Royal Kpn Nv · EURONEXT:KPN

Royal Kpn Nv — KPN — Investor Presentation (September 2017)

46 slides from Royal Kpn Nv's investor presentation, September 2017

  1. Slide 1: Investor Presentation September 2017

    Investor Presentation September 2017

  2. Slide 2: Contents

    Contents 1 Strategy 2 Performance 3 Appendix

  3. 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

  4. Slide 4: External environment reassuring

    External environment reassuring Stable macro-economy with strong competitive position STABLE MACRO ECONOMY STRONG COMPETITIVE POSITION GDP growth NL1 ’16-’17 vs. ’15-’16 2.0% 2.1% 2.1% 1.4% The Netherlands 4 +1 Germany 5 -1 2014 2015 2016 2017E United Kingdom 7 +3 Unemployment NL1 7.4% 6.9% 6.0% Den

  5. Slide 5: 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 42% 32% 19% 7% Fixed network FttC, FttH Coax Wholesale KPN Wholesale KPN Broadband market sha

  6. Slide 6: Key priorities for the coming years in Consumer

    Key priorities for the coming years in Consumer Consumer strategy centered around household 1 Increase penetration of fixed-mobile bundles 2 Reduce churn by increasing loyalty and customer satisfaction 3 Accelerate up- and cross-sell in bundles 4 Grow in TV via cloud-based IPTV platform 5 Benefit fr

  7. Slide 7: Continued growth of fixed-mobile bundles in Consumer

    Continued growth of fixed-mobile bundles in Consumer Clear benefits from convergence strategy Customers in fixed-mobile bundles Multi-brand strategy to drive convergence further Households1 Postpaid customers 47% 40% all brands 33% 38% Q2 ’16 Q2 ’17 Q2 ’16 Q2 ’17 + 61% KPN brand Clear convergence be

  8. Slide 8: Household at center of service model in Consumer

    Household at center of service model in Consumer Significant opportunities to increase share of wallet per household 8

  9. Slide 9: Strong competitive positioning in Dutch market

    Strong competitive positioning in Dutch market Covering all segments: focus on fixed-mobile bundling and high value Leading converged position CLV Lifetime Growing Customer illustrates focusinon Value KPN brand mobile Actuals Q4 ’16 y-on-y1 2yr handset contract One-off handset fee SAC/SRC Traffic &

  10. Slide 10: TV focus point in household centered strategy

    TV focus point in household centered strategy Highest quality of service through differentiated functionalities and leading network Best-in-class IPTV services… …driving continued TV growth 70% 71% High quality Content  161 Metro Core Locations 69% Delivery Network  Superior stable access speeds S

  11. Slide 11: Transforming into Business ICT service provider

    Transforming into Business ICT service provider 1 Realize growth by strengthening and deepening customer relations 2 Clear market segmentation with a targeted sales approach 3 Strengthen portfolio & distribution via partnerships 4 Rationalize & simplify products and services to create standardized b

  12. Slide 12: Strengthening & deepening customer relations

    Strengthening & deepening customer relations Leverage leading position in Telco to grow market share in IT 1 Gartner, management estimates 12

  13. Slide 13: KPN well positioned to deliver on customer needs

    KPN well positioned to deliver on customer needs Standardized building blocks to deliver productivity 13

  14. Slide 14: Strengthening business market portfolio and infrastructure

    Strengthening business market portfolio and infrastructure Leading infrastructure and strengthened market positioning Further strengthening infrastructure Leading cloud & data center services Expanding scale and capabilities Deploying successful hybrid access strategy used in Consumer Deregulation o

  15. Slide 15: 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 provider2 Integrating Mobile IT systems delivers Benefits: Improved time-to-market ~€ 50m run-rate savings in total from decommissioned legacy IT F

  16. Slide 16: Expanding superior network position

    Expanding superior network position 1 Simplify operating model to improve customer experience and operational effectiveness 2 Expand superior access position by deploying innovative technologies and increasing fiber penetration 2 Finalize build of flexible and simplified integrated network Ensuring

  17. Slide 17: Gradual approach to simplify operating model

    Gradual approach to simplify operating model Starting second wave of Simplification program Customer interaction layer (BSS) 1 2 Network interaction layer (OSS) 3 1 Integration Consumer BSS finalized 2 Starting integration Business BSS 3 Starting with OSS Simplification 17

  18. Slide 18: 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) 18

  19. Slide 19: Simplifying our operating model

    Simplifying our operating model Second wave of Simplification program to deliver significant savings Simplification program run-rate opex and Capex savings >760 €m >300 ~460 ~180 ~140 ~140 End 2013 2014 2015 2016 End 2016 2017 - 2019 End 2019 FIRST WAVE SECOND WAVE FROM Product centric TO Customer c

  20. Slide 20: Best mobile access provider

    Best mobile access provider Investment-led strategy enabling superior customer experience Most time spent on LTE1 Best mobile network according to customers3 86% 84% 90% 82% 81% 76% 72% 71% 70% 66% 58% 57% 49% 72% 70% 61% KPN NL NO SE FI CH DK BE AT UK DE FR Competitive speeds on LTE2 54.8Mbps 50.2M

  21. Slide 21: Staying ahead of demand for mobile data

    Staying ahead of demand for mobile data Fully utilizing spectrum position for excellent customer experience 1 Rebased to LTE 800 sites end 2014 2 Excluding small cells 21

  22. Slide 22: Best fixed access provider

    Best fixed access provider Investment-led strategy enabling superior customer experience Best fixed network according to customers1 ~78% ~71% 90% End 2015 End 2016 70% 64% ~68% ~75% End 2015 End 2016 KPN Competitor 1 Competitor 2 1 % of clients that agree on the reputation statement that their opera

  23. Slide 23: Ready to upgrade if demand changes

    Ready to upgrade if demand changes Large step taken with FttC upgrades in 2016 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 0 100 200 300 400

  24. Slide 24: Build flexible and simplified integrated network

    Build flexible and simplified integrated network Three steps to achieve objective 24

  25. Slide 25: 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

  26. Slide 26: 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 satisfaction, data demand increasing rapidly roll-out decentralized CDN on track NPS IPTV doubled1 1.4 ZWOL

  27. Slide 27: 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 22.3% 30% 19.7% Towards 15-17% 1,440 85 Other 132 1,193 ~1,150 20% Mobile access 282 98 Simplification 105 251 Customer 258 driven 220 10% Fixed 683 519 2014 2016 2017 Medium- 0% t

  28. Slide 28: Growing free cash flow to drive shareholder value

    Growing free cash flow to drive shareholder value Developing towards highly cash generative company Strong free cash flow potential Solid financial position  Committed to investment grade credit profile  9.5% Telefónica Deutschland stake provides additional financial flexibility Commitment to grow

  29. Slide 29: Key priorities for the coming years

    Key priorities for the coming years 1 Accelerate up- and cross-sell in bundles 2 Grow in TV and IT services 3 Finalize Business transformation 4 Finalize build of flexible and simplified integrated network and operating model 5 Expand superior access position by deploying innovative technologies and

  30. Slide 30: Contents

    Contents 1 Strategy 2 Performance 3 Appendix

  31. Slide 31: Continued growth of fixed-mobile bundles in Consumer

    Continued growth of fixed-mobile bundles in Consumer Differentiates KPN from commoditized mobile-only players Customers in fixed-mobile bundles Convergence provides significant benefits Households1 Postpaid customers Higher NPS2 Lower churn3 47% all brands 40% 27 ~9% 33% 38% ~5% 13 Q2 ’16 Q2 ’16 Q2

  32. Slide 32: Strong household proposition supports continued revenue growth

    Strong household proposition supports continued revenue growth Fixed revenue growth driven by bundled services Solid performance inCLV illustratesmobile competitive focus on KPN brand environment 2.5% 1.5% 1.5% 2.5% 1.0% 0.0% €m €m 457 467 464 290 298 297 13 14 14 86 79 76 -12% 358 374 374 4.5% Q2 ’

  33. Slide 33: Business revenues impacted by rationalization and migrations

    Business revenues impacted by rationalization and migrations Growth in IT related services, IoT and Security Q2 ’17 y-on-y % Strong growth multi play revenues, 39k multi play net adds adjusted revenues growth of total Traditional fixed voice revenues impacted by rationalization and migrations to KPN

  34. Slide 34: SME: migrations from traditional fixed to multi play on track

    SME: migrations from traditional fixed to multi play on track Continued growth in multi play seats Rationalization and migration …adds to IT Continued growth KPN ÉÉN… of traditional fixed voice up- and cross-sell potential k 530 k 39 36 449 Leading reseller in The Netherlands 427 247 259 211 7 Cloud

  35. Slide 35: Revenue trend The Netherlands

    Revenue trend The Netherlands Adjusted revenues NL declined by 2.1% Adjusted revenues KPN Group €m -3.2% 1,676 1,623 €m 16 1,486 34 1 1,455 14 Q2 ’16 Q2 ’17 Adjusted revenues iBasis -12% Adj. revenues Consumer Business Wholesale Other (incl. Adj. revenues €m NL Q2 ’16 eliminations) NL Q2 ’17 218 192

  36. Slide 36: Adjusted EBITDA margin improved further

    Adjusted EBITDA margin improved further Simplification driving lower personnel and IT/TI expenses Adjusted EBITDA NL increased by 1.7%1 Adjusted EBITDA KPN Group 39.5% 41.0% €m 2 597 +1.5% 12 €m 587 7 592 601 20 31 1 2 3 Adj. EBITDA Revenues Cost of goods Personnel IT/TI Other Adj. EBITDA Q2 ’16 Q2

  37. Slide 37: Strong free cash flow growth

    Strong free cash flow growth Supported by different intrayear phasing compared to last year Growing operating free cash flow1… …and free cash flow2 +28% +151% €m €m 681 261 530 104 H1 ’16 H1 ’17 H1 ’16 H1 ’17 Free cash flow components €m 1,143 6 169 194 13 4 261 504 Reported Change in Change in Inte

  38. Slide 38: Solid financial position

    Solid financial position Lower debt y-on-y Debt portfolio  Net debt € 0.3bn lower vs. Q1 ’17 7.8  Sale of Telefónica shares completed in Q2 ’17 7.4 7.3 € bn  Free cash flow generated in Q2 ’17 6.8 6.5 Partly offset by: 6.2  Final dividend payment of € 6.7ct per share  Share buyback ~60% complet

  39. Slide 39: Contents

    Contents 1 Strategy 2 Performance 3 Appendix

  40. Slide 40: 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

  41. Slide 41: Leading in Corporate Social Responsibility

    Leading in Corporate Social Responsibility Successful CSR strategy1 Social and environmental achievements 2016  Long-term energy target to stay climate neutral until at least 2050 acknowledged by Science Based Targets Quality & Reliability Environment Privacy & Security initiative 79% 20% 96% of Bu

  42. Slide 42: Dutch wireless disclosure

    Dutch wireless disclosure Service revenues (€ m) Q2 ’17 Q2 ’16 y-on-y % Consumer 297 290 2.4% Business1 163 167 -2.4% Other2 36 39 -0.8% KPN The Netherlands 496 496 0.0% SAC/SRC per subscriber (€) Q2 ’17 Q2 ’16 y-on-y % Consumer (postpaid)3 192 225 -15% Business (mobile only – mainly SME) 217 240 -9

  43. Slide 43: 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 interest 1.1 0.9 1.0 0.8 0.6 0.6 0.6 0.6 0.6 0.5 0.4 0.5 0.1 Fixed3 100% ’18 ’19 ’20 ’2

  44. Slide 44: 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

  45. Slide 45: 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 45

  46. Slide 46: 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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