UPDATE 4-Dutch telecom KPN under regulator's watch

Wed Dec 21, 2011 11:54am EST

* OPTA puts KPN under close supervision

* Says risk high that KPN is violating OPTA legislation

* OPTA previously critical of KPN's culture, compliance

* KPN "surprised" by OPT announcement

* Shares up 0.3 pct

By Sara Webb

AMSTERDAM, Dec 21 (Reuters) - The Dutch telecoms regulator has put KPN, the country's telecoms market leader, under close supervision with immediate effect, saying it may have broken the law to the detriment of consumers and competitors.

KPN and other mobile phone operators in the Netherlands are already under investigation by the country's competition authority, known as NMA, for possible price-fixing.

The Post and Telecommunications Authority (OPTA), which was highly critical of KPN's culture and compliance in a report earlier this year, declined to comment on the scope or nature of KPN's infringements and told Reuters its action was "completely separate" from that of NMA.

In a short statement, OPTA said "the risk that KPN is violating OPTA legislation is estimated to be high, with harmful effects on consumers or on the competition," citing "behaviours and violations" by the telecommunications company.

Cynthia Heijne, OPTA's spokeswoman, told Reuters the regulator had already carried out an investigation of KPN and was now taking action on the basis of its findings.

OPTA's officers visited KPN's headquarters in The Hague early on Friday morning to inform the board of directors of their decision, she told Reuters.

OPTA, which is responsible for promoting competition in the communications markets, has far-reaching investigative powers, and its staff may enter the premises, request information, demand disclosure and remove data from a company.

In a report in July, OPTA said it had seen no improvement in KPN's compliance, that "the implementation of regulations is not always ... successful", and that the time taken for implementation was "unacceptable".

It also criticised the corporate culture, noting resistance among employees towards regulatory compliance.

"OPTA is increasingly unhappy about the culture and compliance at KPN, and feel KPN is less sensitive to OPTA's concerns," a person familiar with the discussions told Reuters.

SURPRISED

"KPN was surprised by Dutch regulator OPTA's announcement that it intends to sharpen its supervision of the company in the Netherlands," the telecoms firm said in a statement.

"KPN is aware of a couple of cases which are currently being dealt with to which the OPTA announcement may be related. KPN is firmly of the opinion that it has acted in compliance with relevant laws and regulation in these cases, which are the subject of a number of legal proceedings."

A KPN spokesman declined to comment further.

The largest telecommunications provider in the Netherlands has struggled to reverse a decline in revenues, profit and market share in its domestic fixed-line and mobile businesses in recent quarters as competition intensifies.

Earlier this year, KPN said sales in the Netherlands have been particularly hard hit by consumers bypassing traditional mobile phone and text messaging services in favour of keeping in touch via Facebook, Twitter and instant messaging.

The Dutch parliament in June passed a law banning telecommunications providers such as KPN from charging their subscribers extra fees for Internet services such as Skype and instant messaging.

The law is intended to preserve open access to the Internet at a time when some mobile operators in Europe are blocking or charging extra for specific voice over Internet protocol (VOIP) services including Skype and instant messaging such as WhatsApp, used on Apple's iPhone.

MODEST FINE?

KPN shares felt little impact from the news and were up 0.3 percent at 1553 GMT.

The stock is down 18 percent in the year to date, slightly underperforming the index, down 15 percent.

"We already have a discount (in the share price) following the launch of the NMA investigation," ING analyst Jeffrey Vonk said.

"OPTA will be looking at all the actions. That process will take a lot of time. The fine could be very modest," Vonk added, referring to an earlier instance when OPTA fined KPN.

OPTA's statement on Wednesday also cited the previous instance, dating from 2005, when it fined KPN 17 million euros ($22.3 million) over its use of "improper" discounts in the commercial market for fixed telephony and leased lines.

Earlier this month, the competition authority NMA raided the offices of mobile operators KPN, Vodafone, and Deutsche Telekom's T-mobile as part of a price-fixing investigation.

NMA said at the time that it was investigating whether mobile telecoms operators in the Netherlands engaged in cartel practices including price fixing and the sharing of market information.

The competition authority did not name any of the companies under investigation, but KPN, Vodafone, and T-Mobile each issued separate statements saying they were all fully cooperating with the authority's cartel probe.