KPN puts assets up for sale

Third-generation mobile phones will allow users to watch videos or surf the net

KPN has pledged to reduce its 21.9bn euro ($19.6bn; £13.7bn) debt pile by selling off chunks of its business that might include the flotation of its mobile phone arm, KPN Mobile.

The climate changed radically from trust to mistrust

Paul Smits
KPN boss

The Dutch firm is also embarking on a restructuring project to achieve annual savings of 700m euros from 2003.

KPN's heavy debts, amassed through purchasing third-generation mobile phone licences, led to a plummeting share price and the reduction of credit ratings last year.

KPN's chief executive, Paul Smits, now says that the reduction of this debt is a priority, and aims to raise at least five billion euros from asset sales and return to profitability in 2003.

"The year 2000 was a year of extremes," he said. "The climate changed radically from trust to mistrust."

Growing losses

KPN made an underlying loss of 626m euros last year, compared to 771m euros of profit the previous year.

But it was rescued by the 2.3bn euros gained through the sale of a 15% stake in KPN Mobile to Japan's NTT DoCoMo.

This kept the company out of the red in 2000, and KPN reported net profits of 1.87bn euros.

But the firm admitted that this year's profits would not look so good, despite a forecast increase of 10-15% in sales.

It had 13 million customers for mobile telephone services at the end of 2000, more than three times the amount the previous year.

Mulling a float

Mr Smits also confirmed that a flotation of KPN Mobile was still "in the pipeline" as a cash-raising measure for later this year.

But the weakness of telecom stocks will make a flotation an unattractive option in the current investment climate.

France Telecom received a cool reception for the flotation of its mobile phone arm, Orange, in February.

The delay in reducing its debt led to KPN's credit rating being slashed to triple B - the lowest investment grade.

Mr Smits on Monday expressed determination to see KPN's rating returned to A grade within three years.

Up for grabs

KPN owed 21.9bn euros at the end of last year, 8.7bn euros of which was amassed from purchasing third-generation licences in the Netherlands, Germany and Belgium and as part of the 3G UK Holdings consortium.

The non-core assets up for sale include a holding in Ireland's Eircom and in mobile phone operators in Hungary and the Czech Republic.

The group will also sell property to raise extra cash.

KPN says its focus will be on the Netherlands, Germany and Belgium whilst preparing for the launch of third-generation mobile phones.