KPN announces debt-reduction plan

(Telephony) After increasing its debt by more than 475% in 2000, KPN announced a plan during its year-end conference call to reduce the load and repair its credit rating.

The primary causes of the increased debt was KPN’s acquisition of E-Plus for 10.6 billion euros and UMTS licenses for 8.85 billion euros, bringing the company’s debt to from 4.6 billion euros 21.9 billion euros at the end of 2000.

“The logical consequence of that was the rating agencies lowered our long-term credit rating from ‘A’ to ‘B’,” said Paul Smits, chairman of KPN’s board of management. “We can continue to live with that ‘B’ rating if we have to, but we do not wish to do so. Our financial policy aims now to return to an ‘A’ status within three years.”

To return to an ‘A’ debt rating, KPN said it would sell a number of non-core assets, including: 21% of Eircell; 21% of Eircom; 20.3% of Ceski Telecom; 75.2% of Pantel; 51% of Euroweb; 44.7% of Euroweb; 17.7% of Infonet, excluding Infonet Nederland; 16.3% of UMC; 22.3% of Telkomsel; and 100% of Vision Networks.

KPN is also examining forming partnerships, outsourcing or partially selling other businesses and affiliated companies, including its holdings in data centers, commercial real estate, satellite communications; international consultancy; towers in Belgium, Germany and the Netherlands; and network construction.

As a result of these plans, “we expect, within six months, to have 1.5 billion euros coming in,” Smits said. “As a result of the total of all of these, we expect to have 5 billion euros.”

In addition to the adjustments made to its asset portfolio, KPN also said it will try to make more cash available. The main vehicle for this will be a restructuring that will result in about 8000 layoffs, which is expected to generate a 700 million euro saving in 2003.