Royal Kpn Nv · EURONEXT:KPN
Royal Kpn Nv — KPN — Investor Presentation (May 2017)
45 slides from Royal Kpn Nv's investor presentation, May 2017
Slide 1: Investor Presentation May 2017
Investor Presentation May 2017 Investor Relations May 17
Slide 2: Contents
Contents 1 Strategy 2 Performance 3 Appendix
Slide 3: Strategy
Strategy Strategic choices embedded in organization Further strengthening our Company SIMPLIFY GROW INNOVATE Commercial Digital & simple service Converged Telco Excellent and delivery & IT services user experience Flexible & simplified Best-in-class secured Applying innovative Operational network an
Slide 4: External environment reassuring
External environment reassuring Stable macro-economy with strong competitive position STABLE MACRO ECONOMY STRONG COMPETITIVE POSITION GDP growth NL1 ’16-’17 vs. ’15-’16 2.0% 2.1% 2.1% 1.4% The Netherlands 4 +1 Germany 5 -1 2014 2015 2016 2017E United Kingdom 7 +3 Unemployment NL1 7.4% 6.9% 6.0% Den
Slide 5: External environment reassuring (cont'd)
External environment reassuring (cont’d) KPN strongly positioned as leading integrated service provider Mobile network 2G, 3G, 4G 2G, 3G, 4G 2G, 3G, 4G 4G + MVNO Mobile network quality1 Mobile market share2 42% 32% 19% 7% Fixed network FttC, FttH Coax Wholesale KPN Wholesale KPN Broadband market sha
Slide 6: Key priorities for the coming years in Consumer
Key priorities for the coming years in Consumer Consumer strategy centered around household 1 Increase penetration of fixed-mobile bundles 2 Reduce churn by increasing loyalty and customer satisfaction 3 Accelerate up- and cross-sell in bundles 4 Grow in TV via cloud-based IPTV platform 5 Benefit fr
Slide 7: Continued growth of fixed-mobile bundles in Consumer
Continued growth of fixed-mobile bundles in Consumer Clear benefits from convergence strategy Customers in fixed-mobile bundles Multi-brand strategy to drive convergence further Households1 Postpaid customers 39% 45% 31% 35% Q1 ’16 Q1 ’17 Q1 ’16 Q1 ’17 + 59% KPN brand Clear convergence benefits High
Slide 8: Household at center of service model in Consumer
Household at center of service model in Consumer Significant opportunities to increase share of wallet per household 8
Slide 9: Strong competitive positioning in Dutch market
Strong competitive positioning in Dutch market Covering all segments: focus on fixed-mobile bundling and high value Leading converged position CLV Lifetime Growing Customer illustrates focusinon Value KPN brand mobile Actuals Q4 ’16 y-on-y1 2yr handset contract One-off handset fee SAC/SRC Traffic &
Slide 10: TV focus point in household centered strategy
TV focus point in household centered strategy Highest quality of service through differentiated functionalities and leading network Best-in-class IPTV services… …driving continued TV growth 69% 70% 70% High quality Content 161 Metro Core Locations Delivery Network Superior stable access speeds S
Slide 11: Transforming into Business ICT service provider
Transforming into Business ICT service provider 1 Realize growth by strengthening and deepening customer relations 2 Clear market segmentation with a targeted sales approach 3 Strengthen portfolio & distribution via partnerships 4 Rationalize & simplify products and services to create standardized b
Slide 12: Strengthening & deepening customer relations
Strengthening & deepening customer relations Leverage leading position in Telco to grow market share in IT 1 Gartner, management estimates 12
Slide 13: KPN well positioned to deliver on customer needs
KPN well positioned to deliver on customer needs Standardized building blocks to deliver productivity 13
Slide 14: Strengthening business market portfolio and infrastructure
Strengthening business market portfolio and infrastructure Leading infrastructure and strengthened market positioning Further strengthening infrastructure Leading cloud & data center services Expanding scale and capabilities Deploying successful hybrid access strategy used in Consumer Deregulation o
Slide 15: Operational excellence to improve business customer experience
Operational excellence to improve business customer experience Business organization streamlined further Simplification of Further progress on Strong improvement NPS1 portfolio and organization indirect cost reductions Portfolio rationalization -5.1% Automation of delivery and service Online s
Slide 16: Expanding superior network position
Expanding superior network position 1 Simplify operating model to improve customer experience and operational effectiveness 2 Expand superior access position by deploying innovative technologies and increasing fiber penetration 2 Finalize build of flexible and simplified integrated network Ensuring
Slide 17: Gradual approach to simplify operating model
Gradual approach to simplify operating model Starting second wave of Simplification program Customer interaction layer (BSS) 1 2 Network interaction layer (OSS) 3 1 Integration Consumer BSS finalized 2 Starting integration Business BSS 3 Starting with OSS Simplification 17
Slide 18: Gradual approach to simplify operating model (cont'd)
Gradual approach to simplify operating model (cont’d) 2017-2019: Evolving into next generation Telco Customer interaction layer (BSS) Network interaction layer (OSS) 18
Slide 19: Simplifying our operating model
Simplifying our operating model Second wave of Simplification program to deliver significant savings Simplification program run-rate opex and Capex savings >760 €m >300 ~460 ~180 ~140 ~140 End 2013 2014 2015 2016 End 2016 2017 - 2019 End 2019 FIRST WAVE SECOND WAVE FROM Product centric TO Customer c
Slide 20: Best mobile access provider
Best mobile access provider Investment-led strategy enabling superior customer experience Most time spent on LTE1 Best mobile network according to customers3 86% 84% 90% 82% 81% 76% 72% 71% 70% 66% 58% 57% 49% 72% 70% 61% KPN NL NO SE FI CH DK BE AT UK DE FR Competitive speeds on LTE2 54.8Mbps 50.2M
Slide 21: Staying ahead of demand for mobile data
Staying ahead of demand for mobile data Fully utilizing spectrum position for excellent customer experience 1 Rebased to LTE 800 sites end 2014 2 Excluding small cells 21
Slide 22: Best fixed access provider
Best fixed access provider Investment-led strategy enabling superior customer experience Best fixed network according to customers1 ~78% ~71% 90% End 2015 End 2016 70% 64% ~75% ~68% End 2015 End 2016 KPN Competitor 1 Competitor 2 1 % of clients that agree on the reputation statement that their opera
Slide 23: Ready to upgrade if demand changes
Ready to upgrade if demand changes Large step taken with FttC upgrades in 2016 Vplus delivering highest stable speeds Cost and time efficient upgrades without changing network architecure1 700 Aggregate bit rate (Mbps) ~50% of KPN network 600 500 400 ~80% of KPN network 300 200 100 0 100 200 300 400
Slide 24: Build flexible and simplified integrated network
Build flexible and simplified integrated network Three steps to achieve objective 24
Slide 25: Network rationalization to prepare for virtualization
Network rationalization to prepare for virtualization Reducing complexity and associated costs to enable flexibility IP transformation on track Decentralize, bringing services closer to customers 100% Amount of network equipment 1 ~55% ~35% ~35% ~62% ~100% 2010 2016 2019 Network Network Network Lega
Slide 26: Ahead of the Capex curve
Ahead of the Capex curve KPN built strong fundamentals in past years 40% KPN INVESTED AHEAD OF THE CURVE REDUCING CAPEX 22.3% 30% 19.7% Towards 15-17% 1,440 85 Other 132 1,193 ~1,150 20% Mobile access 282 98 Simplification 105 251 Customer 258 driven 220 10% Fixed 683 519 2014 2016 2017 Medium- 0% t
Slide 27: Growing free cash flow to drive shareholder value
Growing free cash flow to drive shareholder value Developing towards highly cash generative company Strong free cash flow potential Solid financial position Committed to investment grade credit profile 9.5% Telefónica Deutschland stake provides additional financial flexibility Commitment to grow
Slide 28: Key priorities for the coming years
Key priorities for the coming years 1 Accelerate up- and cross-sell in bundles 2 Grow in TV and IT services 3 Finalize Business transformation 4 Finalize build of flexible and simplified integrated network and operating model 5 Expand superior access position by deploying innovative technologies and
Slide 29: Contents
Contents 1 Strategy 2 Performance 3 Appendix
Slide 30: Continued growth fixed-mobile bundles in Consumer
Continued growth fixed-mobile bundles in Consumer Successful up- and cross-sell into mobile Households in fixed-mobile bundles1 Postpaid customers in fixed-mobile bundles 39% 31% 35% 45% all brands Q1 ’16 Q1 ’16 Q1 ’17 Q1 ’17 59% Q1 ’17: Q1 ’17: KPN brand 45k net adds 89k net adds 1 As % of broadban
Slide 31: Strong household proposition driving service revenue growth
Strong household proposition driving service revenue growth Fixed revenue growth driven by bundled services CLV service Continued mobile illustrates focus on revenue KPN brand growth 2.0% 2.6% 1.5% 5.9% 2.8% 1.0% €m €m 460 472 467 299 298 287 15 14 14 83 79 91 -13% 354 375 374 5.6% Q1 ’16 Q4 ’16 Q1
Slide 32: Focus on migrating Business customers to multi play
Focus on migrating Business customers to multi play Rising customer satisfaction y-on-y Further growth in multi-play seats CLV illustrates NPS Business improvingfocus on KPN brand y-on-y 36 k 27 -6 10 Q1 ’16 Q4 ’16 Q1 ’17 -11 Q1 ’16 Q1 ’17 Net adds multi play seats (SME) NPS Business1 1 Source: Kant
Slide 33: LE&Corporate
Migrations to integrated solutions strengthen business customer relations Executing on quality programs Business revenue growth drivers Improving customer satisfaction by simplifying processes Q1 ’17 Q1 ’17 adjusted % of total adjusted y-on-y growth revenues NPS Customer Service Registered client (s
Slide 34: Revenue trend The Netherlands improving
Revenue trend The Netherlands improving Adjusted revenues NL declined by 1.5% (Q4 ’16: -1.9%) Adjusted revenues KPN Group €m -2.4% 1,689 1,648 €m 16 1,503 4 1,480 41 2 Q1 ’16 Q1 ’17 Adjusted revenues iBasis -10% Adj. revenues Consumer Business Wholesale Other (incl. Adj. revenues €m NL Q1 ’16 elimin
Slide 35: Adjusted EBITDA supported by improved operational efficiency
Adjusted EBITDA supported by improved operational efficiency Simplification driving lower personnel and IT/TI expenses Adjusted EBITDA NL increased by 2.5%1 Adjusted EBITDA KPN Group €m +2.8% 37.6% 39.1% 568 584 €m 9 579 25 4 565 7 23 Q1 ’16 Q1 ’17 Adjusted EBITDA iBasis €m -17% 6 Adj. EBITDA Revenu
Slide 36: Free cash flow growth
Free cash flow growth Q1 FCF influenced by intrayear phasing Growing operating free cash flow1… …and free cash flow2 +27% €m €m 318 35 250 Q1 ’16 Q1 ’17 -40 Q1 ’16 Q1 ’17 Free cash flow components €m 555 5 99 1 155 35 266 4 Reported EBITDA Change in Change in Interest paid Taxes received Capex Other
Slide 37: Solid financial position
Solid financial position Lower gross debt y-on-y Debt portfolio Gross debt € 0.71bn lower vs. Q4 ’16 8.1 € 720m bond redemption in January 7.8 € bn 7.4 6.8 6.5 Net debt € 0.22bn lower vs. Q4 ’16 5.4 Telefónica shares partly sold, reducing net debt 2.8x 2.7x 2.3x Average coupon senior bonds
Slide 38: Contents
Contents 1 Strategy 2 Performance 3 Appendix
Slide 39: KPN ADR program
KPN ADR program KPN has a sponsored Level 1 ADR program Bloomberg ticker KKPNY Trading platform Over-the-counter (OTC) CUSIP 780641205 Ratio 1 ADR : 1 Ordinary Share Depositary bank Deutsche Bank Trust Company Americas Depositary bank contact Jonathan Montanaro +1 212 250 9100 (New York) ADR broker
Slide 40: Leading in Corporate Social Responsibility
Leading in Corporate Social Responsibility Successful CSR strategy Social and environmental achievements 2016 KPN tests combination of DSL and 4G for access in Quality & Reliability Environment Privacy & Security remote areas KPN’s e-health network enables home dialysis for patients of the Flevo
Slide 41: Dutch wireless disclosure
Dutch wireless disclosure Service revenues (€ m) Q1 ’17 Q1 ’16 y-on-y % Consumer 298 287 3.8% Business1 160 175 -8.6% Other2 38 35 8.6% KPN The Netherlands 496 497 -0.2% SAC/SRC per subscriber (€) Q1 ’17 Q1 ’16 y-on-y % Consumer (postpaid)3 193 221 -13% Business (mobile only – mainly SME) 158 175 -9
Slide 42: Debt portfolio
Debt portfolio Breakdown nominal debt1 (total € 8.3bn) Nominal debt by currency Other 2% GBP2 Hybrid bonds 24% 24% Euro bonds EUR Global bonds 65% USD2 61% 9% 15% Bond redemption profile (€ bn) Fixed vs. floating interest 1.1 0.9 1.0 0.8 0.6 0.6 0.6 0.6 0.6 0.5 0.4 0.5 0.1 Fixed3 100% ’18 ’19 ’20 ’2
Slide 43: Spectrum in The Netherlands
Spectrum in The Netherlands 800MHz Tele2 VodZig KPN 2*30 (Paired) 2*10 2*10 2*10 900MHz VodZig KPN T-Mob 2*35 (Paired) 2*10 2*10 2*15 1.8GHz KPN VodZig T-Mob 2*70 (Paired) 2*20 2*20 2*30 2.1GHz VodZig KPN T-Mob KPN VodZig T-Mob 2*59.4 (Paired) 2*14.6 2*14.8 2*10 2*5 2*5 2*10 2.6GHz T-Mob KPN Tele2 1
Slide 44: Fixed infrastructure
Fixed infrastructure Active in Download speed Network VDSL2 CO ~50Mbps VDSL2 pair bonding CO ~100Mbps Vectoring SC ~120Mbps Bonded vectoring SC ~240Mbps Bonded VPLUS SC ~400Mbps NG.PON SC >1Gbps FttH ODF ~1Gbps Fiber Copper 44
Slide 45: 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 (‘