KPN: Applying Dutch values to a competitive international market

KPN has always been a company that punches above its weight on the world stage, whether investing in and then acquiring global VoIP provider, iBasis and pioneering the international voice outsourcing model; taking a lead in the M2M market through its partnership with Jasper Wireless; or, most recently, establishing itself at the cutting edge of 100Gbps wavelength service deployment by commercially introducing a 100Gbps service option on its Amsterdam–London route.

But the company operates in a highly competitive market, both domestically and internationally. In May 2011, it came up with a new mantra to guide it through these turbulent economic times – and one that it hopes will keep it among the top five European telcos by revenue: “strengthen, simplify and grow”.

The “strengthen” message is mainly aimed at KPN’s Benelux business, to help it maintain its share of the Benelux market through improved cost control and customer service. KPN expects growth, however, to come from three sources: mobile data revenues, including M2M; ICT revenues from greater synergies between its telco and Getronics ICT business, which were integrated into the KPN Corporate Market Division in October of this year; and from new business in international markets. Simplification – making KPN easier to do business with – is key to the success of its other strategies.

Jasper Snijder, MD of KPN International, points out that KPN has invested significantly in its international business over the past six years, with the result that nearly 40% of KPN’s €13.4 billion revenues come from international sources.

KPN International is the KPN business division responsible for sales to enterprise and wholesale customers with international requirements. Its revenues are not broken out, but Snijder says that its ratio of enteprise to wholesale business is around 60:40.

Wholesale customers include local carriers with international needs, Tier 1 carriers with infrastructure and high-speed connectivity demands, ISPs, media companies and content/service providers. KPN International’s core business is helping such customers reach multiple European destinations.

Its network reaches into 22 European countries, which enables it to position itself as a one-stop-shop provider for services across a large chunk of the continent. It also owns connectivity to the US and Asia and global partnerships that extend its footprint within South America and Asia.

KPN International differentiates the way it sells to wholesale and enterprise customer segments, with enterprises typically requiring more in the way of consultancy and solutions while wholesale customers have tended to buy straightforward capacity services. However, it has an integrated sales team and is increasingly finding that a solutions-based approach is applicable to both customer types.

KPN International’s broad, managed services-rich service portfolio is theoretically available to both wholesale and enterprise segments and the company is seeing a growing number of wholesale customers gravitate towards managed services, starting with managed next-generation network (NGN) services, MPLS VPN and Ethernet E-LAN, where half of its top 10 NGN VPN service customers are carriers.

Here lies KPN International’s key opportunity for growth. “Our NGN solutions used to be aimed at enterprises in the past but we’re seeing growing numbers of wholesale customers finding it easier and cheaper to buy an end-to-end solution from us than to build their own infrastructure,” Snijder comments. “We expect to see substantial wholesale market growth from our NGN over the next 18 to 24 months.

Now Snijder observes that wholesale customers are considering deepening their managed services relationships with the company, looking at the possibility of white labelling services in KPN International’s portfolio that had previously been the domain of enterprise customers.

Such services include managed video-conferencing, cloud services such as IaaS and SaaS, and advanced reporting and optimisation services. “We’re talking with one of our partners at the moment about providing our value-added services to their customers as a white-labelled solution and we believe this indirect channel will grow,” Snijder says.

He is finding that in the current market, customers are looking at supplier strengths and are far more receptive to the idea of reusing what is out there rather than building for themselves. “At the moment, we deliver a ‘light’ version of our services and our customers add their value,” Snijder points out. “The next phase of market development will see us being asked to provide a heavyweight solution which we are trusted to deliver to our partners’ end-customers. This is becoming a serious opportunity for us.”

KPN International has a critical capability for the delivery of white label services on behalf of international customers: the extent of its European network footprint. It has worked hard on the quality, cost-effectiveness and reliability of this network and is in the process of upgrading capacity in eastern Europe so that it can offer the same service portfolio across its continental footprint.

An important string to its bow is the fact that KPN International is backed by the profitable KPN Group. This provides KPN International with more financial security than some of its competitor European carriers that are giving similar pitches in the wholesale market, such as COLT and Interoute.

KPN International brings technical excellence, financial stability and keen pricing. At the same time, it is operating in a crowded market, where it faces aggressive competition from the international wholesale arms of larger European incumbents. In addition, it is competing with US carriers with good European coverage and strong partnership strategies such as AT&T, Verizon and Level 3 – about to be bolstered by its acquisition of Global Crossing – as well as European altnet players.

KPN International is well aware that it needs a strategy to promote its considerable credentials for managed service delivery – and one that makes it stand out from all other contenders. Its answer is to highlight its ‘Dutch Touch Worldwide’ – the set of core values and capabilities which, in KPN International’s eyes, differentiate it as a service provider.

The company enlists national heroes – Hans Brinker, the boy who stuck his finger in a dyke and stopped

the country from flooding, and artist Vincent Van Gogh – in its bid to bolster its market presence, the heroes representing the ‘Dutch’ values of ingenuity and creativity respectively. According to KPN, Amsterdam’s multiculturalism demonstrates Dutch empathy and the longevity of the Dutch Royal palace, which has stood on over 13,000 wooden piles for over 400 years, epitomising the reliability of Dutch engineering.

KPN International has had a reputation for these characteristics for many years. It prides itself on working closely (empathetically) with customers to understand their business challenges, even at a wholesale level, and to provide tailored (creative) solutions faster and more nimbly than its competitors.

Its networks are known for their reliability thanks to strong monitoring, capacity planning and resilient engineering capabilities. Snijder claims that its customer base is remarkably loyal and the company’s customer satisfaction scores are high, although it still has work to do to achieve its goal of outperforming the rest of the market. So the ‘Dutch Touch Worldwide’ campaign is a clever piece of marketing that encapsulates these values.

The company’s Dutch heritage also includes a slice of the States, following a merger of iBasis and KPN’s international wholesale voice operations in 2006.

Eventually iBasis went on to become a wholly-owned KPN subsidiary in 2009, and Snijder explains that talks are underway at board level to “to see how we can improve cooperation and synergy between our businesses, for example, using iBasis as a sales channel for KPN International”.

In the meantime, KPN International has recently launched an SIP trunking solution, aimed initially at enterprise voice customers. Snijder also reveals that further in the future, KPN International may consider offering this service to other market segments. This he says could include working closely together with iBasis and Getronics to provide the foundations for future service developments such as voice.

KPN International can justifiably present itself as nimble and creative. And with economic storm clouds gathering over Europe, this is a quality KPN International is likely to need in the years ahead. The company has a solid set of qualities and capabilities to help it do so: it must now hope that its ‘Dutch Touch Worldwide’ will strengthen its market presence and deliver the growth it expects at a critical time.

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History: KPN International is a business unit within Dutch incumbent, KPN, which was privatised in 1994. KPN shed its postal arm in 1998 and began modernising the company, including searching for opportunities to expand internationally. KPN’s ambitions and ventures during the dot.com bubble period left it with debts of €23 billion and it spent the early part of the noughties trying to restore its balance sheet. In 2006, KPN invested in iBasis, fully acquiring the company in 2009, and in 2007 it bought ICT specialist, Getronics.

Ownership: KPN is a public company listed on the Amsterdam Stock Exchange. It reported revenues of €3.4 billion in 2010 and an operating profit of €3.3 billion.

CEO: Eelco Blok.

Customers: KPN International has more than 700 customers including its global partners, Sprint, Telefónica, SingTel and customers such as AT&T, Belgacom, Cable&Wireless, CenturyLink, COLT, Etisalat, LuxConnect, PCCW, Reliance, Verizon and Vodafone.

Network (KPN International): 120,000km wholly-owned network worldwide. Covers 22 European countries: Netherlands, Austria, Belgium, Czech Republic, Denmark, Finland, France, Germany, Hungary, Ireland, Italy, Luxembourg, Norway, Poland, Portugal, Slovakia, Spain, Sweden, Switzerland, Turkey, and the UK. It includes a 12,000km eight-PoP MPLS network in the US, plus a PoP in Hong Kong.

Products and services (KPN International): MPLS VPN, Ethernet VPN, next-generation network, private line (SDH), wavelength, IP transit, corporate internet, enhanced services and reporting, managed video conferencing and communication services, data centre and security services.