Royal KPN NV · EURONEXT:KPN
Royal KPN NV — Koninklijke KPN — Q1 2019 Earnings Presentation
33 slides from Royal KPN NV's earnings presentation, Apr 26, 2019
Slide 1: Q1 2019 Results
Q1 2019 RESULTS 26 April 2019
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 (F
Slide 3: Highlights Q1 2019
Highlights Q1 2019 Solid start new cost savings program € 27m net indirect opex savings' On track to realize full-year outlook Adjusted EBITDA after leases -0.3% 5-0: Q1 2019: € 563m 1 Indirect opexafter leases, adjusted for the impact of restructuring costs and incidentals Sale iBasis completed FUL
Slide 4: The best converged smart infrastructure
The best converged smart infrastructure. Focus on profitable growth segments. Acceleration of simplification and digitalization.
Slide 5: Strong start to converged infrastructure roll-out
Strong start to converged infrastructure roll-out Started accelerated Future proof ‘Outstanding’ FttH roll-out technology rating in mobile P3 test Up to Te. = TOGbps = 967... Symmetrical 2018: 940 points Partnering with Nokia to Ramping up for deploy latest technologies +1m FitH households G-PON & X
Slide 6: Continuously improving customer experience
Continuously improving customer experience record-high NPS in both segments Consumer NPS' Business NPS' Reputation award? Q12019 Q12019 A Q12018 Q12018 1 2018 restate elative weights of underlying businesses, source: Kantar TNS 6 2industry adju r
Slide 7: Brand strategy
Brand strategy one strong powerful brand: KPN Quality & Accelerate on Signature time-to-market convergence features of all brands under one brand EFFICIENT OPERATING MODEL
Slide 8: Solid results in Consumer Fixed
Solid results in Consumer Fixed Converged Broadband Fixed ARPU households base’ +14k so +1 € 46 5, 1 Corrected for migrations to, and new customers of, small business proposition launched in Q4 2017 (8k)
Slide 9: Solid KPN brand in competitive mobile market
Solid KPN brand in competitive mobile market Postpaid ARPU Stabilizing postpaid Converged under pressure base KPN brand postpaid base € 17 -5.0% =1 k net adds y-on-y KPN brand Q1 2018: € 18 Q4 2018: -8k All brands KPN brand
Slide 10: Strategic actions impacting Business revenue
Strategic actions impacting Business revenue migrations accelerating, core IT services growing Adjusted revenues y-on-y growth trend Q12019 Communication Services -7.6% Mobile service revenues -8.8% loT 5.8% Broadband & Network Services 17% Fixed voice -18% Other -3.6% IT Services (a.0. security, cl
Slide 11: Solid progress small business migrations
Solid progress small business migrations value accretive Strong converged ARPU accretive penetration migrations 33% ofsmallbusiness ~ © broadband base ARPU. ARPU uplift ARPU. Consumer small business proposition Proposition
Slide 12: Lean and digital operations
Lean and digital operations Cost to serve KPN EEN significantly KPN EEN lowers complexity ° ° > 25% -15% lower by 2021 of IT systems by 2021 Simplified end-to-end organization New management structure & accelerate integration of recent acquisitions STABILIZED END-TO-END ADJUSTED EBITDA AL MID-2020
Slide 13: IFRS: four financial KPIs introduced
IFRS 16 four financial KPls introduced Adjusted . Adjusted , Leverage ratio she, tenes indirect opex Free cash flow ‘Net “ ~ “ leases)’ after leases ‘Adjusted EBITDA AL (Adjusted EBITDA AL’)
Slide 14: Financial highlights Q1 2019
Financial highlights Q1 2019 Adjusted revenues Adjusted EBITDA after leases €1,362m €563m:" -2.9% y-on-y -0.3% y-on-y Q1 2018: € 402m Q1 2018: € 565m Free Cash Flow (excl. TEFD dividend) € 69m 202 intrayear phasing -43% y-on-y Q1 2018: € 121m
Slide 15: Financial performance Q1 2019
Financial performance Q1 2019 key P&L metrics €m Q12018 Q12019_ Ay-on-y Consumer 744 728 -2.1% Business 533 506 4.9% Wholesale 152 157 3.0% Other -26 -30 13% Adjusted revenues’ 1,402 1,362 2.9% Adjusted direct costs’ 321 309 -3.8% Adjusted indirect costs after leases’ 516 489 5.2% Adjusted EBITDA af
Slide 16: Adjusted revenues declined y-on-y
Adjusted revenues declined y-on-y €m 0, i 29 % 1,402 | 15 5 3 | —-- a 26 Adj. revenues Consumer Business Wholesale Other Cincl. Q12018 eliminations) Adj. revenues Q12019
Slide 17: Adjusted EBITDA AL in line with last year
Adjusted EBITDA AL in line with last year supported by simplification and digitalization €m ‘0, [ -0.3 % Y 5 20 1 563 6 Or -4) Adj. EBITDA Revenues Cost of goods Personnel IT/TI Other operating Adj. EBITDA after leases & services expenses expenses! after leases Q12018 Q12019 1 Incl. lease-related ex
Slide 18: Net indirect opex savings
Net indirect opex savings Solid start new cost savings program" Basis for net opex reduction program savings target € 27m € 2,015m net savings in Q1 2019 FY 2018 total adjusted indirect 1 Target 2019 - 2021: -€ 350m operating expenses after leases 1 Indirect c ucturing costs and incidentals
Slide 19: Financial performance Q1 2019 - FCF
Financial performance Q1 2019 - FCF y-on-y mainly impacted by restructuring & Capex €m Q12018 Q12019_ Ay-on-y Adjusted EBITDA after leases 565 563 -0.3% Interest lease liabilities 9 8 -12% Depreciation right-of-use asset 38 35 75% Restructuring -13 -36 >100% Incidentals = = nm. EBITDA 598 570 4.7% I
Slide 20: FCF impacted by intra-year phasing in Q1
20 FCF impacted by intra-year phasing in Q1 Q12019 “435% 005 Q1 2018: € 121m Interest paid Lease- related expenses Adj. EBITDA AL Q1 2019 Restructuring EBITDA Q12019 Change in provisions Change in working capital 1 Incl. repayments of lease liabilities Taxes paid Capex Other! FCF Cexcl. TEFD dividen
Slide 21: Solid financial position
21 Solid financial position Sm yp 6494 5772 5,832 6,036 Q12018 Q4 2018 Q12019 e@ Gross debt Net debt Senior bond redeemed € 465m 7.5% coupon EIB facility signed on 1 April 2019 € 300m for mobile network investments
Slide 22: Leverage ratio reflects leases as operational
Leverage ratio reflects leases as operational rather than core financing instrument Leverage ratio Q1 2019 Net debt excluding leases Lease expenses considered opex Net debt (excl. all leases) 2 Net debt incl. all leases = 2.5x Adjusted EBITDA AL O4 2018: 25x Adjusted EBITDA = 2.7x < 25x Q4 2018: 27x
Slide 23: Outlook 2019 and 2019 - 2021 ambitions
Outlook 2019 and 2019 - 2021 ambitions organic sustainable growth Outlook 2019 2019 - 2021 ambitions Adjusted EBITDA AL In line with 2018 Organic growth €11bn Stable at € 11bn annually Front-end loaded restructuring charges leading Three-year mid-single digit CAGR' to incidentally lower FCF compared
Slide 24: Organic
ORGANIC So Malue. — Volume. Lean . operating model.
Slide 25: Information pack
INFORMATION PACK CSR Tax KPI overview Debt portfolio Treatment of hybrid bonds Fixed infrastructure Spectrum
Slide 26: Doing business in a sustainable manner
Doing business in a sustainablemanner Leading position in benchmarks Achievements in Q1 2019 MEMBER OF Reuse & PN takes back customer's Dow Jones recycle old mobile phones Sustainability Indices In Collaboration with RobecoSAM «@® Digital Teaching method for digital skills . launched by KPN Mooiste
Slide 27: Tax Q1 2019
Tax Q1 2019 P&L Cash flow Regions (€ m) Q12018 —Q12019 Q12018_ ~—Q12019 The Netherlands -28 -24 5 > Other 1 2 71 2 Total reported tax -29 26 6 - Of which discontinued operations -1 2 1 2 Reported tax from continuing operations -28 -24 5 - Effective tax rate continuing operations 22.0% 21.2% The effe
Slide 28: KPI overview
28 KPI overview Consumer fixed Consumer mobile Business Q12018 Q12019 Q12018 Q12019 Q12018 Q12019 Household base (k) Postpaid base (k) Customer base (k) F-M households 1,280 1358 F-M postpaid customers. 1,934 2126 Mobile 1,858 1,829 Fixed-only households 2,256 2,037 Mobile-only postpaid customers 17
Slide 29: Debt portfolio
Debt portfolio Nominal debt" Nominal debt Fixed vs. floating Bond redemption by type by currency interest® profile 1%] € 6.7bn HB Eurobonds HM cur Hi Fixed 19 '20 21 '22 23 '24'25 '26'28'29'30 32 HB Global bonds OS cpr’ Hl Floating {71 UsD hybrid (st call) GBP HB Hybrid bonds MB usp’ (71 GBP hybrid
Slide 30: Treatment of hybrid bonds
Treatment of hybrid bonds KPN & credit rating agencies IFRS Each tranche of the hybrid bonds is recognized as 50% equity and GBP and USD tranche have 60 years specified maturity, accounted for 50% debt by the rating agencies as financial liability = Coupon payments treated as regular bond coupon, he
Slide 31: Fixed infrastructure
Fixed infrastructure Co} VDSL2 iam VDSL2 pair bonding See) (or) Vectoring SC (op) Bonded vectoring SC (on) Bonded VPlus SC (Pop | FttH — P2P Passive FttH — XGS / GPON EEE EE \ CO J} split Fiber Copper Download speed ~50Mbps ~100Mbps ~120Mbps ~240Mbps ~400Mbps ~1Gbps Up to 10Gbps Active in network v
Slide 32: Spectrum in The Netherlands
Spectrum in The Netherlands 800MHz (Paired) 900MHz (Paired) 1.8GHz (Paired) 2.1GHz (Paired) 2.6GHz (Unpaired) 2.6GHz (Paired) Total VodZig 210 KPN 2°20 VodZig 2714.6 KPN 169.6MHz VodZig 210 KPN 210 KPN 210 KPN 214.8 VodZig 2°20 VodZig 179.2MHz KPN VodZig 25 5 2*30 235 2°70 2°59.4 160 2°65 578.8MHz
Slide 33: Contact Information
Contact Information: KPN Investor Relations @ +3170 44 60986 © [email protected] @ irkpn.com