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i-mode still struggles

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KPN Telecom is returning to the ranks of cash dividend-paying companies, after a massive debt-trimming exercise.

The once-struggling Dutch phone network today announced it is to pay €0.12 per share (which currently trades at €6). That doesn't mean KPN is entirely back on its feet: with liabilities of € 9.4bn, KPN is far from debt-free.

In the third quarter of 2003, KPN recorded an operating profit before taxes of €451m (Q3 2002: €241m). Net profit after taxes amounted to EUR 172 million, compared to €38m in the third quarter of 2002. Those results were worse than expected.

However, KPN's core business is stable or growing with fixed networks growing 0.8 per cent and mobile revenues advancing 6.5 per cent. In Q3 KPN added 398,000 new mobile customers, mainly through its German subsidiary E-Plus, bringing group subscriber numbers to 14.2 million.

But data service i-mode is underperforming. KPN has a 2003 target of one million subscribers, but with just over 540,000 customers signed up, it is very unlikely to reach this.

In 2000 KPN's heavy debts, amassed through purchasing UMTS licenses, led to a plummeting share price and the reduction of credit ratings. Chief executive Paul Smits, who was ousted after failed attempts to find a merger partner and reduce debts of about €23.2 billion, was replaced by Ad Scheepbouwer.

Scheepbouwer today told investors that he is fairly optimistic about the introduction of UMTS data services. These services will be tested in extensive pilots together with The Hague City Council, Siemens Netherlands, Rotterdam Municipal Port Management and Eneco Energie.

In the Hague, members of the city watch teams will be able to report incidents more rapidly, by using UMTS compatible devices. Eneco will speed up the maintenance and inspection of the energy network. And for Siemens, the pilot will mean a reduction in waiting times for field service engineers. The pilots will run for a number of months.

KPN is investing €1.5 billion in the rollout of UMTS networks in the Netherlands, Germany and Belgium up to and including 2005. ®

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