Royal Kpn Nv · EURONEXT:KPN
Royal Kpn Nv — Q3 2003 Earnings Presentation
73 slides from Royal Kpn Nv's earnings presentation, Nov 10, 2003
Slide 1: Third Quarter Results
Third Quarter Results 10 November 2003
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 KPN’s operations, KPN’s and its joint ventures share of
Slide 3: CEO
CEO Ad Scheepbouwer
Slide 4: Highlights Q3
Highlights Q3 • Continued strong operational results • 398,000 new mobile customers, of which E-Plus 248,000; E-Plus customer base reached 8 mn • 188,000 new i-mode customers • 96,000 new ADSL connections • Early redemptions of € 407 mn; in October € 671 mn redeemed early • Net debt reduced to € 9.4
Slide 5: Increased revenues and profitability
Increased revenues and profitability Revenues1 Operating EBITDA margin1 +81 -41 41.0% 41.3% 40.3% +15 38.3% 3,082 37.8% (in € mn) 3,027 3.1% revenue growth in core divisions 35.5% 32.1% + 1.8% ² Q1 '02 Q2 '02 Q3 '02 Q4 '02 Q1 '03 Q2 '03 Q3 '03 Q3 ’02 Fixed Mobile Other Q3 ’03 Profit before taxes1 45
Slide 6: Broadband
Broadband Revenue driver Fixed Mobile ADSL i-mode Number of Dutch 3 • Penetration in NL in Number of i-mode • 188,000 net adds of broadband connections top quartile Europe customers which 51,000 prepaid • Target of 1 million X 1,000 X 1,000 • Market share KPN subscribers as at increased to 37%¹ YE 2
Slide 7: Fixed
Fixed New initiatives to increase revenues and to protect customer base Consumer market Market shares2 1 • Discount packages successfully introduced >90% – 640,000 customers +/-90% Introduction >85% – 11% of customer base local CPS +/- 80% +/-70% >60% Business market +/-55% +/-50% • Migration to Bus
Slide 8: Mobile
Mobile One company active in three countries Strengthen market position further Target of 9 mn customers end 2004 with margin of 22–25% during 2004 Results Q3: • 248,000 net adds leading to 8 mn customers • 25% operating EBITDA margin Become a better number one Results Q3: • 119,000 net adds leading
Slide 9: Mobile: UMTS
Mobile UMTS • Roll-out – Fulfilment of license obligations – Market demand for 3G services determines speed of further roll-out – UMTS and GSM/GPRS will co-exist • Pilots – Pilots in four German cities ongoing (Berlin, Düsseldorf/Duisburg, Munich, Hannover) – Customer pilots in Rotterdam and The Hag
Slide 10: Benchmarking
Benchmarking Ambition: Top quartile in as many metrics as possible Category Metric Q2 ’03 • Three metrics Revenue growth in top quartile Growth Operating EBITDA growth PBT growth • Further room for Operating EBITDA margin improvement PBT margin Return ROIC FCF margin TSR Revenues per FTE Efficiency
Slide 11: Outlook 2003
Outlook 2003 Excluding impact potential reduction Mobile termination rates 3 March 12 May 22 August 10 November Outlook full year 2003 2003 2003 2003 Growth revenues core activities1 • Fixed 0 – 2 %2 0–2% flat flat • Mobile 5 – 10 % approx. 10 % approx. 10 % approx. 9 % 1 3 4 5 Operating EBITDA grow
Slide 12: CFO
CFO Maarten Henderson
Slide 13: Financial highlights in Q3
Financial highlights in Q3 (Reported, in € millions) Revenues (+1%) Operating EBITDA (+7%) 3,057 3,082 1,175 1,263 Q3 ’02 Q3 ’03 Q3 ’02 Q3 ’03 EBIT (+14%) Profit after taxes (+104%) 527 603 68 139 Q3 ’02 Q3 ’03 Q3 ’02 Q3 ’03 12 P
Slide 14: Results Q3
Results Q3 Excluding exceptional items, Q3 ’02 Q3 ’03 % YTD ’02 YTD ’03 % € millions Revenues 3,027 3,082 2% 9,034 9,121 1% Opex -1,882 -1,808 - 4% -5,855 -5,392 - 8% Operating EBITDA 1,145 1,274 11% 3,179 3,729 17% Depreciation1 -566 -540 - 5% -1,699 -1,635 - 4% Amortization1 -82 -78 - 5% -306 -239
Slide 15: Continued focus on cash
Continued focus on cash Operating EBITDA1 Free cash flow 1,274 1,200 1,208 1,247 1,096 1,145 (in € mn) (in € mn) 1,094 839 780 711 940 582 550 412 Q1 '02 Q2 '02 Q3 '02 Q4 '02 Q1 '03 Q2 '03 Q3 '03 Q1 '02 Q2 '02 Q3 '02 Q4 '02 Q1 '03 Q2 '03 Q3 '03 Capex 15.4 Net debt 417 15.0 13.9 349 12.4 (in € mn) (i
Slide 16: Operating EBITDA margins
Operating EBITDA margins1 Total margin continues to improve 50% KPN Group Fixed Mobile 43.2% 42.5% 41.3% 41.2% 40% 38.5% 41.0% 38.1% 40.3% 36.9% 38.3% 37.8% 34.2% 35.5% 34.5% 34.2% 34.5% 34.4% 33.7% 33.8% 32.1% 33.1% 30% Q1 '02 Q2 '02 Q3 '02 Q4 '02 Q1 '03 Q2 '03 Q3 '03 • Fixed margin – Y-on-Y increa
Slide 17: Financial profile
Financial profile Solid ratios & further improved redemption profile 3 Financial ratios Redemption profile 6 2.6 2.6 5.0 1 5 4.7 2.4 2 2 4.1 4.1 2.1 2.0 3.8 3.7 1.7 4 3.6 1.8 3.5 3 3.4 1 2.9 3.1 1.0 2.8 0.9 0.9 2 2.4 2.1 1.9 0.3 1 0 z Q1 '02 Q2 '02 Q3 '02 Q4 '02 Q1 '03 Q2 '03 Q3 '03 Cash '03 '04 '05
Slide 18: Taxes
Taxes Expectations unchanged • Main issues under discussion – Fiscal valuation of KPN Mobile per December 2002 – Recognition of German transparent branch offices for Dutch tax purposes – Fiscal valuation of 77.49% stake in E-Plus per February 2001 and December 2002 – Qualification of investments in
Slide 19: Fixed in Q3
Fixed in Q3 Revenue growth and strong growth of operating EBITDA and EBIT (Excluding exceptional items, € millions) Revenues (+0.8%) Operating EBITDA (+9%) EBIT (+22%) 1,815 1,830 691 754 352 429 209 201 499 534 469 392 Fixed Networks 70 687 701 545 71 490 281 359 914 893 -438 -402 -316 -288 Q3 ’02
Slide 20: Revenue development Fixed
Revenue development Fixed¹ Increase of 0.8% € millions 39 -17 -18 5 1,830 15 1,815 -7 -2 Q3’02 Internet Internet ADSL Local Other ISP Other Other Q3’03 minutes originating subscription voice traffic and Business Fixed3 Fixed minutes Fixed Fixed telephony Solutions2 Telephony ISP’s Telephony Telephon
Slide 21: Mobile in Q3
Mobile in Q3 Further increase in revenues, operating EBITDA and EBIT (Excluding exceptional items, € millions) Revenues (+7%) Operating EBITDA (+8%) EBIT (+18%) 1,243 1,324 425 457 167 197 81 79 11 168 158 592 630 266 290 591 618 -3 -19 -5 -6 -2 Q3 ’02 Q3 ’03 Q3 ’02 Q3 ’03 Q3 ’02 Q3 ’03 KPN Mobile (
Slide 22: Mobile in Q3
Mobile in Q3 Traffic and subscription revenues increase in all countries KPN Mobile (NL) E-Plus BASE 591 618 592 630 79 81 15 81 21 99 +6% +11% 603 570 549 493 12 7 +10% 67 74 Q3 ’02 Q3 ’03 Q3 ’02 Q3 ’03 Q3 ’02 Q3 ’03 Traffic and subscription Other (including equipment sales) 21 P
Slide 23: E-Plus
E-Plus Growth continues with stable mix and ARPU mn customers ARPU 7.7 8.0 7.3 7.3 7.4 43 43 43 42 43 7.1 40 41 7.0 24 25 25 24 25 22 23 46% 47% 46% 46% 47% 43% 45% 9 9 9 9 8 9 9 Q1 '02 Q2 '02 Q3 '02 Q4 '02 Q1 '03 Q2 '03 Q3 '03 Q1 '02 Q2 '02 Q3 '02 Q4 '02 Q1 '03 Q2 '03 Q3 '03 % post paid blended pos
Slide 24: Q&A
Q&A
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Slide 27: Annex
Annex For more information please contact: KPN Investor Relations Tel: +31 70 44 60986 Fax: +31 70 44 60593 mailto: [email protected] www.kpn.com Over/about KPN – Investor Relations
Slide 28: Other in Q3
Other in Q3 Continued improvement operating EBITDA and EBIT (Excluding exceptional items, € millions) Revenues (–18%) Operating EBITDA (+117%) EBIT 280 229 29 63 -22 30 Q3 ’02 Q3 ’03 Q3 ’02 Q3 ’03 Q3 ’02 Q3 ’03 • Revenue decline due to sale of Directory Services and lower revenues from retail activi
Slide 29: Pension charges
Pension charges ¹ Potential additional P&L charge for 2003 amounts to € 13 mn Coverage ratio Desired4 290 mn Minimum reserve 13 mn 109.7%1 100%3 2002 2003 2004 2005 2006 2007 2008 2009 • Potential funding 2003 decreased from € 541 mn to € 132 mn – Coverage ratio increased to 109.7% – Required minimu
Slide 30: Results Q3 (Reported)
Results Q3 (Reported) € millions Q3 ’02 Q3 ’03 % YTD ’02 YTD ’03 % Revenues 3,057 3,082 1% 9,421 9,793 4% Opex 1,882 1,819 -3% 6,023 5,397 -10% Operating EBITDA 1,175 1,263 7% 3,398 4,396 29% Depreciation 566 582 3% 1,892 1,677 -11% Amortization 82 78 -5% 7,601 292 -96% EBIT 527 603 14% -6,095 2,427
Slide 31: Exceptional items
Exceptional items Impact on operating EBITDA € millions Q3 ’02 Q3 ’03 YTD ’02 YTD ’03 Mobile division - - - - Gain resulting from the termination agreement MobilCom - - - 222 Book profit on the sale of UMC - - - 15 Book profit on the sale of Pannon GSM - - 335 - Settlement Indonesian intermediate ho
Slide 32: Exceptional items
Exceptional items Impact on EBIT & net profit € millions Q3 ’02 Q3 ’03 YTD ’02 YTD ’03 Total impact on operating EBITDA 30 -11 219 667 Impairment charges Goodwill E-Plus and BASE (Mobile) - - -1,882 - UMTS license E-Plus and UMTS/GSM licenses (Mobile) - - -5,382 - Goodwill on KPNQwest (Other activit
Slide 33: Operating expenses
Operating expenses Further decrease Excluding exceptional items, € millions Q3 ’02 Q3 ’03 % YTD ’02 YTD ’03 % Salaries and social security 467 404 -13% 1,479 1,270 -14% contributions Cost of materials 229 232 +1% 665 716 +8% Work contracted out and other 1,022 1,056 +3% 3,065 2,932 -4% expenses Othe
Slide 34: Personnel costs
Personnel costs Substantial progress since YE 2001 – Reduction of 17,249 FTE in total of which 10,411 CLA FTE1 – First discussions started on new CLA -17,2 49 47,888 44,080 39,561 16,837 37,251 35,837 15,840 33,783 33,178 15,761 30,639 1,674 15,209 14,457 975 13,576 13,062 2 10,641 729 685 847 723 9
Slide 35: Analysis operating expenses
Analysis operating expenses Salaries & Cost of materials • Deconsolidation and sale of Salaries non-core activities in € mn 550 550 18% 500 500 17% 16% • Lower number of personnel due to 450 450 15% reorganisation 14% 400 400 13% 12% 350 350 11% 300 300 10% Q1 1’02 Q2 2’02 Q3 3’02 Q4 4’02 Q15’03 Q26
Slide 36: Analysis operating expenses
Analysis operating expenses Work contracted out & Other • Delivery Mobirail project Work contracted out in € mn 1100 1100 38% 1000 1000 • Higher bonuses and dealer 900 900 36% commissions 34% 800 800 700 700 • Deconsolidation and sale of 32% 600 600 non-core activities 30% 500 500 400 400 28% Q1 1’0
Slide 37: Depreciation and amortization
Depreciation and amortization Excluding exceptional items, Q3 ’02 Q3 ’03 % % € millions Depr. Amort. Depr. Amort. Depr. Amort. Fixed 332 7 320 5 - 4% - 29% - Fixed Networks 203 6 181 5 - 11% - 17% - Business Solutions 129 1 139 - 8% Mobile 187 71 190 70 2% - 1.4% Other 47 4 30 3 -36% - 25% Total 566
Slide 38: Taxes
Taxes Reported Q3 and YTD Reported1, € millions Q3 ’03 YTD ’03 Payments (-) Payments (-) Fiscal unities P&L charge P&L charge Receipts (+) Receipts (+) Divisions Fixed/Other -92 No -278 +1723 Dutch Mobile activities -164 No2 -437 No2 German Mobile activities - No - No Belgian Mobile activities - No
Slide 39: Net result affiliates
Net result affiliates Income from participating interests Excluding exceptional items, € millions Q3 ’02 Q3 ’03 YTD ’02 YTD ’03 UMC 3 - 8 2 Český Telecom - - 24 - Infonet -1 -3 -12 -6 Hutchison 3G UK - - -13 - KPNQwest - - -113 - Other -9 -1 -22 0 Total -7 -4 -128 -4 Minority interests KPN Mobile (2
Slide 40: Cash flow
Cash flow € millions Q3 ’02 Q3 ’03 YTD ’02 YTD ’03 Net cash flow provided by operating activities 1,336 1,188 2,778 2,946 Capex -240 -349 -720 -814 Sale of non-core assets 0 0 603 845 Other (including real estate) 17 -18 92 5 Net cash flow from investing activities -223 -367 -25 36 Redemptions -12 -
Slide 41: Free cash flow
Free cash flow € millions Q3 ’02 Q3 ’03 YTD ’02 YTD ’03 Profit or loss after taxes 68 139 -9,549 1,0921 Minority interests 6 -1 0 -23 Depreciation, amortization and impairments 648 660 9,493 1,969 Income from participating interests 7 4 1,602 4 Results from sale of assets -35 0 -392 -461 Change in p
Slide 42: Working capital
Working capital € millions Q3 ’03 € millions YTD ’03 651 -3 401 117 w flo ash n 189 -80 c ve 0m -77 siti 26 Po € -1501 41 1 79 1 83 191 flow Positive cash € 63 m n Decrease Increase Increase Decrease Other Further Accrued MobilCom Capital Decrease Decrease Other trade accrued accounts inventory chan
Slide 43: Capex
Capex Excluding exceptional items, Q3 ’02 Q3 ’03 % YTD ’02 YTD ’03 % € millions Fixed 162 124 -23% 346 351 1% % revenues 9% 7% 5% 6% Fixed Networks 90 73 -19% 206 197 -4% % revenues 6% 5% 4% 4% Business Solutions 72 51 -29% 140 154 10% % revenues 14% 10% 9% 10% Mobile 120 213 78% 335 436 30% % reven
Slide 44: Balance sheet
Balance sheet Assets Liabilities and equity € billions € billions 25.2 25.9 23.1 22.8 25.2 25.9 23.1 22.8 4,5 4,4 4.8 5.5 4,3 4,2 5.7 4,4 Goodwill Group equity 1.6 1.8 5.8 4,4 4,4 4,4 Provisions 1.9 2.1 Licenses 12.7 11.5 10,7 Other Fixed assets Long term liabilities 11,0 10.6 10,2 9.9 10,0 Current
Slide 45: Further improved financial position
Further improved financial position Net debt reduction of 32% within last 12 months € bn Net debt Gross debt 24 23.5 20 19.2 18.9 16 15.4 15.0 14.9 15.0 13.9 12 11.8 12.4 11.1 11.2 10.2 9.4 8 Q1 '02 Q2 '02 Q3 '02 Q4 '02 Q1 '03 Q2 '03 Q3 '03 44
Slide 46: Debt summary
Debt summary € billions Q3 ’02 Q2 ’03 Q3 ’03 Subordinated convertible bonds 1.5 1.51 1.2 Subordinated loans 2.3 0.1 0.1 Eurobonds 6.4 5.3 5.2 Global bonds 5.0 4.2 4.0 Other loans at Royal KPN 1.4 0.4 0.4 Consolidated debt E-Plus 2.1 0.1 0.1 Other 0.2 0.2 0.1 Total debt 18.9 11.8 11.1 of which short-
Slide 47: Early redemptions
Early redemptions € millions Q3 ’03 YTD ’03 October ’03 Open Market Repurchases Subordinated convertible bond 2000 – 2005 286 286 87 Eurobond 1996 – 2006 0 0 155 Eurobond 2001 – 2006 105 105 326 Global bond 2000 – 2005 (EUR) 16 43 103 Other Financial leases E-Plus 0 26 Private loans 0 5 BellSouth lo
Slide 48: Bonds portfolio
Bonds portfolio Overview changes during life of bonds Principal in GBP / USD Principal in € Q1 – Q3 ’03 in € Early redemptions risk in € Rehedge currency YTD ’03 in € Outstanding principal at October 31 ‘03 Outstanding principal 2002 in € Early redemptions YTD ’03 in GBP / USD Outstanding principal
Slide 49: Debt portfolio
Debt portfolio Total gross debt as at end Q3: € 11.1 bn1 3% Other consolidated Syndicated Other debt 29% 68% loan 3% 2% Convertible 2% bond 11% Eurobonds 46% 2 2 EUR USD GBP 10% 90% Global bonds 36% Fixed (incl swapped) Floating 1 Including money market, other short term funding 48 2 Foreign currenc
Slide 50: Mobile structure
Mobile structure Equity stake Royal KPN Debt 100% € 4.7 bn € 5.5 bn KPN Mobile Holding1 Total gross debt2 NTT DoCoMo € 10.1 bn 97.84% 2.16% KPN Mobile € 2.0 bn Total gross debt3 22.51% 77.49% € 5.5 bn € 13.0 bn E-Plus4 Total gross debt Financial leases € 15.1 bn € 0.1 bn 1 KPN Mobile Holding include
Slide 51: Fixed YTD
Fixed YTD Strong operating EBITDA and EBIT growth (Excluding exceptional items, € millions) Revenues (+0.4%) Operating EBITDA (+17%) EBIT (+40%) 5,496 5,518 2,000 2,334 967 1,358 1,507 1,515 232 639 1,384 1,245 549 145 2,036 2,113 Fixed Networks 1,126 1,451 1,695 822 2,843 2,735 -1,309 -1,224 -965 -
Slide 52: KPIs Fixed
KPIs Fixed Fixed Networks Q3 ’02 Q1 ’03 Q2 ’03 Q3 ’03 YTD ’03 Market shares Local > 80% >80% +/- 80% +/- 80% +/- 80% National < 70% >65% +/- 65% > 60% > 60% International +/- 55% >50% >50% +/- 50% +/- 50% Fixed to Mobile < 70% >65% +/- 65% +/- 65% +/- 65% Channels 10,041 9,992 9,979 9,934 9,934 PSTN
Slide 53: Fixed Networks dynamics
Fixed Networks dynamics Decrease in minutes; increase in connections billion minutes connections x 1,000 209 609 20.5 -1.0 -0.4 -1.1 1.2 19.2 1,517 1,555 6,377 6,166 Q3 ’02 Q3 ’03 Q3 ’02 Internet Internet Domestic Other Q3 ’03 minutes minutes traffic Fixed ISP’s Fixed Telephony Telephony Decrease of
Slide 54: Discount packages
Discount packages Introduced in Q2 & Q3 ’03 • 100 minutes1,3 for € 2.16 per month, additional to subscription fee BelPlus • 10 % discount on all national and international minutes • Attractive if most calls are local • 200 minutes2,3 for € 4.50 per month, additional to subscription fee BelPlus • 12.
Slide 55: KPIs Fixed
KPIs Fixed Business Solutions Q3 ’02 Q1 ’03 Q2 ’03 Q3=YTD ’03 Leased lines (x1000)1 97 91 82 78 Analogue 62% 61% 63% 64% Digital 38% 39% 37% 36% VAS Frame Relay (# ports) 9,975 10,691 10,281 9,410 Lan-I (# routers)2 5,870 5,961 6,206 6,581 ADSL (x1000) Installed 209 418 513 609 % Lite (384/128 kbit/
Slide 56: KPIs Fixed
KPIs Fixed Internet subscribers X 1,000 Q3 ’02 Q1 ’03 Q2 ’03 Q3=YTD ’03 Active ISP customers Planet Internet 676 727 740 751 Het Net 569 593 583 587 XS4ALL 144 165 166 191 Total 1,389 1,486 1,489 1,529 Paying ISP customers 99% 99% 100% 100% Number of broadband subscriptions Planet Internet 116 197 2
Slide 57: Mobile YTD
Mobile YTD Further increase in revenues, operating EBITDA and EBIT (Excluding exceptional items, € millions) Revenues (+9%) Operating EBITDA (+9%) EBIT (+45%) 3,486 3,802 1,182 1,294 350 509 240 40 234 10 456 1,809 459 1,592 722 800 1,660 1,766 0 -13 -9 -2 YTD ’02 YTD ’03 YTD ’02 YTD ’03 YTD ’02 YTD
Slide 58: KPIs Mobile
KPIs Mobile KPN Mobile (NL) Q3 ’02 Q1 ’03 Q2 ’03 Q3 ’03 YTD ’03 Market share base 41.8% 40.7% 40.5% 40.6% 40.6% Customers (1,000) 5,044 4,908 4,919 5,038 5,038 Post-paid 1,807 1,900 1,930 1,953 1,953 Of which i-mode 44 137 148 197 197 Pre-paid 3,237 3,008 2,989 3,085 3,085 Of which i-mode 51 51 ARPU
Slide 59: KPN Mobile (NL)
KPN Mobile (NL) Growing customerbase and improved margin mn customers ARPU 5.2 5.2 5.0 5.0 5.0 4.9 4.9 72 76 72 73 76 68 70 39 40 36 36 36 31 33 37% 39% 39% 39% 34% 34% 36% 15 15 14 16 16 12 13 Q1 '02 Q2 '02 Q3 '02 Q4 '02 Q1 '03 Q2 '03 Q3 '03 Q1 '02 Q2 '02 Q3 '02 Q4 '02 Q1 '03 Q2 '03 Q3 '03 % post p
Slide 60: KPIs Mobile
KPIs Mobile E-Plus Q3 ’02 Q1 ’03 Q2 ’03 Q3 ’03 YTD ’03 Market share base 12.4% 12.4% 12.6% 12.7% 12.7% Customers (1,000) 7,034 7,446 7,716 7,964 7,964 Post-paid 3,251 3,453 3,578 3,707 3,707 Of which i-mode 99 140 191 273 273 Pre-paid 3,783 3,993 4,138 4,257 4,257 ARPU (€) 25 23 24 25 24 Post-paid 4
Slide 61: E-Plus
E-Plus Growth continues with stable mix and ARPU mn customers ARPU 7.7 8.0 7.3 7.3 7.4 43 43 43 42 43 7.1 40 41 7.0 24 25 25 24 25 22 23 46% 47% 46% 46% 47% 43% 45% 9 9 9 9 8 9 9 Q1 '02 Q2 '02 Q3 '02 Q4 '02 Q1 '03 Q2 '03 Q3 '03 Q1 '02 Q2 '02 Q3 '02 Q4 '02 Q1 '03 Q2 '03 Q3 '03 % post paid blended pos
Slide 62: KPIs Mobile
KPIs Mobile BASE Q3 ’02 Q1 ’03 Q2 ’03 Q3 ’03 YTD ’03 Market share base¹ 14.2% 14.1% 14.1% 14% 14% Customers (1,000) 1,145 1,131 1,131 1,162 1,162 Post-paid 281 261 255 269 269 Of which i-mode - 8 14 20 20 Pre-paid 864 870 876 893 893 ARPU (€) 21 21 22 22 22 ¹ Post-paid 54 56 61 59 59 ¹ Pre-paid 11 1
Slide 63: BASE
BASE Growth customer base combined with ARPU increase mn customers ARPU 59 1.2 58 54 56 1.1 1.1 1.1 1.1 1.1 1.1 53 53 48 22 21 21 21 22 22 19 26% 11 25% 25% 23% 23% 23% 23% 11 11 11 11 10 11 Q1 '02 Q2 '02 Q3 '02 Q4 '02 Q1 '03 Q2 '03 Q3 '03 Q1 '02 Q2 '02 Q3 '02 Q4 '02 Q1 '03 Q2 '03 Q3 '03 % post paid
Slide 64: Other YTD
Other YTD (Excluding exceptional items, € millions) Revenues (–25%) Operating EBITDA EBIT 925 696 -3 101 -143 -12 YTD ’02 YTD ’03 YTD ’02 YTD ’03 YTD ’02 YTD ’03 • Revenue decline due to sale of Directory Services and Network Construction and lower revenues from retail activities and Xantic • Operat
Slide 65: New Telecommunications Act
New Telecommunications Act • Introduction in The Netherlands delayed (to probably start Q1 2004); the proposed law has passed the Second Chamber on November 4th and will be considered in the First Chamber shortly • Market definitions and dominancy test will be based on general competition law instea
Slide 66: Regulation Fixed
Regulation Fixed Interconnection tariffs Tariff per minute in eurocents • On July 24, OPTA targeted new 1.40 Originating1 rates for origination (-10%) and 1.20 termination (-5%) 1.00 0.80 • Originating tariffs were already 0.60 in middle of EU range 0.40 0.20 0.00 • Terminating tariffs were already
Slide 67: Comparison retail tariffs fixed telephony
Comparison retail tariffs1 fixed telephony Consumer basket Amounts in euros per year per subscriber Portugal KPN’s tariffs Finland low in Norway European Belgium context Italy Subscriptions in Ireland higher end of France the range Germany Traffic rates in UK bottom end the Austria of range Denmark
Slide 68: Regulation Fixed
Regulation Fixed Restrictions on discount packages On August 6, OPTA decided not to allow KPN any additional scope for discounts and savings packages KPN objects to being restricted in offering attractive packages to customers Currently only limited number of discount schemes offered, for example fl
Slide 69: Update Dutch Mobile terminating tariffs
Update Dutch Mobile terminating tariffs No reduction enforced as of yet ¹ Update possible annualized impact of tariffs as proposed by OPTA € millions Revenues Operating EBITDA Fixed - 410 0 Mobile The Netherlands - 180 - 110 Intercompany + 240 0 KPN Group - 350 - 110 • Most recent court ruling: OPTA
Slide 70: Regulation Mobile
Regulation Mobile Other relevant developments • International roaming – Pending investigation of excessive pricing by all UK and German operators; recent focus on UK – Under new regulatory framework, national regulators will have to investigate wholesale international roaming market and may regulate
Slide 71: Benchmarking
Benchmarking Total Shareholder Return 140% 120% 100% 80% 60% Q2'02 Q3'02 Q4'02 Q1'03 Q2 '03 KPN Average peers 70
Slide 72: Benchmarking
Benchmarking Summary of metric definitions Metric Definition Total reported revenues -/- exceptional items for current period/ Revenue growth Total reported revenues -/- exceptional items for same period in prior year Reported operating EBITDA -/- exceptional items for current period/ Operating EBIT
Slide 73: Management focus
Management focus Moving from short term cash to longer term value focus Past Present Future Short-term Mid-term Long-term focus focus focus Repair balance sheet Optimal leverage Positive free cash flow Rationalization and restructuring Customer satisfaction Maximize bottom line growth Best-in-Class