Dutch KPN offers glimmer of hope

KPN banks on DoCoMo's popular i-mode service to boost growth

AMSTERDAM, Netherlands (CNN) -- Dutch telecom group KPN said on Monday losses narrowed after cutting costs and slashing debt.

The company, which plans to cut its workforce by about 5,200 this year, made a loss of 348 million euros ($320 million) in the first three months to March 31, compared with 539 million euros a year ago.

KPN -- like its rivals Deutsche Telekom (FDTE), BT Group (BT-A) and France Telecom (PFTE) -- spent billions of dollars on acquisitions and high-speed mobile phone licences at the peak of the telecom boom about 2 years ago. But investors punished the companies for taking on huge amounts of debt to pay for the acquisitions.

Chief Executive Ad Scheepbouwer, who took over the post on November 1 after his predecessor was ousted following two failed attempts to find a merger partner and reduce debts of about 23.2 billion euros, moved quickly to save the company from the brink of financial disaster by raising 5 billion euros from shareholders to make a dent into it debts.

Earnings before interest, tax, depreciation and amortisation (EBITDA) -- a measure of a debt-laden company's profitability -- rose by a third to 1.059 billion euros, at the higher end of analysts' expectations, an indication that the company is making progress.

"The results... clearly show a further positive response to the new strategy... with a clear focus on cash and margin,'' Scheepbouwer said in a statement.

KPN, whose shares are down 18 percent so far this year, said it expects its EBITDA to grow by at least 12 percent in 2002 and sees "low single-digit" revenue growth. The company's stock slipped 1.1 percent in early Amsterdam trading on Tuesday.

KPN's bottom line -- its loss of 348 million euros -- was hurt by its share of the cost for Europe's largest fibre-optic network operator, KPNQwest, which said last week it was running out of cash.

KPN took a charge of 477 million euros for its 40 percent stake KPNQwest. KPN had said it has a maximum exposure of 700 million euros to the ailing operator.

As for its debt, KPN said that stood at 15.4 billion euros, down from 15.7 billion euros, and forecasts net debt of 14.5 billion euros at the end of the year.

KPN also said its closely-watched rollout of the mobile Internet service i-mode, popularised in Japan by its partner NTT DoCoMo, was in line with expectations with 34,000 handsets sold in Germany and the Netherlands so far. KPN wants to have one million i-mode subscribers in 2003.