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To: Softechie who wrote (1614)	8/31/2001 2:32:58 PM
From: Softechie	Respond to of 2155

THE SKEPTIC: Rock + Hard Place = KPN By ROBB M. STEWART A DOW JONES NEWSWIRES COLUMN LONDON -- As KPN's (KPN) plans to merge with Belgacom (B.BCM) are shelved, it's difficult to see what the Dutch telecoms firm can instead do to resurrect its fortunes. But considering KPN is sitting on EUR23 billion in debt - EUR3.5 billion of which is due in June 2002 - and the company's market cap before Friday's slide was just EUR4.92 billion, it's not something KPN can delay addressing. That KPN would have been willing to accept a minority stake in a merger with Belgacom, along with headquarters in Brussels and a Belgian-led management team, is a sign of just how desperate the situation is. CEO Paul Smits says KPN has secured funding through 2002 and will continue the disposal of non-core assets. So far, though, he isn't looking to sell such "jewels" as German mobile unit E-Plus or the Dutch fixed line network. Needless to say, this isn't a seller's market. Nor is it a market enamored of paper, just in case Smits was thinking of dusting off scotched plans to bail KPN out with a cash call. The share price never did recover from the drubbing it took when a discounted rights issue was being considered. There's always a chance talks with Belgacom will be resurrected or another suitor will step up. But given KPN's debt and battered share price, it will always be negotiating from a position of weakness - offering little hope of a decent premium for KPN holders. (Belgacom wasn't offering any.) Then again, perhaps Smits will echo British Telecom's (BTY) debt-reduction strategy and split the company up. That might entice a private equity concern to bid for the fixed line operations, which thanks to their visible, if plodding, earnings stream could be leveraged against debt. The mobile operations might then find it easier to partner. According to figures from JCF Group, KPN was trading on a 2001 EV/EBITDA of 7.4, falling to 6.2 for 2002. That represents a discount to KPN's European peers, but nothing to get too excited about until KPN lays out credible plans. KPN will release second-quarter earnings Monday. This should offers investors a closer look at just what challenges face the company. -By Robb M. Stewart, Dow Jones Newswires; 44-20-7842-9294; robb.stewart@dowjones.com