Royal Kpn Nv · EURONEXT:KPN
Royal Kpn Nv — KPN — Q3 2011 Earnings Presentation
49 slides from Royal Kpn Nv's earnings presentation, Oct 25, 2011
Slide 1: Third Quarter Results 2011
Third Quarter Results 2011 25 October 2011
Slide 2: Safe harbor
Safe harbor Non-GAAP measures and management estimates This financial report 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 im
Slide 3: Agenda
Agenda Chairman’s review Eelco Blok Group financial review Carla Smits-Nusteling Operational review The Netherlands Eelco Blok Operational review Mobile International Eelco Blok Concluding remarks Eelco Blok 3
Slide 4: Highlights Q3 '11
Highlights Q3 ’11 • Financial results in line to realize full year outlook • Continued strong performances in Germany and Belgium • Consumer wireless in transition period; accompanied by lower service revenues • Continued growing TV market share in Consumer wireline • Corporate Market (Getronics)1 r
Slide 5: Financial highlights Q3 '11
Financial highlights Q3 ’11 • Financial performance Q3 ’11 – Revenues and other income € 3,263m, down 3.4% y-on-y • Regulatory impact of € 116m (3.4%) • Net negative impact incidentals and effect of acquisitions of € 24m – EBITDA excluding restructuring costs of € 1,330m, down 5.5% y-on-y • Restruct
Slide 6: Outlook
Outlook Confirming outlook Outlook 2011 Outlook 2012: • Free cash flow2: ~€ 2.4bn EBITDA >€ 5.3bn1 • DPS: € 0.90 Capex <€ 2bn Outlook 2013: • DPS: € 0.95 Free cash flow2 Growth3 Dividend per At least € 0.85 share 1 Excluding 2011 restructuring costs 2 Free cash flow defined as cash flow from operati
Slide 7: Agenda
Agenda Chairman’s review Eelco Blok Group financial review Carla Smits-Nusteling Operational review The Netherlands Eelco Blok Operational review Mobile International Eelco Blok Concluding remarks Eelco Blok 7
Slide 8: Group results Q3 '11
Group results Q3 ’11 €m Q3 ’11 Q3 ’10 % YTD ’11 YTD ’10 % Revenues and other income 3,263 3,378 -3.4% 9,788 10,009 -2.2% Operating expenses 2,606 2,531 3.0% 7,675 7,530 1.9% – of which Depreciation1 371 353 5.1% 1,070 1,052 1.7% – of which Amortization1 217 208 4.3% 639 586 9.0% Operating profit 657
Slide 9: Group cash flow Q3 '11
Group cash flow Q3 ’11 €m Q3 ’11 Q3 ’10 % • Free cash flow of € 555m in Q3 ’11, Operating profit 657 847 -22% down 19% y-on-y Depreciation and amortization1 588 561 4.8% − € 77m lower EBITDA excluding Interest paid/received -219 -238 -8.0% restructuring y-on-y Tax paid/received -127 -6 >100% − Capex
Slide 10: Group cash flow YTD '11
Group cash flow YTD ’11 €m YTD ’11 YTD ’10 % • Free cash flow of € 1,538m YTD ’11, Operating profit 2,113 2,479 -15% down 4.8% y-on-y Depreciation and amortization1 1,709 1,638 4.3% Interest paid/received -570 -604 -5.6% • € 185m lower EBITDA YTD Tax paid/received -149 -564 -74% excluding restructur
Slide 11: Group financial profile
Group financial profile Maintaining solid financial profile € bn Debt Financing policy 13.8 13.7 13.6 13.6 13.5 12.6 12.8 2.5x 2.4 2.5 2.0x 12.5 12.9 2.2 2.3 2.3 2.2 2.2 12.1 12.2 11.8 11.8 11.4 Q1 '10 Q2 '10 Q3 '10 Q4 '10 Q1 '11 Q2 '11 Q3 '11 Q1 '10 Q2 '10 Q3 '10 Q4 '10 Q1 '11 Q2 '11 Q3 '11 Gross D
Slide 12: Agenda
Agenda Chairman’s review Eelco Blok Group financial review Carla Smits-Nusteling Operational review The Netherlands Eelco Blok Operational review Mobile International Eelco Blok Concluding remarks Eelco Blok 12
Slide 13: Financial review - Dutch Telco
Financial review - Dutch Telco €m Revenues and other income • Revenues and other income down 5.5% y-on-y -5.5% – Regulatory impact of € 39m (2.2%) – € 24m net negative impact from incidentals – € 16m net positive impact from acquisitions – Lower revenues in Consumer, mainly in 1,758 1,759 1,747 1,74
Slide 14: Financial review - Dutch Telco by segment
Financial review - Dutch Telco by segment €m 29.2% 28.1% 29.6% 29.1% 28.4% 26.9% 27.6% • Revenues decline of 6.5% y-on-y Consumer − Regulatory impact of € 19m (1.9%) 969 990 991 990 941 953 927 − Lower wireless revenues and stable performance at wireline Q1 '10 Q2 '10 Q3 '10 Q4 '10 Q1 '11 Q2 '11 Q3
Slide 15: Operating review - Consumer wireless
Operating review - Consumer wireless1 Transition period accompanied by lower service revenues €m 48% 47% 47% 47% 47% 46% 45% Service 448 443 • Transition period for Consumer wireless 434 430 399 409 revenues 395 – New propositions since September 2011 Q1 '10 Q2 '10 Q3 '10 Q4 '10 Q1 '11 Service reven
Slide 16: Consumer wireless - update of trends
Consumer wireless - update of trends Continued IP substitution impact; new portfolio introduced Smartphone penetration1 Trends % 80 • Service revenues decline due to lower SMS and voice 60 67% usage; partly offset by increased data usage 40 48% – Continued decline SMS per customer at Hi brand 20 – S
Slide 17: Operating review - Consumer wireline
Operating review - Consumer wireline 1.9 1.9 1.9 RGUs per customer 1.8 1.8 1.8 1.8 • RGUs per customer steadily increasing − PSTN / ISDN line loss offset by IPTV additions Q1 '10 Q2 '10 Q3 '10 Q4 '10 Q1 '11 Q2 '11 Q3 '11 42% 42% 42% 41% 41% 41% 40% • Continued slight decline in broadband market shar
Slide 18: Operating review - Consumer wireline (cont'd)
Operating review - Consumer wireline (cont’d) Continued growth in TV market share, positive results in FttH areas Innovation roadmap on track Growing TV market share 16% 16% 17% 14% 14% 15% • Wireline innovation roadmap on track 13% 302 360 416 489 193 245 147 Q3 ’11 – Multi-room IPTV launched – IPT
Slide 19: Operating review - Business wireless
Operating review - Business wireless €m 5.3% • Service revenues up 5.3% y-on-y 248 246 240 228 236 230 239 – Impact from regulation € 13m (5.7%) Service – Positive impact from Yes Telecom of € 7m revenues1 – Data driving service revenue growth – Introduction of future proof integrated data / Q1 '10
Slide 20: Operating review - Business wireline
Operating review - Business wireline Continued pressure on traditional services €m -1.8% • Continued impact from decline in traditional business Revenues1 373 338 331 335 346 337 325 • Positive contribution from Atlantic Telecom acquisition (€ 11m) Q1 '10 Q2 '10 Q3 '10 Q4 '10 Q1 '11 Q2 '11 Q3 '11 1.
Slide 21: Operating review - Corporate Market (Getronics)
Operating review - Corporate Market (Getronics) Restructuring program in progress, aligning cost base with lower revenue level €m Revenues and other income -6.1% • Getronics renamed Corporate Market, rebranded to KPN in The Netherlands 538 474 478 476 472 462 447 • Revenues declined 6.1% y-on-y – Cl
Slide 22: Operating review - iBasis
Operating review - iBasis Continued revenue growth while managing profit levels €m Financial 4.1% 3.8% 4.1% • Continued revenue growth 3.2% 3.0% 3.1% 2.7% – Q3 revenues up 3.2% y-on-y, despite ~5.8% negative currency effect 246 256 • Focus on revenue growth while managing profit 234 193 237 248 226
Slide 23: Agenda
Agenda Chairman’s review Eelco Blok Group financial review Carla Smits-Nusteling Operational review The Netherlands Eelco Blok Operational review Mobile International Eelco Blok Concluding remarks Eelco Blok 23
Slide 24: Financial review - Mobile International
Financial review - Mobile International Service revenues up and good profitability despite severe MTA impact Wireless service €m 0.8% • Q3 service revenues up 0.8% y-on-y revenues – Severe regulatory impact of € 77m (7.5%) 987 1,025 999 989 1,033 − High underlying growth in Germany 927 946 − Strong
Slide 25: Financial review - Mobile International by segment
Financial review - Mobile International by segment Continued underlying growth in all segments, severe regulatory impact €m 45.4% 41.8% 43.0% 41.8% 42.2% • Q3 service revenues flat y-on-y (-0.6%) 39.3% 38.9% Germany • Severe regulatory impact of € 65m on service revenues (8.0%), € 34m on EBITDA (8.8
Slide 26: Operating review - Germany
Operating review - Germany High underlying service revenue growth of 8.1% at strong margin Net adds 21.0 21.5 22.1 19.9 20.4 19.3 19.6 • Good performance of ‘Mein BASE’ in both voice and data 351 434 518 – Continued good number of postpaid net adds (92k) 456 – Regional focus and strong captive chann
Slide 27: Operating review - Belgium
Operating review - Belgium1 Strong underlying service revenue growth of 11% Net adds 4.1 3.9 3.9 3.6 3.6 3.7 3.7 • Growing customer base in Q3; – Supported by clear, transparent propositions 136 152 – New propositions launched in Q3 with good initial 53 44 9 sales 24 24 10 14 17 14 20 11 -36 • Under
Slide 28: Agenda
Agenda Chairman’s review Eelco Blok Group financial review Carla Smits-Nusteling Operational review The Netherlands Eelco Blok Operational review International Eelco Blok Concluding remarks Eelco Blok 28
Slide 29: Concluding remarks
Concluding remarks • Financial results in line to realize full year outlook • Continued strong performances in Germany and Belgium • Consumer wireless in transition period; accompanied by lower service revenues • Continued growing TV market share in Consumer wireline • Corporate Market (Getronics) r
Slide 30: Q&A
Q&A
Slide 31: Annex
Annex For further information please contact KPN Investor Relations Tel: +31 70 44 60986 ir@kpn.com www.kpn.com/ir
Slide 32: Analysis of results
Analysis of results Key items worth mentioning in results interpretation €m Q3 ’11 Q3 ’10 YTD ’11 YTD ’10 Revenue effect MTA reduction Group -106 -34 -365 -112 Roaming tariff reduction Group -10 -9 -20 -39 EBITDA effect MTA reduction Group -45 -14 -153 -33 Roaming tariff reduction Group -4 -5 -8 -29
Slide 33: Restructuring costs
Restructuring costs €m Q3 ’11 Q3 ’10 YTD ’11 YTD ’10 Germany - 1 - -1 Belgium -1 - -1 - Rest of World -1 - -3 - Mobile International -2 1 -4 -1 Consumer -2 -3 -2 - Business - - - - Wholesale & Operations -1 -1 3 - IT NL - - - - Other -1 -2 - Dutch Telco -4 - -6 1 Corporate Market (Getronics)1 -78 -
Slide 34: Impact MTA reduction
Impact MTA reduction €m Q3 ’11 YTD ’11 1 1 Revenues EBITDA Revenues EBITDA Germany -60 -32 -171 -89 Belgium -9 -5 -51 -32 Mobile International -69 -37 --222 --121 Consumer -19 -5 -74 -24 Of which: Mobile Wholesale -2 -1 -6 -3 Business -11 -2 -44 -6 Wholesale & Operations -9 -1 -34 -2 Intercompany 2
Slide 35: Operating expenses
Operating expenses €m Q3 ’11 Q3 ’10 % Employee benefits 446 471 -5.3% Cost of materials 230 226 1.8% Work contracted out and other expenses 1,134 1,160 -2.2% Own work capitalized -26 -24 8.3% Other operating expenses2 234 137 71% Depreciation1 371 353 5.1% Amortization1 217 208 4.3% Total 2,606 2,53
Slide 36: Operating expenses - analysis: Employee benefits & Cost of materials
Operating expenses - analysis Employee benefits & Cost of materials €m Employee benefits Y-on-Y decrease • Release of several incentive schemes 15.5% 14.7% 14.1% 14.9% 14.4% • Reduction of own personnel in The Netherlands and 13.7% 13.7% Corporate Market (Getronics), partly offset by an increase at
Slide 37: Operating expenses - analysis: Work contracted out & Other
Operating expenses - analysis Work contracted out & Other €m Work contracted out Y-on-Y decrease • Lower distribution fees at Consumer segment 34.8% 34.8% • Lower traffic costs at W&O due to lower MTA and 34.1% 34.2% 33.8% 34.6% 34.7% less traffic • Decrease of subcontracted costs at Corporate Marke
Slide 38: Operating expenses - analysis: Depreciation & Amortization
Operating expenses - analysis Depreciation & Amortization €m Depreciation1 Y-on-Y increase • One-off adjustment depreciation mobile towers at W&O and Belgium 10.9% 10.7% 11.4% 10.6% 10.5% 10.6% 10.6% Q-on-Q increase • One-off adjustment depreciation mobile towers at W&O 348 351 353 357 347 352 371 a
Slide 39: Tax
Tax P&L Cash flow Fiscal units (€ m) Q3 ’11 Q3 ’10 Q3 ’11 Q3 ’10 Dutch activities -60 -75 -1211 -11 Corporate Market (Getronics) 23 1 -1 - German Mobile activities -34 -29 2 -4 Belgian Mobile activities -9 -9 - - Other -4 -2 -7 -1 Total reported tax -84 -114 -127 -6 Effective tax rate 18.4% 21.2% •
Slide 40: € 1bn share repurchase program for 2011 finalized
€ 1bn share repurchase program for 2011 finalized Date1 Value (€ m) Shares (m) Avg. share price (€) Q1 ’11 178.4 15.2 11.71 Q2 ’11 495.4 47.3 10.47 July 38.2 4.0 9.63 August 168.3 17.8 9.44 September 119.7 12.4 9.65 Q3 ’11 326.2 34.2 9.54 Total 1,000 96.7 10.34 • € 1bn share repurchase program for 2
Slide 41: Debt portfolio
Debt portfolio Breakdown of € 13.5bn gross debt1 12% 81% 7% Global bonds Other 8% 12% 2 2 EUR USD GBP 16% 84% Eurobonds 80% Fixed Floating (incl. swapped) 1 Book value of interest bearing financial liabilities plus the fair value of financial instruments (excluding Reggefiber) related to these finan
Slide 42: Dutch wireless services disclosure
Dutch wireless services disclosure Q3 ’11 Q2 ’11 Q3 ’10 Service revenues (€ m) 691 702 742 − Consumer 395 409 443 − Business 240 239 228 − Other Dutch activities1 56 54 71 SAC/SRC (€) − Consumer 128 164 162 − Business 221 224 242 1 Includes among others Mobile Wholesale NL, Simyo and visitor roaming
Slide 43: Service revenues growth Mobile International
Service revenues growth Mobile International Service revenues growth Germany Service revenues growth Belgium 7.7% 7.9% 8.1% 11.9% 11.4% 7.5% 10.4% 9.7% 8.4% 8.9% 8.1% 6.6%7.2% 4.0%4.4% 4.0% 2.8% 2.5% 3.5% 2.0% 1.0% 1.8% -0.7% -0.5% -0.6% -2.3% -3.9% -5.3% Q1 '10 Q2 '10 Q3 '10 Q4 '10 Q1 '11 Q2 '11 Q3
Slide 44: Regulation
Regulation MTA reductions and upcoming spectrum auctions MTA reductions implemented across the Group Upcoming spectrum auctions • The Dutch Court overruled OPTAs MTA tariff decision and • Discussions on draft auction document NL determined a new tariff as of 1 September 2012 of € 2.40 (expected to b
Slide 45: Spectrum in The Netherlands
Spectrum in The Netherlands Total Free 800MHz 2x30 2x30 MHz Vodafone T-Mobile KPN 900MHz To be auctioned 2x35 2x12.5 2x10 2x12.5 Vodafone T-Mobile KPN Free 1.8GHz 2x70 2x5 2x30 2x20 2x15 Current • 1.9-2.0 Free 14.7 status GHz 14.7MHz unpaired Vodafone T-Mobile KPN Free 2x60 2.1GHz 1x25 2x15 1x5 2x20
Slide 46: Spectrum in Belgium
Spectrum in Belgium KPNgB Proximus Mobistar 900MHz 2x10.8 2x12 2x12 KPNgB Proximus Mobistar Prox Mob Free 1.8GHz 2x5.8 2x5.8 2x22 2x15 2x15 2x11.4 Current KPNgB Proximus Mobistar Telenet & Voo Free 2.1GHz status 2x15 1x5 2x15 1x5 2x15 1x5 2x14.8 1x5 Free 2.6GHz 140MHz paired, 45MHz unpaired KPNgB Pr
Slide 47: Personnel
Personnel • Increase of 205 FTE y-on-y – Reduction of 133 FTE in The Netherlands, 32,203 31,121 30,654 30,599 30,534 30,598 30,859 from all segments excluding Corporate 4,369 Market (Getronics) 3,990 3,934 3,843 3,827 4,010 3,826 – Increase of 789 FTE at Mobile International (including SNT Germany),
Slide 48: Infrastructure
Infrastructure Deploying mix of technologies going forward VDSL Pair VDSL from ADSL on Bonding VDSL from central office FttH Wireless copper central office street cabinet (VDSL-CO) (VDSL-CO) Central Central Central Central office office office office ODF1 Street cabinet up to 20 Mbps DS up to 40 Mbp
Slide 49: Unbundling tariffs
Unbundling tariffs Unbundling in current network Category Monthly tariff Line sharing (LLU)1 € 0.11 / line MDF Node SDF Fully unbundled (LLU)1 € 6.54 / line colocation KPN / Telco MDF colocation1 € 871.20 / footprint / year ~28,000 1,350 street cabinets local exchanges MDF backhaul Commercial pricin