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Financing strategy
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Funding strategy
KPN's funding strategy in the debt capital markets is built around the following principles:
- To raise financing at KPN NV (the top level), except in case of subsidiaries with joint control, where financing at lower levels in the organization may be considered
- To maintain our presence & profile in the international capital markets and where possible broaden our investor base
- To target specific investor segments through diversification of tenor and currency
- To maintain a well balanced redemption schedule
- To use our Global Medium Term Note Program as the basis for financing
Risk management policy
KPN's activities expose it to a variety of financial risks: currency risk, interest rate risk, credit risk and liquidity risk. The overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on KPN's financial performance. Derivative financial instruments are used solely for the purpose of hedging underlying exposures to foreign currency exchange rate risk and interest rate risk. None of these financial instruments are leveraged, used for trading purposes or taken as speculative positions. The policy is to apply hedge accounting for all our derivative financial instruments related to interest bearing debt.
Currency risk
Given KPN’s operating activities, we have a limited exposure to foreign exchange risk of currencies outside the eurozone. All our bonds denominated in foreign currencies are hedged with cross-currency interest rate swaps to mitigate the exposure on currency risk and/or interest risk.
Interest rate risk
KPN is exposed to market risk arising from changing interest rates, primarily in the eurozone. Periodically KPN evaluates the desired mixture of fixed and floating rate liabilities and modifies the interest payments based on the desired mixture of debt. As per Q3 2012 100% of interest-bearing debt is subject to fixed interest rates.
Credit risk
Credit risk is controlled by a restrictive policy as to the choice of potential counter parties. Pursuant to that policy, KPN sets limits for maximum exposure per counter party and investment periods primarily based on certain minimum credit ratings. On a daily basis KPN monitors the credit ratings of our counter parties. Separate limits are set for some strong counter parties without credit rating.
Liquidity risk
Liquidity risk is managed by maintaining sufficient cash, the availability of funding through an adequate amount of committed credit facility and the ability to close market positions. KPN has a EUR 2.0 billion committed revolving credit facility and EUR 200 million of overdraft facilities at its disposal.
Further information about KPN’s risk management can be found in KPN's most recent Annual Report, the section titled 'Quantitative and qualitative disclosures about market risk' in the Consolidated Financial Statements.
