KPNQwest
The E880 million initial public offering (IPO) of 10% of US-Dutch data-communications group KPNQwest offered fund managers the chance to invest in a company that several analysts expect to dominate the data network business in Europe in three years’ time.

By then, analysts believe, KPNQwest, aided by an 18-month head start over rival companies such as Level 3 and Global Crossing of the US, and UK-based Interoute 21, will have won the race to link major European cities with high-speed, fibre-optic cable networks to meet rapidly expanding demand for internet-based commercial services.

Willem Ackerman of KPNQwest: expecting 1999 results to be in line with forecasts

Issuer: KPNQwest
Pricing date: November 9
Size: €880 million
Type : IPO
Issue Price: €20
Listing: Amsterdam Exchanges, Nasdaq
Lead manager: Morgan Stanley Dean Witter

By 2003, KPNQwest expects to show profits from six completed fibre-optic cable networks connecting 39 cities in 14 European countries. It has already completed two networks that link 10 cities in five counties.

KPNQwest, which is based in Hoofddorp in the Netherlands, was only set up in April as a joint venture between Dutch national telecoms company KPN and Qwest Communications International, a US data communications company. The two companies each retain 45% of KPNQwest following the IPO, implying a total market value of €8.8 billion at the
issue price.

KPNQwest made a pre-tax loss of €54.3 million on sales of €120.4 million in 1998 based on the earnings of the businesses that now make up KNPQwest. The company’s shares had risen to €68 by late January, 240% up on the E20 issue price.

The company’s chief financial officer Willem Ackerman told Euro in late January he expects full-year 1999 results to be in line with those forecast by analysts at investment bank Morgan Stanley Dean Witter who foresee a pre-tax loss of €112 million on sales of €168 million. Morgan Stanley was lead manager of the IPO.

Ackerman also agrees with Morgan Stanley analysts that KPNQwest will show its first pre-tax profit in 2003, which the analysts put at €233 million on sales of €2.0 billion.
The turnaround from loss to profit will occur as the networks, currently the centre of costly investment by KPNQwest, come into operation and earn revenue.

Morgan Stanley analysts expect pre-tax profits will grow to E3.6 billion on sales of €9.4 billion by 2010.