Royal Kpn Nv · EURONEXT:KPN
Royal Kpn Nv — KPN — Investor Day (March 2016)
101 slides from Royal Kpn Nv's investor day presentation, Mar 7, 2016
Slide 1: Raising the bar
Raising the bar KPN Capital Markets Day › March 7, 2016 Eelco Blok CEO Simplify Innovate Grow
Slide 2: Raising the bar: Taking successful strategy to the next level
Raising the bar Taking successful strategy to the next level Innovate Grow Simplify Strengthen 2
Slide 3: Significant progress since last CMD in 2014
Significant progress since last CMD in 2014 Promised in February 2014 Achievements since Stabilizing financial performance Adjusted EBITDA FY ’15 stable vs. FY ’14 Financials Grow free cash flow FY ’15 free cash flow growing 30% vs. FY ’141 Simplification program leading to Simplification program up
Slide 4: Delivering value for stakeholders
Delivering value for stakeholders NPS 100Mbps coverage Energy consumption Employee KPN NL Dutch households engagement +3 vs. -10 end 2013 68% vs. 22% end 2013 -6%vs. 2013 77% vs. 63% 2013 CUSTOMERS DIGITAL AGENDA SOCIETY EMPLOYEES Total shareholder return since end 20131: ~50% SHAREHOLDERS 1 Bloombe
Slide 5: Strategy
Strategy Strategic choices embedded in organization Further strengthening our Company SIMPLIFY GROW INNOVATE Digital & simple service Converged Telco Excellent Commercial and delivery & IT services user experience Operational Flexible & simplified Best-in-class secured Applying innovative networks a
Slide 6: Key priorities for the coming years
Key priorities for the coming years Accelerate up- and cross-sell in bundles Grow in TV and IT services Finalize Business transformation Expand superior access position by deploying innovative technologies and increasing fiber penetration Finalize build of flexible and simplified integrated network
Slide 7: Preparing for the Digital Age
Preparing for the Digital Age KPN Capital Markets Day › March 7, 2016 Erik Hoving CTO Simplify Innovate Grow
Slide 8: The Telco industry is past the turning point
The Telco industry is past the turning point Smartphone era has changed everything Exponential data growth1 ignited by launch 1st iPhone It transformed... Discovery 1 Sharing st Smart- 2 nd Sharing Internet of ... Phone usage2 era era phone era era Everything 400k 221x a day We live on our smartphon
Slide 9: We are fully prepared
We are fully prepared Through early investments and innovative technologies First to reach nationwide High fiber penetration & first To fully integrated 4G coverage in Europe to deploy vectoring access model Most time spent on LTE1 FIBER COVERAGE SIMPLIFYING OPERATING MODEL KPN 86% ~80% 65% NL SE DK
Slide 10: We live in exciting times...
We live in exciting times... Four technological developments to impact Telco’s Automation of knowledge work Next generation of Mobile Internet Internet of Things / Connected world Expected impact on Telco’s Cloud technology Autonomous Vehicles Advanced Robotics Energy Storage 3D Printing Renewable E
Slide 11: Growing digitization to fuel emergence of digital life
Growing digitization to fuel emergence of digital life In 2020 a day will have hours Physical Life Digital Life 5
Slide 12: This trend is already taking place...
This trend is already taking place... From basic access to full networked society The 90-00s: The 10s: Be there Share Social media Call Listen Chat music Text Watch TV 6
Slide 13: Critical requirements to manage data growth
Critical requirements to manage data growth In a day that has 48 hours Further network integration towards fully integrated access 1 Simple interfaces to operate applications 8 2 Security Innovative copper technologies 7 3 Simplify operating model & core network Increase fiber penetration 6 4 Virtua
Slide 14: Excellent customer experience via innovative & converged services
Excellent customer experience via innovative & converged services KPN Capital Markets Day › March 7, 2016 Frank van der Post CCO Simplify Innovate Grow
Slide 15: Strategy - Commercial
Strategy - Commercial Moving to fully customer-centric organization Further strengthening our Company SIMPLIFY GROW INNOVATE Digital & simple service Converged Telco Excellent Commercial and delivery & IT services user experience Flexible & simplified Best-in-class secured Applying Operational netwo
Slide 16: Excellent customer experience at core of strategy
Excellent customer experience at core of strategy Embedding customer centric focus throughout KPN organization Customer experience approach FUNDAMENTALS 360º CUSTOMER VIEW CUSTOMER JOURNEY DESIGN • High quality products • Customer understanding • Digital customer interaction and services • Comprehen
Slide 17: Key priorities for the coming years in Business
Key priorities for the coming years in Business Transforming into Business ICT service provider 1 Realize growth by strengthening and deepening customer relations 2 Clear market segmentation with a targeted sales approach 3 Strengthen portfolio & distribution via partnerships 4 Rationalize & simplif
Slide 18: Strengthening & deepening customer relations
Strengthening & deepening customer relations Leverage leading position in Telco to grow market share in IT ADDRESSABLE MARKET 2015 (~₠ 13bn) 2020 (~₠ 14bn) Telco market • Fixed Slightly declining • Mobile Market share >50% Telco market1 • UC / Workspace • Cloud • Security Growing IT market • Virtual
Slide 19: Clear market segmentation and sales approach
Clear market segmentation and sales approach KPN’s distribution reach forms strong basis for growth in IT SMALL & MEDIUM ENTERPRISES LARGE ENTERPRISES & CORPORATE # of customers ~350k ~2.5k ~300 KPN ONE SME KPN ONE Large Enterprises Portfolio Fixed-mobile & ICT solutions, Fixed IP Fixed-mobile & ICT
Slide 20: Changing business market dynamics
Changing business market dynamics Driven by technological developments and changing customer needs Unified Communications / workspace KPN UNIQUELY POSITIONED TO BENEFIT FROM CHANGING CUSTOMER NEEDS CHANGING MARKET DYNAMICS Off-premise / Cloud On-premise & office centric Cloud & user centric Voice co
Slide 21: KPN well positioned to deliver on customer needs
KPN well positioned to deliver on customer needs Standardized building blocks to deliver productivity CO N S U LT I N G U S T RY S O L U T I O I ND NS Applications & Data URI T Y S ERV I C Digital Workspace S E C ES Data Management & Analytics • TA DIG • Workspace as a Service DA ITA & L Hosted & Cl
Slide 22: Strengthen portfolio & distribution via partnerships
Strengthen portfolio & distribution via partnerships Strong position in Dutch market to lead digitization International networking Sell third party IT solutions • Strengthen global presence by combining services of • Leverage technology and standardized products partners to service international cus
Slide 23: Rationalizing and simplifying products & services
Rationalizing and simplifying products & services Digital transformation to drive excellent customer experience Rationalization Standardization Innovation -35% -30% 2013 2015 2018 Portfolio reduction • Simplifying product portfolio • Standardized and modular portfolio • Virtualization • Integrate se
Slide 24: Operational excellence to improve customer experience
Operational excellence to improve customer experience Dedicated programs in place to support NPS development NPS improving, dedicated programs to drive NPS to positive level NPS Business -10 -13 -18 -23 2012 2013 2014 2015 2016 2017 2018 Apply lessons learned in 2015 Dedicated NPS programs 2016 • Si
Slide 25: Finalizing transformation is key priority
Finalizing transformation is key priority De-risk revenue profile and stabilize revenues in medium-term % y-on-y growth % of total revenues % of total revenues FY 2015 FY 2015 FY 2018 Single play wireless -10% 24% Repricing ongoing 15-20% Mainly -21% 18% Continued rationalization 5-10% SME Tradition
Slide 26: Finalizing transformation is key priority (cont'd)
Finalizing transformation is key priority (cont’d) Improve profitability by stabilizing revenues and reducing indirect costs Reduce indirect costs Simplification program CAGR -4.5% • Portfolio rationalization Other • Automation of delivery and service • Online self-care portal Personnel costs • Firs
Slide 27: Key priorities for the coming years in Consumer
Key priorities for the coming years in Consumer Consumer strategy centered around household 1 Increase penetration of fixed-mobile bundles 2 Reduce churn by increasing loyalty and customer satisfaction 3 Accelerate up- and cross-sell in bundles 4 Grow in TV via cloud-based IPTV platform 5 Benefit fr
Slide 28: Successful bundling strategy…
Successful bundling strategy… Strong increase fixed-mobile penetration Steady growth bundling in fixed Medium-term ambition 26% 28% 2011 2015 2015 56% Triple play as % of Fixed-mobile bundles as broadband customers % of broadband customers 2015 Strong growth bundling in mobile1 ~60% 33% 2011 Mobile-
Slide 29: …driving customer satisfaction and reducing churn
…driving customer satisfaction and reducing churn Continued increase NPS and lower acquisition costs Increased NPS Strong reduction in churn1 +9 +9 20% +2 +2 12% 9% 9% -6 -5 -6 2012 -10 2012 2013 2014 2015 2015 NPS Consumer Residential NPS Consumer Mobile Fixed customer Mobile customer Higher ARPU p
Slide 30: Household at center of service model in Consumer
Household at center of service model in Consumer Significant opportunities to increase share of wallet per household Cross-sell fixed-only Upsell security to mobile services Upsell value Deep-sell by added services increasing SIMs Upsell Smart Cross-sell mobile- life services only to fixed 17
Slide 31: Increase value per household in Consumer market
Increase value per household in Consumer market Tailor made approach to optimize value per household E X AMP LE Household scorecard ✔ 4-person household ✔ Apartment building THEORETICAL OPTIMAL SALES TAILOR MADE APPROACH ✔ High income family • Broadband ✔ • TV receivers ✔ • Pay-TV packages Upsell 1
Slide 32: Strong competitive positioning in Dutch market
Strong competitive positioning in Dutch market Covering all segments: focus on fixed-mobile bundling and high value STRONG SHIFT TO HIGH VALUE KPN BRAND High Retail postpaid net adds (k) 84 80 80 70 53 57 59 26 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 ’14 ’14 ’14 ’14 ’15 ’15 ’15 ’15 Value KPN brand No frills brands
Slide 33: Grow in TV via cloud-based IPTV platform
Grow in TV via cloud-based IPTV platform Best customer experience at lowest cost to serve KPN’s interactive Traditional TV platform broadcast IPTV platform to further drive TV growth Set-top box (STB) 85% 75% 77% 71% Cloud-based Intelligence in set-top box 65% Fully interactive 55% 2,245 functionali
Slide 34: Content aggregation via smart partnerships
Content aggregation via smart partnerships Revenue share model facilitating popular content via IPTV platform Strong focus on partnerships to deliver rich content offering Revenue share model • Partnerships with broadcasters Basic content • Attractive interactive T I VE S T R A functionalities for c
Slide 35: Mobile data growth driving shift to large bundles
Mobile data growth driving shift to large bundles Significant upsell potential in existing mobile subscriber base EXPONENTIAL DATA USAGE EXPECTED SIGNIFICANT UPSELL POTENTIAL 2 CAGR +44% 18 2015 ~2 2 End 2015 End 2015 2015 2021 Customer distribution per bundle < 1GB 1GB 5GB 10GB ADPU in GB KPN brand
Slide 36: Focus on excellent customer experience driving NPS
Focus on excellent customer experience driving NPS Large customer satisfaction gap versus competition NPS CONSUMER RESIDENTIAL NPS CONSUMER MOBILE >20 >20 +9 +9 +2 +2 -5 -6 -6 -10 2012 2013 2014 2015 2018 2012 2013 2014 2015 2018 23
Slide 37: Improving in-home solutions and connectivity
Improving in-home solutions and connectivity Implementing in-home strategy to meet customer needs and support NPS Strong demand Strong growth Internet of for stability Things applications BEST IN-HOME SERVICES BEST IN-HOME SOLUTIONS • Stable, fast and reliable in-home connectivity • Managed Smart Ho
Slide 38: Consumer strategy centered around households
Consumer strategy centered around households Grow revenues, increase loyalty and reduce cost to serve • Upsell, cross-sell and deep-sell Grow revenues per household products & services to increase RGUs and ARPU per household • Excellent customer experience Increase loyalty • Further improve customer
Slide 39: Q&A
Q&A Further strengthening our Company SIMPLIFY GROW INNOVATE Digital & simple service Converged Telco Excellent Commercial and delivery & IT services user experience Operational Flexible & simplified Best-in-class secured Applying networks and operating model integrated networks innovative technolog
Slide 40: Simple, flexible integrated networks & operations
Simple, flexible integrated networks & operations KPN Capital Markets Day › March 7, 2016 Joost Farwerck COO Simplify Innovate Grow
Slide 41: Strategy - operations
Strategy - operations Enabling best-in-class customer experience Further strengthening our Company SIMPLIFY GROW INNOVATE Digital & simple service Converged Telco Excellent Commercial and delivery & IT services user experience Operational Flexible & simplified Best-in-class secured Applying innovati
Slide 42: Traffic growth accelerating
Traffic growth accelerating KPN’s Interactive and OTT services driving exponential traffic growth CUSTOMER BEHAVIOR CHANGING DATA USAGE ACCELARATING Non-linear video traffic growing rapidly Total data traffic forecast1 driven by unique KPN and OTT services (KPN fixed & mobile network) KPN Interactiv
Slide 43: Key priorities for the coming years
Key priorities for the coming years 1 Simplify operating model to improve customer experience and operational effectiveness 2 Expand superior access position by deploying innovative technologies and increasing fiber penetration 3 Finalize build of flexible and simplified integrated network Ensuring
Slide 44: Simplifying our operating model
Simplifying our operating model Second wave of Simplification program to deliver significant savings SIMPLIFICATION PROGRAM RUN-RATE OPEX AND CAPEX SAVINGS (in m) > ₠ 300 > ₠ 750 ~₠ 170 ~₠ 450 ~₠ 280 FIRST WAVE SECOND WAVE END END END END 2013 2015 2016 2019 FROM PRODUCT CENTRIC TO CUSTOMER CENTRIC
Slide 45: Gradual approach to simplify operating model
Gradual approach to simplify operating model Our starting point back in 2013 Web App Shop Call Centers Mechanics Sales B2B Customer touchpoints FRONT-END CUSTOMER INTERACTION LAYER (BSS) Telfort Telfort KPN KPN Telfort Telfort KPN Fixed KPN Fixed KPN Mobile KPN Mobile Telfort Fixed Fixed B2B B2B B2B
Slide 46: Gradual approach to simplify operating model (cont'd)
Gradual approach to simplify operating model (cont’d) 2014-2016: Improving customer experience & enabling simplification Web App Shop Call Centers Mechanics Sales B2B Customer touchpoints FRONT-END UNIFORM DIGITAL LAYER CUSTOMER INTERACTION LAYER (BSS) KPN KPN Telfort Telfort KPN Fixed KPN Mobile Te
Slide 47: Gradual approach to simplify operating model (cont'd)
Gradual approach to simplify operating model (cont’d) 2014-2016: What does this mean for the customer and KPN Uniform Digital Layer KPN Fixed KPN Mobile Telfort Fixed ENABLE IMPROVED RATIONALIZE IT CUSTOMER CUSTOMER EXPERIENCE INTERACTION LAYER Removing customer complexity Savings1 Single ID, omnich
Slide 48: Gradual approach to simplify operating model (cont'd)
Gradual approach to simplify operating model (cont’d) 2017-2019: Evolving into next generation Telco Web App Shop Call Centers Mechanics Sales B2B Customer touchpoints FRONT-END UNIFORM DIGITAL LAYER OTT Services CUSTOMER INTERACTION LAYER (BSS) CONSUMER FIXED-MOBILE BUSINESS FIXED-MOBILE BACK-END N
Slide 49: Gradual approach to simplify operating model (cont'd)
Gradual approach to simplify operating model (cont’d) 2017-2019: What does this mean for the customer and KPN CUSTOMER INTERACTION LAYER (BSS) Consumer Fixed-Mobile Business Fixed-Mobile Uniform Digital Layer NETWORK INTERACTION LAYER (OSS) Consumer & Business Fixed-Mobile ENABLE IMPROVED RATIONALIZ
Slide 50: Key priorities for the coming years
Key priorities for the coming years 1 Simplify operating model to improve customer experience and operational effectiveness 2 Expand superior access position by deploying innovative technologies and increasing fiber penetration 3 Finalize build of flexible and simplified integrated network Ensuring
Slide 51: Best mobile access provider
Best mobile access provider Investment-led strategy enabling superior customer experience Most time spent on LTE1 Best network for mobile services3 86% 84% 79% 70% 69% 66% 66% 52% 56% 53% 51% KPN NL SE DK CH AU BE DE UK FR 27% Competitive speeds on LTE 2 41.4Mbps 40.4Mbps 18% 3% KPN Average NL KPN C
Slide 52: Staying ahead of demand for mobile data
Staying ahead of demand for mobile data Fully utilizing spectrum position for excellent customer experience 4G CAPACITY ROLL-OUT UTILIZING FULL SPECTRUM TO AHEAD OF DATA GROWTH DEPLOY CARRIER AGGREGATION 10MHz Indicative 4G site roll-out planning1,2 LTE 800 ACTIVE 150% LTE 800 10MHz 20MHz 125% LTE 8
Slide 53: Staying ahead of demand for mobile data (cont'd)
Staying ahead of demand for mobile data (cont’d) Integrating fixed and mobile access FUTURE-PROOF LEVERAGING BACKHAUL CONNECTION FIXED NETWORK INVESTMENTS Small cells <10% Modernized 24% • Densifying mobile network microwaves • High fiber penetration providing backhaul connection small cells Automat
Slide 54: On top of technology developments
On top of technology developments Continued innovation in Consumer and Business IMPROVING THE QUALITY OF COMMUNICATION OPTIMIZING RETURNS FROM THE INTERNET OF THINGS Customer automatically calling 21bn connected M2M/IoT devices in 20201 with best available technology Using normal call button ~3bn Lo
Slide 55: On top of technology developments (cont'd)
On top of technology developments (cont’d) Anticipating fifth generation cellular technology EVOLUTION OF 5G DRIVEN BY KPN ALREADY PREPARING FOR 5G HYPER CONNECTIVITY NEEDS New areas of business… …need advanced networking Decentralized Content Delivery Network characteristics Launch of LoRa • eHealt
Slide 56: iBasis: Innovative leader in global carrier industry
iBasis: Innovative leader in global carrier industry Making the transformation of the industry work CHANGING INDUSTRY DYNAMICS iBASIS TO FACILITATE TRANSFORMATION • IP transformation • Leveraging global top 3 position in IPX connectivity – Declining voice volumes – Increasing data usage – Providing
Slide 57: Best fixed access provider
Best fixed access provider Investment-led strategy enabling superior customer experience Rising FttC / FttH penetration Best fixed network quality according to customers1 65% ~80% 55% FttC 36% FttH 29% End 2015 End 2016 Percentage of households FttC / FttH 34% Driving coverage 100Mbps ~85% 11% 68% K
Slide 58: Staying ahead of demand for fixed data
Staying ahead of demand for fixed data Flexible to increase bandwidth if demand changes IL L U S T R AT IV E TODAY, 100Mbps IS READY AND FLEXIBLE IF DEMAND CHANGES SIGNIFICANTLY AHEAD OF DEMAND 4-person High Future high Household video demand not expected to household usage usage reach 100Mbps for a
Slide 59: Ready to upgrade if demand changes
Ready to upgrade if demand changes Cost and time efficient upgrades with FttC investments largely completed in 2016 Costs per home: 3 Roll-out Negligible ~90% Activation ~₠ 50 85% ~85% Costs per home: 2 400Mbps Roll-out Negligible 68% ~70% Activation Negligible 59% Costs per home: 1 Roll-out ~₠ 100
Slide 60: Ready to upgrade if demand changes (cont'd)
Ready to upgrade if demand changes (cont’d) FttC offers great perspective to roll-out FttH if needed ~₠ 1,000 ~₠ 725 Medium-term ambition ₠ 450-550 HP FttH ₠ 350-450 from FttC ~₠ 100 HP FttC ₠ 100 HP costs ’07 Current HP costs Current HP costs Ambition HP costs FttH FttH FttC FttH via FttC Increased
Slide 61: Key priorities for the coming years
Key priorities for the coming years 1 Simplify operating model to improve customer experience and operational effectiveness 2 Expand superior access position by deploying innovative technologies and increasing fiber penetration 3 Finalize build of flexible and simplified integrated network Ensuring
Slide 62: Importance of investing in the core network
Importance of investing in the core network Facilitating data growth, while retaining profitability CHANGING CUSTOMER BEHAVIOR REQUIRES STEP CHANGE IN COST PER GB In Tbps Cost per GB UNICAST IPTV1 CAGR + 75% Current networks 2014 2016 2018 2020 In Tbps Next CAGR + 40% generation OTT1 networks 2014 2
Slide 63: Simple, flexible integrated networks & operations
Simple, flexible integrated networks & operations KPN Capital Markets Day › March 7, 2016 Tom Poelhekken EVP Network & IT Operations Simplify Innovate Grow
Slide 64: Build flexible and simplified integrated network
Build flexible and simplified integrated network Three steps to achieve objective SDN NfV 1 Rationalize 2 Decentralize 3 Virtualize Simplify and reduce spend Content closer to customer Increase network efficiency & effectiveness Started 2010 Started 2015 Scope mainly Expected completion 2019 Expecte
Slide 65: Network rationalization to prepare for virtualization
Network rationalization to prepare for virtualization Reducing complexity and associated costs to enable flexibility IP TRANSFORMATION RATIONALIZING & MODERNIZING LEGACY1 100% -200GWh Reduced engergy ~₠ 35m Run-rate opex consumption2 savings3 RATIONALIZING & CONSOLIDATING IP-CORE Legacy ~65% 60% • I
Slide 66: Decentralize, bringing content closer to customer
Decentralize, bringing content closer to customer Higher network efficiency and improved customer experience KPN SERVICE PLATFORMS OTT SERVICES HIGHER NETWORK EFFICIENCY SERVICES • Content Delivery Network (CDN) on 161 Metro Core VOICE IT IPTV locations • Virtual entry point for bandwidth intensive
Slide 67: Virtualization, a revolution for the industry
Virtualization, a revolution for the industry Two driving technologies: NfV and SDN NETWORK FUNCTION VIRTUALIZATION SOFTWARE DEFINED NETWORKS How network functions are implemented In control of traffic flows Hardware becomes cloud Automatically selecting smartest route From video recorder to From ro
Slide 68: Preparing for virtualization in parts of the network
Preparing for virtualization in parts of the network Proof of concepts within all levels IT IPTV VOICE OTT KPN INTERNET Virtual Virtual CDN SERVICES IMS Proof of concepts Virtual NfV Datacenter CORE & TRANSPORT SDN Virtual NEMS1 Virtual Mobile core Cloud RAN xDSL FttH FttO WiFi 2G 3G 4G Virtual Virt
Slide 69: Virtualization, benefits for customer & operator
Virtualization, benefits for customer & operator BENEFITS FOR THE CUSTOMER BENEFITS FOR THE OPERATOR On demand provisioning new services More efficient use of capacity Real-time fulfillment capacity demands Increased network scalability Try-before-you-buy Automated provisioning Longer lifecycle of C
Slide 70: Q&A
Q&A Further strengthening our Company SIMPLIFY GROW INNOVATE Digital & simple service Converged Telco Excellent Commercial and delivery & IT services user experience Operational Flexible & simplified Best-in-class secured Applying innovative networks and operating model integrated networks technolog
Slide 71: Value management and cost focus driving predictable cash generation
Value management and cost focus driving predictable cash generation KPN Capital Markets Day › March 7, 2016 Jan Kees de Jager CFO Simplify Innovate Grow
Slide 72: Strategy - Financial
Strategy - Financial Finance as navigator for business decisions Further strengthening our Company SIMPLIFY GROW INNOVATE Digital & simple service Converged Telco Excellent Commercial and delivery & IT services user experience Operational Flexible & simplified Best-in-class secured Applying innovati
Slide 73: Key financial priorities for coming years
Key financial priorities for coming years Predictable cash generation the basis for attractive shareholder returns • Grow in Consumer Revenues Free cash flow • Stabilize Business Opex Strong potential to • Rigorous cost discipline continue FCF growth • Simplification program Capex • Capex levels tre
Slide 74: Improving revenue profile
Improving revenue profile Optimizing customer lifetime value REVENUES DIRECT COSTS • Increase revenues in Consumer by growing • SAC/SRC decisions based on value management RGUs per household • Marketing tailored to high value segment – Increase fixed-mobile penetration E X AMPLE – Upsell, cross-sell
Slide 75: Strong cost reduction track record
Strong cost reduction track record Execution of cost programs driving structurally lower spend levels FTEs IN THE NETHERLANDS OPEX (EXCL. D&A) THE NETHERLANDS -28% -17% 19,192 4,584 13,772 3,809 ₠m 2010 2015 2010 2015 Simplification program well on track1 FTE (own & external personnel) IT ~₠ 220m ~₠
Slide 76: Programs in place to reduce costs further
Programs in place to reduce costs further Simplification and continued rigorous cost discipline SIMPLIFICATION PROGRAM RIGOROUS COST DISCIPLINE • Targeting ~₠ 450m by end of 20161 • Spend benchmarking • Strict cost discipline approach • Targeting > ₠ 750m by end of 2019 1 - Proactive procurement man
Slide 77: Increasing cost visibility for The Netherlands
Increasing cost visibility for The Netherlands From segment to functional focus; NetCo as a cost center REPORTING CHANGES PER Q1 2016 MOVING TO FUNCTIONAL OPEX SPLIT CURRENT OPEX SPLIT • Eliminating internal revenues: Employee benefits ₠ 975m – Network, Operations & IT (former NetCo) as a Cost of ma
Slide 78: Increasing cost visibility for The Netherlands (cont'd)
Increasing cost visibility for The Netherlands (cont’d) COGS mainly in Commercial; IT/TI mainly in Operations ₠m 6,172 1,475 531 1,218 577 2,371 Adjusted Cost of goods IT / TI Personnel Other operating Adjusted revenues FY ’15 & services expenses expenses EBITDA FY ’15 The Netherlands The Netherland
Slide 79: Ahead of the Capex curve
Ahead of the Capex curve KPN built strong fundamentals in past years KPN INVESTED AHEAD OF THE CURVE REDUCING CAPEX 22.3% 20.8% 30% Towards 15-17% 1,440 Capex / sales 20% 1,300 ~1,200 10% 0% Q1 ’10 Q4 ’15 2014 2015 2016 Medium- term KPN The Netherlands1 Telco Sector (domestic integrated operations)2
Slide 80: Continue to build capacity at less Capex
Continue to build capacity at less Capex Benefit from early investments in best-in-class networks and IT INVESTMENT PROGRAMS 2016 FttC / FttH Carrier aggregation Simplification program Targets end-2016 ~80% FttC / FttH penetration 800/1800MHz carrier aggregation ~₠ 450m savings1 FUTURE INVESTMENT PR
Slide 81: Finalizing balance sheet transformation
Finalizing balance sheet transformation Solid financial profile and attractive shareholder remuneration SOLID FINANCIAL PROFILE PROGRESSIVE SHAREHOLDER REMUNERATION Comfortable with current credit profile • Free cash flow growth forms basis for KPN’s Baa3 / Stable progressive shareholder remuneratio
Slide 82: Disciplined portfolio management approach
Disciplined portfolio management approach Focus on fit with KPN strategy and shareholder value creation PRAGMATIC AND STRATEGIC M&A APPROACH KPN VENTURES TO PROMOTE OUTSIDE-IN INNOVATION • Right asset at the right price ₠ 35m Venture Fund established in 2015 • Focus on scale and capabilities • Suppo
Slide 83: Strategy - Financial
Strategy - Financial Further strengthening our Company SIMPLIFY GROW INNOVATE Digital & simple service Converged Telco Excellent Commercial and delivery & IT services user experience Operational Flexible & simplified Best-in-class secured Applying innovative networks and operating model integrated n
Slide 84: Raising the bar
Raising the bar KPN Capital Markets Day › March 7, 2016 Eelco Blok CEO Simplify Innovate Grow
Slide 85: Key priorities for the coming years
Key priorities for the coming years Accelerate up- and cross-sell in bundles Grow in TV and IT services Finalize Business transformation Expand superior access position by deploying innovative technologies and increasing fiber penetration Finalize build of flexible and simplified integrated network
Slide 86: External environment reassuring
External environment reassuring Macro-economy stabilizing with improving competitive position IMPROVING MACRO-ECONOMY COMPETITIVE ECONOMIC POSITION 2 ’15-’16 vs. ’14-’15 GDP growth NL1 1.9% 2.1% Germany 4 +1 0.9% The Netherlands 5 +3 -0.7% 2013 2014 2015 2016E United Kingdom 10 -1 Unemployment NL1 7
Slide 87: External environment reassuring (cont'd)
External environment reassuring (cont’d) Ideal test market to introduce new technologies ahead of the curve Location of #1 and #6 High quality digital infrastructure internet exchange worldwide1 Central ø 63.5Mbps ø 53.5Mbps location in AMS-IX NL-IX Europe #1 Internet exchange worldwide #6 Average p
Slide 88: External environment reassuring: Regulatory impact easing
External environment reassuring (cont’d) Regulatory impact easing WIRELESS REGULATORY IMPACT VOLUNTARY OPEN ACCESS REDUCES LARGELY ABSORBED NEED FOR FIXED LINE REGULATION MTA & roaming glide path Roam-like-home largely absorbed last step • Virtual Unbundled Local Access (‘VULA’) agreements with whol
Slide 89: External environment reassuring (cont'd)
External environment reassuring (cont’d) Changing dynamics drive emergence of digital life Streaming Social Mobility Internet of Things Customer behavior changing DIGITAL LIFE EMERGING Key enabling technologies SDN NfV Cloud 4G & 5G Fiber Vectoring Virtualization 6
Slide 90: KPN strongly positioned as only integrated service provider
External environment reassuring (cont’d) KPN strongly positioned as only integrated service provider Fixed network FttC, FttH Coax Wholesale KPN N/A Wholesale KPN Broadband market share1 41% 43% N/A N/A 4% TV product perception2 N/A N/A TV market share1 29% 52% N/A N/A 2% Mobile network 2G, 3G, 4G M
Slide 91: Strong fundamentals to deliver shareholder value
Strong fundamentals to deliver shareholder value Ahead of the curve in Europe LEADING INNOVATIVE & DIFFERENTIATING STRONG MARKET POSITIONS CONVERGED SERVICES & BEST SERVICE PROVIDER Strong growth of services Solid market shares and leading NPS level 44% ~33% +625k +172k 41% 29% vs. ~8% since since +
Slide 92: Transforming into Business ICT service provider
Transforming into Business ICT service provider 1 Realize growth by strengthening and deepening customer relations 2 Clear market segmentation with a targeted sales approach 3 Strengthen portfolio & distribution via partnerships 4 Rationalize & simplify products and services to create standardized b
Slide 93: Consumer strategy centered around household
Consumer strategy centered around household 1 Increase penetration of fixed-mobile bundles 2 Reduce churn by increasing loyalty and customer satisfaction 3 Accelerate up- and cross-sell in bundles 4 Grow in TV via cloud-based IPTV platform 5 Benefit from growing mobile data usage 6 Further improve e
Slide 94: Expanding superior network position
Expanding superior network position 1 Simplify operating model to improve customer experience and operational effectiveness 2 Expand superior access position by deploying innovative technologies and increasing fiber penetration 3 Finalize build of flexible and simplified integrated network Ensuring
Slide 95: Synergy realization through partnerships
Synergy realization through partnerships Teaming up to offer unique customer experience Content Technology New business Commercial 12
Slide 96: Leading example of responsible service provider
Leading example of responsible service provider Assuming our role in society SUCCESFUL CORPORATE SOCIAL CORE PRINCIPLES EMBEDDED IN RESPONSIBLE STRATEGY MANAGEMENT INCENTIVE PLANS 18% 77% 73% 1 Short-term targets vs. 2010 vs. 63% end 2013 vs. 69% end 2013 Financial (Revenue, EBITDA, FCF) Non-Financi
Slide 97: Growing free cash flow to drive shareholder value
Growing free cash flow to drive shareholder value Developing towards highly cash generative company Strong free cash flow potential Solid financial position 1 Grow revenues in Consumer, stabilize in Business • Committed to investment grade credit profile • 15.5% Telefónica Deutschland stake provides
Slide 98: Outlook 2016
Outlook 2016 EBITDA Adjusted EBITDA in line with 2015 Capex Capex ~€ 1.2bn Free cash flow Free cash flow (excl. TEFD dividend) > € 650m Dividend per share of € 0.10 in respect of 2016 Dividend Capital repayment per share of € 0.28 in 2016 Excess cash Potential additional shareholder remuneration via
Slide 99: Medium-term ambitions
Medium-term ambitions Ambition for coming three to five years Consumer growing Revenues Business stabilizing EBITDA Adjusted EBITDA margin The Netherlands ≥ 3%-points increase vs. 2015 Capex Capex The Netherlands trending down towards 15-17% of sales Dividend Growing in line with free cash flow grow
Slide 100: Key priorities for the coming years
Key priorities for the coming years Accelerate up- and cross-sell in bundles Grow in TV and IT services Finalize Business transformation Expand superior access position by deploying innovative technologies and increasing fiber penetration Finalize build of flexible and simplified integrated network
Slide 101: 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 (‘FCF’). These non-GAAP figures should not be viewed as a substitute for KPN’s GAAP figures. KPN defines EBITDA as operating result before depreciatio