Royal KPN NV · EURONEXT:KPN
Royal KPN NV — KPN — Q4 2019 Earnings Presentation
39 slides from Royal KPN NV's earnings presentation, Jan 29, 2020
Slide 1: Q4 & FY 2019 Results
Q4 & FY 2019 RESULTS 29 January 2020
Slide 2: 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 (‘
Slide 3: Operational highlights FY 2019
Operational highlights FY 2019 good progress on the execution of our strategy The best converged Focus on profitable Accelerating smart infrastructure growth segments simplification & digitalization Accelerated fiber roll-out strategy Consumer: focus on households Digital transformation and converge
Slide 4: The best converged smart infrastructure: 2019-2021 strategy
The best converged smart infrastructure 2019 – 2021 strategy Fiber roll-out Full mobile network Moving to All-IP acceleration modernization +1 million 100% 100% FttH households by end 2021 by end 2021 5G ready by end 2021 Stable Capex envelope € 1.1bn 4 substantial shift in mix from ~35% to ~50% acc
Slide 5: Fiber roll-out acceleration
Fiber roll-out acceleration progress made in 2019 FttH roll-out in Future proof FttC roll-out progress technology nearly finalized ~120k Deploying latest technologies G-PON & XGS-PON ~390k additional households additional households1 1Gbps proposition will become available on fiber >70 new projects
Slide 6: FttH access investments
FttH access investments driving higher returns in Consumer +2 +€ 6 +6%pt Convergence -40% NPS1 Fixed ARPU penetration Churn Fiber vs. Copper customers Q4 2019 KPN brand 6 1 Source: Kantar TNS
Slide 7: Full mobile network modernization
Full mobile network modernization progress made in 2019 Strong start to …using latest …significantly mobile network technologies… improving modernization… download speed Massive 640 sites modernized MIMO >30% higher download speed since September 2019 on modernized sites 5G ready 7
Slide 8: Moving to all-IP
Moving to all-IP progress made in 2019 Migration legacy lines Shutting down well on track legacy networks k ~775 PSTN SDH ~175 ISDN 3G Copper in fiber areas Q4 2018 Q4 2019 8
Slide 9: Consumer: targeted household approach
Consumer: targeted household approach 2019 – 2021 strategy Grow converged …and SIMs …to drive higher households… per household… converged postpaid base (all brands) +300k +10% by end 2021 by end 2021 70% by end 2021 9
Slide 10: Consumer convergence
Consumer convergence progress made in 2019 +59K converged +4.6% SIMs per +189k converged households household postpaid base FY ’19 FY ’19 +14 +41 +5 -2 +59k +61 +104 +15 +9 +189k 1,344 1,358 1,399 1,404 1,402 1.57 1.59 1.60 1.61 2,126 2,230 2,246 2,254 +4.1% +4.6% +3.7% 49% 49% +1.9% 62% 62% 63% 48%
Slide 11: Consumer: strategic actions in 2019
Consumer: strategic actions in 2019 executing our convergence strategy Convergence strategy Brand strategy One strong brand: KPN Strengthen household relationships Drive simplification Launch of KPN Hussel Fully flexible household proposition 11
Slide 12: Consumer Fixed and Mobile KPIs
Consumer Fixed and Mobile KPIs quarterly trends in 2019 Fixed KPIs Mobile KPIs Fixed Postpaid 46 46 48 48 17 17 17 17 ARPU (€)- ARPU (€) KPN brand FY ’19 1 -1k +17k +36k +28k postpaid net adds +80k 0 Broadband Postpaid -3 net adds1 (k) net adds -6 FY ’19 -17 -16 -56k all brands (k) FY ’19 -24 -14 -2
Slide 13: Stable broadband network share
Stable broadband network share KPN invests in a ~52% ~51% ~52% future-proof network, benefitting all our customers Market share KPN Consumer + SoHo + Wholesale1 Significant Wholesale market share adds to KPN’s strong position in Q1 2019 Q2 2019 Q3 2019 the Dutch fixed market Broadband net adds (k) K
Slide 14: Business: stabilizing end-to-end Adj. EBITDA AL
Business: stabilizing end-to-end Adj. EBITDA AL 2019 – 2021 strategy Transformation of Value over Lean & digital operating platform volume strategy operations 100% customer LE & Simplifying IT infrastructure migrations from legacy portfolio SME and LE in 20201 Corporate >25% lower cost to serve KPN
Slide 15: Business transformation along customer segments
Business transformation along customer segments 1 2 3 Small business (SoHo) SME LE & Corporate KPN small KPN EEN KPN smart business SME combinations +30k net adds in 2019 +158k net adds in 2019 launched in 2019 small business proposition1 1 Incl. migrations from Consumer 15
Slide 16: Business: strategic actions in 2019
Business: strategic actions in 2019 strong progress in operational transformation Migrations from Value over volume Lean & digital legacy portfolio strategy operations 59% 68% 74% Data-Driven Pricing model introduced to maximize value >25% lower cost to serve KPN EEN realized 50% 53% 45% per order 3
Slide 17: Business revenue trend
Business revenue trend strategic actions considerably impacted 2019 revenue Adjusted revenues Organic Graduallyrevenue trend11 improving y-on-y growth trend organic revenue trend Q4 2019 FY 2019 Communication Services -9.1% -8.4% Mobile service revenues -11% -9.1% IoT 19% 15% -4.5% -4.3% -[xx]% Broa
Slide 18: Customer experience & recognition
Customer experience & recognition Consumer NPS1 Business NPS1 Awards #1 19 3 #1 reputation2 18 17 1 Best mobile provider3 13 Strongest Dutch brand4 -1 Best retail chain5 Global Microsoft -4 Security & Compliance Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Partner of the Year 2019
Slide 19: Acceleration of simplification & digitalization
Acceleration of simplification & digitalization From 20 to 2 From 5 core Simplified converged IT networks to 1 end-to-end stacks organization ~€ 350 million 2019-2021 net opex savings program1 1 Indirect opex after leases adjusted for the impact of restructuring costs, incidentals 19
Slide 20: €141 million net indirect opex savings in 2019
€ 141 million net indirect opex savings in 2019 contributing strategic actions Digital Opex reduction IT rationalization transformation Agile based operating model Portfolio rationalization TV platform optimization Simplified organization Brand rationalization Mobile IT consolidation following brand
Slide 21: Doing business in a sustainable manner
Doing business in a sustainable manner A-list CDP and #2 in Dow Jones Sustainability Index Secure future-proof Social and digital Environmental infrastructure – SDG 9 inclusion – SDG 11 impact – SDG 12 Facilitate private and public Improve life in cities and remote Commit to circular economy partner
Slide 22: Financial highlights FY 2019
Financial highlights FY 2019 Adjusted revenues Adjusted EBITDA Free Cash Flow after leases (excl. TEFD dividend) € 5,486m € 2,317m € 726m -2.7% y-on-y1 +1.2% y-on-y1 -8.6% y-on-y1 2018: € 5,639m1 2018: € 2,290m1 2018: € 795m1 1 Key figures for FY 2018 and y-on-y trend are not corrected for impact of
Slide 23: Financial performance Q4 and FY 2019
Financial performance Q4 and FY 2019 €m Q4 2018 Q4 2019 Δ y-on-y FY 2018 FY 2019 Δ y-on-y Consumer 756 734 -2.9% 2,986 2,916 -2.3% Business 548 528 -3.7% 2,137 2,042 -4.4% Wholesale 158 146 -7.6% 623 628 0.7% Other -26 -15 -42% -107 -100 -6.7% Adjusted revenues 1,436 1,393 -3.0% 5,639 5,486 -2.7% Ad
Slide 24: Adjusted revenues declined in Q4 and FY 2019
Adjusted revenues declined in Q4 and FY 2019 €m FY 2019 € 5,486 -3.0% 1,436 -2.7% y-on-y FY 2018: € 5,639m 22 11 1,393 20 12 € 2m negative impact from divestments1 Adj. revenues Consumer Business Wholesale Other (incl. Adj. revenues Q4 2018 eliminations) Q4 2019 1 For information purposes only, Q4 a
Slide 25: Slightly growing Adjusted EBITDA AL in FY 2019
Slightly growing Adjusted EBITDA AL in FY 2019 supported by simplification and digitalization €m -1.6% -0.1% FY 2019: € 2,317 570 17 6 561 +1.2% y-on-y FY 2018: € 2,290m 18 43 7 € 6m negative impact from divestments1 Adj. EBITDA Revenues Cost of Personnel IT/TI Other Adj. EBITDA after leases goods &
Slide 26: Financial performance Q4 and FY 2019 – FCF
Financial performance Q4 and FY 2019 – FCF €m Q4 2018 Q4 2019 Δ y-on-y FY 2018 FY 2019 Δ y-on-y Adjusted EBITDA after leases 570 561 -1.6% 2,290 2,317 1.2% Interest lease liabilities 8 6 -27% 33 28 -16% Depreciation right-of-use asset 36 33 -6.6% 146 138 -6.0% Restructuring -27 -22 -18% -101 -115 13
Slide 27: FCF development in FY 2019
FCF development in FY 2019 FY 2019 €m 2,317 165 95 2,578 -8.6% y-on-y 329 7 51 9 FY 2018: € 795m € 4m negative impact from divestments4 1,115 726 340 Adj. Lease- Restructuring EBITDA Interest Taxes Change in Change in Capex Other1,3 FCF EBITDA AL related & FY 2019 paid paid provisions2 working (excl
Slide 28: Solid financial position
Solid financial position €m 6,494 Refinancing in 2019 leading to ~€ 67m 6,188 5,832 5,920 lower cash interest payments in 2020 5,306 5,148 Q1 2019, € 465m 7.5% bond redeemed Q2 2019, £ 96m 6.0% bond redeemed1 Q4 2019, $ 405m 8.375% senior bond repurchased Leverage ratio 2.5x 2.3x 2.2x Other re
Slide 29: Outlook 2020 and 2019-2021 ambitions
Outlook 2020 and 2019 – 2021 ambitions Outlook 2020 2019 – 2021 ambitions Adjusted EBITDA AL Stable to slightly growing compared to 20191 Organic growth Capex € 1.1bn Stable at € 1.1bn annually FCF At least mid-single digit percentage growth compared to 20192 Three-year mid-single digit CAGR3 (excl.
Slide 30: Value over volume. Lean operating model.
Value over volume. Lean operating model. 30
Slide 31: Information Pack
INFORMATION PACK Q4 & FY 2018 corrected for divestments Tax Debt portfolio Treatment of hybrid bonds Fixed infrastructure Spectrum Business go-to-market strategy 31
Slide 32: Q4 & FY 2018 corrected for divestments
Q4 & FY 2018 corrected for divestments divestments: NLDC, International Network Services and Argeweb 1 €m Q4 2018 Impact Q4 2018 FY 2018 Impact FY 2018 divestments excl. divestments divestments excl. divestments Consumer 756 - 756 2,986 - 2,986 Business 548 -3 545 2,137 -3 2,134 Wholesale 158 -12 14
Slide 33: Tax Q4 and FY 2019
Tax Q4 and FY 2019 P&L Cash flow Regions (€ m) Q4 2018 Q4 2019 FY 2018 FY 2019 Q4 2018 Q4 2019 FY 2018 FY 2019 The Netherlands -132 54 -224 -49 16 - -9 -7 Other - - -5 - -1 - -4 - Total reported tax -132 54 -229 -49 15 - -13 -7 Of which discontinued operations - - -5 - -1 - -4 - Reported tax from co
Slide 34: Debt portfolio
Debt portfolio Nominal debt1 Nominal debt1 Fixed vs. floating Bond redemption by type by currency interest3 profile € bn 1.1 1% 14% 1.0 19% 0.9 21% 0.6 0.6 0.6 7% € 6.7bn 28% 0.5 0.4 0.5 0.5 58% 71% 81% 0.1 Eurobonds EUR Fixed ’19 ’20 ’21 ’22 ’23 ’24 ’25 ’26 ’28 ’29 ’30 ’32 2 Global bonds GBP Floati
Slide 35: Treatment of hybrid bonds
Treatment of hybrid bonds KPN & credit rating agencies IFRS Hybrid bonds are recognized as 50% equity and 50% debt by the EUR tranche is a perpetual instrument, accounted for as equity rating agencies. The GBP tranche is considered 100% debt as it has Coupon payments treated as equity distribution,
Slide 36: Fixed infrastructure
Fixed infrastructure Download Active in speed network CO VDSL2 ~50Mbps VDSL2 pair bonding CO ~100Mbps Vectoring SC ~120Mbps Bonded vectoring SC ~240Mbps Bonded VPlus ~400Mbps SC FttH – P2P ~1Gbps PoP FttH – G-PON CO Passive split ~1Gbps Passive FttH – XGS-PON Up to 10Gbps CO split Fiber
Slide 37: Spectrum in the Netherlands
Spectrum in the Netherlands 800MHz T-Mob 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 T-Mob 1
Slide 38: Business go-to-market strategy
Business go-to-market strategy smartly positioned solutions for every customer 38
Slide 39: KPN Investor Relations
KPN Investor Relations ir.kpn.com