Royal KPN NV · EURONEXT:KPN
Royal KPN NV — KPN — FY2007 Earnings Presentation
107 slides from Royal KPN NV's earnings presentation, Feb 5, 2008
Slide 1: Annual Results 2007 Strategy Update: 'Back to Growth'
Annual Results 2007 Strategy Update: ‘Back to Growth’ 5 February 2008
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, its and its joint ventures' share of ne
Slide 3: Disclaimer
Disclaimer We define EBITDA as operating result before depreciation and impairments of PP&E and amortization and impairments of intangible assets. Note that our definition of EBITDA deviates from the literal definition of earnings before interest, taxes, depreciation and amortization and should not
Slide 4: Agenda
Agenda Review 2007 Marcel Smits, CFO Strategy update Ad Scheepbouwer, Chairman and CEO Strategy The Netherlands Baptiest Coopmans, MD Consumer Eelco Blok, MD Business / W&O Strategy Mobile International Stan Miller, MD Mobile International Concluding remarks Ad Scheepbouwer, Chairman and CEO 4
Slide 5: Highlights 2007
Highlights 2007 • Solid performance in the Netherlands – Consumer net line loss declining, TV customer base nearly doubled – Strong EBITDA growth in wireless services as a result of Telfort integration – Continued growth in Business market, migration to new services accelerating – FttC / FttH roll-o
Slide 6: Group results
Group results Revenue and EBITDA increase fueled by acquisitions, tax gain in Germany € mn Q4 ’07 Q4 ’06 % FY ’07 FY ’06 % Revenues and other income 3,659 3,039 20% 12,632 12,057 4.8% – of which Revenues 3,579 3,022 18% 12,461 11,941 4.4% Operating expenses 3,025 2,672 13% 10,132 9,834 3.0% 1 – of w
Slide 7: Group cash flow
Group cash flow Continued strong free cash flow, another € 2.5 bn returned to shareholders € mn Q4 ’07 Q4 ’06 % FY ’07 FY ’06 % Operating result 634 367 73% 2,500 2,223 12% Depreciation & amortization1 582 785 -26% 2,400 2,614 -8.2% Interest paid/received -123 -228 46% -471 -479 1.7% Tax paid/receiv
Slide 8: Performance versus Guidance
Performance versus Guidance Full-year guidance met Outlook FY 2007 Guidance 6 February Q1 Q2 Q3 Q4 FY ’07 Revenues and other income1 Flat -2.6% 1.0% -0.6% -1.1% -0.8% EBITDA1,2 Flat -1.4% -0.5% 1.5% -2.1% -0.6% Capex € 1.6 - € 1.8 bn € 0.3 bn € 0.3 bn € 0.4 bn € 0.7 bn € 1.7 bn Free cash flow3 > € 2
Slide 9: Tax Germany
Tax Germany € 1.2 bn DTA increase at E-Plus, no impact on cash taxes • E-Plus moved into tax paying position in 2007 as a result of successful Background challenger strategy and financial restructuring at E-Plus • 60% of taxable income offset against past losses under German fiscal law • DTA increas
Slide 10: Group financial profile
Group financial profile Leverage up to 2.3x following acquisitions to strengthen business profile € bn Debt Financing policy 12.1 10.7 2.5x 10.0 9.7 10.1 11.0 2.0x 2.3 10.0 2.1 1.9 1.8 1.9 9.2 9.3 8.8 Q4 ’06 Q1 ’07 Q2 ’07 Q3 ’07 Q4 ’07 Q4 ’06 Q1 ’07 Q2 ’07 Q3 ’07 Q4 ’07 Gross Debt Net Debt Net Debt
Slide 11: Financial highlights the Netherlands
Financial highlights the Netherlands Significant contribution from acquisitions, slowdown in underlying trend Total (€ mn) Q4 ’07 Q4 ’06 FY ’07 FY ’06 Revenues and other income 2,710 2,149 9,013 8,517 % change 26% 5.8% – of which wireless Service revenues1 636 644 2,630 2,529 % change -1.2% 4.0% Ope
Slide 12: Financial review the Netherlands by segment
Financial review the Netherlands by segment € mn Revenues and other income € mn EBITDA (margin) Consumer 17.5% 19.0% 1,057 1,037 1,032 1,053 1,011 15.4% 17.0% 14.9% 163 181 196 179 151 Q4 '06 Q1 '07 Q2 '07 Q3 '07 Q4 '07 Q4 '06 Q1 '07 Q2 '07 Q3 '07 Q4 '07 Business 23.1% 22.5% 22.6% 847 849 846 832 85
Slide 13: Consumer wireless
Consumer wireless Continued growth in Post Paid and data, impact from MTA and roaming tariff cuts mn Post Paid share up 2%-points 5.9 5.9 5.9 6.1 6.2 2.3 2.4 2.4 2.5 2.5 • Post Paid share up 2%-points Y-on-Y, following focus on value customers 39% 40% 41% 41% 41% – KPN ahead of competition in 2006 –
Slide 14: Consumer wireline
Consumer wireline Sustained growth of new services, net line loss improving to 90k mn Broadband share at 44% mn VoIP connections up 64% 45% 44% 39% 39% 44% 37% 38% 36% 41% 41% 0.79 0.85 2.4 2.5 2.5 0.73 2.1 2.2 0.65 0.52 Q4 '06 Q1 '07 Q2 '07 Q3 '07 Q4 '07 Q4 '06 Q1 '07 Q2 '07 Q3 '07 Q4 '07 KPN broad
Slide 15: Business market
Business market Continued migration from traditional to new services Traditional services X 1,000 IP data services Wireless services 91 42 54 24 232 235 235 231 36 229 33 16 11 8 1.3 1.3 1.3 5 1.2 1.2 1.9 1.8 1.7 4 2 Q4 ’05 Q4 ’06 Q4 ’07 Q4 ’05 Q4 ’06 Q4 ’07 Q4 '06 Q1 '07 Q2 '07 Q3 '07 Q4 '07 PSTN/I
Slide 16: Financial highlights Mobile International
Financial highlights Mobile International Continued profitable growth in challenging markets Total (€ mn) Q4 ’07 Q4 ’06 FY ’07 FY ’06 Revenues and other income 1,039 993 3,960 3,819 % change 4.6% 3.7% – of which wireless Service revenues1 956 934 3,753 3,608 % change 2.4% 4.0% Operating expenses 892
Slide 17: Financial review Mobile International by segment
Financial review Mobile International by segment € mn Revenues and other income € mn EBITDA (margin) E-Plus 747 698 736 769 760 39.8% 37.6% 36.6% 36.2% 29.5% 692 700 735 721 660 220 253 293 289 278 Q4 '06 Q1 '07 Q2 '07 Q3 '07 Q4 '07 Q4 '06 Q1 '07 Q2 '07 Q3 '07 Q4 '07 BASE 40.0% 39.5% 41.9% 36.4% 160
Slide 18: Operating review E-Plus
Operating review E-Plus Service revenue growth and EBITDA margin well ahead of H2 guidance Record net adds, Post Paid accelerating Service revenue share up 1%-point 14.8 14.1 14.4% 13.1 13.6 12.7 14.0% 127 13.7% 22 88 13.4% 13.5% 67 55 568 467 459 372 367 Q4 ’07 Q1 ’07 Q2 ’07 Q3 ’07 Q4 ’07 Q4 '06 Q1
Slide 19: Operating review BASE
Operating review BASE Headwind from competition and MTA cuts, impact from acquisitions to come Customer growth Revenue share up ~1%-point 2.9 2.6 2.7 2.5 ~16% ~16% ~16% 2.4 ~16% >15% 17 4 18 23 6 137 122 100 115 94 Q4 ’06 Q1 ’07 Q2 ’07 Q3 ’07 Q4 ’07 Q4 '06 Q1 '07 Q2 '07 Q3 '07 Q4 '07 Customers (mn)
Slide 20: Operating review Mobile Wholesale NL
Operating review Mobile Wholesale NL Continued growth from wholesale partnerships X 1,000 Net adds1 mn Customers up 21%1 18 1.7 1.8 1.6 1.6 1.5 21 15 109 36 70 33 75 25 36 Q4 ’06 Q1 ’07 Q2 ’07 Q3 ’07 Q4 ’07 Q4 ’06 Q1 ’07 Q2 ’07 Q3 ’07 Q4 ’07 Pre Paid net adds Post Paid net adds € mn Continued servic
Slide 21: Pro forma disclosure Fixed
Pro forma disclosure Fixed Revenue and EBITDA decline stabilizing, in line with previous quarters Fixed (incl. Other)1,2,3 FY ’07 Q4 ’07 Q3 ’07 Q2 ’07 Q1 ’07 FY ’06 Q4 ’06 Revenues and other income 5,114 1,217 1,304 1,282 1,311 5,356 1,248 Y-on-Y decline -242 -31 -33 -79 -99 -395 -64 Y-on-Y % -4.5%
Slide 22: Pro forma disclosure KPN Mobile the Netherlands
Pro forma disclosure KPN Mobile the Netherlands Strong EBITDA growth as a result of successful Telfort integration mn Customers up 8%, driven by Post Paid € mn Stable market share 8.7 8.8 8.9 9.2 9.4 47.2% 47.2% 47.0% 47.1% 47.1% 4.1 4.2 4.3 3.9 4.0 45% 45% 46% 46% 46% 735 731 755 764 724 4.8 4.8 4.
Slide 23: Agenda
Agenda Review 2007 Marcel Smits, CFO Strategy update Ad Scheepbouwer, Chairman and CEO Strategy The Netherlands Baptiest Coopmans, MD Consumer Eelco Blok, MD Business / W&O Strategy Mobile International Stan Miller, MD Mobile International Concluding remarks Ad Scheepbouwer, Chairman and CEO 23
Slide 24: Looking back
Looking back KPN consistently outperforming telecom sector and AEX index Shareholder returns Share price performance since 20021 • Track record of delivering € shareholder value 14 KPN • Returning excess cash to 12 +120% shareholders 10 • € 9.8 bn returned to shareholders since 2002 8 – € 4.0 bn div
Slide 25: Ambition 2008-2010
Ambition 2008-2010 KPN entering a growth phase with continued attractive shareholder remuneration ‘Back to growth’ Value 2008-2010 • The Netherlands reaching inflection ‘Attack-Defend- • Continued growth Mobile International Exploit’ • Additional growth from recent acquisitions 2005-2007 • Ahead of
Slide 26: Sources of growth
Sources of growth All divisions contributing to profitable growth The Netherlands Inflection KPN Group Mobile International Continued growth Value-creating acquisitions ‘Back to growth’ Additional growth e.g. recent acquisitions Getronics and iBasis 26
Slide 27: The Netherlands back to growth
The Netherlands back to growth Leading service provider with EBITDA inflection Transformation Investing in market positions • Ramping up new • Accelerate recent growth initiatives services • Selectively add new services • Radical • Mitigate shrinking businesses Number one simplification at back and
Slide 28: Strategic objectives the Netherlands 2010
Strategic objectives the Netherlands 2010 Becoming the ‘best-in-class’ service provider Consumer • Leading service provider with wireless growth and without line loss Business • Leading managed ICT service provider in the Netherlands Wholesale & • Network transformation, higher bandwidth and radical
Slide 29: FTE reductions
FTE reductions1 Substantial reduction in own personnel and temporary staff until 2010 Reduction own staff • March 2005 commitment for 8,000 FTE reductions Cumulative own staff reduction between 2005-2009 March 2005 Update 2008 – Ahead of plan (5,412 vs. 5,000 FTE) – ~2,600 FTE remaining for 2008-200
Slide 30: Strategic objectives Mobile International 2010
Strategic objectives Mobile International 2010 Expand and continue profitable growth in European mobile business Germany • Outperform market growth at attractive margins Belgium • Expand in scope and outperform International • Selective expansion in Europe Strategic objectives supported by managemen
Slide 31: Outlook 2010
Outlook 2010 Three-year outlook based on ‘Back-to-Growth’ strategy Reported Outlook Key assumptions 2007 2010 • High single digit growth Mobile International Revenues € 12.6 bn > € 15 bn • Revenue inflection Netherlands latest in 2010 • EBITDA floor1 of € 3.2 bn in NL for 2008, followed by growth in
Slide 32: Shareholder remuneration
Shareholder remuneration Committed to industry leading shareholder returns 2004 – 2007 2008 – 2010 • Valuable track record of delivering • Continued commitment to return surplus shareholder returns cash • Proposed 2007 final dividend of € 0.36 • Updated dividend policy, underpinning – FY ’07 dividen
Slide 33: Agenda
Agenda Review 2007 Marcel Smits, CFO Strategy update Ad Scheepbouwer, Chairman and CEO Strategy The Netherlands Baptiest Coopmans, MD Consumer Eelco Blok, MD Business / W&O Strategy Mobile International Stan Miller, MD Mobile International Concluding remarks Ad Scheepbouwer, Chairman and CEO 33
Slide 34: Consumer market
Consumer market Ambition 2010 Strengthen position as leading Consumer service provider Market share growth in broadband and strengthening wireless Reach inflection in EBITDA 34
Slide 35: Consumer market: strategic building blocks
Consumer market Strategic building blocks to return to EBITDA growth Customer focus Growth in wireless Stop line loss • Subscriber and ARPU growth • Acceleration in minutes and data • Dual play and TV offerings Mix of FttC and FttH Simplified multi brand portfolio Cost reduction Price Value • Simpli
Slide 36: Customer focus
Customer focus Returning to revenue growth through customer focus Subscribers ARPU Revenues Wireless X MTA/roaming offset by Continued growth Up voice usage and data growth Subscribers ARPU Revenues Wireline X Stopping line loss Cross- and upselling Stabilizing 36
Slide 37: Strategy wireless
Strategy wireless ‘Best-in-class’ mobile operator in the Netherlands Strategic focus • Value play focusing on most profitable customers • Further strengthening market position Revenue • Growth in data and voice minutes growth • Benefit from price elasticity in roaming ‘Best-in-class’ mobile operator
Slide 38: Wireless data
Wireless data Substantial growth in wireless data Data DVB-H • Rapid growth in wireless data in 2007 • TV on wireless handhelds (DVB-H) – Successful introduction of non-SMS data bundles commercially introduced mid 2008 under Hi and Telfort brands – Range of handsets available supporting DVB-H – Cont
Slide 39: Strategy wireline
Strategy wireline Focus on stopping line loss and enhancing leading position • Upselling PSTN with broadband to Dual play to maintain customer value stop line loss • Converting PSTN customers to KPN VoIP as retention offer • Telfort positioned as challenger in Strong market Leverage broadband and Vo
Slide 40: TV strategy
TV strategy Step-up Digitenne efforts, Interactive TV as stepping stone for fiber roll-out Digitenne (DVB-T) Interactive TV (IPTV) • DVB-T used to establish position in TV market • Interactive TV positioned as premium proposition • Unique TV proposition setting new competitive – € 9.95 per month pri
Slide 41: Fiber roll-out
Fiber roll-out All-IP roll-out providing superior fiber propositions with mix of FttC and FttH Fiber-to-the-Curb (FttC) Fiber-to-the-Home (FttH) • Fast broadband connection • Very fast broadband connection – Up to 50 Mb/s based on VDSL – Up to 100 Mb/s, unrivalled offer – Superior proposition compar
Slide 42: Simplification
Simplification Improved customer service through simplification and first time right 2007 Simplification 2010 Complexity Simplicity • > 10 brands • 3 brands • 8 ‘production • Extended lines’ distribution (web based, more • 8 portfolios shops) • 8 helpdesks and • New ‘production bills line’ • Multipl
Slide 43: Consumer EBITDA growth 2008-2010
Consumer EBITDA growth 2008-2010 Leading service provider with strong market shares and growing EBITDA Investing in revenue growth • Growth in wireless voice and data • Growth in VoIP / broadband Cost reductions • Growth in TV • Simplification • Selective FttH roll-out • ‘First time right’ • Structu
Slide 44: Agenda
Agenda Review 2007 Marcel Smits, CFO Strategy update Ad Scheepbouwer, Chairman and CEO Strategy The Netherlands Baptiest Coopmans, MD Consumer Eelco Blok, MD Business / W&O Strategy Mobile International Stan Miller, MD Mobile International Concluding remarks Ad Scheepbouwer, Chairman and CEO 44
Slide 45: Business market
Business market Ambition 2010 Leading managed ICT service provider Preferred Business market supplier Revenue growth with ‘best-in-class’ margins 45
Slide 46: Business market: building blocks
Business market Strategic building blocks to sustain EBITDA growth Customer focus Leveraging leading position Migration to IP-based services • Market share growth • Strong focus on customer needs • Cross- and upselling • Migration to IP services and FttO Moving up the value chain Simplified portfoli
Slide 47: Business market strategy
Business market strategy Market leadership in the Netherlands in three target areas Strategic focus Revenue trend 2010 Strongly increase position in ICT outsourcing Out- • Step-up in market share sourcing • Extend market leadership with ‘best-in-class’ margin Build online ICT challenger Application
Slide 48: Infrastructure services
Infrastructure services Market leadership in voice and data services • Continued customer growth • Tap growth potential from wireless data services Wireless – Laptop data cards, Blackberry, smart metering, RFID • Superior HSDPA 3.6 network, plans to upgrade to HSDPA 7.2/14.4 • EBITDA improvement thr
Slide 49: Fiber-to-the-Office
Fiber-to-the-Office Step up in FttO initiatives Market leadership strategy Services offered • Step up in FttO initiatives, started in 2007 • FttO offering superior bandwidths, allowing – 15 Business parks connected each month new applications • Regional marketing approach with local • Applications a
Slide 50: Application Management
Application Management Well positioned to address growth segment Online Applications Software Online • Successful introduction in SME / SoHo segment in 2007 – Standardized applications with (telco-like) business model and monthly fee – Differentiating from traditional IT service providers • Entering
Slide 51: Housing & hosting
Housing & hosting Rapid growth driven by storage requirements Housing & hosting • KPN volume in housing & hosting services almost doubled in 2007 – Housing up 85% to 10,000 sqm occupied – Hosting up 100% to 1,825 servers • Growth driven by storage requirements for ICT services – Secure storage of co
Slide 52: Simplification
Simplification All-IP portfolio brings simplified portfolio to customers Traditional Portfolio All-IP Portfolio Complex Simple • Technology based • Access independent Principles • Service platform and operations for • Modular every technology • Packageable • Selling as much as possible • Serving cus
Slide 53: Business EBITDA growth 2008-2010
Business EBITDA growth 2008-2010 Market leader in all segments with organic EBITDA growth Investing in revenue growth • Growth in IP-based services • Growth in ICT services Productivity growth • FttO roll-out • Traditional revenues • Growth in wireless voice and substituted by revenues data from new
Slide 54: Getronics acquisition closed, turnaround plan
Acquisition closed, turnaround plan with additional opportunities • Getronics consolidated with KPN as of 23 October 2007 – Revenues and other income of € 488 mn – EBITDA of € 23 mn, EBITDA margin of 4.7% • Turnaround plan ready after first 100 days – Defined strategy for Benelux and global services
Slide 55: Getronics strategy
Getronics strategy Expand in workspace management with own operations and partnerships • Benelux champion of ICT services and consulting • Offering end-to-end solutions centered around workspace management, data Benelux center and hosting services, connectivity solutions and Software as a Service ma
Slide 56: Benelux strategy
Benelux strategy Benelux champion of ICT services and consulting Telecoms ICT IT services Computing Unified infrastructure communication services Mobile payments Mobile workspace Optimized Business Workspace Applications applications Connectivity services Business & ICT (fixed and mobile) alignment
Slide 57: Focus on core assets
Focus on core assets Recouping part of the acquisition price through sale of non-core assets Focus on core assets Potential divestment of non-core assets • Considering divestments of strong non-core Business IT service provider businesses processes – Both in the Benelux and global operations IT serv
Slide 58: Wholesale & Operations
Wholesale & Operations Ambition 2010 ‘Best-in-class’ network operator with very high productivity Network based on IP Growing wholesale business 58
Slide 59: Wholesale & Operations: building blocks
Wholesale & Operations Strategic building blocks to become ‘best-in-class’ network operator Proactive network roll-out Open access model Committed wholesale partner Content Services All-IP services and infrastructure Control 2007 2010 Applications IP/Ethernet IP/Ethernet backbone network Backbonenet
Slide 60: All-IP infrastructure update
All-IP infrastructure update Confirming roll-out scheme, Capex guidance and real estate proceeds Previous guidance Status and next steps • FttC roll-out starting 2008 • FttC roll-out plan further detailed and ready to start Network roll-out • Selective regional FttH • 100k households on FttH, e.g. i
Slide 61: Cost reductions
Cost reductions Highly efficient network operator through continued cost reductions Cost reductions Improving EBITDA margin • Substantial cost reduction at back-end through • ‘Best-in-class’ network operator simplification – Additional FTE reductions • Solid EBITDA margins – Reduction in service pla
Slide 62: Growth platform in international wholesale
Growth platform in international wholesale Status iBasis Next steps • Merger of KPN’s international carrier • Ambition for continued organic growth in KGCS with iBasis closed on 1 October 2008, in particular in Asia and Latin America – Book gain of € 66 mn upon closing • Outsourcing agreement with T
Slide 63: Agenda
Agenda Review 2007 Marcel Smits, CFO Strategy update Ad Scheepbouwer, Chairman and CEO Strategy The Netherlands Baptiest Coopmans, MD Consumer Eelco Blok, MD Business / W&O Strategy Mobile International Stan Miller, MD Mobile International Concluding remarks Ad Scheepbouwer, Chairman and CEO 63
Slide 64: Mobile International
Mobile International Ambition 2010 E-Plus outperforming competition in growing German market Re-igniting growth in Belgium with broader scope Selective expansion in Europe 64
Slide 65: Mobile International: building blocks
Mobile International Strategic building blocks for further profitable growth Country-specific strategies Multi-brand strategy Wholesale partnerships Price Value • Differentiated strategies in Belgium, Germany and rest of Europe • Specific brands for each segment • Committed wholesale partner Lowest
Slide 66: Wireless data
Wireless data Wireless data as important growth contributor in Germany and Belgium Current status Ambition 2010 • Data demand growing rapidly following • Sustained growth in SMS, Wireless introduction of data flat fees acceleration in data data services • Predominantly used for internet • Availabili
Slide 67: E-Plus objectives
E-Plus objectives Continued growth from both voice and data • Market returning to growth as a result of price elasticity Commercial • Step up Post Paid additions and continued growth in propositions wholesale • Acquisition of SMS Michel with circa 200 retail outlets Continued • Increase data revenue
Slide 68: BASE objectives
BASE objectives Re-igniting growth with positive impact from acquisitions • Successful launch of new commercial propositions – BASE Gold / Platinum launched in October Commercial – Grow in Post Paid segment propositions • New SoHo / SME proposition and segmented market approach Re-igniting growth of
Slide 69: Mobile wholesale objectives
Mobile wholesale objectives Continued expansion of wholesale partnerships in Europe National wholesale International wholesale • Exploit synergies in wholesale between • MVNO launched in Spain in on 29 the Netherlands, Belgium and Germany January on Orange network – Expertise – Simyo launched as KPN
Slide 70: Agenda
Agenda Review 2007 Marcel Smits, CFO Strategy update Ad Scheepbouwer, Chairman and CEO Strategy The Netherlands Baptiest Coopmans, MD Consumer Eelco Blok, MD Business / W&O Strategy Mobile International Stan Miller, MD Mobile International Concluding remarks Ad Scheepbouwer, Chairman and CEO 70
Slide 71: Concluding remarks
Concluding remarks • Solid performance in 2007, full-year guidance met • Strategy update announced today with ambitious targets • Leading service provider in the Netherlands with EBITDA inflection • Continued profitable growth at Mobile International • Incentive scheme for senior management aligned
Slide 72: Q&A
Q&A
Slide 73: 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 74: Analysis of results
Analysis of results Key items worth mentioning in results interpretation € mn Q4 ’07 Q4 ’06 FY ’07 FY ’06 Revenue effect MTA tariff reduction1 Group -50 -48 -174 -243 EBITDA effect MTA tariff reduction1 Group -26 -13 -95 -84 Book gain on sale of subsidiaries W&O / Other 66 6 70 82 Book gain on sale
Slide 75: Guidance reconciliation
Guidance reconciliation Revenues and other income Q4 FY € mn 2007 2006 2007 2006 Reported 3,659 3,039 12,632 12,057 Getronics -478 - -478 - Acquisition iBasis and Tiscali -109 - -129 - Book gain KGCS -66 - -66 - Comparison with guidance 3,006 3,039 11,959 12,057 -1.1% -0.8% EBITDA1 Q4 FY € mn 2007 2
Slide 76: MTA regulation
MTA regulation • New MTA regulation, estimated impact of ~4% on service revenues in 20081 € cents per minute 15 Aug ’07 1 July ’08 1 April ’09 1 July ’09 The Netherlands KPN 10.0 9.0 8.0 7.0 Vodafone 10.0 9.0 9.0 7.0 T-Mobile 11.4 10.4 10.4 8.1 Avg. asymmetry 1.4 1.4 2.4 1.1 • New MTA tariffs valid
Slide 77: Impact MTA reduction
Impact MTA reduction1 € mn Q4 ’07 FY ’07 2 2 Revenues EBITDA Revenues EBITDA E-Plus -17 -9 -90 -45 BASE3 -11 -8 -51 -35 Mobile Wholesale NL -2 -1 -3 -2 Mobile International -30 -18 -144 -82 Consumer -13 -7 -19 -11 Business -6 -1 -9 -2 Wholesale & Operations -5 -8 The Netherlands -24 -8 -36 -13 Inter
Slide 78: Restructuring charges
Restructuring charges € mn Q4 ’07 FY ’07 E-Plus BASE Mobile Wholesale NL Mobile International - - Consumer -3 -4 Business -4 -7 Getronics -6 -6 Wholesale & Operations -14 -23 The Netherlands -27 -40 Other -6 -19 KPN Group -33 -59 78
Slide 79: Operating expenses
Operating expenses € mn Q4 ’07 Q4 ’06 % Salaries and social security contributions 587 355 65.4% Cost of materials 280 266 5.3% Work contracted out and other expenses 1,327 1,078 23.1% Own work capitalized -40 -26 53.8% Other operating expenses 289 214 35.0% Depreciation1 405 439 -7.7% Amortization1
Slide 80: Analysis operating expenses: Salaries & Cost of materials
Analysis operating expenses1 Salaries & Cost of materials € mn Salaries 16.4% Y-on-Y increase 11.7% 12.5% 11.8% 11.8% • Continued headcount reductions, offset by 11.0% acquisitions 222 Q-on-Q increase • Acquisition iBasis and Tele2 / Versatel Belgium 355 364 349 332 365 Q4 ’06 Q1 ’07 Q2 ’07 Q3 ’07 Q
Slide 81: Analysis operating expenses: Work contracted out & Other
Analysis operating expenses1 Work contracted out & Other € mn Work contracted out Y-on-Y increase 37.4% 39.6% 35.7% 35.9% 36.2% • Higher wireless traffic volumes 37.1% • Partly offset by lower wireline volumes and MTA 103 Q-on-Q increase 1,126 1,224 • Higher handset sales due to increase in (Post 1,
Slide 82: Analysis operating expenses: Depreciation & Amortization
Analysis operating expenses Depreciation & Amortization € mn Depreciation1 Y-on-Y decrease 15.0% 14.5% 14.1% • Fixed depreciation trending down due to lower 12.6% 11.3% Capex 439 439 416 380 405 Q4 ’06 Q1 ’07 Q2 ’07 Q3 ’07 Q4 ’07 Depreciation % of Revenues € mn Amortization1 Y-on-Y decrease 11.4% •
Slide 83: Personnel
Personnel Continuing underlying decline in the Netherlands • Personnel increase Y-on-Y of 17,555 FTE – 1,316 FTE reduction in the Netherlands (excl. Getronics) 43,531 – Excluding acquisitions reduction of 1,740 FTE in the Netherlands 9,013 • FTEs increase compared to Q3 – Increase of 18,031 FTE due
Slide 84: Tax
Tax P&L Cash flow Fiscal units (€ mn) Q4 ’07 Q4 ’06 Q4 ’07 Q4 ’06 Dutch activities -51 198 -171 -65 Getronics - - - - German Mobile activities 1,160 37 - - Belgian Mobile activities -8 -15 - - Total 1,101 220 -171 -65 • € 1.2 bn deferred tax asset recorded at E-Plus • € 171 mn Dutch corporate tax pa
Slide 85: Net cash flow from operating activities
Net cash flow from operating activities € mn Q4 ’07 Q4 ’06 FY ’07 FY ’06 Operating Result 634 367 2,500 2,223 Depreciation, amortization and impairments 582 785 2,400 2,614 Interest paid -123 -228 -471 -479 Income tax paid -171 -66 -251 147 Other income -80 -17 -171 -116 Share based compensation 1 4
Slide 86: Total cash flow
Total cash flow € mn Q4 ’07 Q4 ’06 FY ’07 FY ’06 Net cash flow from operating activities 1,212 815 3,890 4,071 1 Capex -707 -533 -1,688 -1,650 Acquisitions -1,157 -10 -1,690 -370 Disposals real estate 19 21 143 56 Disposals other 58 0 89 72 Other -1 5 -8 14 Net cash flow from investing activities -1
Slide 87: Capex
Capex1 € mn Q4 ’07 Q4 ’06 % FY ’07 FY ’06 % Mobile International 207 152 36.2% 577 615 -6.2% % Revenues Mobile International 20.0% 15.3% 14.6% 16.1% E-Plus 149 119 25.2% 435 486 -10.5% % Revenues E-Plus 19.6% 15.9% 14.7% 16.8% BASE 50 29 72.4% 131 123 6.5% % Revenues BASE 32.3% 18.4% 21.4% 19.8% Mob
Slide 88: Balance sheet
Balance sheet Assets Equity and liabilities € bn € bn 21.3 21.1 20.8 20.7 24.8 21.3 21.1 20.8 20.7 24.8 4.5 5.8 4.6 4.2 4.4 3.3 1.6 4.6 4.7 4.7 3.9 4.2 1.4 Goodwill Group equity 4 1.6 1.5 1.5 4.2 4.0 4.0 3.9 12.1 Licenses 1 Provisions 2 11.6 11.6 11.5 10.7 Other non- Non-current 11.6 9.4 9.2 9.0 9.0
Slide 89: Share repurchase progress
Share repurchase progress Date1 Value (€ mn) mn shares Avg. share price (€) Q1 ’07 136.8 11.9 11.46 Q2 ’07 313.5 25.4 12.34 Q3 ’07 669.9 57.8 11.57 October 149.8 11.9 12.56 November 118.0 9.5 12.51 December 112.0 9.1 12.32 Q4 ’07 379.8 30.5 12.45 Total 1.500.0 125.6 11.94 • Share repurchases of € 1.
Slide 90: Debt summary
Debt summary € bn Q4 ’07 Q3 ’07 Q4 ’06 Bonds 10.37 9.21 8.39 Eurobonds 8.48 7.29 6.31 Global bonds 1.89 1.92 2.08 Other debt 1.38 1.14 0.68 Other loans at Royal KPN1 1.29 1.06 0.63 Consolidated debt 0.09 0.08 0.05 Fair value financial instruments 0.35 0.31 0.91 Total debt 12.10 10.66 9.98 – of which
Slide 91: Debt portfolio
Debt portfolio Breakdown of € 12.1 bn gross debt1 8% Financial 74% 18% instruments Other 3% 11% Eurobonds 70% Global bonds EUR USD2 GBP2 16% 26% 74% Fixed Floating (incl. swapped) 1 Book value of interest bearing financial liabilities plus the fair value of financial instruments related to these fin
Slide 92: Consumer voice market
Consumer voice market1 mn Q4 ’07 Q3 ’07 Q4 ’06 KPN PSTN / ISDN 2.85 3.04 3.93 Wholesale Line Rental (WLR) 0.32 0.28 - Total traditional voice 3.17 3.32 3.93 KPN VoIP 0.85 0.79 0.52 Cable VoIP 1.05 0.98 0.70 Alternative DSL VoIP 0.28 0.26 0.21 Total VoIP 2.18 2.03 1.43 Cable voice analogue 0.11 0.11
Slide 93: Consumer market
Consumer market mn VoIP connections x 1,000 PSTN / ISDN trends Q4 '06 Q1 '07 Q2 '07 Q3 '07 Q4 '07 37% 38% 39% 39% 36% 2.2 29% 21% 32% 2.0 38% 1.9 0.28 1.8 0.26 37% 50% 0.25 69% 25% 1.4 0.25 18% 0.21 0.98 1.05 42% 0.91 51% -190 0.85 0.70 46% -247 31% 13% 0.65 0.73 0.79 0.85 0.52 -291 -353 -357 Q4 '06
Slide 94: Future Ready Workspace 2.0
Future Ready Workspace 2.0 Integrated solutions offering to meet customer demand Future Ready Workspace 2.0 Infrastructure Support Communications Collaboration Security • Core module providing all basic functionalities based on Custom Business Highly standardized solutions Business Communication Col
Slide 95: Infrastructure rationalization
Infrastructure rationalization Termination in legacy systems in medium term Changes in medium term (illustrative) Service Multiplay service platforms • Single service delivery and control Layer platform Core Single core network network (IP/Ethernet/MPLS Core) • First generation IP-MPLS terminated1 R
Slide 96: 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 97: E-Plus
E-Plus Continued growth in new propositions, driving service revenue growth X 1,000 Subscribers new propositions Service revenue growth 7,575 14.7% 14.0% 6,706 3.9% 5,880 4.0% 5,149 9.5% 2.4% 9.1% 4,345 0.9% 8.7% 2.5% 3.7% 3.4% 2.4% 10.0% 8.4% 2.4% 2.4% 4.2% 2.5% 2.9% Q4 '06 Q1 '07 Q2 '07 Q3 '07 Q4
Slide 98: Pro forma disclosure KPN Mobile the Netherlands
Pro forma disclosure KPN Mobile the Netherlands Financials and KPIs € mn Q4 ’07 Q4 ’06 % FY ’07 FY ’06 % Revenues and other income 3,659 3,039 20.4% 12,632 12,057 4.8% E-Plus & BASE 915 907 0.9% 3,576 3,516 1.7% KPN Mobile the Netherlands 736 765 -3.8% 3,062 2,980 2.8% Fixed (incl. Other and Interco
Slide 99: Pro forma disclosure Fixed (incl. Other)
Pro forma disclosure Fixed (incl. Other) Reconciliation for noteworthy items Revenues & other income FY ’07 Q4 ’07 Q3 ’07 Q2 ’07 Q1 ’07 FY ’06 Q4 ’06 Q3 ’06 Q2 ’06 Q1 ’06 (€ mn) Reported 5,994 2,008 1,334 1,337 1,315 5,561 1,367 1,337 1,364 1,493 Xantic -4 -4 -92 -6 -3 -831 Getronics -482 -482 Tele2
Slide 100: KPIs Consumer Voice
KPIs Consumer Voice Wireline Q4 ’07 Q3 ’07 Q4 ’06 VoIP penetration1 40% 38% 28% Market share – Voice2 >55% ~60% ~60% – VoIP 39% 39% 36% – Traditional voice ~75% >70% >65% Voice connections (x 1,000) 3,694 3,823 4,445 – PSTN 2,563 2,733 3,554 – ISDN 284 304 374 – VoIP packages (Voice / Broadband) 847
Slide 101: KPIs Consumer Internet & TV
KPIs Consumer Internet & TV Internet Q4 ’07 Q3 ’07 Q4 ’06 Broadband penetration1 76% 75% 69% Broadband market share KPN (ISP) retail2 43.9% 44.3% 40.9% Broadband connections2 45.9% 46.8% 42.7% ADSL connections 2,528 2,518 2,135 Broadband ISP customers (x 1,000) 2,402 2,382 2,044 – Het Net 643 629 55
Slide 102: KPIs Business
KPIs Business Wireline Q4 ’07 Q3 ’07 Q4 ’06 Market share voice >60% ~55% >55% Access lines (x 1,000) 1,695 1,710 1,833 – PSTN 815 825 905 – ISDN 867 874 923 – VoIP 13 11 5 Traditional originating minutes (bn) 1.72 1.66 1.97 Network services (x 1,000) – Leased lines 32.7 33.9 36.4 – E-VPN connections
Slide 103: KPIs Getronics
KPIs Getronics1 Getronics Q4 ’07 Revenue and other income (€ mn) 488 – of which assets held for sale, Spain and Portugal 46 Service revenue (€ mn) 433 Margin – Gross profit2 21% – Service profit3 22% Number of FTEs 18,031 1 Consolidated as of 23 October 2007 2 Defined as total gross profit divided b
Slide 104: KPIs Wholesale & Operations
KPIs Wholesale & Operations Wholesale & Operations Q4 ’07 Q3 ’07 Q4 ’06 Minutes (bn) 7.18 9.21 10.05 – Terminating services 2.92 2.72 3.26 – Originating 1.56 1.56 2.20 – Transit services 2.70 2.40 2.34 – International wholesale services1 - 2.53 2.25 Local loop (x 1,000) MDF access lines2 3,445 3,389
Slide 105: KPIs E-Plus
KPIs E-Plus Q4 ’07 Q3 ’07 Q4 ’06 Market share1 Service revenue 14.4% 14.0% 13.4% Base 15.3% 15.1% 14.9% Customers (x 1,000) 14,807 14,112 12,654 – Post Paid 6,297 6,170 6,005 – Pre Paid 8,510 7,942 6,649 – of which new brands 7,575 6,706 4,345 Service revenues (€ mn) 721 735 692 ARPU (€) 17 18 19 –
Slide 106: KPIs BASE
KPIs BASE Q4 ’07 Q3 ’07 Q4 ’06 Market share1 Revenue ~16% ~16% >15% Base >23% ~23% ~22% Customers (x 1,000) 2,855 2,722 2,358 – Post Paid 512 494 461 – Pre Paid 2,343 2,228 1,897 Service revenues (€ mn) 148 147 157 ARPU (€) 18 18 20 – Post Paid 49 52 50 – Pre Paid 11 11 13 Non-voice as % of ARPU 17%
Slide 107: KPIs Mobile wholesale NL
KPIs Mobile wholesale NL Q4 ’07 Q3 ’07 Q4 ’06 Customers1 (x 1,000) 1,791 1,695 1,480 – Post Paid 470 449 365 – Pre Paid 1,321 1,246 1,115 Service revenues1 (€ mn) 87 88 85 1. Restated numbers for 2006 and 2007 107