Bowing to market pressure, debt-laden Koninklijke KPN NV on Monday confirmed it is replacing CEO Paul Smits.
The Dutch telecommunication operator also said it negotiated a three year 2.5-billion-euro (US$2.27 billion) credit facility with a consortium of Dutch and international banks, solving any medium term financing gap. The credit can be drawn upon when needed and doesn’t increase KPN’s current debt load of 22.8 billion euros, the company said.
One week after he stated he would not dodge responsibility for the company, Smits is being punished for being unable to close deals to ease KPN’s mountain of debt. Ad Scheepbouwer, chairman of Dutch postal and logistics group TPG NV, will replace him, KPN said, adding that the agreement with the banks was directly related to the appointment of the new CEO. Scheepbouwer enjoys a good reputation in the financial community.
Shares in KPN (KPN.AMS) initially jumped 11 per cent to 2.65 euros on the news before settling back a bit to trade up 9.2 per cent at 2.6 euros around 2:15 PM local time. The stock has lost over 85 per cent of its value since Jan. 1 this year. Last Thursday the credit rating agency Moody’s downgraded KPN to one notch above junk bond status.
Smits, who was appointed CEO in March last year, faced the arduous task of getting cash to pay off the debt amassed by his predecessor. A series of deals fell through and KPN’s stock fell to an all-time low. Calls for Smits’ resignation sounded louder than ever after merger talks with Belgium’s Belgacom SA were called off on Aug. 31.
Smits will, for now, remain with KPN. He has been given a position on the management board of KPN and will be responsible for mobile communications.
The industry downturn has led to several such resignations among high profile telecommunication executives. The chairman of British Telecommunications PLC (BT), Sir Iain Vallance, stepped down in April of this year, and Marconi Chairman Roger Hurn and Chief Executive George Simpson resigned last week.