KPN tweaks corporate strategy in favour of further cost savings

Dutch telco KPN told its capital markets day that it plans to embark on a second wave of cost savings, which should amount to at least €300 million by the end of 2019.

As public companies are inclined to do, KPN’s existing corporate strategy has a special name: Strengthen – Simplify – Grow. This new plan also has a new name, presumably to symbolise its evolution from the previous one.

“Under our strategy Strengthen – Simplify – Grow, we invested ahead of the curve to build best-in-class networks and innovated to bring Dutch households and businesses great products and leading service quality,” Eelco Blok, CEO of KPN. “The coming years will see relentless growth of connected devices and surging data traffic.

“To stay ahead, we are evolving our strategy to the next level which we call Simplify – Grow – Innovate. We will deliver a second wave of major business simplification, expand the capacity of our fully integrated network, and keep innovating to drive new products and give an excellent customer experience to all our customers at home, on the move and at work. Based on this strategy, we will maximize value for our shareholders and all other stakeholders while maintaining a solid financial profile.”

While there will, no doubt, be some innovation, the underlying message is one of reducing costs and increasing profitability. This sort of thing is presumably what investors wanted to hear in the short term, it doesn’t necessarily offer a clear roadmap for the company’s long-term sustainability.

The first round of ‘simplification’ saved €450 million per year, so KPN will have racked up €750 million of annual savings by 2020. The company says this will mainly be realized ‘through further simplification and rationalization of back-end IT processes and systems, and network infrastructure,’ but if the customer experience suffers as a result it may prove to be a false economy.