Royal KPN NV · EURONEXT:KPN
Royal KPN NV — KPN — Q3 2019 Earnings Presentation
35 slides from Royal KPN NV's earnings presentation, Oct 25, 2019
Slide 1: Q3 2019 Results
Q3 2019 RESULTS 25 October 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 Q3 2019
Highlights Q3 2019 Strong cost Smart converged management infrastructure Net indirect opex savings Successful € 37m 5G test ~70k € 103m YTD 2019 FttH homes passed YTD Recognized for sustainability efforts #2 most sustainable telco worldwide Dow Jones Sustainability Index
Slide 4: The best converged smart infrastructure
The best converged smart infrastructure. Focus on profitable growth segments. Acceleration of simplification and digitalization.
Slide 5: Update: accelerated fiber roll-out strategy
Update: accelerated fiber roll-out strategy Further ramping up Connecting more Using latest capacity and more homes technology >60 ~70k ~1Gbps projects up and running homes passed YTD First live G-PON connection with customers
Slide 6: Update: mobile network modernization
Update: mobile network modernization first sites upgraded in The Hague area Typical current site 4 frequency bands 2x2 MIMO 1Gbps backhaul 2 antennas Not 5G ready ~150 site configurations ~80% Fris Typical modernized site 6-8 frequency bands 4X or higher order MIMO 10Gbps backhaul 1 antenna 5G ready
Slide 7: Best household access and customer experience
Best household access and customer experience. Growing converged base and product penetration. Focus on delivering value.
Slide 8: Introduced a new converged proposition: KPN Hussel
Introduced a new converged proposition: KPN Hussel targeting higher Customer Lifetime Value Fully flexible One converged Introducing new household customer benefits including proposition: journey unlimited mobile complete freedom data and kids SIM to mix & match services ONE-STOP-SHOP: BROADBAND + M
Slide 9: Customer experience & recognition
Customer experience & recognition record-high Consumer NPS Consumer NPS' Business NPS' Awards in WN Q3 2019 Q3 2019 i“ Strongest €) Dutch brand? Best Q3 2018 03 2018 retail chain® of relative weights of underlying businesses, source: Kantar TNS
Slide 10: Consumer convergence in the quarter
Consumer convergence in the quarter Households Postpaid SIM cards converged converged SIMs per +5k households +15k postpaid base 1.6 household 1404k total converged households 2,246k total converged SIMs Q3 2018: 1.53 O/ converged O/ converged 49 % broadband customers 62 %o all brands Q3 2018: 45% Q
Slide 11: Consumer Fixed in the quarter
Consumer Fixed in the quarter Broadband base’ Fixed ARPU Impacted by brand strategy Price increase effective from 1 June 2019 1 Corrected for migrations to and new customers of small business propositions (7k) Fixed revenues Flat ..... Bundled services # Traditional voice + Digitenne ¥
Slide 12: Consumer Mobile in the quarter
Consumer Mobile in the quarter Growing postpaid = Postpaid ARPU Mobile service base KPN brand Stable g-on-q revenues +36k 23%. € 17 € 194m Q2 2019: +17k Q3 2018: € 18 Q3 2018: € 210m
Slide 13: Business revenue trend in the quarter
13 Business revenue trend in the quarter continues to be impacted by strategic actions Adjusted revenues y-on-y growth trend Q3 2019 Communication Services -8.9% Mobile service revenues 77h loT 24% Broadband & Network Services -18% Fixed Voice -21% Other -17% IT Services (a.0. security, cloud, works
Slide 14: Migrations from legacy portfolio
Migrations from legacy portfolio SME customers LE customers Small business portfolio 68% SME base 45% LE base 35% converged O migrated! © migrated’ © customers Q2 2019: 59% Q2 2019: 33% Q2 2019: 34% 1 Migrated from traditional fixed voice and legacy broadband services 14
Slide 15: Financial highlights Q3 2019
Financial highlights Q3 2019 Adjusted revenues Adjusted EBITDA after leases €1,372m €599m -1.8% y-on-y +2.9% y-on-y Q3 2018: € 1,398m Q3 2018: € 582m Free Cash Flow (excl. TEFD dividend) € 226m -2.2% Y-On-y Q3 2018: € 231m
Slide 16: Financial performance Q3 and YTD 2019
Financial performance Q3 and YTD 2019 key P&L metrics 16 €m Q32018 Q32019 Ay-on-y YTD 2018 YTD 2019 Ay-on-y Consumer 748 731 -2.2% 2,230 2,182 -2.1% Business 520 502 -3.6% 1,589 1,514 47% Wholesale 157 166 5.2% 465 482 3.6% Other -28 -26 ~4.6% -81 -85 4.6% Adjusted revenues’ 1,398 1,372 1.8% 4,202 4
Slide 17: Adjusted revenues declined y-on-y
Adjusted revenues declined y-on-y €m ° f -1 8 % 1398 | pT 8 1 1,372 ee i = _ ae 19 Adj. revenues Consumer Business Wholesale Other Cincl. Adj. revenues Q3 2018 eliminations) Q3 2019
Slide 18: Solid growth Adjusted EBITDA AL
Solid growth Adjusted EBITDA AL supported by simplification and digitalization 1 1 599 582 Bo 2 2 Adj. EBITDA Revenues Cost of goods Personnel IT/TI Other operating Adj. EBITDA after leases & services expenses expenses! after leases Q3 2018 Q3 2019 1 Incl. lease-related expenses 18
Slide 19: Indirect opex savings program on track
Indirect opex savings program on track € 103m ~€ 350m net savings YTD target 2019 - 2021
Slide 20: FCF Q3 and YTD 2019
FCF Q3 and YTD 2019 YTD mainly impacted by change in working capital €m Q3 2018 =Q32019 Ay-on-y YTD 2018 YTD 2019 Ay-on-y Adjusted EBITDA after leases 582 599 2.9% 1,720 1,756 2.1% Interest lease liabilities 8 7 -11% 25 22 -12% Depreciation right-of-use asset 37 34 -7.6% 1 104 5.8% Restructuring -39
Slide 21: FCF development YTD 2019
FCF development YTD 2019 YTD 2019 em 1,980 98 a -€ 132m... 1,756 , 32 _—_ y y 157 YTD 2018: € 574m 265 7 | 795 442 | “ | Adj. Lease- Restructuring EBITDA Changein Changein _ Interest Taxes Capex Other? FCF EBITDA AL related & YTD 2019 provisions’ —_ working paid paid (excl. TEFD YTD 2019 expenses _
Slide 22: Solid financial position
22 Solid financial position €m 6509 6141 5.934 5,920 5,554 Q3 2018 Q2 2019 Q3 2019 e@ Gross debt Net debt Q3 2019 leverage ratio 2.3X Q2 2019: 2.4x
Slide 23: Outlook 2019 and 2019 - 2021 ambitions
Outlook 2019 and 2019 - 2021 ambitions organic sustainable growth Outlook 2019 2019 - 2021 ambitions Adjusted EBITDA Slightly growing compared with 2018 Organic growth €11bn Stable at € 11bn annually At least € 700m! Three-year mid-single digit CAGR® driven by EBITDA AL growth Regular DPS € 125 cent
Slide 24: Organic value over volume, lean operating model
ORGANIC So Malue. — Volume. Lean . operating model.
Slide 25: Information pack
INFORMATION PACK CSR New converged proposition Tax KPI overview Debt portfolio Treatment of hybrid bonds Fixed infrastructure Spectrum
Slide 26: Doing business in a sustainable manner
26 Doing business in a sustainablemanner Leading position in benchmarks MEMBER OF Dow Jones Sustainability Indices In Collaboration with RobecoSAM «@® EURONEXT Reputationranking i ee Dut VIBEQiris # companies INDICES RepTrak Pulse2019 1 Industry adjusted, source: Reputation institute Achievements in
Slide 27: New converged proposition set-up
New converged proposition set-up FMC benefits on Mobile and/or Entertainment Broadband’ Mobile’ TV’ Entertainment’ Speed €/month Data €/month Options €/ month eg. kidssm 1GB 7502,5™ 50Mbps 42.50 OGB 10 1STB 10 Spotify 100 Mbps 4750 2GB 15 4K 2.50 Fox Sports 200 Mbps 50 5GB 1750 Recording 5 Film 1 50
Slide 28: Example new propositions: KPN Hussel
Example new propositions: KPN Hussel Q AXA PA»oa Si al g | es Cexample) Mobile 10GB Broadband 50Mbps TV 1x STB Entertainment Spotify €79 vs. € 81.5 for previous proposition Cou p | es Cexample) Mobile 10GB+5GB Broadband 100Mbps TV 2x STB Entertainment Netflix € 105.5 vs. € 1055 for previous proposit
Slide 29: Tax Q3 and YTD 2019
Tax Q3 and YTD 2019 P&L Cash flow Regions (€ m) Q32018 Q32019 YTD2018 YTD 2019 Q3 2018 Q32019 YTD 2018 YTD 2019 The Netherlands -23 -42 91 -103 - > -25 7 Other -3 = -5 = -1 = -3 = Total reported tax -26 42 -96 -103 1 - -28 7 Of which discontinued operations -3 - 5 - -1 - -3 - Reported tax from conti
Slide 30: KPI overview
KPI overview Consumer fixed Consumer mobile Business Q3 2018 Q3 2019 Q3 2018 _Q3 2019 Q32018 Q3 2019 Household base (k) Postpaid base (k) Customer base (k) F-M households 1,325 1,404 F-M postpaid customers 2,032 2246 Mobile 1,863 1819 Fixed-only households 2,139 1,877 Mobile-only postpaid customers
Slide 31: Debt portfolio
Debt portfolio Nominal debt" Nominal debt Fixed vs. floating Bond redemption by type by currency interest® profile 1%} € 6.5bn 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 32: 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 33: Fixed infrastructure
33 Fixed infrastructure co | VDSL2 co } VDSL2 pair bonding {sc } Vectoring (sc } Bonded vectoring {sc | Bonded VPlus { Pop | FttH — P2P Passive FttH — G-PON split Passive split FttH — XGS-PON Fiber Copper DE OE EEE Download speed ~5OMbps ~100Mbps ~120Mbps ~240Mbps ~400Mbps ~1Gbps ~1Gbps Up to 10Gbps
Slide 34: 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 35: KPN Investor Relations
KPN Investor Relations ®irkpn.com