Half Year Results July 2010

Transcription

1 Half Year Results July 2010

2 Safe harbor NonGAAP measures and management estimates This financial report 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. KPN defines EBITDA as operating result before depreciation and impairments of PP&E and amortization and 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. In the net debt/ebitda ratio, KPN defines EBITDA as a 12 month rolling average excluding book gains, release of pension provisions and restructuring costs, when over EUR 20m. 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 regarding EPlus. 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 nonfinancial information, reference is made to KPN s quarterly factsheets available on Forwardlooking statements Certain statements contained in this financial report constitute forwardlooking 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 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 KPN s control that could cause actual results to differ materially from such statements. A number of these factors are described (not exhaustively) in the Annual Report

3 Agenda Chairman s review Group financial review International Dutch Telco Getronics Concluding remarks Ad Scheepbouwer Carla SmitsNusteling Eelco Blok Baptiest Coopmans Ad Scheepbouwer Ad Scheepbouwer 3

4 Highlights Q2 Profitability again improved through focus on EBITDA, FCF and market shares Continued focus on costs, customer value and market shares in Dutch Telco leads to solid profitability Service revenue growth and strong profitability at Mobile International Good result German spectrum auction, enabling mobile data as an additional area of growth Outlook confirmed, 0.27 interim dividend

5 Financial highlights Q2 Financial performance Q2 10 Revenues and other income 3,354m, down 1.7% yony EBITDA of 1,386m, up 4.8% yony Capex of 380m, in line with Q2 09 Free cash flow of 707m, 935m YTD Earnings per share of 0.29, up 32% yony Continued focus on industryleading shareholder returns 1.0bn SBB for 2010 started in February, 58% completed to date following acceleration in May Final dividend of 0.46 per share paid in April, 733m in total Total cash returned to shareholders in H1 up 8% yony Interim dividend declared for 2010 of 0.27 per share, up 17% compared to

6 Outlook Outlook for 2010 and 2011 confirmed Reported 2009 Outlook 2010 Revenues and other income EBITDA Capex 13.5bn 5.2bn Incl. real estate: 56m 1.8bn In line with 2009 > 5.5bn Incl. real estate: Not material < 2bn Higher revenues in H2 yony, excluding disposals EBITDA growth of 300m for full year 2010 remains unchanged Balancing profitability with market shares Outlook 2011 Free cash flow 1 Dividend per share > 2.4bn 0.69 > 2.4bn 0.80 Growth in EBITDA, free cash flow and dividend per share Dividend per share at least 0.85 for Free cash flow defined as cash flow from operating activities, plus proceeds from real estate, minus Capex and excluding tax recapture EPlus 6

7 Agenda Chairman s review Group financial review International Dutch Telco Getronics Concluding remarks Ad Scheepbouwer Carla SmitsNusteling Eelco Blok Baptiest Coopmans Ad Scheepbouwer Ad Scheepbouwer 7

8 Group results Q2 10 EBITDA on track to reach 5.5bn for 2010 m Q2 10 Q2 09 % YTD 10 YTD 09 % Revenues and other income 3,354 3, % 6,631 6, % Operating expenses of which Depreciation 1 of which Amortization 1 2, , % 10% 3.7% 4, , % 11% 5.3% Operating profit % 1,632 1,374 19% Financial income/expense Share of profit of associates % >100% % >100% Profit before taxes % 1, % Taxes % % Profit after taxes % % Earnings per share % % EBITDA 3 1,386 1, % 2,709 2, % 1 Including impairments, if any 2 Defined as profit after taxes per ordinary share / ADS on a nondiluted basis (in ) 3 Defined as operating profit plus depreciation, amortization & impairments 8

9 Group cash flow Q2 10 On track to meet fullyear guidance of at least 2.4bn free cash flow for 2010 m Q2 10 Q2 09 % YTD 10 YTD 09 % Operating profit Depreciation and amortization 1 Interest paid/received Tax paid/received Change in provisions Change in working capital 2 Other movements % 5.7% 14% n.m. 34% 27% n.m. 1,632 1, ,374 1, % 8.9% 30% 0.7% 61% 33% n.m. Net cash flow from operating activities 1,072 1, % 1,301 1,179 10% Capex % % Proceeds from real estate % % Tax recapture EPlus n.m % Free cash flow % % Dividend paid Share repurchases Cash return to shareholders ,164 1,265 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 EPlus % >100% 35% ,175 10% 4.1% 7.7% 9

10 Regulatory New MTA glide paths implemented in the Netherlands and Belgium MTA NL Draft proposal on MTA glide path from April 2010 has been modified by OPTA Updated glide path implemented per 7 July 2010 Limited effects for 2010, lower tariffs for 2011 compared to draft proposal KPN is considering an appeal to the decision ct / min Until 7 July 10 7 July 10 Sep 10 Jan 11 Sep 11 Sep 12 KPN Vodafone TMobile MTA Belgium Belgian regulator published final decision on new glide path Implementation of new tariffs per 1 August, minor changes in tariffs compared to draft proposal KPN will launch a suspension and an annulment procedure against the decision ct / min KPN Group Belgium Mobistar Proximus Current Aug 10 Jan Jan Jan

11 Pension update and collective labor agreement New collective labor agreement in place; pension fund below 105% threshold Pension update New collective labor agreement KPN pension funds in the Netherlands negatively impacted by declining interest rates and deterioration of financial markets Average coverage ratio of KPN s pension funds at 100.5% at end of Q2 10 Additional cash payment of 11m required in Q4 10 Further payments with a maximum of 360m over a five year period, until the coverage ratio reaches the 105% threshold New collective labor agreement in place for 2010 Fixed salary increase of 1% per 1 January 2010 Variable salary (bonus) increase of 1% point Employee pension contribution increase of 13% points Promoting New Way of Working Cost savings due to reduction in office space and lower travelling expenses With 10,000 employees at KPN and Getronics working accordingly, KPN is an example for prospective clients Providing employees flexibility on when and where to work, thereby increasing efficiency and improving worklife balance Getronics the Netherlands agreed a one time payment of 300 per employee with no structural salary increase 11

12 Group financial profile Maintaining solid financial profile bn Debt Financing policy 2.5x x Q1 '09 Q2 '09 Q3 '09 Q4 '09 Q1 '10 Q2 '10 Gross Debt Net Debt Q1 '09 Q2 '09 Q3 '09 Q4 '09 Q1 '10 Q2 '10 Net Debt / EBITDA 1 Financial framework range bn Redemption profile Net debt / EBITDA of 2.3x per Q2 10 Increase due to payments for final dividend, share buybacks and German licenses Average maturity of 6.6 years per Q2 10 '10 '11 '12 '13 '14 '15 '16 '17 '18 ' '30 Debt maturity 861m redemption in October 2010 well covered No drawings on 1.5bn credit facility 1 Based on 12 months rolling EBITDA excluding book gains/losses, release of pension provisions and restructuring costs, all over 20m 12

13 Agenda Chairman s review Group financial review International Dutch Telco Getronics Concluding remarks Ad Scheepbouwer Carla SmitsNusteling Eelco Blok Baptiest Coopmans Ad Scheepbouwer Ad Scheepbouwer 13

14 Analysis Mobile International Continued service revenue growth with strong profitability Wireless service revenues EBITDA (margin) Capex m +4.7% Q1 '09 Q2 '09 Q3 '09 Q4 '09 Q1 '10 Q2 '10 m 40.7% 39.0% 37.5% 38.2% 37.6% 38.4% Q1 '09 Q2 '09 Q3 '09 Q4 '09 Q1 '10 Q2 '10 EBITDA EBITDA margin m Q1 '09 Q2 '09 Q3 '09 Q4 '09 Q1 '10 Q2 '10 Service revenues up 4.7% yony Good trend in Germany Continued outperformance in Belgium Strong growth yony in RoW EBITDA up 7.9% yony Strong margin from continued focus on profitable growth All Opco s contributing, including 11m provision release in Belgium Capex in line with Q2 09 Accelerated network rollout in H2 in Belgium and Germany Expected Capex level of ~ 600m in x

15 Financial review Mobile International by segment Continued revenue growth with strong margins Belgium¹ m 40.3% 32.5% 33.3% 32.5% 33.2% 34.8% % Q1 '09 Q2 '09 Q3 '09 Q4 '09 Q1 '10 Q2 '10 Ongoing market outperformance with service revenue growth of 6.6% yony Divestment of fixed B2B; Q2 revenue impact of 12m, EBITDA 2m Strong EBITDA margin, partly due to release of 11m provision Germany m 41.6% 41.8% 42.4% 41.8% 41.8% 43.0% Service revenues up 2.0% yony Very strong margin of 43% Continued focus on right sales channels Renewed focus on costs Q1 '09 Q2 '09 Q3 '09 Q4 '09 Q1 '10 Q2 '10 Rest of World 3 m Revenues and other income Q1 '09 Q2 '09 Q3 '09 Q4 '09 Q1 '10 Q2 '10 EBITDA margin EBITDA External revenues up 34% yony with Spain, France and Ortel contributing Improved EBITDA, focus on driving growth further 1 Including fixed Belgian B2B and Carrier business, including the fiber network; divested per 31 March EBITDA margin excluding release of provision 3 External revenues, excluding intercompany 15

16 Operating review Belgium 1 Service revenues up 6.6%, driven by BASE, partnerships and regional focus Q1 '09 Q2 '09 Q3 '09 Q4 '09 Q1 '10 Q2 '10 Customers (m) m Net adds Postpaid net adds (k) Prepaid net adds (k) Service revenues >17% >17% ~18% ~18% >18% >16% Service revenues up 6.6% yony Strong growth in postpaid revenues, mainly driven by BASE brand and SME/SoHo segment Service revenue share >18 % Strong regional focus on distribution and partnerships Increased traction in Walloon region by growing number of points of sale and regional partners Leveraging brands and specific content through partnerships, e.g. RTL, Sudpresse Service revenues Service revenue market share 2 1 Refers to wireless only 2 Management estimates, based on service revenues Annual report of Belgian Telecom Mediation Service 178 Q1 '09 Q2 '09 Q3 '09 Q4 '09 Q1 '10 Q2 '10 BASE brand considered as the leading value for money operator with high awareness and customer satisfaction 3 16

17 Operating review Germany Return to service revenue growth, higher growth in next quarters Net adds m Service revenues Q1 '09 Q2 '09 Q3 '09 Q4 '09 Q1 '10 Q2 '10 Customers (m) Postpaid net adds (k) Prepaid net adds (k) 15.8% 15.4% 15.5% 15.5% 15.4% 15.6% Increased marketing efforts paying off Regional organization established, city analysis completed and now showing first positive results within key cities Net adds of 300k in Q2 10 with strong increase in postpaid of 51K Mein BASE highly visible in the market, BASE has highest customer satisfaction 1 Strong improvement in gross adds performance since launch of Mein BASE Higher uptake in captive channels Q1 '09 Q2 '09 Q3 '09 Q4 '09 Q1 '10 Q2 '10 Service revenues Service revenue market share 2 Service revenues up 2.0% yony Supported by 0.5% from consolidating Multiconnect (former part of SNT Germany) Higher growth in next quarters 1 Based on company survey 2 Management estimates, based on service revenues 17

18 Operating review Germany (cont d) BASE relaunch and regionalization examples Grow postpaid adds Strengthen captive channels BASE relaunch Keep subsidies low Reduce complexity Various initiatives to improve customer intimacy, e.g. Ambassador program Recruiting ambassadors who recommend Mein BASE to friends and family Relationship with ambassadors closely monitored by local shops Gross adds in local shops more than doubled in weeks following launch Regionalization Regional profiling based on 4 key elements Productivity (gross adds per shop) Network coverage Point of sale coverage Point of sale productivity Postpaid subscriber share Illustrative Identifying sales opportunities Expand channels Size of bubble reflects # of pops in area Mature Boost productivity of channels Distribution coverage (# shops per 100k pops) 18

19 Operating review RoW MVNOs in Spain and France on track, leveraging Ortel Spain Continued subscriber growth with healthy ARPU, mainly Simyo Total customer base at ~400k Significantly improved network conditions in Q2 10 Focus on key commercial leads and execution thereof France Growth mainly driven by Simyo Total customer base at ~200k Continued focus on improving network conditions Ortel France launched in March 10, several agreements signed with cultural distribution channels Ortel Profitable growth in existing markets: the Netherlands, Germany and Belgium Successful launch of Ortel France in March 2010, > 1,000 sales per day Further footprint expansion to Spain expected end of year

20 Mobile International Challenger strategy Key pillars for continued profitable growth Multibrand Partnerships Lifecycle 03 Launch Challenger strategy Belgium incubator 05 Challenger strategy Germany implemented Targeting specific customer groups with differentiated brands and offers Smart follower Commercial & operational partnerships to leverage capabilities Business model Strategy exported to Spain & later to France Refined strategy Belgium Relaunch BASE brand Regionalization started Timed investments Proven technology Lower risk Lower cost Invest at the right time in the proven/ standardized technology Incumbent Challenger Push Consumer Demand Pull Cost to serve Strong margin due to lowest cost to serve of selective target segments Enhanced focus on execution Refined strategy Germany Relaunch BASE brand Execute regionalization Exploit mobile data opportunity in high market share areas 20

21 German spectrum auction Good auction outcome, capacity and standardization are key Total EPlus 800MHz Paired O 2x5 O 2x5 T 2x5 T 2x5 V 2x5 V 2x5 60.0MHz 0% 900MHz Paired 1.8GHz Paired 2.1GHz Paired 2.1GHz Unpaired E 2x5 T 2x5 V 2x5 E 1x5 O 2x5 T 2x5 V 2x5 T 1x5 T 2x5 T 2x5 V 2x5 V 1x5 V 2x5 T 2x5 E 2x5 O 1x5 T V 2x7.4 2x7.4 E O 2x5 2x5 E E 2x5 2x5 O 1x14.2 O O V E E E E 2x5 2x7.4 2x5.4 2x5 2x5 2x5 2x7.4 E O O O T T 2x5 2x5 2x5 2x5 2x5 2x5 69.6MHz 14% 140.4MHz 39% 120.0MHz 33% Standardized MHz 15% 2.6GHz Paired 1 T 2x5 T 2x5 T 2x5 T 2x5 O 2x5 O 2x5 O 2x5 O 2x5 E 2x5 E 2x5 V 2x5 V 2x5 V 2x5 V 2x MHz 14% 2.6GHz Unpaired 1 V 1x5 V 1x5 V 1x5 V 1x5 V 1x5 E 1x5 E 1x5 O 1x5 O 1x5 T 1x5 50.0MHz 20% 614.2MHz 23% connecting blocks, leading to highest capacity in most standard spectrum for data EPlus has obtained and holds most spectrum in standardized bands EPlus doubled capacity, now at 23% of total spectrum in the German mobile market 1 Spectrum blocks will be connected, but location in the band is not known yet E: EPlus, O: O 2, T: TMobile, V: Vodafone, colors indicate acquired spectrum 21

22 German spectrum auction (cont d) EPlus acquired unique combination of spectrum, suiting challenger strategy Spectrum provides flexibility at low cost Doubling amount of spectrum, with most spectrum acquired in standardized bands 4 blocks in a row in 2.1GHz is a unique outcome Highest possible capacity, leveraging existing rollout plans Acquired at very low cost 2.1GHz particularly suited for mobile data Most standard frequency for mobile data Flexibility in technology, e.g. HSPA+, LTE EPlus can make use of current grid Wide availability of handsets No rollout obligations Band 800MHz 1.8GHz 2.1GHz 2.6GHz Total Prices paid in auction Comparable prices for 2.1GHz 0.11 Acquired spectrum In per MHz/ pop Price paid m 187m 54m 284m Price per MHz/ pop 0.38 EPlus India 1 France Includes spectrum allocated to MTNL and BSNL pre auction 2 Includes May 2010 spectrum of 2x5 MHz to SFR, 2x4.8 MHz to Orange and Jan 2010 spectrum of 2x5 MHz to Free Mobile (assuming similar price for 900 and 2100) 22

23 Key pillars of business model Mobile International well positioned to benefit from data opportunity Exploit existing capabilities Leverage new capabilities Implications Cost to serve Focus on consumer segment No push: low acquisition/ distribution cost Outsourcing/ partnerships Standardized technology ZTE and incumbent vendors used for rollout and equipment Most efficient spectrum for data network rollout Remaining most profitable #3 operator Capex ~ m for the medium term Customer demand Established reputation of value for money Target segments through multibrands Wholesale partnerships Affordable smartphones Data partnerships Highest speed network at lowest cost Regionalization Confident of achieving market share of 2025% Offering high speed mobile data services Q4 10 in Belgium Q2 11 in Germany 23

24 Gradual enhanced focus on data Continuation of proven Challenger strategy based on same principles Market perspective Since 2005: focus on voice 2005: >95% voice & SMS, data uncertain Additional growth area: mobile data 2010: data starting to become mass market service FixedMobile Substitution Wholesale & Partnerships Regionalization Return on Capital Employed Mobile share of voice still low, large untapped potential Leverage proven business models to new markets/ segments Build new partnerships & business models Expand voice target regions based on regional approach Maximize return on existing assets Potential to leverage mobile data network Build M2M partnerships and explore new data wholesale business models Monetize leading position in voice to build data position Exploit spectrum auction outcome Benefit from lower equipment pricing Continued profitable growth in voice and SMS Data as % of service revenues from low/mid single digit to market average 24

25 Network & commercial rollout Groundwork is done, focus on execution of accelerated data network rollout Objective Realized Next steps Commercial Network Provide highest speed data network at lowest cost Cover target segments in Germany & Belgium Provide high quality data services for target segments Leverage value for money leadership 1.8 Mbit/s HSDPA 09 Up to 3.6 Mbit/s 240 kbit/s EDGE Up to 21.6 Mbit/s 10 Nationwide data coverage Roadmap for accelerated rollout of high speed data network Regional action plan Partnerships, e.g. for content, wholesale and smartphones HSPA sites k Germany 12k Execute on accelerated rollout roadmap Open to partnerships Create additional partnerships Further develop wholesale data offerings 25

26 M2M opportunity Independent platform levered with partnerships Strategic partnership Strategic partnership with independent platform of Jasper Wireless Lead exchange with other telecom operators that use the Jasper platform Jasper platform provides a global solution and is highly user friendly KPN group wide strategy Become leading M2M service provider in the paneuropean and local markets Service large clients that require paneuropean solutions with one European team Service clients that require local solutions with local teams Major contract wins KPN PanEuropean solution Global solution Scale is key in M2M market Partners for Australia, South America and South East Asia to follow PanEuropean solution 26

27 Operating review ibasis Focus on revenues and profitability, increased traction of turnaround Performance Progress 3.5% 3.4% Financial 4.3% 4.1% 3.8% Focus on balancing revenue growth with profitability, whilst improving market share New sales commission plan aligning revenue with margin focus Total minutes (bn) % 163 Operational Q1 '09 Q2 '09 Q3 '09 Q4 '09 Q1 '10 Q2 '10 Revenues and other income EBITDA margin Q1 '09 Q2 '09 Q3 '09 Q4 '09 Q1 '10 Q2 ' Average revenue per minute ( ct) Revenues of 237m in Q2, up 34% yony Supported by currency effect of 4m (~2%) EBITDA up 50% yony, due to savings on overhead, increase in revenues and focus on profitability Increased traction of ibasis turnaround More stability and focus following full takeover by KPN Record quarter in number of minutes 6 days in Q2 within top 10 of record minute days in ibasis history Improving market share position 27

28 Agenda Chairman s review Group financial review International Dutch Telco Getronics Concluding remarks Ad Scheepbouwer Carla SmitsNusteling Eelco Blok Baptiest Coopmans Ad Scheepbouwer Ad Scheepbouwer 28

29 Dutch Telco strategy Key elements of value maximizing strategy Manage for value Grow mobile data Targeting single access Lifecycle Distribution Brands Value maximization Customer Lifecycle Management Multibrand, multiproposition and national distribution network Leverage Telco & ICT Monetize mobile data growth Focus on smartphone segment Have best networks Multipropositions, TV is key Digitenne, IPTV on copper Fiber tripleplay Lowest cost First GSM network in NL Rollout (A)DSL Rollout 3G Network TV offering launch with Digitenne AllIP network strategy Broadband consolidation, market share > 40% Increasing TV presence with IPTV Consumer / Business organization structure ICT services provider via acquisition Getronics Leverage leading Telco & ICT position Increase share of wallet Migration to IPbased services VDSL upgrade Regional rollout of fiber High quality mobile network, up to 14.4Mb/s Simplification & First time right Cost reductions whilst investing in new services 08 > 10 Start rollout Fiber/ joint venture Reggefiber Exploit mobile data, IPTV and tripleplay opportunity 29

30 Analysis Dutch Telco business Stable EBITDA due to focus on costs and customer value m 1,824 Revenues and other income 4.3% 1,838 1,770 1,782 1,758 1,759 Revenues and other income down 4.3% yony in Q2 10 Continued pressure on traditional business Ongoing impact economic situation in Business 2.2% impact from regulation m Q1 '09 Q2 '09 Q3 '09 Q4 '09 Q1 '10 Q2 '10 EBITDA and EBITDA margin 48.4% 50.2% 50.6% 49.2% 52.2% 52.2% 0.3% Q1 '09 Q2 '09 Q3 '09 Q4 '09 Q1 '10 Q2 '10 EBITDA flat yony in Q2 versus a very strong quarter last year Maintaining focus on maximizing market value and customer value Continued bestinclass benchmarking supports cost reductions Benefitting from incidentals, totaling 10m EBITDA margin of 52.2% in Q

31 Financial review Dutch Telco business by segment Solid profitability across all segments Business Consumer W&O (national)² m 26.9% 26.0% 23.7% 24.0% 26.9% 29.2% 1,031 1,042 1,018 1, Q1 '09 Q2 '09 Q3 '09 Q4 '09 Q1 '10 Q2 '10 m 33.4% 30.9% 31.9% 31.3% 35.2% 32.6% 33.2%¹ Q1 '09 Q2 '09 Q3 '09 Q4 '09 Q1 '10 Q2 '10 m 60.5% 59.9% 61.0% 60.5% 60.7% 60.2% Q1 '09 Q2 '09 Q3 '09 Q4 '09 Q1 '10 Q2 '10 Revenues and other income EBITDA margin Revenues impacted by continued decrease in voice wireline and regulation Profitability continues to increase Continued pressure from economic circumstances and regulation Satisfactory performance of wireless services Declining trend in wireline services, including 3m negative effect Revenues impacted by regulation and ongoing decline in traditional business Underlying EBITDA margin of 59.1% in Q2 10, corrected for 13m of releases 1 EBITDA margin excluding 19m release of deferred connection fees in Q Excluding book gains 31

32 Operating review Consumer wireless 1 Service revenues down 6.1%, impacted by regulation Service revenues Customer base m m 6.1% Q1 '09 Q2 '09 Q3 '09 Q4 '09 Q1 '10 Q2 ' Q1 '09 Q2 '09 Q3 '09 Q4 '09 Q1 '10 Q2 '10 Prepaid Postpaid 4.6% impact from regulation Focus on profitable revenues leading to lower traffic Partly offset by continued data growth Customer value maximization, leading to lower adds Shift within base to high value smartphone customers ARPU Q1 '09 Q2 '09 Q3 '09 Q4 '09 Q1 '10 Q2 '10 ARPU increasing to 25 Focus on high value customers Mix effect due to lower prepaid customer base 34% of ARPU is nonvoice 1 Excluding Mobile Wholesale NL 32

33 Operating review Consumer wireline Net line loss at manageable level in Q2 X 1,000 PSTN/ISDN loss Q1 '09 Q2 '09 Q3 '09 Q4 '09 Q1 '10 Q2 ' PSTN/ISDN line loss stable Outflow to cable stable compared to previous quarters Continued success of retention offers Broadband market growth 1 Net line loss 2 X 1,000 43% 43% 43% 42% 42% 42% Q1 '09 Q2 '09 Q3 '09 Q4 '09 Q1 '10 Q2 '10 Broadband market share X 1,000 Q1 '09 Q2 '09 Q3 '09 Q4 '09 Q1 '10 Q2 ' Broadband market growth supported by fiber rollout KPN market share slightly under pressure, VDSL upgrade to support broadband position Net line loss at manageable levels Expecting positive contribution from IPTV Fiber activations in progress 1 Broadband market including fiber; management estimates conform Telecom Paper 2 Quarterly delta in PSTN/ISDN access lines + delta Consumer VoIP, ADSL Only and delta Consumer Fiber 33 x

34 Operating review Business wireless Satisfactory performance of wireless services Service revenues m Flat Q1 '09 Q2 '09 Q3 '09 Q4 '09 Q1 '10 Q2 '10 Total voice & data Data (excl. SMS) Service revenues flat yony 3.3% impact from regulation Continued data growth Increased competition on dongles and smartphones Customers m % 44% 46% 48% 47% 50% Q1 '09 Q2 '09 Q3 '09 Q4 '09 Q1 '10 Q2 '10 % data users Continued growth in customer numbers 50% of customers use data services Focus on customer value by managing SAC/SRC ARPU Q1 '09 Q2 '09 Q3 '09 Q4 '09 Q1 '10 Q2 '10 ARPU dilution due to M2M and data mix effect Voice services resilient, data strong 29% of ARPU is nonvoice 34 x

35 Operating review Business wireline Continued negative revenue trend Revenues 1 m 7.8% Q1 '09 Q2 '09 Q3 '09 Q4 '09 Q1 '10 Q2 '10 Continued impact from economy and competition Underlying revenue trend shows slightly increased decline 19m release of deferred connection fees in Q1; 3m negative effect in Q2 Voice / internet connections Q1 '09 Q2 '09 Q3 '09 Q4 '09 Q1 '10 Q2 '10 PSTN / ISDN lines (m) Business DSL (k) Lower revenues in voice & internet due to lower installed base of PSTN/ISDN and lower traffic volumes Solid performance Business DSL (Managed) data services Q1 '09 Q2 '09 Q3 '09 Q4 '09 Q1 '10 Q2 '10 Continued growth VPN connections Increase in unmanaged VPN, small decline in managed VPN Customer rationalization of locations Leased lines (k) Total VPN connections (k) 1 Revenues for Voice & Internet wireline and Data network services 35 x

36 Managing for value Strategic objective to maximize market value and customer value Managing for value Dutch Telco strategy has two pillars: market value and customer value Balancing market share, pricing and SAC/SRC to maximize market value Dutch Telco profitability rising Value maximization strategy leading to growing profitability Dutch Telco Dutch Telco EBITDA inflection Market share Market value Pricing bn 45% decrease Flat 4.9% growth SAC/SRC Distribution, multibrand and Customer Lifecycle Management to maximize customer value Distribution Customer value Brands Customer Lifecycle Management Continuous evaluation of value play, current status Market value stable Consumer mobile and broadband market shares slightly under pressure, TV rising ARPU stable/ growing Continued EBITDA growth 1 Approximations for Dutch Telco business, due to different reporting format before Management estimates 36

37 Managing for value (cont d) Actions to increase market value while carefully watching market shares Selective price increases Selective price increases across all products and brands Reintroducing activation fees SAC/SRC trending down Efficient use SAC/SRC, based on customer value Lowered distribution fees Strengthen distribution Strengthening distribution footprint Increase customer intimacy Increase own store sales Expanding with stores from 3rd party reseller, t for telecom 30 ARPU¹ stable/ growing SAC/SRC² trending down Q Q1 '10 Q2 '10 Broadband Traditional voice Wireless TV SAC/SRC² trending down despite Focus on high value customers 50% of new postpaid subs take smartphone, higher SAC Carefully watching mobile and broadband market shares that are slightly under pressure, TV rising # of KPN shops up 52 to 213 National distribution footprint for three KPN brands 1 Consumer 2 Consumer wireless, postpaid 37

38 Continuous cost reductions Cost reductions continue in 2010 and beyond, whilst investing in new services Continuous cost scrutiny Strong track record of reducing cost Continued focus on old cost areas Materializing over multiyear period m Traffic cost Network + IT 3, % / ~2% SAC/ SRC FTE Opex 3,915 Procurement Consultants / ~7% 3, Investments in new services Investments in new services TV: Digitenne & IPTV Fiber Mobile data IP connectivity New Way of Working Software online Healthcare New cost efficiency areas Various new areas Network rationalization Billing systems Service delivery streets Operating costs TI platforms Selective centralization within NL For example: Shared services, Finance Procurement costs down Next discount wave, leverage scope in growth areas Combined purchasing Mobile International Simplifying organization Improve efficiency of Innovation, Product and Project management How? Continued Best in class benchmarking 38

39 Consumer wireline key beliefs FttH is superior technology, mix of infrastructures going forward FttH superior TV proposition Copper still competitive FttH considered to be longterm superior solution for the Dutch market TV proposition key in competitive tripleplay package Bandwidths on copper infrastructure still sufficient for most customers in medium term Open access Fiber rollout takes time Mix of infrastructures Content Services ADSL on copper VDSL from central office (VDSLCO) FttC FttH Wireless Applications Mobile Mobile network UMTS/HSDPA Network umts/hsdpa Control IP/Ethernet backbone network Backbone Copper access Fiber access Network network network vdsl Central office (ADSL2+) Street cabinet Central office (VDSL2) Street cabinet Street cabinet ODF 1 KPN sharing infrastructure on all networks Committed wholesale partner Fiber rollout takes time, as a result of constraints on rollout capacity Mix of fixed and mobile technology Regional differentiation, based on business case by region 39

40 Consumer wireline strategy Balanced mix to maintain mediumterm position, while securing longterm position Strategy driver Consumer need for functionality drives network strategy, technology independent Tripleplay Interactive TV Multiroom TV HDTV Copper Copper VDSLCO upgrade (April 2010) Higher BB speeds, up to 30Mb IPTV coverage to 80% HDTV coverage to 70% Fiber Rollout FttH for superior portfolio >100Mb, up & download Digital multiroom HDTV Differentiating assets Digitenne: low entry digital TV proposition Distribution power Multibrand propositions Leverage fixed & mobile via extensive customer database Operational excellence Simplification First time right Customer service Customer Lifecycle Management 40

41 Copper status VDSL enabling nationwide IPTV, matching customer needs VDSL upgrade matching customer needs VDSLCO upgrade (April 2010) Sufficiently high broadband speeds, up to 30Mb IPTV coverage of 80% HDTV coverage of 70% Continuing VDSL network upgrades, next step ( outer rings ) completed in Q2 11 Further penetration of higher BB speeds IPTV coverage increased to 88% + Aligning FttC & VDSL due to similar customer experience, no further rollout of FttC Marketing initial FttC homes passed using VDSL approach Less complex customer activation Lower installation Capex IPTV accelerating, support broadband base 10% 11% Q1 '09 Q2 '09 Q3 '09 Q4 '09 Q1 '10 Q2 '10 Digitenne¹ (k) 12% IPTV² (k) 12% 13% 14% TV market share National IPTV launch successful, acceleration in customers additions IPTV adds from ~2k to ~4k per week since May On track for total TV base of 1.5m by 2012 Broadband customer base remains relatively stable despite increased competition IPTV helps retaining customers ~50% of new IPTV subs are new broadband customers 1 Digitenne used as primary TV connection 2 Including FttH IPTV 41

42 FibertotheHome status Reggefiber performance promising, KPN FttH activations take time Reggefiber JV status Reggefiber controls ~93%¹ Dutch fiber market Reggefiber JV 569k HP 72 KPN FttH status KPN 26k HA Other ISP ~160k HA² Q1 '09 Q2 '09 Q3 '09 Q4 '09 Q1 '10 Q2 '10 Homes Passed (k) Homes Activated (k) Activating homes takes time KPN owns 41% of Reggefiber JV 41% 59% Operational issues in the past Full package proposition list prices too high Sub optimal customer profile in initial rollout areas Strong competition Chosen sales methods not effective enough 1 Telecompaper 2 Source: Stratix. ~50% penetration in the areas where FttH was rolledout before JV established other ISP: e.g. XMS, Com1, Edutel, Solcon 42

43 FibertotheHome going forward Adjusted approach implemented, longterm ambition intact FttH KPN adjusted approach Turning lessons learned into adjusted approach to improve penetration: Introduced new pricing & proposition strategy Improved selection criteria regional rollout areas Full deployment of all sales channels KPN s fiber department now fully embedded in KPN organization Optimized fiber delivery process; shortened delivery time & increased first time right Penetration¹ Increase penetration Ambition 35% % Homes Activated Phase 1 Phase 24 Introducing other KPN brands Selling dualplay Wholesale Smart migration Targeting m homes passed on FttH by 2012, incl. HP contributed by Reggefiber Reach longterm penetration of ~60% homes activated 2 Months 30 Increasing penetration of homes activated takes time Targeting minimum of 250k active KPN customers on FttH by Homes Activated (HA) in areas where Homes Passes (HP) rollout is finished 2 Including wholesale 43

44 New pricing & proposition strategy Lower product entry levels, stable ARPU Previous offering New: As from 1 July 10 Voice bundles optional instead of inclusive Lower list prices No ARPU decrease expected Copper Broadband Television VoIP Copper/VDSL Broadband Television VoIP Basis 45, 3 / 0,5 Mbps IPTV Evening/ weekend Bundle Basis 40, 8 / 1 Mbps Mobile BB IPTV Incl. tvreceiver Access Extra 60, 8 / 1 Mbps IPTV Always bundle Extra 50, 16 / 2 Mbps Mobile BB IPTV Incl. tvreceiver Access Premium 75, 20 / 1 Mbps IPTV Always bundle Premium 65, 40 / 3 Mbps Mobile BB IPTV Incl. tvreceiver Access Fiber Fiber Broadband Television VoIP Fiber Broadband Television VoIP Bronze 65, 30 / 30 Mbps IPTV Incl. tvreceiver Always bundle Bronze 55, 30 / 30 Mbps IPTV Incl. tvreceiver Access Silver 80, 50 / 50 Mbps IPTV Incl. 2 receivers one w/ HD recorder, extra channels Always bundle Silver 70, 50 / 50 Mbps IPTV Incl. 2 receivers one w/ HD recorder, extra channels Access Gold 110, 100 / 100 Mbps IPTV Incl. 2 receivers w/ HD recorder, extra channels, HD Always bundle Gold 100, 100 / 100 Mbps IPTV Incl. 2 receivers w/ HD recorder, extra channels, HD Access 44

45 Mobile data 1 Mobile data is a growth opportunity in the years to come m 3.5 Mobile data users Trends Strong increase in data users Smartphone data users grow with CAGR of >50% Laptop data users grow with CAGR of >30% Illustrative Illustrative Smartphone Volume Laptop Data traffic CAGR of ~90% Signaling traffic CAGR of ~250% Average usage Network capacity Average data usage increasing Accelerating growth in signaling traffic due to increase in smartphones and applications Key beliefs KPN Mobile data is a growth opportunity in the years to come High quality network results in superior customer experience, capturing strong data uptake Continued investments in capacity and further improvement of active traffic controls is required to effectively manage network Number of sessions Network capacity 1 Excluding M2M data users; figures based on management estimates Further implementing pricing differentiation is key to monetize data opportunity 45

46 Mobile data (cont d) Align data pricing with cost to serve Backhaul Network planning Network quality Spectrum Sites Network quality and capacity depending on spectrum, backhaul and number of sites High quality network ready for data growth Highest number of 3G sites in the Netherlands Upgrading connection to sites with fiber Implementation of additional traffic control tools Declining voice ARPU offset by growing data ARPU Aligning data pricing with cost to serve, e.g. Volume Bandwidth Timing Quality of Service Latency Priority Informing customers ARPU Limited additional Capex required to upgrade network 46

47 Dutch Telco strategy Key elements of value maximizing strategy Manage for value Grow mobile data Targeting single access Lifecycle Distribution Brands Value maximization Customer Lifecycle Management Multibrand, multiproposition and national distribution network Leverage Telco & ICT Monetize mobile data growth Focus on smartphone segment Have best networks Multipropositions, TV is key Digitenne, IPTV on copper Fiber tripleplay Lowest cost First GSM network in NL Rollout (A)DSL Rollout 3G Network TV offering launch with Digitenne AllIP network strategy Broadband consolidation, market share > 40% Increasing TV presence with IPTV Consumer / Business organization structure ICT services provider via acquisition Getronics Leverage leading Telco & ICT position Increase share of wallet Migration to IPbased services VDSL upgrade Regional rollout of fiber High quality mobile network, up to 14.4Mb/s Simplification & First time right Cost reductions whilst investing in new services 08 > 10 Start rollout Fiber/ joint venture Reggefiber Exploit mobile data, IPTV and tripleplay opportunity 47

48 Agenda Chairman s review Group financial review International Dutch Telco Getronics Concluding remarks Ad Scheepbouwer Carla SmitsNusteling Eelco Blok Baptiest Coopmans Ad Scheepbouwer Ad Scheepbouwer 48

49 Operating review Getronics Impact of economic circumstances remains, on track for EBITDA uplift in 2010 m Revenues and other income down 10% (Existing operations) 12% Difficult market conditions result in topline pressure, no change in customer behavior The Netherlands down 12% yony in Q2 International flat yony in Q2, including positive foreign exchange impact ~6% m Q1 '09 Q2 '09 Q3 '09 Q4 '09 Q1 '10 Q2 '10 flat Netherlands International EBITDA and EBITDA margin (Existing operations) 8.4% 6.4% 6.9% 6.1% 1.7% % Q1 '09 Q2 '09 Q3 '09 Q4 '09 Q1 '10 Q2 '10 EBITDA EBITDA margin Yony revenue performance to improve in Q3 and Q4, compared to revenue declines in H1 10 EBITDA margin of 8.4% in Q2 10, on track for 8% EBITDA margin in 2010 EBITDA growth supported by absence of restructuring costs ( 26m in Q2 09) 5m release of provision in Q2 10 Full impact of FTE reductions and other cost savings coming through in 2010 Recovery in the Netherlands lagging behind European market Getronics maintained market share 49

50 Agenda Chairman s review Group financial review International Dutch Telco Getronics Concluding remarks Ad Scheepbouwer Carla SmitsNusteling Eelco Blok Baptiest Coopmans Ad Scheepbouwer Ad Scheepbouwer 50

51 Concluding remarks Continued focus on cost, customer value and market shares Multibrand and partner approach, cost cutting track record Growth potential from new services, e.g. IPTV, fiber, mobile data Good result German spectrum auction Prudent financial framework Sustainable free cash flow, industryleading returns Outlook confirmed, 0.27 interim dividend

52 Q&A

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

54 Analysis of results Key items worth mentioning in results interpretation m Revenue effect MTA tariff reduction Q2 10 Q2 09 YTD 10 YTD 09 Group EBITDA effect MTA tariff reduction Group Book gain on sale of real estate Other Restructuring charges Group Goodwill impairment ibasis 11 Goodwill impairment Getronics 13 Release of provisions W&O 5 5 Release of provisions Getronics 5 5 Release of provisions Belgium Revenue & EBITDA effect Release of deferred connection fees Business 3 16 Release of deferred connection fees W&O

55 MTA regulation ct / min Until 7 July 10 7 July 10 Sep 10 Jan 11 Sep 11 Sep 12 The Netherlands KPN Vodafone TMobile Germany MTA tariffs valid from 1 April 2009 until 30 November 2010 TMobile / Vodafone lowered from 7.92 to 6.59 cents per minute EPlus / O 2 lowered from 8.80 to 7.14 cents per minute ct / min Current Aug 10 Jan 11 Jan 12 Jan 13 Belgium KPN Group Belgium Mobistar Proximus

56 Impact MTA reduction m Revenues Q2 10 EBITDA 1 Revenues YTD 10 EBITDA 1 Germany Belgium Rest of World Mobile International Consumer Of which: Mobile Wholesale Business Wholesale & Operations 2 Intercompany Dutch Telco business KPN Group Defined as Operating result plus depreciation, amortization and impairments 2 As of Q2 10 W&O figures are reported excluding ibasis. The Q1 10 revenue impact of ibasis is corrected in Q2 10. YTD figures show the total W&O impact excluding ibasis 56

57 Restructuring charges m Q2 10 Q2 09 YTD 10 YTD 09 Germany Belgium Rest of World Mobile International Consumer Business Getronics Wholesale & Operations The Netherlands Other KPN Group

58 Operating expenses m Q2 10 Q2 09 % Salaries and social security contributions Cost of materials Work contracted out and other expenses 1,144 1,182 Own work capitalized Other operating expenses Depreciation Amortization Total 2,515 2, % 11% 3.2% 11% 8.2% 10% 3.7% 5.8% m 78.3% 78.0% 79.1% 75.9% 75.1% 2,669 2,579 2,647 2,484 2,515 2,089 2,002 2,064 1, , Operating expenses as % of revenues Operating expenses excluding D&A D&A Q2 '09 Q3 '09 Q4 '09 Q1 '10 Q2 '10 1 Including impairments, if any 58

59 Analysis operating expenses Salaries & Cost of materials m Salaries 16.1% 15.9% 15.2% 15.7% 15.5% 14.7% YonY decrease Reduction of own personnel at all segments QonQ decrease Reduction of own personnel Dutch Telco business and Getronics Q1 '09 Q2 '09 Q3 '09 Q4 '09 Q1 '10 Q2 '10 m Salaries and social security % of Revenues Cost of materials 6.2% 6.5% 6.3% 6.4% 6.3% 5.9% Q1 '09 Q2 '09 Q3 '09 Q4 '09 Q1 '10 Q2 '10 YonY decrease Fewer gross adds due to focused approach leading to fewer handsets distributed Simplification and First time right strategy leading to lower costs Continued decline in handset prices leading to lower procurement costs QonQ decrease Fewer gross adds due to focused approach leading to fewer handsets distributed Cost of materials % of Revenues 59

60 Analysis operating expenses Work contracted out & Other m 36.3% Work contracted out 34.7% 34.4% 33.9% 34.1% 34.2% YonY decrease Lower traffic costs due to regulatory tariff cuts Disposal of SNT leading to lower external personnel Focus on own sales channels in Germany leading to lower payments to 3rd parties 1,231 1,182 1,137 1,136 1,116 1,144 QonQ increase Higher revenues at ibasis leading to higher costs Q1 '09 Q2 '09 Q3 '09 Q4 '09 Q1 '10 Q2 '10 m 5.8% 197 Work contracted out % of Revenues Other 5.0% 5.4% 6.5% 4.6% 4.7% Q1 '09 Q2 '09 Q3 '09 Q4 '09 Q1 '10 Q2 '10 YonY decrease Lower costs due to divestment of SNT Absence of restructuring costs at Getronics ( 26m in Q2 09) Partly compensated by higher marketing spend at EPlus QonQ increase Higher marketing spend at EPlus Partly offset by release of various restructuring provisions Other operating expenses % of Revenues 60

61 Analysis operating expenses Depreciation & Amortization m Depreciation % 11.5% 11.6% 11.4% 10.6% 10.5% YonY decrease Lifetime of mobile masts increased, lowering depreciation charges Smaller asset base across all segments, lowering depreciation charges Q1 '09 Q2 '09 Q3 '09 Q4 '09 Q1 '10 Q2 '10 Depreciation % of Revenues m Amortization 1 6.2% 5.5% 5.8% 6.0% 5.6% 5.9% Q1 '09 Q2 '09 Q3 '09 Q4 '09 Q1 '10 Q2 '10 Amortization % of Revenues 1 Including impairments, if any YonY increase Extended spectrum licenses in the Netherlands leading to higher amortization Acquired software in Belgium leading to higher amortization Partly compensated by final writedown of Telfort customer base per Q3 09, lowering amortization charges QonQ increase Extended spectrum licenses in the Netherlands leading to higher amortization Acquired software in Belgium leading to higher amortization 61

62 Personnel 35,638 35,502 34,550 4,972 4,901 4,570 9,181 9,057 8,692 8,231 8,321 8,314 33,148 4,470 8,490 7,923 32,203 31,121 4,369 3,990 8,298 8,231 7,722 7,367 Decrease of 4,381 FTE yoy Reduction of 1,690 FTE in the Netherlands (excl. Getronics) from all segments and due to divestment of SNT Netherlands (Q4 09) Reduction of 1,737 FTE at Getronics, mainly from divestments and restructuring Reduction of 954 FTE at KPN abroad, mainly from Belgium, Germany and call centers Decrease of 1,082 FTE qoq Reduction of 281 FTE in the Netherlands, specifically Dutch Telco Reduction of 446 FTE at Getronics Reduction of 355 FTE at KPN abroad, mainly from Germany and SNT 13,254 13,223 12,974 12,265 11,814 11,533 Q1 '09 Q2 '09 Q3 '09 Q4 '09 Q1 '10 Q2 '10 Personnel domestic Personnel abroad Getronics domestic Getronics abroad Cumulative reduction of 8,957 FTE in the Netherlands since 2005 Excluding Getronics and acquisitions Reduction target of 10,000 FTE in the Netherlands by year end 2010 Taking a number of outsourcing decisions in H

63 Tax P&L Cash flow Fiscal units ( m) Q2 10 Q2 09 Q2 10 Q2 09 Dutch activities Getronics German Mobile activities Belgian Mobile activities Other Total Tax receipt of 60m in Q2 09 related to prior years Effective tax rate decreased from 29.6% in Q2 09 to 26.0% in Q2 10 Decrease is due to new DTA valuation methodology at EPlus DTA EPlus is expected to remain more or less at the same level, see tax paper published on 26 January 2010 for more information Effective tax rate increased from 23.8% in Q1 10 to 26.0% in Q2 10 Oneoff charges of 11m leading to temporarily inflated tax rate Slightly higher share of group taxable income generated in the Netherlands leading to higher effective tax rate Expected tax rate for FY 2010 is around 23% 63

64 Net cash flow from operating activities m Operating Profit Depreciation, amortization and impairments Interest paid Income tax paid Other income (including dividends received) Share based compensation Change in provisions Net cash flow from operating activities before changes in working capital Q ,167 Q ,195 YTD 10 1,632 1, ,594 YTD 09 1,374 1, ,618 Inventory Trade receivables Other current assets Current liabilities Change in working capital Net cash flow from operating activities Capex 1 1, , , , Proceeds from real estate Tax recapture EPlus Free cash flow 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 64

65 Total cash flow m Q2 10 Q2 09 YTD 10 YTD 09 Net cash flow from operating activities 1,072 1,120 1,301 1,179 Capex 1 Acquisitions Disposals real estate Disposals other Other Net cash flow from investing activities , Dividends paid Share repurchases Debt financing Other , Net cash flow used in financing activities 1, , Changes in cash and cash equivalents , Including Property, Plant & Equipment and software 2 For H1 10 mainly related to spectrum auction Germany 65

66 Capex 1 m Q2 10 Q2 09 % YTD 10 YTD 09 % Germany % Revenues Germany 89 11% 83 10% 7.2% % % 28% Belgium % Revenues Belgium % 22 11% 45% % 40 10% 38% Rest of World % Revenues Rest of World 1 2.9% 1 4.5% 0% 2 3.2% 2 5.3% 0% Mobile International % Revenues Mobile International % % 3.8% % % 29% Consumer % Revenues Consumer % % 63% % % 50% Business % Revenues Business % % 32% % % 44% Wholesale & Operations (national) % Revenues Wholesale & Operations (national) % % 18% % % 22% Dutch Telco business % Revenues Dutch Telco business % % 0.4% % % 10% Getronics % Revenues Getronics % % 24% % % 5.6% The Netherlands % Revenues the Netherlands % % 0.7% % % 8.2% Total % Revenues % % 1.6% % % 15% 1 Including Property, Plant & Equipment and software 66

67 Balance sheet Assets bn Equity & liabilities bn Goodwill 3 Group equity Licenses Provisions Jun Sep Dec Mar Jun 2010 PPE 1 2 Other noncurrent assets Current assets Cash Noncurrent liabilities Current 4 liabilities Jun Sep Dec Mar Jun Property, plant & equipment 2 Including deferred tax assets, software and other intangibles and assets held for sale 3 Including minority interest 4 Current liabilities include approximately 0.04bn of nonnetted cash balances per Q

68 Share repurchase progress Date 1 Value ( m) Shares (m) Avg. share price ( ) Q April May June Q July Total bn share repurchase program for 2010 started on 4 February % completed to date m shares repurchased in Q2 10, average price of bn in shares repurchased since start in 2004, average price of 9.05 ~35% of outstanding shares cancelled since 2004 Number of outstanding shares amounting to 1,618,143,699 per 30 June ,533,785 shares will be cancelled in Q Figures based on transaction date of share repurchases, some rounding changes may be applicable 2 Until 26 July

69 Debt summary bn Q2 10 Q1 10 Q2 09 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 Current liabilities include approximately 0.04bn of nonnetted cash balances per Q

70 Debt portfolio Breakdown of 13.8bn gross debt 1 Global bonds 14% Other 2% Financial instrum ents 2% 13% 12% 75% 2 2 EUR USD GBP 7% Eurobonds 82% Fixed 93% 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 70

71 Consumer voice market 1 m Q2 10 Q1 10 Q2 09 KPN PSTN / ISDN Wholesale Line Rental (WLR) Total traditional voice KPN VoIP Cable VoIP Alternative DSL VoIP Total VoIP Mobileonly Total households Management estimates, figures updated due to better insights 71

72 Infrastructure Deploying mix of technologies going forward ADSL on copper VDSL from central office (VDSLCO) FttC FttH Wireless Central office (ADSL2+) Central office (VDSL2) ODF 1 Street cabinet Street cabinet Street cabinet up to 20 Mb/s down up to 2 Mb/s up IPTV & HDTV up to 40 Mb/s down up to 4 Mb/s up IPTV, multiroom HD 3050 Mb/s down up to 4 Mb/s up IPTV, multiroom HD >100 Mb/s (symmetrical) IPTV, multiroom HD >14 Mb/s down (HSPA / LTE) DVBT (Digitenne) Fiber Copper 1 Optical distribution frame 72

73 Unbundling tariffs Unbundling in current network SDF ~28,000 street cabinets 1,350 local exchanges Unbundling in network FttC ~28,000 Street cabinets MDF colocation Wholesale ADSL Consumer market (tariffs not regulated) SDF colocation MDF ~200 Wholesale Broadband Access Consumer market (WBA) (tariffs not regulated) Unbundling in network FttH ODF City PoP Node KPN / Telco Node KPN / Telco Node KPN / Telco Line sharing (LLU) 1 Fully unbundled (LLU) 1 MDF colocation 1 MDF backhaul Wholesale ADSL access fee 1 Fully unbundled (SLU) 1 SDF colocation 1 SDF backhaul Category Category Line sharing (SLU) 1 Wholesale Broadband Access (WBA) 1 Category Fully unbundled (ODF FttH) ODF FttH colocation ~3,500 ODF FttH Backhaul Wholesale Broadband Wholesale Broadband Access (WBA) Access (WBA) FttH (not regulated) ODF FttO Regulated Not regulated 1 Tariffs refer to WPC (WPC 2A); WPC 2B currently in consultation, expected to be confirmed in Q / line 6.53 / line / footprint / year Commercial pricing, not regulated 5.32 shared nonshared 7.58 / line 7.44 / line 1.20 / line or 5.36 / per unit Oneoff / per unit To be regulated 5.32 shared nonshared Monthly tariff / month Oneoff 3, / month nonshared To be regulated Monthly tariff Monthly tariff 73