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KPN Surviving the crisis

in the telecom industry

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Industry Telecommunications

Founded 19th century (founded), 1989 (privatized)

Headquarters The Hague, Netherlands

Key peopleAd Scheepbouwer (CEO), Ton Risseeuw (Chairman of the

supervisory board)

Products Fixed line and mobile telephony, internet, digital television, ITservices, IPTV

Revenue 13.51 billion (2009)

Operating inc

ome

2.850 billion (2009) Profit 2.178 billion (2009)

Employees 33,150 (2009)

SubsidiariesGetronics, Internet

Website

www.kpn.com

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Company was quoted onAmsterdam stock

exchange in 1994

In June 1998 KPN was split into twocompanies

PTT telecom carried the name KPN

Mail and Courier activities named TP

G

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After the privatization, the environment

changed dramatically for a number of reasons

First Increasing deregulation in international market Second Deregulation had as an objective to

stimulate competition

Third Technological development that enables in the

rise in the use of the internet Fourth Surprising growth of mobile communication

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The company identified its core activities Fixed telecommunication

Basically a service for domestic market

Mobile telecommunication Business with many new entrants where branding and service

is the important factor

Data communication(IP/Data) and internet IP/Data is very international and requires fast global or at

least pan European infrastructure Call center

Based on outsourcing by large companies

Media services

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Unisource Alliance with Televerket fromSweden

It offered world wide network and advancedfax services for larger internationalcompanies

In 1992 Swiss PTT telecom announced it

would joinUnisource Within that year itself an agreement was

signed withUS based Sprint for distributionof worldwide network services

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In December 1994US basedAT&T and

Unisource decided to start a joint venture

namedUniworld. The company offered its services through its

own offices or through local providers

In EuropeUniworld also representedAT&T,

KDD from Japan and Singapore

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It was decided that owners ofUnisource

would each buy the business networks that

served their local market. KPN boughtBelgian network

In 1998AT&T decided to withdraw fromworld partners

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Formed in 1998 between KPN andQwest(U.S.A)

Quoted inU

.S.A

and Netherland SE Leading pan European provider of data-

centric services based on IP. Advanced 20,000 km fibre optic network

connecting 50 cities in Europe It wanted to become the highest quality and

lowest cost fibre-optic network in Europe. On 31st May 2002 filed for bankruptcy.

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country Servicesoffered Year ofentry Year ofexit

Czech republic GSM &Fixed 1990 2003

Ukraine GSM &Fixed 1992 2003

Hungary GSM &Fixed 1993 2002

Indonesia GSM 1994 1999

Ireland GSM &Fixed 1996 2001

UK 3-G 2000 2002

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Second half of1990s 3G came into picture

Selling license, source of revenue for govt.

KPN paid 8.7b for 3G license inGermany forits subsidiary E-plus.

It had already paid 10.6b for stake in E-plus

These investments more than 150% of KPNs

turnover in2000 and mostly borrowed.

More investments to roll out 3G

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On May 2000 announced agreement

It provided both financial and technological

resources. NTT-Docomo 15% shares in KPN mobile

KPN able to introduce i-mode in 2002.

3G already launched by Docomo in Japan

Docomo to build total global presence

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3G services increased KPNs debt

1st negotiations with Telefonica, Spain, in

2000 2nd negotiations with Belgacom in 2001.

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In 2000 total assets rose from 17.991bn to53.465bn.

Jan 2001 fell in credit rating fromA- to BBB. Stock prices dropped from 55.50 to 6.50.

11th Sep, 2001,Ad Scheepbouwer became theCEO.

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Two main directions

Disposal of assetsReducing cost

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2000 Minority equity participatins weresold.

Large number of non-core assets weredisposed. Divestments lowered net debt

2000 22bn

2001 15.5bn 2002 12.35bn

Increase in cash flow and productivity alsoreduced debt.

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Reduction of workforce.

Reduction of working capital.

Decrease in capital expenditures.

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Two main options

Remain as a regional player.

Become an International player.