Royal KPN NV · EURONEXT:KPN
Royal KPN NV — KPN — Investor Day (June 2009)
109 slides from Royal KPN NV's investor day presentation, Jun 12, 2009
Slide 1: KPN Investor Day: Mobile International
KPN Investor Day: Mobile International Doing things differently Paris, 12 June 2009
Slide 2: Safe harbor
Safe harbor Non-GAAP measures and management estimates This presentation contains a number of non-GAAP figures, such as EBITDA and free cash flow. These non-GAAP figures should not be viewed as a substitute for KPN’s GAAP figures. KPN defines EBITDA as operating result before depreciation and impair
Slide 3: Programme
Programme Time Topic Speaker 09.00 - 09.10 Opening Vivienne van Asten 09.10 - 09.30 Introduction Ad Scheepbouwer Strategy Mobile International Stan Miller 09.30 - 10.00 Finance Eric Hageman 10.00 - 10.20 Regulation Marc van Asbroeck 10.20 - 10.45 KPN Group Belgium Libor Voncina, replaced by Erik Hov
Slide 4: Agenda
Agenda Introduction Ad Scheepbouwer, Chairman and CEO KPN Strategy Stan Miller, CEO KPN Mobile International Finance Eric Hageman, CFO KPN Mobile International Regulation Marc van Asbroeck, Chief Legal & Regulation KPN Group Belgium Erik Hoving, CTO KPN Mobile International E-Plus Thorsten Dirks, CE
Slide 5: Historic perspective: KPN end of 2001
Historic perspective: KPN end of 20011 The Netherlands main contributor, activities all over the world Revenues € 12.9 bn Gross debt € 23.0 bn KPN Group EBITDA € 3.4 bn FTE 45.7k Cash flow2 € 0.4 bn The Netherlands Mobile International & other Revenues € 10.6 bn Revenues € 2.3 bn EBITDA € 3.1 bn EBI
Slide 6: KPN strategies 2002-2010
KPN strategies 2002-2010 Clear strategies and execution have paved the way for growth opportunities ‘Back to growth’ Value 2008-2010 • The Netherlands reaching inflection ‘Attack-Defend- • Continued growth Mobile International Exploit’ • Additional growth from recent acquisitions 2005-2007 • Ahead o
Slide 7: 2002-2004: Turnaround strategy
2002-2004: Turnaround strategy Tough actions taken with focus on core activities • Focus on core markets – The Netherlands; market leader in Fixed and Mobile – Germany; # 3 mobile operator Focused – Belgium; # 3 mobile operator strategy • Disposal of non-core assets, total proceeds of ~€ 4.4 bn – Ir
Slide 8: 2005-2007: Attack-Defend-Exploit strategy
2005-2007: Attack-Defend-Exploit strategy Transforming our business model The Netherlands Mobile International Attack-Defend-Exploit strategy Challenger Strategy • Proactive migration of traditional services to IP-based services, e.g. Customer • Handpick segments with tailored Attack VoIP targeting
Slide 9: 2008-2010: Back-to-growth strategy
2008-2010: Back-to-growth strategy Reaching inflection and focus on profitable growth The Netherlands Mobile International • Ramping up new services • Continue to outperform competition – Accelerate recent growth initiatives Germany – Selectively add new services • Solid margins through strong cost
Slide 10: KPN strategies focus on value creation
KPN strategies focus on value creation KPN clearly outperforming the Telco sector KPN share price outperformance(1) € ‘Back to growth’ 14 2008-2010 ‘Attack-Defend-Exploit’ 2005-2007 12 10 ‘Turnaround’ +284% 2002-2004 8 6 4 2 -24% +193% +47% +17% 0 Sep 2001 2003 2004 2005 2006 2007 2008 Jun 2009 KPN
Slide 11: KPN today
KPN today1 Market leader in the Netherlands, mobile Challenger abroad Revenues € 14.6 bn Gross debt € 13.6 bn KPN Group EBITDA € 5.1 bn FTE 35.6k Cash flow2 € 3.1 bn The Netherlands Mobile International Revenues € 10.5 bn +€ 0.1 bn Revenues € 4.1 bn +€ 1.8 bn EBITDA € 3.6 bn +€ 0.5 bn EBITDA € 1.5 b
Slide 12: Agenda
Agenda Introduction Ad Scheepbouwer, Chairman and CEO KPN Strategy Stan Miller, CEO KPN Mobile International Finance Eric Hageman, CFO KPN Mobile International Regulation Marc van Asbroeck, Chief Legal & Regulation KPN Group Belgium Erik Hoving, CTO KPN Mobile International E-Plus Thorsten Dirks, CE
Slide 13: Key messages
Key messages • We have delivered on our promises • Challenger strategy works • Confident that our strategy will continue to work in the future • Management team with strong and proven track record in managing challenges • Continue to deliver shareholder value Challenger strategy: delivering profitab
Slide 14: Mobile International board
Mobile International board Experienced team responsible for allocation of resources KPN Mobile International CEO KPN Mobile International Stan Miller CFO Eric Hageman E-Plus International Wholesale KPN Mobile International CEO CEO CHRO Thorsten Dirks Eric Hageman Bruce Humphreys KPN Group Belgium Ne
Slide 15: Strategic cornerstones
Strategic cornerstones Committed to four key pillars that deliver profitable growth Position around customers Create customer pull • Use choices about what segments to • Design segment-specific, highly target to guide offers and differentiated offers that will be organization irresistible for finely
Slide 16: Strategy introduced in 2005
Strategy introduced in 2005 New strategy turns weaknesses into strengths Str ate gy 200 upda One market 5 te Network Back Customer ownership From office, billing service & Marketing Sales Push and and IT support operation Market segments Network Sales Pull Back Customer To ownership office, billing
Slide 17: Belgian mobile market situation in 2003
Belgian mobile market situation in 2003 • Proximus and Mobistar controlled 91% of mobile market revenues Market structure • Both had roughly three times KPN Group Belgium’s EBITDA margin • Very low usage, fourth lowest of all EU-14 countries Market • 35% of the market is Post Paid characteristics •
Slide 18: German mobile market situation in 2005
German mobile market situation in 2005 Str ate gy 200 upda 5 te • T-Mobile and Vodafone controlled 75% of mobile market revenues Market structure • Both had roughly two times E-Plus’ EBITDA margin • Very low usage, second lowest of all EU-25 countries Market • 50% of the market was Post Paid charact
Slide 19: Results at E-Plus
Results at E-Plus We have delivered on our promises Key examples Results so far • Introduced SIM-only • 11.9 mn ‘new brands’ customers Customer targeting • Online community - no frills offers • Leading position in segments • Fixed-Mobile substitution through • Post Paid MoU from 135 to 281 Propositi
Slide 20: Mobile market development
Mobile market development ‘Challengers’ will continue to take market share as FMS continues Mobile premiums decrease which increase New players intensify competition mobile share of voice 100% High Traditional Mobile premium1 mobile network Germany ’05/’08 Finland Market share operators Spain ’05/’0
Slide 21: Doing things differently
Doing things differently Competitors are moving to converged services; we remain focused on mobile Fixed-Mobile strategies Converged services “In between” Substitution challengers • All-in-one, quadruple play • Ease-of-use, attractive prices • Retention, access protection • Customer share-of-wallet
Slide 22: Challenger strategy
Challenger strategy Tactics for delivering profitable growth Sample of some of the tactics A • Mobile share of voice still low, Fixed-Mobile significant untapped potential Position Create Substitution • Voice remains dominant over around customer pull data for the next years customers B • Leverage p
Slide 23: Fixed-Mobile Substitution
A Fixed-Mobile Substitution Continued growth potential from FMS Mobile share of voice traffic Ø 54%1 42% 38% 44% • Significant changes 2005-2008 54% 57% 52% − Avg. mobile voice share +16% to 54% 26% 15% − Price ratio Mobile/Fixed down 25% 2008 2005 Mobile ARPM & MTA • Significant untapped FMS potent
Slide 24: Wholesale
B Wholesale Leverage proven business models into new markets & move up the value chain Wholesale growth matrix Leading Markets I Open business Market leader Complementary model II Evolution no frills / price fixed-net / utilities value / applications •I Expand proven business models to new markets –
Slide 25: Regionalization
C Regionalization Expand voice regions and leverage leading voice position into data Incumbent Challenger approach Effective deployment of resources through local scale • National focus I Below fair market share Voice Leading market share • Leading technology (push) Low Low market market Fix Fix Fix
Slide 26: Delivering returns on technology investments
D Delivering returns on technology investments Technology that fits customer requirements and delivers profitable growth Future Uncertainty Strategy Illust r ative Market size 4G • Deliver returns on technology investments € – Utilize technology to drive profitable growth 3G ? and customer satisfact
Slide 27: Enhanced segmentation
Enhanced segmentation Creeping up the value chain by selectively targeting SME / SoHo Addressable market Segmentation • Mobile International currently playing for value 5 Illu for money segment of the market str ati 4 ve • Selectively expanding addressable market through focused targeting 3 Customer
Slide 28: Portfolio
Portfolio Selectively exploring value enhancing opportunities Achievements Going forward • Distribution strengthened Core markets – E.g. SMS Michel, Allo Telecom • Exploring selective value ‘Fill-in’ • MVNO with segment focus enhancing opportunities acquisitions – E.g. Ortel, blau • Management focus
Slide 29: Horizontalization
Horizontalization Leverage successful brands, wholesale and infrastructure across markets Horizontalization • International brands rolled-out across footprint based on proven business model • Wholesale as vital intermediate to align international market trends and needs with infrastructure deploymen
Slide 30: Our achievements
Our achievements1 2005 2008 Change Service revenues € 3.2 bn € 4.1 bn + 28% EBITDA € 0.9 bn € 1.6 bn + 78% EBITDA margin 27% 36% + 9%-pts Cash flow2 € 420 mn € 942 mn +124% Customers 13.9 mn 23.4 mn +68% 1 Based on old management structure, including Wholesale NL and Sympac for ’07-’08 2 Cash Flow d
Slide 31: Concluding remarks
Concluding remarks • We have delivered on our promises • Challenger strategy works • Confident that our strategy will continue to work in the future • Strong and proven track record in managing challenges • Continue to deliver shareholder value Challenger strategy: delivering profitable growth 31
Slide 32: Agenda
Agenda Introduction Ad Scheepbouwer, Chairman and CEO KPN Strategy Stan Miller, CEO KPN Mobile International Finance Eric Hageman, CFO KPN Mobile International Regulation Marc van Asbroeck, Chief Legal & Regulation KPN Group Belgium Erik Hoving, CTO KPN Mobile International E-Plus Thorsten Dirks, CE
Slide 33: Key FY 2008 financials per country
Mobile International Key FY 2008 financials per country1 Germany Belgium Rest of World Revenue € 3.2 bn Revenue € 0.8 bn Revenue € 73 mn EBITDA € 1.2 bn EBITDA € 0.3 bn EBITDA -/-€ 23 mn EBITDA margin 38.7% EBITDA margin 32.5% EBITDA margin -/-31.5% Market share2 15.4% Market share2 >16% Leading MVN
Slide 34: Business turnaround
Business turnaround Significant value creation, amongst most profitable # 3 operators BASE E-Plus • Market underperformance • Market underperformance • Liability instead of asset • Value of < € 5 bn 2002 • EBITDA: € 10 mn 2005 • EBITDA: € 673 mn • EBITDA margin: 3.2% • EBITDA margin: 23.8% • Cash fl
Slide 35: Financial performance
Financial performance1 Continued profitable growth with strong cash flow through Challenger model 13% 5% 9% 4,140 9% • Continued market outperformance revenues 3,786 Service 3,609 3,199 – Strong service revenue growth at 9% CAGR 2005 2006 2007 2008 35% 14% 10% • Focus on profitable growth 33% 37% 36
Slide 36: Value creation
Value creation Challenger model with clear focus on value creation Share price evolution1 2003 BASE • Attractive customer propositions € • Established multi-brand strategy and MVNOs 14 • Distribution from push to pull • Simplified operations, outsourced where possible 12 2005 E-Plus 10 • Differentia
Slide 37: Market perspective
Market perspective Focus on profitable growth, balancing risk vs. reward through targeted investment Germany Principles 9.6% 4.4% 6.7% Service revenue • Managing risk versus reward growth (y-on-y) ~ -/- 1% ~ -/- 4% ~0% – Continued service revenue share gains – Strong focus on profitable growth – Com
Slide 38: Macro-economic environment
Macro-economic environment Various initiatives to proactively address changing economic environment GDP % growth Limited impact 4% 2% • Economic impact mainly on corporate market 0% – Little exposure for Int’l, no corporate presence -2% • Early signs of downturn in consumer market -4% – Less roaming
Slide 39: Priorities
Priorities Effective execution to manage risks and maximize opportunities • Manage risk versus reward Principles – Continued service revenue share gains, with strong focus on profitability & cash flow – Targeted investment based on proven opportunity • Optimizing international portfolio, focus on co
Slide 40: Concluding remarks
Concluding remarks • Leading Challenger & amongst most profitable # 3 operators • Significant value created through Challenger model • Committed to continued outperformance through profitable growth • Proactively addressing / exploiting changing economic environment • Effective execution to manage r
Slide 41: Agenda
Agenda Introduction Ad Scheepbouwer, Chairman and CEO KPN Strategy Stan Miller, CEO KPN Mobile International Finance Eric Hageman, CFO KPN Mobile International Regulation Marc van Asbroeck, Chief Legal & Regulation KPN Group Belgium Erik Hoving, CTO KPN Mobile International E-Plus Thorsten Dirks, CE
Slide 42: Key messages
Key messages • We use regulation competitively to improve our strategic position • We strive for change because we have the flexibility and capability to use it for our good • Regulation determines or restricts the telecoms sector, but as a Challenger we have used it to our benefit Challenger strate
Slide 43: Regulatory playing field in 2003
Regulatory playing field in 2003 European Challengers disadvantaged on all issues Issues 2003 • Structural imbalance between first entrants and -/- later entrants -/- Regulatory playing field • Political unwillingness to create regulatory level -/- -/- playing field • Challengers have no weight in p
Slide 44: Market dynamics before Challenger strategy
Market dynamics before Challenger strategy Failed implementation of the regulatory framework reinforced status quo Market imbalance No market dynamics Germany Market revenue share 100% 91% 90% 88% 88% 88% • Special & exclusive rights 80% enjoyed by first entrants 60% 40% 9% 10% 12% 12% 12% 20% • Dis
Slide 45: Changing the status quo
Changing the status quo Challengers across Europe have increased lobbying power by bundling forces Increase lobbying power • Mobile Challengers Group representing: – 80+ million customers Create awareness of imbalance – 9 operators – 15 countries • Lobbying via ECTA1 • Create awareness that above co
Slide 46: MTA discussion
MTA discussion Challengers demand asymmetry as logical outcome of scale differences • Symmetry at high level as objective Issue • Challengers not heard • German self-regulation is effectively a pseudo cartel • Recognition that above cost MTAs are barriers for Challengers • Germany: some asymmetry ha
Slide 47: MTA development & proposal
MTA development & proposal Enforce immediate further decrease of first entrants’ MTA Proposal Historic developments & going forward € T-Mobile & Vodafone O2 & E-Plus • Enforce national 0.20 Germany asymmetric decrease 0.15 during next years (via courts, incl. EU) 0.10 0.05 • Enforce Fixed-to-Mobile
Slide 48: Spectrum
Spectrum Market imbalance from discrimination being repaired Issue • 900-1800 MHz discrimination between incumbents and Challengers • Review of the GSM Directive, managed to get resolution on competitive aspects of EU frequency refarming (Reding) Germany: Belgium: • 900 MHz frequencies received in 2
Slide 49: Spectrum auctions
Spectrum auctions Ensure equal level playing field for all operators • More than 350 MHz spectrum available (800 & 1800 MHz, 2.1 & 2.6 GHz) Germany • Consultation until 17 July 2009, final decision on process in October 2009; auction most likely to start in December • Draft Royal Decree: – Provides
Slide 50: Roaming
Roaming Different approach from incumbent operators • Roaming alliances between large incumbents unfavourable for Challengers • KPN group companies squeezed in (corporate) retail market due to high roaming wholesale rates • KPN not in favour of retail regulation • Ongoing lobby on the wholesale issu
Slide 51: Legal cases
Legal cases Pending cases in support for Challengers • € 1 bn claim for abuse of on-net Proximus • Provisional judgment (on-net & price squeeze) on-net Support for our • Experts appointed – report expected September 2009 overall • Price squeeze in corporate market (retail vs. MTA) positioning as Pro
Slide 52: Half-time score regulatory playing field in 2009
Half-time score regulatory playing field in 2009 European Challengers have achieved movement in the regulatory field Issues 2003 • Structural imbalance between first entrants and + + later entrants Regulatory playing • Political unwillingness to create regulatory level ++ + field playing field • Cha
Slide 53: Agenda
Agenda Introduction Ad Scheepbouwer, Chairman and CEO KPN Strategy Stan Miller, CEO KPN Mobile International Finance Eric Hageman, CFO KPN Mobile International Regulation Marc van Asbroeck, Chief Legal & Regulation KPN Group Belgium Erik Hoving, CTO KPN Mobile International E-Plus Thorsten Dirks, CE
Slide 54: Introduction
Introduction • KPN Group Belgium is a success story • Delivering profitable growth ahead of the market since 2003 by doing things differently • Values underpinning Challenger strategy are transparency, simplicity and honesty • Confident in continued outperformance whilst delivering profitable growth
Slide 55: Belgium
Belgium Three distinct regions requiring a different approach Demographics of Belgium • Relatively small country with relatively small Telecom players 6.2 mn 1.0 mn • Three distinct cultures and languages 3.6 mn • Relatively small population of just under 11 mn • Mountainous area in Wallonia challen
Slide 56: Historic market trends in Belgium
Historic market trends in Belgium Revenues stabilizing, continued growth in subscribers and minutes € bn Mobile Service revenues MoU Belgium +13% +7% +1% -4% -2% +3% +1% +1% +1% +2% 3.99 4.04 3.89 3.83 147 151 153 155 157 160 3.32 3.74 2003 2004 2005 2006 2007 2008 2003 2004 2005 2006 2007 2008 mn S
Slide 57: Performance KPN Group Belgium
Performance KPN Group Belgium Continued market outperformance on all key metrics Service revenue growth (y-on-y) mn Customer growth 3.4 33.7% 29.7% 2.9 2.4 2.0 11.0% 12.6% 1.6 6.5% 5% 4.4% 1.3 6% 7% -2.3% 1% -2% -1% -4% 2003 2004 2005 2006 2007 2008 Q1 '09 2003 2004 2005 2006 2007 2008 KPN Group Bel
Slide 58: KPN Group Belgium going forward
KPN Group Belgium going forward Confident in continued outperformance in Belgium Market shares 2003 Market shares 2008 +9% +7% +11% 9% 3% 15% 16% 14% 24% 27% 31% 32% 35% 35% 31% 70% 60% 53% 49% 51% 45% Customers Service EBITDA Customers Service EBITDA revenues revenues Targeting 20-25% service reven
Slide 59: Challenger strategy
Challenger strategy Tactics for delivering profitable growth Sample of some of the tactics A • Mobile share of voice on EU Fixed-Mobile average, further upside Position Create Substitution • Voice remains dominant over around customer pull data for the next years customers B • Leverage proven busine
Slide 60: Building BASE brand by transparent, simple and honest positioning
A Building BASE brand by transparent, simple and honest positioning • BASE brand launched in 2002 Used mobile • Maximizing brand awareness at lowest video booth to marketing costs film ‘real’ people and • Re-launch in April ’09 going back to select new values and with simplified tariff plans BASE fa
Slide 61: Distribution
A Distribution Strong position in distribution via own channels in addition to wholesale partners Channels Comments • Number of shops up from 44 in 2005 to 54 • Extending BASE experience Shops shops in Q1 ’09 on AAA locations • Focus on up-selling and servicing • ~80% of shops in Wallonia • Acquisit
Slide 62: Segmentation
B Segmentation Targeting untapped segments using multiple brands and partnerships Brands Status Going forward Flagship • Drive volume, focus on • Re-launch of BASE tariff customer insights Own plans in April ’09 brands • Refresh brand values of • Own customers, own No Frills transparency, simplicity
Slide 63: Partnerships examples
B Partnerships examples Targeting specific groups with brands familiar to the customer • Partnership with RTL Belgium since March Call for free ’09, brand launch expected in mid 2009 during ‘party hours’ at weekends • Strong partner in targeting Wallonia with trusted brand and competitive offer • Pa
Slide 64: Regionalization
C Regionalization Smart investments in marketing, sales and network Position KPN Group Belgium Strategy • Analyze distribution of market shares region 6.2 mn 1.0 mn by region • Apply differentiated strategy depending on 3.6 mn growth potential Actions • Solid position in Flanders, with fair • Local
Slide 65: Data development in Belgium
D Data development in Belgium Delay in non-SMS data uptake and in 3G handset adaptation compared to EU Non-SMS data as % of total market size Handset development < 1% 6% GSM only 100 GPRS 99% 94% 75 % handsets (installed base) EDGE 2005 2008 UMTS 50 • Non-SMS data in Belgium lagging behind due to ab
Slide 66: Mobile data applications
D Mobile data applications EDGE currently sufficient for majority of applications used by consumers Bandwidth needed for good mobile user experiences Comments (kB) • Email, instant messaging, EDGE UMTS HSPA LTE social networking account for 40 - 60% of data usage E-mail (150KB attachment) 64 E-mail
Slide 67: Selective roll-out of data network
D Selective roll-out of data network Network roll-out based on those services that consumers want Strategy Technology Approach • Smart follower in wireless data – KPN Group Belgium targeting consumer and SME / • National GPRS / EDGE SoHo segments with value offers coverage in place – Combination of
Slide 68: KPN Belgium
KPN Belgium Continue up-selling of products while enhancing B2B position • Strengthen distribution for both consumer and SME / SoHo markets in Belgium Rationale • Cross- and up-selling opportunities through complementary distribution channels • Valuable network asset being top 3 most dense fiber net
Slide 69: Concluding remarks
Concluding remarks • Delivering profitable growth ahead of the market since 2003 • Continue to focus BASE brand on transparency, simplicity and honesty • Targeting untapped segments using multiple brands and wholesale partnerships • Strong position in distribution via own channels in addition to who
Slide 70: Agenda
Agenda Introduction Ad Scheepbouwer, Chairman and CEO KPN Strategy Stan Miller, CEO KPN Mobile International Finance Eric Hageman, CFO KPN Mobile International Regulation Marc van Asbroeck, Chief Legal & Regulation KPN Group Belgium Erik Hoving, CTO KPN Mobile International E-Plus Thorsten Dirks, CE
Slide 71: Key messages
Key messages • Delivering profitable growth ahead of the market since 2005 • Further upside potential for proven Challenger strategy • Strong position in both wholesale and retail segments • Leveraging potential of regional approach • Best value-for-money proposition for mobile data Challenger strat
Slide 72: Historic market trends in Germany
Historic market trends in Germany Market growth almost flat, continued growth in subscribers € bn Revenues mobile bn Total minutes telecommunications services 7% 11% -2% -2% 33% flat 84 90 23.1 22.6 22.1 22.1 76 57 1 1 2006 2007 2008 2009 2006 2007 2008 2009 mn Subscribers • Continued growth in numb
Slide 73: Performance E-Plus
Performance E-Plus Continued market outperformance on all key metrics Service revenue growth mn Customer base 9.6% Average 17.8 18.0 18% growth/yr 6.7% 14.8 4.3% 4.4% 4.1% 12.7 10.7 4% 0% 0% -1% -4% 2005 2006 2007 2008 Q1 '09 2005 2006 2007 2008 Q1 '09 E-Plus German market1 € mn EBITDA and margin €
Slide 74: E-Plus going forward
E-Plus going forward Confident in continued outperformance in Germany Market shares 2005 Market shares 2008 12% 8% 13% 9% 14% 14% 8% 15% 14% 12% 17% 15% 44% 37% 38% 39% 34% 35% 37% 37% 41% 36% 36% 35% Customers Service EBITDA Customers Service EBITDA revenues revenues Targeting 20-25% service revenu
Slide 75: Market trends going forward
Market trends going forward Growth in value-for-money segment and data, impact from regulation Value-for-money segment Data as % of total market size (as % of total market size) (incl. SMS) 18% 24% > 30% ~35% 76% ~65% 2008 2012 2008 2012 Voice trends Segmentation MTA Roaming MoU Number of Segments /
Slide 76: Challenger strategy
Challenger strategy Tactics for delivering profitable growth Sample of some of the tactics A • Mobile share of voice still low, Fixed-Mobile significant untapped potential Position Create Substitution • Voice remains dominant over around customer pull data for the next years customers B • Leverage p
Slide 77: Fixed-Mobile substitution
A Fixed-Mobile substitution Usage above market average, driven by Fixed-Mobile substitution min Minutes of Use • Usage above market average Post Paid 252 281 281 • Flat rate offers, no-frills offers and on- 192 135 net offers 2005 2006 2007 2008 Q1 '09 min Minutes of Use • Usage growth driven by att
Slide 78: Partners: new brands
A New brands Over 60% of total customer base and high profitability ‘New’ brands on E-Plus network X 1,000 Customers on ‘new’ brands 64% Own brands 51% 11,340 39% 7,575 10% 4,345 Partners 1,079 YE '05 YE '06 YE '07 YE '08 Customers on new brands % of total customer base Attractive propositions with
Slide 79: Leading flat rate brand in Germany
A Leading flat rate brand in Germany • Germany’s first mobile flat rate offer, introduced in 2005 • Still the only “flat-rate only” brand in the market • Customer retention program “Freundeskreis” – Community build-up via own website, special events and offers • Point-of-sale experience • Welcome pa
Slide 80: Germany's first online no-frills brand
A Germany’s first online no-frills brand • Germany’s first online-only no-frills brand – Online-only and Pre Paid only • Best-in-class voice and data price in discount segment • Community build-up via online platform – “Godfather” customer service idea – Viral campaign – Blog and forum communication
Slide 81: Customer satisfaction
A Customer satisfaction Customer satisfaction substantially above market average Customer satisfaction • Net Promotor Score (NPS) for (Net promotor score, NPS) E-Plus brands substantially higher than competitor brands Best – Customers that would Competitor recommend product to others 60 – Relatively
Slide 82: Distribution
A Distribution Strong position in distribution through own channels and partners • Number of outlets increased from less than 200 in 2005 to over 700 by Q1 ’09 Own shops – Supported by acquisition SMS Michel in Q1 ’08 (~200 shops) and partner – Increased visibility on high streets shops – Improved s
Slide 83: Wholesale
B Wholesale E-Plus firmly established as market leader in wholesale segment Market shares in wholesale1 • Wholesale segment rapidly 100% growing in Germany – ~2 mn customers in 2006 – >15 mn customers now • E-Plus strongly established as market leader in wholesale segment – >50% market share – Marke
Slide 84: Segmentation going forward
B Segmentation going forward Introducing new propositions and starting new partnerships • Expanding into SME / SoHo segment • Introduction of Yes Telecom in Germany SME / SoHo – Value-for-money mobile services for SME / SoHo – Already successful in the Netherlands • Introduction of data flat rates i
Slide 85: Regionalization
C Regionalization Smart investments in marketing, sales and network Strong position E-Plus • Analyze distribution of market shares city by city Approach • Apply differentiated strategy depending on growth potential to create regional scale Hamburg Berlin • Limited investments, aligned with Above fai
Slide 86: Wireless data
D Wireless data Consumers mainly use ‘light’ data and prefer flat rates Drivers behind data usage (%) • Consumers mainly use ‘light’ data applications on smartphones Communication 55% Information 43% • Consumers have a preference for flat fees Transactions 36% Social networks 24% • Data tariffs E-Pl
Slide 87: Wireless data (cont'd)
D Wireless data (cont’d) Consumers satisfied with services, data usage expected to take off Satisfaction bandwidths for handset use* • Bandwidths offered sufficient for current ‘light’ data usage on handsets Satisfied Slightly • Different requirements and usage disappointed 62% patterns for corporat
Slide 88: Data network roll-out
D Data network roll-out E-Plus network roll-out based on those services that consumers want Smart follower strategy Technology Approach • Smart follower in wireless data – Investing in data networks now GPRS • National coverage in place demand is taking off – Benefiting from increased capabilities f
Slide 89: Concluding remarks
Concluding remarks • Delivering profitable growth ahead of the market since 2005 • Further upside potential for proven Challenger strategy • Strong position in both wholesale and retail segments • Leveraging potential of regional approach • Best value-for-money proposition for mobile data • Confiden
Slide 90: Agenda
Agenda Introduction Ad Scheepbouwer, Chairman and CEO KPN Strategy Stan Miller, CEO KPN Mobile International Finance Eric Hageman, CFO KPN Mobile International Regulation Marc van Asbroeck, Chief Legal & Regulation KPN Group Belgium Erik Hoving, CTO KPN Mobile International E-Plus Thorsten Dirks, CE
Slide 91: Overview
Overview Organization built across markets, leverage international partners and own brands Belgium Germany Spain France Netherlands Own brands Own brands Own brands Own brands Own brands Wholesale Wholesale Wholesale Wholesale Wholesale Network Network Network • Launched 2003 • Launched 2005 • Launc
Slide 92: Mobile wholesale strategy
Mobile wholesale strategy Wholesale as key pillar of Int’l Challenger strategy, strong wholesale capabilities d u n ce Challenger strategy Wholesale capabilities Anno t ’06 Sep Lean • Minimize investment through • Build leanest and most profitable Financial operating Opex model, partnership, operato
Slide 93: Redesigned business model
Redesigned business model Flexible business model, successfully leveraged to new markets Do it in-house Partner Existing markets Own brands Leverage retail processes Wholesale partners Sales Network Back office, Customer service ownership Marketing Sales billing & IT & support & operation Sales Sale
Slide 94: Achievements
Achievements Leading wholesaler in existing markets with compelling wholesale economics Achievements Compelling economics • Market leader 1 Strong subscriber growth due to high Germany • >50% MVNO market share1 awareness • >20 partner brands – Market segmentation – Multi-brands • Market leader – Mul
Slide 95: MVNO market
MVNO market1 Cultural and retail major segments, competitors’ share underrepresented MVNO market per segments 2008 Comments Telco Cultural Retail Web Youth • E-Plus main MVNO across all segments • Simple Retail & No-Frills Web offers represent over 65% of Germany market >50% Market share E-Plus Othe
Slide 96: International expansion
International expansion Selective expansion to European markets through low cost business model d u n ce Expansion rationale European scope Anno t ’06 Sep • Market size: Large markets with major value • Challenger strategy is very successful in home creation potential markets – Belgium, Germany and
Slide 97: Spain: Market overview
Spain: Market overview Attractive MVNO landscape, showing clear upside potential € mn 152 • MVNO revenue market MVNO share only 1% of total Market > 25 players share MNO 15,085 • Indicating growth potential, e.g. NL ~10%, Revenue Germany ~5% Only 4 players € cents Spread Total minutes MoU 15.8 213 •
Slide 98: Spain: Organizational set-up
Spain: Organizational set-up Lean & mean organization, large scalability at attractive economics Key activities ~10 FTE • Management Management • G&A (Finance, Legal, HR) España ~5 FTE ~5 FTE • Marketing & Sales Partners Own brands Operating • Web portal & community across • Brand account mgmt borde
Slide 99: Spain: Achievements
Spain: Achievements Firmly established as leading MVNO after 1 year with >200k customers Status > 1 year Going forward Own brands • Launched Simyo & blau • Drive volume, expand offer • High brand awareness • Exploit economic environment • Launched ~10 brands Partner brands • Target new (internationa
Slide 100: Spain: MVNO & platform cost
Spain: MVNO & platform cost Strong reductions in costs over time, downward trend expected to continue e ativ Host cost (Orange) ex Platform cost per customer1 str I nd I ll u € per minute/ SMS Opex per customer 100% -/- ~ 20% Voice 67% -/- ~ 80% SMS -/- ~ 15% 33% 200 Time # customers (’000) Strong r
Slide 101: France: Market overview
France: Market overview Attractive MVNO landscape, showing clear upside potential ’000 • MVNO revenue market 2,943 share ~2% of total > 25 players Market MVNO • Indicating growth share MNO potential, e.g. NL ~10%, 54,448 Germany ~5% revenue Subscribers Only 3 players share € cents Spread Total minut
Slide 102: Simyo
Simyo Leveraging our successful brand across markets Launch Launch Launch mid 2005 Jan 2008 Jan 2009 Simyo Germany Simyo Spain Simyo France • Strong DNA, implementation of Simyo in new markets according to this DNA • Unique offer with simple & transparent cost structure and high quality & reliabilit
Slide 103: France: Achievements
France: Achievements Simyo successfully launched, building momentum in the French MVNO market Achievements Going forward Own brands Organizational • Efficient platform implementation, • Launch other own brands, in only 150 days founders involvement • Minimal Capex required due to leveraging Spanish
Slide 104: Going forward
Going forward Continued profitable growth with strong cash flow Going forward Objectives • Continued growth from leading partners • Focus on profitable growth • Target new segments through through continued FMS and new Existing partnerships business models markets • Moving up the MVNO value chain to
Slide 105: Concluding remarks
Concluding remarks • Wholesale as key pillar of Challenger strategy, strong wholesale capabilities • Organization built across markets, leverage international partners & own brands • Unique business model through redesign of value chain • Leading wholesaler in existing markets with compelling wholes
Slide 106: Agenda
Agenda Introduction Ad Scheepbouwer, Chairman and CEO KPN Strategy Stan Miller, CEO KPN Mobile International Finance Eric Hageman, CFO KPN Mobile International Regulation Marc van Asbroeck, Chief Legal & Regulation KPN Group Belgium Erik Hoving, CTO KPN Mobile International E-Plus Thorsten Dirks, CE
Slide 107: Concluding remarks
Concluding remarks • Challenger strategy delivered on its promises and achieved continued outperformance • Significant potential from Challenger strategy still to be realized using our segmented, multi-branding approach • Proven ability to think and do things differently will enable us to continue t
Slide 108: Q&A
Q&A
Slide 109: KPN Investor Relations
For further information please contact KPN Investor Relations Tel: +31 70 44 60986 Fax: +31 70 44 60593 ir@kpn.com www.kpn.com