Dutch telecoms group KPN, one of Europe's most troubled telecoms companies, has reported its first quarterly profit in nearly two years.

The small third-quarter net profit of 68m euros (�43.3m; $68.3m) indicates KPN has stabilised since it nearly went bankrupt last year.

It tapped shareholders for a 5bn-euro bail-out and began to dispose of assets and make heavy job and cost cuts.

"In the past year, KPN's position has been transformed," chief executive Ad Scheepbouwer said in a statement.

KPN said net debt shrank to 13.9bn euros from 20bn in the quarter ending September, and it now expects it to fall to 13bn euros by the end of the year and 10bn euros by 2004.

KPN's credit rating is just above junk status.

Growth forecast

KPN's shares rose 3.4% after the results in which it forecast core profit would rise by at least 18% this year.

"Once again, we are able to raise... our targets for the full year at the same time as putting the financing of our mobile business on a proper footing for future growth," Mr Scheepbouwer said.

KPN will use the 500m euros from the sale of the directories unit, TeleMedia Nederland, to cut its debt.

Its net profit in the quarter compares with a net loss of 231m euros in the same quarter last year.