Royal Kpn Nv · EURONEXT:KPN
Royal Kpn Nv — KPN — Investor Day (2020)
61 slides from Royal Kpn Nv's investor day presentation, 2020
Slide 1: Fast Forward Fiber
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Slide 2: Strategy Update 2020
Strategy Update 2020 T kpn. The network of the Netherlands R 2) kpn
Slide 3: Solid foundation in place, momentum is accelerating
Solid foundation in place, momentum is accelerating Fiber rollout accelerating & HP/week) _. °23 avg. 2019 H1 2019 H2 2019 =H12020 = Oct 2020 Strong cost savings discipline € 256m YTD 2020 2019 net indirect opex savings realized in latest program YTD 2020° 3. Strategy Update 2020 & kpn
Slide 4: Acceleration supported by three key pillars
Acceleration supported by three key pillars Three strategic pillars... ..fo Support our ambition to p . Leverage & expand superior network Covering the Netherlands through fiber . * Low latency services via 5G and edge computing Connect the Netherlands to a sustainable future * Leading the Dutch dig
Slide 5: Supportive industry trends, telcos more relevant than ever
Supportive industry trends, telcos more relevant than ever i heehee? & Demand for more connectivity Ecosystem business models Artificial Intelligence enabling + and better, differentiated neural B2B networks offerings 14 15 16 17 18 19 20 21 22 23 24 25 Massive data growth over the years Work/life b
Slide 6: The Netherlands: an attractive environment to do business
The Netherlands: an attractive environment to do business 6 Outperforming economy in Europe ¢% co? growth y-on-yy 2020 2219 2926 2419 17°13 _ —_ = = —_ P| -5.0 -80 2015 2016 2017 2018 2019 2020 Hi NL Eurozone AAA country extending COVID-19 support into 2021 (% debt/GDP ratioy 103 cor 90 88 86 84 i 7
Slide 7: The Netherlands: leading in digitalization
The Netherlands: leading in digitalization Frontrunner on digitalization’ =] Digitalization Index Lowest latency in Europe’ milliseconds Amsterdam — London Best performer Digital Infrastructure Digital Intensity Largest Internet exchange hub in Europe 7 Strategy Update 2020 & kpn
Slide 8: KPN well positioned in mature three-player market
KPN well positioned in mature three-player market 8 Strategy Update 2020 Fixed access Broadband network market share TV product perception (1-10) TV market share Mobile network quality Mobile value market share Fixed-mobile convergence Business market presence Business market capabilities & kpn FItH
Slide 9: Network of the Netherlands
Network of the Netherlands Revenues Wholesale 12% broadband 4.2m customers ~52% total broadband network share’ Business 236Mbps average maximum download speed’ Up to 1Gbps commercially available’ Consumer Investing in the future of the Netherlands >€ 1bn annual Capex mobile Biggest private investor
Slide 10: Integrated model to optimize value creation
Integrated model to optimize value creation wo 3 Fi Complementary cash flow profiles £ Hl P asin s Margin versus capital intensity a B2B Wholesale Optimized network penetration Service provider Retail + Wholesale 2 Integrated service approach a Digital interface Commercializing fiber rollout Network
Slide 11: Qualified & motivated workforce ready to accelerate digitalization of NL
Qualified & motivated workforce ready to accelerate digitalization of NL employees Purpose We go all out to connect everyone in *9 v the Netherlands to a sustainable future Vision To make the Netherlands the most connected country in the world 77% Ambition Your preferred partner in digital life serv
Slide 12: ESG fully embedded in strategy and organization
ESG fully embedded in strategy and organization g nase wana Industry, innovation ji) & infrastructure Secure future-proof infrastructure Sustainable cities (7 & communities ‘ Ed ABS Energy Social efficiency & digital & circularity inclusion (y) | Responsible consumption CONSUMPTION wit) & production
Slide 13: ESG milestones and ambitions recognized by leading benchmarks
ESG milestones and ambitions recognized by leading benchmarks Important milestones crossed... Carbon neutral for own operations >30% women in senior management 2015 v 2023 2011 ¥ 2020 v 2025 100% >30% gender ~100% green energy diversity at circular Board level Rankings & awards in 2020 Member of Dow
Slide 14: Accelerate Digitalization
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Slide 15: Acceleration supported by three key pillars
Acceleration supported by three key pillars Three strategic pillars... ..fo Support our ambition to p . Leverage & expand superior network Covering the Netherlands through fiber . * Low latency services via 5G and edge computing Connect the Netherlands to a sustainable future * Leading the Dutch dig
Slide 16: State-of-the-art, future-proof network design
State-of-the-art, future-proof network design Copper legacy will mostly be phased out eventually We built a state-of-the-art network Next step 1,300 central offices 4 core locations Covering the 31,000 street cabinets 161 meno core locations Netherlands ~89% Fis ~8.5m copper lines ~53% FH through fi
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Slide 18: Strong fiber foundation
, Strong fiber founc¢ <100k HP © 100-200k HP @ 200k He 18 Strategy Update 2020 La rgest fiber footprint in NL ~33% FitH coverage (2.7m HP) as per Q3 2020 90 construction areas and growing Scaling up rollout to ~10k HP per week Upgrading copper to fiber (overlay areas) New built areas +7.6% B2C fiber
Slide 19: Leverage superior network: attractive returns from fiber
Leverage superior network: attractive returns from fiber Significantly higher network penetration over time’ Customers increasingly willing to pay for quality sox “75% 7 5054 > ~50% a A ~50% 50-60% 510% t 555% >55% Inflow >100Mbps Average VAS B2C ARPU revenue per user Copper [ll Fiber YO-1 Y4-7 Y7+
Slide 20: Creating value through fiber investments
Creating value through fiber investments Retail + Wholesale Penetration rate development over time (%) ARPU Business case Penetration rate uplift _ €54 retail 2 “ Higher wholesale Fiber revenue & Fiber tariff my Rollout 5 start = + Copper € 50 retail 2 Copper revenue loss cs Penetration rate decline
Slide 21: Expand superior network: the leading fiber company in the Netherlands
Expand superior network: the leading fiber company in the Netherlands Accelerating fiber rollout to base case ~500k HP annual run ratew Ambition to cover the Netherlands with FttH’ ~500 ~300 >80% 2019 2020 2021-2025 2019 2020 2023 2025 Ultimate goal Secured contracting capacity Sophisticated rollout
Slide 22: Wholesale open access model adding value to the fiber case
Wholesale open access model adding value to the fiber case Contributing to the Netherlands... ..and to KPN a Offer Dutch citizens access Optimizing value creation through increased to superior networks utilization of fixed and mobile network oe” yo Accelerating digitalization in the Netherlands Attr
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Slide 24: Differentiated 5G services for B2B customers
Differentiated 5G services for B2Cdriven B2Bdriven : nationwide 4G B2C driven coverage F industr 5G B2B driven wOURONS 24 Strategy Update 2020 B2B customers 100x faster 100x more connected devices (1 million per km?) 5x faster response times (5 ms) Slicing of virtual networks Mission-critical commun
Slide 25: 5G strategy focused on offering differentiated services in specific industries
5G strategy focused on offering differentiated services in specific industries 25. Strategy Update 2020
Slide 26: Accelerate to grow: leverage & expand superior network
Accelerate to grow: leverage & expand superior network ..fo0 Support our ambition to Connect the Netherlands to a sustainable future ¢ Leading the Dutch digitalization wave * Recognized as ESG front runner Grow mass-market service revenues and EBITDA ¢ Fiber fueling household revenue growth in B2C *
Slide 27: Accelerate to grow
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Slide 28: Mass-market service provider generating most attractive margins
Mass-market service provider generating most attractive margins B 2 Cc Revenues Adj. EBITDA AL’ ~10% ~25% SA L E HM 82, SME, Wholesale Other B2B 28 Strategy Update 2020 1, End-to-end adj. EBITDA AL YTD 2020, management estimate (& & x 5°) 3
Slide 29: B2C: Preferred digital partner for households
B2C: Preferred digital partner for households Front runner on product innovations with strong household focus Propositions 2013 FMC (KPN Compleet) 2019 Flexible offering (KPN Hussel) Digital partnerships 2011 Spotify 2015 Netflix 2019 Amazon Brand convergence 2015 Hi 2019 Telfort 29. Strategy Update
Slide 30: B2C: Base developments turning in the right direction
B2C: Base developments turning in the right direction Broadband net adds’ a —_—" \ KPN brand: +51k Postpaid net adds — oO NN CPN brand 879K 18Q1 18Q2 18Q3 18Q4 1901 19Q2 19Q3 1904 201 20Q2 20Q3 30 Strategy Update 2020 & kpn
Slide 31: B2C: Strong brand position facilitating growth of flagship KPN brand
B2C: Strong brand position facilitating growth of flagship KPN brand Built strong flagship KPN brand... B aT &kpn (Gsaait) © simyo o +15 Consumer NPS >2m Broadband RGUs 49 % Ce ob netration ° L >3m Mobile SIMs 60 % Soe MP bIl tration 31. Strategy Update 2020 2. Brand Finance 2019 1 Flagship brand Pl
Slide 32: B2C: Providing best omni-channel experience with customer in control
B2C: Providing best omni-channel experience with customer in control Launching a new app enabling telco at your fingertips... ..in every part of the customer journey ans Onboarding Delivery status Razendsnelglasvere! cate Installation guide Nieuw abonnenent an Household mo weit Cross-sell & retentio
Slide 33: B2C: Flexible offering focusing on households
B2C: Flexible offering focusing on households wo a vy 2 5 S g S z Gaming = Ee 3 + 2 2 3 (J wo c = 3° Broadband 33. Strategy Update 2020 KPN Hussel NETFLIX Pay TV & OTT o Mobile (ny Smarthome TV Unique & clearly differentiated Proposition Single app-based platform Customer in control Home of entertai
Slide 34: B2C: Return to service revenue growth by end 2021
B2C: Return to service revenue growth by end 2021 Base growth Fiber base growth offsetting copper decline Mobile driven by Unlimited and convergence B2C service revenue growth by end 2021 Higher ARPA Driven by household value steering 34 Strategy Update 2020 & kp n
Slide 35: B2B: Clearly segmented customer focus
B2B: Clearly segmented customer focus Small & Medium Enterprises (SME) >> Modular future-proof portfolio Converged propositions >> KPN Small Business >> KPN EEN Return to growth »> Increased product density »» Customer migrations ~35% B2B Adj. service revenues contribution Co} B2B Adj. EBITDA AL ~50
Slide 36: B2B: Moving in the right direction despite revenue challenges
B2B: Moving in the right direction despite revenue challenges Underlying B2B revenue trend improving’ YTD trend impacted by COVID and strategic actions €m 43% 45% 5.9% 5.8% —— —— 73% -8.6% 2015 2016 2017 2018 2019 YTD 2020 YTD 2019 COVID-19 Migrations — Non- Other YTD 2020 service 36 Strategy Update
Slide 37: SME: Distinctive KPN EEN proposition as solid foundation for growth
SME: Distinctive KPN EEN proposition as solid foundation for growth Modular offering for Small & Medium Enterprises Integration 37 Strategy Update 2020 Strongly growing KPN EEN subscribers 673 4 949 O19 48 278 «304 «334 368 402 430 462 18Q1 18Q2 18Q3 18Q4 19Q1 19Q2 19Q3 19Q4 20Q1 20Q2 20Q3 BB KPN EE
Slide 38: SME: Service revenue stabilization by end 2021
SME: Service revenue stabilization by end 2021 Finalizing migrations and cross-sell opportunities fueling revenue stabilization ~ 6% of 2021 revenues in legacy products O vs. 40% in 2019 >20% of KPN EEN base in triple play Double play biggest within KPN EEN base SME service revenue stabilization by
Slide 39: LCE: Platform positioning with future-proof proposition
LCE: Platform positioning with future-proof proposition Standardized offering for Large & Corporate Enterprises Workspace Services Security & Continuity 39 Strategy Update 2020 LCE customer migrations on track Q2 2019 Q4 2019 Q3 2020 Return to growth driven by »> Gradually decreasing impact of ratio
Slide 40: B2B: Digital transformation to improve customer experience
B2B: Digital transformation to improve customer experience Dig italizi NJ customer journeys Positive NPS on goal portfolio 9 7 Improving operational excellence | 7 cL “4 roducts currently Legacy KPN EEN Target portfolio -50% byend 202" 42% SMe ce oy IT systems currently -75% by end 202% 60% 40 Strat
Slide 41: Wholesale: Sustainable growth from open access model
Wholesale: Sustainable growth from open access model Growing broadband base 877 906 935 957 978 993 1,016 BEEBEBEEE Q12019 Q22019 32019 Q4 2019 Q12020 22020 Q3 2020 Gl ope MDF Ml wea Long-term commercial MVNO agreements 715 772 774. 761 751 758 7719 Q12019 Q22019 Q32019 Q4 2019 Q12020 Q2 2020 Q3 202
Slide 42: Accelerate to grow: grow and strengthen customer footprint
Accelerate to grow: grow and strengthen customer footprint ..fo0 Support our ambition to Connect the Netherlands to a sustainable future * Leading the Dutch digitalization wave * Recognized as ESG front runner Grow mass-market service revenues and EBITDA * Fiber fueling household revenue growth in B
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Slide 44: Momentum to embed digitalization in all layers of the organization
Momentum to embed digitalization in all layers of the organization Customers Digital employee mindset & capabilities 44 Strategy Update 2020 Digital mindset in organization & new way of working »» Flexible new way of working »» Further develop digital capabilities & kpn
Slide 45: Strongly simplified IT architecture to accelerate digitalization
Strongly simplified IT architecture to accelerate digitalization Web Customer touchpoints Ce OTTservices Cy Shop Callcenters = Mechanics tf & Xx Uniform digitallayer Customer interaction layer (BSS) SalesB2B 2 SK —4 ) ) Big steps in IT simplification in past years KPN B2C KPN B2C REN, B28, ‘aa’ i ‘I
Slide 46: How we work: digital mindset & new ways of working
How we work: digital mindset & new ways of working fos &S (2) 2 q Personal * Flexible working opportunities * High vitality & engagement * Build future digital skills Collaborative * Reimagine offices * Improve collaboration * Enable innovation High performing * Improve outcome, focus on results * S
Slide 47: Accelerate to grow: simplify & streamline operating model
Accelerate to grow: simplify & streamline operating model ..fo Support our ambition to Connect the Netherlands to a sustainable future * Leading the Dutch digitalization wave * Recognized as ESG front runner Grow mass-market service revenues and EBITDA ¢ Fiber fueling household revenue growth in B2C
Slide 48: Financials
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Slide 49: Delivering strong margins and cash generation vs. EU peers
Delivering strong margins and cash generation vs. EU peers Adjusted EBITDA (AL) margin KPN vs. Europe.) if 44 43 41 41 41 40 40 39 «7 3735 SOA Oovoodose OF S Steadily improving ROCE «) Operational free cash flow margin KPN vs. Europe.) 98 29 4 23 23 2 19 90 92 8 17__»_1 7 2018 2019 12020 6eeqQonoosg
Slide 50: Growing mass-market revenues and next wave cost savings
Growing mass-market revenues and next wave cost savings Return to growth in B2C Initial € 350m target ~17% of 2018 cost base Stabilize sme 7 5 256 Continued growth Wholesale jini | 375-400 FY 2019 YTD 2020 Total end Additional Q3 2020 savings Growing mass-market service revenues by end 2021 50. Stra
Slide 51: Five main contributors to next wave of cost savings program
Five main contributors to next wave of cost savings program Portfolio simplification Digital customer journey >> B2C+SME: app as primary touchpoint IT rationalization >> CRM and Service & Operations >» Move to three integrated IT stacks »> ERP implementation >> Simplify network-related IT ict portfo
Slide 52: Making clear investment decisions: accelerate fiber
Making clear investment decisions: accelerate fiber Increasing fiber investments. bn) G 5 1.1 Capex to increase to € 1.1-1.2bn in 2021-2023 Fiber € 450-500m + € 1.2bn 2021 Nonfiber €981m € 820-850m €700-750m = € 1.1-1.2bn 2022-2023 2019 2020 2021 Capex / sales «) Fiber 23 5-6 8-10 Norfiber 182 16-17
Slide 53: Clear Free Cash Flow growth trajectory
Clear Free Cash Flow growth trajectory Outlook 2020 2021)-on-y 2022+ y-on-y Cash interest paid . 2021: ~€ 30m interest Adjusted EBITDA AL ~€2,320m A A driv y bond redemptior refinancing Capex €1.1bn A 4 Cash restructuring Incidentals Cash taxes paid 202 Om c Change in provisions due to limited pean
Slide 54: Robust liquidity position & committed to investment grade credit profile
Robust liquidity position & committed to investment grade credit profile Robust liquidity... a 1,250 ..covering debt maturity until 2023 Leverage profile 2,042 465 1,694 27x - = - = Cash & RCF Total Debt Debt First call Remaining Q3 2018 Q3 2019 Q3 2020 short term liquidity end maturities maturities
Slide 55: Further expanding margins going forward
Further expanding margins going forward Adjusted EBITDA (AL) margin KPN vs. Europe.) 44 43 41 41 41 40 40 39 37 37 2 OOFOSCOGOES Operational free cash flow margin KPN vs. Europe 29 24 23-23 22 98 76g 7 S20 G&OOOT>#E SG 55. Strategy Update 2020 ° Opportunity to increase margin >46% Ambition to move t
Slide 56: Outlook 2021 and ambitions 2023
Outlook 2021 and ambitions 2023 Outlook Outlook Ambitions FY 2020 FY 2021 FY 2023 Adj. EBITDA AL ~€ 2,320m Growth >€2,450m Capex € 11bn €1.2bn € 14-1.2bn Free Cash Flow ~€ 750m ~€ 750m >€ 870m Regular DPS € Bcents Progressive Progressive +3-5% annual growth +3-5% annual growth 56 Strategy Update 202
Slide 57: Continue attractive shareholder returns
Continue attractive shareholder returns Committed to progressive dividend policy 10 2014 = =2015 = 2016 BE Regular DPS (€ ct) 57. Strategy Update 2020 2017 2018 2019 2020 2021 2022 2023 & kpn
Slide 58: Wrap up and Q&A
Wrap up and Q&A Accelerate fiber Digitalize customer journeys Grow mass-market revenues Next wave cost savings Progressive dividend & kpn
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Slide 60: Safe harbor
Safe harbor Alternative performancemeasuresand managementestimates 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 (FCF)
Slide 61: KPN Investor Relations
KPN Investor Relations @ irkpn.com