markets, which include Belgium and Germany besides the Netherlands, and is under pressure to invest in higher-speed networks in all of those countries.

It aims to make 4G services available across the whole of the Netherlands and most of Belgium by the end of 2014 and has earmarked total capital expenditure of about €2.3 billion for 2013, having spent €2.21 billion in 2012.