Royal KPN NV · EURONEXT:KPN
Royal KPN NV — KPN — Q4 2020 Earnings Presentation
43 slides from Royal KPN NV's earnings presentation, February 2021
Slide 1: Accelerate to grow
(1 0 AEE DOA of the Netherla
Slide 2: Safe harbor
Safe harbor Alternative performancemeasuresand managementestimates 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 (FCF)
Slide 3: KPN Q4 and FY 2020 results
KPN Q4 and FY 2020 results T kpn. The network of the Netherlands R qe) kpn
Slide 4: Highlights Q4 and FY 2020
Highlights Q4 and FY 2020 Delivered on FY 2020 outlook Growing postpaid base, further stabilizing broadband base in Consumer Encouraging trend in mass-market service revenues Awards for fastest 5G network in NL, 5G Innovation, and best in mobile data Accelerated fiber rollout Substantially improving
Slide 5: Robust Q4 results
Robust Q4 results Adjusted revenues Q4 2020 FY 2020 €1,354m €5,275m 28% 3.9% 24 2019 FY 2019 €1393m €5,486m Net profit Q4 2020 FY 2020 € 174m €561m >100% 8.7% 4.2019 FY 2019 € 84m € 614m Operational Free Cash Flow Q4 2020 FY 2020 € 272m €1172m +14% -25% 04 2019 FY 2019 €29m €1202m 5 Q4 2020 Results
Slide 6: Delivered on 2020 outlook
Delivered on 2020 outlook Achievements Outlook FY 2020 FY 2020 Adjusted EBITDA AL €2,320m ~€ 2,320m Capex €1,147m € 11bn Free Cash Flow € 765m ~€ 750m Regular DPS € 13 cents € 13 cents 6 42020 Results the AGM on 14 April 2021 &kpn
Slide 7: Accelerate to grow supported by three key pillars
Accelerate to grow supported by three key pillars Three strategic pillars... ..fo0 Support our ambition to p . Leverage & expand superior networks Covering the Netherlands through fiber . * Low latency services via 5G and edge computing Connect the Netherlands to a sustainable future * Leading the D
Slide 8: Expand superior network
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Slide 9: Expand superior network: the leading fiber company in the Netherlands
Expand superior network: the leading fiber company in the Netherlands Accelerating fiber rollout to base case ~500k HP annual run rate Ambition to cover the Netherlands with FttH’ k ~500 319 >80% 2019 2020 2021-2025 2019 2020 2023 2025 Ultimate goal Secured contracting capacity Sophisticated rollout
Slide 10: Expand superior network: run-rate reached to deliver on ambitions
10 Expand superior network: run-rate reached to deliver on ambitions Continuously expanding fiber footprint +112 76 +73 2,784 2599 2,672 Q4 2019 Q12020 Q22020 Q32020 Q42020 2020: +319k HP rollout +33k HP on 3 party FItH Q4 2020 Results Solid FttH activation rate +23 +32 ee as 1287 59 Weekly rollout
Slide 11: Award winning 5G network reaching majority of the Netherlands
Award winning 5G network reaching majority of the Netherlands Excellent 5G position Umlaut Connect te: test Reaching ~70% of NL on new 7OOMHz spectrum : Leading 5G ecosystem 2,803 2,210 | AWN 929 - as Q4 2019 = Q12020. = Q22020))—-Q32020 = Q4 2020 HB Sites modernized WE We 7 5G OUTSTANDING ele SPEED
Slide 12: Grow and strengthen customer footprint
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Slide 13: B2C: Encouraging base and revenue trend
B2C: Encouraging base and revenue trend Key take-aways Adjusted revenues ¢ m) Improving Fixed service revenue trend fueled by price adjustments and fiber 480 477 477 480 484 * Fixed non-service revenues driven by success of SuperWiFi * Mobile service revenue trend improving due to stabilizing base 2
Slide 14: B2C: Base and revenue trends turning in the right direction
B2C: Base and revenue trends turning in the right direction Stabilizing broadband net adds ¢k)' Higher fixed ARPU Fixed revenue growth ; +0.8% € 5 O — — Or “ ~ +4.0% y-on- 06% 6 _ Y-ON-y “0.9% 0.6% Positive postpaid net adds ¢k) +9 Stable mobile ARPU Mobile service revenue trend improving "1 _— —— €
Slide 15: B2C: Fiber investments driving performance
B2C: Fiber investments driving performance Continuously growing fiber broadband base...) +77k -132k 1,786 1,748 1721 1,062 1,074 1,091 Q4 2019 Q1 2020 Q2 2020 Customers increasingly willing to pay for quality ry 2020) ~70% ~40% Inflow >100Mbps Average VAS revenue per user 15 Q42020 Results ..and fib
Slide 16: B2C: Focus on households and convergence reflected by new disclosure
B2C: Focus on households and convergence reflected by new disclosure Serving more fixed-mobile households Growing fixed-mobile service revenues ¢ m) 3,609 3,590 3,570 3,553 oss ost bar a - 802 790 781 775 eo) + @12020. = Q22020 »=—-Q32020 = Q4 2020 12020 Q2 2020 Q3 2020 Q4 2020 Slightly growing Aver
Slide 17: B2B: Moving in the right direction despite revenue challenges
B2B: Moving in the right direction despite revenue challenges Underlying B2B revenue trend improving Revenue trend impacted by COVID and migrations 5.7% 4.3% 4.5% 2.3% ——= ——= 73% — — “8.6% 2015 2016 «=«2017-—«-2018+~—« 2019 +-—«2020 FY 2019 COVID- Migrations Non- Other FY 2020 19 service 7 ~Q42020
Slide 18: B2B: Revenue pressure largely driven by strategic actions and COVID-19
B2B: Revenue pressure largely driven by strategic actions and COVID-19 Key take-aways * Communication Services impacted by customer migrations to target portfolio and loss of roaming revenues * IT Services lower as growth in Workspace was more than offset by declining revenues from Cloud and Securit
Slide 19: B2B: Customer migrations to future-proof proposition
B2B: Customer migrations to future-proof proposition SME customer migrations nearly completed’ LCE customer migrations on track Q4 2019 Q4 2019 Q4 2020 Q4 2020 Strongly growing KPN EEN subscriber base Positive NPS on target portfolio’ 745 10 619 673 486 549 4 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020
Slide 20: Wholesale: Sustainable growth from open access model
Wholesale: Sustainable growth from open access model Key take-aways * Added 30k broadband lines and 8k postpaid customers * Continuing open Wholesale policy based on voluntary offers and long-term contracts Broadband customer base) 957-978 993 1,016 1,046 Q4 Ql Q2..Q3) 4 2019 2020 2020 2020 2020 Hl
Slide 21: ESG milestones and ambitions recognized by leading benchmarks
ESG milestones and ambitions recognized by leading benchmarks Important milestones crossed... Carbon neutral for own operations 2015 ¥ 2011 ¥ 2020 v 100% >30% gender green energy diversity at Board level Rankings & awards in 2020 Member of Dow Jones Sustainability Indices Powered by the S&P Global C
Slide 22: & kpn
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Slide 23: Group financials
Group financials (€m) FY 2019 FY2020 Ay-on-y Ay-on- ex esnens Service revenues 5,090 4874 42% -27% Non-service & other 397 401 +0.9% Adjusted revenues 5,486 5,275 3.9% -2.4% Total adjusted opex 3,004 2803 6.7% 5.3% Lease related expenses 165 152 782% 2.8% Adjusted indirect opex after leases 1,868 1,
Slide 24: Mass-market service revenues to grow by end 2021
Mass-market service revenues to grow by end 20721 Mass-market service revenues é m) -0.1% -0.9% 198 Q1 2019 Q2 2019 Q32019 = Q42019,-Q12020. Q22020 = Q32020) = Q4 2020 HB Wholesale Ml sme’ — Mass-market service revenue growth (% y-on-y) B2C Mobile [ B2¢ Fixed 1. Corrected for the impact of divestmen
Slide 25: Strong cost savings track record and next wave cost savings
Strong cost savings track record and next wave cost savings Strong cost savings since start New wave cost savings program €m 33 3800 ee 2? = —_ > € 5 O Mm het indirect opex (~15% of 2020 indirect cost base) FY Ql Q2 Q3 Q4 Total end 2019 2020 2020 2020 2020. = Q4 2020 25 Q4 2020 Results 1. Net indire
Slide 26: Making clear investment decisions: accelerate fiber
Making clear investment decisions: accelerate fiber Increasing fiber investments m) 44115 1,147 Fiber rollout’ 127 294, 2020 driven by accelerated fiber rollout Other 987 , 852 700-750 2021 not to exceed € 2019 2020 2021 Capex / sales’ Fiber rollout 24 5.6 8-10 Other 18.1 162 13-15 Total 20.5 21.8 2
Slide 27: Rigorous working capital management to limit impact fiber rollout
Rigorous working capital management to limit impact fiber rollout Effect delta Working capital (€ m) Q4 2019 Q4 2020 working capital Current assets Inventories 54 47 +7 Trade and other receivables 508 436 +72 Prepayments and accrued income 246 198 +48 Contract assets and contract costs 37 49 -12 Cur
Slide 28: Strong underlying cash generation
Strong underlying cash generation (€m) FY2019_ FY 2020 Ay-on-y Adjusted EBITDA after leases 2317 2,320 +0.1% As % of adj. revenues 422% 44.0% Capex 405, 1147 +29% Operational Free Cash Flow 1,202 1,172 “2.5% As % of adj. revenues 219% 222% Cash restructuring -133 58 56% incidentals 210 28 -87% Chang
Slide 29: Significantly improving return on capital
Significantly improving return on capital Operational efficiency 13.5% tional ef Jue to h ask a m Dato fisher No ROCE’ »» Strong and discipline st control >> Lower restructuring charges 10.1% 9.2% 95% 2018 2019 2020 Capital efficiency 765% Capital efficiency declined 2018 2019 2020 75.0% Th.2% 4 >>
Slide 30: Robust liquidity position, committed to investment-grade credit profile
Robust liquidity position, committed to investment-grade credit profile 99 1% 87x 93x 9.2K * Robust liquidity... bk 1250 2,114 22x 22x 25x 25x 864 6188 6154 6,376 6,197 5,148 5759 5,063 5,248 5584 5,332 Cash & short RCF Total liquidity end term investments! Q4 2020 1,041 696 907 792 864 Q4 2019 Q120
Slide 31: Fully delivered on disclosure agenda
Fully delivered on disclosure agenda Fiber »> Additional KPIs and more insight into our fiber activities ¥ >> Fiber Capex ¥ >> Fiber return model ¥ Consumer >> New revenue breakdown with focus on convergence ¥ >> New KPIs to reflect household focus (eg. ARPA) ¥ Business >> New revenue breakdown per
Slide 32: Clear 2021 outlook and 2023 ambitions reiterated
Clear 2021 outlook and 2023 ambitions reiterated Adjusted EBITDA AL Capex Free Cash Flow Regular DPS 32 Q42020 Results Achievements Outlook Ambitions FY 2020 FY 2021 FY 2023 €2,320m € 147m € 765m € 13 cents ~€ 2,345m €1,200m ~€ 765m € 13.6 cents +4.6% y-on-y @ AGM on 14 April 20 >€ 2,450m € 1.1-1.2b
Slide 33: Closing remarks & Q&A
Closing remarks & Q&A Delivered on FY 2020 outlook Growing postpaid base, further stabilizing broadband base in Consumer Encouraging trend in mass-market service revenues Awards for fastest 5G network in NL, 5G Innovation, and best in mobile data fiber rollout Substantially improving ROCE Continued
Slide 34: Appendix
Slide 35: Q4 & FY 2019 financials corrected for impact of divestments
Q4 & FY 2019 financials corrected for impact of divestments ll Tax Ill Debt portfolio IV. Treatment of hybrid bonds V_ Mobile infrastructure VI Spectrum & kpn
Slide 36: I: Q4 2019 financials corrected for impact of divestments
I: Q4 2019 financials corrected for impact of divestments Income statement (€ ™) Q4 2019 Impact Q42019 Q42020 Ay-on-y divestments —_excicivestmens ct destments Consumer 734 © 734 732 Business 528 -28 500 4T4 5.3% Wholesale 146 2 146 161 Network, Operations & IT 2 - 2 5 Other Cincl. eliminations) 7 3
Slide 37: I: FY 2019 financials corrected for impact of divestments
I: FY 2019 financials corrected for impact of divestments Income statement (€ m) FY 2019 Impact FY 2019 FY2020 Ay-on-y divestments exci <ivestments exc divestments Consumer 2916 2 2916 2,863 Business 2,043 -90 1,953 1,841 “5.7% Wholesale 627 34 593 624 45.3% Network, Operations & IT 6 2 6 9 Other Ci
Slide 38: II: Tax Q4 and FY 2020
Il: Tax Q4 and FY 2020 P&L Cash flow P&L Cash flow Regions (€ m) Q42019 Q42020 Q42019 Q42020 FY 2019 FY 2020 FY 2019 FY 2020 The Netherlands 55 23 - = 48 -89 -6 = Other 4 : - : 4 1 4 = Total reported tax 54 23 - 2 “49 -88 7 - Of which discontinued operations - - - - - 2 - - Reported tax from continu
Slide 39: III: Debt portfolio
lll: Debt portfolio Nominal debt by type’ Nominal debt by currency’ Fixed vs. floating interest’ Debt redemption profile’ eb») 6% 2 2223 24 '25 26 27 282930 31 32 HB Eurobonds TM cur Bl Fixed 1 Global bonds OS cee HB Floating I Usd hybrid (ist call) GBP HB Hybrid bonds Hi uso’ HM EUR hybrid (ist cal
Slide 40: IV: Treatment of hybrid bonds
IV: Treatment of hybrid bonds KPN & Credit rating agencies IFRS Rating agencies recognize hybrid bonds as EUR tranche is a perpetual instrument, accounted for as equity 50% equity >> Coupon payments treated as equity distribution (dividend), 50% debt hence not expensed through P&L, not included in F
Slide 41: V: Mobile infrastructure
V: Mobile infrastructure Modernizing sites with the latest technologies, 5G ready Typical current site Typical modernized site 4 frequency bands 6-8 frequency bands 2x2 MIMO 4x4 or higher order MIMO. 1 Gbps backhaul 10 Gbps backhaul 2 antennas 1 antenna Not 5G ready 5G ready ~150 site configurations
Slide 42: VI: Spectrum in the Netherlands
VI: Spectrum in the Netherlands 7OOMHz (Paired) 800MHz (Paired) 900MHz (Paired) 1.4GHz (Unpaired) 1.8GHz (Paired) 2.1GHz' (Paired) 2.6GHz (Unpaired) 2.6GHz (Paired) Total 42 Q42020 Results VodZig 2x10 Ee VodZig 2x20 VodZig 4x10 215MHz 2x30 2x30 2x35 1x40. 2x70 2x 60 1x 60 2x65 680MHz & kpn
Slide 43: KPN Investor Relations
KPN Investor Relations @ irkpn.com & kpn