THE HAGUE, 01/11/06 - Telecom concern KPN yesterday raised its 2006 earnings forecast. But its share price dropped as investors were unhappy with its third-quarter figures.

KPN now expects earnings growth of 4 to 6 percent. Its earlier forecast projected growth of 1 to 3 percent. But KPN simultaneously announced third-quarter net profit of 349 million euros (up from 334 million a year earlier), while analysts had on average forecast a figure of 369 million euros.

KPN reported as the reason for the improved earnings forecast that the decline in revenues from fixed-line telephony has become slightly less strong. Additionally, it is generously offset by growth at mobile telephony. Thanks among other factors to the acquisition of Telfort, its market share in the Netherlands has risen, and in Germany, KPN's subsidiary E-Plus is the fastest grower, according to the company.

The mobile division posted operating profit up at 264 million euros from 196 million a year earlier. In the Netherlands, all brands are running well and the mobile arm is outperforming the market, KPN reported.

Fixed telephony saw its operating profit drop to 321 million euros from 396 million. The number of fixed connections shrank by 140,000 in the third quarter from 165,000 in the previous quarter.

KPN is market leader in phoning via Internet connections with a share of 25 percent. The inflow of new clients is actually so large that the company has too few staff to handle all applications.

KPN also announced it will buy back up to 750 million euros in bonds from a 1.5-billion euro bond issue. The buyback will be financed by the issue of a new eurobond of an as yet unspecified amount. The process will be completed within two weeks.