Royal Kpn Nv · EURONEXT:KPN
Royal Kpn Nv — KPN — Investor Day (February 2014)
75 slides from Royal Kpn Nv's investor day presentation, Feb 19, 2014
Slide 1: KPN Capital Markets Day 2014
KPN Capital / Markets Day 2014 19 February
Slide 2: Industry trends: Long term vision into action
Industry trends: Long term vision into action KPN Capital Markets Day 19 February 2014 Erik Hoving CTO KPN
Slide 3: Turning point for Telco industry
Turning point for Telco industry From incremental steps towards exponential change Turning point Global Internet of Things Smartphone processing power to increase exponentially from now to 2020 ? In m processors Moore’s law Today Connected devices1 Data traffic growth2 1990 2000 2010 2020 12.5bn 50b
Slide 4: Vision for 2020
Vision for 2020 Highly trusted user centric access provider in digital world From a telecommunication world To a digital economy a Usage centric User centric b Multi-product line up Simple product line up c Multiple points for access Fully integrated access d Secured access Secured digital highway e
Slide 5: KPN preparing for the future
KPN preparing for the future Positioning around customer demand @ Home user Individual user @ Work user Full scale Independent Reliable and effective Demand connectivity & connectivity integrated solutions security Low cost mobile Integrated IT and Solutions Multi play access Telco solutions Mobile
Slide 6: Vision into action (example I)
Vision into action (example I) Modernizing 2G & 3G and upgrading to 4G simultaneously Early planning led to fast 4G roll-out in The Netherlands Project Start 4G roll-out Nationwide LTE Advanced planning upgrades started 4G coverage features 2011 2012 2013 2014 Preparations Spectrum 4G services Start
Slide 7: Vision into action (example II)
Vision into action (example II) Hybrid upgraded copper / FttH strategy Leading the way in Europe with copper upgrades and FttH roll-out Continued FttC upgrade Pair bonding Bonded G.Fast live FttH roll-out started live vectoring live 2010 2011 2012 2013 2014 2015 2016 VDSL2-CO 1.0m HP Vectoring ~2.0m
Slide 8: Vision into action (example III)
Vision into action (example III) Moving towards 1 converged IP core for a simplified infrastructure Simplify Integrate Optimize Core networks mosaic optimized Towards 1 converged IP core per service optimized for volume All services BB IPTV Mobile Business IP Transport IP Transport Ethernet Aggregat
Slide 9: Building on strong fundamentals
Building on strong fundamentals Integrated access to service entire user spectrum Integrated network Integrated access for secure digital world 1 Integrated access 4G roll-out Using all devices Independent Integrated of location access Security 2 3 Upgraded Towards To every dimension of the digital
Slide 10: The Netherlands
The Netherlands KPN Capital Markets Day 19 February 2014 Joost Farwerck Managing Director The Netherlands
Slide 11: Building on strong fundamentals
Building on strong fundamentals Excellent position as the integrated access provider Leveraging unique assets; best-in-class fixed & mobile networks and ICT infrastructure Leading products in Business and Consumer markets Only operator in The Netherlands with converged in-house capabilities Bu
Slide 12: External environment
External environment Dutch market ahead of the curve Dutch market ahead of the curve… …compared to European peers • The Netherlands renown for early adopters 4G population coverage1 ~85% 85% High broadband speeds ~70% 56% ~50% ~50% 50% 41% 40% High smartphone penetration Nationwide 4G coverage
Slide 13: Operational progress across segments
Operational progress across segments Consumer Consumer Business Residential Mobile Operational improvements Difficult macro and Competitive market, • Inflection customer competitive market mainly in no frills segment Today base Shift to SIM-only Shift traditional services • Inflection fina
Slide 14: Clear priorities in The Netherlands
Clear priorities in The Netherlands Strong customer focus by offering best services over best networks Strong customer focus, Further strengthen Towards lean best services best-in-class networks operating model Focus on multi play Hybrid upgraded Simplified products and with copper / FttH appr
Slide 15: Strong customer focus
Strong customer focus Optimize customer lifetime value Best products to drive multi play Multi play supporting profitability Strong customer focus and service Reducing churn Simplicity of products in everything (activation 1x and usage) ~0.75x ~0.60x ~0.25x Focus on value added services for cu
Slide 16: Best networks - Hybrid upgraded copper / FttH
Best networks - Hybrid upgraded copper / FttH Maintaining leading fixed network position Today Network speeds ahead of demand • Premium triple play requires ~40Mbps • Excellent position to capture bandwidth demand 70% access to download speeds >40Mbps ~55% access to download speeds of 200Mbps in
Slide 17: Best networks - Leading 4G network
Best networks - Leading 4G network Maintaining leading coverage and capacity position Large 4G advantage Continued focus on network advantage Nationwide coverage, significantly ahead of Strong combination of 2G, 3G and 4G competition1 networks providing best customer services Secure and robust
Slide 18: Simple, low cost operating model
Simple, low cost operating model Key to outperformance in dynamic Telco landscape Simplified product 1 Significant cost savings portfolio • >€ 300m run-rate >€ 300m Capex and opex savings by 2016 2013 2016 2 Simplified client processes FTE reductions ~1,500-2,000 2013 2016 3 Simplified network & IT
Slide 19: Simple, low cost operating model: product portfolio
Simple, low cost operating model 1 Simple and flexible product portfolio Simplified product portfolio Phasing out products • Simple converged product line-up • ~10% of products generating 80% of revenues • Strong focus on integrated bundles Phase out ~40% of products by 2014 Phase out ~80% of pr
Slide 20: Simple, low cost operating model: online client processes
Simple, low cost operating model 2 Focus on online client processes Primary role Today 2016 Orientation Transaction and self-help service Online Significant increase online transactions Transaction Customer experience and full service 50% reduction in call Shops ratio related to delivery by 2016
Slide 21: Simple, low cost operating model: simplifying networks & IT
Simple, low cost operating model 3 Reducing complexity by simplifying networks & IT Today Going forward • Customized and complex network and IT • Standardized IP based network and IT systems infrastructure based on worldwide adopted technologies • Simplified portfolio and processes allowing • Ration
Slide 22: Capex at less elevated levels
Capex at less elevated levels Towards stable financials Increased investments since 2010 Capex-to-sales ratio development Continued investments 30% • High investments in recent years 25% 25% 20% 21% • Maintain best quality networks, investments 15% 16% at less elevated levels 10% Q2 Q4 Q2 Q4 Q2 Q4 Q
Slide 23: Building on strong fundamentals
Building on strong fundamentals Towards stable financials Excellently positioned as the integrated access provider Strong customer focus by offering best services over best networks Best products to drive take-up of multi play Multi play to reduce churn and support ARPU Simple, low cost oper
Slide 24: Consumer
Consumer KPN Capital Markets Day 19 February 2014 Jaap Postma Head of Consumer
Slide 25: Dutch consumer market
Dutch consumer market Multi-brand approach to target all consumer segments Niches Main stream Niches Full mobile mobile & fixed fixed service Premium Youth No frills Online only Targeting main stream markets with KPN and Telfort and niche segments through sub-brands 25
Slide 26: Building on strong fundamentals
Building on strong fundamentals Uniquely positioned for move towards integrated market Residential market Mobile market Today Full focus on TV and Full focus on 4G triple play Multi play to focus on loyal customers and reduce churn Integrated market Mobile-only market Going Multi-brand approac
Slide 27: Residential market
Residential market Outperforming in advanced residential market Outperforming on RGU growth Limited loss of unique access lines k +1.7% k -3.6% -4.1% +1.5% -0.1% -5.7% 7,113 7,235 3,434 3,310 2,776 5,991 6,082 2,661 3,686 3,683 1,732 1,634 2012 2013 2012 2013 2012 2013 2012 2013 2012 2013 2012 2013
Slide 28: Residential - IPTV
Residential - IPTV Market leading IPTV proposition driving multi play Largest interactive customer base Reducing capital intensity IPTV fully interactive, KPN TV base 70% interactive Cloud based IPTV infrastructure • Interactive base Ziggo ~20% and UPC ~35% resulting in simple and advanced STB •
Slide 29: Residential - Triple play
Residential - Triple play Growing interactive TV base leading to increased triple play take-up Growing TV market share >30% Increasing triple play packages 25% 23% 17% 15% ~60% 44% 36% 2010 2011 2012 2013 2016 1,216 26% 19% 979 Growing interactive TV base1 658 481 ~90% 70% 57% 2010 2011 2012 2013 20
Slide 30: Residential - Hybrid upgraded copper / FttH
Residential - Hybrid upgraded copper / FttH Successful in FttH areas and with copper upgrades …and with outer ring upgrades Successful in FttH areas… (copper) Above average market share Higher market share +5%-points +3%-points National average FttH areas Non-upgrade Upgrade area Broadband market sh
Slide 31: Mobile market
Mobile market Challenges in KPN’s mobile market KPN maintaining postpaid base… …but ARPU remains under pressure… m CAGR -8.9% 3.7 3.4 3.5 3.5 41 37 34 31 2010 2011 2012 2013 2010 2011 2012 2013 Retail postpaid ARPU (€) …also due to shift to SIM-only… …but SIM-only price level already low1 € 150 64%
Slide 32: Mobile - Market approach
Mobile - Market approach Full service and no frills segments Full service segment No frills segment Focus on maintaining value in higher ARPU Focus on volumes in growing value for money segment segment % of revenues1 % of subscribers2 % of revenues1 % of subscribers2 1 Based on total Consumer Mo
Slide 33: Mobile - 4G
Mobile - 4G Leverage impressive 4G head start 4G providing upsell opportunity to higher data bundles Nationwide 4G coverage, significantly ahead of Customer growth competition 4G to support focus on 4G accessible for all customers increasing postpaid subscriber base • Included in all KPN and H
Slide 34: Mobile - Committed revenues
Mobile - Committed revenues Reducing risk profile through focus on committed revenues Reduce risk profile 12% 9% 7% 6% Aim to further reduce risk profile 4% 15% 11% 8% towards sustainable committed ARPU 19% 10% 11% 12% Focus on committed revenues 82% 72% 57% 65% All-in-one bundles to drive inc
Slide 35: Integrated market - Multi-brand approach
Integrated market - Multi-brand approach Focus on loyal customers reducing churn No discounts, value added services at marginal costs Attractive mobile offer for existing broadband customers Mobile offer + + 300 min 500 min 100 SMS 1000 SMS 45 additional Free unlimited calls Doubling voice, IPTV
Slide 36: Concluding remarks
Concluding remarks Investments in fixed and mobile networks have resulted in a strong competitive position KPN and Telfort integrated service offerings give us a unique position in The Netherlands Innovative and high quality IPTV product is driving growth in triple play We will leverage our
Slide 37: Business
Business KPN Capital Markets Day 19 February 2014 John van Vianen Head of Business
Slide 38: Business market positioning
Business market positioning Strong customer focus with innovative services Managed customer Integrated Cloud devices Access Mobile voice & data Fixed voice & data Datacenter services Telco core Security ICT, cloud, advisory and new applications to support Telco core 38
Slide 39: Business market positioning (cont'd)
Business market positioning (cont’d) Focus on 4 strategic building blocks 1. Tailored approach 2. Best services LME / Corporate SME SoHo Verticals 3. Innovative new services 4. Strong cost focus New revenue stream to offset Towards lean operating model decline Telco core Strong quality
Slide 40: Tailored approach
1. Tailored approach Market approach focused on customer needs Distribution Portfolio Segments Verticals (% of KPN Business revenues) Critical communications Mobile voice & data Fixed voice & data Direct sales Datacenter services LME/ IAAS/SAAS services Corporate ICT services Local government (~65%)
Slide 41: Tailored approach (cont'd)
1. Tailored approach (cont’d) Stable market positions in competitive landscape Brands Segments Main competitors LME/ Corporate SME SoHo 41
Slide 42: Tailored approach - Verticals
1. Tailored approach - Verticals Customized sector approach Customized approach Verticals • Combining sales, marketing and product Healthcare Critical communications management • Added value through customized sector approach and sector knowledge • Dedicated sector solutions via integrated Education
Slide 43: Tailored approach - Verticals: Healthcare
1. Tailored approach - Verticals (cont’d) Example: Healthcare CareSmart CareTogether CareFree Contributes to labor productivity Reduces healthcare errors by improving Increases comfort for patient by using ICT exchange of healthcare information (living independently at home) Mobile alert, Health clo
Slide 44: Best services
2. Best services Strong customer focus by providing high quality services Best mobile services Strong customer recognition Best mobile network quality according to Best ICT service provider for SME3 business customers1 58% 24% Best ICT company in The Netherlands4 7% KPN Competitor 1 Competitor
Slide 45: Best services: KPN ONE
2. Best services (cont’d) KPN best positioned to offer integrated services KPN ONE • One bill • One online service portal • One contract • One address book • One price/employee • One phone number • One helpdesk • One voicemail • One contact E-Mail Instant Sharing Audio and Video Software Calling Ava
Slide 46: Best services: fully committed revenues
2. Best services (cont’d) Major steps towards fully committed revenues Grow bundled services De-risking ARPU KPN ONE to reach ~1/5 of addressable customer base by 2016 ~100% 85% ~500 20% 2012 2013 2016 10 De-risking Telco % flat fees fixed1 2013 2016 core revenues KPN ONE seats (k) ~90% 59% 50% 20
Slide 47: Innovative new services
3. Innovative new services To offset revenue decline Telco core Cloud Mobile payments Software Online Successful pilot 30% yearly growth Pilot for retailers achieved since 2007 & customers with leading Dutch banks Big Data Internet of Things Guiding customers RFID Monitoring Big data platform
Slide 48: Strong cost focus
4. Strong cost focus Strong quality and cost focus to offset margin pressure Optimize end-to-end Simplification Integration IT Solutions chains • Improve delivery time by • Reducing product portfolio • Fits customer need for reducing handling time More than 50% reduction in integrated Telco and IC
Slide 49: Concluding remarks
Concluding remarks Stabilizing financial performance Stabilization of revenues Strong quality and cost focus 1. Tailored approach • Towards lean operating model 2. Best services I. Optimize end-to-end chains 3. Innovative new services II. Simplification product portfolio III. Integration IT Solution
Slide 50: BASE Company
BASE Company KPN Capital Markets Day 19 February 2014 Jos Donvil CEO BASE Company
Slide 51: Fundamentals of the BASE Company strategy
Fundamentals of the BASE Company strategy 51 Key building blocks for continued success Mobile centric Challenger – Building blocks Fundamentals for continued growth Data Postpaid Network B2B Fixed
Slide 52: Successful Challenger strategy
Successful Challenger strategy 52 Strong market outperformance Service revenue market share growing 50% 49% 48% 46% 46% 45% 45% 64% 35% 36% 35% 35% 35% 35% 35% 28% 15% 16% 17% 18% 19% ~20% >20% 8% 2002 2007 2008 2009 2010 2011 2012 2013-Q3 Proximus Mobistar BASE Company BASE Company’s innovative off
Slide 53: Belgian mobile market has changed significantly
Belgian mobile market has changed significantly 53 Since mid 2012, the mobile market transformed Key market developments BASE Company’s response to the changed market • Increased price competition • New mobile portfolio shifting focus to postpaid & data • Entrance of Telenet on mobile market • Launc
Slide 54: Clear market positioning
Clear market positioning 54 Recognized as leader in price, service and network quality Price leadership1 % of users recognizing price difference consider the operator the cheapest 56.1 58.7 55.3 49.6 51.1 47.6 31.7 30.5 25.9 27.1 26.6 20.1 18.7 18.4 18.0 14.2 12.5 17.4 5.6 15.0 2008 2009 2010 2011 2
Slide 55: Low cost operating model
55 Low cost operating model High quality at low costs Small and flat organisation1 Cost efficient growth by multi-brand strategy FTE ~15,750 Mobile Branded MVNO brands Resellers partners Fixed ~1,800 ~2,150 ~900 BASE Belgacom Mobistar Telenet Company Smart networks Optimization of operating model •
Slide 56: Fundamentals for continued growth
56 Fundamentals for continued growth Growth potential identified i Postpaid ii Data iii Network iv Fixed v B2B
Slide 57: Building on strong postpaid and data strategy
57 Fundamentals for continued growth (cont’d) Building on strong postpaid and data strategy Strong evolution postpaid in retail sales Origin postpaid gross adds Q4 2013 29% 35% 47% Internal 36% 71% 65% 53% 64% Competition 2011 2012 2013 Postpaid Prepaid Highest smartphone penetration1 Growing data p
Slide 58: Building further on strong network
58 Fundamentals for continued growth (cont’d) Building further on strong network 4G triples average real speed experience Aim to obtain nationwide 4G coverage by end-2014 Per 31 Dec 2013 20 20 6 4 4 Jul 2012 Apr 2013 Oct 2013 End 2014 4G coverage 203 cities, towns Average real speed and villages (Mb
Slide 59: Building on additional growth opportunities
59 Fundamentals for continued growth (cont’d) Building on additional growth opportunities Competitive fixed line proposition1 Currently underrepresented in B2B B2B market share 3Q 20133 Channels D/L speed Free fixed Price vs. SNOW 31% BASE 33 30 € 39 Belgacom Pack Start > 70 30 € 58 +49% 62% Telenet
Slide 60: Key building blocks for continued success
Fundamentals of the BASE Company strategy 60 Key building blocks for continued success • Long-term market share1 goal 25% Reiterating ambitions • 25-30 medium-term EBITDA margin2 Mobile centric Challenger – Building blocks Fundamentals for continued growth Data Postpaid Network B2B Fixed 1 Market sh
Slide 61: Building on strong fundamentals
Building on strong fundamentals KPN Capital Markets Day 19 February 2014 Eelco Blok CEO KPN
Slide 62: Highlights of today
Highlights of today Building on strong fundamentals Major investments in networks and market positions significantly strengthened the Company KPN is now a frontrunner in Europe with 4G and fixed network upgrades Continued progress towards a lean operating model These strong fundamentals posi
Slide 63: A changing external environment
Building on strong fundamentals A changing external environment Regulation Economy Data growth Technology Competition 63
Slide 64: External environment
External environment Regulatory impact largely absorbed; economy recovering Strict regulation absorbed Economy recovering MTA rates reaching end of glide path First signs of economic recovery in The Netherlands ULL rates in The Netherlands amongst lowest in Europe Belgian economy showing res
Slide 65: External environment (cont'd)
External environment (cont’d) Changing dynamics delivering new opportunities Data growth Technology Technology Competition Competition Interconnectivity Greater capacity at lower KPN best-placed for between devices / cloud cost per GB convergence OTT (mainly video) Faster copper techniques
Slide 66: KPN today is stronger and future proof
Building on strong fundamentals KPN today is stronger and future proof Networks & products Market positions Operating model E-Plus sale Financial profile 66
Slide 67: Strong fundamentals: networks and products
Strong fundamentals: networks and products Best-in-class mobile and fixed networks; leading products Leading Mobile network Fixed network products Best spectrum Copper network Leading in bundles safeguarded upgraded and IPTV product Comple- ted High quality High FttH coverage Flat fee da
Slide 68: Strong fundamentals: market positions
Strong fundamentals: market positions Focusing on 4G, IPTV and bundles Market positions improved Focus on bundled services… % Bundles growing Lowering churn Growing k 1x ~0.75x Stabilized 1,216 ~0.60x ~0.25x 10 173 2010 2011 2012 2013 2013 2016E 1P 2P 3P 4P Broadband Mobile NL TV Belgium KPN ONE 4P
Slide 69: Strong fundamentals: operating model
Strong fundamentals: operating model Towards a lean operating model Completed Going forward NL FTE reduction program Simplification program 19,054 Simplified product portfolio 14,782 ~4,6501 fewer FTE Reducing Capex and opex Q1 ’11 Q4 ’13 Reduce complexity Streamlined portfolio Capex at less
Slide 70: KPN taking responsibility within society
Strong fundamentals: operating model (cont’d) KPN taking responsibility within society Society Energy consumption Employee engagement Δ Consumption compared to 2010 17.0% 11.3% 5.6% Healthcare Security Simplify Perform -0.9% -1.7% -3.3% 2011 2012 2013 Service Sponsor Work-Life Vitality Do nothing Re
Slide 71: Strong fundamentals: E-Plus sale
Strong fundamentals: E-Plus sale E-Plus sale strengthening KPN Group Confident on regulatory approval Substantial benefits Increased competitiveness due to creation of Combination Telefónica Deutschland and stronger player in size and market presence E-Plus to realize substantial synergies Rev
Slide 72: Strong fundamentals: financial profile
Strong fundamentals: financial profile Sound and stable financial profile Financial profile Shareholder remuneration Sound and stable financial position Sustainable and growing DPS, subject to sale of E-Plus Committed to investment grade credit profile 2014 2015 € bn 2.7x 2.2x 2.3x 2.4x € 0.07
Slide 73: Outlook (continuing operations)
Outlook (continuing operations) • Financial performance stabilizing towards the end of 2014 2014 • Capex < € 1.4bn1 • Capex < € 1.5bn, including Reggefiber1 • Free cash flow (excl. TEFD dividend)2 growth expected in 2015 − Limited tax cash out in The Netherlands in coming years due to tax loss on sa
Slide 74: Highlights of today
Highlights of today Building on strong fundamentals Major investments in networks and market positions significantly strengthened the Company KPN is now a frontrunner in Europe with 4G and fixed network upgrades Continued progress towards a lean operating model These strong fundamentals posi
Slide 75: Safe harbor
Safe harbor Non-GAAP measures and management estimates This presentation contains a number of non-GAAP figures, such as EBITDA and free cash flow. These non-GAAP figures should not be viewed as a substitute for KPN’s GAAP figures. KPN defines EBITDA as operating result before depreciation and impair