Royal KPN NV · EURONEXT:KPN

Royal KPN NV — KPN — Q1 2018 Earnings Presentation

39 slides from Royal KPN NV's earnings presentation, Apr 26, 2018

  1. Slide 1: First Quarter Results 2018

    First Quarter Results 2018 26 April 2018

  2. 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 (‘

  3. Slide 3: Highlights Q1

    Highlights Q1 Services & Innovation Operational Financial2  Leading customer satisfaction1  Ongoing success of convergence and €m Q1 ’18  NPS Consumer: +12 (Q1 ’17: +13) value strategy in Consumer Adj. revenues 1,402  NPS Business: -3 (Q1 ’17: -6)  +48k fixed-mobile postpaid customers y-on-y %

  4. Slide 4: Simplification and digitalization embedded in organization

    Simplification and digitalization embedded in organization Driving cost savings and potential new revenue streams Increase of digital customer interaction WeChat Go Europe platform supporting lower contact center costs in Consumer offering in-app purchases +11% -21% -14% KPN enabled app and connecti

  5. Slide 5: Continued focus on value in competitive Consumer mobile environment

    Continued focus on value in competitive Consumer mobile environment KPN brand resilient through high convergence penetration Service revenues impacted by regulation Focus on retention …through successful and price pressure in mobile-only of high value customers… convergence strategy €m -9.0% flat 22

  6. Slide 6: Sustained revenue growth in Consumer residential

    Sustained revenue growth in Consumer residential Continuously improving excellent customer experience Further fixed-mobile Continued New fully integrated TV-offering households growth1 fixed revenue growth €m +2.1% 43% 476 467 39% Q1 ’17 Q1 ’18 Q1 ’17 Q1 ’18 New IPTV app with leading user interface

  7. Slide 7: Good progress in Business transformation

    Good progress in Business transformation Simplified portfolio driving improved customer satisfaction Business revenue growth drivers Improving customer satisfaction Q1 ’18 Q1 ’18 adjusted % of total y-on-y growth adj. revenues Communication Services -8.7% 63% Mobile service revenues -7.9% 24% IoT 40

  8. Slide 8: Growth in IT services and IoT

    Growth in IT services and IoT Nationwide IoT network supporting leading position Upsell security portfolio through KPN ÉÉN SME Full IoT service offering leading to strong growth Data driven solutions Offered as plug & play end-to-end KPN Things services solution KPN ÉÉN customers Connectivity Hardwa

  9. Slide 9: Revenues impacted by regulation

    Revenues impacted by regulation Adjusted revenues NL declined by 3.4% €m 1,451 20 13 9 1,401 26 Adj. revenues NL Q1 ’17 Consumer Business Wholesale Other (incl. Adj. revenues NL Q1 ’18 eliminations) -1.3% Growth of adjusted revenues NL, excluding € 31m regulation impact (roaming & MTA / FTA) First Q

  10. Slide 10: Adjusted EBITDA growth driven by Simplification and digitalization

    Adjusted EBITDA growth driven by Simplification and digitalization Adjusted EBITDA NL increased by 2.2% 38.3% 40.6% €m 20 569 556 Lower traffic costs due to 17 1 reduction MTA tariffs 28 3 50 Ongoing Simplification and 2 digitalization savings 1 2 3 Adj. EBITDA NL Revenues Cost of goods Personnel IT

  11. Slide 11: Solid financial position supported by growing free cash flow

    Solid financial position supported by growing free cash flow Growing free cash flow1 Lower debt level €m € bn 122 7.4 7.2 7.2 6.5 6.0 5.8 2.8x 2.6x 2.5x 29 Q1 ’17 Q1 ’18 Q1 ’17 Q4 ’17 Q1 ’18 Gross debt2 x.x x.x Net debt / EBITDA Net debt 1 All figures based on continuing operations. iBasis classifie

  12. Slide 12: Outlook 2018

    Outlook 2018 Outlook 20181 Shareholder remuneration  Adjusted EBITDA in line with 2017  Intended DPS of € 12ct in respect of 2018  Capex ~€ 1.1bn  Intention to grow regular DPS in line with FCF growth profile  Free cash flow (excl. TEFD dividend) growing  Intention to pass-through TEFD dividen

  13. Slide 13: Q&A: Key priorities on track

    Q&A Key priorities on track Accelerate up and cross-sell in bundles Grow in TV and IT services Finalize Business transformation Finalize build of flexible and simplified integrated network and operating model Expand superior access position by deploying innovative technologies and increasing fiber p

  14. Slide 14: Q1 2018 – Information Pack

    Q1 2018 – Information Pack For further information please contact KPN Investor Relations +31 70 44 60986 [email protected] ir.kpn.com 14

  15. Slide 15: Contents

    Contents 1 KPN ADR Program 2 CSR strategy 3 Group results overview 4 Group KPI overview 5 Debt overview 6 IFRS 15 7 Spectrum 8 Fixed infrastructure 9 Telefónica Deutschland stake 15

  16. Slide 16: KPN ADR program

    KPN ADR program KPN has a sponsored Level 1 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) ADR broker

  17. Slide 17: Contents

    Contents 1 KPN ADR Program 2 CSR strategy 3 Group results overview 4 Group KPI overview 5 Debt overview 6 IFRS 15 7 Spectrum 8 Fixed infrastructure 9 Telefónica Deutschland stake 17

  18. Slide 18: Leading in Corporate Social Responsibility

    Leading in Corporate Social Responsibility Successful CSR strategy1 Social and environmental achievements in Q1 ’18 2017  Rolled out CardioSecur, allowing 1,100 doctors to take electrocardiograms with a smartphone Employee Engagement Environment Privacy & Security  Signed the capital equipment ple

  19. Slide 19: Contents

    Contents 1 KPN ADR Program 2 CSR strategy 3 Group results overview 4 Group KPI overview 5 Debt overview 6 IFRS 15 7 Spectrum 8 Fixed infrastructure 9 Telefónica Deutschland stake 19

  20. Slide 20: Group results Q1 ’18 (continuing operations)

    Group results Q1 ’18 (continuing operations) (€ m) Q1 ’18 Q4 ’17 Q1 ’17 y-on-y % Revenues 1,402 1,452 1,451 -3.4% Adjusted revenues 1,402 1,452 1,451 -3.4% Operating expenses (excl. D&A) 847 921 922 -8.2% EBITDA 555 531 529 4.9% Adjusted EBITDA 569 567 557 2.3% Depreciation 242 255 246 -1.6% Amortiz

  21. Slide 21: Group cash flow Q1 ’18 (continuing operations)

    Group cash flow Q1 ’18 (continuing operations) (€ m) Q1 ’18 Q1 ’17 y-on-y % EBITDA 555 529 4.9% Interest paid/received -119 -154 -23% Tax paid/received -5 - n.m. Change in provisions1 9 8 20% Change in working capital1 -83 -93 -11% Other movements -4 3 n.m. Net cash flow from operating activities 35

  22. Slide 22: Dutch mobile service revenues

    Dutch mobile service revenues Service revenues (€ m) Q1 ’18 Q1 ’17 y-on-y % Consumer 208 228 -9.0% Business1 137 145 -5.2% Other2 36 37 -4.2% KPN The Netherlands 381 411 -7.2% 1 Includes M2M service revenues First Quarter 2018 Results | Information Pack | Group results overview | 22 2 Includes among

  23. Slide 23: Contents

    Contents 1 KPN ADR Program 2 CSR strategy 3 Group results overview 4 Group KPI overview 5 Debt overview 6 IFRS 15 7 Spectrum 8 Fixed infrastructure 9 Telefónica Deutschland stake 23

  24. Slide 24: Consumer

    Consumer Fixed-Mobile KPIs Fixed-Mobile household development Fixed-Mobile postpaid development 42% 43% 53% 51% 39% 45% 2,011 1,788 1,721 2,475 2,323 2,256 1,886 1,934 1,672 1,122 1,253 1,280 Q1 ’17 Q4 ’17 Q1 ’18 Q1 ’17 Q4 ’17 Q1 ’18 F-M households (k) Fixed-only households(k) F-M postpaid base (k)

  25. Slide 25: Consumer (cont’d)

    Consumer (cont’d) Residential KPIs Household base (k) ARPU per household 3,596 3,576 3,536 € 44 € 43 € 42 703 608 577 391 396 395 2,502 2,571 2,564 Q1 ’17 Q4 ’17 Q1 ’18 Q1 ’17 Q4 ’17 Q1 ’18 Not bundled Not bundled (BB only) Bundled (PSTN & Digitenne) Broadband IPTV 40% 41% 32% 32% 27 12 21 7 10 -8 Q

  26. Slide 26: Consumer (cont’d)

    Consumer (cont’d) Mobile KPIs Mobile net adds Mobile postpaid ARPU € 20 € 18 € 18 -2 -9 -7 -19 -20 -50 Q1 ’17 Q4 ’17 Q1 ’18 Q1 ’17 Q4 ’17 Q1 ’18 Postpaid net adds (k)1 Prepaid net adds (k) Committed ARPU Non-committed ARPU Wireless service revenues 228 211 208 -9.0% y-on-y Q1 ’17 Q4 ’17 Q1 ’18 Servi

  27. Slide 27: Business

    Business Total Mobile Multi play (mainly SME) 1,805 1,882 1,858 474 512 352 € 25 € 23 € 23 € 34 € 33 € 32 Q1 ’17 Q4 ’17 Q1 ’18 Q1 ’17 Q4 ’17 Q1 ’18 Business mobile ARPU ARPU per multi play seat Total Business mobile customer base (k) Multi play seats (k) Fixed voice Broadband 482 503 294 2851 283 43

  28. Slide 28: Contents

    Contents 1 KPN ADR Program 2 CSR strategy 3 Group results overview 4 Group KPI overview 5 Debt overview 6 IFRS 15 7 Spectrum 8 Fixed infrastructure 9 Telefónica Deutschland stake 28

  29. Slide 29: Debt portfolio

    Debt portfolio Breakdown nominal debt1 (total € 8.3bn) Nominal debt by currency Other 2% GBP2 Hybrid bonds 24% 24% Euro bonds EUR 65% 61% Global bonds USD2 9% 15% Bond redemption profile (€ bn) Fixed vs. floating interest3 1.1 0.9 1.0 Floating 0.8 15% 0.6 0.6 0.6 0.6 0.6 0.5 0.4 0.5 0.1 Fixed ’18 ’1

  30. Slide 30: Treatment of hybrid bonds

    Treatment of hybrid bonds KPN & Credit rating agencies IFRS  Each tranche of the hybrid bonds is recognized as 50%  EUR tranche is a perpetual, accounted for as equity equity and 50% debt by the rating agencies  Coupon payments treated as equity distribution, hence not expensed through P&L, not i

  31. Slide 31: Contents

    Contents 1 KPN ADR Program 2 CSR strategy 3 Group results overview 4 Group KPI overview 5 Debt overview 6 IFRS 15 7 Spectrum 8 Fixed infrastructure 9 Telefónica Deutschland stake 31

  32. Slide 32: IFRS changed revenue recognition rules

    IFRS 15 changed revenue recognition rules Example 1: Handset sales via own channels Accounting for this example Contract components (€) Value Revenue / (€) Month 1 Month 2 … Month 24 Total cost Non-service revenue (handset) 528 - … - 528 Contract duration (months) 24 Service revenues 30 30 … 30 720

  33. Slide 33: IFRS changed revenue recognition rules (cont’d)

    IFRS 15 changed revenue recognition rules (cont’d) Example 2: Handset sales via third parties Accounting for this example Contract components (€) Value Revenue / (€) Month 1 Month 2 … Month 24 Total cost Service revenues 30 30 … 30 720 Contract duration (months) 24 P&L Total revenues 30 30 … 30 720

  34. Slide 34: Contents

    Contents 1 KPN ADR Program 2 CSR strategy 3 Group results overview 4 Group KPI overview 5 Debt overview 6 IFRS 15 7 Spectrum 8 Fixed infrastructure 9 Telefónica Deutschland stake 34

  35. Slide 35: Spectrum in The Netherlands

    Spectrum in The Netherlands 800MHz Tele2 VodZig KPN 2*30 (Paired) 2*10 2*10 2*10 900MHz VodZig KPN T-Mob 2*35 (Paired) 2*10 2*10 2*15 1.8GHz KPN VodZig T-Mob 2*70 (Paired) 2*20 2*20 2*30 2.1GHz VodZig KPN T-Mob KPN VodZig T-Mob 2*59.4 (Paired) 2*14.6 2*14.8 2*10 2*5 2*5 2*10 2.6GHz T-Mob KPN Tele2 1

  36. Slide 36: Contents

    Contents 1 KPN ADR Program 2 CSR strategy 3 Group results overview 4 Group KPI overview 5 Debt overview 6 IFRS 15 7 Spectrum 8 Fixed infrastructure 9 Telefónica Deutschland stake 36

  37. Slide 37: Fixed infrastructure

    Fixed infrastructure Active in Download speed 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 First Quarter 2018 Results | Information Pack | Fixed infrastructu

  38. Slide 38: Contents

    Contents 1 KPN ADR Program 2 CSR strategy 3 Group results overview 4 Group KPI overview 5 Debt overview 6 IFRS 15 7 Spectrum 8 Fixed infrastructure 9 Telefónica Deutschland stake 38

  39. Slide 39: Telefónica Deutschland stake

    Telefónica Deutschland stake Accounting treatment Balance sheet  Stake included as financial asset1  Fair value of KPN’s stake based on Telefónica Deutschland’s share price and adjusted quarterly  Fair value movements recorded in other comprehensive income  Due to IFRS 9, as of 1 January 2018, f

KPN — Q1 2018 Earnings Presentation on 6ix