KPN said net profit rose to just EUR334 million from EUR313 million in the same quarter of 2007, missing expectations of a 26% rise to EUR393 million.
At 1045 GMT, KPN shares traded down 2.7% at EUR11.57 in Amsterdam in a broadly lower market, while at the same time the DJ Stoxx 600 Telecommunications Index was down 0.34%.
Some analysts questioned whether KPN used its working capital effectively in the first quarter and also the performance of its Belgian subsidiary, Base, as revenue there also missed forecasts.
Still, KPN also confirmed its outlook for 2008, reiterating that capital expenditure for the year is expected to be approximately EUR2 billion and free cash flow at least EUR2.4 billion.
Profit before income tax in 1Q rose to EUR648 million from EUR537 million, KPN said.
Revenue in the first quarter was EUR3.57 billion from EUR2.92 billion in the first quarter of 2007, helped by the integration of Dutch IT services company Getronics which it bought in October for EUR766 million to bolster its IT activities. Getronics added EUR515 million to KPN's revenue in the first quarter.
The company is reviewing some of Getronics' non-core assets, for which Chief Executive Ad Scheepbouwer didn't rule out a sale this year, with several potential bidders lined up.
"The Getronics' results are encouraging; the acquisition of Getronics by KPN has contributed to significant new contract wins and restructuring is progressing according to plan," Scheepbouwer said.
Earnings before interest, tax, depreciation and amortization, or Ebitda, rose slightly to EUR1.23 billion from EUR1.19 billion. Scheepbouwer also said there are signs that Ebitda in The Netherlands is "bottoming out."
"First quarter performance in The Netherlands encourages us to expect that we will comfortably pass the 2008 Ebitda floor of EUR3.17 billion provided in our guidance on February 5, 2008," he said.
On February 5 when KPN reported its earnings for the 2007 fiscal year, the Dutch telco said that it expects total revenue and other income to exceed EUR15 billion by 2010, with earnings before interest, tax, depreciation and amortization, or Ebitda, to exceed EUR5.5 billion.
At the time KPN also raised its dividend target to EUR0.80 per share for 2010, from EUR0.54 for 2007, and said it plans to return EUR2 billion to shareholders this year.
KPN reported a solid set of first quarter results, said Petercam analyst Thijs Berkelder. He said first quarter Ebitda of EUR1.23 billion was in line. He rates KPN shares at buy.
The company showed positive operational trends, said Bear Stearns analyst Jonathan Dann, noting a particularly strong performance in The Netherlands and at E-Plus that showed management "is well on track to meet 2008 guidance."
Dann rates KPN at buy with a price target of EUR15.50.
The results and outlook were broadly inline, said ING analyst Damien Chew, though risks include increasing competition from Dutch cable operators and execution risk from the ongoing all-IP network upgrade. Chew rates KPN at buy with a target price of EUR14.
KPN operates fixed lines and mobile telecom services in the Netherlands and Belgium, in addition to the E-Plus mobile service in Germany. In Belgium, KPN owns mobile provider Base, the country's No. 3 mobile operator.
-By Tjeerd Wiersma, Dow Jones Newswires; +31 20 5715 201, firstname.lastname@example.org
(END) Dow Jones Newswires
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