Royal Kpn Nv · EURONEXT:KPN
Royal Kpn Nv — Koninklijke KPN — Investor Presentation (November 2016)
46 slides from Royal Kpn Nv's investor presentation, November 2016
Slide 1: Investor presentation November 2016
Investor presentation November 2016
Slide 2: Contents
Contents 1 Strategy 2 Performance 3 Appendix
Slide 3: Strategy: Simplify, Grow, Innovate
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 4: 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 5: External environment reassuring (cont'd)
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 share 1 29% 52% N/A N/A 2% Mobile network 2G, 3G, 4G
Slide 6: 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 7: 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 8: 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 N S IND Applications & Data UR I T Y S ERV I CES Digital Workspace S EC Data Management & Analytics • TA DIG • Workspace as a Service DA ITA & L Hosted & Clo
Slide 9: LE & Corporate: 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 10: 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 11: 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 12: 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 13: 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 13 17
Slide 14: 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 15: 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 AT IV E functionalities for customer
Slide 16: 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 17: 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 18: 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 LTE2 41.4Mbps 40.4Mbps 18% 3% KPN Average NL KPN Co
Slide 19: 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 20: 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% 78% 55% FttC 36% 49% FttH 29% 29% End 2015 Q3 2016 Percentage of households FttC / FttH 34% Driving coverage 100Mbps 74% 68%
Slide 21: 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 89% Activation ~₠ 50 84% Costs per home: 2 400Mbps 74% Roll-out Negligible 68% Activation Negligible 62% 57% Costs per home: 1 Roll-out ~₠ 100 200
Slide 22: 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 23: 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 24: 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 25: 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 26: 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 27: 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 28: Contents
Contents 1 Strategy 2 Performance 3 Appendix
Slide 29: Value focus reflected in new consumer propositions
Value focus reflected in new consumer propositions Enrichment of bundles in combination with price adjustments 1 July 26 September Internet security service added to New mobile line-up launched bundled packages EU roaming included in premium bundles Prices KPN residential bundles +€ 2.50 Q2
Slide 30: Continued growth of fixed-mobile bundles in Consumer
Continued growth of fixed-mobile bundles in Consumer Over half of KPN brand postpaid customers in fixed-mobile bundles Households in fixed-mobile bundles1 Postpaid customers in fixed-mobile bundles 35% 40% 28% 25% all brands Q3 ’15 Q3 ’15 Q3 ’16 Q3 ’16 53% KPN brand k 944 1,003 k 1,384 1,461 689 997
Slide 31: Bundled residential services driving RGUs per household
Bundled residential services driving RGUs per household ARPU per household supported by price adjustments …driving RGU and ARPU per Continued growth bundled Triple play growth… household growth service revenues +1.1% +2.5% +3.1% k q-on-q 2.13 2.14 % y-on-y €m 3,746 3,684 3,655 2.04 467 453 458 14 15
Slide 32: Continued value focus in Consumer mobile
Continued value focus in Consumer mobile Strong competitive position driven by high value KPN brand and fixed-mobile bundles Customer base growth Committed ARPU stable y-on-y Continued service revenue growth +2.1% +1.8% +0.7% k €m 80 € 28 309 302 € 26 € 26 290 36 23 ~€ 22 ~€ 22 ~€ 22 Q3 ’15 Q2 ’161
Slide 33: Migration to multi play in SME
Migration to multi play in SME providing up- and cross-sell opportunities… Traditional telco Multi play Multi play Hosted voice 50% Additional services Repricing RGU uplift1 + Migration to Up- and cross-sell KPN ONE Ongoing decline in fixed-only voice lines… …but multi play seats in SME increasing +
Slide 34: LE&Corporate: challenges in Business remain
…but challenges in Business remain Impact from repricing and migration to IP-based services Business revenue growth drivers Further progress reducing indirect costs Q3 ’16 Q3 ’16 adjusted % of total y-on-y adjusted CAGR growth revenues Business total -7.0% -4.5% Single play wireless -13% 23% 1 Mainl
Slide 35: Customer satisfaction improving further
Customer satisfaction improving further Strong improvement in Business driven by dedicated NPS programs NPS Consumer residential1 NPS Consumer mobile1 NPS Business1 10 9 6 7 -5 -10 +3 +3 +5 Q3 ’15 Q3 ’16 Q3 ’15 Q3 ’16 Q3 ’15 Q3 ’16 1 Source: TNS NIPO. Consumer residential (all brands), Consumer mobi
Slide 36: Revenue trend improving
Revenue trend improving Adjusted revenues1 declined by 3.0% €m 12 1,764 5 1 43 17 1,711 10 2 3 Adj. revenues Consumer Business Wholesale iBasis Other Adj. revenues Q3 ’15 Q3 ’16 1 Customer base growth and improving ARPU trend 2 Impact of repricing and migrations to IP-based services 3 Market share g
Slide 37: Adjusted EBITDA improving
Adjusted EBITDA1 improving Supported by positive impact of cost savings related to Simplification program Adjusted EBITDA1 increased by 3.4% €m 20 5 662 640 29 0 5 3 30 2 1 Adj. EBITDA Revenues Cost of goods Personnel IT/TI Other operating iBasis Other Adj. EBITDA Q3 ’15 & services expenses expenses
Slide 38: Free cash flow impacted by changes in working capital
Free cash flow1 impacted by changes in working capital € 63m impact from €m cash optimization2 1,803 49 44 248 399 1 63 313 2 250 895 6 Reported Change in Change in Taxes received Interest paid Capex Other FCF excl. Cash Excl. impact EBITDA provisions working capital (paid) TEFD optimization cash ac
Slide 39: Solid financial position
Solid financial position Successful bond tender and new issue will result in lower interest payments Lower gross debt y-on-y Debt portfolio further optimized Successful bond tender and new issue in September 8.6 Issued € 625m 0.625% bond due 2025 and € 625m 1.125% bond € bn 7.8 8.0 due 2028 7.5
Slide 40: Contents
Contents 1 Strategy 2 Performance 3 Appendix
Slide 41: KPN ADR program
KPN ADR program KPN has a sponsored Level 1 ADR program ADR program Bloomberg ticker KKPNY Trading platform Over-the-counter (OTC) CUSIP 780641205 Ratio 1 ADR : 1 Ordinary Share Depositary bank Deutsche Bank Trust Company Americas Depositary bank contact Jonathan Montanaro +1 212 250 9100 (New York)
Slide 42: Corporate Social Responsible Strategy
Corporate Social Responsible Strategy Successful CSR strategy1 Social and environmental achievements in 2016 2015 KPN included in CDP’s Climate A list Leading the corporate response to climate change 18% 77% 73% 2 Included in Dow Jones Sustainability World Index for the fifth vs. 2010 vs. 70%
Slide 43: Dutch wireless disclosure
Dutch wireless disclosure Service revenues (€ m) Q3 ’16 Q3 ’15 y-on-y % Consumer 302 309 -2.3% Business1 174 179 -2.8% Other2 42 37 14% KPN The Netherlands 518 525 -1.3% SAC/SRC per subscriber (€) Q3 ’16 Q3 ’15 y-on-y % Consumer (postpaid)3 203 193 5.2% Business (mobile only – mainly SME) 203 218 -6
Slide 44: Debt portfolio
Debt portfolio Breakdown of € 9.0bn nominal debt1 including hybrid bonds Breakdown nominal debt1 (total € 9.0bn) Nominal debt by currency Other 2% GBP2 Hybrid bonds 22% 22% Euro bonds EUR Global bonds 68% USD2 64% 8% 14% Bond redemption profile Fixed vs. floating interest € bn 1.1 0.9 1.0 0.7 0.8 0.
Slide 45: Fixed infrastructure
Fixed infrastructure Next round of upgrades Download speed Active in (up to) Network VDSL2 CO 50Mbps VDSL2 pair bonding CO 100Mbps Vectoring SC 120Mbps Bonded vectoring SC 240Mbps Bonded VPLUS SC 400Mbps NG.PON SC >1Gbps FttH ODF 1Gbps Fiber Copper 45
Slide 46: 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 and numerical reconciliations are included in KPN’s quarte
Koninklijke KPN — Investor Presentation (November 2016) on 6ix