KPN pulling out of 3G consortium to cut UK losses
Wednesday 21 August 2002
KPN, the struggling Dutch telecoms group, announced yesterday it wants to cut its losses in Britain by selling its 15 per cent stake in Hutchison 3G, a mobile consortium it owns with Hutchison Whampoa and NTT DoCoMo.
The move will see KPN take a €1.2bn (£769m) write-off on the venture. Ad Scheepbouwer, the chief executive of KPN, said the stake was a "non-core asset" which would be sold along with other parts of the business that were not deemed to be crucial to KPN's future.
Hong Kong-based Hutchison said it would not take a write-down on its stake in the British third-generation mobile phone business. It said it would "keep its options open" about whether it would buy out KPN's stake.
KPN has not yet discussed its plan to exit Hutchison 3G with its two partners and is not thought to be in talks with any prospective buyers.
The struggling company unveiled its intention to sell this holding as it announced a €9.3bn net loss for the second quarter, due mainly to losses on a number of its mobile phone businesses.
Mr Scheepbouwer said the heavy charges reflected more pessimistic prospects for third-generation mobile phone technologies, the launch of which has been delayed by technical glitches and cash shortages among operators.
KPN's hefty write-off brought it into line with its rivals, which have also written off billions of euros in asset values in the wake of an 80 per cent drop in share prices since March 2000.
Mr Scheepbouwer said "reality has changed" in Europe's beleaguered mobile market. He added this meant that KPN, and its rivals, had to admit that they thought they would attract customers more quickly than has been the case, and that those customers would be prepared to pay more for services such as broadband internet access through their mobile phones.
KPN was more optimistic about its prospects for the full year, saying it expects to generate earnings before tax at least 14 per cent higher than last year. The figure was an improvement on KPN's forecast earlier this year that earnings would be 12 per cent higher this year.
KPN also emphasised its write-offs did not affect its operational free cash flow, which improved to a positive €412m from a negative €166m a year ago.
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