Royal Kpn Nv · EURONEXT:KPN
Royal Kpn Nv — KPN — Q3 2016 Earnings Presentation
46 slides from Royal Kpn Nv's earnings presentation, Oct 27, 2016
Slide 1: Third Quarter 2016 Results
Third Quarter 2016 Results 27 October 2016
Slide 2: 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
Slide 3: Contents
Contents 1 Highlights and operational performance Eelco Blok 2 Financial performance Jan Kees de Jager 3 Outlook and concluding remarks Eelco Blok 3
Slide 4: Highlights Q3 '16
Highlights Q3 ’16 Services & Innovation Operational Financial2 Value focus reflected in new Continued high value base growth Adjusted revenues Q3 ’16: consumer propositions in Consumer € 1,711m, -3.0% y-on-y Increasing penetration of fixed- The Netherlands: -1.9% y-on-y Strong improvemen
Slide 5: 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 6: 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 7: 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 8: 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 9: Migration to multi play in SME providing up- and cross-sell opportunities
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 10: ...but 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 11: 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 12: Contents
Contents 1 Highlights and operational performance Eelco Blok 2 Financial performance Jan Kees de Jager 3 Outlook and concluding remarks Eelco Blok 12
Slide 13: Financial performance supported by cost savings
Financial performance supported by cost savings1 €m Q3 ’16 Q3 ’15 y-on-y % Adjusted revenues 1,711 1,764 -3.0% Adjusted EBITDA 662 640 3.4% Net profit 45 87 -48% Capex 265 305 -13% Operating FCF2 397 335 19% FCF 146 213 -31% 1 All figures based on continuing operations, unless stated otherwise Third
Slide 14: 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 15: 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 16: 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 17: 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 18: Contents
Contents 1 Highlights and operational performance Eelco Blok 2 Financial performance Jan Kees de Jager 3 Outlook and concluding remarks Eelco Blok 18
Slide 19: On track for outlook 2016
On track for outlook 2016 Outlook 2016 Shareholder remuneration Adjusted EBITDA in line with 2015 Intended DPS of € 10ct in respect of 2016 Capex ~€ 1.2bn Intention to grow regular DPS in line with FCF growth profile Free cash flow > € 650m (excl. TEFD dividend) Excess cash could be util
Slide 20: Q&A
Q&A Services & Innovation Operational Financial2 Value focus reflected in new Continued high value base growth Adjusted revenues Q3 ’16: consumer propositions in Consumer € 1,711m, -3.0% y-on-y Increasing penetration of fixed- The Netherlands: -1.9% y-on-y Strong improvement customer mob
Slide 21: Q3 2016 – Information Pack
Q3 2016 – Information Pack For further information please contact KPN Investor Relations +31 70 44 60986 [email protected] ir.kpn.com 21
Slide 22: Contents
Contents 1 KPN ADR Program 2 CSR strategy 3 Group results overview 4 Group KPI overview 5 Debt overview 6 Spectrum 7 Fixed infrastructure 8 Telefónica Deutschland stake 22
Slide 23: 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 24: Contents
Contents 1 KPN ADR Program 2 CSR strategy 3 Group results overview 4 Group KPI overview 5 Debt overview 6 Spectrum 7 Fixed infrastructure 8 Telefónica Deutschland stake 24
Slide 25: 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 26: Contents
Contents 1 KPN ADR Program 2 CSR strategy 3 Group results overview 4 Group KPI overview 5 Debt overview 6 Spectrum 7 Fixed infrastructure 8 Telefónica Deutschland stake 26
Slide 27: Group results Q3 '16 (continuing operations)
Group results Q3 ’16 (continuing operations)1 (€ m) Q3 ’16 Q2 ’16 Q3 ’15 y-on-y % Revenues 1,718 1,676 1,764 -2.6% Adjusted revenues 1,711 1,676 1,764 -3.0% Operating expenses (excl. D&A) 1,053 1,097 1,162 -9.4% EBITDA 665 579 602 10% Adjusted EBITDA 662 592 640 3.4% Depreciation 251 252 276 -9.1% A
Slide 28: Group results YTD '16 (continuing operations)
Group results YTD ’16 (continuing operations)1 (€ m) YTD ’16 Q3 ’15 y-on-y % Revenues 5,083 5,263 -3.4% Adjusted revenues 5,076 5,273 -3.7% Operating expenses (excl. D&A) 3,280 3,517 -6.7% EBITDA 1,803 1,746 3.3% Adjusted EBITDA 1,822 1,837 -0.8% Depreciation 754 823 -8.4% Amortization 411 375 9.6%
Slide 29: Group cash flow Q3 '16 (continuing operations)
Group cash flow Q3 ’16 (continuing operations)1 (€ m) Q3 ’16 Q3 ’15 y-on-y % EBITDA 665 602 10% Interest paid/received -136 -113 20% Tax paid/received - -1 -100% Change in provisions2 -15 9 n.m. Change in working capital2 -103 18 n.m. Other movements -8 3 n.m. Net cash flow from operating activities
Slide 30: Group cash flow YTD '16 (continuing operations)
Group cash flow YTD ’16 (continuing operations)1 (€ m) YTD ’16 YTD ’15 y-on-y % EBITDA 1,803 1,746 3.3% Interest paid/received -399 -414 -3.6% Tax paid/received 44 -13 n.m. Change in provisions2 -49 -1 >100% Change in working capital2 -248 -51 >100% Other movements 96 152 -37% Net cash flow from ope
Slide 31: Financials by segment
Financials by segment The Netherlands Consumer Business 61.0% 62.1% 62.9% 60.6% 61.2% 58.7% 790 767 802 612 573 569 482 498 385 450 347 348 Q3 ’15 Q2 ’16 Q3 ’16 Q3 ’15 Q2 ’16 Q3 ’16 Wholesale Network, Operations & IT 68.1% 69.6% 67.9% 182 184 187 124 128 127 -257 -294 -276 Q3 ’15 Q2 ’16 Q3 ’16 Q3 ’1
Slide 32: 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 33: Contents
Contents 1 KPN ADR Program 2 CSR strategy 3 Group results overview 4 Group KPI overview 5 Debt overview 6 Spectrum 7 Fixed infrastructure 8 Telefónica Deutschland stake 33
Slide 34: Consumer
Consumer Fixed-Mobile KPIs Fixed-Mobile household development Fixed-Mobile postpaid development 38% 40% 33% 35% 28% 25% 2,246 2,205 3,057 2,740 2,652 2,516 1,384 1,461 689 944 1,003 997 Q3 ’15 Q2 ’16 Q3 ’16 Q3 ’15 Q2 ’16 Q3 ’16 F-M households(k) Fixed-only households (k) F-M base (k) Mobile-only bas
Slide 35: Consumer (cont'd)
Consumer (cont’d) Residential KPIs Household base (k) RGUs and ARPU per household 3,746 3,684 3,655 2.13 2.14 950 810 775 2.04 451 414 405 768 766 767 € 39 € 40 € 41 1,577 1,694 1,708 Q3 ’15 Q2 ’16 Q3 ’16 Q3 ’15 Q2 ’16 Q3 ’16 Not bundled Not bundled (BB only) Dual play Triple play (PSTN & Digitenne)
Slide 36: Consumer (cont'd) Mobile KPIs
Consumer (cont’d) Mobile KPIs Mobile net adds Mobile postpaid ARPU 80 € 28 € 26 € 26 % committed ARPU 36 231 5 ~77% ~85% ~84% -8 -2 Q3 ’15 Q2 ’16 Q3 ’16 Q3 ’15 Q2 ’16 Q3 ’16 Postpaid net adds Prepaid net adds Committed ARPU Non-committed ARPU Service revenues Committed ARPU breakdown 41% 42% 6% 6% 6
Slide 37: Business
Business Total Business Mobile Multi play (mainly SME)3 1,794 1,809 1,8321 276 289 56 179 167 174 -2.8% 41 y-on-y 35 35 Q3 ’15 Q2 ’16 Q3 ’16 Q3 ’15 Q2 ’16 Q3 ’16 Total Business mobile service revenues2 (€ m) ARPU per multi play seat (€) Total Business mobile customer base (k) Multi play seats (k) Mo
Slide 38: Contents
Contents 1 KPN ADR Program 2 CSR strategy 3 Group results overview 4 Group KPI overview 5 Debt overview 6 Spectrum 7 Fixed infrastructure 8 Telefónica Deutschland stake 38
Slide 39: 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 40: 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
Slide 41: Contents
Contents 1 KPN ADR Program 2 CSR strategy 3 Group results overview 4 Group KPI overview 5 Debt overview 6 Spectrum 7 Fixed infrastructure 8 Telefónica Deutschland stake 41
Slide 42: Spectrum in The Netherlands
Spectrum in The Netherlands 800MHz Tele2 VOD KPN 2*30 (Paired) 2*10 2*10 2*10 900MHz VOD KPN T-Mob 2*35 (Paired) 2*10 2*10 2*15 1.8GHz KPN VOD T-Mob 2*70 (Paired) 2*20 2*20 2*30 1.9GHz T-Mob KPN VOD T-Mob 1*35 (Unpaired) 10 5 5.4 14.6 2.1GHz VOD KPN T-Mob KPN VOD T-Mob 2*59.4 (Paired) 2*14.6 2*14.8
Slide 43: Contents
Contents 1 KPN ADR Program 2 CSR strategy 3 Group results overview 4 Group KPI overview 5 Debt overview 6 Spectrum 7 Fixed infrastructure 8 Telefónica Deutschland stake 43
Slide 44: 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 Third Quarter 2016 Results | Information
Slide 45: Contents
Contents 1 KPN ADR Program 2 CSR strategy 3 Group results overview 4 Group KPI overview 5 Debt overview 6 Spectrum 7 Fixed infrastructure 8 Telefónica Deutschland stake 45
Slide 46: 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 Significant or prolonged value decreas