Royal Kpn Nv · EURONEXT:KPN
Royal Kpn Nv — Koninklijke Kpn — Q2 2020 Earnings Presentation
44 slides from Royal Kpn Nv's earnings presentation, Jul 27, 2020
Slide 1: KPN Q2 & H1 2020 Results
KPN Q2 & H1 2020 RESULTS 27 July 2020
Slide 2: Safe harbor
Safe harbor Alternative performance measures and management estimates This financial report contains a number of alternative performance measures (non-GAAP figures) to provide readers with additional financial information that is regularly reviewed by management, such as EBITDA and Free Cash Flow (F
Slide 3: Highlights & Progress Against Strategy
1. HIGHLIGHTS & PROGRESS AGAINST STRATEGY 2. BUSINESS PERFORMANCE UPDATE 3. FINANCIAL RESULTS
Slide 4: Key highlights Q2 and H1 2020
Key highlights Q2 and H1 2020 . KPN delivered stable adj. EBITDA AL and higher free cash flow in Q2 2020 (excl. divestments) COVID-19 negatively impacted KPN’s service revenues, mostly roaming and B2B segment - This was offset by ongoing cost measures, leading to stable adjusted EBITDA AL y-on-y — F
Slide 5: KPN delivered robust performance in Q2 2020 despite COVID-19 challenges
KPN delivered robust performance in Q2 2020 despite the challenges related to COVID-19 Adj. revenues Adj. net ind. opex savings Adj. EBITDA AL Highlights in Q2 2020 Q2 2020 H1 2020 Q2 2020 H1 2020 Q2 2020 H1 2020 = Adjusted revenues -4.9% y-on-y — -3.0% excl. impact divestments € 1292m € 2,622m € 33
Slide 6: Estimated net effect of COVID-19 on group's financial results
The estimated net effect of COVID-19 on group’s financial results was slightly negative in Q2 2020 Estimated financial net effect COVID-19 Group level H12020 net effect Comments H1 2020 Adjusted gross profit ~€5-7m negative = Estimated service revenue impact of Fewer FTE (closure of shops) €1-4m pos
Slide 7: Committed to 2020 outlook; interim dividend announced
Committed to 2020 outlook; interim dividend announced Outlook 2020 is based on comparable basis corrected for divestments. The historical comparable basis figures are based on management estimates and are not audited Adjusted Capex FCF Regul EBITDA AL (excl sition Cap (excl. acquisition Capex) Gees
Slide 8: H1 2020: solid progress on strategic pillars
H1 2020: solid progress on strategic pillars 1. The best converged smart infrastructure 2. Focus on profitable growth segments 1A: Further expand leading NL fiber activities = 76k FitH added in Q2 (30% vs. Q1 2020); 254k since start in 2019 — This includes acquisition of ~6.5k homes passed / ~2.2k h
Slide 9: 1: Good progress building the best converged smart infrastructure
1: Good progress building the best converged smart infrastructure Ambitions 2019 - 2021 Progress 2019 until Q2 2020 Next steps +1 million FttH households Full mobile network modernization 100% 5G ready 100% ALL-IP FttH roll-out (x1,000 households) Q119, -Q219 Q3'19 Q419 Q1'20 Q2'20_ Total = ~1,490 s
Slide 10: 1A: KPN has the largest fiber footprint in NL
1A: KPN has the largest fiber footprint in NL: ~2.6m homes passed = Accelerating fiber roll-out at fastest pace possible — Moving towards >40% fiber coverage by the end of 2021 — Ensuring local access with ODF deals on third party networks = Significantly improving access speeds for our customers —
Slide 11: 1A: Ramping up fiber roll out
1A: Ramping up fiber roll out, 74k FttH homes passed in Q2 2020 FttH homes passed (k) FttH homes activated (k) Avg. FttH roll out per week (households) DBO VGA_D BS —<a 2,384 2,416 2,465 2523 2,5 1,217 1,237 1,265 1,287 1,319 ~3,750 ~2,000 °2:500 ~2,300 4000" sas 7 rrr - average 201 Q2 2019 Q3 2019
Slide 12: 1A: Consumer fiber outperforms copper, driving value for KPN
1A: Consumer fiber outperforms copper, driving value for KPN Growing fiber broadband base (k) Attractive fiber broadband ARPU (€) Growing fiber service revenues (€ m) +53k -137k [ses 1,823 1,786 1,748 lam 1,038 1,048 1,062 1,074 1,091 53 54 54 54 54 | | | | [ Q2 2019 Q32019 Q42019 Q12020 Q22020 Wl F
Slide 13: 1B: Full mobile network modernization
1B: Full mobile network modernization to offer the best customer experience = KPN is modernizing its mobile network to stay ahead of ever- Mobile data traffic KPN network (Tb/month) increasing data demand and to offer the best customer experience and technology to customers — ~1490 sites modernized
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Slide 15: 3: Solid progress accelerating simplification and digitalization
3: Solid progress accelerating simplification and digitalization Ambitions 2019 - 2021 Progress 2019 until Q2 2020 Next steps = Integrated Telfort prepaid and other subsidiary stacks in KPN stack From 20 to 2 converged = Migrating customers to new OSS, strongly " Further IT integration to 1 converge
Slide 16: Doing business in a sustainable manner
Doing business in a sustainable manner COVID-19 measures taken, and thinking ahead... Milestones & ambitions UN SDG Achievements in H12020 am SDG9: Secure future-proof infrastructure 6 green energy = Involved in European ‘SG Blueprint” consortium 2015 for research into remote-controlled logistics Ca
Slide 17: Business Performance Update
1. HIGHLIGHTS & PROGRESS AGAINST STRATEGY 2. BUSINESS PERFORMANCE UPDATE 3. FINANCIAL RESULTS
Slide 18: Consumer - Delivery Q2 and H1 2020
Consumer - Delivery Q2 and H1 2020 Highlights Revenue trend (€ m) = Fixed revenue trend stable, lower base off-set by higher ARPU 475 483 480 - 477 477 " Substantially improving base dynamics driven by fiber growth, Fixed 246 248 254 234 229 SuperWiFi and strong Unlimited proposition HB Mobile | |_|
Slide 19: Consumer - KPIs Q2 2020
Consumer - KPIs Q2 2020 Converged households (k) Broadband base (k) Mobile postpaid base (k) 1399 1404 1402 1384 1,387 2896 2,871 2848 2823 2,812 3605 3602 3588 3575 3,574 48% 49% 49% 49% iol | ff | | Q22019 Q32019 Q4 2019 Q12020 Q2 2020 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q2 2019 Q3 2019 Q4 201
Slide 20: Business - Delivery Q2 and H1 2020
▪ ▪ ▪ ▪ Δ Δ Δ Δ 2 2 (excl. divestments ) (excl. divestments )
Slide 21: Business - KPIs Q2 2020
Business -— KPIs Q2 2020 SME customer migrations’ LE/Corporate customer migrations’ H1 2020 B2B Service revenues” 84% 82% 72% 33% = Q2 2019 Q32019 Q42019 = Q12020) = Q22020 = Q22019 Q32019 Q42019 Q12020 22020 = 84% of SME customers eligible for . migration have migrated — Pace of migrations in Q2 20
Slide 22: Wholesale - Delivery Q2 and H1 2020
▪ ▪ ▪ ▪ ▪ Δ Δ Δ Δ (excl. divestments1 ) (excl. divestments1 )
Slide 23: Network, Operations & IT - Delivery Q2 and H1 2020
Network, Operations & IT - Delivery Q2 and H1 2020 Highlights Segment financials (€ m) H12019 H12020 Ay-on-y = Adjusted operating expenses after leases declined 9.3% y-on-y, Adjusted operating expenses after leases 379 344 -9.3% mainly driven by As % of adjusted Group revenues 13.9% 13.1% — Reductio
Slide 24: Financial Results
1. HIGHLIGHTS & PROGRESS AGAINST STRATEGY 2. BUSINESS PERFORMANCE UPDATE 3. FINANCIAL RESULTS
Slide 25: Group financials
Group financials (€m) H12019 H12020 Ay-on-y Ay-on-y xc mpact VA Service revenues 2,539 2,440 -3.9% Non-service & other 181 182 40.3% Adjusted revenues H1 2020 excl. impact divestments A y-on-y Adjusted revenues 2,721 2,622 33.6% 2.4% Consumer 1418 2.2% Total adjusted opex TA79 1,384 -64% 5.6% ! Leas
Slide 26: Strong and disciplined cost control
Strong and disciplined cost control = € 213m net indirect opex savings realized since start in 2019' = Reduction driven by personnel and IT/TI expenses = ~€ 137m net indirect opex savings to be realized by the end 2021 = Confident to reach our target of ~€ 350m by the end of 2021 = Scaled down 176 F
Slide 27: Strong underlying cash generation
Strong underlying cash generation (€m) H12019 H12020 Ay-on-y Adjusted EBITDA after leases 4,157 1160 0.3% As % of adj. revenues 425% 44.3% . . Capex 531 572 +78% Highlights Operational free cash flow 626 588 6.1% . . . {As % of ad) revenues Z0% EES Lower operational free cash flow fully driven by hi
Slide 28: Capex and working capital
Capex and working capital Highlights Capex (€ m) H12019 %oftotal H12020 %oftotal Ay-on-y ‘Access 71 36% 293 51% = Capex related to access more than doubled compared to H1 2019 T/T 210 40% Af 36% = Invested € 54m less in Commercial as a result of better inventory Commercial 126 24% ws _ y 1» — manage
Slide 29: Steadily improving return on capital
Steadily improving return on capital Operational efficiency” 119% 12.9% ROCE' 90% 9.8% H1 2019 H1 2020 Capital efficiency’ 75.7% 76.5% H1 2019 H1 2020 H1 2019 H1 2020 lation -/- Nominal Strong and disciplined cost control offsetting lower revenues Lower restructuring charges due to postponed reorgan
Slide 30: Liquidity position
Liquidity position Liquidity considerations Liquidity schedule (€ m) = Total committed liquidity of € 2.2bn — €907m in cash! — €125bn of committed unused credit lines (RCF) = €1bn STEP-labeled Euro Commercial Paper (ECP) program signed in June = On 2 April 2020, KPN has fully drawn its € 300m credit
Slide 31: Financial position
Financial position Financial position Highlights Interest cover! Thx 7% 87x @3D—1__ ps Interest cover ratio was 9.3x at the end of the 6.3x , quarter (Q1 2020: 8.7x) Leverage ratio? 24x 23x @a——>*_KPN's leverage ratio was 2.3x (Q1 2020: 2.2x) 2.2x 2.2x = Strong liquidity position at € 2.2bn €m — €90
Slide 32: Disclosure agenda going forward
Disclosure agenda going forward: committed to continuously improving Consumer Delivered in H12020 = New revenue breakdown to reflect focus on convergence = ROCE and segment Adjusted EBITDA after leases v — Fixed-mobile service revenues — Published with H1 and FY results 7 Fixed-only broadband servic
Slide 33: Closing remarks
Closing remarks . KPN delivered stable adj. EBITDA AL and higher free cash flow in Q2 2020 (excl. divestments) =" Demand for essential connectivity services remained solid in the second quarter COVID-19 negatively impacted KPN’s service revenues, mostly roaming and B2B segment This was offset by ong
Slide 34: Q&A
Slide 35: Appendices
Appendices I; Q2 & H12019 financials corrected for impact of divestments ll: Tax lll: Debt portfolio IV: Treatment of hybrid bonds V: Fixed infrastructure VI: Mobile infrastructure Vil: Spectrum
Slide 36: Q2 2019 financials corrected for impact of divestments
I: Q@2 2019 financials corrected for impact of divestments Income statement (€ m) Q2 2019 Impact Q22019 Q2 2020 Ay-on-y divestments exc dvestmenrs exc vestments Consumer 722 ° 722 706 Business 507 -29 478 451 5.7% Wholesale 159 -12 147 149 412% Network, Operations & IT 1 - 1 1 Other Cincl. eliminat
Slide 37: H1 2019 financials corrected for impact of divestments
I: H1 2019 financials corrected for impact of divestments Income statement (€ 1m) H12019 Impact H12019 H12020 Ay-on-y divestments excl divestments excl divestments Consumer 1450 - 1,450 1,418 Business 1,013 -37 976 929 4.8% Wholesale 316 B 293 302" +3.2% Network, Operations & IT 3 S 3 3 Other Cincl.
Slide 38: Tax Q2 and H1 2020
ll: Tax Q2 and H1 2020 P&L Cash flow P&L Cash flow Regions (€ m) Q22019 _Q22020 Q22019 _Q22020 H12019 __H12020 H12019 _H12020 The Netherlands 7 -36 -8 = -61 -66 7 = Other - = - = - = - = Total reported tax 37 -36 8 - -61 -66 7 Of which discontinued operations - = - = - 2 - Reported tax from continui
Slide 39: Debt portfolio
lll: Debt portfolio Nominal debt by type' Nominal debt by currency’ Fixed vs. floating interest’ Debt redemption profile’ ¢€ bn) ”~ 1.0 14% HB curobonds MM cur Hl Fixed 20 21 '22'23'24 25 '26'27 '28'29'30 32 I Global bonds Ml cer’ HI Floating ___ USD hybrid (st cal Ml cep Hybrid bonds USD? [77] EUR
Slide 40: Treatment of hybrid bonds
IV: Treatment of hybrid bonds KPN & credit rating agencies IFRS = Hybrid bonds are recognized as 50% equity and 50% debt by the rating agencies = Definition of KPN net debt includes: ‘[...], taking into account 50% of the nominal value of any hybrid capital instrument’ — Hybrid bonds are part of KPN
Slide 41: Fixed infrastructure
V: Fixed infrastructure Download Active in speed network Ton) VDSL2 ~! v al fat SOMbps on VDSL2 pair bonding {) ~100Mbps v sc} Vectoring Ay ~120Mbps v So Bonded vectoring Gh ~240Mbps v an Bonded VPlus (a ~400Mbps (Pop) FitH - P2P (n) ~1Gbps EN FttH - G-PON ~ 1 (Fane) z Gl 1Gbps assive FttH — XGS-PON
Slide 42: Mobile infrastructure
VI: Mobile infrastructure Modernizing sites with the latest technologies, 5G ready Spectrum auctions in NL Typical current site Typical modernized site 4 frequency bands 6-8 frequency bands 2x2 MIMO 4x4 or higher order MIMO 1 Gbps backhaul 10 Gbps backhaul 2 antennas 1antenna Not 5G ready 5G ready ~
Slide 43: Spectrum in the Netherlands
Vil: Spectrum in the Netherlands 7OOMHz (Paired) 800MHz (Paired) 900MHz (Paired) 1.4GHz (Unpaired) 1.8GHz (Paired) 2.1GHz' (Paired) 2.6GHz (Unpaired) 2.6GHz (Paired) T-Mob 1:2.1GHz as per 1 January 2021
Slide 44: KPN Investor Relations
KPN Investor Relations @ irkpn.com