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Investing.com -- Dutch telecom operator, KPN (AS:KPN) warned of slower earnings growth in the third quarter on Wednesday, overshadowing a better-than-expected second-quarter performance and sending its shares down more than 2%.
Group service revenue rose 3.7% year over year to €1.34 billion, exceeding the consensus forecast of €1.33 billion.
Adjusted EBITDA after leases increased 4% to €670 million, also beating the consensus of €658 million.
The result included a €9 million one-off gain from an intellectual property rights settlement and a 1% benefit from the TowerCo consolidation, which were not expected to recur in the second half of the year.
KPN raised its 2025 adjusted EBITDAaL guidance to over €2,630 million from more than €2,600 million. Free cash flow guidance was lifted to €940 million, a 4% increase year over year.
Capital expenditure for the year is still projected at €1.25 billion. Group service revenue growth guidance was reiterated at 3%, in line with the updated consensus forecast of 2.8%.
The company expects third-quarter adjusted EBITDAaL to grow 1.5% organically, excluding one-offs and TowerCo contributions.
The expected deceleration reflects rephasing of personnel costs and softer trends in the business unit.
By segment, business service revenue rose 5.7% to €468 million, topping the €461 million consensus.
Wholesale service revenue increased 8.1% to €171 million, ahead of the €163 million estimate, supported by new roaming agreements.
Consumer service revenue was up 1.3% to €698 million, slightly below the €702 million forecast.
Broadband net additions rose to 13,000 in the quarter from 2,000 in the first quarter, while postpaid mobile net additions climbed to 37,000 from 21,000.
Free cash flow in the second quarter totaled €180 million, missing the €215 million estimate despite capex falling to €298 million from an expected €325 million.
KPN attributed the shortfall to seasonal working capital trends, with stronger free cash flow typically seen in the second half of the year.
The company’s €250 million share buyback program is nearing completion. Its shares closed at €4.12 on Tuesday, trading near the top of the 52-week range of €3.47 to €4.19. KPN is valued at 17 times estimated 2025 earnings, above the sector average of 16 times. The equity free cash flow yield stands at 5.8%, while the dividend yield is 4.4%.
“We see ACM approval for the Glaspoort/Delta Fiber deal (decision expected soon) as the next key milestone for the market – the outcome will determine whether there will be rising fibre overbuild or fibre consolidation,” said analysts at UBS in a note.