Is 2025 The Breakout Year For Dutch Incumbent Telco Koninklijke KPN?

2025-03-31 09:00:00 ET

Summary

• Investor looking to invest in telecoms can choose from many telcos in Europe as most European countries have their own incumbent.
• Incumbent telcos are reliable dividend payers, but this is no guarantee for a positive total return as declining share prices can eat in to the returns from dividends.
• KPN shares are likely to keep trading in the same range as where they've traded over the last decade. Growth opportunities in the Dutch market are limited.
• KPN investors can hold the KPN shares for the dividend, but it should be possible to find other European incumbent telcos with a better outlook for capital gains.

Challenges with investing in European incumbent telcos

Virtually every country in Europe has its own incumbent telecom operator. This is different than in the U.S., where there's telcos that operate over many or all states since soon after they were founded. The set up in the E.U. has grown to be like this from when each European country set up its own telegraph services in ancient history. This basic service was a first building block for the state-owned European telecoms operators. They, for a long time, remained the only company in each country offering telegraph and later also the telephony services and they were thus monopolies. They're referred to as the "incumbents". In the Netherlands, for example, there was the state-owned company "Koninklijke Post Telegraaf Telefoon Nederland", which is "Koninklijke PTT Nederland" for short or "KPN" for even shorter, and which translates to "Royal Post Telegraph Telephone the Netherlands". The postal and telecoms services were at the time run by the same organization. These have later been split up and are now in separate companies. The Dutch incumbent telco inherited the telco part and has to this day kept the name "KPN" ( KKPNF ) ( KKPNY ). The name is engrained in Dutch society, while it's actually no longer accurate because the "P" in KPN refers to Post, while postal services have not been part of KPN's business since many decades....

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