June 11, 2010 / 1:45 PM / 9 years ago

KPN CEO says will not sell E-Plus in Germany

AMSTERDAM (Reuters) - Dutch telecoms group KPN (KPN.AS) is committed to the German wireless market and will not sell its E-Plus unit there, chief executive Ad Scheepbouwer said on Friday.

KPN’s E-plus unit has about half the market share of Deutsche Telekom (DTEGn.DE) and Vodafone (VOD.L) in Europe’s biggest wireless market, but concerns have grown that it is not investing enough there to keep its place and that it might have to sell the cash-generating business, possibly to Spain’s Telefonica (TEF.MC).

“We have earned a third spot in the German market with our strategy. With our current frequencies and the newly acquired, we expect to maintain that position ... by ourselves,” KPN’s Chief Executive Ad Scheepbouwer said in an interview. KPN is targeting a 20 to 25 percent German market share over the next three to five years, up from the current 15 percent, but will avoid making capital investment beyond existing plans over the coming years, he said.

Selling E-Plus is not an option, said Scheepbouwer, who will retire next year. No successor has yet been named.

“E-Plus is an integrated part of our strategy,” he said.

Scheepbouwer told Reuters that E-plus would be able to handle booming demand for mobile data, driven by people using phones to access e-mail, social networks, videos and maps, although partnerships remained an option.

MARGINS MAY DIP

Analysts say KPN’s position in Germany may be at risk after competitors snatched the most popular bands in last month’s German mobile spectrum auction.

E-Plus doubled its amount of spectrum in the auction, but it was left without access to the popular 800 Mhz band.

Scheepbouwer said with two additional blocks in the 2.1 GHz band, E-Plus was able to fight competition by offering capacity rather than a new technology.

Scheepbouwer expects KPN can optimize and expand its network, without raising annual capital investments.

“We annually spend about 2 billion euros on capital investments, of which about 750 million euros internationally,” he said. “Most of the time we don’t even reach that amount. I don’t expect us to change our capex framework in the coming years.”

Last year KPN invested about 450 million euros in Germany, 12 percent less than in 2008.

“We have increased commercial activity this year, which puts pressure on margins. So far we have been able to compensate that operationally ... In recent quarters our (EBITDA) margin at E-Plus has been above the 40 percent, and whilst it may drop a couple of points, I certainly don’t expect to go below 35 percent, a level we have been above for the last five years.”

Although Scheepbouwer thinks KPN is in no need to cooperate with other mobile operators after last month’s spectrum auction, he said he would always be open to partnerships.

“We don’t need cooperation based on our current package. But we will always investigate whether things can be done cheaper with others, but at the moment this is not necessary.”

Editing by Will Waterman

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