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KPN trades fixed line for IP telephony

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Dutch telco KPN joins BT by turning off its public switched telephone network (PSTN) in less than three years. Eelco Blok, the CEO of KPN's fixed network, told German magazine WirtsschaftsWoche it will abandon its 100 year-old fixed line network in 2010 in favor of IP telephony.

By ripping out its legacy networks, including traditional telephone exchanges and copper wires, and replacing it with a nationwide fibre-to-the-kerb system that will deliver broadband services at 30-50 megabit speeds, KPN hope to drastically reduce costs. The group expects it can lay off 8000 workers, almost half of its fixed network work force.

In the UK BT announced similar plans to phase out its public switched telephone network (PSTN), replacing it with a multi-service internet protocol (IP) based network which will carry both voice and data services.

Plans for its ambitious All IP project were already outlined last year, but KPN didn't say it would end its traditional phone business that soon. "We need to because we face fierce competition," Blok told WirtschaftsWoche.

KPN is rapidly losing customers to Dutch cable operators which offer telephony at low prices. Sales of its fixed line business in 2006 dropped 3.4 per cent, despite adding over 500.000 VoiP customers.

KPN today reported an 8.9 per cent rise in 2006 net profit, which disappointed investors. Full year earnings are up slightly from €1.45bn to €1.5bn. Broadband continued to grow in Q4 with VoIP as the key driver. KNP's mobile telephone division, which includes E-Plus in Germany and Belgian provider Base, reported a 12 per cent rise in sales to € 6.45bn, nearly half of all KPN's revenues.

For 2007 KPN expects flat earnings and operating results. The migration to the all-IP platform and the merger of the firm’s fixed line and mobile operations by 2010 would place a drain on earnings, CEO Ad Scheepbouwer warned, but the sale of real estate and more than 4,000 job cuts would balance those investments. ®

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