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KPN Gives Upbeat 2010 Outlook, Shares Rise

Telecoms group KPN gave an upbeat three-year outlook on Tuesday as it reported quarterly results that matched forecasts, adding its Dutch business will return to growth after doubling job cuts.

KPN shares rose more than 2 percent after the company forecast its earnings before interest, tax, depreciation and amortization (EBITDA) would rise to more than 5.5 billion euros ($8.15 billion) in 2010 from 4.9 billion in 2007.

Helped by the acquisition of IT services provider Getronics and German mobile unit E-Plus, fourth-quarter EBITDA rose 5.6 percent to 1.22 billion euros and compared with an average forecast of 1.23 billion in a Reuters poll of 14 analysts.

The former Dutch telecoms monopoly also announced it would target a dividend of 0.80 euro per share in 2010, up from the 0.54 euro per share for 2007, and announced a 1 billion euro share buyback for 2008.

"KPN has issued bullish targets, particularly taking into account that the company's guidance is usually conservative," SNS Securities analysts said in a note.

Shares in KPN rose 2.7 percent to 12.69 euros, while the DJ Stoxx European telecoms index was up 0.5 percent.

KPN said it expected its existing Dutch business to return to EBITDA growth this year and revenue growth by 2010 after years of declines as consumers disconnected their traditional fixed lines in favor of telephony over cable TV networks or mobile phones.

The company said its line loss was already slowing and growing activities such as broadband, where it has 44 percent market share in the Netherlands, or its small but growing digital TV business would help turn the trend.

"The parts of the business that are declining are becoming less and less important in the portfolio," Chief Financial Officer Marcel Smits told journalists on a conference call.

Job Cuts

The company will also cut about 4,500 jobs by 2010, 2,000 more than it had originally planned, leading to annual cost savings of 110 million euros by 2010. External staff cuts are to save another 130 million per year.

KPN said it expected its international mobile revenues to grow, leading to 2010 group revenue of more than 15 billion euros and a free cash flow in the years 2008 to 2010 of at least 2.4 billion euros a year. KPN had 2007 revenue of 12.6 billion.

Fourth-quarter group revenue rose 20 percent to 3.66 billion euros, in line with an average analyst forecast of 3.6 billion.

Revenue grew faster than core earnings as Getronics, which had already struggled to improve margins before the takeover, added 488 million euros of revenue but contributed just 23 million to EBITDA.

KPN sold Getronics's Australian unit to business solutions company UXC for an undisclosed sum and said it was considering further disposals.

KPN Chief Executive Ad Scheepbouwer said KPN bought Getronics to expand into managing the networks and work stations of large corporate clients, so-called workspace management.

The remainder of the Getronics business, worth about 800 million euros in annual revenue and some with good profitability, could be sold, helping KPN partially to recoup the 1.2 billion euros it paid for Getronics and its debt.

In Germany, a key profit driver, KPN's E-Plus unit, added 695,000 customers in the fourth quarter, the largest increase in a single quarter since 2000.