KPN – Surviving the crisis in

the telecom industry

Background
Industry  Telecommunications


Founded 19th century (founded), 1989 (privatized)

Headquarters The Hague, Netherlands

Key people Ad Scheepbouwer (CEO), Ton Risseeuw (Chairman of the
supervisory board)

Products Fixed line and mobile telephony, internet, digital television, IT
services, IPTV

Revenue €13.51 billion (2009)

Operating income €2.850 billion (2009)

Profit €2.178 billion (2009)

Employees 33,150 (2009)

Subsidiaries Getronics, Internet

Website www.kpn.com
  
Facts

 Company was quoted on Amsterdam stock

exchange in 1994
 In June 1998 KPN was split into two
companies
 PTT telecom carried the name KPN
 Mail and Courier activities named TPG
Environment Change

 After the privatization, the environment changed

dramatically for a number of reasons
 First – Increasing deregulation in international market
 Second – Deregulation had as an objective to
stimulate competition
 Third – Technological development that enables in the
rise in the use of the internet
 Fourth – Surprising growth of mobile communication
Strategy
 The company identified its core activities
 Fixed telecommunication
▪ Basically a service for domestic market
 Mobile telecommunication
▪ Business with many new entrants where branding and service
is the important factor
 Data communication(IP/Data) and internet
▪ IP/Data is very international and requires fast global or at
least pan European infrastructure
 Call center
▪ Based on outsourcing by large companies
 Media services
Strategic alliances : Unisource

 Unisource  Alliance with Televerket from

Sweden
 It offered world wide network and advanced
fax services for larger international companies
 In 1992 Swiss PTT telecom announced it would
join Unisource
 Within that year itself an agreement was
signed with US based Sprint for distribution of
worldwide network services
Strategic alliances : Unisource

 In December 1994 US based AT&T and

Unisource decided to start a joint venture
named Uniworld.
 The company offered its services through its
own offices or through local providers
 In Europe Uniworld also represented AT&T,
KDD from Japan and Singapore
Breaking up : Unisource

 It was decided that owners of Unisource

would each buy the business networks that
served their local market. KPN bought
Belgian network
 In 1998 AT&T decided to withdraw from
world partners
Joint Venture: KPNQwest

 Formed in 1998 between KPN and Qwest(U.S.A)

 Quoted in U.S.A and Netherland SE
 Leading pan European provider of data-centric
services based on IP.
 Advanced 20,000 km fibre optic network
connecting 50 cities in Europe
 It wanted to become the highest quality and
lowest cost fibre-optic network in Europe.
 On 31st May 2002 filed for bankruptcy.
Equity Participation
country Services offered Year of entry Year of exit
Czech republic GSM & Fixed 1990 2003
Ukraine GSM & Fixed 1992 2003
Hungary GSM & Fixed 1993 2002
Indonesia GSM 1994 1999
Ireland GSM & Fixed 1996 2001
UK 3-G 2000 2002
3G

 Second half of 1990s 3G came into picture

 Selling license, source of revenue for govt.
 KPN paid €8.7b for 3G license in Germany for
its subsidiary E-plus.
 It had already paid €10.6b for stake in E-plus
 These investments more than 150% of KPNs
turnover in2000 and mostly borrowed.
 More investments to roll out 3G
Relationship with NTT-Docomo and
Hutchison
 On May 2000 announced agreement
 It provided both financial and technological
resources.
 NTT-Docomo 15% shares in KPN mobile
 KPN able to introduce i-mode in 2002.
 3G already launched by Docomo in Japan
 Docomo to build total global presence
Merger Attempts

 3G services increased KPN’s debt

 1st negotiations with Telefonica, Spain, in
2000
 2nd negotiations with Belgacom in 2001.
Financial Crisis

 In 2000  total assets rose from €17.991bn to

€53.465bn.
 Jan 2001  fell in credit rating from A- to
BBB.
 Stock prices dropped from € 55.50 to €6.50.
 11th Sep, 2001, Ad Scheepbouwer became the
CEO.
Financial Restructuring

Two main directions

 Disposal of assets
 Reducing cost
Disposal of Assets

 2000  Minority equity participatins were sold.

 Large number of non-core assets were
disposed.
 Divestments lowered net debt
 2000 €22bn
 2001 €15.5bn
 2002 €12.35bn
 Increase in cash flow and productivity also
reduced debt.
Reducing Cost

 Reduction of workforce.
 Reduction of working capital.
 Decrease in capital expenditures.
Strategic Options

 Two main options

 Remain as a regional player.
 Become an International player.