Third Quarter Results October PDF Free Download

Third Quarter Results 2012 23 October 2012

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 total excluding book gains, release of pension provisions and restructuring costs, when over 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. Underlying revenues and other income and underlying EBITDA are derived from revenues and other income and EBITDA, respectively, and are adjusted for the impact of MTA and roaming (regulation), changes in the composition of the group (acquisitions and disposals), 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 nonfinancial information, reference is made to KPN s quarterly factsheets available on www.kpn.com/ir 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 2011. 2

Contents 1 Chairman s review Eelco Blok 2 Group financial review Eric Hageman 3 Operating review The Netherlands Eelco Blok 4 Operating review International Eelco Blok 5 Concluding remarks Eelco Blok 3

Executive summary Mixed performance across the group Domestic businesses on track to reach 2012 market share targets Bottomingout of broadband market share Relatively stable market share in competitive mobile environment Maintaining stable market positions in Business segment Continued upgrades of mobile and fixed networks Mobile network upgrades started to enable LTE Good results from hybrid VDSL / FttH approach Customer focus through investments in quality and service 4,0005,000 FTE reduction program on track to be completed end 2013 4

Executive summary (cont d) Price competition in Germany offsetting growth from new propositions Growth from higher postpaid net adds offset by customer optimization Continued strong profitable growth in Belgium Efforts in corporate social responsibility recognized Inclusion Dow Jones Sustainability World Index #1 telecom operator worldwide on emissions reduction performance Outlook confirmed 5

Outlook Confirming outlook EBITDA 1 2012 Outlook 4.7 4.9bn On track to reach outlook for full year 2012 Capex 2.0 2.2bn Free cash flow 2 1.6 1.8bn Dividend per share 0.35 Dividend per share outlook 2013 of at least 0.35 1 Excluding restructuring costs 2 Free cash flow defined as cash flow from operating activities, plus proceeds from real estate, minus Capex and excluding tax recapture EPlus 6

Group financial profile bn 12.8 11.9 13.6 12.5 13.5 12.8 Debt 12.8 11.7 13.1 11.8 13.3 12.4 13.9 12.4 2.5x 2.0x 2.2 2.4 Financing policy 2.5 2.4 2.3 2.6 2.7 Q1 12 Q2 12 Q1 12 Q2 12 Gross debt Net debt Net debt / EBITDA 1 Financial framework range bn 1.0 1.1 1.4 Bond redemption profile 1.3 1.3 1.0 1.0 1.0 1.0 0.8 0.7 0.5 1.0 0.8 Net debt / EBITDA 1 of 2.7x at end of Lower EBITDA over the past twelve months Cash phasing, interim dividend payment in August Strengthened liquidity position 750m 8.5year Eurobond with coupon of 3.25% issued in July 2bn revolving credit facility extended to July 2017 12 13 14 15 16 17 18 19 20 21 Bond maturity 22 23 24 26 29 30 Average coupon 5.1%, average maturity 6.8 years 1 Based on 12 months rolling total EBITDA excluding book gains, release of pension provisions and restructuring costs, when over 20m 8

Group results m % Revenues and other income 3,051 3,263 6.5% Operating expenses (excl. D&A) Depreciation 1 Amortization 1 Operating expenses 1,887 414 214 2,515 2,018 371 217 2,606 6.5% 12% 1.4% 3.5% Operating profit 536 657 18% Financial income/expense Share of profit of associates 210 3 199 6 5.5% 50% Profit before taxes 323 452 29% Taxes 73 84 13% Profit after taxes 250 368 32% Earnings per share 2 0.17 0.26 35% EBITDA 3 (reported) Restructuring costs EBITDA (excl. restructuring costs) 1,164 13 1,177 1,245 85 1,330 6.5% 85% 12% Revenues down 2.8%, excluding impact from sale of Getronics International (3.7%) EBITDA excluding restructuring costs down 12% mainly due to NetCo, Germany and Consumer Residential Operating expenses (excl. D&A) down 6.5% 197m lower operating expenses Corporate Market (sale Getronics International) 72m lower restructuring costs in Partly offset by Investments to strengthen Dutch market positions Higher commercial investments in Germany Higher pension costs, incl. 19m oneoff actuarial losses Getronics UK & US Depreciation up 12% Additional oneoff Germany ( 42m) 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 9

Group results YTD 12 m YTD 12 YTD 11 % Revenues and other income 9,434 9,788 3.6% Operating expenses (excl. D&A) Depreciation 1 Amortization 1 Operating expenses 6,027 1,082 634 7,743 5,966 1,070 639 7,675 1.0% 1.1% 0.8% 0.9% Operating profit 1,691 2,113 20% Financial income/expense Share of profit of associates 574 16 534 17 7.5% 5.9% Profit before taxes 1,101 1,562 30% Taxes 248 189 31% Profit after taxes 853 1,373 38% Earnings per share 2 0.60 0.93 35% EBITDA 3 (reported) Restructuring costs EBITDA (excl. restructuring costs) 3,407 83 3,490 3,822 108 3,930 11% 23% 11% Revenues down 1.6%, excluding impact from sale of Getronics International (2.0%) EBITDA excluding restructuring costs down 11% mainly due to NetCo and Consumer Residential Operating expenses (excl. D&A) up 1.0% Investments to strengthen Dutch market positions Commercial investments and higher traffic costs in Germany Higher pension costs, incl. 55m oneoff actuarial losses Getronics UK & US Partly offset by 273m lower operating expenses Corporate Market (sale Getronics International) 25m lower restructuring costs YTD 12 Higher taxes due to oneoff benefit innovation tax facilities in 2011 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 10

Group cash flow m % Operating profit 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 536 628 125 123 52 130 3 657 588 219 127 29 20 18% 6.8% 43% 3.1% n.m. n.m. n.m. 731 948 23% Capex 3 476 498 4.4% Proceeds from real estate 2 13 85% Tax recapture EPlus 89 92 3.3% Free cash flow 4 346 555 38% Free cash flow of 346m 150m lower change in working capital 81m lower EBITDA 81m lower change in provisions Partly offset by 94m lower interest paid Capex down 4.4% yony at 476m Lower Capex in Germany and NetCo partly offset by increased customer driven investments in The Netherlands 0.12 interim dividend per share paid in August Dividend paid Share repurchases 170 405 333 58% 100% Cash return to shareholders 170 738 77% 1 Including impairments, if any 2 Excluding changes in deferred taxes 3 Including property, plant & equipment and software 4 Defined as cash flow from operating activities, plus proceeds from real estate, minus Capex and excluding tax recapture EPlus 11

Group cash flow YTD 12 m YTD 12 YTD 11 % Operating profit 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 1,691 1,716 504 333 105 329 59 2,113 1,709 570 149 179 246 65 20% 0.4% 12% >100% 41% 34% 9.2% 2,077 2,613 21% Capex 3 1,443 1,395 3.4% Proceeds from real estate 40 75 47% Tax recapture EPlus 243 245 0.8% Free cash flow 4 917 1,538 40% Dividend paid Share repurchases 979 1,200 1,000 18% 100% Cash return to shareholders 979 2,200 56% 1 Including impairments, if any 2 Excluding changes in deferred taxes 3 Including property, plant & equipment and software 4 Defined as cash flow from operating activities, plus proceeds from real estate, minus Capex and excluding tax recapture EPlus Free cash flow of 917m YTD 12 415m lower EBITDA 184m higher taxes paid 83m lower change in working capital 48m higher Capex Partly offset by 74m higher change in provisions 66m lower interest paid Higher Capex YTD 12 due to increased customer driven investments in The Netherlands Coverage ratio of KPN pension funds at 104% end of Implementation Ultimate Forward Rate led to 3% positive effect on coverage ratio 19m recovery payment in Recovery payments of 23m in Q4 12 and 19m in Q1 13 12

Financial review Dutch Telco m Revenues and other income 5.7% Revenues and other income down 5.7% yony Regulatory impact of 27m (1.6%) Lower revenues in Consumer Mobile and NetCo 1,704 1,705 1,651 1,704 1,626 1,618 1,557 EBITDA excluding restructuring costs down 11% yony 94m lower revenues Regulatory impact of 16m (1.8%) Q1 12 Q2 12 EBITDA margin 1 of 50.3% in Margin pressure due to: m 52.7% EBITDA and EBITDA margin 1 52.4% 53.5% 50.8% 48.8% 49.1% 50.3% Investments to strengthen domestic market positions Decline of high margin traditional services 11% Improvements in underlying cost structure planned to support margin 898 1 893 1 884 4 866 14 794 13 795 41 783 6 6m restructuring costs in 897 892 880 852 781 754 777 Total restructuring costs 80m since start of FTE reduction program Restructuring costs Q1 12 Q2 12 EBITDA margin (excl. restructuring costs) EBITDA 1 EBITDA margin excluding restructuring costs, if any 13

Operating expenses Dutch Telco m Breakdown operating expenses Dutch Telco (excl. D&A and restructuring costs) 806 229 811 226 120 130 767 204 120 837 240 0.8% 833 241 822 237 145 144 131 773 225 97 Operating expenses (excluding D&A and restructuring costs) up by 0.8% yony Employee benefits up 21m due to release of provision in, higher expenses per FTE (wages and social security contributions) and higher costs for customer facing staff Cost of materials down 23m as a result of the introduction of new mobile propositions, including handset lease model Work contracted out relatively stable as lower traffic costs across all segments are offset by higher content costs for TV and higher FttH access costs 351 49 46 47 50 49 51 52 72 15 350 75 16 336 75 15 338 82 18 337 79 17 341 78 16 332 82 15 Improvements underlying cost structure planned related to FTE reduction program and quality improvements Q1 12 Q2 12 Employee benefits Cost of materials Work contracted out and other expenses Own work capitalized Other operating expenses Intercompany 14

Financial review Dutch Telco by segment m 30.2% 28.8% Consumer Mobile 29.4% 27.6% 22.0% 30.4% 34.4% Revenues Consumer Mobile down 11% Service revenue decline of 10%, impacted by regulation of 13m (3.0%) Lower traffic partly offset by higher committed revenues 1 480 490 473 457 427 444 422 EBITDA margin 2 increasing to 34.4% Supported by introduction of new commercial propositions, including handset lease model Q1 12 Q2 12 m 27.6% Consumer Residential 28.0% 26.5% 23.3% 23.4% 21.9% 21.9% Revenues Consumer Residential relatively stable qonq; higher TV and FttH revenues offsetting smaller fixed voice customer base EBITDA margin 2 at 21.9% Increased FttH and IPTV activations 479 479 472 473 458 457 457 Higher content costs Continued decline high margin traditional services Q1 12 Q2 12 EBITDA margin (excl. restructuring costs) Revenues and other income 1 Recurring subscription fees 2 EBITDA margin excluding restructuring costs, if any 15

Financial review Dutch Telco by segment (cont d) m Business Revenues Business down by 5.2% yony Regulatory impact of 10m (1.7%) 31.8% 32.8% 35.0% 30.1% 34.8% 33.4% 34.1% Lower traffic, decline in traditional services and price pressure Partly offset by good results challenger brands 614 615 600 604 598 601 569 EBITDA margin 1 relatively stable at 34.1% Q1 12 Q2 12 m 61.3% 61.7% 62.0% NetCo 61.6% 58.3% 57.0% 57.0% Revenues decline at NetCo 6.5% yony Driven by revenue decline at other Dutch Telco segments EBITDA margin 1 at 57.0% Higher costs related to uptake of FttH activations 698 684 664 734 664 635 621 Tech Mahindra partnership enabling increased efficiency of future IT spend Q1 12 Q2 12 EBITDA margin (excl. restructuring costs) Revenues and other income 1 EBITDA margin excluding restructuring costs, if any 16

Financial review Corporate Market & ibasis m 8.0% 448 326 128 m 3.1% 5.0% 439 323 122 4.1% Corporate Market 1 9.6% 2 6.1% 1.6% 499 424 307 347 428 300 123 156 132 Q1 12 The Netherlands ibasis International 2.7% 2.8% 2.7% 6.8% 366 326 42 3 Q2 12 2.7% 5.5% 291 291 3.4% Revenues Corporate Market The Netherlands down by 5.2% yony Clients postponing investments and continued price pressure EBITDA margin 4 at 5.5% 7.2% EBITDA margin, corrected for negative incidental of 5m Lower personnel costs as a result of the FTE reduction program Offset by lower margin business Revenues increased by 3.1% at ibasis Including 4.6% positive currency effect 226 246 256 249 255 261 264 EBITDA margin at 3.4% Focus on cost control, offsetting continuous margin pressure EBITDA margin (excl. restructuring costs) Q1 12 Q2 12 Revenues and other income 1 Total revenues and other income includes eliminations 2 EBITDA margin excluding impact Getronics International classification as asset held for sale 3 Impacted by sale of Getronics International on 1 May 2012 4 EBITDA margin excluding restructuring costs, if any 17

FTE reduction program on track ~1,150 less FTE in The Netherlands since start FTE reduction program Accelerated investment strategy leading to ~150 FTE increase ~1,300 less FTE resulting from FTE reduction program, mainly at Corporate Market 208m restructuring costs per related to ~2,500 FTE Status 4,0005,000 FTE reduction program Announced May 11 Provisions per Restructuring costs 250300m 208m 367 FTE 775 FTE 19,054 18,687 17,912 7,954 7,605 6,974 FTE 4,0005,000 ~2,500 Efficiency 8001,100 ~1,700 11,100 11,082 10,938 Outsourcing 1,4001,700 ~450 Offshoring 1,8002,200 ~350 Corporate Market domestic Personnel domestic 18

Financial review Mobile International Germany m 41.6% 38.9% 773 803 42.4% 838 43.9% 38.2% 829 794 Q1 12 39.8% 38.5% 38.6% 1 842 839 Q2 12 Revenues in Germany stable yony Roaming regulation impact of 3m (0.4%) Underlying service revenue growth of 0.9% EBITDA margin at 38.5% Roaming regulation EBITDA impact of 1m (0.3%) Increased commercial investments Belgium m 30.6% 33.0% 186 194 36.9% 198 38.9% 203 35.7% 36.8% 31.4% 191 207 201 Q1 12 Q2 12 Belgium revenues increased by 1.5% yony Regulation impact of 10m (5.1%) Underlying service revenue growth of 9.0% EBITDA margin at 36.8% Regulation EBITDA impact of 6m (8.2%) Underlying EBITDA growth of 17% yony Rest of World m 69 4 79 2 81 1 73 13 60 5 61 5 52 2 Revenue decline in Rest of World of 36% yony Sale of KPN France in Ortel Mobile operating in competitive environment EBITDA slightly improving qonq EBITDA margin Q1 12 Q2 12 Revenues and other income EBITDA 1 EBITDA margin excluding impact sale of SNT Inkasso ( 16m) 19

Portfolio management Streamlining portfolio of businesses, clear focus on value creation Incountry, selective acquisitions to strengthen domestic businesses, addition of scale and capabilities Divestment of noncore assets to focus on core footprint and most profitable divisions Selective acquisitions Divestments Acquisition Segment Rationale Impact Divestment Segment Rationale Impact Fiber wholesale platform (Q2 12) NetCo FttH commitment Efficiency Getronics International (Q2 12) Corporate Market Low margin business 8m book gain Fiber ISPs 1 (Q4 12) Consumer Residential FttH commitment ~1.8% broadband market share Tower sales (The Netherlands) ( / Q1 12) NetCo Noncore 98m book gain Lijbrandt 2 (Q2 12) Consumer Residential FttH commitment ~0.2% broadband market share SNT Inkasso Germany (Q2 12) Germany Noncore 16m book gain RoutIT (12.5% stake) () NLix () Business Business Add capability Add capability Improvement in product offering Widening of portfolio KPN France () PharmaPartners () Rest of World Corporate Market Noncore Noncore 10m book gain 5m book gain Total acquisition costs 150200m Total book gains 137m 1 ~120k FttH customers 2 ~13k FttH customers 20

Operating review Consumer Mobile Relatively stable market share in competitive mobile environment Service revenues Net adds Postpaid retail ARPU m 47% 442 388 k 14 65 46% 45% 44% 45% 45% 44% 446 397 430 386 406 364 387 345 403 360 387 345 Q1 12 Q2 12 Total market share NL 3 33 2 Wholesale Retail 34 30 14 3 9 9 9 18 9 14 38 Q1 12 Q2 12 Postpaid retail Postpaid wholesale 38 39 37 36 34 36 34 ~54% ~55% ~59% ~62% ~65% ~63% ~66% Q1 12 Q2 12 % committed postpaid retail ARPU Service revenues (incl. wholesale) down by 10% yony Regulatory impact (3.0%) Lower traffic partly offset by committed revenues 1 Market share service revenues 3 relatively stable Distribution footprint further expanded (multibrand and XL stores) Retail postpaid net adds of 14k in Aggressive promotions by competition following new Hi & Telfort propositions Postpaid ARPU lower yony at 34 Committed % postpaid retail ARPU ~66%, up ~7%points yony New propositions launched for all brands 1 Recurring subscription fees 2 Q2 2011 net adds positively impacted by acquisition of Tringg (14k) 3 Total Dutch (Consumer and Business) service revenue market share 22

Operating review Consumer Residential Broadband customer base increasing RGUs & ARPU per customer 1.85 38 1.87 38 1.89 39 1.92 39 1.94 39 Q1 12 1.97 39 Q2 12 2.01 40 RGUs per customer continued to increase driven by takeup of triple play (63k net adds in ) Net line loss in at 25k (: 35k) RGUs (#) Blended ARPU ( ) 16% 16% 17% 17% 18% 19% 20% Continued increase TV market share to 20% Strong IPTV growth at 88k net adds TV 360 882 416 868 489 853 573 827 652 801 741 771 829 741 IPTV base now larger than Digitenne base Q1 12 Q2 12 4 IPTV on smartphone introduced in Q3 TV market share 2 IPTV (k) Digitenne (k) 1 Broadband 41% 2,569 41% 2,558 40% 2,547 40% 2,538 39% 2,516 Q1 12 39% 2,528 Q2 12 4 39% 2,546 18k broadband net adds in Q3, market share stabilizing around 39% Good performance FttH activations Customer base increasing at slightly increasing ARPU per customer Broadband market share 3 Broadband ISP customers (k) 1 Digitenne used as primary TV connection 2 Source: Telecompaper, management estimates for, definition TV market share adjusted per 3 Source: Telecompaper, management estimates for 4 Includes 12k broadband customers and 13k TV customers from Lijbrandt acquisition in Q2 12 23

Operating review Consumer Residential (cont d) FttH penetration level continues to increase FttH penetration increasing Strong FttH activations: 34k in Q3 KPN FttH base at 198k Penetration of FttH increased to 18% Penetration growth by 7%points yony FttH rollout continuing FttH rollout continued at good pace, well over 1 million Homes Passed in KPN areas 126k additional Homes Passed in Q3 Total Reggefiber Homes Passed at 1,181k k 10% 50 10% 61 11% 77 13% 102 14% 125 17% 164 3 18% 198 k 693 506 768 626 844 705 951 813 1,005 879 1,078 986 1,181 1,112 Q1 12 Q2 12 Q1 12 Q2 12 FttH penetration 2 KPN FttH HA 1 Total Reggefiber HP 1 KPN areas HP 1 1 HP is Homes Passed; HA is Homes Activated 2 FttH penetration is defined as KPN FttH HA divided by KPN areas HP 3 Including 13k FttH customers from Lijbrandt acquisition 24

Operating review Business Service revenues 1 m 42 245 43 253 42 254 41 254 39 3.5% 252 39 253 36 245 Service revenues down 3.5% yony Impact from regulation 10m (3.9%) ARPU at 36 impacted by regulation, lower traffic, M2M growth and data mix effect Wireless customer base 1 Voice / Internet connections 2 Q1 12 Q2 12 Voice & SMS Data (excl. SMS) ARPU ( ) m 1.94 1.99 2.04 2.11 2.15 2.22 2.26 65% 68% 71% 73% 62% 57% 59% Q1 12 Q2 12 % data users 168 171 175 176 179 176 176 1.3 1.3 1.3 1.3 1.3 1.2 1.2 Q1 12 Q2 12 Business DSL (k) PSTN / ISDN lines (m) Growing customer base and data users (73%) supporting wireless data revenues Good performance by challenger brands Telfort and Yes Telecom Market positions remained stable in Q3 Stable performance Business DSL Strategic partnership RoutIT, strengthening SME product offering 1 Business wireless figures include Yes Telecom as of Q2 2011 2 Voice / Internet connections include Atlantic Telecom lines as of Q2 2011 25

Operating review Germany Price competition leading to a slowdown in growth in Germany 21.0 21.5 22.1 Net adds 22.7 23.1 23.5 24.0 High postpaid net adds at 210k Successful allnet flat propositions rollout continued 434 456 518 458 240 119 102 92 111 105 Q1 12 m Customers (m) Prepaid net adds (k) Service revenues 15.5% 15.8% 16.0% 15.9% 15.7% 263 284 179 210 Q2 12 Postpaid net adds (k) 15.8% 15.9% Prepaid net adds at 284k Competition in ethnic segment Value focus in customer acquisition strategy Service revenue growth of 0.5% Roaming regulation impact of 0.4% Underlying service revenue growth of 0.9% Higher postpaid net adds offset by customer optimization Stable market share at 15.9% 736 768 805 790 767 791 809 Continued data service revenue growth of 40% yony Q1 12 Q2 12 Service revenue market share Service revenues 27

Operating review Germany (cont d) Growth from higher net adds offset by customer optimization New BASE tariffs introduced in Q1 2012 New initiatives 2) June Nofrills postpaid propositions introduced Yourfone in April, simyo in May, Blau in June New prepaid propositions to capture data growth in wholesale market New initiatives need few quarters following launch to gain traction High speed data network rollout to support further growth in data revenues 2011 2013 Market developments Competition (MVNOs) introduced low priced postpaid initiatives on competitor networks as of second half 2011 Increased competition in ethnic segment High value customers trading down and optimizing their packages Customer optimization impacting service revenue growth rate 28

Operating review Belgium 3.9 3.9 4.1 Net adds 4.1 4.3 4.4 3.7 Continued strong underlying service revenue growth of 9.0% Driven by B2B, wholesale and data 136 9 152 40 133 132 14 20 11 21 9 4 234 3 Service revenue market share increased to ~20% Q1 12 Q2 12 696 Net adds postpaid at 3k Higher churn due to increased competition m ~19% 160 Customers (m) Postpaid net adds (k) Prepaid net adds (k) Prepaid net adds including cleanup (k) Service revenues ~19% ~19% >19% >19% ~20% ~20% 171 176 180 170 180 181 Q1 12 Q2 12 Net adds prepaid Q3 at 234k, corrected for cleanup Cleanup of 930k expired SIM cards Commercial initiatives launched to maintain priceleadership Jim Mobile as well as BASE portfolio revamped Continued focus on high speed data network rollout Service revenue market share Service revenues 29

Concluding remarks Mixed operational performance across the group Growing broadband customer base, market share stabilizing around 39% TV market share increased to 20% supporting triple play takeup Fiber penetration level increased to 18% Market share Dutch mobile relatively stable in competitive environment Lower growth in Germany due to increased price competition Continued strong profitable growth in Belgium 4,0005,000 FTE reduction program on track to be completed end 2013 Outlook confirmed 31

Q&A 32

Annex For further information please contact KPN Investor Relations +31 70 44 60986 ir@kpn.com www.kpn.com/ir

Analysis of results Impact regulation, incidentals and restructuring m YTD 12 YTD 11 Revenue effect MTA reduction Regulation Group 21 106 81 365 Roaming tariff reduction Regulation Group 19 10 23 20 EBITDA 1 effect MTA reduction Regulation Group 8 45 29 153 Roaming tariff reduction Regulation Group 15 4 18 8 Restructuring costs Restructuring Group 13 85 83 108 Release of provisions Incidental Belgium 5 5 Release of provisions Incidental NetCo 9 Release of accrued expenses Incidental NetCo 5 Booking of provision Incidental Corporate Market 5 5 Release of provisions Incidental Corporate Market 10 10 Revenue & EBITDA 1 effect Book gain on sale of real estate Incidental NetCo 5 31 49 Book gain on sale of business Incidental Germany 16 Book gain on sale of business Incidental Corporate Market 8 5 Release of deferred revenues Incidental Consumer Mobile 7 Release of deferred connection fees Incidental Consumer Residential 11 Release of deferred connection fees Incidental Business 10 1 Defined as operating profit plus depreciation, amortization and impairments 34

Restructuring costs m YTD 12 YTD 11 Germany Belgium Rest of World 1 1 1 3 Mobile International 2 4 Consumer Mobile Consumer Residential 1 Business NetCo Other Dutch Telco 6 4 60 6 Corporate Market 4 78 8 90 The Netherlands 10 82 68 96 Other 3 1 15 8 KPN Group 13 85 83 108 1 2 3 1 1 2 2 23 12 20 3 2 1 3 1 YTD 11 adjusted due to better insights 35

Impact MTA reduction m YTD 12 Revenues EBITDA 1 Revenues EBITDA 1 Germany Belgium Mobile International 6 3 19 9 Consumer Mobile Of which: Mobile Wholesale Business NetCo Intercompany The Netherlands 15 5 62 20 KPN Group 21 8 81 29 6 8 1 3 4 3 3 2 19 33 6 14 15 9 12 7 1 1 Defined as operating profit plus depreciation, amortization and impairments 36

Operating expenses m % Employee benefits 432 446 3.1% Cost of materials 186 230 19% Work contracted out and other expenses 1,110 1,134 2.1% Own work capitalized 26 26 flat Other operating expenses 1 185 234 21% Depreciation 2 414 371 12% Amortization 2 214 217 1.4% Total 2,515 2,606 3.5% m 79.0% 77.7% 80.0% 89.2% 80.2% 3 83.2% 82.5% 82.6% 2,523 1,966 557 2,546 1,982 564 2,606 2,018 588 2,939 2,059 298 582 2,627 2,087 540 2,601 2,053 548 2,515 1,887 628 Operating expenses as % of revenues Operating expenses (excl. D&A) Impairment Corporate Market Depreciation & Amortization Q1 12 Q2 12 1 Including restructuring costs 2 Including impairments, if any 3 Excluding impairment of 298m at Corporate Market 37

Operating expenses analysis Employee benefits & Cost of materials m 14.9% 14.4% 477 471 Employee benefits 16.8% 13.7% 14.6% 446 480 532 Q1 12 15.2% 480 Q2 12 14.2% 432 YonY decrease Lower costs due to sale of Getronics International Partly offset by: Higher pension costs relating to UK and US Getronics pension funds ( 19m) Release of several incentive schemes in QonQ decrease Lower costs due to sale of Getronics International Release of paid holiday provision % of Revenues Employee benefits m Cost of materials YonY decrease 8.6% Lower SAC at Consumer Mobile due to new 8.1% 8.4% 7.5% propositions, incl. handset lease model 7.1% 7.1% Lower costs due to sale of Getronics International 6.1% 258 232 230 285 264 236 186 QonQ decrease Lower SAC due to handset lease model Lower costs due to sale of Getronics International Lower sales high end smartphones at Business Q1 12 Q2 12 % of Revenues Cost of materials 38

Operating expenses analysis Work contracted out & Other m 34.6% 34.7% Work contracted out 36.2% 34.8% 34.2% 36.2% 36.5% YonY decrease Lower traffic costs in The Netherlands Lower costs due to sale of KPN France Partly offset by Higher content costs at Consumer Residential Higher traffic costs ibasis and Belgium 1,106 1,136 1,134 1,127 1,143 1,142 1,110 QonQ decrease Lower maintenance and IT contract costs at Netco Q1 12 Q2 12 % of Revenues Work contracted out m 4.8% 5.3% 7.2% Other 6.0% 5.6% 7.1% 6.1% YonY decrease Lower restructuring costs Partly offset by higher marketing costs QonQ decrease Lower restructuring costs 154 173 234 198 176 224 185 Q1 12 Q2 12 % of Revenues Other operating expenses 39

Operating expenses analysis Depreciation & Amortization m 10.9% 347 10.7% 352 % of Revenues 11.4% Depreciation 1 14.3% 10.8% 2 115 371 355 10.5% 331 Q1 12 Impairment Corporate Market 13.6% 10.7% 414 337 Q2 12 Depreciation YonY increase Additional depreciation assets under construction ( AUC ) Germany ( 42m) Introduction new mobile propositions, incl. handset lease model at Consumer Mobile and Germany Partly offset by extension economic lifetime fiber network at NetCo QonQ increase Additional depreciation AUC Germany ( 42m) Introduction new mobile propositions, incl. handset lease model at Consumer Mobile and Germany m Amortization 1 12.4% YonY and QonQ relatively stable Nothing material to explain 6.6% 6.5% 6.7% 6.9% 2 6.6% 6.7% 7.0% 183 210 212 217 227 209 211 214 Q1 12 Q2 12 % of Revenues Impairment Corporate Market Amortization 1 Including impairments, if any 2 Excluding impairment of 298m at Corporate Market 40

Tax P&L Cash flow Fiscal units ( m) The Netherlands 40 60 121 1 121 1 Corporate Market 4 23 1 1 Germany Belgium Other 27 8 2 34 9 4 1 2 7 Total reported tax 73 84 123 127 Effective tax rate 22.7% 18.4% In, the effective tax rate amounted to 22.7% mainly due to losses related to nondeductible pension expenses in 2012 for the UK and US Getronics pension funds Effective Group tax rate expected to be ~22% for 2012, 20% in years 20132015 The positive tax impact on the P&L of Corporate Market for is mainly due to restructuring costs 1 Including tax recapture EPlus 41

Debt portfolio Breakdown of 13.9bn gross debt 1 Global bonds 5% Other 2% 5% 15% 80% EUR USD 2 GBP 2 Eurobonds 93% 100% Fixed 3 1 Nominal value of interest bearing financial liabilities related to these liabilities 2 Foreign currency amounts hedged into EUR 3 Excluding bank overdraft 42

Dutch wireless disclosure m % Service revenues Consumer retail Business Other 1 639 345 245 49 690 386 254 50 7.4% 11% 3.5% 2.0% SAC/SRC Consumer retail 2 Business 174 320 122 227 43% 41% 1 Includes amongst others Consumer Mobile wholesale and visitor roaming revenues at NetCo 2 Including handset subsidies, commissions, SIM costs and capitalization of handsets corrected for residual value 43

Mobile International wireless disclosure Service revenues growth Germany Service revenues growth Belgium 15.0% 1.0% 7.9% 7.5% 8.1% 7.2% 1.2% 4.2% 4.2% 3.0% 3.0% 0.5% 0.9% 8.1% 8.9% 11.4% 7.8% 3.5% 11.1% 11.8% 9.0% 6.3% 5.3% 2.8% 0.5% 0.6% 5.3% 3.9% Q1 12 Q2 12 Q1 12 Q2 12 Reported Underlying Reported Underlying 1 1 Market growth Germany 2 Market growth Belgium 2 0.2% 3.0% 3.1% 1.02.0% 0.9% 0.5% 0.4% 0.6% 1.2% 0.9% 3.0% 2.0 / 3.0% 4.4% 5.7% Q1 12 Q2 12 Q1 12 Q2 12 1 The definition of underlying is explained in the safe harbor of this presentation 2 Management estimates for market service revenues growth, based on equity research 44

Regulation MTA rates across the group NL In, the Dutch Court overruled OPTAs MTA tariff decision and determined a new tariff as of 1 September 2012 of 2.40 cent per minute instead of 1.20 cent per minute GER BE ct/ min Until 7 July 7 July 10 Sep 10 Jan 11 Sep 11 Sep 12 MTA rate 7.00 5.60 5.60 4.20 2.70 2.40 Legal proceedings against current MTA decisions ongoing New MTA tariff decision expected in November 2012 ct/ min Until 1 Dec 10 1 Dec 10 30 Nov 12 MTA rate 7.14 3.36 KPN s annulment request has been rejected ct / min Until Aug Aug 10 Jan 11 Jan 12 Jan 13 MTA rate 11.43 5.68 4.76 2.92 1.08 Impact on Group revenues & EBITDA m 2010 2011 2012E Revenues 180 459 ~105 EBITDA 62 192 ~40 45

Regulation Spectrum in The Netherlands Total 800MHz Free 2*30 MHz 2*30 900MHz Vodafone TMobile KPN 2*12.5 2*10 2*12.5 To be auctioned 2*35 1.8GHz Vodafone TMobile KPN Free 2*5 2*30 2*20 2*15 2*70 Current status 1.9GHz Free 14.7MHz unpaired 1*14.7 2.1GHz Vodafone TMobile KPN Free 2*15 1*5 2*20 1*10 2*15 1*5 2*10 2*60 1*20 2.6GHz Vodafone TMobile KPN Ziggo4 Tele2 Free 2*10 2*5 2*10 2*20 2*20 55 unpaired 2*65 1*55 Total Vodafone TMobile KPN Ziggo4 Tele2 Free 90MHz 140MHz 120MHz 40MHz 40MHz 184.7MHz Upcoming spectrum auction The auction starts October 31 st 2012. The auction rules published in January 2012 include the following: Frequencies auctioned in 800MHz, 900MHz, 1.8GHz, 1.9GHz, 2.1GHz and 2.6GHz bands 2*10MHz in 800MHz band reserved for new entrant(s). Reservation of 2x5MHz in 900MHz has been removed Existing 900MHz and 1.8GHz licenses will expire as of 26 February 2013. The government decided to allow extension of the existing licenses for a maximum period of 21 months All spectrum has minimum prices and rollout obligations. In addition, reserved spectrum has trading restrictions for the first five years No spectrum caps for nonreserved spectrum License duration of 800MHz, 900MHz, 1.8GHz, 1.9GHz and 2.6GHz bands is 17 years. 2.1GHz licenses expire on 1 January 2017 46

Regulation Spectrum in Germany 800MHz Paired O2 VOD DT 2*5 2*5 2*5 2*5 2*5 2*5 2*30 900MHz Paired E+ O2 DT DT VOD VOD 2*5 2*5 2*5 2*7*4 2*5 2*7.4 2*34.8 1.8GHz Paired DT E+ O2 VOD E+ 2*5 2*5 2*5 2*5 2*5 2*5 2*5 2*7.4 2*5.4 2*5 2*5 2*5 2*7.4 2*70.2 Current status 2.1GHz Paired 2.1GHz Unpaired VOD E+ O2 DT 2*5 2*5 2*5 2*5 2*5 2*5 2*5 2*5 2*5 2*5 2*5 2*5 E+ DT VOD O2 5 5 5 5 14.2 2*60 1*34.2 2.6GHz Paired VOD DT E+ O2 2*5 2*5 2*5 2*5 2*5 2*5 2*5 2*5 2*5 2*5 2*5 2*5 2*5 2*5 2*70 2.6GHz Unpaired E+ VOD DT O2 5 5 5 5 5 5 5 5 5 1*45 Total VOD DT E+ O2 155.6MHz 154.8MHz 139.8MHz 164MHz 47

Personnel Decrease of 4,150 FTE yony 30,534 3,826 7,954 7,654 11,100 30,598 3,827 7,791 7,859 11,121 30,859 4,010 7,654 8,085 11,110 31,084 4,016 7,605 8,381 11,082 31,040 4,104 7,406 8,565 10,965 26,972 23 7,168 8,725 11,056 26,709 24 6,974 8,773 10,938 Reduction of 172 FTE domestic personnel across all segments Increase of 688 FTE abroad personnel to support growth Reduction of 680 FTE Corporate Market domestic Reduction of 3,986 FTE at Corporate Market abroad due to sale of Getronics International Decrease of 263 FTE qonq Reduction of 118 FTE domestic personnel across all segments Increase of 48 FTE personnel abroad Reduction of 194 FTE Corporate Market domestic 1 Q1 12 Q2 12 Corporate Market abroad Corporate Market domestic Personnel abroad Personnel domestic 1 Distribution of FTE between segments adjusted due to better insights 48

Infrastructure Deploying mix of technologies going forward ADSL on copper VDSL from central office (VDSLCO) VDSL pair bonding central office (VDSLCO) VDSL from street cabinet FttH Wireless Central office Central office Central office Central office ODF 1 Street cabinet up to 20 Mbps DS 2 up to 2 Mbps US IPTV & HDTV up to 50 Mbps DS up to 5 Mbps US IPTV, multiroom HDTV up to 80 Mbps DS up to 8 Mbps US IPTV, multiroom HDTV up to 50 Mbps DS up to 5 Mbps US IPTV, multiroom HDTV 50, 60, 100, 500 Mbps US & DS IPTV, multiroom HDTV >14 Mbps DS (HSPA / LTE) DVBT (Digitenne) Fiber Copper 1 Optical distribution frame 2 DS: Download Speed; US: Upload Speed 49

Unbundling tariffs Unbundling in copper network SDF ~28,000 street cabinets 1,350 local exchanges Unbundling in network FttC ~28,000 Street cabinets MDF ~200 Unbundling in network FttH ~3,500 MDF colocation Wholesale Broadband Access Consumer market (tariffs not regulated) SDF colocation Wholesale Broadband Access Consumer market (tariffs not regulated) ODF City PoP Wholesale Broadband Access (not regulated) Regulated Not regulated Node KPN / Telco Node KPN / Telco Node KPN / Telco Category Line sharing (LLU) 1 Fully unbundled (LLU) 1 MDF colocation 1 MDF backhaul Wholesale Broadband Access Category Line sharing (SLU) 2 Fully unbundled (SLU) 2 SDF colocation 3 Wholesale Broadband Access 0.11 / line 6.69 / line Monthly tariff 891.24 / footprint / year Commercial pricing, not regulated 5.32 shared 13.00 nonshared Monthly tariff 6.69 / line 6.69 / line 1.24 / line or 5.50 / per unit Oneoff 503.64 / per unit 5.32 shared 13.00 nonshared Category Monthly tariff Fully unbundled (ODF FttH) 12.58 18.35 ODF FttH colocation ODF FttH Backhaul Wholesale Broadband Access FttH ODF FttO 524 / month / per Area Pop Oneoff 3,146 / per Area Pop 629 / month 25.00 45.00 nonshared Not regulated 1 Tariffs per 1 January 2012, refer to WPC 20092011 (WPC 2A) + 2.3% indexation according to decision of OPTA on LLU 2 Tariffs per 1 April 2012 3 Tariffs per 1 May 2012 50

Third Quarter Results October 2012