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Friday, 22 April 2011

Dutch telecom behemoth KPN lost track of trends in telecom landscape: scraps 5000 jobs (25%) in The Netherlands alone.

The Dutch financial newspaper Financieel Dagblad ( opened yesterday, March 21 with the news that former state monopolist in the telecom business and current market leader KPN Telecom scraps up to 5000 jobs (link in Dutch) in The Netherlands: 25% of the total amount of personnel. Here are some pertinent snips of the article:
KPN is until 2015 going to scrap 4000 to 5000 jobs, due to unexpected headwinds on the main Dutch telecom markets. These numbers are about 20% to 25% of total personnel in The Netherlands. The stock is currently moving 7.5% lower. The company announced that this morning in a press release. The company also submitted a profit warning: did the company forecast last month that profit for 2011 would amount at least €5.5 bln, now this number is reduced to €5.3 bln. Directly after opening of the AEX (Amsterdam Exchange) the equity dropped 7.5%.
The lowered profit has also to do with necessary new investments of €2 bln, according to KPN. KPN speaks in the press release of ‘accelerated change’ of consumber behavior and of increasing price pressure in the very important business-to- business market.
The growth of communication via social networks, like Facebook and mobile apps, led to a considerable drop of the traditional phone and SMS traffic, according to KPN. The company will compensate this trend by changing their portfolio of subscriptions and by focussing on mobile data traffic. 
“We see negative trends in The Netherlands”, according to CEO Eelco Blok, who took office recently after long-term CEO Ad Scheepbouwer stepped down. But he added that German pricefighter E-Plus, a subsidiary of KPN, is doing fine on the German market. Last month when the devolution took place, Blok stated that he would not make a U-turn with the company, but now he is clearly retracting from this statement. 
The loss of jobs needs to be compensated by large-scale outsourcing and offshoring of support services.
The ebitda  dropped in Q1 with 4.1%, compared to Q1 last year, to a level of €1.269 bln. The turnover dropped with 1.3% to €3.24 bln.…

Yesterday afternoon, it became clear in which way KPN wants to compensate the losses it makes as a result of the social networks: the company wants to charge extra costs for the usage of social networks, like Facebook, Twitter, WhatsApp, Skype and Ping on their mobile internet subscriptions. It does this by putting access to the social networks in a special mobile portfolio.

For people that don’t know the Dutch telecom situation: KPN was a company you loved to hate in the past. It was a state monopolist that didn’t know the word “customer care” and charged ridiculous prices per minute for calling abroad with a fixed phone and for using mobile phones in the nineties. It had the manoeuvrability of a supertanker and the flexibility of a T-beam.

Only after competition was allowed in mobile phone and internet subscriptions (about 1996) from the likes of Vodafone, Orange, Tele2 and T-Mobile, the company started to move. Initially by trying to take-over or squeeze their competition and after that by becoming a little bit more customer friendly.

The company was almost bankrupted in the European UMTS auctions (2nd generation mobile internet) that took place in the year 2000. KPN paid an excess amount for their concessions in Germany and The Netherlands and were punished for this by almost defaulting.
Under former CEO Ad Scheepbouwer the company recovered some lost ground by rolling out broadband internet in The Netherlands. However, KPN was accused of blocking their internet network for the competion. The company tried to do this by installing glassfiber telecom distribution frames in residential areas in such a way that the service switches of the competition would become useless. This plan failed ultimately.

And now the company pays the price for being too rigid and too much a former monopolist to see that the world around it has changed. I can’t blame the company for trying to outsource and offshore support services to (probably) India, Indonesia and Suriname. This is a sensible thing to do if you want to survive as a company in a low-margin market.

But please don’t try to overcharge the customer for the fact that you – as a company – didn’t see the changes coming in mobile internet and telephone usage. You better think of ways to make honest money with your mobile phones. Otherwise you might be wiped out by the competion.

Happy easter holidays…

1 comment:

  1. Just hoping that Vodafone and T-mobile won't follow this ridicilous plan, and furthermore the european commission will undo this action because it affects internet neutrality..