Second Quarter Results July 2017

Transcription

1 Second Quarter Results July 2017

2 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 ( FCF ). These non-gaap figures should not be viewed as a substitute for KPN s GAAP figures and are not uniformly defined by all companies including KPN s peers. Numerical reconciliations are included in KPN s quarterly factsheets and in the Integrated Annual Report KPN s management considers these non- GAAP figures, combined with GAAP performance measures and in conjunction with each other, most appropriate to measure the performance of the Group and its segments. The non- GAAP figures are used by management for planning, reporting (internal and external) and incentive purposes. KPN s main alternative performance measures are listed below. KPN defines EBITDA as operating result before depreciation (including impairments) of PP&E and amortization (including impairments) of intangible assets. Note that KPN s 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 as adopted by the European Union. In the Net Debt / EBITDA ratio, KPN defines Net Debt as the nominal value of interest bearing financial liabilities excluding derivatives and related collateral, representing the net repayment obligations in Euro, taking into account 50% of the nominal value of the hybrid capital instruments, less net cash and short-term investments, and defines EBITDA as a 12 month rolling total excluding restructuring costs, incidentals and major changes in the composition of the Group (acquisitions and disposals). Free Cash Flow is defined as cash flow from continuing operating activities plus proceeds from real estate, minus capital expenditures (Capex), being expenditures on PP&E and software. Operating free cash flow is defined as adjusted EBITDA minus Capex. Revenues are defined as the total of revenues and other income unless indicated otherwise. Adjusted revenues and adjusted EBITDA are derived from revenues (including other income) and EBITDA, respectively, and are adjusted for the impact of restructuring costs and incidentals. The term service revenues refers to wireless service revenues. All market share information in this financial report is based on management estimates based on externally available information, unless indicated otherwise. For a full overview on KPN s non-financial information, reference is made to KPN s quarterly factsheets available on ir.kpn.com Forward-looking statements Certain statements contained in this financial report constitute forward-looking statements. These statements may include, without limitation, statements concerning future results of operations, the impact of regulatory initiatives on KPN s operations, KPN s and its joint ventures' share of new and existing markets, general industry and macro-economic trends and KPN s performance relative thereto and statements preceded by, followed by or including the words believes, expects, anticipates, will, may, could, should, intends, estimate, plan, goal, target, aim or similar expressions. These forward-looking statements rely on a number of assumptions concerning future events and are subject to uncertainties and other factors, many of which are outside KPN s control that could cause actual results to differ materially from such statements and speak only as of the date they are made. A number of these factors are described (not exhaustively) in the Integrated Annual Report Second Quarter 2017 Results Safe Harbor 2

3 Delivering on strategic vision Simplify, Grow, Innovate Further strengthening our Company SIMPLIFY GROW INNOVATE Commercial Digital & simple service and delivery Converged Telco & IT services Excellent user experience Operational Flexible & simplified network and operating model Best-in-class secured integrated networks Applying innovative technologies Financial Lean cost structure Value management & predictable cash generation Invested ahead of the curve CEO Value creation Second Quarter 2017 Results Strategy 3

4 Highlights Q2 Services & Innovation Operational Financial 5 New Consumer propositions focus on freedom of choice Improving customer satisfaction 1 NPS Consumer: +13 (: +9) NPS Business: -6 (: -9) First operator to launch WeChat Go for Chinese tourists in Europe Migrated KPN Business Mobile customers to integrated IT system Best ICT service provider according to Dutch CIOs 2 KPN s ambitious climate goals acknowledged by SBTi 3 Continued focus on value and convergence in Consumer 8k broadband net adds 25k IPTV net adds 9k postpaid net adds 4, KPN brand 21k Postpaid ARPU stable at 26 ARPU per household increased by 5.0% y-on-y to 42 SME: fixed-mobile bundling on track 39k multi play net adds Positioning for growth in IT LE & Corporate: focus on value in competitive mobile-only market Growth in IT related services, IoT and Security m Q2 '17 H1 '17 Adj. revenues 1,623 3,271 % y-on-y -3.2% -2.8% Adj. revenues NL 1,455 2,935 % y-on-y -2.1% -1.8% Adj. EBITDA 601 1,185 % y-on-y 1.5% 2.2% Adj. EBITDA NL 597 1,176 % y-on-y 1.7% 2.1% FCF (excl. TEFD dividend) % y-on-y 57% >100% 8.4ct per share paid to shareholders 6.7ct final dividend over ct pass through TEFD dividend Share buyback program ~60% completed end Second wave Simplification program: ~ 65m run-rate savings realized 6 1 Source: Kantar TNS 2 Source: Dutch IT Partner Preference Survey 3 Science Based Targets initiative 4 Adjusted for 15k migration to Business 5 All figures in this presentation are based on continuing operations, unless stated otherwise 6 End vs. end Q4 16 Second Quarter 2017 Results Highlights 4

5 Key priorities on track 1 Accelerate up- and cross-sell in bundles 2 Grow in TV and IT services 3 Finalize Business transformation 4 Finalize build of flexible and simplified integrated network and operating model 5 Expand superior access position by deploying innovative technologies and increasing fiber penetration 6 Optimize financial framework and grow dividend Simplify Grow Innovate Second Quarter 2017 Results Key priorities 5

6 Targeted household marketing drives customer loyalty and convergence Using smart analytics to drive value 1 Step 1: Creation of uniform digital layer completed Benefits Net Promotor Score Client advice (automatically shown to customer service) Convergence penetration Step 2: Use Data & Analytics to optimize - Customer service - Up- and cross-sell - Network investments while preserving privacy Client situation Data pool New (3) Offered (0) Client has the right for KPN Veilig to be installed on 2 devices 0 installed We can enhance the client s connection (speed/stability) by switching WiFi channels Upgrade to Alles-in-1 Standaard, from Internet+Bellen Household value Churn Marketing expenses Second Quarter 2017 Results Accelerate up- and cross-sell in bundles 6

7 New Consumer propositions focus on freedom of choice 1 Unbundling content in new propositions More-for-more in new mobile propositions Step 1: Choose your package Step 3: Choose your mobile subscription Basic Standard Premium Internet 40Mbps 80Mbps 100Mbps Data 1 New vs old price TV Functionality HD HD HD 4K 4K Everywhere, any device, on-demand access Step 2: Optional content packages 24 months 4GB (2GB) 20GB (10GB) GB (20GB) (previous propositions) 1 Showing data allowances for fixed-mobile customers 2 New proposition excludes Spotify (separately available at 7.50 per month) Second Quarter 2017 Results Accelerate up- and cross-sell in bundles 7

8 Continued growth of fixed-mobile bundles in Consumer Differentiates KPN from commoditized mobile-only players 1 Customers in fixed-mobile bundles Convergence provides significant benefits Households 1 Postpaid customers Higher NPS 2 Lower churn 3 47% all brands 40% 27 ~9% 33% 38% 13 ~5% 61% KPN brand Consumer total (all brands) Fixed-mobile bundles 3 Consumer total Fixed-mobile bundles : 34k net adds : 61k net adds 1 As % of broadband customers 2 Source: Kantar TNS 3 KPN brand Second Quarter 2017 Results Accelerate up- and cross-sell in bundles 8

9 Strong household proposition supports continued revenue growth 1 Fixed revenue growth driven by bundled services CLV illustrates focus on KPN brand Solid performance in competitive mobile environment 2.5% 1.5% 1.5% 2.5% 1.0% 0.0% m % m % Q1 17 Q1 17 Bundled Not-bundled Other y-on-y growth Consumer Residential Mobile service revenues y-on-y growth 1 1 Excluding VAT benefit and regulation impact Second Quarter 2017 Results Accelerate up- and cross-sell in bundles 9

10 Business revenues impacted by rationalization and migrations Growth in IT related services, IoT and Security 2 adjusted revenues y-on-y growth % of total Strong growth multi play revenues, 39k multi play net adds Mainly SME Business total -5.9% Multi play 34% 7.2% Traditional fixed -19% 15% Single play wireless -16% 20% Traditional fixed voice revenues impacted by rationalization and migrations to KPN ÉÉN (Multi play) Single play wireless revenues mostly impacted by migration of LE & Corporate customers to KPN ÉÉN LE (Customized solutions) LE & Corporate (k) SME (k) Mobile-only customer base (mainly SME) 1,264 1,074 LE & Corporate customized solutions supported by migrations from single play wireless, but impacted by rationalization and repricing Strong growth KPN ÉÉN LE seats Important client wins Mainly LE&Corporate Customized solutions 0.7% 26% Network & IT services -7.1% 22% +40% Migration of legacy network services to new technologies impacting revenues, growth in IT services New services 14% 5.9% Growth of Internet of Things and Security Second Quarter 2017 Results Grow in IT services 10

11 SME: migrations from traditional fixed to multi play on track Continued growth in multi play seats 2 Rationalization and migration of traditional fixed voice Continued growth KPN ÉÉN adds to IT up- and cross-sell potential k k Leading reseller in The Netherlands Q1 17 Q1 17 Cloud solutions Traditional fixed-only voice lines Fixed voice lines in multi play (SME) Net adds multi play seats (SME) Security solutions Second Quarter 2017 Results Grow in IT services 11

12 Building on market leading position in IoT with innovative platform Recently launched IoT platform fulfills customer needs 3 Expanding growth with fully integrated IoT solution Showing strong growth Frontrunner in IoT M2M base (m) First nationwide network +55% 3.1 Rolling out LTE M % Highest IoT density 23% 22% 11% 10% 10% 7% 5% 3% KPN IoT market share ARPU x3 KPN AT&T Verizon Telstra Vodafone Telia Telefónica Orange Telenor 46% 57% Connectivity Full solution IoT/Mobile connections (2016) 1 1 Source: Gartner Second Quarter 2017 Results Finalize Business transformation 12

13 Transformation to leading Business ICT provider on track Supported by Simplification Migration of KPN Business Mobile clients completed 3 Best ICT service provider 2 Benefits: Improved time-to-market Integrating Mobile IT systems delivers ~ 50m run-rate savings in total from decommissioned legacy IT Focus to further improve Business NPS 1 KPN awarded #1 ICT service provider in NL in 4 categories: -9-6 IT services Telecom Mobility Internet 1 Source: Kantar TNS 2 Source: Dutch IT Partner Preference Survey Second Quarter 2017 Results Finalize Business transformation 13

14 Revenue trend The Netherlands Adjusted revenues NL declined by 2.1% Adjusted revenues KPN Group m -3.2% 1,676 1,623 m 16 1, , Adjusted revenues ibasis Adj. revenues NL Consumer Business Wholesale Other (incl. eliminations) Adj. revenues NL m % 192 Second Quarter 2017 Results Financial performance 14

15 Adjusted EBITDA margin improved further Simplification driving lower personnel and IT/TI expenses Adjusted EBITDA NL increased by 1.7% % 41.0% Adjusted EBITDA KPN Group m m % Adj. EBITDA NL Revenues Cost of goods & services Personnel expenses IT/TI Adjusted EBITDA margin The Netherlands Other operating expenses Adj. EBITDA NL Adjusted EBITDA ibasis 1 Lower SAC/SRC and lower traffic, partly offset by higher content costs m 6-33% 2 Structural benefits from Simplification 4 3 Less marketing expenses 1 The presented categories show adjusted numbers and differ from the opex breakdown as presented in KPN s Integrated Annual Report 2016 Second Quarter 2017 Results Financial performance 15

16 Continued investments to further improve customer experience Core network important differentiator for quality of service 4 Changing customer behavior, data demand increasing rapidly Upgraded core network, roll-out decentralized CDN on track Supporting customer satisfaction, NPS IPTV doubled CAGR ~65% AMSTERDAM ROTTERDAM ZWOLLE ARNHEM Unicast IPTV traffic (Tbps) Core location Metro-Core location CAGR ~45% Street cabinet or Mobile base station Upgrade core network completed 161 Metro Core Locations 141 decentralized Content Delivery Network locations OTT traffic (Tbps) Providing significant cost reduction 1 KPN brand, source: Kantar TNS Second Quarter 2017 Results Finalize build of integrated network 16

17 Strong free cash flow growth Supported by different intrayear phasing compared to last year Growing operating free cash flow 1 and free cash flow 2 m % 681 m +151% H1 16 H1 17 H1 16 H1 17 m 1,143 Free cash flow components Reported EBITDA H1 17 Change in provisions Change in working capital Interest paid Taxes received (paid) Capex Other FCF excl. TEFD dividend H Adjusted EBITDA minus Capex 2 Excluding TEFD dividend Second Quarter 2017 Results Financial performance 17

18 Solid financial position 6 Lower debt y-on-y Debt portfolio bn Net debt 0.3bn lower vs. Q1 17 Sale of Telefónica shares completed in Free cash flow generated in Partly offset by: Final dividend payment of 6.7ct per share Share buyback ~60% completed end 2.8x 2.7x 2.5x Average coupon senior bonds 4.1% (: 5.0%) Financial flexibility Q1 17 Gross debt 1 x.x x.x Net debt Net debt / EBITDA Additional financial flexibility via 9.5% stake in TEFD Maturity of 1.25bn credit facility extended to July Gross debt defined as the nominal value of interest bearing financial liabilities, excluding derivatives and related collateral, representing the net repayment obligations in Euro, taking into account 50% of the nominal value of the hybrid capital instruments Second Quarter 2017 Results Optimize financial framework 18

19 Outlook Outlook 2017 Shareholder remuneration Adjusted EBITDA in line with 2016 Including ~ 40-50m roaming regulation impact Capex ~ 1.15bn Free cash flow (excl. TEFD dividend) growing 1 Additional cash flow via dividend from 9.5% stake in Telefónica Deutschland Intended DPS of 11ct in respect of 2017 Interim dividend of 3.7ct to be paid on 2 August 2017 Intention to grow regular DPS in line with FCF growth profile thereafter Excess cash could be utilized for Operational / financial flexibility (Small) in-country M&A Shareholder remuneration 200m share buyback program on track 1 Compared to 2016 free cash flow, after adjusting for the impact of cash optimization actions, of 683m Second Quarter 2017 Results Grow dividend 19

20 Q&A Key priorities on track 1 Accelerate up- and cross-sell in bundles 2 Grow in TV and IT services 3 Finalize Business transformation 4 Finalize build of flexible and simplified integrated network and operating model 5 Expand superior access position by deploying innovative technologies and increasing fiber penetration 6 Optimize financial framework and grow dividend Simplify Grow Innovate Second Quarter 2017 Results Q&A 20

21 Q Information Pack For further information please contact KPN Investor Relations ir.kpn.com 21

22 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

23 KPN ADR program KPN has a sponsored Level 1 ADR program Bloomberg ticker Trading platform KKPNY Over-the-counter (OTC) CUSIP Ratio Depositary bank Depositary bank contact ADR broker helpline ADR website Depositary bank s local custodian 1 ADR : 1 Ordinary Share Deutsche Bank Trust Company Americas Jonathan Montanaro (New York) (London) adr@db.com Deutsche Bank, Amsterdam Second Quarter 2017 Results Information Pack ADR program 23

24 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

25 Leading in Corporate Social Responsibility Successful CSR strategy Quality & Reliability Environment Privacy & Security Social and environmental achievements Long-term energy target to stay climate neutral until at least 2050 acknowledged by Science Based Targets initiative 79% of Business customers agree that KPN has the best fixed network 20% Less energy consumption vs % of customers who were infected by malware helped within 8 hours Recognition KPN co-developed a smart bicycle lock preventing mobile phone usage during cycling Pilot for network engineers to use bicycles in cities instead of cars 1 As disclosed in KPN s Integrated Annual Report 2016 Second Quarter 2017 Results Information Pack CSR 25

26 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

27 Group results (continuing operations) ( m) Q1 17 y-on-y % Revenues 1,631 1,648 1, % Adjusted revenues 1,623 1,648 1, % Operating expenses (excl. D&A) 1,044 1,092 1, % EBITDA % Adjusted EBITDA % Depreciation % Amortization % Operating expenses 1,399 1,447 1, % Operating profit % Net finance costs % Share of profit of associates and joint ventures n.m. Profit before taxes % Income tax % Profit after taxes % Second Quarter 2017 Results Information Pack Group results overview 27

28 Group results YTD 17 (continuing operations) ( m) YTD 17 YTD 16 y-on-y % Revenues 3,279 3, % Adjusted revenues 3,271 3, % Operating expenses (excl. D&A) 2,136 2, % EBITDA 1,143 1, % Adjusted EBITDA 1,185 1, % Depreciation % Amortization % Operating expenses 2,846 3, % Operating profit % Net finance costs % Share of profit of associates and joint ventures 1-1 n.m. Profit before taxes % Income tax % Profit after taxes % Second Quarter 2017 Results Information Pack Group results overview 28

29 Group cash flow (continuing operations) ( m) y-on-y % EBITDA % Interest paid/received % Tax paid/received >100% Change in provisions % Change in working capital % Other movements % Net cash flow from operating activities % Capex % Proceeds from real estate - - n.m. Free cash flow % Coupon on perpetual hybrid - - n.m. 1 Excluding changes in deferred taxes Second Quarter 2017 Results Information Pack Group results overview 29

30 Group cash flow YTD 17 (continuing operations) ( m) YTD 17 YTD 16 y-on-y % EBITDA 1,143 1, % Interest paid/received % Tax paid/received n.m. Change in provisions % Change in working capital % Other movements % Net cash flow from operating activities % Capex % Proceeds from real estate - - n.m. Free cash flow % Coupon on perpetual hybrid - - n.m. 1 Excluding changes in deferred taxes Second Quarter 2017 Results Information Pack Group results overview 30

31 Dutch wireless disclosure Service revenues ( m) y-on-y % Consumer % Business % Other % KPN The Netherlands % SAC/SRC per subscriber ( ) y-on-y % Consumer (postpaid) % Business (mobile only mainly SME) % 1 Includes mobile-only (mainly SME) service revenues and partial allocation of Multi play (mainly SME) and Customized solutions (mainly LE & Corporate) revenues to mobile service revenues 2 Includes amongst others Wholesale mobile service revenues and visitor roaming 3 Including handset subsidies, commissions and SIM costs Second Quarter 2017 Results Information Pack Group results overview 31

32 Tax YTD 17 P&L Cash flow Regions ( m) YTD 17 YTD 16 YTD 17 YTD 16 The Netherlands Belgium Other Total reported tax Of which discontinued operations Reported tax from continuing operations Effective tax rate continuing operations 21.7% 23.0% The effective tax rate for H1 17 is influenced by one-off effects (mainly due to participation exemptions) and a change of the mix of profits and losses in the various countries Without one-off effects 1, the effective tax rate would have been ~23% in H1 17 For the period, the effective tax rate, excluding one-off effects, is expected to be ~21% 1 Amongst others, settlements with tax authorities, impairments, revaluations Second Quarter 2017 Results Information Pack Group results overview 32

33 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

34 Consumer Fixed-Mobile KPIs Fixed-Mobile household development Fixed-Mobile postpaid development 33% 39% 40% 38% 45% 47% 2,740 2,474 2,416 2,246 2,011 1, ,122 1,156 1,384 1,672 1,733 Q1 17 Q1 17 F-M households (k) Fixed-only households(k) F-M postpaid base (k) Mobile-only postpaid base (k) F-M penetration broadband base F-M penetration postpaid base Second Quarter 2017 Results Information Pack Group KPI overview 34

35 Consumer (cont d) Residential KPIs Household base (k) RGUs and ARPU per household 3, , , , , , Q1 17 Q1 17 Not bundled (PSTN & Digitenne) Not bundled (BB only) Bundled ARPU per household RGUs per household Broadband IPTV IPTV 41% 40% 31% 32% Q1 17 Q1 17 Net adds (k) Broadband market share 1 Net adds (k) TV market share 1 1 Source: Telecompaper Second Quarter 2017 Results Information Pack Group KPI overview 35

36 Consumer (cont d) Mobile KPIs Mobile net adds Mobile postpaid ARPU ~85% ~83% ~85% Q1 17 Q1 17 Postpaid net adds (k) Prepaid net adds (k) Committed ARPU Non-committed ARPU % committed ARPU Wireless service revenues 42% % % y-on-y Q1 17 Service revenues ( m) Total market share NL 1 Adjusted for 4k clean-up at Simyo 2 Adjusted for 15k migration to Business Second Quarter 2017 Results Information Pack Group KPI overview 36

37 Business Total Business Mobile 1 Multi play (mainly SME) 1, , , % y-on-y Q1 17 Q1 17 Total Business mobile service revenues 2 ( m) Total Business mobile customer base (k) ARPU per multi play seat ( ) Multi play seats (k) Mobile-only (mainly SME) 1 Fixed-only (mainly SME) 1,264 1,103 1, Q1 17 Q1 17 Mobile-only ARPU ( ) Fixed-only voice ARPU ( ) Mobile-only customer base (k) Fixed-only voice lines (k) 1 Including migration of 15k from Consumer in and 32k customers per Q3 '16 following acquisition of Dekatel 2 Includes mobile-only (mainly SME) service revenues and partial allocation of Multi play (mainly SME) and Customized solutions (mainly LE & Corporate) revenues to mobile service revenues Second Quarter 2017 Results Information Pack Group KPI overview 37

38 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

39 Debt portfolio Hybrid bonds 24% Breakdown nominal debt 1 (total 8.3bn) Other 2% GBP 2 24% Nominal debt by currency Global bonds 9% Euro bonds 65% USD 2 15% EUR 61% Bond redemption profile ( bn) Fixed vs. floating interest USD hybrid (1st call) GBP EUR hybrid (1st call) GBP hybrid (1st call) EUR USD Fixed 3 100% 1 Based on the nominal value of interest bearing liabilities after swap to EUR, including 1.1bn hybrid bond, GBP 400m hybrid bond and USD 600m hybrid bond 2 Foreign currency amounts hedged into EUR 3 Excludes bank overdrafts Second Quarter 2017 Results Information Pack Debt overview 39

40 Treatment of hybrid bonds KPN & Credit rating agencies Each tranche of the hybrid bonds is recognized as 50% equity and 50% debt by the rating agencies Definition of KPN net debt includes: [ ], taking into account 50% of the nominal value of any hybrid capital instrument Hybrid bonds are part of KPN s bond portfolio Independent of IFRS classification In line with treatment by credit rating agencies IFRS EUR tranche is a perpetual, accounted for as equity Coupon payments treated as equity distribution, hence not expensed through P&L, not included in FCF, but in financing cash flow 1,2 GBP and USD tranche have 60 years specified maturity, accounted for as financial liability Coupon payments treated as regular bond coupon, hence expensed through P&L, included in FCF Tranche Nominal KPN net debt Maturity Rates (swapped) 1 IFRS principal IFRS coupon EUR 1.1bn 6.125% 1,100m 550m Perpetual (first-call Sept-2018) 6.125% Equity Financing cash flow 2 (not incl. in FCF) GBP 0.4bn 6.875% 460m 230m 60 years (first-call Mar-2020) 6.777% Liability Interest paid (incl. in FCF) USD 0.6bn 7.000% 465m 233m 60 years (first-call Mar-2023) 6.344% Liability Interest paid (incl. in FCF) Total 2,025m 1,013m 1 EUR tranche had short first coupon payment (0.5 years was payable in September 2013), annual coupon payments in September thereafter; USD tranche has semi-annual coupon payments (March / September); GBP tranche has annual coupon payments in March 2 Cash flow item Paid coupon perpetual hybrid bonds Second Quarter 2017 Results Information Pack Debt overview 40

41 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

42 Spectrum in The Netherlands 800MHz (Paired) Tele2 VodZig KPN 2*10 2*10 2*10 2*30 900MHz (Paired) VodZig KPN T-Mob 2*10 2*10 2*15 2*35 1.8GHz (Paired) KPN VodZig T-Mob 2*20 2*20 2*30 2*70 2.1GHz (Paired) VodZig KPN T-Mob KPN VodZig T-Mob 2*14.6 2*14.8 2*10 2*5 2*5 2*10 2* GHz (Unpaired) T-Mob KPN Tele *60 2.6GHz (Paired) VodZig T-Mob KPN Tele2 2*30 2*5 2*10 2*20 2*65 Total KPN VodZig T-Mob Tele MHz 179.2MHz 165MHz 65MHz 578.8MHz Second Quarter 2017 Results Information Pack Spectrum 42

43 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

44 Fixed infrastructure CO VDSL2 Download speed ~50Mbps Active in Network CO VDSL2 pair bonding ~100Mbps SC Vectoring ~120Mbps SC Bonded vectoring ~240Mbps Bonded VPLUS SC ~400Mbps SC NG.PON >1Gbps ODF FttH ~1Gbps Fiber Copper Second Quarter 2017 Results Information Pack Fixed Infrastructure 44

45 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

46 Telefónica Deutschland stake Accounting treatment Balance sheet Stake included as financial asset 1 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 decreases booked as an impairment through the P&L within net finance costs Dividends received reported as finance income within net finance costs Upon sale of (part of) the stake, all related capital gains or losses recognized through the P&L as financial income Significant or prolonged value decreases booked as an impairment through the P&L within net finance costs Dividends received part of operating cash flow and free cash flow as dividends received Dividends, not qualifying as specific capital repayments, received and/or capital gains realized (proceeds above tax book value) on KPN s stake are subject to Dutch corporate income tax Deferred tax asset can be utilized to offset income related to KPN s stake P&L Cash flow statement Tax 1 Defined under IFRS as available-for-sale financial asset Second Quarter 2017 Results Information Pack Telefónica Deutschland stake 46