Royal KPN NV · EURONEXT:KPN
Royal KPN NV — H1 2007 Earnings Presentation
100 slides from Royal KPN NV's earnings presentation, Jul 30, 2007
Slide 1: Half Year Results 2007
Half Year Results 2007 30 July 2007
Slide 2: Safe harbor
Safe harbor Certain statements contained in this presentation constitute forward-looking statements. These statements may include, without limitation, statements concerning future results of operations, the impact of regulatory initiatives on our operations, our and our joint ventures' share of new
Slide 3: Disclaimer
Disclaimer We define EBITDA as operating profit before depreciation and impairments of PP&E and amortization and impairments of intangible assets. The measure is used by financial institutions and credit-rating agencies as one of the key indicators of borrowing potential. Many analysts use EBITDA as
Slide 4: Agenda
Agenda Intended offer for Getronics Ad Scheepbouwer, Chairman and CEO Chairman’s review Ad Scheepbouwer, Chairman and CEO Financial review Marcel Smits, CFO Operating review The Netherlands Ad Scheepbouwer, Chairman and CEO Operating review Mobile Int’l Stan Miller, MD Mobile International Concludin
Slide 5: Rationale for the offer
Rationale for the offer Integrating KPN and Getronics creates market leading position • Customers increasingly requiring all telecommunications and IT services from a single end-to-end vendor – KPN and Getronics already partnering in large contract wins, e.g. ING and NS • Instantly market leader in
Slide 6: Profile Getronics
Profile Getronics Leading international provider of workspace and application services Key financials Getronics • International provider of workspace and application services € mn 2006 2005 – Top four Workspace Services Revenues 2,627 2,525 company worldwide EBITAE 117 143 – Focus on the Netherlands
Slide 7: Intended offer
Intended offer Aggregate consideration for ordinary shares of € 766 mn • Cash offer for all issued and outstanding Getronics ordinary shares – € 6.25 per Getronics ordinary share, aggregate consideration of € 766 mn – Premium of 23% over the last business day before announcement • Cash offer for Get
Slide 8: Strategy, governance and organisation
Strategy, governance and organisation Focus on Benelux, UK and US; disposal of non-core operations continued • Getronics’ Benelux activities most valuable for KPN’s ICT strategy, Focus on as KPN already has significant activities in these countries Benelux, UK • Maintaining sales and delivery capabi
Slide 9: Value creation
Value creation Opportunity to create value by integrating KPN and Getronics • Instantly market leader in workspace management in the Benelux by integrating KPN and Getronics • Significant cross- and up-selling opportunities between both client bases • Expected synergies of at least € 50 mn per annum
Slide 10: Timelines and next steps
Timelines and next steps • Request works councils of KPN and Getronics for advice • Request for approval from relevant competition authorities • Launch of the offer expected in September 2007 • Offer to be discussed in Getronics Extraordinary General Meeting of Shareholders • Conditions for honourin
Slide 11: Agenda
Agenda Intended offer for Getronics Ad Scheepbouwer, Chairman and CEO Chairman’s review Ad Scheepbouwer, Chairman and CEO Financial review Marcel Smits, CFO Operating review The Netherlands Ad Scheepbouwer, Chairman and CEO Operating review Mobile Int’l Stan Miller, MD Mobile International Concludin
Slide 12: Strategic transformation
Strategic transformation Good progress on strategic priorities • Revenue and EBITDA mix rapidly changing, no overall impact – Continued revenue and EBITDA loss in traditional (voice) services – Compensated by growth in Mobile and new (IP-based) services – Well on track to meet guidance • Good progre
Slide 13: Highlights first half 2007
Highlights first half 2007 • Mobile International: continued profitable growth – Strong performance E-Plus, EBITDA up 25% YTD, EBITDA margin ~40% in Q2 – Solid results at BASE despite challenging market conditions – Continued revenue and EBITDA growth at Mobile Wholesale NL • The Netherlands: resili
Slide 14: Financial highlights first half 2007
Financial highlights first half 2007 • On track to meet guidance following Q2 results – Revenues and other income down 0.8% to € 5.9 bn YTD – EBITDA down 0.9% to € 2.5 bn YTD – Capex of € 0.6 bn YTD – Free cash flow1 of € 1.2 bn YTD – EPS of € 0.38 YTD (non-diluted) • Shareholder returns on track –
Slide 15: Agenda
Agenda Intended offer for Getronics Ad Scheepbouwer, Chairman and CEO Chairman’s review Ad Scheepbouwer, Chairman and CEO Financial review Marcel Smits, CFO Operating review The Netherlands Ad Scheepbouwer, Chairman and CEO Operating review Mobile Int’l Stan Miller, MD Mobile International Concludin
Slide 16: Group results
Group results First half year revenues and EBITDA nearly flat € mn Q2 ’07 Q2 ’06 % YTD ’07 YTD ’06 % Revenues and other income 3,012 2,979 1.1% 5,936 5,981 -0.8% – of which Revenues 2,957 2,968 -0.4% 5,875 5,891 -0.3% Operating expenses 2,363 2,309 2.3% 4,750 4,699 1.1% 1 – of which Depreciation 416
Slide 17: Group cash flow
Group cash flow Continued strong free cash flow € mn Q2 ’07 Q2 ’06 % YTD ’07 YTD ’06 % • Free cash flow of € 1.2 bn YTD Operating result 649 670 -3.1% 1,186 1,282 -7.5% Depreciation & amortization1 626 611 2.5% 1,278 1,205 6.1% • Cash flow from Interest paid/received -194 -134 44.8% -253 -143 76.9%
Slide 18: Performance versus Guidance
Performance versus Guidance On track to meet guidance Item Outlook FY ’07 as given 8 Feb Q1 ’07 Q2 ’07 YTD ’07 Revenues and other income1 Flat -2.6% 1.1% -0.8% EBITDA1,2 Flat -1.4% -0.5% -0.9% Capex € 1.6 - € 1.8 bn € 0.3 bn € 0.3 bn € 0.6 bn Free cash flow3 > € 2 bn € 0.6 bn € 0.6 bn € 1.2 bn • On
Slide 19: Roaming update
Roaming update No impact on guidance • EU proposal to lower EU roaming rates in 3 steps (23 May 2007) € cents per minute Current avg. Aug-Sept ’07 30 August ’08 30 August ’09 Retail outbound ~100 49 46 43 EU proposal Retail inbound ~65 25 22 19 Wholesale ~50 30 28 26 • Wholesale tariff effective as
Slide 20: Group financial profile
Group financial profile Smoothened redemption profile following refinancing transaction € bn Debt Financing policy 11.0 2.5x 10.4 10.1 10.0 9.7 2.0x 1.8 1.9 1.9 1.8 1.9 9.4 9.2 9.3 8.8 8.8 Q2 ’06 Q3 ’06 Q4 ’06 Q1 ’07 Q2 ’07 Q2 ’06 Q3 ’06 Q4 ’06 Q1 ’07 Q2 ’07 Gross Debt Net Debt Net Debt / EBITDA1 Fi
Slide 21: Financial highlights the Netherlands
Financial highlights the Netherlands Growth in Business and wireless services, continued decline in Consumer € mn Q2 ’07 Q2 ’06 YTD ’07 YTD ’06 Revenues and other income 2,120 2,121 4,187 4,240 % change 0.0% -1.3% – of which wireless Service revenues1 667 626 1,318 1,222 % change 6.5% 7.9% Operating
Slide 22: Financial review the Netherlands by segment
Financial review the Netherlands by segment € mn Revenues and other income € mn EBITDA (margin) Consumer 18.5% 17.5% 19.0% 1,063 1,070 1,057 1,037 1,032 17.2% 15.4% 197 184 163 181 196 Q2 '06 Q3 '06 Q4 '06 Q1 '07 Q2 '07 Q2 '06 Q3 '06 Q4 '06 Q1 '07 Q2 '07 Business 22.8% 23.1% 22.5% 819 847 849 846 21
Slide 23: Financial highlights Mobile International
Financial highlights Mobile International Continued profitable growth from challenger business model € mn Q2 ’07 Q2 ’06 YTD ’07 YTD ’06 Revenues and other income 975 952 1,910 1,826 % change 2.4% 4.6% – of which wireless Service revenues1 935 908 1,827 1,724 % change 3.0% 6.0% Operating expenses 788
Slide 24: Financial review Mobile International by segment
Financial review Mobile International by segment € mn Revenues and other income € mn EBITDA (margin) E-Plus 722 760 747 698 736 37.0% 39.8% 1 36.2% 32.6% 29.5% 683 714 692 660 700 267 248 220 253 293 Q2 '06 Q3 '06 Q4 '06 Q1 '07 Q2 '07 Q2 '06 Q3 '06 Q4 '06 Q1 '07 Q2 '07 BASE 162 160 46.2% 43.8% 156 1
Slide 25: Pro forma disclosure Fixed
Pro forma disclosure Fixed Revenue decline decelerating in Q2 ’07, EBITDA lower due to additional costs Fixed (incl. Other and Intercompany)1,2 Q2 ’07 Q1 ’07 Q2 ’06 Q1 ’06 Revenues and other income (excl. notable items3) 1,282 1,311 1,361 1,410 Y-on-Y decline -79 -99 -117 -121 Y-on-Y % -5.8% -7.0% -
Slide 26: Pro forma disclosure KPN Mobile the Netherlands
Pro forma disclosure KPN Mobile the Netherlands Outstanding performance, 6% service revenue growth, ~42% EBITDA margin mn Strong focus on Post Paid € mn Service revenues up 6.3% 8.7 8.8 8.9 8.2 8.5 47.5% 47.2% 47.2% 46.7% 47.0% 3.7 3.9 4.0 4.1 3.5 43% 44% 45% 45% 46% 752 735 731 755 710 4.7 4.8 4.8
Slide 27: Agenda
Agenda Intended offer for Getronics Ad Scheepbouwer, Chairman and CEO Chairman’s review Ad Scheepbouwer, Chairman and CEO Financial review Marcel Smits, CFO Operating review The Netherlands Ad Scheepbouwer, Chairman and CEO Consumer Business Wholesale & Operations Operating review Mobile Int’l Stan
Slide 28: Strategic transformation
Strategic transformation Ahead of the pack in delivering value during past 4 years Strategy Milestones Challenger strategy Profitable growth BASE • Position around customers • Market share up ~8% Mid 2002 • Create customer pull through differentiating offers • Service revenues doubled • Outsource an
Slide 29: Consumer strategy
Consumer strategy Portfolio strategy to maximize customer value Strategy Milestones • Broad portfolio, propositions tailored to consumer needs Market share gains – Proactive VoIP, broadband and TV rollout, TV as part of in all segments Portfolio triple play offer management – Retention on traditiona
Slide 30: Consumer wireless services
Consumer wireless services Outstanding performance, 7% service revenue growth and 14% lower SAC mn Post Paid share up 5%-points • Continued growth of all brands, covering all key 5.9 5.9 5.9 5.9 5.9 segments 2.1 2.2 2.3 2.4 2.4 • Considerable uptake Fixed-Mobile propositions 36% 38% 39% – 15,000 hom
Slide 31: Consumer VoIP
Consumer VoIP VoIP market growth slowing down, KPN market leader mn VoIP uptake • KPN market leader in VoIP 36% 34% – 83k net adds in Q2, of which 43k from Tiscali 28% 1.8 1.9 – Market share up 1% to 38% following Tiscali 22% 0.25 acquisition 1.4 0.25 17% 0.21 1.0 0.85 0.91 • VoIP market growth dece
Slide 32: Line loss
Line loss Net line loss slowing down to 110k in Q2 due to successful retention offers x 1,000 PSTN / ISDN trends • Slowdown in loss of traditional lines Q2 '06 Q3 '06 Q4 '06 Q1 '07 Q2 '07 – Infrastructure loss trending down 33% 29% – Retention offers traditional voice 43% 38% – VoIP market growth de
Slide 33: Broadband
Broadband Broadband share up almost 4% following Tiscali acquisition mn Broadband1 Broadband share up 3.6% 72% 73% 64% 66% 69% • Step up in retail market share following Tiscali 5.16 5.27 acquisition 5.00 4.56 4.74 0.75 – Tiscali acquisition adding 3.8% market share 0.89 0.90 0.82 0.86 – Retail broa
Slide 34: TV
TV Growth accelerating, due to marketing efforts and continued network rollout X 1,000 TV subscribers • TV subscriber growth accelerating +14% – Mainly driven by DVB-T marketing efforts and +12% growing coverage +8% +7% – Record net adds of 41k, up 47% Y-on-Y – Market share digital TV 14% 337 • More
Slide 35: Agenda
Agenda Intended offer for Getronics Ad Scheepbouwer, Chairman and CEO Chairman’s review Ad Scheepbouwer, Chairman and CEO Financial review Marcel Smits, CFO Operating review The Netherlands Ad Scheepbouwer, Chairman and CEO Consumer Business Wholesale & Operations Operating review Mobile Int’l Stan
Slide 36: Business market trends
Business market trends Rapid adoption of IP-based services, replacing traditional services mn 1.9 1.7 • Decline in PSTN/ISDN, replaced by IP-based voice services, e.g. VoIP and IP-PBX Voice • Continued growth in wireless services 1.0 1.2 • Fixed-Mobile integrated offers launched Q4 '05 Q2 '06 Q4 '06
Slide 37: Business market strategy
Business market strategy Integrated customer approach to maximize customer value Strategy Milestones • Expanding position in IP-based services, e.g. IP-VPN, Migration to E-VPN and Business DSL Market leader in IP-based • Phasing out traditional services, in line with All-IP strategy IP-based service
Slide 38: Business voice
Business voice Decline in wireline customers, continued growth in wireless services mn Wireline voice • Stable market share in declining traditional voice market >55% >55% >55% >55% >55% • Customers migrating to IP-based voice services – Large customers migrating to IP-PBX and VoIP Connect 1.86 1.84
Slide 39: Business data
Business data Continued growth in data services X 1,000 IP-based data services up 40% • Significant number of customers already migrated from leased lines to IP-based services 62 71 54 – Leased lines down 13% Y-on-Y 39 45 13.1 – IP-based data services up >40% 12.6 10.9 11.4 9.0 • Continued upselling
Slide 40: Managed data services
Managed data services Upselling broadband connectivity with applications and hosting services Software Online Housing / hosting services • Upselling broadband connections with online • Housing / hosting services to cross sell ICT applications connectivity and value-added services • Broad service por
Slide 41: Contract wins
Contract wins Enhancing market positions in all segments Customer Services Scope Dutch Railways • Call center services (SNT) € 20 mn • SAP hosting and website hosting services Construction • Wireline and wireless voice services 5 years • Managed ICT services, housing / hosting services Retail chain
Slide 42: Agenda
Agenda Intended offer for Getronics Ad Scheepbouwer, Chairman and CEO Chairman’s review Ad Scheepbouwer, Chairman and CEO Financial review Marcel Smits, CFO Operating review The Netherlands Ad Scheepbouwer, Chairman and CEO Consumer Business Wholesale & Operations Operating review Mobile Int’l Stan
Slide 43: Wholesale & Operations
Wholesale & Operations Lower internal traffic volumes, good progress in network rollout € mn bn minutes Internal revenues • Internal revenues down due to decline in 5.5 traditional voice in Consumer and Business 5.1 5.3 5.1 4.5 • External revenues gradually recovering – Price pressure in internation
Slide 44: Update restructuring
Update restructuring On track to meet 2007 objectives Impact FY ’07 Impact H1 ’07 Since YE ’04 FTE reductions 1,200 – 1,500 ~950 ~4,500 Restructuring / € 100 – 150 mn € 37 mn integration costs All-IP project € 50 – 100 mn € 12 mn costs Sale real estate € 100 – 200 mn € 82 mn (Book gains) (€ 75 – 150
Slide 45: All-IP regulation
All-IP regulation Important milestone in All-IP strategy reached Agreement with unbundlers Alternatives MDF Access • Directional support for All-IP from OPTA in Wholesale • National coverage with October 2006, conditional to alternatives for Broadband wholesale service on KPN’s MDF access Access All
Slide 46: Fiber initiatives
Fiber initiatives Selective fiber deployment based on profitable business cases • Dutch building corporations (>25% of home owners) investing in FttH – Higher perceived value for real estate Background – Initiatives in Delft, Leiden, Nijmegen, Almere and Enschede • Continued demand for higher bandwi
Slide 47: Telfort network integration
Telfort network integration Network integration on track, radio network switch-off completed Radio network integration Core network integration Completed Q2 ’07 Completed 2008 • All Telfort customers migrated to KPN infrastructure • Integration of Telfort and KPN core – Telfort EDGE customers migrat
Slide 48: Agenda
Agenda Intended offer for Getronics Ad Scheepbouwer, Chairman and CEO Chairman’s review Ad Scheepbouwer, Chairman and CEO Financial review Marcel Smits, CFO Operating review The Netherlands Ad Scheepbouwer, Chairman and CEO Operating review Mobile Int’l Stan Miller, MD Mobile International Concludin
Slide 49: Mobile International
Mobile International Successful mobile challenger in our markets • E-Plus – Significant market upside, price elasticity increasingly materializing – Continued market outperformance with strong margins – New brands driving growth at structurally lower costs – Targeting market outperformance with serv
Slide 50: German market: mobile premium
German market Significant upside to be captured through Fixed-Mobile substitution Market development Germany vs. EU • Mobile premium High – Germany ~3.5x •Germany 2005 Evolution – EU average ~2.5x • Mobile usage Mobile premium •Germany – Germany ~20% today – EU average ~40% •Netherlands • Mobile onl
Slide 51: Operating review E-Plus
Operating review E-Plus Continued market outperformance with strong margins New brands drive customer growth, up 14% Service revenue share up nearly 1% point 13.6 12.7 13.1 13.7% 11.9 12.2 13.5% 13.2% 13.4% 22 12.8% 77 67 55 111 467 333 372 367 252 Q2 ’06 Q3 ’06 Q4 ’06 Q1 ’07 Q2 ’07 Q2 '06 Q3 '06 Q4
Slide 52: E-Plus
E-Plus Continued profitable growth through challenger strategy • Continued growth of new brands with strong awareness, approx. 5.9 mn subscribers, or 43% of total subscribers • Expansion of multi-brand portfolio with new propositions Multi-brands – Launch of BASE 5, unlimited calls to all networks,
Slide 53: Latest developments E-Plus
Latest developments E-Plus continues to do things differently as a challenger German market E-Plus • Continue to address individual segments • Price erosion following directly or through wholesale partners Pricing and ongoing launch of new – Simplicity, transparency, attractive pricing propositions
Slide 54: E-Plus objectives
E-Plus objectives Service revenue growth at least equal to Q2 ’07, EBITDA margin >35% Trend past four quarters Target H2 ’07 “E-Plus outperforming the market” “Continued outperformance” • Market service revenues down 2% – MTA reduction of ~20% – Price cuts of ~15%, incl. 3% VAT increase Service reve
Slide 55: Operating review BASE
Operating review BASE Solid results despite challenging market conditions and regulatory MTA cuts Strong contribution from new initiatives Revenue share up 2% points 2.5 2.6 2.4 ~16% 2.2 ~16% 2.1 >15% 17 ~15% 3 23 >14% 6 112 122 94 100 64 Q2 ’06 Q3 ’06 Q4 ’06 Q1 ’07 Q2 ’07 Q2 '06 Q3 '06 Q4 '06 Q1 '0
Slide 56: BASE
BASE Challenging market conditions, new initiatives gaining traction • Service revenue growth under pressure, market decline estimated at 6% Belgian – MTA cuts in November ’06 and May ’07 totaling 35% market • Competition focusing on heavy price competition via promotions and replicating BASE’s inno
Slide 57: Regulatory framework
Regulatory framework Headwind from MTA reductions, predominantly smaller asymmetry Service revenue growth E-Plus Service revenue growth BASE 15.1% 15.2% 14.0% 14.0% 4.2% 12.3% 11.8% 4.2% 4.0% 11.0% 10.6% 3.9% 3.4% 5.0% 15.2% 5.9% 6.2% 11.8% 10.9% 7.5% 9.8% 10.0% 8.4% 3.7% 5.7% 5.9% 6.6% 2.5% -0.7% Q
Slide 58: Operating review Mobile Wholesale NL
Operating review Mobile Wholesale NL Continued profitable growth from wholesale partnerships X 1,000 Healthy mix of net adds mn 33% customer growth 1.7 18 1.6 39 1.5 1.4 45 15 1.3 111 90 33 69 82 32 Q2 ’06 Q3 ’06 Q4 ’06 Q1 ’07 Q2 ’07 Q2 ’06 Q3 ’06 Q4 ’06 Q1 ’07 Q2 ’07 Pre Paid net adds Post Paid net
Slide 59: Mobile wholesale
Mobile wholesale Efficient business model to tap into niche markets • Growing market (~17% share), predominantly value for money and ethnic – Competition becoming more aggressive on wholesale pricing – Lower pricing more than offset by volume growth Mobile – Transition towards value added services w
Slide 60: Agenda
Agenda Intended offer for Getronics Ad Scheepbouwer, Chairman and CEO Chairman’s review Ad Scheepbouwer, Chairman and CEO Financial review Marcel Smits, CFO Operating review The Netherlands Ad Scheepbouwer, Chairman and CEO Operating review Mobile Int’l Stan Miller, MD Mobile International Concludin
Slide 61: Concluding remarks
Concluding remarks • Ahead of the pack in delivering value over the past 4 years • Good progress on strategic priorities • Continued profitable growth Mobile International • Resilient performance in the Netherlands • Agreement with unbundlers for migration to All-IP network • On track to meet guidan
Slide 62: Q&A
Q&A
Slide 63: Annex
Annex For further information please contact KPN Investor Relations Tel: +31 70 44 61583 Fax: +31 70 44 60593 [email protected] www.kpn.com/ir
Slide 64: Analysis of results
Analysis of results Key items worth mentioning in results interpretation € mn Q2 ’07 Q2 ’06 YTD ’07 YTD ’06 Revenue effect MTA tariff reduction Group -35 -65 -66 -123 EBITDA effect MTA tariff reduction Group -19 -20 -33 -39 Book gain on sale of subsidiaries Other 11 4 76 Book gain on sale of real es
Slide 65: Impact MTA reduction
Impact MTA reduction1 € mn Q2 ’07 YTD ’07 2 2 Revenues EBITDA Revenues EBITDA E-Plus -25 -14 -49 -23 BASE -10 -5 -17 -10 Mobile Wholesale NL Mobile International -35 -19 -66 -33 Consumer Business Wholesale & Operations The Netherlands - - - - Intercompany KPN Group -35 -19 -66 -33 MTA tariff reducti
Slide 66: MTA the Netherlands
MTA the Netherlands Certainty on mobile termination until mid 2010 • OPTA proposal to lower MTA tariffs (15 May) € cents per minute Aug ’07 1 July ’08 1 April ’09 1 July ’09 KPN 10.0 9.0 8.0 7.0 OPTA Vodafone 10.0 9.0 9.0 7.0 proposal Orange / T-Mobile 11.4 10.4 10.4 8.1 Asymmetry 1.4 1.4 2.4 1.1 •
Slide 67: Restructuring charges
Restructuring charges € mn Q2 ’07 YTD ’07 E-Plus BASE Mobile Wholesale NL Mobile International - - Consumer -1 Business -1 -2 Wholesale & Operations -3 -6 Other The Netherlands -4 -9 Other -1 -5 KPN Group -5 -14 67
Slide 68: Operating expenses
Operating expenses € mn Q2 ’07 Q2 ’06 % Salaries and social security contributions 349 355 -1.7% Cost of materials 200 188 6.4% Work contracted out and other expenses 1069 1,046 2.2% Own work capitalized -29 -31 -6.5% Other operating expenses 148 140 5.7% Depreciation1 416 469 -11.3% Amortization1 2
Slide 69: Analysis operating expenses: Salaries & Cost of materials
Analysis operating expenses Salaries & Cost of materials € mn Salaries Y-on-Y decrease 12.5% • Continued headcount reductions, partly offset by 12.0% 11.5% 11.7% 11.8% acquisitions Q-on-Q decrease • Decrease in total salaries due to outsourcing of 750 FTE at E-Plus in Q1 355 348 355 364 349 Q2 ’06 Q
Slide 70: Analysis operating expenses: Work contracted out & other
Analysis operating expenses Work contracted out & other € mn Work contracted out Y-on-Y increase 35.2% 37.7% 35.7% 35.9% 36.2% • Higher mobile traffic volumes • Additional temporary staffing to solve VoIP issues 1,143 1,078 1,069 1,046 1,047 Q-on-Q increase • Contract wins in Corporate market • Outs
Slide 71: Analysis operating expenses: Depreciation & Amortization
Analysis operating expenses Depreciation & Amortization € mn Depreciation1 Y-on-Y decrease • Fixed depreciation trending down due to lower 15.8% 15.6% 15.0% Capex 14.5% 14.1% • Partly offset by € 13 mn accelerated depreciation following Telfort network integration Q-on-Q decrease 469 473 439 439 416
Slide 72: Personnel
Personnel Continuing decline, predominantly in the Netherlands • Personnel reduction Y-on-Y of 1,152 FTE – 698 FTE reduction in the Netherlands -1,152 – Excluding acquisitions reduction of 1,515 FTE in the Netherlands 26,033 25,921 25,976 24,799 24,881 • Q2 increase of 82 FTE vs. Q1 6,807 6,787 6,99
Slide 73: Tax
Tax P&L Cash flow Fiscal units (€ mn) Q2 ’07 Q2 ’06 Q2 ’07 Q2 ’06 Dutch activities -95 -125 -42 -5 German Mobile activities -12 - - - Belgian Mobile activities -11 2 - - Total -118 -123 -42 -5 • € 42 mn Dutch corporate tax paid as net operating losses at KPN Mobile are exhausted • Lower P&L charge f
Slide 74: Net cash flow from operating activities
Net cash flow from operating activities € mn Q2 ’07 Q2 ’06 YTD ’07 YTD ’06 Operating Result 649 670 1,186 1,282 Depreciation, amortization and impairments 626 611 1,278 1,205 Interest paid -194 -134 -253 -143 Income tax paid -42 -5 -42 214 Share based compensation 2 3 5 5 Other income -54 -11 -60 -9
Slide 75: Total cash flow
Total cash flow € mn Q2 ’07 Q2 ’06 YTD ’07 YTD ’06 Net cash flow from operating activities 882 1,033 1,716 2,103 1 Capex -327 -379 -603 -692 Acquisitions -233 -198 -233 -308 Disposals real estate 82 15 82 15 Disposals other 0 0 15 69 Other -8 10 -8 14 Net cash flow from investing activities -486 -55
Slide 76: Capex
Capex1 € mn Q2 ’07 Q2 ’06 % YTD ’07 YTD ’06 % Mobile International 127 150 -15.3% 238 279 -14.7% % Revenues Mobile International 13.0% 15.8% 12.5% 15.3% E-Plus 99 126 -21.4% 191 216 -11.6% % Revenues E-Plus 13.5% 17.5% 13.3% 15.6% BASE 28 24 16.7% 45 62 -27.4% % Revenues BASE 18.1% 15.4% 14.7% 20.7%
Slide 77: Balance sheet
Balance sheet Assets Equity and liabilities € bn € bn 22.6 22.4 21.3 21.1 20.8 22.6 22.4 21.3 21.1 20.8 4.6 3.8 Group equity 4 4.7 4.8 4.6 4.6 Goodwill 4.2 4.4 3.9 4.7 1.6 1.7 1.6 4.4 4.3 1 1.5 1.5 4.2 4.0 Licenses Provisions 4.0 2 Other non- Non-current 11.7 current assets liabilities 11.6 11.6 11.
Slide 78: Share repurchase progress
Share repurchase progress Date1 Value (€ mn) mn shares Avg. share price (€) Q1 ’07 136.8 11.9 11.46 April 79.1 6.4 12.37 May 118.0 9.6 12.31 June 116.4 9.4 12.40 Q2 ’07 313.5 25.4 12.34 July 87.3 7.2 12.06 Total 537.6 44.5 12.07 • € 1 bn share repurchase program commenced on 8 February 2007 – 45% ex
Slide 79: Debt summary
Debt summary € bn Q2 ’07 Q1 ’07 Q2 ’06 Bonds 9.30 8.36 8.38 Eurobonds 7.32 6.31 6.28 Global bonds 1.98 2.05 2.10 Other debt 0.52 0.42 1.05 Other loans at Royal KPN1 0.44 0.38 1.00 Consolidated debt 0.08 0.04 0.05 Fair value financial instruments 0.24 0.94 0.95 Total debt 10.06 9.72 10.38 – of which
Slide 80: Debt portfolio
Debt portfolio Breakdown of € 10.1 bn1 gross debt 10% Financial Other instruments 68% 5% 2% 22% Eurobonds Global bonds 73% 20% EUR USD 2 GBP 2 31% 69% Fixed Floating (incl. swapped) 1 Book value of interest bearing financial liabilities plus the fair value of financial instruments related to these f
Slide 81: Acquisition of Tiscali the Netherlands driving broadband share
Acquisition of Tiscali the Netherlands driving broadband share • Strengthening KPN’s broadband position with 249k subscribers – 201k retail subs, 48k wholesale subs, excluding Demon and Speedlinq customers Rationale – KPN retail broadband market share up 3.8% to 44.6% • Synergies from integration wi
Slide 82: Actions taken in VoIP
Actions taken in VoIP Successful turnaround in 3 months, step by step up scaling Actions taken in February Results • Reduced order intake • 5-6k clean orders per week Order intake • Advertising on hold • Step by step up scaling • Focus on clean orders • Call center capacity doubled • 90% first-time
Slide 83: All-IP infrastructure
All-IP infrastructure Business model for unbundlers changing due to KPN’s All-IP network Current infrastructure Local Exchange KPN Colocation equipment fiber Node copper copper KPN / Telco 7 mn households 28,000 street cabinets 1,350 local exchanges 400 colocations All-IP infrastructure copper fiber
Slide 84: Unbundling tariffs
Unbundling tariffs SLU and colocation set by OPTA, backhaul and WBA based on deal pricing Unbundling in current network Category Monthly tariffs Line sharing (LLU) € 0.37 / line LLU MDF colocation MDF backhaul (regulated) (regulated) (fiber, not regulated) Fully unbundled (LLU) € 8.00 / line MDF Nod
Slide 85: E-Plus: impact of new strategy
E-Plus: impact of new strategy Continued growth new propositions, double digit “underlying” service revenue growth X 1,000 Subscribers new propositions Service revenue growth 15.1% 14.7% 5,880 14.0% 14.0% 5,149 2.4% 4.2% 4.2% 4.0% 4,345 3.9% 9.5% 3,586 0.9% 2,850 2.4% 10.9% 9.8% 10.0% 8.4% 3.7% 2.5%
Slide 86: German market development
German market development Mobile usage Germany International comparison mobile usage 70% Finland 35% 58% 19.2% Austria 17% 49% 15.5% France 10% 14.2% 13.1% 48% 12.1% 12.1% Spain 16% 38% UK 9% 38% Denmark 11% 107 33% 85 Italy 16% 75 63 68 59 27% Netherlands 17% 26% Sweden 6% 2001 2002 2003 2004 2005
Slide 87: Tariff comparison German market
Tariff comparison German market Superior E-Plus price position in all segments Low usage customers Mid usage customers High usage customers 80 Simyo Zehnsation DT Classic Relax 100 60 VF CallYa VF 100 O2 Loop O2 Genion M Monthly bill (€) 40 BASE 2 20 DT Max VF Superflat O2 Genion L 0 0 25 50 75 75 1
Slide 88: Versatel partnership
Versatel partnership Partnership to tap into converged offerings segment • Wholesale partnership with broadband challenger Versatel – Versatel bundling mobile with current dual play voice / broadband offering – Branded under Versatel’s own brand Wholesale – Enabling E-Plus to tap into converged offe
Slide 89: Pro forma disclosure KPN Mobile the Netherlands
Pro forma disclosure KPN Mobile the Netherlands Financials and KPIs € mn Q2 ’07 Q2 ’06 % Revenues and other income 3,012 2,979 1.1% E-Plus & BASE 891 878 1.5% KPN Mobile the Netherlands 784 737 6.4% Fixed (incl. Other and Intercompany eliminations) 1,337 1,364 -2.0% EBITDA 1,275 1,281 -0.5% E-Plus &
Slide 90: Pro forma disclosure Fixed: reconciliation for noteworthy items
Pro forma disclosure Fixed (incl. Other) Reconciliation for noteworthy items Revenue and other income Q2 ’07 Q1 ’07 Q4 ’06 Q3 ’06 Q2 ’06 Q1 ’06 Q4 ’05 Q3 ’05 Q2 ’05 Q1 ’05 € mn Reported 1,337 1,315 1,367 1,337 1,364 1,493 1,526 1,470 1,516 1,571 Xantic -4 -6 -3 -831 -39 -40 -38 -40 Book gain NTT DoC
Slide 91: Pro forma disclosure Fixed: revenues and EBITDA Y-on-Y
Pro forma disclosure Fixed (incl. Other) Reconciliation revenues and EBITDA, Y-on-Y comparison1 € mn Revenues and other income 1,364 -3 1,361 -114 +55 1,337 +71 -18 -18 1,282 Q2 '06 Notable Q2 '06 Traditional New Transit / Other effects Q2 '07 Notable Q2 '07 reported items normalized voice services
Slide 92: Dutch Consumer voice market
Dutch Consumer voice market1 mn Q2 ’05 Q2 ’06 Q2 ’07 KPN PSTN / ISDN 5.22 4.55 3.28 Wholesale Line Rental (WLR) - - 0.18 Total traditional voice 5.22 4.55 3.46 KPN VoIP - 0.16 0.73 Cable VoIP - 0.50 0.91 Alt DSL VoIP - 0.11 0.25 Total VoIP - 0.77 1.89 Cable voice analogue 0.25 0.16 0.11 Mobile-only
Slide 93: KPIs Consumer Voice
KPIs Consumer Voice Wireline Q2 ’07 Q1 ’07 Q2 ’06 VoIP penetration1 36% 34% 17% Market share – Voice2 >55% ~ 60% > 55% – VoIP 38% 37% 19% – Traditional voice3 ~70% ~ 70% > 65% Voice connections (x 1,000) 4,017 4,225 4,708 – PSTN 2,961 3,230 4,121 – ISDN 323 345 431 – VoIP packages (Voice / Broadband
Slide 94: KPIs Consumer Internet & TV
KPIs Consumer Internet & TV Internet Q2 ’07 Q1 ’07 Q2 ’06 Broadband penetration 73% 72% 64% Broadband market share KPN (ISP) retail1 44.6% 41.0% 39.6% Broadband connections1 46.0% 42.7% 42.4% ADSL connections 2,427 2,234 1,936 Broadband ISP customers (x 1,000) 2,344 2,114 1,806 – Planet Internet 592
Slide 95: KPIs Business
KPIs Business Wireline Q2 ’07 Q1 ’07 Q2 ’06 Market share voice > 55% > 55% > 55% Access lines (x 1,000) 1,757 1,796 1,863 – PSTN 852 878 931 – ISDN 895 910 932 – VoIP 10 8 - Traditional originating minutes (bn) 1.80 1.95 2.08 Network services (x 1,000) – Leased lines 34.1 35.1 39.3 – E-VPN connectio
Slide 96: KPIs Wholesale & Operations
KPIs Wholesale & Operations Q2 ’07 Q1 ’07 Q2 ’06 Minutes (bn) 9.44 9.79 10.11 – Terminating services 2.94 3.22 3.24 – Originating 1.72 2.03 2.53 – Transit services 2.45 2.38 2.11 – International wholesale services 2.33 2.16 2.23 Local loop (x 1,000) MDF access lines1 3,327 3,233 2,844 – of which lin
Slide 97: KPIs E-Plus
KPIs E-Plus Q2 ’07 Q1 ’07 Q2 ’06 Market share1 Service revenue 13.7% 13.5% 12.8% Base 15.1% 14.9% 14.5% Customers (x 1,000) 13,565 13,143 11,852 – Post Paid 6,082 6,027 5,827 – Pre Paid 7,483 7,116 6,025 Service revenues (€ mn) 700 660 683 ARPU (€) 17 17 20 – Post Paid 31 30 33 – Pre Paid 6 6 6 Non-
Slide 98: KPIs BASE
KPIs BASE Q2 ’07 Q1 ’07 Q2 ’06 Market share1 Revenue ~16% ~16% >14% Base >22% >22% ~21% Customers (x 1,000) 2,580 2,475 2,104 – Post Paid 490 484 441 – Pre Paid 2,090 1,991 1,663 Service revenues (€ mn) 151 149 152 ARPU (€) 20 21 24 – Post Paid 52 52 61 – Pre Paid 12 13 15 Non-voice as % of ARPU 16%
Slide 99: KPIs Mobile wholesale NL
KPIs Mobile wholesale NL Q2 ’07 Q1 ’07 Q2 ’06 Customers (x 1,000) 1,710 1,645 1,290 – Post Paid 413 380 308 – Pre Paid 1,297 1,265 982 Service revenues (€ mn) 85 84 74 99
Slide 100: Other in Q2
Other in Q2 € mn Revenues and other income € mn EBITDA1 2 1 -6 -18 Q2 ’07 Q2 ’06 Q2 ’07 Q2 ’06 • € 3 mn book gain on Xantic in Q2 ’06 • € 12 mn release of salary related provisions in Q2 ’06 • Several one-offs negatively impacting EBITDA in Q2 ’07 1 Defined as Operating result plus depreciation, amo