UPDATE 4-KPN to cuts costs as tariff regulation bites

* Q4 EBITDA 1.36 bln euros, market forecast 1.38 bln euros

* Mobile data seen as growth driver on smartphone surge

* Reaffirms outlook for 2011

* Announces new 1 billion-euro share buyback for 2011

* Sees 2011 dividend per share of at least 0.85 euro cents

(Recasts, updates shares)

By Roberta B. Cowan

AMSTERDAM, Jan 26 (Reuters) - Dutch telecoms company KPN NV (KPN.AS) expects tariff cuts imposed on its mobile network to hurt profits next year and plans to cut costs to help make amends.

KPN also said smartphone use among its mobile customers was growing fastest in Germany, where it is set to more than double this year with 75 percent of users having high speed mobile data. The carrier was reporting a 4 percent rise in fourth-quarter profit that fell just short of consensus, and confirming plans to return cash to shareholders via a 1-billion-euro share buyback and a higher dividend.

It reaffirmed its 2011 outlook for further growth in earnings before interest, tax, depreciation and amortisation (EBITDA) and free cashflow, with capital expenditure set at up to 2 billion euros. But it warned that expected cuts in the mobile termination tariffs that operators charge each other to connect a customer to another network would hurt its business even more this year than in 2010.

Chief Financial Officer Carla Smits-Nusteling said KPN plans to recoup the losses, which she put at about 200 million euros at the EBITDA level in 2011, by cutting costs further and increasing subscribers for bundled packages.

Next year, the impact of tariff cuts will be about 125 million at the revenue level and about 50 million euros at the EBITDA level, Smits-Nusteling said.

SURGING SMARTPHONE USE

KPN competes in its home market with Vodafone (VOD.L) and Deutsche Telekom AG (DTEGn.DE) and also operates in Germany, France, Spain and Belgium. It provides various brands targeting different end-users including mobile and data services, the area experiencing the fastest growth thanks to surging use of smartphones such as Apple's iPhone.

"Mobile data is one of the main growth drivers at KPN," said Smits-Nusteling, adding that about 60 percent of KPN's customers are now chosing smartphones and that growth in mobile data use is fastest in Germany, where its service is sold under the E-Plus brand.

KPN expects 75 percent of its E-Plus users to have high speed mobile data, against 35 percent in the fourth quarter.

EBITDA for KPN's international mobile business fell 4.9 percent to 368 million euros in the fourth quarter, reflecting lower profits in Germany and Belgium due to mobile termination rate cuts and increased investment.

Overall, fourth-quarter EBITDA rose 4 percent to 1.36 billion euros, just short of the 1.38 billion euros forecast by analysts, while full-year 2010 EBITDA rose 9 percent to 5.48 billion euros, just below the company's own forecast of over 5.5 billion euros.

KPN's shares fell in early trade but finished off lows down 0.4 percent at 11.495 euros with the main index .AEX up 0.9 percent.

Fourth-quarter revenue was up 0.5 percent at 3.39 billion euros, just short of analysts' forecasts of 3.4 billion euros.

Outgoing Chief Executive Ad Scheepbouwer said the results were achieved "despite economic headwinds and severe regulation" adding that KPN delivered strong operating results and robust cash generation.

KPN said this year it will continue its current strategy under its new chief executive, Eelco Blok, who takes over in April. (Editing by Greg Mahlich and David Cowell)