Royal Kpn Nv · EURONEXT:KPN
Royal Kpn Nv — KPN — Investor Day (November 2023)
72 slides from Royal Kpn Nv's investor day presentation, Nov 7, 2023
Slide 1: Capital Markets Day 2023
7 November kpn. The network of the Netherlands 1 Presentatie titel Vertrouwelijk
Slide 2: Agenda
Agenda 1 Reflect: KPN today 2 Orientate: Market landscape and dynamics 3 Envision: Strategy 2024-2027 – Connect, Activate & Grow 4 Outlook: Financial ambitions 2027 5 Q&A Vertrouwelijk
Slide 3: Our purpose: connect the Netherlands to a sustainable future
Our purpose: we go all out to connect the Netherlands to a sustainable future We… Connect Households | Business | Society >15m Customers served1 Activate Customers | Workforce | Investments >3.5bn Invested2 Grow Community | Innovation | Returns #1 ESG …the Netherlands 3 CMD 2023 1. All broadband lin
Slide 4: Reflect: KPN today
Reflect: KPN today Presentatie titel 4 Vertrouwelijk
Slide 5: Delivered on the ambitions of our Accelerate to Grow strategy
Delivered on the ambitions of our Accelerate to Grow strategy Three strategic pillars… …supported our ambitions Leverage & expand superior network 1 • Covering the Netherlands through fiber • Low latency services via 5G and edge computing Connect the Netherlands to a sustainable future • Leading the
Slide 6: Pillar 1: leverage & expand superior network
Pillar 1: leverage & expand superior network 5G 55% fiber Fully modernized Recognition for Security 1st Regulatory clarity household 5G-ready network best networks mindset fiber wholesale coverage (Q3 ’23) & services until 2030 6 CMD 2023
Slide 7: Pillar 2: grow & strengthen customer footprint
Pillar 2: grow & strengthen customer footprint Returned to service revenue growth Industry-leading NPS1 Base growth across all segments Group service revenue growth (y-on-y) NPS per segment Broadband net adds (k) +12 +13 55 +2.6% +1.5% 27 24 B2C 16 4 1 Postpaid net adds (k) -1.1% +6 179 195 130 115
Slide 8: Pillar 3: simplify & streamline operating model
Pillar 3: simplify & streamline operating model Increased productivity1 Digitalization efforts Innovative Started switch off copper Cloudification & high engagement aggregated services network 82% >50% Next-gen TV ~3m households >400 out of ~1,600 Employee MijnKPN app shift to Android decommissioned
Slide 9: Accelerate to Grow: long-term value creation model is working
Accelerate to Grow: long-term value creation model is working Growing EBITDA AL at healthy margin Solid FCF per share growth underpinned by share buybacks (€ m) (€ ct) 44.0% 44.7% 45.2% ~45% CAGR: +7% CAGR: +1.3% 2,320 2,347 2,404 2,410 0.18 0.19 0.21 0.22 2020 2021 2022 2023 outlook 2020 2021 2022
Slide 10: Orientate: Market landscape and dynamics
Orientate: Market landscape and dynamics 4 10 Presentatie CMD 2023 titel Vertrouwelijk
Slide 11: A snapshot of the Netherlands: a dynamic digital economy
A snapshot of the Netherlands: a dynamic digital economy #3 In European Digital High GDP growth ~4% Economy and Society Index 2022 ~17.9m people with solid population growth ~1% ~95 % Of population uses the internet on a daily basis ~95 % Of the population has Low unemployment rate ~4% access to int
Slide 12: Key dynamics shaping Telco ecosystem
Key dynamics shaping Telco ecosystem Customer needs Volatile external environment ~52% average 17 % y-on-y increase >2x connected Macro- Inflation and Cost of adult's time of OTT services devices economic energy prices Capital spent digitally1 in traffic mix2 by 20273 instability (margin squeeze) Co
Slide 13: KPN: ready for traffic growth from technology innovations
KPN: ready for traffic growth from technology innovations Leading fiber footprint & best mobile network Ready to support growth from technology innovations 55% 5G Fiber 5G Fiber footprint Best mobile network Network platforms well capable to handle traffic growth 13.5 Cloud & Edge IoT Cyber security
Slide 14: KPN: well positioned in Dutch market
KPN: well positioned in Dutch market Solid market shares in Dutch market 1 Consumer 29 % Mobile service 37 % Broadband revenues subscribers Business Network 47 % Total 51 % Broadband revenues subscribers2 14 CMD 2023 1. Telecompaper & management estimate 2. Retail & Wholesale
Slide 15: Envision: Strategy 2024-2027
Envision: Strategy 2024-2027 Connect, Activate & Grow 4 Presentatie titel 15 Vertrouwelijk
Slide 16: Strategy 2024-2027: a mission to Connect, Activate & Grow
Strategy 2024-2027: a mission to Connect, Activate & Grow Purpose We go all out to connect everyone in the Netherlands to a sustainable future Strategic Connect Activate Grow Missions Connect with our customers to Activate our best network, Grow sustainably by modernizing deliver on their needs plat
Slide 17: Future FiberCo will support growth in our segments
Future FiberCo will support growth in our segments… Customers Consumer Business Wholesale Upgrading active access layer & modernizing customer interfaces Fiber 5G Copper / legacy ~425 Gwh 4G 2G Core Metro core Technical building Mobile sites Cabinets Home Enterprise 4 ~160 1.2k 5.3k 18k 17 CMD 2023
Slide 18: Complemented by network modernization
…complemented by network modernization Customers Consumer Business Wholesale Always-on network, legacy switched off Digital services Fiber 5G 5G ~400 Gwh Cloud RAN Core Metro core Technical building Mobile sites Fiber PoPs Home Enterprise 4 ~160 0.4k -6k 3k 18 CMD 2023
Slide 19: ESG fully embedded in strategy
ESG fully embedded in strategy Inclusive We provide services that are reliable We make it possible for everyone to and secure by design. We operate Security Diversity participate in, and benefit from, a with respect Reliability Social inclusion connected society Human rights Digital inclusion Energy
Slide 20: Consumer
Consumer 4 20 Presentatie CMD 2023 titel Vertrouwelijk
Slide 21: B2C: Consumer service revenue growth established
B2C: Consumer service revenue growth established Back to growth in broadband net adds (k)1 20 Service revenue trend improving over time 0 (y-on-y %) -10 +5% Continued positive postpaid net adds (k) 40 20 0 0 Q1 2021 Q3 2021 Q1 2022 Q3 2022 Q1 2023 Q3 2023 FMC net adds (k) 20 Mobile Broadband FMC Tot
Slide 22: B2C: to be the #1 in service revenue market share
B2C: to be the #1 in service revenue market share Connect Activate Grow Lead the fiber and Redefine Converged NextGen Digital 5G upgrade of the with Household 3.0 Operating Model Netherlands 22 CMD 2023
Slide 23: Fiber engine at full speed
Fiber engine at full speed Leading fiber footprint Continuously expanding fiber footprint homes passed (m) homes passed, % of households CAGR: +18% 4.6 2.8 ~2.6 ~650k HP p.a. ~80% 2020 Q3 2023 Other players 55% (today) KPN Glaspoort 34% Copper / Fiber mix (% broadband customers) 40% 2020 Q3 2023 202
Slide 24: HP on track, focus shifts to HC conversion
HP on track, focus shifts to HC conversion Preparation Construction (HP) Connection (HC) Activation (HA) Service assurance Largest producer of HC in NL Five strategic priorities…. ….fiber positive impact visible (m) Fiber broadband net adds, excl. copper migrations (k) Streamlined HP/HC process +22
Slide 25: Fiber business case is working well
Fiber business case is working well Homes Connected & Homes Activated performance 1 (% per rollout year) ~8 % 60% HA 80% HC Fiber-uptake after 1st year 2023 2022 >55% Network penetration on 2021 fiber network over time 2020 2019 +€ 3 Retail ARPU uplift 2018 & before New build areas € 700-1,000 Const
Slide 26: B2C: segmented approach to ensure full appeal across all customers
B2C: segmented approach to ensure full appeal across all customers Our go to market is supported by… Growth opportunity in Customer base shifting to Unlimited youngsters & price seekers KPN Unlimited acquisition mix Flanker brands to target specific market segment e.g. Price seekers Mid- range High-
Slide 27: B2C: Household 3.0 is redefining converged loyalty
B2C: Household 3.0 is redefining converged loyalty to enjoy connectivity Customer Connect: Activate: Grow: Reliable & Secure Easy & Attentive Innovative & Responsible promise Connectivity Other Connectivity Continuously is core (Fiber & 5G) identifying new areas Enabled by top-tier partners, innovat
Slide 28: B2C: leverage network investments for in-home experience
B2C: leverage network investments to provide flawless in-home experience Next-Gen TV Unique gaming proposition • Leveraging new Android based platform • Superior low latency, driving flawless gaming • Streaming based on 4K and 8K technology • Best access to multiple suites of cloud gaming • Most ext
Slide 29: B2C: NextGen digital shift to enable convenience and loyalty
B2C: NextGen digital shift to enable convenience, connection & loyalty Digital Adoption1 4 YOU Convenient & Efficient Personal & Relevant Easy & Engaging -20% calls 4 KPN Customer satisfaction Connection & Loyalty Engaged & Effective2 +40% 43 48 60 Grow Digitally y Activate 2021 2022 2023 Customer C
Slide 30: Business
Business 4 30 Presentatie CMD 2023 titel Vertrouwelijk
Slide 31: B2B: turnaround delivered, focus on quality and sustainable growth
B2B: turnaround delivered, focus on quality and sustainable growth SME strong, LCE & Tailored Solutions… …also contributing to B2B turnaround With best-in-class customer satisfaction Service revenue growth (% y-on-y) Service revenue growth (% y-on-y) NPS1 +15% +5% 6 +10% +5% 0% 0% -5% -1 -10% -15% -
Slide 32: B2B: evolving from products to solutions focused propositions
B2B: evolving from products to solutions focused propositions Connect Activate Grow Leading Telecom Develop the Digital Increase Share of & IT Solutions Ecosystem & Partners Wallet Provider 32 CMD 2023
Slide 33: B2B: connect solutions with converged propositions
B2B: connect solutions with converged propositions Business Organizational Employee outcomes Client Interaction Performance Productivity SME LCE Tailored Solutions Propositions KPN KPN SMART EEN COMBINATIONS MKB Access & Cloud & Security & Portfolio Business Connectivity Workspace Continuity 33 CMD
Slide 34: B2B: strong performance SME, leverage position to drive growth
B2B: strong performance SME, leverage position to drive further growth Standardized offering strengthened market position... …leading to strong service revenue growth in SME Mobile base (k) Broadband base (k) SME service revenue growth (% y-on-y) 20 +195 +72 +11.7% SME service revenue 1,166 295 grow
Slide 35: B2B: SME provides one-stop ecosystem for small businesses
B2B: SME provides one-stop ecosystem for small businesses Target group Platform Play Leverage platform play to connect customers, suppliers and partners Enrich connectivity services Optimize value play with security and standardized Strong potential to increase share of wallet ICT building blocks Br
Slide 36: B2B: LCE customer base migrated, grow share of wallet
B2B: LCE customer base migrated, leverage portfolio to grow share of wallet Leverage KPN Smart Combinations portfolio to drive growth Cleaned up LCE legacy base1 Customers migrated to target portfolio (%) KPN SMART ~100% COMBINATIONS 88% 83% 76% LCE service revenue distribution mix YTD 2023 Other 20
Slide 37: B2B: delivering value through modular and secure propositions
B2B: delivering value through modular and secure propositions Connected Employee Mobile Unified Comms Workplace Connected Employee & Organization at heart of KPN Smart Combinations, complemented by Customer Hardware Security unique value adding solutions Experience VoIP & Licenses services Secure &
Slide 38: B2B: new solutions to strengthen and enrich our portfolio
B2B: new solutions to strengthen and enrich our portfolio Leveraging unique combination of Private 5G, Multi-Cloud & Networking to enable end-to-end business & mission critical use cases for our customers KPN Campus KPN Multi-cloud Onsite / Indoor Private 5G Localization SD-LAN Edge Computing Public
Slide 39: B2B: accelerate platform & data play on strong connectivity base
B2B: accelerate platform & data play on strong connectivity base Strong growth in Internet of Things Growth journey: Leveraging networks, roaming partnerships and modular solutions IoT M2M SIMs (k) +62% 11,576 Built IoT foundation with Value add platform play, accelerated 7,134 core connectivity ser
Slide 40: B2B: delivering ICT solutions through Tailored Solutions
B2B: delivering value-adding ICT solutions through Tailored Solutions Focus markets Main Ports & Logistics, Public Sector (critical), Financial Services & Insurance • Position as strategic ICT services and Increase share of wallet integration partner for largest customers Network, Security, Workplac
Slide 41: Wholesale
Wholesale 4 Presentatie titel 41 Vertrouwelijk
Slide 42: Wholesale: sustainable growth from open access portfolio
Wholesale: sustainable growth from open access portfolio Postpaid base Wholesale service revenue growth (m subs) (% y-on-y) CAGR +23% Mobile Other 0.8 Broadband Total +20% 0.4 +10% 0% -10% Broadband base Q1 2021 Q3 2021 Q1 2022 Q3 2022 Q1 2023 Q3 2023 (m subs) CAGR +4.3% Wholesale service revenue di
Slide 43: Wholesale: leverage unique assets, expand into new markets
Wholesale: leverage unique assets, expand into new markets Connect Activate Grow Create Innovative Building Leverage Innovation to Remain Preferred Blocks for Industry Grow with Industry Connectivity Partner (B2B2X) Partners 43 CMD 2023
Slide 44: Wholesale: grow through connectivity and new building blocks
Wholesale: grow business through connectivity and new building blocks Connect Activate Business Access VAS CPaaS API Global Access Fixed access Mobile access Media Interconnect Messaging Voice Roaming Strong Foundation of Services 44 CMD 2023
Slide 45: Leveraging KPN's internet exchange
Leveraging KPN’s internet exchange to deliver future distinctive solutions Cloud KPN uniquely owns Internet Exchange (IX) • Largest distributed IX in the world Applications • #4 in the world by traffic volume • #6 in the world by connected networks • Fully meshed low-latency network Internet Insert
Slide 46: Tech & Digital
Tech & Digital 4 46 Presentatie CMD 2023 titel Vertrouwelijk
Slide 47: Building the best network and digital infrastructure of the Netherlands
Building the best network and digital infrastructure of the Netherlands Connect Activate Grow Leading Deliver Best Digital Maximize Value of Infrastructure Experience Passive Assets 47 CMD 2023
Slide 48: High-quality, secure network, enabling the best digital experience
High-quality, secure network, enabling the best digital experience Customers Consumer Business Wholesale Modern Operating Model 110010 Best Digital 010011 Experience Digital UX Platform Play Unlock Data Market Leading Autonomous Infrastructure Operations Fiber 5G Multi-Cloud Valuable Lean Passive op
Slide 49: Complete fiber roll out and leverage superior network
Complete fiber roll out and leverage superior network Complete roll out, jointly covering ~80% of NL by end-2026 While at the same time investing in superior customer experience Homes passed, % of households Remaining priorities on fiber by 2027 KPN footprint Glaspoort footprint ~80% ~85% of fiber h
Slide 50: Gaining momentum in decommissioning copper and realizing savings
Gaining momentum in decommissioning copper and realizing savings Ramping up decommissioned households Benefits Potential Savings Service 2.4m 2.9m tickets ~€ 25m 2.1m Energy Copper opex 2023 Consumption 40k Q4 2022 Q1 2023 Q2 2023 Q3 2023 Maintenance Cost ~€ 70m Copper Capex 2023 Indicative timeline
Slide 51: Stay ahead of the curve in our mobile network
Stay ahead of the curve in our mobile network 2023-2024 2024-2027 5G Foundation >2027 5G Monetization 5G as a Platform • Start 3.5Ghz network roll out • 5G-SA core • 5G monetization services • Campus 5G • 5G slicing • 2G sunset • Introduce speed-tiering • Edge services • Preparing for 6G • 5G networ
Slide 52: Leveraging our Multi-Cloud & Networking Fabric
Leveraging our Multi-Cloud & state-of-the-art Networking Fabric Any Cloud, anywhere for both internal and external purposes Private Edge Cloud Cloud + Public Cloud Enterprise Cloud Multi-cloud Network High capacity, reliable and Multi-Cloud Network secure Networking Fabric 52 CMD 2023
Slide 53: Best digital experience, fuelled by unlocking data and AI
Best digital experience, fuelled by unlocking data and AI Customer Converged Digital front-end Enabling a seamless omni-channel experience using an Digital app-centric digital design and partner-centric design Experience Consolidate fixed and mobile functions into a flexible, standards based true co
Slide 54: Modern Operating Model
Modern Operating Model Presentatie CMD 2023 titel Vertrouwelijk
Slide 55: Leverage the power of data, automation and AI to modernize KPN
Leverage the power of data, automation and AI to modernize KPN Focus areas to realize exceptional customer experience and net indirect opex step-down Simplification Always-on automation IT rationalization Energy reduction Simplify products and networks Deploy always-on and fully Innovate on the clou
Slide 56: Automation: always-on network offering ease, cost savings
Automation: always-on network offering ease, cost savings & satisfaction Transform the customer activation process… …to just simply log-in Current activation process New reversed on-demand access network Order-driven, configuration of the E2E-network with Just log-in and network is updated for the s
Slide 57: Automation: using AI to optimize customer service
Automation: using AI to optimize KPN’s customer service and reduce costs Traditional AI >100 use-cases identified across value chain Generative AI AI impacting E2E Higher value chain efficiency Customer service Marketing & Sales Operations Higher Investments NPS Autonomous operations Customer contac
Slide 58: Methods to reduce energy spend
Methods to reduce energy spend Direct savings -8% Reduce energy consumption • Network modernization and simplification • Copper switch off GWh • Network functions virtualization <400 GWh per 20271 • Office space reduction 2020 2023 2027 Alternative energy sources KPN €/MWh • PPA Wind - Eneco agreeme
Slide 59: Solid progress on road towards net zero
Solid progress on road towards net zero Scope 1 - Direct emissions In kTon CO2e Base year1 • Gross emissions, relating to fuel consumption car fleet, heating of 59 buildings, consumption of coolants, fuel consumption of emergency LTM Q2 ’22 -82% 12 LTM Q2 ’23 power generators Scope 1 -15% • Ambition
Slide 60: Emerging opportunities: gradually build Edge network
Emerging opportunities: gradually build Edge network of the Netherlands Transform highly distributed infrastructure…. …to KPN Edge Locations Metaverse 5G and Content Secure by Device Processing ~160 design (Metro) Core Buildings IP to Fixed & anywhere Mobile KPN Edge Highly Ultra low networked laten
Slide 61: Optimize value creation in passive network domains
Optimize value creation in passive network domains Network layer Fiber Mobile Legacy Real Estate DCs / MCs Fully owned urban Active equipment Residual copper Core Datacenters fiber network (e.g. antennas) related real estate Fiber lines KPN 4.14m Majority cell towers ~1,200 4 leased Infrastructure a
Slide 62: Outlook: Financial ambitions 2027
Outlook: Financial ambitions 2027 Presentatie CMD 2023 titel Vertrouwelijk
Slide 63: Delivered accelerating service revenue growth at attractive margins
Delivered accelerating service revenue growth at attractive margins Contribution margin (% of revenues) 76% 75% 74% ~74% Group service revenue growth (% y-on-y) +2.6% EBITDA margin (% of revenues) +1.5% 44% 45% 45% ~45% OpFCF margin -1.1% (% of revenues) 22% 22% 23% ~23% -4.2% 2020 2021 2022 YTD 202
Slide 64: EBITDA growth driven by higher service revenues and cost program
EBITDA growth driven by higher service revenues and cost program Growing adjusted EBITDA AL Targeting service revenue growth (€ m) CAGR : ~3% in 2024-2027 CAGR: CAGR: ~3% +1.3% 2,410 2,320 Net indirect cost savings from modernizing operating model 2020 2023 outlook 2027 Direct cost increase Glaspoor
Slide 65: Large scale fiber roll out until 2026, lower Capex as of 2027
Large scale fiber roll out at full pace until 2026, lower Capex as of 2027 Capex developments 2023-2027 (€ bn) 1.2 ~1.2 ~1.2 ~1.2 <1.0 Fiber Fiber Capex ~€ 450-500m in 2023-2026, significantly lower as of 2027 Customer driven Customer driven Capex, small increase driven by growing customer footprint
Slide 66: Strong underlying cash earnings growth, Free Cash Flow step-up in 2027
Strong underlying cash earnings growth, Free Cash Flow step-up in 2027 Free Cash Flow growth drivers + - ~ Operating Free Cash Flow1 (€ m) CAGR: ~10% 2024 2027 CAGR: ~6% Adj. EBITDA AL ~3% CAGR ~1.2bn Capex <€ 1bn as of 2027 2023 2024 2025 2026 2027 outlook OpFCF1 From ~€ 110m (2023) Free Cash Flow
Slide 67: KPN committed to maintain its solid financial position
KPN committed to maintain its solid financial position Stable leverage ratio Net debt / EBITDA AL 2.4x • Fully committed to an investment grade credit profile 2.3x 2.3x 2.3x • Targeting <2.5x leverage ratio in mid-term • Well-spread maturity profile, weighted average maturity 2020 2021 2022 Q3 2023
Slide 68: Outlook 2023 and ambitions 2027
Outlook 2023 and ambitions 2027 Outlook Outlook Ambitions FY 2023 FY 2024 FY 20271 Service revenues ~3% ~3% CAGR Adj. EBITDA AL ~€ 2,410m ~€ 2,480m ~3% CAGR Capex € 1.2bn ~€ 1.2bn <€ 1.0bn Free Cash Flow ~€ 870m ~€ 870m ~7% CAGR 68 CMD 2023 1. CAGR compared to FY 2023
Slide 69: Continue attractive shareholder returns, return FCF to shareholders
Continue attractive shareholder returns, return FCF to shareholders Capital allocation aimed at long-term Shareholder remuneration policy value creation for all stakeholders Full Free Cash Flow returned to shareholders over Disciplined, value creating reinvestment. 2024-2027 period Capex at ~€ 1.2bn
Slide 70: Summary financial ambitions 2027
Summary financial ambitions 2027 Service revenues CAGR ~3% Adj. EBITDA AL CAGR ROCE growing to ~3% 15% Free Cash Flow CAGR ~7% 70 CMD 2023
Slide 71: 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 (‘
Slide 72: KPN Investor Relations
KPN Investor Relations ir.kpn.com 73 CMD 2023