Royal Kpn Nv · EURONEXT:KPN
Royal Kpn Nv — KPN — Q1 2012 Earnings Presentation
51 slides from Royal Kpn Nv's earnings presentation, Apr 24, 2012
Slide 1: First Quarter Results 2012
First Quarter Results 2012 24 April 2012
Slide 2: Safe harbor
Safe harbor Non-GAAP measures and management estimates This financial report contains a number of non-GAAP figures, such as EBITDA and free cash flow. These non-GAAP figures should not be viewed as a substitute for KPN’s GAAP figures. KPN defines EBITDA as operating result before depreciation and im
Slide 3: Contents
Contents 1 Chairman’s review Eelco Blok 2 Group financial review Eric Hageman 3 Group operating review Eelco Blok 4 Concluding remarks Eelco Blok 3
Slide 4: Highlights Q1 '12 - Transition year on track
Highlights Q1 ’12 Transition year on track • Financial results according to plan in first quarter of transition year • EBITDA and FCF impacted by phasing and accelerated investments in The Netherlands • Further improving Dutch mobile propositions and expanding distribution • Increasing TV market sha
Slide 5: Outlook - Confirming outlook
Outlook Confirming outlook 2012 Outlook • Transition year on track, improving EBITDA1 € 4.7 - 4.9bn performance Dutch businesses planned in second half of 2012 Capex € 2.0 - 2.2bn • Accelerated investment strategy will support sustainable profit levels in The Netherlands from end-2012 Free cash flow
Slide 6: Contents
Contents 1 Chairman’s review Eelco Blok 2 Group financial review Eric Hageman 3 Group operating review Eelco Blok 4 Concluding remarks Eelco Blok 6
Slide 7: Group results Q1 '12
Group results Q1 ’12 €m Q1 ’12 Q1 ’11 % • Revenues down 1.4% due to performance of The Netherlands Revenues and other income 3,191 3,235 -1.4% • EBITDA excluding restructuring costs Operating expenses (excl. D&A) 2,087 1,966 6.2% 1 down 12%, mainly due to Consumer – Depreciation 331 347 -4.6% Mobile
Slide 8: Group cash flow Q1 '12
Group cash flow Q1 ’12 €m Q1 ’12 Q1 ’11 % Operating profit 564 712 -21% • Free cash flow of € 37m Depreciation and amortization1 540 557 -3.1% ‒ € 165m lower EBITDA Interest paid/received -258 -256 0.8% ‒ € 78m higher Capex Tax paid/received -91 -115 -21% Partly offset by Change in provisions -58 -1
Slide 9: Group financial profile
Group financial profile Maintaining solid financial profile € bn Debt Financing policy 13.6 13.5 2.5x 13.1 12.8 12.8 12.8 2.5 12.5 2.4 2.4 2.3 2.2 2.0x 11.9 11.8 11.7 Q1 ’11 Q2 ’11 Q3 ’11 Q4 ’11 Q1 ’12 Q1 ’11 Q2 ’11 Q3 ’11 Q4 ’11 Q1 ’12 Net debt / EBITDA1 Financial framework range Gross debt Net deb
Slide 10: Financial review – Dutch Telco
Financial review – Dutch Telco €m • Revenues and other income down 4.6% Revenues and other income y-on-y -4.6% – Regulatory impact of € 24m (1.4%) – Lower revenues mainly in Consumer Mobile, Consumer Residential and NetCo 1,704 1,705 1,704 1,651 1,626 • EBITDA excluding restructuring costs down 12%
Slide 11: Financial review – Dutch Telco (cont'd)
Financial review – Dutch Telco (cont’d) Breakdown operating expenses (excl. D&A and restructuring costs) • Operating expenses (excluding D&A and restructuring costs) up 3.3% y-on-y driven by €m 3.3% investments to strengthen Dutch market positions 837 – Employee benefits up € 12m (higher expenses pe
Slide 12: Financial review – Dutch Telco by segment
Financial review – Dutch Telco by segment €m • Revenues Consumer Mobile down 11% y-on-y Consumer Mobile − Service revenue decline of 12%, impacted by 30.2% 28.8% 29.4% 27.6% regulation of € 14m (3.2%) 22.0% • EBITDA margin1 at 22.0% − Revenue decline and regulation 480 490 473 457 − Increased commer
Slide 13: Financial review – Dutch Telco by segment (cont'd)
Financial review – Dutch Telco by segment (cont’d) €m • Revenues Business down by 2.6% y-on-y Business − Regulatory impact € 5m (1.0%) 35.0% 34.8% − Traditional services decline and price pressure 32.8% 31.8% 30.1% partly offset by good performance wireless data • EBITDA margin1 higher y-on-y at 34.
Slide 14: Financial review – Corporate Market & iBasis
Financial review – Corporate Market & iBasis €m Corporate Market 1 • Revenues Corporate Market down 4.7% y-on-y 9.6% 8.0% − Continued price pressure 6.1% − Clients postponing investments in IT 5.0% 1.6% • EBITDA margin2 at 1.6% in Q1 − Supported by € 10m positive incidental 499 449 439 424 428 − Low
Slide 15: Financial review – Mobile International by segment
Financial review – Mobile International by segment €m 43.9% • Revenue growth of 2.7% y-on-y in Germany 41.6% 42.4% 38.9% 38.2% − Service revenue growth of 4.2% Germany − Lower hardware revenues 773 803 838 829 794 • EBITDA margin at 38.2% − Investments to support introduction of new propositions Q1
Slide 16: Contents
Contents 1 Chairman’s review Eelco Blok 2 Group financial review Eric Hageman 3 Group operating review Eelco Blok 4 Concluding remarks Eelco Blok 16
Slide 17: Simplification and quality
Simplification and quality Driving customer satisfaction and reputation in The Netherlands Online as excellent service channel Decrease lead times Improve customer experience • Delivery time of broadband and VoIP • Improved user interface for IPTV • Installation videos placed online orders reduced b
Slide 18: Product developments
Product developments Innovation in portfolio and customer service Consumer Mobile Consumer Residential Business / Corporate Market • Launch new mobile propositions • Enriched triple play propositions • Cloud services − Hi: unlimited messaging − Increased broadband speed − Telfort: calling for free a
Slide 19: Operating review – Consumer Mobile
Operating review – Consumer Mobile €m 47% 46% 45% 44% 45% • Service revenues (incl. wholesale) down by 446 12% y-on-y 442 revenues1 430 406 387 − Regulatory impact (3.2%) Service − Continued changing customer behavior (~6%) 388 397 386 364 345 − Yes Telecom moved to Business (1.3%)1 − Smaller custom
Slide 20: Operating review – Consumer Mobile (cont'd)
Operating review – Consumer Mobile (cont’d) Transparent, simplified and flexible propositions introduced Road to new customer oriented propositions 1. Actively approach high value customers of Hi by upselling to higher bundles (April ’11) 2. Launch of new integrated data / voice / SMS propositions K
Slide 21: Operating review – Consumer Residential
Operating review – Consumer Residential # 4.9% • RGUs per customer are steadily increasing ‒ Triple play customers as percentage of total 1.94 customer 1.89 1.92 RGUs per 1.85 1.87 customer base increasing ‒ Net line loss of 50k in line with Q1 ’11 • Broadband market share remains under pressure at
Slide 22: Operating review – Consumer Residential (cont'd)
Operating review – Consumer Residential (cont’d) Regionalization Network quality and customer relation determine approach 1 Network • Select regions while taking future FttH roll-out and copper upgrades into account 2 Analysis of selected regions • Strong short-term marketing and sales • Performance
Slide 23: Operating review – Consumer Residential (cont'd)
Operating review – Consumer Residential (cont’d) TV FttH • TV market share increasing to 18% in Q1 • More than 1 million homes passed by Reggefiber − Growth of IPTV activations continued, 79k net adds − 54k homes passed rolled-out in Q1 in Q1 • Improvements TV proposition • FttH activations continue
Slide 24: Operating review – Business wireless
Operating review – Business wireless €m 2.9% 245 253 254 254 252 • Service revenues 2.9% higher y-on-y revenues1 Service − Impact from regulation € 5m (2.0%) − Increased customer base and usage leading to data revenue growth Q1 ’11 Q2 ’11 Q3 ’11 Q4 ’11 Q1 ’12 Voice & SMS Data (excl. SMS) m 1.94 1.99
Slide 25: Operating review – Business wireline
Operating review – Business wireline €m -6.4% 346 337 • Further decline in traditional access lines Revenues 325 324 318 and traffic revenues • Introduction of new services such as Cloud services and integrated fixed / mobile propositions Q1 ’11 Q2 ’11 Q3 ’11 Q4 ’11 Q1 ’12 Voice / Internet connectio
Slide 26: Operating review – Corporate Market
Operating review – Corporate Market • Revenues down 4.7% y-on-y €m Revenues and other income − Continued price pressure -4.7% 499 − Ongoing market pressure, no recovery in The 449 439 424 428 Netherlands • Maintaining market position2 in difficult environment • Focus on restructuring and cost reduct
Slide 27: Operating review – iBasis
Operating review – iBasis • Revenue growth of 13% y-on-y Financial €m 4.1% − Including ~2.4% positive currency effect − Revenue per minute increased 11% y-on-y 3.1% 2.7% 2.8% 2.7% • Focus remains on balancing revenue growth with maintaining profitability and generating free 226 246 256 249 255 cash
Slide 28: Operating review – Germany
Operating review – Germany • Net adds postpaid in line with previous quarters Net adds 22.1 22.7 23.1 21.0 21.5 • Focus on higher value customers with introduction of new propositions − BASE plus introduced in February 434 456 518 458 240 • Net adds prepaid lower 119 102 92 111 105 − Increased compe
Slide 29: Operating review – Germany (cont'd)
Operating review – Germany (cont’d) High speed data network roll-out continues Targeting new market segment • Roll-out of HSPA+ with 2012 Traditional No-frills speeds of up to 42 Mbps postpaid market Postpaid Prepaid • On track to reach the E-Plus Challenger New Market leader target of >80% position
Slide 30: Operating review – Belgium
Operating review – Belgium Net adds • Continued underlying service revenue growth 4.1 4.1 4.3 (11%) 3.9 3.9 − Strong performance driven by mobile data, B2B, wholesale and interconnect traffic − Continued market outperformance leading to service 152 revenue market share of >19% 136 133 40 9 • Net add
Slide 31: Contents
Contents 1 Chairman’s review Eelco Blok 2 Group financial review Eric Hageman 3 Group operating review Eelco Blok 4 Concluding remarks Eelco Blok 31
Slide 32: Concluding remarks
Concluding remarks • Financial results according to plan in first quarter of transition year • EBITDA and FCF impacted by phasing and accelerated investments in The Netherlands • Further improving Dutch mobile propositions and expanding distribution • Increasing TV market share and start of regional
Slide 33: Q&A
Q&A 33
Slide 34: Annex
Annex Annex For further information please contact KPN Investor Relations Tel: +31 70 44 60986 [email protected] www.kpn.com/ir
Slide 35: Analysis of results – Impact regulation, incidentals and restructuring
Analysis of results Impact regulation, incidentals and restructuring €m Q1 ’12 Q1 ’11 Revenue effect MTA reduction Regulation Group -30 -127 Roaming tariff reduction Regulation Group -1 -6 EBITDA effect MTA reduction Regulation Group -10 -53 Roaming tariff reduction Regulation Group -1 -3 Release of
Slide 36: Restructuring costs
Restructuring costs €m Q1 ’12 Q1 ’11 Germany - - Belgium - - Rest of World - - Mobile International - - Consumer Mobile - - Consumer Residential1 -1 -1 Business -11 - NetCo - - Other -1 - Dutch Telco -13 -1 Corporate Market -3 -5 The Netherlands -16 -6 Other -3 -4 KPN Group -19 -10 1 Q1 ’11 adjusted
Slide 37: Impact MTA reduction
Impact MTA reduction €m Q1 ’12 Q1 ’11 1 1 Revenues EBITDA Revenues EBITDA Germany - - -53 -27 Belgium -6 -3 -21 -14 Mobile International -6 -3 -74 -41 Consumer Mobile -14 -4 -28 -9 Of which: Mobile Wholesale -4 - -2 -1 Business -5 -3 -17 -2 NetCo -5 - -12 -1 Intercompany - - 4 - The Netherlands -24
Slide 38: Operating expenses
Operating expenses €m Q1 ’12 Q1 ’11 % Employee benefits 532 477 12% Cost of materials 264 258 2.3% Work contracted out and other expenses 1,143 1,106 3.3% Own work capitalized -28 -29 -3.4% Other operating expenses1 176 154 14% Depreciation2 331 347 -4.6% Amortization2 209 210 -0.5% Total 2,627 2,52
Slide 39: Operating expenses - analysis Employee benefits & Cost of materials
Operating expenses - analysis Employee benefits & Cost of materials €m Employee benefits Y-on-Y increase 16.8% • Higher pension costs mainly relating to UK and US 14.9% 14.4% 14.6% Getronics pension funds (€ 19m) and The 13.7% Netherlands (€ 15m) • Increase in remuneration relating to CLA1 532 • Inc
Slide 40: Operating expenses - analysis Work contracted out & Other
Operating expenses - analysis Work contracted out & Other €m Work contracted out Y-on-Y increase 36.2% • Higher traffic costs at iBasis and Germany 34.6% 34.7% 34.8% 34.2% • Higher content related expenses • Partly offset by lower traffic costs in The Netherlands 1,106 1,136 1,134 1,127 1,143 Q-on-Q
Slide 41: Operating expenses - analysis Depreciation & Amortization
Operating expenses - analysis Depreciation & Amortization €m Depreciation1 Y-on-Y decrease 14.3% • Extension economic lifetime fiber network at NetCo 10.9% 11.4% 10.7% 10.8%2 10.5% Q-on-Q decrease 115 • Extension economic lifetime fiber network at NetCo 347 352 371 355 331 Q1 ’11 Q2 ’11 Q3 ’11 Q4 ’1
Slide 42: Tax
Tax P&L Cash flow Fiscal units (€ m) Q1 ’12 Q1 ’11 Q1 ’12 Q1 ’11 Dutch activities -51 63 -811 -1081 Corporate Market 3 6 -4 -2 German activities -27 -29 -4 -4 Belgian activities -7 -7 - - Other -1 - -1 -1 Total reported tax -83 33 -90 -115 Effective tax rate 21.9% 20.9%2 • In Q1 ’12, the effective t
Slide 43: Debt portfolio
Debt portfolio Breakdown of € 13.1bn gross debt1 16% 78% Global Other 6% bonds 2% 6% 2 2 EUR USD GBP Eurobonds 92% 100% 3 Fixed 1 Nominal value of interest bearing financial liabilities related to these liabilities 2 Foreign currency amounts hedged into EUR 3 Excluding bank overdraft 43
Slide 44: Dutch wireless disclosure
Dutch wireless disclosure €m Q1 ’12 Q1 ’11 % Service revenues 646 698 -7.4% − Consumer retail 345 388 -11% − Business1 252 245 2.9% − Other2 49 65 -25% SAC/SRC − Consumer retail 149 141 5.7% − Business 258 229 13% 1 Since Q2 ’11 including Yes Telecom 2 Includes amongst others Consumer Mobile wholesa
Slide 45: Mobile International wireless disclosure
Mobile International wireless disclosure Service revenues growth Germany Service revenues growth Belgium 15.0% 11.4% 11.1% 8.1% 8.1% 8.9% 7.9% 7.5% 7.2% 7.8% 6.3% 4.2% 4.2% 3.5% 1.0% 1.2% -0.5% -0.6% -3.9% -5.3% Q1 ’11 Q2 ’11 Q3 ’11 Q4 ’11 Q1 ’12 Q1 ’11 Q2 ’11 Q3 ’11 Q4 ’11 Q1 ’12 Reported Underlyin
Slide 46: Regulation – MTA reductions
Regulation MTA reductions MTA reductions implemented across the Group NL • The Dutch Court overruled OPTAs MTA tariff decision and determined a new tariff as of 1 September 2012 of € 2.40 cent per minute instead of € 1.20 cent per minute • The EC published a serious doubt letter, indicating that the
Slide 47: Regulation – Spectrum in The Netherlands
Regulation Spectrum in The Netherlands Total Free 800MHz 2*30 2*30 MHz Vodafone T-Mobile KPN 900MHz To be auctioned 2*35 2*12.5 2*10 2*12.5 Vodafone T-Mobile KPN Free 1.8GHz 2*70 2*5 2*30 2*20 2*15 1.9-2.0 Current status • GHz Free 14.7MHz unpaired 1*14.7 Vodafone T-Mobile KPN Free 2*60 2.1GHz 1*20
Slide 48: Regulation – Spectrum in Germany
Regulation Spectrum in Germany 800MHz O2 VOD DT 2*30 Paired 2*5 2*5 2*5 2*5 2*5 2*5 900MHz E+ O2 DT DT VOD VOD 2*34.8 Paired 2*5 2*5 2*5 2*7*4 2*5 2*7.4 1.8GHz DT E+ O2 VOD E+ 2*70.2 Paired 2*5 2*5 2*5 2*5 2*5 2*5 2*5 2*7.4 2*5.4 2*5 2*5 2*5 2*7.4 2.1GHz VOD E+ O2 DT 2*60 Paired 2*5 2*5 2*5 2*5 2*5
Slide 49: Personnel
Personnel • Increase of 506 FTE y-on-y 31,084 – Reduction of 126 FTE in personnel 30,534 30,598 30,859 31,040 domestic from all segments 3,826 3,827 4,010 4,016 4,104 – Increase of 836 FTE at Mobile International (including SNT Germany), to support growing business 7,888 7,791 7,654 7,605 7,406 – Co
Slide 50: Infrastructure – Deploying mix of technologies going forward
Infrastructure Deploying mix of technologies going forward VDSL from VDSL pair bonding ADSL on central office central office VDSL from copper (VDSL-CO) (VDSL-CO) street cabinet FttH Wireless Central Central Central Central office office office office ODF1 Street cabinet up to 20 Mbps DS2 up to 50 Mb
Slide 51: Unbundling tariffs
Unbundling tariffs Unbundling in current network Category Monthly tariff Line sharing (LLU)1 € 0.11 / line MDF Node Fully unbundled (LLU)1 € 6.69 / line SDF colocation KPN / Telco MDF colocation1 € 891.24 / footprint / year ~28,000 1,350 MDF backhaul Commercial pricing, not regulated street cabinets