Strengthen, Simplify and Grow

turns into “Strengthen, Simplify and Shrink” as KPN “accelerates its transition in The Netherlands and continues to adjust to a changing external environment” – verbatim from its press and analyst presentations today. KPN’s transition seems to be accelerating in the wrong direction with a 63% drop in fourth-quarter profit and mobile customers increasingly transitioning to other providers. The problem: while KPN is successful in attacking other incumbent positions in Germany and Belgium it is not successful in defending its Dutch incumbent position.

Is KPN really adjusting to a changing external environment? The early signs are there. In the Dutch consumer market KPN is partnering with challengers such as Spotify and is considering to open up location and billing APIs to web and app developers. But will this be enough in a world where connectivity is becoming a feature rather than a product?

In the Dutch business market, KPN wants to address the growth areas of unified communications, secure managed devices, private cloud, and service aggregation. But with an underperforming KPN corporate IT services division, a shrinking Dutch IT services market, and an SMB cloud portfolio that is too desktop focused this will not be easy. While we predict Dutch enterprise public cloud service spending will increase with a CAGR of 33% for the next couple of years we also predict KPN will have a tough time in addressing this growth area (here are 12 reasons why).

The real challenge for KPN will be to find the revenue growth trajectory in the Dutch market. In the mean time, the transition period is bound to be disruptive and painful.

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About Pim Bilderbeek