Additional job cuts as KPN focuses on core market

Dutch telecommunication provider Koninklijke KPN NV on Friday announced an additional 1,300 job cuts on top of its already planned 4,800 redundancies, a spokeswoman confirmed.

"The cuts will come through natural wastage, not forced redundancies," she said.

On Wednesday, due to a weak telecommunication market and its own massive debt, KPN announced it will pull back from its plans to expand into a pan-European service provider. Instead the company will refocus itself by offering wholesale telecommunication products and services in its core markets of the Netherlands, Belgium and Germany.

KPN's restructuring plans were announced along with its third-quarter figures, which featured a net loss of 231 million euros (US$210 million as of Sept. 30, the last day of the quarter reported), compared with a net profit of 1.95 billion euros for the same period last year, KPN said in a statement Wednesday.

Revenue was up by 13.4 percent in the third quarter to 3.12 billion euros, compared with revenue of 2.75 billion euros in the same quarter last year, but most crippling to KPN is its 22.3 billion euros of debt, the company said.

In an effort to reduce its debt load, KPN announced a share offering plan valued at 5 billion euros. The debt itself is a result of the cost of KPN's 3G (third-generation) mobile phone licenses in the Netherlands and Germany, KPN said.

The move by KPN echoes debt reduction and restructuring plans announced earlier in the year by British Telecommunications PLC (BT) and Finnish telecommunication company Sonera Corp. Both companies also blamed massive debt loads on exorbitant 3G costs.

As part of KPN's restructuring plan, previously announced job cuts of 4,800 jobs will go ahead in an effort to save an annual 800 million euros beginning in 2004, the company said. In October KPN's works council criticized the company's plan to cut about 10 percent of its workforce, stressing that such a move could negatively affect the company's customers, due in part to an increased workload for the company's remaining employees.

After consulting with company unions, the parties reached an agreement on Nov. 16 on redundancies, KPN said. Under the plan there will be 2,800 forced redundancies and 2,000 voluntary layoffs, with most of those job losses coming in 2002 in KPN's fixed network services division, distribution outlets, corporate offices and IP/data division Benelux, KPN said.

As part of its agreement with the unions, KPN will decrease the number of forced redundancies by enforcing salary cuts for senior management in the Netherlands and freezing salary increases in the Dutch corporate offices for 2002 and 2003, the company said.

The additional 1,300 job cuts announced Friday will be completed by 2004, the KPN spokeswoman said.

KPN will also continue to sell noncore assets to reduce its debt. Possible assets that could be put up for sale include its German mobile operator E-Plus Mobilfunk GmbH & Co., which currently accounts for 13.3 billion euros or nearly 60 percent of KPN's debt.

KPN suffered losses in its mobile communication division (a 93 million-euro loss, compared to a profit of 2.09 billion euros year-on-year), IP/data division (a 26 million-euro loss, compared to a loss of 12 million euros year-on-year) and its Information and Communications Mobile (ICM) division (a 13 million-euro loss, compared to a loss of 31 million euros year-on-year).

KPN's fixed-network services division reported a profit of 233 million euros, down from a profit of 293 million euros in the third quarter of 2000.

One of the bright spots for KPN Mobile came with the reported increased number of subscribers in Germany (up to 7.5 million subscribers from 5.7 million a year ago), the Netherlands (up to 5.2 million subscribers from 4.6 million a year ago) and Belgium (up to 897,000 subscribers from 376,000 a year ago).

Due in part to such strong numbers, KPN will now focus its efforts on customers in the Netherlands, Germany and Belgium, putting its pan-European expansion plans on hold indefinitely, the company said. Specifically, KPN will attempt to derive more revenue per customer with more services, such as those offered by its broadband networks division to wholesale fixed network customers, KPN said.

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