Royal KPN NV · EURONEXT:KPN
Royal KPN NV — FY2005 Earnings Presentation
97 slides from Royal KPN NV's earnings presentation, Feb 7, 2006
Slide 1: Annual Results 2005
Annual Results 2005 7 February 2006 p
Slide 2: Safe harbor
Safe harbor Certain statements contained in this presentation constitute forward-looking statements. These statements may include, without limitation, statements concerning future results of operations, the impact of regulatory initiatives on our operations, our and our joint ventures' share of new
Slide 3: Disclaimer
Disclaimer This presentation contains a number of non-GAAP figures, such as Operating Revenues, EBITDA and free cash flow. These non-GAAP figures should not be viewed as a substitute for our GAAP figures. Our non-GAAP measures may not be comparable to non-GAAP measures used by other companies. We de
Slide 4: Agenda
Agenda Chairman’s review Ad Scheepbouwer, Chairman and CEO Financial review Marcel Smits, CFO Operating review Fixed Mobile Eelco Blok, COO Stan Miller, CEO Fixed division Mobile International •Consumer •The Netherlands •Business •E-Plus •Wholesale & Ops. •BASE •All IP update Concluding remarks Ad S
Slide 5: Group highlights
Group highlights Raised 2005 guidance met on all metrics • Free cash flow up 6.6% at 2.4 bn • Operating revenues rose by 1% to 11.9 bn; as per guidance definition1 –0.3% • EBITDA down 2.3%; down 4.0% as per guidance definition1 • Capex of 1,394 mn 1 Excluding restructuring charges, impairments
Slide 6: Group highlights
Group highlights Execution of “Attack – Defend – Exploit” strategy on track • Market share of KPN ISPs up 6.4 percentage points to 36.1% • VoIP launched, national roll out in high gear from January 2006 • TV offering expanded • Share in traditional voice consumer market rising three consecutive quar
Slide 7: Confidence increased…
Confidence increased… …in Operating performance •“Attack – Defend – Exploit” components •Strengthened Mobile strategies …in cash flows… •Outlook 2006 EBITDA •More visibility on interest and tax •Equals ability to deliver returns to shareholders …and more convinced of need for financial flexibility •
Slide 8: Outlook 2006
Outlook 20061 2005 2006 Operating € 11,826 mn4 Low single digit increase revenues1 EBITDA1,2 € 4,623 mn5 Flat6 Capex € 1,394 mn € 1.6 - € 1.8 bn Free cash € 2,439 mn > € 2 bn flow3 1 Excluding restructuring charges, impairments and book gains/losses over 20 mn, brand unification costs and Telfort
Slide 9: Shareholder remuneration
Shareholder remuneration € bn Share repurchases Dividend 0.45 0.35 0.252 1.0 1.7 0.8 0.9 — — — ’02 ’03 ’04 '05 '02 '03 '04 '05 Total paid dividend (€ bn) Dividend per share (€) % decrease in number of shares outstanding 1 • Proposed dividend over 2005 of '02 '03 '04 '05 0.45 per share • 1.0 bn a
Slide 10: Adjustment to financing policy
Adjustment to financing policy Rating floor of Baa2 (Moody’s) / BBB (S&P) maintained • Adjustment of financing policy to Net debt / EBITDA1 range of 2.0 – 2.5 times – Taking into account KPN’s experience to date of operating under its existing financing framework – KPN’s current and expected trading
Slide 11: Agenda
Agenda Chairman’s review Ad Scheepbouwer, Chairman and CEO Financial review Marcel Smits, CFO Operating review Fixed Mobile Eelco Blok, COO Stan Miller, CEO Fixed division Mobile International •Consumer •The Netherlands •Business •E-Plus •Wholesale & Ops. •BASE •All IP update Concluding remarks Ad S
Slide 12: Group results Q4
Group results Q4 € mn Q4 ’05 Q4 ’04 % • Reported EBITDA up 10.7%, including following items Operating revenues 3,166 3,008 5.3% - of which Net sales 3,033 2,960 2.5% – Telfort consolidated as of 4 October, contributing 93 mn Operating expenses 1 2,471 2,379 3.9% revenue4 and 35 mn EBITDA - of wh
Slide 13: Group results FY '05
Group results FY ’05 € mn FY ’05 FY ’04 % • Operating revenues up 1% – Telfort consolidation as of Operating revenues 11,936 11,819 1.0% 4 October ( 93 mn) - of which Net sales 11,685 11,630 0.5% – 110 mn book gain NTT Operating expenses 9,588 9,174 4.5% DoCoMo - of which Depreciation 1 1,882 1,9
Slide 14: Financial highlights - KPN Fixed
Financial highlights - KPN Fixed € mn Q4 ’05 Q4 ’04 FY ’05 FY ’04 Operating revenues 1,734 1,814 6,883 7,249 % change -4.4% -5.0% Operating expenses 1,391 1,343 5,367 5,440 - of which D&A 311 307 1,276 1,309 Operating result 343 471 1,516 1,809 EBITDA 654 778 2,792 3,118 % change -15.9% -10.5% EBITD
Slide 15: Operating review by segment
Operating review by segment € mn Operating revenues EBITDA margin Consumer Consumer 620 610 602 583 589 17.9% 16.3% 16.3% 15.8% 13.8% Q4 '04 Q1 '05 Q2 '05 Q3 '05 Q4 '05 Q4 '04 Q1 '05 Q2 '05 Q3 '05 Q4 '05 Business Business 724 17.3% 677 14.4% 13.7% 15.2% 663 644 669 13.0% 10.0% Q4 '04 Q1 '05 Q2 '05 Q
Slide 16: Financial highlights - Mobile
Financial highlights - Mobile Excl. Telfort, NTT DoCoMo € mn Q4 ’05 Q4 ’04 FY ’05 FY ’04 Q4 ’05 Operating revenues 1,680 1,374 5,857 5,264 1,444 % change 22.3% 11.3% 5.1% – of which Service revenues1 1,465 1,249 5,370 4,846 1,344 % change 17.3% 10.8% 7.6% Operating expenses 1,408 1,178 5,100 4,383 1
Slide 17: Operating review KPN Mobile the Netherlands
Operating review KPN Mobile the Netherlands1 Market position strengthened by Telfort acquisition Growth of customer base Revenue market share Customers (mn) 8.1 (Post Paid %) 46.3% 6.3 6.3 (40%) 6.1 5.7 (37%) (38%) (36%) (44%) 37.5% 36.8% 37.1% 37.3% 92 Net adds 141 91 106 126 211 73 -68 -33 -717 Q4
Slide 18: Operating review E-Plus
Operating review E-Plus Continued growth in a more competitive market 13% growth of customer base Revenue market share picks up Customers (mn) 10.7 (Post Paid %) 10.1 9.7 9.8 (52%) 9.5 (52%) (51%) (51%) (50%) 316 12.4% 12.4% 12.1% 12.1% 298 11.9% Net adds 219 308 148 163 152 108 -23 -6 Q4 '04 Q1 '05
Slide 19: Operating review BASE
Operating review BASE Strong momentum continues 21% growth of customer base Continued increase in revenue market share 1.9 2.0 Customers (mn) 1.8 1.8 1.6 >13% >13% 24 >12% ~13% 6 >11% 38 5 Net adds 76 57 106 81 76 15 Q4 ’04 Q1 ’05 Q2 ’05 Q3 ’05 Q4 ’05 Q4 '04 Q1 '05 Q2 '05 Q3 '05 Q4 '05 Pre Paid Post
Slide 20: Group cash flow
Group cash flow € mn Q4 ’05 Q4 ’04 % FY ’05 FY ’04 % Operating result 695 629 10.5% 2,348 2,645 -11.2% Depreciation and amortization1 624 562 11.0% 2,376 2,190 8.5% Interest paid/received -258 -271 -4.8% -484 -623 -22.3% Tax paid/received -5 19 -24 8 Book gains -118 -17 > 200% -151 -73 > 100% Change
Slide 21: Headcount reduction
Headcount reduction Well on track Personnel in the Netherlands Achievements 2005 • Group simplification implemented 21,265 -1,3 • Phase-out traditional IT systems 51 19,914 and platforms ongoing -2,1 755 06 19,159 • FTE reduction ahead of schedule partly related to 2006 projects brought forward; wel
Slide 22: Pensions and non-operating P&L items
Pensions and non-operating P&L items Pensions • Significant decrease of shortfall, no immediate funding obligations1 Depreciation • Due to lower Capex spending in prior years depreciation continues to trend down Amortization • Linear amortization will result in fairly stable amortization charges at
Slide 23: Tax
Tax Corporate tax audit settlement in Germany • Permanent downward adjustment of loss carry forward by 5.9 bn1 • Temporary downward adjustment of loss carry forward by 5.4 bn1 • Adjustment is temporary because of replacement of impairment (in the past) by depreciation in the future Increased def
Slide 24: Group financial profile
Group financial profile € bn Debt Financial framework 10.8 10.9 8.9 10.1 8.1 7.8 8.0 8.4 10.0 9.5 6× 8.9 8.2 2× 7.9 7.9 7.4 1.7 1.6 1.7 1.7 1.9 Q4 ’04 Q1 ’05 Q2 ’05 Q3 ’05 Q4 ’05 Q4 ’04 Q1 ’05 Q2 ’05 Q3 ’05 Q4 ’05 Gross Debt Net Debt Operating EBITDA/Net interest1 Minimum target Net Debt/Operating E
Slide 25: Balance sheet
Balance sheet Assets Equity and liabilities € bn € bn 24.2 24.1 23.5 23.4 22.7 24.2 24.1 23.5 23.4 22.7 4.1 4.1 4.1 4.0 6.4 6.4 5.2 5.0 4.6 5.1 Goodwill Group equity3 4.3 4.2 4.2 1.9 4.3 2.2 2.2 1.7 2.3 4.5 1 Licenses Provisions 2 10.5 Other non- Non-current 10.2 10.0 10.5 10.5 10.5 11.1 10.0 9.9 cu
Slide 26: Agenda
Agenda Chairman’s review Ad Scheepbouwer, Chairman and CEO Financial review Marcel Smits, CFO Operating review Fixed Mobile Eelco Blok, COO Stan Miller, CEO Fixed division Mobile International •Consumer •The Netherlands •Business •E-Plus •Wholesale & Ops. •BASE •All IP update Concluding remarks Ad S
Slide 27: KPN Fixed trends
KPN Fixed trends Drivers € mn Revenues Internet minutes (bn) # ADSL connections % of revenues -/- 6% % of revenues Fixed Fixed 5.0 2,000 4% 72 124 7% 5% 98 35 2% 0.0 Q1 ’04 Q4 ’04 Q1 ’05 Q4 ’05 Q1 ’04 Q4 ’04 Q1 ’05 Q4 ’05 # leased lines # IP VPN connections -/- 15% 40,000 65,000 1.5% 28 44 2.5% 5% 8
Slide 28: Fixed strategy update
Fixed strategy update “Attack – Defend – Exploit” 2005 progress 2006 objectives •Market shares broadband (DSL, •Expand leadership position in IP-VPN, E-VPN) developing broadband Attack positively •Achieve significant VoIP market •Developed multi-play, VoIP & TV share •Further roll-out enables new •L
Slide 29: Structure and shape of Dutch consumer market
Structure and shape of Dutch consumer market Consumer demand and competitive landscape changing Trends impacting revenue in Dutch telecom market “Mobile only” households1 Broadband penetration2 VoIP lines in % of broadband3 16% 58% 12% 45% 9% 6% 8% 27% 4% 6% 15% 2% 1% 2002 2003 2004 2005 2002 2003 2
Slide 30: Core consumer markets
Attack Defend Exploit Core consumer markets We made significant steps forward 65% Traditional voice market share 1 Position strengthened 64% • First flat fee offer: “Free evening and weekend” • Bundled “Dect handsets + voice minutes” since launch 61% Q3 about 100k sold leading to significant ARPU in
Slide 31: Consumer broadband
Attack Defend Exploit Consumer broadband Increased market share as stepping stone for IP services X 1,000 Dutch broadband connections1 Achievements 2005 4,000 •Strong independent growth KPN ISPs 3,000 1,740 •Successful execution acquisition policy 1,623 2,000 1,381 1,500 1,567 •KPN ISPs have been aw
Slide 32: However, transition to VoIP drives accelerated line loss
Attack Defend Exploit However, transition to VoIP drives accelerated line loss market share voice minutes Y-on-Y line-loss 70% Q4 ’04 Q1 ’05 Q2 ’05 Q3 ’05 Q4 ’05 -2.3% -3.2% -3.9% 60% z - 4.8% Q4 ’03 Q2 ’04 Q4 ’04 Q2 ’05 Q4 ’05 - 6.7% KPN voice market share excl. VoIP PSTN/ISDN subscription loss KPN
Slide 33: KPN has started to market VoIP nationwide through aggressive multi-branding
Attack Defend Exploit KPN has started to market VoIP nationwide through aggressive multi-branding Current status •Successful regional commercial introduction in December 2005 •Now available on national basis •End January 50k VoIP packages sold •KPN fastest growing VoIP provider •VoIP available throu
Slide 34: KPN TV
Attack Defend Exploit KPN TV Acceleration in development of TV services DVB-T based TV IP TV •Increase customer base to •Successful technical pilot 184,000 customers •Signed-up attractive content •Acquisition Nozema pending portfolio Achievements •Upgraded consumer value •Roll-out ADSL 2+ network 20
Slide 35: IP TV will change dynamics of the TV market
Attack Defend Exploit IP TV will change dynamics of the TV market Launch KPN TV “Open” TV “Interactive” TV “Personal” TV • Basic + theme channels • Content organization • Facilitating transactions • Integrated offering of • Replay TV and personalization • Content exchange entertainment and • Video o
Slide 36: Content will be our trump card
Content will be our trump card Over 60 channels contracted so far Dutch national channels Dutch commercial Basic package channels Other channels Premium / Theme channels 36 p
Slide 37: Business market trends
Business market trends Market trends and competitive dynamics are changing Market trends Increased competition •ICT becomes increasingly vital for •IT and system integrators (e.g. businesses Capgemini, Accenture and IBM) moving •Security of ICT is growing in importance down the value chain •Increase
Slide 38: Core business markets
Attack Defend Exploit Core business markets Continued strong growth of IP-VPN and E-VPN connections Leased lines Accomplished in 2005 59,487 47,651 •Focus on Managed Services - 20% •Innovation teams in place •Sales reorganized •Customer satisfaction improved and now better Q4 ’04 Q4 ’05 than competi
Slide 39: Business services
Attack Defend Exploit Business services Moving up the value chain into application management services Managed Services Business Process Outsourcing Domain of •VoIP solutions service Integrators •Managed RFID1 solutions ICT outsourcing Limited Scope •Narrowcasting solutions (telecom outsourcing) •So
Slide 40: Innovation: new managed services expanding
Attack Defend Exploit Innovation: new managed services expanding Examples We are helping medical services to become more efficient through a Secure National Health Care Network We are helping to make the Netherlands safer through Integrated Safety & Security solutions We are helping business custome
Slide 41: Wholesale & Operations market trends
Wholesale & Operations market trends Market & Competition Strategic initiatives •Growing demand for higher bandwidth •Proactive introduction of new wholesale and new broadband services (VoIP), services (e.g. wholesale DSL, WiFi, TV) declining traditional voice and internet besides regulatory obligat
Slide 42: All IP migration
Attack Defend Exploit All IP migration Key component of “Attack – Defend – Exploit” strategy Enabling new services Pushing broadband share Financial implications •Products and services •Customers demand higher •All IP is the predominant become applications on bandwidth for new driver of FTE reductio
Slide 43: All IP roll-out
Attack Defend Exploit All IP roll-out First visible steps already to be taken in 2006 From vision to operational plan Preparation •Overall program plan prepared (2005) •Supplier selection •Externally/internally communicated, focus on employee mobility From operational plan to pilot Piloting •Develop
Slide 44: Agenda
Agenda Chairman’s review Ad Scheepbouwer, Chairman and CEO Financial review Marcel Smits, CFO Operating review Fixed Mobile Eelco Blok, COO Stan Miller, CEO Fixed division Mobile International •Consumer •The Netherlands •Business •E-Plus •Wholesale & Ops. •BASE •All IP update Concluding remarks Ad S
Slide 45: Mobile
Mobile 2005 progress 2006 objectives •Telfort acquisition •To further strengthen our •Hi positioning market leadership position KPN Mobile NL •Simyo introduction •3G roll-out •Introduced new strategy •Maximize benefits of the •Launch of multi-brands groundwork laid in 2005 •MVNO initiatives •Further
Slide 46: Competitive landscape for our mobile businesses
Competitive landscape for our mobile businesses Different starting points require different strategies Market and KPN Opportunity Strategy • Above EU average Fixed - • Optimize market • Multi-proposition Mobile substitution position to value market leadership The • Market leader in mobile creation N
Slide 47: Mobile strategies
Mobile strategies Expand on solid fundamentals which have been established in 2005 Common Differentiated •Multi-brand •Starting position •Distribution; captive channel focus •Handset subsidies •Value steering e.g. Post Paid focus •3G strategy •Joint purchasing & roaming •Mobile vs. Fixed pricing KPN
Slide 48: 2G / 3G strategies
2G / 3G strategies Differentiated network strategies in accordance with market position •Initial uptake of laptop cards in Business market (customer pull) Market / •In consumer market competition positioned as cheap voice (product push) Trends •Handsets currently lacking appealing suitable applicati
Slide 49: E-Plus
E-Plus On 9 August we said we would do things differently… Customer •Handpick segments with tailored offerings targeting Proposition •Turn core services into great value Channels •Redesign pull & its economics Deployment •Focus regionally, maximizes impact of pull-actions Regulatory •Launch offensiv
Slide 50: E-Plus status update
E-Plus status update …and we did things differently • Handpick segments • Post Paid focus, highest H2 net adds in market Customer with tailored • New brands: BASE, Simyo, Ay Yildiz and MVNOs targeting offerings with fast awareness build-up, > 1 mn subscribers in 6 months • Turn core services • Launc
Slide 51: Targeted new brands are starting to have impact…
Targeted new brands are starting to have impact… New brands subscribers 1,079 655 535 415 283 186 98 Jun Jul Aug Sep Oct Nov Dec New brands as % of E-Plus subscriber base 0.0% 1.0% 2.8% 4.1% 5.2% 6.4% 10.1% Very fast payback as the model is SAC/SRC light and ARPU is significantly higher than E-Plus
Slide 52: ...and we have many more partners
...and we have many more partners 52
Slide 53: E-Plus looking back
E-Plus looking back Highlights Comments • Record Post Paid net adds in H2 • Market leaders react strongly with ahead of competition pricing lever driving overall market revenues down • Increasing revenue share (even when adjusted for NTT DoCoMo) • Limited active conversion (BASE) of E-Plus subs, can
Slide 54: E-Plus looking forward
E-Plus looking forward In 2006 we will •Continue to accelerate the momentum on the new offers – More offers (e.g. youth, ethnic) – More investment behind current offers the speed of this acceleration will determine the precise timing of the “topline crossover” •Continue Medion/Aldi which in Q4 2005
Slide 55: BASE
BASE Continue to challenge the competition in difficult market Stay one step ahead of the competition Position •Reinforce efforts amongst select segments (e.g. smart shoppers, around kids, youth, SoHo, Turks, Expats, partnerships and MVNOs) customers •Further simplify services and make pricing more
Slide 56: Agenda
Agenda Chairman’s review Ad Scheepbouwer, Chairman and CEO Financial review Marcel Smits, CFO Operating review Fixed Mobile International Eelco Blok, COO Stan Miller, CEO Fixed division Mobile International •Consumer •The Netherlands •Business •E-Plus •Wholesale & Ops. •BASE •All IP update Concludin
Slide 57: Slide 57
Slide 58: Repositioning the KPN brand
Repositioning the KPN brand •Committed to be a major player in a rapidly changing playing field •Towards a more customer centric and marketing driven company •A trusted partner, leading our customers into an exciting new world •Offering reliable, innovative products and services 58
Slide 59: Fixed-Mobile convergence
Fixed-Mobile convergence Phased development towards fixed-mobile convergence in the Netherlands 1 •Cross and up selling in shops and outbound calls Integrated •Fixed-Mobile loyalty via Customer Lifecycle Management CLM •Total service provider (ZekerWeten) 2 •Hi: New proposition combining Mobile and
Slide 60: Concluding remarks
Concluding remarks • 2005 was a year of major transformation • We have delivered against targets • We have created a solid platform to accelerate growth • Confidence increased 60
Slide 61: Q&A
Q&A
Slide 62: Annex
Annex For more information please contact KPN Investor Relations Tel: +31 70 44 60986 Fax: +31 70 44 60593 mail to: ir@kpn.com www.kpn.com
Slide 63: Analysis of results
Analysis of results Key items worth mentioning in results interpretation Q4 ’05 Q4 ’04 FY ’05 FY ’04 Revenue effect MTA tariff reduction Group -67 -70 -262 -241 EBITDA effect MTA tariff reduction Group -29 -20 -121 -58 Revenue effect Telfort consolidation Group 93 93 EBITDA effect Telfort consolidat
Slide 64: Performance versus Guidance
Performance versus Guidance 2005 outlook1 met on all metrics Status Outlook FY 2005 November update Q1 ’05 Q2 ’05 Q3 ’05 Q4 ’05 FY ’05 Operating revenues1 Flat, including MTA reduction -0.6% 2.1% -0.9% -2.6% -0.3% EBITDA1,2 Decline by less than 5% -6.3% -1.3% -2.7% -5.6% -4.0% Capex ~ 1.4 bn 0.2
Slide 65: Reconciliation for outlook 2006
Reconciliation for outlook 2006 2005 reported figures reconciled for outlook 2006 € mn FY ’05 Reported operating revenues 11,936 Disposals1 -110 Operating revenues for 2006 outlook 11,826 Reported EBITDA2 4,724 Disposals1 -110 Restructuring charges 92 Release pension provisions -83 EBITDA2 for 2006
Slide 66: Telfort consolidation
Telfort consolidation € mn Telfort Consolidation Consolidation stand-alone effect effect Q4 ’05 KPN M NL KPN Group Operating revenues 145 126 93 Operating expenses 147 128 95 –Of which D&A 37 37 37 Operating result -2 -2 -2 EBITDA1 35 35 35 • 19 mn elimination (revenue and cost) with KPN Mobile NL
Slide 67: Book gains
Book gains € mn Q4 ’05 FY ’05 E-Plus 38 38 KPN Mobile (NL) 13 13 BASE - - Other 59 59 Total Mobile 110 110 Consumer - - Business - 4 Wholesale & Operations 5 13 Total Fixed 5 17 Other 3 24 KPN Group 118 151 • 110 mn book gain on acquisition of NTT DoCoMo’s 2.16% stake in KPN Mobile – E-Plus: 25 m
Slide 68: Impact MTA reduction
Impact MTA reduction1 € mn Q4 ’05 FY ’05 Net sales EBITDA2 Net sales EBITDA2 KPN Mobile (NL) -19 -10 -81 -45 E-Plus -25 -20 -97 -76 Total Mobile -44 -30 -178 -121 Consumer -7 - -27 - Business -8 - -29 - Wholesale & Operations -35 - -139 - Total Fixed -50 - -195 - Intercompany 27 - 111 - KPN Group -6
Slide 69: Restructuring charges
Restructuring charges € mn Q4 ’05 FY ’05 E-Plus - - KPN Mobile (NL) -1 -3 BASE - - Total Mobile -1 -3 Consumer - -1 Business 2 -2 Wholesale & Operations -29 -52 Total Fixed -27 -54 Other -6 -35 KPN Group -34 -92 69
Slide 70: Operating expenses
Operating expenses € mn Q4 ’05 Q4 ’04 % Salaries and social security contributions 284 423 -32.9% Cost of materials 281 252 11.5% Work contracted out and other expenses 1,054 999 5.5% Own work capitalized -35 -39 -10.3% Other 263 182 44.5% Depreciation1 483 465 3.9% Amortization1 141 97 45.4% Total
Slide 71: Analysis operating expenses
Analysis operating expenses Salaries & Cost of materials € mn Salaries Y-on-Y & Q-on-Q decrease 14.3% 14.2% • Lower FTE due to ongoing restructuring, 13.1% 12.8% predominantly at Fixed and Other 9.4% • In part offset by consolidation of Telfort and Kral retail outlets • Q4 ’05 contains 83 mn relea
Slide 72: Analysis operating expenses
Analysis operating expenses Work contracted out & other € mn Work contracted out Y-on-Y increase 33.8% 35.1% 34.5% 35.2% 34.8% • Higher Post Paid distribution fees at KPN Mobile NL due to strong gross adds and Telfort consolidation • Increased traffic volumes at Mobile • Higher customer acquisition
Slide 73: Analysis operating expenses
Analysis operating expenses Depreciation & Amortization € mn Depreciation Q-on-Q increase 16.6% • Depreciation is trending down due to lower 15.7% 16.1% 15.8% 15.9% Capex spending in prior years • Offset by Telfort consolidation 465 470 470 459 483 Q4 ’04 Q1 ’05 Q2 ’05 Q3 '05 Q4 '05 Depreciation % o
Slide 74: Personnel
Personnel Continuing decline, predominantly in the Netherlands •Personnel reduction nearly 1,500 FTE, of -1,458 which more than 1,300 FTE in the Netherlands 28,056 27,428 26,900 26,316 26,598 •Increase in Q4 ’05 due 6,791 6,660 1 to consolidation effects 6,704 6,752 6,684 – Telfort + 574 FTE – Kral3
Slide 75: Pensions
Pensions Significant decrease of shortfall, no immediate funding obligation • IFRS as of opening balance ’04, increase pension provision by 0.8 bn • Cost not equal to contribution paid, but based on actuarial method IFRS transition • Balance sheet contains balance of obligation and assets • Corrid
Slide 76: Tax
Tax € mn Q4 ’05 Q4 ’04 Payments (–) Payments (–) Fiscal unities P&L charge P&L charge Receipts (+) Receipts (+) Fixed division & Other activities -102 -5 -256 -87 German Mobile activities 9 - - - Dutch Mobile activities 40 - 270 106 •Mobile NV 30 - 270 106 •Telfort BV 10 - - - Belgian Mobile activit
Slide 77: Group cash flow Q4
Group cash flow Q4 € mn Q4 ’05 Q4 ’04 % •Substantial free cash flow4 of 0.5 bn Operating result 695 629 10.5% Depreciation and amortization1 624 562 11.0% Interest paid/received -258 -271 -4.8% •Cash flow from operations Tax paid/received -5 19 down 10% Book gains -118 -17 > 200% Change in provisi
Slide 78: Group cash flow FY '05
Group cash flow FY ’05 € mn FY ’05 FY ’04 % •Free cash flow of 2.4 bn, up 6.6% Operating result 2,348 2,645 -11.2% Depreciation and amortization1 2,376 2,190 8.5% Interest paid/received -484 -623 -22.3% •Cash flow from operations Tax paid/received -24 8 remains strong at 3.8 bn Book gains -151 -
Slide 79: Total cash flow
Total cash flow € mn Q4 ’05 Q4 ’04 FY ’05 FY ’04 Net cash flow from operating activities 969 1,081 3,833 3,957 1 Capex -469 -510 -1,394 -1,668 Acquisitions -1,021 -67 -1,031 -77 Disposals 16 79 208 83 Other -9 -1 11 88 Net cash flow from investing activities -1,483 - 499 -2,206 - 1,574 Dividends pai
Slide 80: Net cash flow from operating activities
Net cash flow from operating activities € mn Q4 ’05 Q4 ’04 FY ’05 FY ’04 Operating Result 695 629 2,348 2,645 Depreciation, amortization and impairments 624 562 2,376 2,190 Interest paid/received -258 -271 -484 -623 Income tax paid/received -5 19 -24 8 Book gains -118 -17 -151 -73 Change in provisio
Slide 81: Capex
Capex1 € mn Q4 ’05 Q4 ’04 % FY ’05 FY ’04 % Mobile 235 295 -20% 678 1,029 -34% % net sales Mobile 15.1% 21.9% 11.9% 19.8% E-Plus 138 239 -42% 401 780 -49% % net sales E-Plus 19.6% 35.0% 14.6% 30.4% KPN Mobile (NL) 49 48 2% 159 207 -23% % net sales KPN Mobile (NL) 6.8% 8.5% 6.5% 9.2% BASE 47 8 > 200%
Slide 82: Share buyback progression
Share buyback progression 1.7 bn returned to shareholders in 2005 •181 mn shares (7.8% of outstanding capital) cancelled on 6 December •Share repurchases from Dutch State – 60 mn shares repurchased for 508 mn, stake of Dutch State lowered to 8% – Subsequently, the Dutch State’s special share in
Slide 83: Debt summary
Debt summary € bn Q4 ’05 Q3 ’05 Subordinated convertible bonds - 0.32 Eurobonds 5.64 5.65 Global bonds 2.37 3.21 Other loans at Royal KPN 1.16 0.74 Consolidated debt 0.10 0.11 E-Plus 0.05 0.05 Other 0.05 0.06 Fair value financial instruments 0.70 0.87 Total debt 9.97 10.90 of which short-term 2.03 2
Slide 84: Debt portfolio
Debt portfolio Gross debt at Q4 ’05: 10.0 bn 1 3% 66% Other Financial 31% consolidated instruments debt 7% 1% Eurobonds Other 56% 12% EUR USD 2 GBP 2 34% Global bonds 24% 66% Fixed Floating (incl. swapped) 1 Book value of interest bearing financial liabilities plus the fair value of financial inst
Slide 85: Health Care
Attack Defend Exploit Health Care KPN improves efficiency through communication solutions KPN will implement a secure national Health Care Network based on • Ethernet VPN • SDSL • GSM / UMTS Service offering •Internet •Mail •Access to applications (examples) • Info systems for health care providers
Slide 86: Safety & Security
Attack Defend Exploit Safety & Security Our solutions make the Netherlands safer Strategic Goals Next Steps •Provide integrated Safety & Security •Focus on security solutions for objects solutions and environments – Partnerships based on portfolio and •Integrate new technology know how •Further deve
Slide 87: Narrowcasting
Attack Defend Exploit Narrowcasting Allowing business customers to extend their media strategy Target groups Retail Personal Broadcasting Media messaging strategy Mass media 1 to 1 media Public areas • TV • Personalized internet • Radio • E-mail • Outdoor • Direct marketing • Print Narrowcasting In
Slide 88: All IP will bring fiber to every street cabinet in the Netherlands
All IP will bring fiber to every street cabinet in the Netherlands over the next 5 years1 Gn1 Gn2 Lw2 Amr2 Amr Zl2 Zl Asd3 Asd2 Hgl Es Ah2 Gv3 Ut1 Ah Gv2 Ut2 Here is a copper line In the end we will Rt1 into the house. The dismantle 1,350 Rt2 Bd2 Ht family will get a new telephone Bd Ehv modem which
Slide 89: Operating review KPN Mobile the Netherlands excl. Telfort
Operating review KPN Mobile the Netherlands excl. Telfort1 Ending the year on a high note 21% growth of Post Paid customer base Revenue market share continuous to increase Customers (mn) (Post Paid %) 6.3 6.3 37.5% 37.9% 6.1 5.7 37.3% 5.7 36.8% 37.1% (37%) (38%) (36%) (44%) (46%) 92 Net adds 141 91
Slide 90: KPIs Fixed
KPIs Fixed Consumer Voice Q4 ’05 Q3 ’05 Q4 ’04 Market share Consumer ± 65% > 60% ± 60% - Local > 65% > 65% ± 65% - National ± 60% ± 60% > 55% - Fixed to Mobile ± 65% ± 65% ± 60% - International > 40% > 40% ± 40% Lines (x 1,000) 4,999 5,137 5,359 PSTN 4,518 4,638 4,836 ISDN 481 499 523 Minutes (bn) 2
Slide 91: KPIs Fixed
KPIs Fixed Consumer Internet Q4 ’05 Q3 ’05 Q4 ’04 KPN ISP customers (x 1,000) Planet Internet 804 761 757 Het Net 749 643 606 XS4ALL 312 290 264 Other1 112 133 - Total 1,977 1,827 1,627 Broadband market share –Retail (ISP) consumer broadband 36.1% 34.1% 29.7% –Consumer broadband connections 42.3% 42
Slide 92: KPIs Fixed
KPIs Fixed Business Q4 ’05 Q3 ’05 Q4 ’04 Market share Business > 55% > 55% ± 60% - Local > 60% > 60% ± 65% - National > 55% > 55% ± 60% - Fixed to Mobile > 55% > 55% ± 60% - International ± 45% ± 45% > 45% Lines (x 1,000) 1,908 1,930 1,988 PSTN 965 982 1,024 ISDN 943 948 964 Minutes (bn) 2.39 2.34 3
Slide 93: KPIs Fixed
KPIs Fixed Wholesale & Operations X 1,000 Q4 ’05 Q3 ’05 Q4 ’04 Local exchanges DSL enabled 1,361 1,361 1,361 ADSL coverage NL1 99% 99% 99% MDF access lines2 2,551 2,348 1,898 of which line sharing2,3 2,349 2,247 1,834 Minutes (bn) 10.42 9.86 10.62 –Terminating services 3.44 3.13 3.50 –Originating vo
Slide 94: KPIs Mobile
KPIs Mobile E-Plus Q4 ’05 Q3 ’05 Q4 ’04 Market share –Market share revenue1 12.4% 12.1% 12.1% –Market share base2 13.5% 13.2% 13.3% Customers (x 1,000) 10,748 10,124 9,511 Post Paid 5,574 5,258 4,724 Pre Paid 5,174 4,866 4,787 Service revenues 629 644 603 ARPU (€) 20 21 22 Post Paid 33 36 37 Pre Pai
Slide 95: KPIs Mobile
KPIs Mobile KPN Mobile (NL) Q4 ’05 Q3 ’05 Q4 ’04 Market share –Market share revenue1 46.3% 37.3% 36.8% –Market share base2 49.5% 37.0% 40.0% Customers (x 1,000) 8,072 5,701 6,076 Post Paid 3,260 2,524 2,186 Pre Paid 4,812 3,177 3,890 Service revenues 690 588 534 ARPU (€) 29 32 30 Post Paid 58 66 68
Slide 96: KPIs Mobile
KPIs Mobile BASE Q4 ’05 Q3 ’05 Q4 ’04 Market share –Market share revenue1 > 13% > 13% > 11% –Market share base2 > 19% 19% > 17% Customers (x 1,000) 2,001 1,929 1,647 Post Paid 429 372 323 Pre Paid 1,572 1,557 1,324 Service revenues 146 138 112 ARPU (€) 25 24 24 Post Paid 60 63 62 Pre Paid 16 15 14 N
Slide 97: Other in Q4
Other in Q4 € mn Operating revenues (–44%) € mn EBITDA 82 94 52 Q4 ’04 Q4 ’05 -28 Q4 ’04 Q4 ’05 •Deconsolidation of PanTel – Revenue 29 mn – EBITDA 7 mn •Letter of intend signed to sell Xantic, expected to close in Q1 • 83 mn release of pension provision, partly offset by 6 mn restructuring c