KPN Earnings: Revenue and EBITDA Up 2%; Fiber Deployment in Large Dutch Cities Accelerates

Narrow-moat KPN’s KPN 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.

KPN is now starting to deploy fiber-to-the-home in densely populated cities like The Hague, Rotterdam, and Amsterdam. We believe KPN could gain some broadband customers from VodafoneZiggo, Netherlands’ cable operator, which has a strong presence in large cities. We don’t expect any big market share shifts though as VodafoneZiggo can defend its position well thanks to a reliable cable network (offering speeds of up to 500 megabits) and a high proportion of convergent customers, who are attracted by VodafoneZiggo’s ample sports rights, including soccer and Formula One. KPN’s FTTH footprint expanded by 221,000 quarter on quarter to 4.14 million, with 127,000 additions after it acquired the fiber network of Primevest Capital Partners.