Company Reports

The service revenue risk we flagged last quarter materialized in KPN’s second quarter, with management reducing 2026 service revenue growth guidance to 1.5% from 2.0%-2.5% previously.

KPN delivered a first quarter broadly in line with 2026 guidance. Service revenue growth was the only weak spot, with 0.6% year-on-year growth while management has forecast 2%-2.5% growth in 2026.

KPN reported full-year service revenue of EUR 5.4 billion, up 2.7% year over year, meeting guidance as its fiber-to-the-home rollout continued to support net consumer broadband additions. Management reaffirmed its 2027 targets while guiding for moderated service revenue growth in 2026.

KPN maintained its commercial momentum in the third quarter, adding 6,000 net consumer broadband subscribers and 47,000 postpaid mobile subscribers sequentially. Service revenue rose 1.7% year on year, reflecting strength in both consumer and business segments.

KPN delivered a solid second quarter with 3.7% year-on-year revenue growth and 6.4% adjusted EBITDA after leases growth, reaching EUR 1.34 billion and EUR 670 million, respectively.

As expected, narrow-moat KPN delivered on its 2024 guidance, with service revenues up 3.4% year on year to EUR 5.2 billion, compared with guidance of 3.0% growth. For 2025, KPN guided for 3% service revenue growth, EUR 2.58 billion in EBITDAaL and EUR 1.25 billion in capital expenditure. The firm's commitment on dividends also remains on track, with EUR 0.17 expected for fiscal-year 2024 and EUR 0.182 for 2025, a 7% increase. KPN remains one of our favorite picks for investors interested in European telecoms, together with Deutsche Telekom and Tele2. However, all of these names remain fairly valued at the moment. We are maintaining our EUR 3.40 fair value estimate for KPN.

KPN is the incumbent telecom operator in the Netherlands, operating in the fixed-line and mobile markets. It has maintained a stable market share during the past decade in broadband, where it shares leadership with peer VodafoneZiggo (40% each). We believe the Dutch broadband market to be a rational oligopoly where both players prefer not to engage in aggressive market share shifts but rather maintain stable positions, executing slight price increases each year. The mobile market, where KPN has a 20% share, has three major operators (KPN, VodafoneZiggo, and Odido, previously T-Mobile Netherlands), which allows for overall market stability.

Narrow-moat KPN reported third-quarter adjusted revenue growth of 4.2% to EUR 1,420 million and adjusted EBITDAaL growth of 2.3% to EUR 643 million, both slightly above company-compiled consensus. Free cash flow was the only metric that came in below consensus, with management citing timing of interest payments, higher cash taxes, and investment in working capital as the cause. Management reaffirmed its guidance for the year as well as its midterm ambitions. We make no changes to our forecasts and maintain our EUR 3.20 fair value estimate.

Narrow-moat KPN's second-quarter results were slightly ahead of company-compiled consensus. Adjusted revenue grew by 4.5% year over year to EUR 1.39 billion, which flowed into the EBITDAaL line which grew by 5.6%, reaching EUR 629 million. Adjusted EBITDA after leases expanded 40 basis points to 45.2%. Management reiterated its yearly outlook, which seems conservative at this point. Management is targeting 3% growth in adjusted revenue and EBITDAaL, while these same metrics are up 3.9% and 4.6% in the first half of the year, respectively. We maintain our EUR 3.20 fair value estimate, with shares remaining slightly overvalued, trading in EUR 3.60 territory.

Narrow-moat KPN has started 2024 on a strong note with revenue and adjusted EBITDA after leases growing 3.3% and 3.6%, respectively and management raised guidance slightly after the acquisition of Youfone. KPN now expects adjusted EBITDAaL of EUR 2.5 billion in 2024 compared with EUR 2.48 billion before. Growth from KPN is two-sided: first, the Dutch telecom market remains highly rational, with the overall market growing by 4.3% in fourth-quarter 2023, according to Telecompaper. This is an exception as many telecom markets across Europe tend to shrink and not grow. Second, KPN is outperforming its peers, especially in the broadband segment, where it is gaining market share from VodafoneZiggo as the company keeps rolling out fiber to the home in the Netherlands. We maintain our EUR 3.20 fair value estimate, with shares being slightly overvalued. KPN, together with Deutsche Telekom and Tele2, remains one of our favorite picks among European telecom companies. KPN aims to grow dividends at a 7% compounded annual growth rate until 2027, in addition to EUR 200 million of yearly buybacks, which we see as maintainable.

KPN is the incumbent telecom operator in the Netherlands, operating in the fixed-line and mobile markets. It has maintained a stable market share during the past decade in broadband, where it shares leadership with peer VodafoneZiggo (40% each). We believe the Dutch broadband market to be a rational oligopoly where both players prefer not to engage in aggressive market share shifts but rather maintain stable positions, executing slight price increases each year. The mobile market, where KPN has a 20% share, has three major operators (KPN, VodafoneZiggo, and Odido, previously T-Mobile Netherlands), which allows for overall market stability.

We are raising our fair value estimate for narrow-moat KPN to EUR 3.20 per share from EUR 3.00, as we raise our medium-term forecasts. We model a 2% compounded annual growth rate, or CAGR, in adjusted EBITDAaL for the next five years, slightly more conservative than management’s 3% CAGR until 2027, as KPN capitalizes on revenue growth and cost controls. In 2023, KPN has managed to grow its top line by 1.7% mainly aided by its mobile and converged businesses. Although EBITDAaL only grew 0.6% in 2023 due to inflationary pressure, we believe the firm can accelerate growth going forward as it keeps growing revenue—reducing costs—and as inflation cools down. KPN will raise dividends by 13% in 2024 to EUR 0.17 per share compared with EUR 0.15 in 2023, and then grow them at a 7% CAGR from 2024 onward. This target looks achievable given the firm enjoys a healthy gap between its free cash flow and its dividend payments. We also assume KPN will execute EUR 200 million to EUR 300 million of share buybacks per year.

KPN is the incumbent telecom operator in the Netherlands, operating in the fixed-line and mobile markets. It has maintained a stable market share during the past decade in broadband, where it shares leadership with peer VodafoneZiggo (40% each). We believe the Dutch broadband market to be a rational oligopoly where both players prefer not to engage in aggressive market share shifts but rather maintain stable positions, executing slight price increases each year. The mobile market, where KPN enjoys a 20% share, has three major operators (KPN, VodafoneZiggo, and T-Mobile Netherlands) and has recently been more competitive than broadband, as T-Mobile has been gaining share for several years by offering lower prices and more flexible terms.

KPN is the incumbent telecom operator in the Netherlands, operating in the fixed-line and mobile markets. It has maintained a stable market share during the past decade in broadband, where it shares leadership with peer VodafoneZiggo (40% each). We believe the Dutch broadband market to be a rational oligopoly where both players prefer not to engage in aggressive market share shifts but rather maintain stable positions, executing slight price increases each year. The mobile market, where KPN enjoys a 20% share, has three major operators (KPN, VodafoneZiggo, and T-Mobile Netherlands) and has recently been more competitive than broadband, as T-Mobile has been gaining share for several years by offering lower prices and more flexible terms.

Narrow-moat KPN’s revenue grew 2.2% in the third quarter to EUR 1.36 billion. EBITDA after leases grew by 1.6% to EUR 629 million, a 46.1% margin. In the consumer market mobile revenue grew by a strong 5% in line with previous quarters, whereas broadband service revenue returned to growth (2.6%) after several quarters of flat growth or small declines. We maintain our EUR 3.00 fair value estimate and shares remain fairly valued at this point. KPN intends to distribute a EUR 0.15 dividend in 2023, which represents a 5% yield at this point. We also see KPN’s dividend as maintainable and with room to grow at low single digits to midsingle digits thanks to its steady performance in the Netherlands and continuous cost-controls.

In the second quarter of 2023, KPN reported service revenue growth of 2.8% year over year supported by a stable customer base and slight price increases. As we saw in the prior quarter, this revenue growth did not flow to the EBITDA after leases, or EBITDAaL, which remained flat, as costs are increasing at the same pace. Growing revenue but flat or declining EBITDAaL growth has been a general narrative this quarter among telecommunication operators as they cannot avoid growth in personnel and energy expenses, which normally are indexed to inflation. KPN has locked in energy prices for the remainder of the year and has implemented price increases in its broadband offerings, which should help EBITDAaL in the second half of the year. KPN is one of our favorite European telecommunication companies from a cost management perspective, having shown very good discipline for years. We are maintaining our EUR 3.00 fair value estimate and believe shares are slightly expensive now, trading at around EUR 3.30.

Dutch telecoms operator KPN announced on June 19 the acquisition of regional fibre operator Primevest in the Netherlands. The acquisition will add 127,000 fiber-to-the-home premises in Rotterdam, the Hague, and Eindhoven to KPN’s footprint. This will add to KPN’s existing FTTH footprint of 3.8 million premises, bringing the company’s total to nearly 4 million. We maintain our narrow moat and EUR 3.00 fair value estimate for KPN.

Narrow-moat KPN’s service revenue grew by 1.2% organically while EBITDA after leases, or EBITADaL, fell 1.6% year over year largely on higher inflation costs. Total operating expenses increased by 4.4% in the first quarter, largely due to higher energy costs, which increased by almost 20%. Personnel and IT expenses fell by 1.3% and 4.7%, respectively. Despite the higher costs, KPN remained confident it can reach its 2023 EBITDAaL guidance, which aims for EBITDAaL of EUR 2.4 billion, flat compared with 2022. The 2023 guidance of flat EBITDAaL looks reachable to us, considering KPN has historically done a good job at keeping costs under control. We will continue to monitor EBITDAaL and cost performance through the year, and we are maintaining our EUR 3.00 fair value estimate, with shares being slightly overvalued at this point. We recommend KPN to dividend investors looking for an attractive, but maintainable, dividend yield thanks to the stability of the Dutch market and a strong focus on cost controls.

KPN is the incumbent telecom operator in the Netherlands, operating in both the fixed-line and mobile markets. It has maintained a stable market share during the past decade in broadband, where it shares leadership with peer VodafoneZiggo (40% each). We believe the Dutch broadband market to be a rational oligopoly where both players prefer not to engage in aggressive market share shifts but rather maintain stable positions, executing slight price increases each year. The mobile market, where KPN enjoys a 20% share, has three major operators (KPN, VodafoneZiggo, and T-Mobile Netherlands) and has recently been more competitive than broadband, as T-Mobile has been gaining share for several years by offering lower prices and more flexible terms.

Narrow-moat KPN met its own guidance for fourth-quarter 2022. Service revenue grew by 1.5% organically while EBITDA after leases grew 2.4% year over year. As usual, KPN has kept operating expenses in check, growing by just 0.8% during the whole of 2022, something we consider a success given the current energy and inflationary environment. As guided by KPN last quarter, it expects flat EBITDAaL during 2023 even in the current environment of high energy prices. Despite flat expected growth in 2023, management intends to grow dividends by almost 5%, from EUR 0.143 to EUR 0.150 per share, which we believe is achievable, as there is enough cash flow available for dividends after servicing debt. It also intends to repurchase EUR 300 million in shares (like it did in 2022), although we see a neutral impact on shareholders here unless shares trade below our EUR 2.80 fair value estimate, which we maintain. We recommend KPN to dividend investors looking for an attractive, but maintainable dividend yield thanks to the stability of the Dutch market and a strong focus on cost controls.