First Quarter Results April 2008

Transcription

1 First Quarter Results April 2008

2 Safe harbor Certain statements contained in this presentation constitute forwardlooking statements. These statements may include, without limitation, statements concerning future results of operations, the impact of regulatory initiatives on KPN s operations, its and its joint ventures' share of new and existing markets, general industry and macroeconomic trends and KPN s performance relative thereto, and statements preceded by, followed by or including the words believes, expects, anticipates or similar expressions. These forwardlooking statements rely on a number of assumptions concerning future events and are subject to uncertainties and other factors, many of which are outside our control that could cause actual results to differ materially from such statements. A number of these factors are described (not exhaustively) in the 2007 Annual Report and Form 20F. All figures in this presentation are unaudited and based on IFRS. This presentation contains a number of nongaap figures, such as EBITDA and free cash flow. These nongaap figures should not be viewed as a substitute for KPN s GAAP figures. All market share information in this presentation is based on management estimates based on externally available information, unless indicated otherwise. 2

3 Disclaimer We define EBITDA as operating result before depreciation and impairments of PP&E and amortization and impairments of intangible assets. Note that our definition of EBITDA deviates from the literal definition of earnings before interest, taxes, depreciation and amortization and should not be considered in isolation or as a substitute for analyses of the results as reported under IFRS. In all cases, a reconciliation of EBITDA and the nearest GAAP measure (operating result) is provided. In the net debt/ebitda ratio, we define EBITDA as a 12 month rolling average excluding book gains and restructuring costs, both over EUR 20m. For 2008 and subsequent years, free cash flow is defined as cash flow from operating activities plus proceeds from real estate, minus capital expenditures (Capex), being expenditures on PP&E and software, and excluding tax recapture at EPlus. 3

4 Agenda Chairman s review Financial review Operating review Concluding remarks Ad Scheepbouwer, Chairman and CEO Marcel Smits, CFO Ad Scheepbouwer, Chairman and CEO Ad Scheepbouwer, Chairman and CEO 4

5 Highlights Solid Q1 performance in revenues, EBITDA and earnings Accelerating growth and continued market outperformance at EPlus Robust underlying EBITDA in the Netherlands excluding acquisitions Growth in wireless data, VoIP and TV; further improvement of net line loss Solid financial and operational performance at Getronics 5 p

6 Financial highlights Solid financial performance in Q1 08 Revenues and other income up 22%, as a result of Getronics and ibasis EBITDA up 3.5% Free cash flow 1 of 351 mn Earnings per share of 0.19, up 19% Committed to delivering shareholder returns of 2 bn in bn share repurchase program started on 22 February, 29% completed to date Final dividend per share for 2007 of 0.36, paid in April following AGM approval Financial profile strengthened following 850 mn bond issue in March 1 Defined as cash flow from operating activities, plus proceeds from real estate, minus Capex and excluding recapture at EPlus 6 p

7 Agenda Chairman s review Financial review Operating review Concluding remarks Ad Scheepbouwer, Chairman and CEO Marcel Smits, CFO Ad Scheepbouwer, Chairman and CEO Ad Scheepbouwer, Chairman and CEO 7

8 Group results Q1 08 Revenue and EBITDA growth driven by acquisitions in 2007 mn Revenues and other income of which Revenues Operating expenses of which Depreciation 1 of which Amortization 1 Operating result Financial income/expense Share of profit of associates Profit before taxes Taxes Profit after taxes Q1 08 3,570 3,532 2, Q1 07 2,924 2,918 2, % 22% 21% 22% 6.8% 18% 21% 25% 17% 54% 6.7% Revenues and other income up 22% due to acquisitions Operating expenses up 22% Lower D&A due to Telfort network integration effects in Q1 07 Lower capital intensity of acquired businesses EBITDA up 3.5% Lower margins of acquired businesses Profit minority shareholders Profit equity holders of the parent % Interest costs up 25% due to higher debt level Earnings per share 2 EBITDA , ,189 19% 3.5% Earnings per share up 19%, supported by continued share repurchases 1 Including impairments, if any 2 Defined as profit after taxes per ordinary share / ADS on a nondiluted basis (in ) 3 Defined as operating result plus depreciation, amortization & impairments 8 p

9 Group cash flow Q1 08 Free cash flow of 351 mn due to higher Capex, tax and interest payments mn Operating result Depreciation and amortization 1 Interest paid/received Tax paid/received Change in provisions Change in working capital 2 Other movements Net cash flow from operating activities Q Q % 21% 10% >100% 6.2% 20% >100% 22% Free cash flow 4 of 351 mn in Q1 Seasonality of cash flow patterns High Q4 07 Capex leading to decrease in working capital in Q1 Higher tax and interest payments Expecting fullyear FCF of at least 2.4 bn, in line with guidance Seasonality in working capital largely reversed in Q2 08 Real estate disposals Capex 3 Proceeds from real estate Tax recapture EPlus % Capex of 356 mn, up 29% Higher investments in Q1 08, mainly due to AllIP Free cash flow 4 Dividend paid Share repurchases Cash return to shareholders Shareholder returns on track 1 bn program commenced on 22 February 21% repurchased in Q1 29% completed to date 1 Including impairments, if any 2 Excluding changes in deferred taxes 3 Including Property, Plant & Equipment and software 4 Defined as net cash flow from operating activities, plus proceeds from real estate, minus Capex and excluding tax recapture at EPlus % 53% 53% 9 p

10 Group financial profile Financial profile strengthened following 850 mn bond issue in March bn Debt Financing policy x 2.0x Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Gross Debt Net Debt Net Debt / EBITDA 1 Financial framework range bn Redemption profile Net debt / EBITDA 1 stable at 2.3x Sufficient liquidity for redemptions in mn bond issued in March 08 with long seven year maturity '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '30 Debt maturity Proceeds from bond received on 2 April 1 Based on 12 months rolling EBITDA excluding book gains/losses and restructuring costs both over 20 mn 2 Including 520 mn drawings on credit facility, excluding redemptions following new bond issue in March 10

11 Delisting Delisting in New York, London and Frankfurt, compliance remains in place Delisting NYSE: delisted as per 4 April 2008 Deregistration with SEC as per early July 2008 London Stock Exchange: delisted as per 24 April 2008 Frankfurt Stock Exchange: delisting in Q ADR program Current ADR program converted into Level I ADR program ADR trading continued on the overthecounter (OTC) market (ticker symbol: KKPNY) Investors able to buy and hold ADRs in the same way as listed ADRs Compliance Obligations for SOx suspended as of 4 April 2008 Committed to high standards for corporate governance and disclosure, in line with Dutch corporate governance code Key elements of SOx legislation continue to form an integral part of KPN s governance, internal control and reporting 11

12 EBITDA the Netherlands 1 Solid underlying EBITDA in the Netherlands in Q1 08 mn Underlying EBITDA the Netherlands 1 Underlying EBITDA defined as the Netherlands excluding Getronics, ibasis/kgcs and sale of real estate Q1 '06 Q2 '06 Q3 '06 Q4 '06 Q1 '07 Q2 '07 Q3 '07 Q4 '07 Q1 '08 Underlying EBITDA growth (yony) Q1 '07 Q2 '07 Q3 '07 Q4 '07 Q1 '08 EBITDA decrease of ~ 20 mn yony in Q1 08 EBITDA down 2.5% to 829 mn in Q1 08 Lower decrease than previous quarters On track for 2008 EBITDA guidance Guiding for EBITDA drop of less than 100 mn in % 3.7% 2.5% 8.9% 8.0% 1 The Netherlands excluding Getronics, ibasis/kgcs and book gains on sale of real estate 12 p

13 Financial highlights the Netherlands Significant contribution from acquisitions, solid underlying EBITDA trend mn Q1 08 Q1 07 % Revenues and other income of which wireless service revenues 1 2, , % 4.8% Operating expenses of which D&A 2, , % 14% Operating result % EBITDA % EBITDA margin 33.8% 41.7% Revenues and other income up 26% as a result of Getronics and ibasis Lower overall EBITDA margin due to lower margins on businesses acquired in 2007 Solid EBITDA margin in wireless services despite regulatory tariff cuts 11 mn book gain on sale of real estate in Q mn additional VoIP costs in Q Revenues and other income minus equipment sales and other income 13 p

14 Financial review the Netherlands by segment mn Revenues and other income mn EBITDA (margin) Consumer 1,037 1,032 1,053 1, % 19.0% 17.0% 14.9% 19.8% Q1 '07 Q2 '07 Q3 '07 Q4 '07 Q1 '08 Q1 '07 Q2 '07 Q3 '07 Q4 '07 Q1 '08 Business % 22.9% 23.1% 21.9% 23.9% Q1 '07 Q2 '07 Q3 '07 Q4 '07 Q1 ' Q1 '07 Q2 '07 Q3 '07 Q4 '07 Q1 '08 Revenues and other income Wireless service revenues EBITDA EBITDA margin 1 Restated numbers, see appendix for further explanation 14 p

15 Financial review the Netherlands by segment (cont d) mn Revenues and other income mn EBITDA (margin) Wholesale & Operations , % 55.7% 51.7% % % Q1 '07 Q2 '07 Q3 '07 Q4 '07 Q1 '08 Q1 '07 Q2 '07 Q3 '07 Q4 '07 Q1 '08 Getronics % 4.7% Q1 '07 Q2 '07 Q3 '07 Q4 '07 Q1 '08 Q1 '07 Q2 '07 Q3 '07 Q4 '07 Q1 '08 Revenues and other income External revenues EBITDA EBITDA margin 1 Restated numbers, see appendix for further explanation 2 Including revenues and EBITDA from ibasis and KGCS, excluding book gain on KGCS of 66 mn in Q4 07 and 6 mn in Q Consolidated as of 23 October p

16 Financial highlights Mobile International Continued profitable growth, especially at EPlus mn Q1 08 Q1 07 % Revenues and other income of which wireless service revenues 1 1, % 5.2% Operating expenses of which D&A % 4.2% Operating result % EBITDA % EBITDA margin 35.1% 36.0% EPlus: service revenue growth accelerating, margin well above 35% BASE: focus on initiatives to reignite growth, positive draft decision on MTA regulation Mobile Wholesale NL: further growth from launch of new wholesale partnerships Other: MVNO in Spain successfully launched 1 Revenues and other income minus equipment sales and other income 16 p

17 Financial review Mobile International by segment mn Revenues and other income mn EBITDA (margin) EPlus % 39.8% 37.6% 36.6% 37.6% Q1 '07 Q2 '07 Q3 '07 Q4 '07 Q1 '08 Q1 '07 Q2 '07 Q3 '07 Q4 '07 Q1 '08 BASE % 41.9% 36.4% 32.3% 36.0% Q1 '07 Q2 '07 Q3 '07 Q4 '07 Q1 '08 Q1 '07 Q2 '07 Q3 '07 Q4 '07 Q1 '08 Revenues and other income Wireless service revenues EBITDA EBITDA margin 17 p

18 Financial review Mobile International by segment (cont d) mn Revenues and other income mn EBITDA (margin) Mobile Wholesale NL % 41.2% 36.4% 38.6% 42.4% Q1 '07 Q2 '07 Q3 '07 Q4 '07 Q1 '08 Q1 '07 Q2 '07 Q3 '07 Q4 '07 Q1 '08 Other activities 1 and intercompany Q1 '07 Q2 '07 Q3 '07 Q4 '07 Q1 '08 Q1 '07 Q2 '07 Q3 '07 Q4 '07 Q1 ' Revenues and other income Wireless service revenues EBITDA EBITDA margin 1 Including Tele2 / Versatel Belgium (as of 1 October 2007), Sympac, YES Telecom and MVNO in Spain 18 p

19 Agenda Chairman s review Financial review Operating review Ad Scheepbouwer, Chairman and CEO Marcel Smits, CFO Ad Scheepbouwer, Chairman and CEO The Netherlands Mobile International Concluding remarks Ad Scheepbouwer, Chairman and CEO 19

20 Consumer in Q1 Continued growth in new services, strong improvement in net line loss Customer focus Growth in wireless Price Stop line loss Simplified multi brand portfolio Value Net line loss more than halved since Q1 07 Impact from regulation in wireless fully absorbed by cost reductions Growth in wireless data Continued growth in VoIP and TV First customers connected to fiber in April Cost savings from simplification and First time right reflected in strong EBITDA Mix of FttC and FttH Cost reduction 20 p

21 Consumer wireline voice Strong improvement in net line loss and continued growth in VoIP X 1,000 mn Net line loss 1 Q1 '07 Q2 '07 Q3 '07 Q4 '07 Q1 ' % % VoIP connections 39% KPN Cable Other ADSL Market share 70 39% 39% Q1 '07 Q2 '07 Q3 '07 Q4 '07 Q1 '08 Net line loss further improved to 70k Going forward split into change in KPN retail subscribers (80k in Q1 08) and change in Consumer WLR (10k in Q1 08) Proactively slowing down decline in PSTN/ISDN Successful range of retention offers Outflow to WLR declining further in Q1 08 Market leadership in VoIP sustained Market growth of 5560k per month Capturing fair share of net adds Less impact from competitor offerings Focus on further improvement of net line loss beyond Q1 08 Supported by FttC / FttH in near future 1 PSTN / ISDN line loss + growth VoIP Consumer + growth ADSL only + growth WLR; management estimates 21 p

22 Consumer internet wireline & TV Strengthening leading position in broadband, strong growth in TV mn Broadband connections 1 41% 45% 44% 44% 44% Q1 '07 Q2 '07 Q3 '07 Q4 '07 Q1 '08 KPN Cable Other ADSL 2 Market share Broadband market share stable at 44% Telfort broadband showing solid growth Supported by ongoing growth in VoIP Focused strategy to strengthen leading position in each segment Focus on customer value x 1,000 13% TV subscribers 17% 18% 19% 14% Q1 '07 Q2 '07 Q3 '07 Q4 '07 Q1 '08 KPN TV subscribers Market share Digital TV High customer growth in TV, up 87% Net adds of 56k in Q1 08 Acceleration of Interactive TV (IPTV) Renewed national advertising in April Market share momentum maintained 19% share in digital TV by end of Q Based on management estimates, approximately 80% consumers and 20% businesses 2 Excluding Bitstream 22 p

23 Consumer fiber First customers connected to fiber in April, scaling up in coming quarters Current status Customer demand for higher bandwidths increasing Platforms for VoIP and IPTV operational and stable Technical tests with FttC / FttH completed successfully in Q1 New fiber (FttC and FttH) infrastructure, processes and propositions ready for commercial rollout Fibertothe Curb (FttC) FttC implementation started in one city (3,000+ households) Migration from PSTN / ISDN and ADSL to FttC First customers connected in April 2008 Commercial propositions on FttC to be launched as of Q2 08 Fibertothe Home (FttH) FttH deployed in selective cases and in cooperation with partners Glasnet Enschede started in 2007, first tranche of households activated in Q1 08 Cooperation with Reggefiber to connect 70k households in Almere KPN operating as service provider on open infrastructure 23

24 Consumer wireless Impact from MTA and roaming absorbed by cost reductions mn Continued growth in Post Paid Impact from regulation absorbed by cost reductions, resulting in strong Q1 EBITDA 40% 41% Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Post Paid share 41% Pre Paid 41% mn Underlying growth 2 of ~1% 43% Post Paid Customer base further strengthened in Q1 Share of highvalue Post Paid customers up 3%point yony to 43% Slight market share loss, mainly in Pre Paid Growth in data taking off Dutch wireless market consolidating to a threeplayer market Market expected to stabilize in H2 08 KPN focusing on maintaining market share Expecting strong growth in wireless data KPN well positioned with superior network Q1 '07 Q2 '07 Q3 '07 Q4 '07 Q1 '08 Service revenues 1 Correction for ~220k inactive Pre Paid accounts in Q Excluding impact from MTA and roaming 24 p

25 Wireless data Range of data propositions expanded to meet growing demand Mobile handset Surf & Mail propositions with flatfee data services on mobile 4.95 per month with maximum use of 5 MB 9.95 per month for unlimited use 1 (128 kb/s down, 64 kb/s up) KPN Vandaag portal for news, traffic and webmail Laptop data cards Broadband propositions using superior KPN HSDPA network Range of propositions with different speeds and usage limits per month for 200 MB per month (768 kb/s) 45 per month for unlimited use 1 (1.5 Mb/s) DVBH Wireless TV on handhelds (DVBH) to be launched mid 2008 DVBH selected as official European standard for wireless TV Range of handsets available supporting DVBH standard ~70% population coverage as at end Q1 08 Rollout started in 2007, all major cities covered early Subject to fair use policy 25 p

26 Business in Q1 Growth in IPbased services, ICTrelated services and outsourcing Customer focus Migration to IPbased services Simplified portfolio Leveraging leading position Moving up the value chain Cost reduction Continued migration from traditional to IPbased services Ongoing growth in wireless customer base, especially in data New partnerships in FttO Temporarily lower growth in PABX business Increased margins following customer focus and cost reductions New organizational structure aligned with strategy 26 p

27 Business reporting Key components of Business activities tied into reporting Key segments Scope KPIs Corporate solutions Revenues 1 Outsourcing Workspace management Endtoend ICT services for top 500 clients Outsourcing services Managed workspaces Voice Mobile Data 0.5 bn ICT services Revenues bn Application management Managed services for voice and data Online applications Housing and hosting services Installation and maintenance for (IP)PBX Net accounts (#) Housing services (m 2 ) Hosting services (servers) Infrastructure services Revenues bn Infrastructure services Connectivity Wireline Access, originating minutes, bundles Traditional and IPbased voice Wireless Access, minutes, voice and data bundles Valueadded services # leased lines # IPVPN, EVPN, MVPN Traditional voice ARPU, MoU Subscribers, % data users ARPU, nonvoice %, MoU SAC/SRC 1 Revenues for FY 07, restated for new reporting structure 27

28 Business Infrastructure Services Migration to new services in wireline, wireless services absorbing regulation Traditional services X 1,000 IP data services Wireless services % 29% 31% 35% 37% Q1 06 Q1 07 Q1 08 Q1 06 Q1 07 Q Q1 '07 Q2 '07 Q3 '07 Q4 '07 Q1 '08 PSTN/ISDN (mn) Leased lines (x 1,000) Business DSL MVPN EVPN Customers (mn) % data users Service revenues ( mn) Wireline services Continued substitution of traditional services by IPbased services PSTN / ISDN down 8% Business DSL and EVPN up >60% Stepup in FibertotheOffice Wireless services Customer base up 10% yony Data users representing 37% of total base Service revenues down 4% Substantial negative impact from lower MTA and roaming tariffs Continued focus on managing SAC/SRC levels 28

29 Business Wireless data Wide range of wireless data services using superior HSDPA network Mobile handset Strong growth in data users and usage following national advertising Addon bundles for internet and on smartphone or PDA per month depending on monthly use Laptop data cards Solid growth in laptop data cards for business users Highspeed laptop cards using UMTS, HSDPA or HSUPA Maximum speed 3.6 Mb/s down, 1.4 Mb/s up per month depending on speed and monthly use Network Superior network based on HSDPA 3.6, best data network coverage in the Netherlands 1 Plans to upgrade to HSDPA 7.2 / 14.4 under consideration HSUPA launched in Q1 08, offering higher upload speeds 1 Press release Agentschap Telecom, 4 April

30 Business FttO Step up in FttO initiatives, ambition for over 7,500 connections by YE 08 Market leadership strategy 11 business parks connected to FttO in Q1 Ambition for over 7,500 connections by YE 08 Targeting 60% market share on Top 300 business parks Regional marketing approach with local partners Breednet Cooperation KPN announced participation in Breednet in April 2008 Open partnership for rolling out FttO 14 municipalities in Amsterdam area Largest FttO project in the Netherlands Financial contributions from government and municipalities Focus on SME and nonprofit organizations 30 p

31 Business ICT Services Expanding position in standardized ICT applications and housing & hosting mn Revenues ICT Services Strong growth in online ICT applications National advertising campaigns in 2007 Over 20k net accounts by end Q Slow start in PABX business in Q1 08 after peak in project completions in Q4 07 X 1, Q1 '07 Q2 '07 Q3 '07 Q4 '07 Q1 '08 Housing / hosting services Q1 '07 Q2 '07 Q3 '07 Q4 '07 Q1 '08 Housing services (m 2 ) Hosting services (servers) Majority stake in ApplicationNet to support growth in ICT services Strong performance in housing / hosting Housing services up 44% yony, capacity almost fully utilized Hosting services up 39% yony Capacity expansion for housing services Fifth KPN cybercenter under construction, ready in November 2008 and fully booked Sharing capacity with Getronics datacenters 1 Restated numbers 31

32 Business Corporate Solutions Sustained growth in workspace management mn X 1,000 Revenues Corporate Solutions Q1 '07 Q2 '07 Q3 '07 Q4 '07 Q1 '08 Managed workplaces Revenues up 17% yony Efficient execution of contracts won in 2007 Cross and upselling existing customers Higher Q4 revenues due to seasonality Customers serviced with dedicated programs by branch Successful penetration of local government market with new propositions Ongoing growth in managed workplaces Mobile managed workplaces up 19%, data workplaces up 64% yony Supported by ongoing contract wins Q1 '07 Q2 '07 Q3 '07 Q4 '07 Q1 '08 Voice Mobile Data 32

33 Getronics strategy Positive feedback on new strategy, confirming intention for noncore assets Strategy New Getronics strategy announced in February Market leader in workspace management in the Benelux Expanding global delivery capability for international clients FutureReady Workspace 2.0 launched in March 08 Modular and standardized workspace management applications at lower costs Positive feedback from industry analysts on new Getronics strategy Confirming intention for disposal of noncore assets as announced on 5 February Disposal noncore assets Sale process for noncore assets in Benelux started in April Final decision will be made depending on market circumstances Several divestments completed since October 2007 Spain and Portugal in December 07 partnership with Tecnocom Telecom Australia in February 08 partnership with UXC 33

34 Getronics results Solid Q1 results, integration and restructuring on track Key financials Getronics mn Revenues Service revenues EBITDA Application Integration / Management Revenue split Consulting and Transformation services 20% 28% 52% ,504 2, Workspace management Q Solid revenues and EBITDA in Q1 08 Recent divestments in Iberia and Australia 4 mn restructuring and integration costs in Q1, higher costs expected in coming quarters Release of provisions of 6 mn in Q1 08 Several multiyear contract wins in Q1 PSN, Nestlé and Kings College Integration and restructuring on track HQ relocation in progress Organizational restructuring in the Netherlands to be completed in Q2 Confirming outlook for 2010 of ~ 1.5 bn revenues and ~ 125 mn EBITDA 1 Source: Getronics Annual Report Pro forma number, as EBITDA was not provided by Getronics 34 p

35 Wholesale & Operations in Q1 First customers connected to fiber, cost and FTE reductions on track Proactive network rollout AllIP services and infrastructure Simplified processes Applications Open access model Content Mobile network UMTS/HSDPA Services IP/Ethernet backbone network Copper access network VDSL Lowest cost Control Fiber access network AllIP network rollout on track First customers connected to fiber Sale of top real estate portfolio in progress Good progress in efficiency improvements and cost reductions ibasis focusing on integration efforts and synergies International wholesale Committed wholesale partner 35 p

36 W&O Operations Good progress in AllIP network rollout, cost savings on track AllIP network rollout AllIP on track to achieve ambitions First customers connected to FttC and FttH following successful pilots Focus on commercial migration and network rollout going forward Real estate Top real estate portfolio expected to be sold mid buildings in prime locations with value of about 300 mn Information profile sent out, strong interest received from potential buyers Remaining real estate to be sold in Cost savings Efficiency improvements on track Reduction of 186 FTE in Q1 08 (405 FTE in total in the Netherlands) Assessing cost reduction and outsourcing opportunities with suppliers Gradually phasing out and rationalizing legacy infrastructure 36

37 W&O Wholesale Stepup in external wholesale due to consolidation of ibasis mn External revenues bn minutes Q1 '07 Q2 '07 Q3 '07 Q4 '07 Q1 '08 Wholesale & Operations ibasis External minutes External revenues up 37% Consolidation of ibasis as of Q4 07 Growth in WBA and WLR Revenue upside from outsourcing deal between ibasis and TDC Additional revenues of ~$ 80 mn per year Approved by competition authorities ibasis focusing on integration efforts and synergies Q1 '07 Q2 '07 Q3 '07 Q4 '07 Q1 '08 National International (ibasis) 1 Including KGCS which has been consolidated into ibasis as of Q Restated numbers for external minutes 3 Adjusted EBITDA used by ibasis as nongaap measurement to provide further information on operating trends 37 p

38 Agenda Chairman s review Financial review Operating review Ad Scheepbouwer, Chairman and CEO Marcel Smits, CFO Ad Scheepbouwer, Chairman and CEO The Netherlands Mobile International Concluding remarks Ad Scheepbouwer, Chairman and CEO 38

39 Operating review EPlus Service revenue growth accelerating, driven by new brands Strong net adds Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Customers (mn) Pre Paid net adds (k) Post Paid net adds (k) mn Service revenues up 6.8% 13.5% 13.7% 14.0% 14.4% 14.7% Customer base exceeds 15 mn Strong net adds of 576k in Q1 Growth predominantly in MVNOs Service revenue growth accelerating, up 6.8% yony Market outperformance Contribution of strong net adds in Q4 SAC/SRC down 20% yony Supported by higher share of new brands Expanding captive channels Selective 3G rollout following demand Additional Capex included in guidance Q1 '07 Q2 '07 Q3 '07 Q4 '07 Q1 '08 Service revenues Service revenue market share 1 Management estimates, based on service revenues 39 p

40 EPlus distribution More effective distribution through expansion of captive channels Distribution strategy Expanding EPlus branch network from 500 to over 700 shops by YE 08 Shift from expensive dealers towards captive channels Key factor in lowering SAC / SRC, in addition to growing share of wholesale partnerships Recent acquisitions in retail Acquisition of SMS Michel in January ~200 retail outlets in prime locations ~100 shops to be rebranded to EPlus Other 100 shops to remain independent under SMS Michel brand Focus on attracting high value Post Paid customers via own channels In addition, acquisition of Ortel Mobile and Blau to strengthen distribution in ethnic and discount segments Agreement on the usage of over 50 former Tchibo retail outlets Small shops on prime locations 40

41 Operating review BASE Focus on initiatives to reignite growth, positive draft decision on MTA tariffs Customer growth Customer base reached 3 mn Net adds of 137k in Q1 08 Growth mainly in Pre Paid segment Expanding leading position in MVNOs mn Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Customers (mn) Pre Paid net adds (k) Post Paid net adds (k) Service revenues down 2.7% ~16% ~16% ~16% ~16% ~16% Service revenues down 2.7% Negative impact of 8% from MTA Positive draft decision from Belgian Court to maintain asymmetry in MTA tariffs Proactively reducing data roaming tariffs Reduced prices for 10 European countries Stimulating growth in data Building a growth platform with Allo Telecom and Tele2 Belgium Q1 '07 Q2 '07 Q3 '07 Q4 '07 Q1 '08 Service revenues Service revenue market share 1 Management estimates, based on revenues 41 p

42 Operating review Mobile Wholesale NL Further growth from new wholesale partnerships X 1,000 Net adds Net adds of 8k in Q High churn on inactive Pre Paid users Further growth in MVNOs, especially in Post Paid Increased competition in ethnic segment, position strengthened through Ortel Mobile 33 Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Pre Paid net adds Post Paid net adds mn Continued service revenue growth Service revenue growth of 2.4% in Q1 MTA impact of ~2% on service revenue growth New wholesale partners added Rabo Mobiel MVNO switched from Orange to KPN in February Several new wholesale partnerships signed up for launch in Q2 08 Q1 '07 Q2 '07 Q3 '07 Q4 '07 Q1 '08 Service revenues Revenues and other income 42 p

43 Mobile wholesale strategy Continued expansion in wholesale partnerships Wholesale strategy Initiatives in Q1 08 Continuous search for expansion opportunities based on proven business model MVNOs treated as true partners, creating longterm wholesale partnerships MVNO launched in Spain, exploring opportunities in other countries Looking for attractive network deal in other countries Leveraging platform resources Opportunities for revenue upside with limited risk Acquisitions of Ortel and Blau Increasing expertise in ethnic and discount segments MVNO Spain MVNO in Spain launched through Orange network First propositions launched in January Customer growth meeting expectations Majority stake in Ortel Mobile announced in March Strong position and expertise in ethnic segment in three countries Reported 85 mn revenues for 2007 Acquisition of Blau Mobilfunk announced in March Strong position in discount and ethnic segment in Germany Reported 42 mn revenues for

44 MVNO Spain Successful launch in Spain, providing platform for further growth Attractive Spanish Market Large market with high value potential Many interesting market segments Mutually attractive network deal with Orange Partners available with local knowledge Unique international platform MVNE platform and operations implemented within 7 months International platform enabling high quality services Multihost, multilanguage and multicountry Modular and flexible for multiple brands Fully managed services Limited initial investment due to low capital intensity of business model Successful launch with partners Online discounter Spanish commercial bank Telecom and utility provider Spanish alternative telecom provider Commercially launched in January 2008 High customer awareness Soft launch in March and marketing in April 2008 First proposition launched in the ethnic segment in March 2008 MVNE platform deal closed Strong pipeline with local and international partners 44

45 Agenda Chairman s review Financial review Operating review Concluding remarks Ad Scheepbouwer, Chairman and CEO Marcel Smits, CFO Ad Scheepbouwer, Chairman and CEO Ad Scheepbouwer, Chairman and CEO 45

46 Concluding remarks Solid Q1 performance in revenues, EBITDA and earnings Accelerating growth and continued market outperformance at EPlus Robust underlying EBITDA in the Netherlands excluding acquisitions Growth in wireless data, VoIP and TV; further improvement of net line loss Solid financial and operational performance at Getronics Committed to shareholder returns of 2 bn for p

47 Q & A

48 Annex For further information please contact KPN Investor Relations Tel: Fax:

49 Analysis of results Key items worth mentioning in results interpretation mn Revenue effect MTA tariff reduction EBITDA effect MTA tariff reduction Book gain on sale of subsidiaries Book gain on sale of real estate Additional costs to solve VoIP issues Restructuring charges Depreciation effect Telfort network integration Amortization effect Telfort network integration Accelerated depreciation copper network Q1 08 Group 43 Group 25 W&O / Other 6 W&O 11 NL Group 9 W&O W&O W&O 19 Q

50 MTA regulation The Netherlands cents per minute KPN Vodafone TMobile Avg. asymmetry 15 Aug 07 1 July 08 1 April 09 1 July Germany New MTA tariffs valid from 1 December 2007 until 31 March 2009 TMobile / Vodafone lowered from 8.78 to 7.92 cents per minute EPlus / O 2 lowered from 9.94 to 8.80 cents per minute BIPT proposal for less asymmetry suspended, current MTA tariffs unclear Former glide path with more asymmetry remaining in place for now Belgium cents per minute BASE Proximus Mobistar Avg. asymmetry 1 May 08 1 July

51 Impact MTA reduction 1 mn EPlus BASE Mobile Wholesale NL Mobile International Q1 08 Revenues EBITDA Consumer Business Wholesale & Operations The Netherlands Intercompany KPN Group Additional decline compared to Defined as Operating result plus depreciation, amortization and impairments 51

52 Restructuring charges mn Q1 08 EPlus BASE Mobile Wholesale NL Mobile International Consumer Business Getronics Wholesale & Operations The Netherlands Other KPN Group

53 Operating expenses mn Q1 08 Q1 07 % Salaries and social security contributions % Cost of materials % Work contracted out and other expenses 1,260 1, % Own work capitalized % Other operating expenses % Depreciation % Amortization % Total 2,922 2, % mn 81.8% 79.9% 78.4% 2,387 2,363 2, % 82.7% 3,025 2,922 1,735 1,737 1,817 2, , Operating expenses as % of revenues Operating expenses excluding D&A D&A Q1 '07 Q2 '07 Q3 '07 Q4 '07 Q1 '08 1 Including impairments, if any 53

54 Analysis operating expenses 1 Salaries & Cost of materials mn Salaries 16.4% 18.0% YonY increase 12.5% 11.8% 11.0% 11.8% 12.5% Impact of acquisitions, partly offset by headcount reductions mn Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 KPN salaries and social security Getronics salaries and social security 7.1% 6.8% Cost of materials 7.5% % of Revenues % of Revenues excl. Getronics 7.8% 7.0% 6.5% 6.3% QonQ increase Wage increase due to KPN collective labour agreement as of Q1 08 Impact of SMS Michel acquisition YonY decrease Less handset sales due to SIMonly and wholesale offers Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 KPN cost of materials Getronics cost of materials % of Revenues % of Revenues excl. Getronics 1 Yearonyear and quarteronquarter analysis excluding Getronics acquisition 54

55 Analysis operating expenses 1 Work contracted out & Other mn 35.9% 36.2% Work contracted out 39.6% 37.4% 38.0% 37.1% % YonY increase Higher wireless traffic volumes Partly offset by lower wireline volumes QonQ decrease Higher handset sales due to increase in (Post Paid) gross adds at Mobile in Q4 07 mn Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 KPN work contracted out Getronics work contracted out 5.5% Other 5.0% 5.4% % of Revenues % of Revenues excl. Getronics 8.1% 7.3% % 5.5% 52 QonQ decrease 9 mn restructuring costs in Q1 08 ( 33 mn in Q4 07) Higher marketing costs at the Netherlands in Q Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 KPN other operating expenses % of Revenues Getronics other operating expenses % of Revenues excl. Getronics 1 Yearonyear and quarteronquarter analysis excluding Getronics acquisition 55

56 Analysis operating expenses Depreciation & Amortization mn 15.0% 14.1% Depreciation % 11.3% 11.6% YonY decrease Lower asset base due to less CAPEX spending in prior years 19 mn accelerated depreciation from Telfort network integration in Q1 07, partly offset by depreciation from Getronics and ibasis Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Depreciation % of Revenues QonQ increase 19 mn accelerated depreciation of copper network mn 7.3% 7.1% Amortization 1 5.3% 4.9% 4.9% YonY decrease 57 mn accelerated amortization of Telfort license following network integration in Q1 07, Partly offset by amortization from Getronics and ibasis Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Amortization % of Revenues 1 Including impairments, if any 56

57 Personnel Continued underlying decline in the Netherlands 43,531 8,838 43,409 8,377 Personnel increase YonY of 18,610 FTE 17,484 FTE increase from Getronics 1,257 FTE reduction in the Netherlands (excl. Getronics) Reduction of 1,641 FTE in the Netherlands excluding acquisitions 9,193 9,107 24,799 24,881 24,890 6,235 6,353 6,819 7,832 8,618 1,257 18,564 18,528 18,071 17,668 17,307 FTE decrease of 122 FTE compared to Q4 Decrease of 461 FTE at Getronics due to sale of Australia Reduction of 405 FTE in the Netherlands excluding acquisitions of 44 FTE Partly offset by increase of 786 FTE at personnel abroad mainly due to SMS Michel Q1 '07 Q2 '07 Q3 '07 Q4 '07 Q1 '08 Personnel domestic Personnel abroad 1 Getronics domestic Getronics abroad 1 Including ~4,400 FTE in call center activities abroad, reported under Consumer the Netherlands 57

58 Tax P&L Cash flow Fiscal units ( mn) Q1 08 Q1 07 Q1 08 Q1 07 Dutch activities Getronics 1 German Mobile activities Belgian Mobile activities Other activities 2 Total mn Dutch corporate tax paid Tax recapture on EPlus EBITDA of 46 mn paid to Dutch fiscal authorities NOLs at KPN Mobile the Netherlands exhausted as of Q3 07 Higher P&L tax in Q mn in the Netherlands due to higher taxable income 35 mn in Germany due to recognition of deferred tax asset at EPlus in Q

59 Net cash flow from operating activities mn Operating Result Depreciation, amortization and impairments Interest paid Income tax paid Other income Share based compensation Change in provisions Net cash flow from operating activities before changes in working capital Inventory Trade receivables Other current assets Current liabilities Change in working capital Q Q , Net cash flow from operating activities Capex Proceeds from real estate 13 Tax recapture EPlus 46 Free cash flow, excl. tax recapture Including Property, Plant & Equipment and software 2 Defined as Net cash flow from operating activities plus proceeds from real estate minus Capex, excluding tax recapture at EPlus 59

60 Total cash flow mn Net cash flow from operating activities Q Q Capex 1 Acquisitions Disposals real estate Disposals other Other Net cash flow from investing activities Dividends paid Share repurchases 2 Debt financing Other Net cash flow used in financing activities Changes in cash and cash equivalents Including Property, Plant & Equipment and software 2 Including paid dividend tax in Q

61 Capex 1 mn Q1 08 Q1 07 % Mobile International % Revenues Mobile International % % 19.8% EPlus % Revenues EPlus BASE % Revenues BASE Mobile Wholesale NL % Revenues Mobile Wholesale NL % % 1 1.2% % % 1 1.2% 26.1% 11.8% 0.0% The Netherlands % Revenues the Netherlands % % 61.2% Consumer % Revenues Consumer Business % Revenues Business Getronics % Revenues Getronics Wholesale & Operations % Revenues Wholesale & Operations % % % % % % % 25.0% >200% 41.7% Other 1 0 Total % Revenues % % 29.0% 1 Including Property, Plant & Equipment and software 61

62 Balance sheet Assets bn Equity and liabilities bn Goodwill 1 Licenses 2 Other noncurrent assets 4 Group equity Provisions Noncurrent liabilities Current assets 3 Cash Current 3 liabilities Mar Jun Sep Dec Mar Mar Jun Sep Dec Mar Including other intangibles 2 Including Property, Plant & Equipment and software 3 Both cash and gross debt include approximately 0.6 bn of nonnetted cash balances per Q Including minority interest 62

63 Share repurchase progress Date 1 Value ( mn) mn shares Avg. share price ( ) January February March Q April Total bn share repurchase program commenced on 22 February % executed by end of Q1 29% completed to date 6.0 bn in shares repurchased since start in mn shares repurchased until Q1, average price 8.51 Number of outstanding shares amounting to 1,802,902,513 as of 1 April % of outstanding shares cancelled since Figures based on transaction date of share repurchases 63

64 Debt summary bn Q1 08 Q4 07 Q1 07 Bonds Eurobonds Global bonds Other debt Other loans at Royal KPN Consolidated debt Fair value financial instruments Total debt of which shortterm Cash and cash equivalents Total net debt Both cash and gross debt include approximately 0.6 bn of nonnetted cash balances per Q

65 Debt portfolio Breakdown of 11.9 bn gross debt 1 9% Financial instruments Other 4% 10% Eurobonds 71% 18% 73% Global bonds 15% 2 2 EUR USD GBP 25% 75% Fixed Floating (incl. swapped) 1 Book value of interest bearing financial liabilities plus the fair value of financial instruments related to these financial liabilities 2 Foreign currency amounts hedged into Euro 65

66 Consumer voice market 1 mn Q1 08 Q4 07 Q1 07 KPN PSTN / ISDN Wholesale Line Rental (WLR) Total traditional voice KPN VoIP Cable VoIP Alternative DSL VoIP Total VoIP Cable voice analogue Mobileonly Total households Management estimates 66

67 Business segment reporting Aligning reporting with organizational structure 1 2 New reporting Infrastructure Services of which: wireless services ICT Services Business segment restructuring into four reporting entities, following customer centric strategy 1. Infrastructure Services: voice wireline & wireless and network services (excl. housing & hosting) 2. ICT Services: housing & hosting and application services 3. Corporate Solutions: workspace management (excl. intercompany revenues to infrastructure services relating to voice wireline & wireless) 4. Other 3 4 Corporate Solutions Other (including intercompany) Smaller entities moved to other segments Sympac and YES Telecom transferred to Mobile International Several services for wholesale customers transferred to W&O Revenue impact of / 89 mn EBITDA impact of / 8 mn 67

68 Restatement reported figures Change in business reporting format as of Q1 08 Revenues and other income EBITDA FY 2007 ( mn) Old reporting New reporting Change Old reporting New reporting Change EPlus BASE Mobile Wholesale NL Other (incl. intercompany) 2, , , , Mobile International 3,960 3, ,466 1, Consumer Business Getronics Wholesale & Operations Other (incl. intercompany) 4,133 3, ,870 2,860 4,133 3, ,841 2, , , The Netherlands 9,013 8, ,479 3, Other Intercompany KPN Group 12,632 12,632 4,900 4,900 68

69 Business segment reporting mn Voice wireline Access, originating traffic Traditional, VoIP Wireless services Originating, terminating voice Data services Revenues and other income 07 1,028 30% Network services 776 Connectivity Housing, hosting services 23% Application services 477 Installation, servicing (IP) PBX Managed services 14% Other Sales force Narrow casting Intercompany Old reporting format Corporate solutions 585 Endtoend ICT services Outsourcing services 17% % 400 mn 1 Infrastructure Services Voice wireline Data, network services Of which: Wireless services 2 ICT Services Installation, servicing (IP) PBX Housing, hosting services Narrow casting 3 Corporate Solutions Endtoend ICT services Outsourcing services Other Sales force Intercompany New reporting format Revenues and other income 07 2,552 77% % % 297 Total 3,382 Total 3,293 69

70 Unbundling tariffs SLU and colocation set by OPTA, backhaul and WBA based on deal pricing Unbundling in current network Category Monthly tariffs LLU (regulated) MDF colocation (regulated) MDF backhaul (fiber, not regulated) Line sharing (LLU) Fully unbundled (LLU) 0.37 / line 8.00 / line SDF ~28,000 street cabinets MDF colocation 1,350 local exchanges Wholesale ADSL (not regulated) Node KPN / Telco MDF colocation MDF backhaul Wholesale ADSL 473 / footprint / year Deal pricing 7.50 shared nonshared Unbundling in AllIP network Category Monthly tariffs SLU SDF colocation (regulated) (regulated) SDF backhaul (fiber, not regulated) Line sharing (SLU) Fully unbundled (SLU) 6.17 / line 8.05 / line SDF colocation Node KPN / Telco SDF colocation / cabinet Oneoff 3,0006,000 ~28,000 street cabinets ~138 Metro Core locations SDF backhaul Deal pricing Wholesale Broadband Access (WBA) (not regulated) Wholesale Broadband Access (WBA) Deal pricing 70

71 Service revenue growth Mobile International Strong underlying growth outperforming the market 8.4% 14.7% Service revenue growth EPlus 2.5% 8.6% 8.7% 9.1% 2.9% 4.2% Reported Underlying (excl. MTA) 1 8.5% 6.8% Q1 '07 Q2 '07 Q3 '07 Q4 '07 Q1 '08 Service revenue growth BASE Reported Underlying (excl. MTA) Market growth Germany 2 Market growth Belgium 2 5.7% 11.4% 0.7% 9.0% 7.5% 3.2% 5.7% 1.3% 2.7% 5.4% Q1 '07 Q2 '07 Q3 '07 Q4 '07 Q1 '08 Q1 '07 Q2 '07 Q3 '07 Q4 '07 Q1 '08E Q1 '07 Q2 '07 Q3 '07 Q4 '07 Q1 '08E 0.0% /2% 0% 3.7% 3.2% 4.6% 3.7% 4.0% /4% 0% 6.8% 5.9% 1 Also excluding VAT increase with negative impact of 2.4% on service revenue growth in Service revenue growth, based on equity research 71

72 Dutch wireless services disclosure 1 Q1 08 Q4 07 Q1 07 Service revenues ( mn) Consumer Business Mobile Wholesale NL SAC / SRC ( ) Consumer Business As of Q1 2008, KPN no longer provides the same pro forma disclosure as provided during Instead, total service revenues and SAC/SRC for wireless services offered by the segments Consumer, Business and Mobile Wholesale International will be provided. 72

73 KPIs Consumer Voice Voice Q1 08 Q4 07 Q1 07 Market penetration 1 Broadband VoIP penetration 78% 42% 76% 40% 72% 34% Market share Voice 2 Traditional voice 3 VoIP Broadband 4 TV >55% ~75% 39% 44% 8% >55% ~75% 39% 44% 7% ~ 60% ~70% 37% 41% 4% Access lines (x 1,000) PSTN ISDN VoIP packages (Voice / Broadband) , ,694 2, ,225 3, Net line loss 5 (x 1,000) Traditional voice ARPU ( ) Access Traffic Based on management estimate 2 Share in total consumer voice (including VoIP); management estimates 3 Share in traditional consumer voice (excluding VoIP); management estimates 4 Including DSL and Cable; management estimates 5 Quarterly delta in PSTN/ISDN access lines + delta consumer VoIP, ADSL only and WLR; management estimates 73

74 KPIs Consumer Broadband, TV & Wireless Broadband Broadband ISP customers (x 1,000) KPN (Direct & Planet) Het Net XS4ALL Other Q1 08 Q4 07 Q1 07 2,443 1, ,402 1, ,114 1, Broadband ARPU ( ) TV Q1 08 Q4 07 Q1 07 Subscribers (x 1,000) ARPU ( ) Wireless Q1 08 Q4 07 Q1 07 Customers 1 (x 1,000) Service revenues ( mn) ARPU ( ) MoU (originating, terminating) SAC/SRC ( ) 6, , , Correction for ~220k inactive Pre Paid accounts in Q

75 KPIs Business Infrastructure Services Wireline Q1 08 Q4 07 Q1 07 Market share voice 1 >50% ~55% ~55% Access lines (x 1,000) PSTN ISDN VoIP 1, , , Traditional voice ARPU ( ) Access Traffic Network services (x 1,000) Leased lines EVPN connections Business DSL Managed network services (x 1,000) IPVPN connections MVPN routers Wireless Q1 08 Q4 07 Q1 07 Customers (x 1,000) of which data users Service revenues ( mn) ARPU ( ) MoU (originating, terminating) SAC/SRC ( ) 1 Share in traditional voice (including VoIP and internet dialup); management estimates 1,325 37% ,306 35% ,208 29%