Royal KPN NV · EURONEXT:KPN
Royal KPN NV — KPN — Investor Presentation (December 2009)
39 slides from Royal KPN NV's investor presentation, Dec 15, 2009
Slide 1: Update on KPN’s fiber roll-out
Update on KPN’s fiber roll-out Next phase in Consumer strategy 15 December 2009
Slide 2: Safe harbor
Safe harbor Non-GAAP measures and management estimates This presentation contains a number of non-GAAP figures, such as ‘existing’ and ‘disposed’ revenues and other income, EBITDA and free cash flow. These non-GAAP figures should not be viewed as a substitute for KPN’s GAAP figures. KPN defines EBIT
Slide 3: Agenda
Agenda Introduction Baptiest Coopmans, MD Consumer Current market position Baptiest Coopmans, MD Consumer Evaluation fiber pilots Baptiest Coopmans, MD Consumer Ambition going forward Eelco Blok, MD Business/W&O/Getronics Concluding remarks Eelco Blok, MD Business/W&O/Getronics 3
Slide 4: Introduction
Introduction • KPN believes FttH is the long-term superior technology and will proceed with fiber in the Netherlands • Commercial fiber pilots in 2x5 cities since H2 ’08, testing penetration and ARPU uplift • Encountered operational issues, actions taken to enable ramp-up • Pilots delivering promisi
Slide 5: FttH benefits
FttH benefits Providing new applications for society, but roll-out takes time Benefits Fiber-to-the-Home (FttH) Examples other countries Current portfolio • FttH rolled out in several other countries Telephony Broadband TV – Denmark – Japan – Singapore – South Korea – United States Supporting future
Slide 6: Trends in Dutch Consumer market
Trends in Dutch Consumer market Increasing demand for higher bandwidths and higher quality TV services Bandwidth TV Triple play • Steady growth in demand for • Increasing demand for higher • Demand for triple play bundles higher bandwidths quality digital TV services with increasing rapidly interact
Slide 7: Key beliefs KPN
Key beliefs KPN FttH is superior technology, mix of infrastructures going forward FttH superior TV proposition Copper still competitive • FttH considered to be long-term • TV proposition key in competitive • Bandwidths on copper superior solution for the Dutch triple-play package infrastructure stil
Slide 8: Agenda
Agenda Introduction Baptiest Coopmans, MD Consumer Current market position Baptiest Coopmans, MD Consumer Evaluation fiber pilots Baptiest Coopmans, MD Consumer Ambition going forward Eelco Blok, MD Business/W&O/Getronics Concluding remarks Eelco Blok, MD Business/W&O/Getronics 8
Slide 9: Competitive and technological landscape
Competitive and technological landscape Market consolidated in past years, rapid adoption of new technologies 2005 2009 • 1 incumbent • 1 incumbent Market • 6 cable operators • 4 cable operators • 7 alternative DSL operators • 3 alternative DSL operators • 5 mobile operators • 3 mobile operators • P
Slide 10: Consumer strategy
Consumer strategy Delivering substantial results over the past years Key elements Consumer strategy Results • Multi-brand strategy focusing on • Net line loss at relatively low levels different segments – ~140k/quarter in ‘06, ~50k/quarter in ‘09 • Managing customer base for value • Broadband market
Slide 11: Market position
Market position Stable broadband market share KPN, continued growth in TV Market position KPN Comments market share 44% 44% 44% 44% 44% Broadband 40% 41% • KPN market share stable at ~44% since 38% mid-2007, following several acquisitions 34% 32% • Broadband market growth slowing down, due to high b
Slide 12: Branding and distribution
Branding and distribution Successful multi-brand strategy and leading position in distribution Simplification Multi-brand strategy Distribution • Strong progress in • Multiple brands targeting • Leading position in distribution simplification of services and different market segments based on three
Slide 13: Agenda
Agenda Introduction Baptiest Coopmans, MD Consumer Current market position Baptiest Coopmans, MD Consumer Evaluation fiber pilots Baptiest Coopmans, MD Consumer Ambition going forward Eelco Blok, MD Business/W&O/Getronics Concluding remarks Eelco Blok, MD Business/W&O/Getronics 13
Slide 14: Overview fiber KPN / Reggefiber
Overview fiber KPN / Reggefiber About 900k homes passed, or 14% of Dutch households, with fiber per Q3 ’09 Fiber-to-the-Home (FttH) Fiber-to-the-Curb (FttC) Network • Network rolled out and operated by Reggefiber JV • Network rolled out and operated by KPN • KPN owning 41% stake in JV • Customers ac
Slide 15: Commercial pilots
Commercial pilots Commercial pilots in 2x5 cities to evaluate uplift in penetration and ARPU Overview fiber pilots • 2x5 cities selected in 2008 for assessment of commercial success • Testing operational processes for fiber roll-out D – Network roll-out A 3 E – Regional marketing approach 1 5 – Cust
Slide 16: Operational learnings from fiber pilots
Operational learnings from fiber pilots Focus on scalability issues, taking time to fine-tune processes Network roll-out Delivery processes and IT Sales and marketing • Roll-out of homes passed on • Scalability issues with new • Local marketing approach track delivery processes and IT – Service cent
Slide 17: Propositions fiber pilots
Propositions fiber pilots Transparent triple-play packages FttH and FttC Gold Silver Bronze Price per month € 110 € 80 € 65 Up to 100 Mb download 50 Mb download 30 Mb download Broadband 6 Mb upload 5 Mb upload 3 Mb upload >100 channels >70 channels >50 channels FttH TV (incl. football package) IPTV
Slide 18: IPTV proposition on fiber
IPTV proposition on fiber Competitive advantage vs. cable TV propositions TV key part of • TV key in buying triple-play package triple-play bundle • Move towards single provider for all services Product • Interactive TV with multi-room HD capabilities characteristics • Extensive Video-on-Demand libr
Slide 19: Consumer feedback
Consumer feedback Overall positive feedback on fiber Customer quotes taken from Net Promoter Score survey Oct – Dec 2009 1) “Fast broadband “Very complete, excellent connection, good service “Wonderful image” service, no complaints!” and helpdesk” “Upload speeds should be much higher” “We want BBC!”
Slide 20: FttH pilot results
FttH pilot results First phase FttH results show market penetration in line with expectations Current penetration Further increase in penetration 70% FttH Homes Contracted1 Phase 2 Penetration 60% • Higher upload speeds Son & Breugel Haaksbergen 50% • Triple- & Dual-play Almere Haven Elburg • Ramp-u
Slide 21: FttH pilot results (cont’d)
FttH pilot results (cont’d) Promising trends in market penetration Overall market penetration1 • FttH taking share from cable and other 70% operators in fiber areas 60% Total 50% +3% – Overall market penetration up 3%-points 40% to 61% Copper 30% Fiber 20% • Customers buying more services from 10% K
Slide 22: FttH pilot results (cont’d)
FttH pilot results (cont’d) ARPU increase from higher proportion of multi-play customers € ARPU1 • Customers willing to pay for fiber 60 Fiber services 50 – Indicated by average ARPU of ~€ 60 Total – Premium on fiber, based on high 40 +€ 8 bandwidths offered and multi-room HDTV Copper capabilities 3
Slide 23: FttC pilot results
FttC pilot results Commercial success in one area, other areas still in progress Current penetration Comments FttC Homes Contracted1 • Short effective sales period in FttC areas due to stop of active sales Penetration Hengelo, Oosterhout 50% – Start of active sales in March/April 2009 Zoeterwoude –
Slide 24: Business case
Business case Positive business case for fiber, leading to regional roll-out FttH FttC Pay-back • Business case for average area of • Business case for average area of period 1,000 homes indicating pay-back 1,000 homes indicating pay-back period of ~8 years period of 4-5 years • Pay-back period long
Slide 25: Key learnings fiber pilots
Key learnings fiber pilots • KPN believes FttH is the long-term superior technology • Focus on operational excellence following scalability issues • Promising commercial results based on penetration and ARPU • TV proposition key in competitive triple-play package • Consumer feedback indicating deman
Slide 26: Agenda
Agenda Introduction Baptiest Coopmans, MD Consumer Current market position Baptiest Coopmans, MD Consumer Evaluation fiber pilots Baptiest Coopmans, MD Consumer Ambition going forward Eelco Blok, MD Business/W&O/Getronics Concluding remarks Eelco Blok, MD Business/W&O/Getronics 26
Slide 27: Fiber going forward
Fiber going forward Gradual fiber roll-out, complemented with wireless services 2009 2010 2012 Medium term tive t ive stra stra Illu Illu Fiber Wireless Fiber Wireless • Copper network • Intermediate step • Further roll-out and • Further fiber roll-out, based on ADSL2+ with VDSL upgrade, commerciali
Slide 28: Infrastructure
Infrastructure Deploying mix of technologies going forward ADSL on copper VDSL from FttC FttH Wireless central office (VDSL-CO) Central office Central office (ADSL2+) (VDSL2) ODF1 Street Street Street cabinet cabinet cabinet up to 20 Mb/s down up to 40 Mb/s down 30-50 Mb/s down >100 Mb/s >14 Mb/s do
Slide 29: Reggefiber
Reggefiber Further FttH roll-out continues to be executed through Reggefiber JV Ownership structure • JV offering open access model for other service providers and active operators Reggeborgh • Financing for further roll-out in progress – Reggefiber expecting to secure external financing 41% Reggefi
Slide 30: Fiber Capex overview
Fiber Capex overview Different stages in roll-out process have different Capex and parties involved Homes passed Homes connected Homes activated • Install own equipment and What • Roll-out of dark fiber to • Install FTU2 in homes provide (wholesale) premises services FttH Who • KPN • Reggefiber • Re
Slide 31: KPN service portfolio per Q2 ’10
KPN service portfolio per Q2 ’10 Transparent multi-play packages, symmetrical speeds on FttH List prices Basic / Bronze Extra / Silver Premium / Gold (incl. VAT) 30 Mb download, 50 Mb download, 100 Mb download, FttH € 65 30 Mb upload € 80 50 Mb upload € 110 100 Mb upload Broadband Copper /FttC Up to
Slide 32: Ambition 2010-2012
Ambition 2010-2012 Gradual migration to fiber, no material impact on Capex Fiber VDSL-CO • Targeting 600-800k active customers on • VDSL upgrade on copper network FttH/FttC by 2012 completed by Q2 ’10 – Leveraging FttH infrastructure that – 50% of households with higher broadband Reggeborgh contribu
Slide 33: Network efficiency through All-IP
Network efficiency through All-IP Focus on cash flow generation while migrating to IP Strategy as announced in 2005 Focus going forward • Ramping up new services like VoIP, • Legacy infrastructure operated longer broadband and TV than initially planned – High cash flow generation • Maintaining marke
Slide 34: Regulation
Regulation Regulatory clarity for fiber, but not stimulating large-scale roll-out • Meeting increasing data demand with mix of infrastructures KPN view on – Fixed networks for TV and broadband in densely populated areas infrastructure – Wireless technology option for less densely populated areas • I
Slide 35: Agenda
Agenda Introduction Baptiest Coopmans, MD Consumer Current market position Baptiest Coopmans, MD Consumer Evaluation fiber pilots Baptiest Coopmans, MD Consumer Ambition going forward Eelco Blok, MD Business/W&O/Getronics Concluding remarks Eelco Blok, MD Business/W&O/Getronics 35
Slide 36: Concluding remarks
Concluding remarks • KPN believes FttH is the long-term superior technology and will proceed with fiber in the Netherlands • Operational issues in fiber pilots, promising commercial results so far • Fiber roll-out takes time, partly as a result of limited roll-out capacity • Ambition for 30-60% fibe
Slide 37: Q&A
Q&A
Slide 38: Annex
Annex For further information please contact KPN Investor Relations Tel: +31 70 44 60986 Fax: +31 70 44 60593 ir@kpn.com www.kpn.com/ir
Slide 39: Unbundling tariffs
Unbundling tariffs SLU, ODF, colocation set by OPTA; backhaul and WBA based on deal pricing Unbundling in current network Category Monthly tariff Line sharing (LLU)1 € 0.19 / line MDF Node Fully unbundled (LLU)1 € 7.83 / line SDF colocation KPN / Telco MDF colocation1 € 874 / footprint / year ~28,00