Royal KPN NV · EURONEXT:KPN
Royal KPN NV — Investor Presentation (May 2018)
45 slides from Royal KPN NV's investor presentation, May 2018
Slide 1: Investor Presentation May 2018
Investor Presentation May 2018
Slide 2: Contents
Contents 1 Strategy 2 Performance 3 Appendix
Slide 3: Strategy: Strategic choices embedded in organization
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 3.1% 3.2% 2.3% 2.2% The Netherlands 4 - Germany 5 - 2015 2016 2017 2018E United Kingdom 8 -1 Unemployment NL1 6.9% 6.0% Denma
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% 53% 13 all brands 43% Consumer tot
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: Enabling digital customer interaction
Enabling digital customer interaction Driving cost savings and potential new revenue streams Increase of digital customer interaction WeChat Go Europe platform supporting lower contact center costs in Consumer offering in-app purchases +11% -21% -14% KPN enabled app and connectivity for Chinese tour
Slide 12: 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 13: 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 14: 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 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 provider Integrating Mobile IT systems delivers Benefits: Improved time-to-market ~€ 50m run-rate savings in total from decommissioned legacy IT Fo
Slide 16: 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 17: Growth in IT services and IoT
Growth in IT services and IoT Nationwide IoT network supporting leading position Upsell security portfolio through KPN ÉÉN SME Full IoT service offering leading to strong growth Data driven solutions Offered as plug & play end-to-end KPN Things services solution KPN ÉÉN customers Connectivity Hardwa
Slide 18: Simplifying operating model and expanding superior network position
Simplifying operating model and 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 in
Slide 19: 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 20: 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 21: 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 | 21
Slide 22: 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 23: 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 24: 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 25: 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 26: 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 27: 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 28: 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 29: Contents
Contents 1 Strategy 2 Performance 3 Appendix
Slide 30: Continued focus on value in competitive Consumer mobile environment
Continued focus on value in competitive Consumer mobile environment KPN brand resilient through high convergence penetration Service revenues impacted by regulation Focus on retention …through successful and price pressure in mobile-only of high value customers… convergence strategy €m -9.0% flat 22
Slide 31: Sustained revenue growth in Consumer residential
Sustained revenue growth in Consumer residential Continuously improving excellent customer experience Further fixed-mobile Continued New fully integrated TV-offering households growth1 fixed revenue growth €m +2.1% 43% 476 467 39% Q1 ’17 Q1 ’18 Q1 ’17 Q1 ’18 New IPTV app with leading user interface
Slide 32: Good progress in Business transformation
Good progress in Business transformation Simplified portfolio driving improved customer satisfaction Business revenue growth drivers Improving customer satisfaction Q1 ’18 Q1 ’18 adjusted % of total y-on-y growth adj. revenues Communication Services -8.7% 63% Mobile service revenues -7.9% 24% IoT 40
Slide 33: Revenues impacted by regulation
Revenues impacted by regulation Adjusted revenues NL declined by 3.4% €m 1,451 20 13 9 1,401 26 Adj. revenues NL Q1 ’17 Consumer Business Wholesale Other (incl. Adj. revenues NL Q1 ’18 eliminations) -1.3% Growth of adjusted revenues NL, excluding € 31m regulation impact (roaming & MTA / FTA) Investo
Slide 34: Adjusted EBITDA growth driven by Simplification and digitalization
Adjusted EBITDA growth driven by Simplification and digitalization Adjusted EBITDA NL increased by 2.2% 38.3% 40.6% €m 20 569 556 Lower traffic costs due to 17 1 reduction MTA tariffs 28 3 50 Ongoing Simplification and 2 digitalization savings 1 2 3 Adj. EBITDA NL Revenues Cost of goods Personnel IT
Slide 35: Solid financial position supported by growing free cash flow
Solid financial position supported by growing free cash flow Growing free cash flow1 Lower debt level €m € bn 122 7.4 7.2 7.2 6.5 6.0 5.8 2.8x 2.6x 2.5x 29 Q1 ’17 Q1 ’18 Q1 ’17 Q4 ’17 Q1 ’18 Gross debt2 x.x x.x Net debt / EBITDA Net debt 1 All figures based on continuing operations. iBasis classifie
Slide 36: Contents
Contents 1 Strategy 2 Performance 3 Appendix
Slide 37: 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 38: 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 39: Dutch mobile service revenues
Dutch mobile service revenues Service revenues (€ m) Q1 ’18 Q1 ’17 y-on-y % Consumer 208 228 -9.0% Business1 137 145 -5.2% Other2 36 37 -4.2% KPN The Netherlands 381 411 -7.2% 1 Includes M2M service revenues Investor presentation | Appendix | Dutch wireless | 39 2 Includes amongst others Wholesale m
Slide 40: Debt portfolio
Debt portfolio Breakdown nominal debt1 (total € 8.3bn) Nominal debt by currency Other 2% GBP2 Hybrid bonds 24% 24% Euro bonds EUR 65% 61% Global bonds USD2 9% 15% Bond redemption profile (€ bn) Fixed vs. floating interest3 1.1 0.9 1.0 Floating 0.8 15% 0.6 0.6 0.6 0.6 0.6 0.5 0.4 0.5 0.1 Fixed ’18 ’1
Slide 41: IFRS changed revenue recognition rules
IFRS 15 changed revenue recognition rules Example 1: Handset sales via own channels Accounting for this example Contract components (€) Value Revenue / (€) Month 1 Month 2 … Month 24 Total cost Non-service revenue (handset) 528 - … - 528 Contract duration (months) 24 Service revenues 30 30 … 30 720
Slide 42: IFRS changed revenue recognition rules (cont'd)
IFRS 15 changed revenue recognition rules (cont’d) Example 2: Handset sales via third parties Accounting for this example Contract components (€) Value Revenue / (€) Month 1 Month 2 … Month 24 Total cost Service revenues 30 30 … 30 720 Contract duration (months) 24 P&L Total revenues 30 30 … 30 720
Slide 43: 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 44: 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 | 44
Slide 45: 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 (‘