KPN Ramps Up Fibre Roll-Out Plans, Aims for 1.3 mil. FTTH Connections by 2012

KPN has announced it is accelerating the roll-out of its fibre-optic high-speed broadband next-generation network (NGN), with fresh plans to connect some 1.3 million Dutch homes by the end of 2012. Following a series of commercial fibre pilots in 10 cities, Dutch former incumbent KPN has stated it believes fibre-to-the-home (FTTH) is the long-term superior technology, and is targeting some 600,000 to 800,000 active customers within the next three years, representing some 10% of Dutch households.

KPN will carry out the fibre NGN roll-out through its 41%-owned joint venture (JV) with fibre infrastructure firm Reggefiber, which it established in May 2008 and has since conducted full connectivity trials in 10 Dutch cities. The operator says it is now committed to a gradual, regional fibre roll-out that will see a mix of infrastructures deployed including fibre, copper, and wireless networks. As an intermediate step, KPN will also upgrade its existing copper network with "VDSL from central office" (VDSL-CO) before mid-2010.

The Dutch telecoms giant has also announced this week that it has completed a 1-billion-euro (US$1.47-billion) share buyback programme, which has seen it repurchase some 96.2 million shares at an average price of 10.39 euro apiece over the last year.

Outlook and Implications

• Full Steam Ahead for FTTH in the Netherlands: Since the formation of KPN's Reggefiber JV in May 2008, fibre roll-out in the Netherlands has somewhat stalled as a result of regulatory and economic uncertainty (see Netherlands: 25 November 2008: KPN Says No Mass Roll-Out of FTTH Yet). However, over the last year KPN has quietly trialled several urban networks and conducted a full connectivity evaluation, before deciding to proceed with its current plans, with the trials resulting in about 460,000 users already enjoying KPN's FTTH services. The Netherlands, with population of some 16.4 million people, has one of the highest fixed-line broadband penetration rates with close to 80% of households connected, but the speed of these connections is at risk of flagging behind its European neighbours as fibre roll-outs accelerate elsewhere (see United Kingdom: 18 August 2009: BT Launches Free ADSL+ 20-Mbps Broadband Upgrade, Accelerates Fibre Roll-Out and Spain: 13 August 2009: Telefónica's 100-Mbps FTTH Service Becomes Commercially Available in Spain). Although fibre NGN roll-out has suffered several false starts and it still mired in regulatory confusion in many of its neighbours (see Germany: 8 December 2009: German Regulator Releases Terms for Access to Deutsche Telekom's Passive Broadband Infrastructure and Italy: 30 November 2009: Telecom Italia CEO Reiterates Opposition to State-Controlled Fibre Roll-Out), KPN's significant commitment should see the Netherlands remain among the leaders in European fixed-line broadband.
• KPN Commits 1.3-Billion-Euro Investment to its Home Market: The operator has been understandably cautious, as it estimates the cost of rolling out a full FTTH network is about 1,000 euro per household in urbanised areas, meaning the total cost of its target of connecting 1.3 million Dutch homes in the next three years will be some 1.3 billion euro. KPN has survived the worst of the global downturn, and saw earnings rise in the last quarter largely because of reduced capital expenditure and the taking of other measures to slim costs, but the Dutch telecoms group said it saw no sign of recovery yet in its markets (see Europe: 27 October 2009: KPN Q3 Earnings Up 4.4% Y/Y as Cost Cutting Kicks In). KPN's cutbacks have included the loss of 2,152 jobs, or about 6% of its workforce, in 2009, and have included 1,400 jobs at its struggling computer-services unit Getronics, where third-quarter sales fell 9.2% year-on-year (see Netherlands: 1 April 2009: KPN Cuts 1,400 Jobs at Getronics Computer Services Unit).
• KPN Faces Further Challenges in its European Markets: The operator is seeing healthy growth in its Belgian market (see Belgium: 9 October 2009: KPN Belgium, Mobistar to Cooperate in Network Expansion), but things could become tougher for its Belgian unit BASE with the imminent entry of a fourth mobile operator in the country (see Belgium: 5 October 2009: Belgium Finally Sets Target Date for Fourth 3G Licence, Auction Due in Q1 2010), and KPN has recently divested it carrier business in the country (see Belgium: 25 November 2009: KPN Sells Belgian B2B, Carrier Businesses to Mobistar Citing "Unfavourable" Market). Elsewhere, things are becoming increasingly uncomfortable in the German market for KPN's mobile unit E-Plus, as Telefónica ramps up its presence in the country and KPN faces an expensive frequency auction in 2010 to keep up with the competition (see Germany: 6 November 2009: Telefónica Buys Hansenet from Telecom Italia for 900 mil. Euro). Meanwhile, the management of E-Plus has indicated that the operator might consider cutting costs by a network-sharing agreement (see Germany – Belgium: 20 November 2009: KPN Considers German Co-Operation with Telefónica, Could Sell Belgian Ops—CEO). Across the pond, KPN has almost completed long-running efforts to acquire U.S. carrier iBasis, and has now secured the required number of shares for the deal (see Netherlands: 24 November 2009: KPN Closes iBasis Takeover with Improved Cash Offer).