KPN Earnings: Cost Inflation Offsets Revenue Growth; Mobile Revenue the Standout, Up 5.3%

In the second quarter of 2023, KPN reported service revenue growth of 2.8% year over year supported by a stable customer base and slight price increases. As we saw in the prior quarter, this revenue growth did not flow to the EBITDA after leases, or EBITDAaL, which remained flat, as costs are increasing at the same pace. Growing revenue but flat or declining EBITDAaL growth has been a general narrative this quarter among telecommunication operators as they cannot avoid growth in personnel and energy expenses, which normally are indexed to inflation. KPN has locked in energy prices for the remainder of the year and has implemented price increases in its broadband offerings, which should help EBITDAaL in the second half of the year. KPN is one of our favorite European telecommunication companies from a cost management perspective, having shown very good discipline for years. We are maintaining our EUR 3.00 fair value estimate and believe shares are slightly expensive now, trading at around EUR 3.30.