UPDATE: KPN Profit Up On Cost Cuts; Keeps Outlook

(Adds background, comments from analyst, company.) By Roberta B. Cowan Of DOW JONES NEWSWIRES AMSTERDAM (Dow Jones)--Royal KPN NV (KPN.AE) Tuesday reported a 26% increase in second-quarter net profit, mainly due to cost cutting, kept its full-year targets and said it doesn't see any further deterioration in the markets in which it operates. The Netherlands' largest telecommunications company posted a net profit of EUR465 million for the quarter ended June 30, up from EUR370 million a year earlier, beating analysts' expectations of EUR449 million. Earnings before interest, tax, deprecation and amortization, or Ebitda, came in at EUR1.4 billion, up from EUR1.3 billion a year earlier. Profitability improved at the group level due in part to cuts including jobs, consultancies, procurement costs and network rationalization. KPN didn't quantify the cost savings. The company also reported a EUR31 million increase in Ebitda attributable to Getronics, its information communications technology unit, while it benefited from the absence of regorganization costs incurred in 2009. Still, revenue declined 1.7% to EUR3.35 billion, from EUR3.41 billion, due in part to pressure in its Dutch consumer and business markets, missing expectations for EUR3.36 billion. The results were broadly in line, said ABN Amro analyst Rene Verhoef, noting the better than expected 3.6% rise in Ebitda at German mobile unit E-Plus. Still, he said the 4.3% sales decline at its business unit was disappointing, amid pressure in fixed-line and increased competition. Verhoef has a buy rating on the stock. KPN confirmed its outlook for revenue, Ebitda and free cash flow for this year and next. "All in all we are confident of achieving our objectives for 2010 and 2011 and have set an interim dividend per share of EUR0.27 for 2010 leading into the full year target of EUR0.80 dividend per share," said Chief Executive Ad Scheepbouwer. KPN said it didn't see any "further deterioration" of the markets in which it operates but cautioned that any worsening of economic circumstances could "jeopardize KPN's objective of achieving sound financial performance." KPN also said Tuesday it has experienced a strong increase in data users on its Dutch network, is investing to adapt to the rapid growth in mobile data resulting from smartphones and changing its pricing policies as a result. The company competes in its home market with Vodafone Group PLC (VOD) and Deutsche Telekom AG (DT), and also operates in Germany through its E-Plus unit. By 0818 GMT, KPN's shares were trading up 1.3% at EUR11.21 in a broadly higher AEX market. Company Web site: www.kpn.com -By Roberta B. Cowan, Dow Jones Newswires; +3120-571-5200; roberta.cowan@dowjones.com Order free Annual Report for Vodafone Group PLC Visit http://djnweurope.ar.wilink.com/?ticker=GB00B16GWD56 or call +44 (0)208 391 6028 (END) Dow Jones Newswires July 27, 2010 04:21 ET (08:21 GMT)