Analyst Note| Javier Correonero |
KPN's second-quarter results were stable as usual, with organic service revenue growth of 1.4% and EBITDA growth (after leases) of 1.1%. In the consumer segment, service revenue declined 1.1% as growth in sales to the fiber base were not enough to offset declines in the copper base. The mobile segment grew 1.4% thanks to net customer additions of 33,000 and stable average revenue per user trends. Management raised its outlook slightly for 2022, from an expected EBITDAaL of EUR 2,350 million to EUR 2,400 million. KPN continues to do a good job of reducing its cost base despite inflationary pressures. Operating expenses increased by just 0.8% during the quarter, with wage inflation and higher energy costs offsetting other cost controls. We are confident in KPN’s ability to keep costs under control, as the company has shown very good cost discipline over more than a decade, resulting in significant margin expansion. Despite the cost of goods and services increasing 4.5% due to inflation, personnel and IT expenses declined by 4.5% and 5.3% respectively. We maintain our EUR 2.80 fair value estimate and view shares as overvalued currently.