Fourth Quarter and Annual Results 2016 1 February 2017 Safe harbor - PowerPoint PPT Presentation

Fourth Quarter and Annual Results 2016 1 February 2017

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 will be included in the Integrated Annual Report 2016. 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 2015. 2 Q4 and FY 2016 Results | Safe Harbor |

Highlights Q4 and 2016 Services & Innovation Operational Financial 2 Focus on value and convergence  Addressable convergence base  € m Q4 '16 FY '16 in Consumer paying off expanded by adding XS4ALL Adj. revenues 1,704 6,780 Increasing penetration of fixed-  % y-on-y -2.3% -3.4% mobile bundles Strong improvement customer  Adj. revenues NL 1,519 6,026 37% of broadband base  satisfaction in Business 43% of postpaid base  % y-on-y -1.9% -2.4% 18k IPTV net adds  Adj. EBITDA 606 2,428 2k broadband net adds  Successful introduction VoLTE  % y-on-y 4.1% 0.4% 19k postpaid net adds, driven by  Adj. EBITDA NL 602 2,411 the high value KPN brand FttH/FttC coverage at ~78% of % y-on-y 6.2% 1.3%  households FCF (excl. TEFD dividend) 3 370 683 Accelerated migrations to  integrated solutions in Business % y-on-y 66% 24% 27k multi play net adds (mainly SME) #1 Sustainable Datacenter award   Intended regular dividend of € 10ct Strengthening customer relations,  (EMEA) 1  but impacting revenues per share in respect of 2016 Less customized work y-on-y  € 6.7ct final dividend expected in  April 2017 First wave Simplification program finalized: ~€ 460m run-rate savings realized 4  1 Source: Datacenter Dynamics 3 2 All figures based on continuing operations, unless stated otherwise Q4 and FY 2016 Results | Highlights | 3 Q4 ’16 excludes € 11m positive impact from cash optimization from bond tender in September; FY ’16 excludes € 52m negative impact from cash optimization actions 4 End Q4 ’16 vs. end Q4 ’13

Delivering on strategic vision Simplify, Grow, Innovate Further strengthening our Company SIMPLIFY GROW INNOVATE Digital & simple service Converged Telco Excellent Commercial and delivery & IT services user experience Flexible & simplified Best-in-class secured Applying innovative Operational integrated networks technologies network and operating model Lean Value management Invested ahead Financial of the curve cost structure & predictable cash generation CEO Value creation 4 Q4 and FY 2016 Results | Strategy |

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 5 Q4 and FY 2016 Results | Key priorities |

Continued growth of fixed-mobile bundles in Consumer 1 Clear benefits from convergence strategy Customers in fixed-mobile bundles Multi-brand strategy to drive convergence further Households 1 Postpaid customers 37% 43% 29% 33% + Q4 ’15 Q4 ’15 Q4 ’16 Q4 ’16 56% KPN brand Clear convergence benefits Higher NPS 2 (Q4 ’16) Lower churn 3 (Q4 ’16) Lower marketing expenses 4 23 ~10% -34% ~5% 10 Consumer total Fixed-mobile Consumer total Fixed-mobile FY ’15 FY ’16 (all brands) bundles 3 bundles 6 Q4 and FY 2016 Results | Accelerate up ‐ and cross ‐ sell in bundles | 1 As % of broadband customers 3 KPN brand 2 Source: Kantar TNS 4 Consumer Marketing & Communication expenses

Continued value focus in Consumer mobile 1 Strategic focus on KPN brand drives Customer Lifetime Value CLV illustrates focus on KPN brand Focus on committed ARPU… …and Customer Lifetime Value € 26 € 26 € 25 Actuals Q4 ’16 y-on-y 1 ~€ 22 ~€ 22 ~€ 21 2yr handset contract Q4 ’15 Q3 ’16 Q4 ’16 Committed postpaid ARPU One-off handset fee Non-committed postpaid ARPU SAC/SRC 80 k Traffic & Other 36 19 CLV Q4 ’15 Q3 ’16 Q4 ’16 Postpaid net adds 7 Q4 and FY 2016 Results | Accelerate up ‐ and cross ‐ sell in bundles | 1 KPN brand

TV focus point in household centered strategy 2 Highest quality of service through differentiated functionalities and leading network Best-in-class IPTV services… …driving continued TV growth 70% High quality Content 69% 161 Metro Core Locations  66% Delivery Network Superior stable access speeds  Superior In-app personalized TV offering  functionality 2,871 2,873 Integrated access OTT services  2,828 Available everywhere, incl. 4G  Content 2,321 Selective 2,258 2,325 Basic content Upsell content aggregation exclusive content Q4 ’15 Q3 ’16 Q4 ’16 Best rated Total TV base (k) TV services 1 “Most stable TV connection” Broadband base (k) “Highest quality equipment” % IPTV of broadband base 1 For nationwide operators, source: Dutch Consumers’ Association (Consumentenbond), January 2017 8 Q4 and FY 2016 Results | Grow in TV |

Migrations to integrated solutions strengthen business customer relations 3 Revenue challenges in Business remain Business revenue growth drivers Q4 ’16 Q4 ’16 FY ’16 FY ’16 adjusted % of total adjusted adjusted % of total adjusted y-on-y growth revenues y-on-y growth revenues Business total -9.2% -7.6% Single play wireless -9.4% 22% -13% 23% Mainly SME Traditional fixed -22% 16% -19% 17% Multi play 27% 5.8% 27% 5.2% LE&Corporate Network & IT services -11% 22% -10% 22% Mainly Customized solutions -5.8% 1 26% -2.7% 1 24% New services 3.3% 1 5.4% 27% 1 5.4% 1 Excludes migration of contract from New services to Customized solutions 9 Q4 and FY 2016 Results | Finalize Business transformation |