Royal KPN NV · EURONEXT:KPN
Royal KPN NV — Koninklijke KPN — Investor Presentation (February 2018)
48 slides from Royal KPN NV's investor presentation, February 2018
Slide 1: Investor Presentation February 2018
Investor Presentation February 2018
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: Simplification and digitalization embedded in organization
Simplification and digitalization embedded in organization Driving revenue opportunities and lower spend Use data & analytics ENABLING IMPROVED - Targeted household marketing - Optimized customer service CUSTOMER EXPERIENCE Digitalize - Smarter network investments Removing complexity for customers -
Slide 5: External environment reassuring
External environment reassuring Growing macro-economy with strong competitive position FAVOURABLE MACRO ECONOMY STRONG COMPETITIVE POSITION GDP growth NL1 ’17-’18 vs. ’16-’17 3.2% 3.1% 2.3% 2.2% The Netherlands 4 - Germany 5 - 2015 2016 2017E 2018E United Kingdom 8 -1 Unemployment NL1 6.9% 6.0% Denm
Slide 6: 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 43% 30% 20% 7% Fixed network FttC, FttH Coax Wholesale KPN Wholesale KPN Broadband market sha
Slide 7: Strong progress in Simplify, Grow, Innovate strategy
Strong progress in Simplify, Grow, Innovate strategy Key priorities on track Accelerate up- and cross-sell in bundles Grow in TV and IT services Finalize Business transformation Finalize build of flexible and simplified integrated network and operating model Expand superior access position by deploy
Slide 8: Further strengthening convergence position in Consumer
Further strengthening convergence position in Consumer Clear benefits from targeted household approach Customers in fixed-mobile bundles Clear convergence benefits Households1 Postpaid customers Higher NPS2 (Q4 ’17) Increasing SIMs per household3 25 1.51 1.47 +2.7% 51% 13 all brands 42% 37% 43% Cons
Slide 9: Household at center of service model in Consumer
Household at center of service model in Consumer Strong focus to increase share of wallet per household Higher margins from Skinny bundles increasing upsell opportunities improved up- and cross-sell ~-4% Lower inflow ARPU per household from unbundling content Q4 ’16 Q4 ’17 ~+60% Higher inflow ARPU f
Slide 10: Strong competitive positioning in Dutch market
Strong competitive positioning in Dutch market Covering all segments: focus on fixed-mobile bundling and high value CLVmarket Higher illustrates focus on KPN brand share Leading converged position through increasing KPN share in brand mix 42% 43% ~43% ~23% ~22% ~21% ~77% ~78% ~79% Q4 ’16 Q3 ’17 Q4 ’
Slide 11: Digitalization strengthening customer relationships
Digitalization strengthening customer relationships Data & analytics supporting value per household …enabling data & analytics Creation of uniform digital layer completed… for targeted household approach Targeted marketing Enables personalized actions and campaigning Improving customer service
Slide 12: Targeted household marketing drives customer loyalty and convergence
Targeted household marketing drives customer loyalty and convergence Using smart analytics to drive value Step 1: Creation of uniform digital layer completed Benefits Net Promotor Score Convergence Client advice (automatically penetration shown to customer service) New (3) Offered (0) Household valu
Slide 13: Simplified Business portfolio in 2017
Simplified Business portfolio in 2017 Added scale and capabilities to strengthen position as leading ICT service provider Changing customer needs… Tailor made single Standardized Traditional Cloud-based (IT) Platform Shared access & OTT play solutions bundled services on-premise services services sp
Slide 14: Transformation to leading Business ICT provider on track
Transformation to leading Business ICT provider on track Supported by Simplification Migration of KPN Business Mobile clients completed Best ICT service provider Integrating Mobile IT systems delivers Benefits: Improved time-to-market ~€ 50m run-rate savings in total from decommissioned legacy IT Fo
Slide 15: Improved positioning in growing IT market
Improved positioning in growing IT market Leverage leading position in communication services to grow market share in IT …increasing share in IT services… …in growing IT market Expanding growth in Internet of Things Increasing share in IT services… …in growing IT market with fully integrated solutio
Slide 16: Expanding superior network position
Expanding superior network position Simplify operating model to improve customer experience and operational effectiveness Expand superior access position by deploying innovative technologies and increasing fiber penetration Finalize build of flexible and simplified integrated network Ensuring best-i
Slide 17: Second wave Simplification program ahead of schedule
Second wave Simplification program ahead of schedule Run-rate savings target raised to at least € 350m by end 2019 Simplification program run-rate opex and Capex savings €m >350 >240 ~110 End 2016 2017 2018 - 2019 End 2019 SECOND WAVE Customer centric Next generation Telco Fully virtualized Investor
Slide 18: Gradual approach to simplify operating model
Gradual approach to simplify operating model BSS integration nearly completed, starting OSS integration in 2018 End 2013 End 2017 UNIFORM DIGITAL LAYER (API) Customer interaction layer (BSS) BSS integration KPN Telfort Telfort ~€ 80m run-rate savings1 from KPN Consumer Fixed KPN Mobile B2B B2B B2B C
Slide 19: 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) Investor presentation | Strategy | Network, Operations & IT | 19
Slide 20: Ready to upgrade if demand changes
Ready to upgrade if demand changes Dense fiber network reaching ~80% of households (FttH / FttC) 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
Slide 21: Converging fixed and mobile network technologies
Converging fixed and mobile network technologies Mix of technologies to deliver best customer experience Launch of 4G 50 Mbps LTE 1800 225 Mbps LoRa Triple carrier aggregation LTE-M 5G use cases FttS / FttB / FttH Fixed-wireless VPlus technologies convergence SDN / NfV Core network 100 Gbps Decentra
Slide 22: Determining value of 5G technologies through use cases
Determining value of 5G technologies through use cases Starting several pilots with business partners Urban areas Transport & Logistics Virtual reality Cargo / asset tracking 4k / 8k television Predictive maintenance Crowd control Increase asset utilization Rural applications Automotive Precision fa
Slide 23: Continued investments to further improve customer experience
Continued investments to further improve customer experience Core network important differentiator for quality of service Changing customer behavior, Upgraded core network, Supporting customer experience, data demand increasing rapidly roll-out decentralized CDN on track strong increase NPS IPTV1 CA
Slide 24: 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 25: Gradually moving to a software defined network
Gradually moving to a software defined network Providing flexible on-demand capacity and new services, faster and at lower costs BSS OSS ON-DEMAND Network VIRTUALIZED SERVICES UNIFORM DIGITAL LAYER (API) Fast delivery Real-time scaling Legacy network Software Defined Network Intuitive user experienc
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 19.7% 19.2% 30% € 1.19bn € 1.14bn ~€ 1.1bn Other 98 Mobile access 105 140 20% 128 Simplification 251 251 Customer 220 driven 213 10% Fixed 519 407 2016 2017 2018 0% Q1 ’10 Q3 ’17 N
Slide 27: Growing free cash flow to drive value
Growing free cash flow to drive value Strong free cash flow potential Solid financial position Committed to investment grade credit profile 1 Grow revenues in Consumer, stabilize in Business Telefónica Deutschland stake provides additional financial flexibility 2 Rigorous focus on driving down c
Slide 28: Contents
Contents 1 Strategy 2 Performance 3 Appendix
Slide 29: Continued growth fixed-mobile bundles in Consumer
Continued growth fixed-mobile bundles in Consumer Successful up- and cross-sell of additional SIMs per household Households in fixed-mobile bundles1 Postpaid customers in fixed-mobile bundles 42% 37% 43% 51% all brands Q4 ’16 Q4 ’16 Q4 ’17 Q4 ’17 65% Q4 ’17: Q4 ’17: KPN brand 64k net adds 95k net ad
Slide 30: Strong household proposition supporting value creation
Strong household proposition supporting value creation Continued revenue growth in Consumer Residential Successful launch of new line-up CLV illustrates Bundled services driving continuedfocus on KPN revenue brand growth 2.6% 3.2% 2.5% €m 472 482 484 14 13 12 83 79 78 -6.0% 375 390 394 5.1% Q4 ’16 Q
Slide 31: Gaining market share through continued value focus in Mobile
Gaining market share through continued value focus in Mobile Regulation and shift from handset to SIM-only propositions impacting service revenue trend Shift to SIM-only, regulation …impacting mobile …but higher market share through and lower base growth… service revenues… increasing KPN share in br
Slide 32: LE&Corporate
Migrations in Business on track, lower exposure to traditional services On track for revenue stabilization in Business Business revenue growth drivers Steadily improving revenue trend FY ’15 FY ’17 Q4 ’17 % of total % of total adjusted adjusted adjusted y-on-y growth revenues revenues Business total
Slide 33: Ready to accelerate growth of multi play in SME
Ready to accelerate growth of multi play in SME Continued growth KPN ÉÉN adds to IT up- and cross-sell potential Strengthened delivery chain supporting strong pick up… …and driving clear benefits Successful pilot ISDN migrations to KPN ÉÉN ~9x ~+50% 45 38 2 27 -45 Q4 ’16 Q3 ’17 Q4 ’17 Q4 ’16 Q3 ’17
Slide 34: Strong momentum in converged communications & IT services
Strong momentum in converged communications & IT services Several landmark corporate deals in 2017 driving increased order intake Continued growth order intake +14% DC LAN and Managed Security services Internet VPN 2016 2017 Order intake LE & Corporate All connectivity in IT workspace trains and sta
Slide 35: Simplification driving quality improvements at improved margins
Simplification driving quality improvements at improved margins Solid progress in further reducing spend levels FY ’17 opex reduction (€ 138m) supporting margins -3.8% 40.0% 40.8% €m -2.5% €m 3,615 3,477 6,026 5,878 4 498 -0.4% 488 €m 3 547 502 2,411 2,401 2 1,149 1,119 1 1,421 1,368 FY ’16 FY ’17 F
Slide 36: Q4 '17 adjusted revenues impacted by regulation
Q4 ’17 adjusted revenues impacted by regulation Adjusted revenues NL declined by 2.5% Adjusted revenues KPN Group €m 1,519 -5.3% €m 1,704 1,614 11 8 4 1,481 23 Q4 ’16 Q4 ’17 Adj. revenues Consumer Business Wholesale Other (incl. Adj. revenues NL Q4 ’16 eliminations) NL Q4 ’17 Adjusted revenues iBasi
Slide 37: Q4 '17 adjusted EBITDA impacted by regulation and cost phasing
Q4 ’17 adjusted EBITDA impacted by regulation and cost phasing Higher marketing expenses and customer driven investments related to order intake in Business Adjusted EBITDA NL declined by 1.3%1 39.6% 40.1% €m 602 17 594 Lower traffic, partly offset by 1 14 3 4 higher cost of goods sold 38 1 2 3 2 On
Slide 38: Free cash flow growth driven by lower interest and Capex
Free cash flow growth driven by lower interest and Capex Growing free cash flow1 Free cash flow components +9.1% €m 745 2,306 683 4 69 349 13 13 745 1,139 FY ’16 FY ’17 Reported Change in Change Interest Taxes Capex Other FCF excl. EBITDA provisions in working paid paid TEFD FY ’17 capital dividend
Slide 39: Solid financial position
Solid financial position Lower debt y-on-y Debt portfolio Net debt € 0.3bn lower vs. Q3 ’17 mainly due to free 8.1 cash flow generation € bn 7.3 7.2 6.8 6.3 6.0 Average coupon senior bonds 3.9% (Q4 ’16: 4.1%) 2.8x 2.6x 2.5x Financial flexibility Additional financial flexibility via stake in TE
Slide 40: Contents
Contents 1 Strategy 2 Performance 3 Appendix
Slide 41: 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 42: Successful CSR strategy delivering benefits for customers and KPN
Successful CSR strategy delivering benefits for customers and KPN Recognition by leading benchmarks Less energy consumption despite rising data volumes1 4.3 ~1,050 4.0 3.8 3.7 #1 3.5 3.5 Industry 3.4 ~3.2 Leader 100 Most sustainable Telco in the world 2010 2011 2012 2013 2014 2015 2016 2017 Data vol
Slide 43: Dutch wireless disclosure
Dutch wireless disclosure Service revenues (€ m) Q4 ’17 Q4 ’16 y-on-y % FY ’17 FY ’16 y-on-y % Consumer 276 299 -7.7% 1,154 1,179 -2.1% Business1 158 162 -2.5% 639 678 -5.8% Other2 45 40 13% 159 155 2.6% KPN The Netherlands 479 501 -4.4% 1,952 2,012 -3.0% SAC/SRC per subscriber (€) Q4 ’17 Q4 ’16 y-o
Slide 44: 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 interest3 1.1 Floating 0.9 1.0 0.8 8% 0.6 0.6 0.6 0.6 0.6 0.5 0.4 0.5 0.1 Fixed 92% ’18
Slide 45: Estimated IFRS 15 impact for FY 2017
Estimated IFRS 15 impact for FY 2017 Different timing revenue recognition impacting revenues and EBITDA FY ’17 (€ m) IAS 18 (actual) IFRS 15 (estimated delta) Adjusted revenues KPN Group 6,500 ~ -130 Adjusted EBITDA KPN Group 2,417 ~ -100 Free Cash Flow (excl. TEFD dividend) 745 No change Equity (pe
Slide 46: 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 47: 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 Investor presentation | Appendix | Fixed infrastructure | 47
Slide 48: 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 (‘
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