Investor presentation September 2016
Contents 1 Strategy 2 Performance 3 Appendix
Strategy Strategic choices embedded in organization 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 networks and operating model integrated networks technologies Lean Value management Invested ahead Financial cost structure & predictable cash generation of the curve Shareholder value creation CEO 3 5 5
External environment reassuring Macro-economy stabilizing with improving competitive position IMPROVING MACRO-ECONOMY COMPETITIVE ECONOMIC POSITION 2 ’15-’16 vs. ’14-’15 GDP growth NL 1 2.1% 1.9% Germany 4 +1 0.9% The Netherlands 5 +3 -0.7% 2013 2014 2015 2016E United Kingdom 10 -1 Unemployment NL 1 Denmark 12 +1 7.4% 7.3% 6.9% 6.7% Belgium 19 -1 2013 2014 2015 2016E 4 3 1 CBS and CBP (issued 2015) 2 World Economic Forum; The Global Competitiveness Report 2015-2016 & 2014-2015
External environment reassuring (cont’d) KPN strongly positioned as only integrated service provider Fixed network FttC, FttH Coax Wholesale KPN N/A Wholesale KPN Broadband market share 1 41% 43% N/A N/A 4% TV product perception 2 N/A N/A TV market share 1 29% 52% N/A N/A 2% Mobile network 2G, 3G, 4G MVNO 2G, 3G, 4G 2G, 3G, 4G 4G + MVNO Mobile network quality 3 Mobile market share 4 44% N/A 35% 21% N/A Fixed-mobile convergence SME, LE, SME, LE, Business market presence SME SME, LE SME, LE Corporate Corporate Business market capabilities Trusted brand 1 Telecompaper (Q4 2015) 2 Independent market survey (Consumentenbond; Q3 2015) 3 Independent market survey (Q4 2015) 4 Total Dutch (Consumer and Business) mobile service revenue market share (Q4 2015) 5 7
Transforming into Business ICT service provider 1 Realize growth by strengthening and deepening customer relations Clear market segmentation with a targeted sales approach 2 Strengthen portfolio & distribution via partnerships 3 Rationalize & simplify products and services to create standardized building blocks 4 Operational excellence to improve customer experience 5 De-risk revenue profile 6 Improve profitability and stabilize revenues 6 9
Strengthening & deepening customer relations Leverage leading position in Telco to grow market share in IT ADDRESSABLE MARKET ADDRESSABLE MARKET 2015 (~₠ 13 bn) 2015 (~₠ 13 bn) 2020 (~₠ 14 bn) • Fixed Slightly declining Telco market Telco market 1 • Mobile Market share >50% • UC / Workspace • Cloud • Security Growing IT market • Virtualization of services IT market 1 Market share <5% • Internet of Things / M2M • Housing & Hosting • Retain value and maintain market leading positions in Telco services • Leverage leading market positions to drive cross- and upsell in IT market Ambition • Obtain leading positions in Cloud, Workspace and Security • Strengthen position in other IT domains via partnerships 7 5 1 Gartner, management estimates
KPN well positioned to deliver on customer needs Standardized building blocks to deliver productivity N S U L T O I N C G Y S O T R L U S T U I D O N N I S I T Y S E Applications & Data R R V Digital Workspace U C I C E E S S Data Management & Analytics • • Workspace as a Service A D T A I G D I T & A Hosted & Cloud Applications • L • Unified Communications S N W O O I T R A App Development (with partners) • K • Modular & Hybrid C S I P L A P C Cloud Contact Center • P • Omni Support E A C L O U D Y T I N I V F I Cloud Infrastructure & Hosting R Access & Connectivity T A NL C S E N T R N U O (Mission) Critical Hosting • • 2G / 3G / 4G, VDSL, Fiber C C T U & R S E S E & C CloudNL • S • Private Connect, VPN, Network B H C O A S E U T I N C G S I I V N R Storage & Backup • E E • IoT, LoRa, M2M, Internet S S S Y C T O I N T I N U Colocation • • Service Operator S P E R C O V I F E R S E S I S 8 O N A L 8
Finalizing transformation is key priority De-risk revenue profile and stabilize revenues in medium-term % y-on-y growth % of total revenues % of total revenues FY 2015 FY 2015 FY 2018 -10% 24% 15-20% Single play wireless Repricing ongoing Mainly -21% 18% Continued rationalization 5-10% SME Traditional fixed traditional voice 37% 4% Multi play seats 10-15% Multi play picking up LE & Corporate -11% 23% Economy slowly 25-30% Network & IT services improving Mainly -5.2% 23% Leverage position in 25-30% Customized solutions Telco and grow IT 30% 4% Strong growth 10-15% New services Cloud, IoT, M2M 9 12
Finalizing transformation is key priority (cont’d) Improve profitability by stabilizing revenues and reducing indirect costs Reduce indirect costs Simplification program CAGR -4.5% • Portfolio rationalization Other • Automation of delivery and service • Online self-care portal Personnel First Time Right • costs • Agile working environment • FTE reductions in supporting roles IT/TI 2015 2016 2018 10 13
Key priorities for the coming years in Consumer Consumer strategy centered around household Increase penetration of fixed-mobile bundles 1 Reduce churn by increasing loyalty and customer satisfaction 2 Accelerate up- and cross-sell in bundles 3 Grow in TV via cloud-based IPTV platform 4 Benefit from growing mobile data usage 5 Further improve excellent customer experience 6 Grow revenues, increase loyalty and reduce cost to serve 11 14
Successful bundling strategy… Strong increase fixed-mobile penetration Steady growth bundling in fixed Medium-term ambition 26% 28% 2011 2015 2015 56% Triple play as % of Fixed-mobile bundles as broadband customers % of broadband customers 2015 Strong growth bundling in mobile 1 ~60% 33% 2011 2015 Mobile-only Fixed-mobile Fixed-mobile bundles bundles Other customers 12 15 1 Retail postpaid customers
Household at center of service model in Consumer Significant opportunities to increase share of wallet per household Cross-sell fixed-only Upsell security to mobile services Upsell value Deep-sell by added services increasing SIMs Upsell Smart Cross-sell mobile- life services only to fixed 13 17
Strong competitive positioning in Dutch market Covering all segments: focus on fixed-mobile bundling and high value STRONG SHIFT TO HIGH VALUE KPN BRAND High Retail postpaid net adds (k) 80 84 80 70 59 53 57 26 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 ’14 ’14 ’14 ’14 ’15 ’15 ’15 ’15 Value KPN brand No frills brands Broadband net adds (k) 40 41 35 33 31 6 Low Fixed-mobile integration High -7 -7 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 ’14 ’14 ’14 ’14 ’15 ’15 ’15 ’15 Size Total revenues 14 19
Content aggregation via smart partnerships Revenue share model facilitating popular content via IPTV platform Strong focus on partnerships to deliver rich content offering Revenue share model • Partnerships with broadcasters Basic content • Attractive interactive ILLUSTRATIVE functionalities for customers Contract content supplier • Revenue share model Upsell content ✔ Non-exclusive agreement • Access OTT services & Pay-TV packages via IPTV ✔ user interface Integrated in IPTV user interface Consumer fee ₠ 10 • Smart partnerships Exclusive content • Only available for KPN Revenue share KPN 50% customers 15 21
Expanding superior network position 1 Simplify operating model to improve customer experience and operational effectiveness 2 Expand superior access position by deploying innovative technologies and increasing fiber penetration 3 Finalize build of flexible and simplified integrated network Ensuring best-in-class customer experience 16 11
Simplifying our operating model Second wave of Simplification program to deliver significant savings SIMPLIFICATION PROGRAM RUN-RATE OPEX AND CAPEX SAVINGS (in m) > ₠ 300 > ₠ 750 ~₠ 450 ~₠ 170 ~₠ 280 FIRST WAVE SECOND WAVE END END END END 2013 2015 2016 2019 FROM PRODUCT CENTRIC TO CUSTOMER CENTRIC TO NEXT GENERATION TELCO 17 5
Best mobile access provider Investment-led strategy enabling superior customer experience Most time spent on LTE 1 Best network for mobile services 3 86% 84% 79% 70% 69% 66% 66% 52% 56% 53% 51% KPN NL SE DK CH AU BE DE UK FR 27% Competitive speeds on LTE 2 41.4Mbps 40.4Mbps 18% 3% KPN Average NL KPN Competitor 1 Competitor 2 Competitor 3 1 OpenSignal; The state of LTE (December 2015) 18 12 2 Ookla (December 2015) 3 Independent market survey (Q4 2015)
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