Royal KPN : KPN Q4 2019 Results (Presentation)

Q4 & FY 2019 RESULTS

29 January 2020

Safe harbor

Alternative performance measures and management estimates

This financial report contains a number of alternative performance measures (non-GAAP figures) to provide readers with additional financial information that is regularly reviewed by management, such as EBITDA and Free Cash Flow ('FCF'). These non-GAAP figures should not be viewed as a substitute for KPN's GAAP figures and are not uniformly defined by all companies including KPN's peers. Numerical reconciliations are included in KPN's quarterly factsheets and in the Integrated Annual Report 2018. 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. The figures shown in this financial report are based on continuing operations and were rounded in accordance with standard business principles. As a result, totals indicated may not be equal to the precise sum of the individual figures.

Financial information is based on KPN's interpretation of IFRS as adopted by the European Union as disclosed in the Integrated Annual Report 2018 and do not take into account the impact of future IFRS standards or interpretations. Note that certain definitions used by KPN in this report deviate from the literal definition thereof 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. KPN defines revenues as the total of revenues and other income. Adjusted revenues are derived from revenues (including other income) and are adjusted for the impact of incidentals. KPN defines EBITDA as operating result before depreciation (including impairments) of PP&E and amortization (including impairments) of intangible assets. Adjusted EBITDA after leases ('adjusted EBITDA AL') are derived from EBITDA and are adjusted for the impact of restructuring costs and incidentals ('adjusted') and for lease costs, including depreciation of right-of-use assets and interest on lease liabilities ('after leases' or 'AL'). KPN defines Gross Debt as the nominal value of interest-bearing financial liabilities representing the net repayment obligations in Euro, excluding derivatives, related collateral, and leases, taking into account 50% of the nominal value of the hybrid capital instruments. In its Leverage Ratio, KPN defines Net Debt as Gross Debt less net cash and short-term investments, divided by 12 month rolling adjusted EBITDA AL excluding major changes in the composition of the Group (acquisitions and disposals). The Lease adjusted leverage ratio is calculated as Net Debt including lease liabilities divided by 12 month rolling adjusted EBITDA excluding major changes in the composition of the Group (acquisitions and disposals). Free Cash Flow ('FCF') 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 and adjusted for repayments of lease liabilities.

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. A number of these factors are described (not exhaustively) in the Integrated Annual Report 2018. All forward-looking statements and ambitions stated in this financial report that refer to a growth or decline, refer to such growth or decline relative to the situation per 31 December 2018, unless stated otherwise.

Comparative figures regarding IFRS 16

The impact of the adoption of IFRS 16 is unaudited and may be subject to change until the publication of KPN's Financial Statements 2019.

Additional information regarding impact of divestments on Q4 and FY 2018 financial figures

KPN's Q4 2019 Press Release and Q4 2019 Analyst Presentation include additional information regarding impact of divestments on the Q4 and FY 2018 comparative financial figures, as KPN's Board of Management deems it important to provide readers with additional information on the financial impact of the following divestments: NLDC, International Network Services and Argeweb.

The impact of divestments as mentioned represents the estimated financial impact (transfer of revenues, addition of COGS and transfer of indirect costs) of the combined completed divestments as if the actual transfer of shares (closing) had taken place 12 months earlier. This information has been included for comparison reasons only and is not considered to be an alternative performance measure. Please note that the financial impact of divestments is based on management estimates, which have not and will not be audited.

2

Operational highlights FY 2019

good progress on the execution of our strategy

The best converged	Focus on profitable	Accelerating
smart infrastructure	growth segments	simplification &
		digitalization
Accelerated fiber roll-out strategy	Consumer: focus on households	Digital transformation
	and convergence
Mobile network modernization		IT rationalization
	Business: focus on stabilizing
Migration legacy lines to all-IP	end-to-end Adj. EBITDA AL	Sustainable opex reductions
	Wholesale: grow WBA/VULA	Focus on core activities
	portfolio

3

The best converged smart infrastructure

2019 - 2021 strategy

Fiber roll-out	Full mobile network	Moving to All-IP
acceleration	modernization
+1 million	100%	100%

FttH households

by end 2021

by end 2021

5G ready

by end 2021

Stable Capex envelope € 1.1bn

substantial shift in mix from ~35% to ~50% access investments (2019-2021)

4

Fiber roll-out acceleration

progress made in 2019

FttH roll-out in progress

~120k

additional households

>70

new projects up and running

Future proof technology

Deploying latest technologies G-PON & XGS-PON

1Gbps proposition will become available on fiber as of March 2020

FttC roll-out nearly finalized

~390k

additional households1

1 Technically ready

5

FttH access investments

driving higher returns in Consumer

+2		+€ 6		+6%pt		-40%
NPS1		Fixed ARPU		Convergence		Churn
		penetration

Fiber vs. Copper customers Q4 2019

KPN brand

6 1 Source: Kantar TNS

Full mobile network modernization

progress made in 2019

Strong start to	…using latest	…significantly
mobile network	technologies…	improving
modernization…		download speed
	Massive
640	MIMO	>30%
sites modernized		higher download speed
since September 2019		on modernized sites
	5G
	ready

7

Moving to all-IP

progress made in 2019

Migration legacy lines well on track

k

~775

~175

Q4 2018

Q4 2019

Shutting down legacy networks

PSTN SDH

ISDN 3G

Copper in fiber areas

8

Consumer: targeted household approach

2019 - 2021 strategy

Grow converged	…and SIMs	…to drive higher
households…	per household…	converged postpaid
		base (all brands)

+300k	+10%	70%
by end 2021	by end 2021	by end 2021

9

Consumer convergence

progress made in 2019

+59K converged households

					FY '19
+14	+41		+5	-2	+59k
1,344	1,358	1,399	1,404		1,402

48% 49% 49%

46%

Q4 2018

Q1 2019

Q2 2019

Q3 2019

Q4 2019

Converged household base (k)

Convergence penetration all brands

+4.6% SIMs per household

1.57

1.59

1.60

1.61

+3.7% +4.1% +4.6%

+1.9%

Q1 2019

Q2 2019

Q3 2019

Q4 2019

SIMs per household

% growth vs. FY 2018

+189k converged postpaid base

														FY '19
		+61		+104		+15			+9		+189k
													2,254
				2,126		2,230	2,246
					62%	62%		63%
				59%
Q4	2018		Q1 2019	Q2 2019	Q3 2019	Q4 2019

Converged postpaid base (k)

Convergence penetration all brands

10

Consumer: strategic actions in 2019

executing our convergence strategy

Convergence strategy	Brand strategy
	One strong brand: KPN
	Strengthen household relationships
	Drive simplification

Launch of KPN Hussel

Fully flexible household proposition

11

Consumer Fixed and Mobile KPIs

quarterly trends in 2019

Fixed KPIs

Fixed					48		48
ARPU (€)-	46		46

1
Broadband
net adds1 (k)						FY '19
			-17		-16
					-56k
		-24
	Q1 2019	Q2 2019	Q3 2019	Q4 2019

Mobile KPIs

Postpaid	17		17		17		17
ARPU (€)

KPN brand	-1k	+17k	+36k	+28k	FY '19
postpaid net adds	+80k
Postpaid		0	-3
net adds	-6
all brands (k)					FY '19
				-14	-23k
	Q1 2019	Q2 2019	Q3 2019	Q4 2019

1 Corrected for migrations to and new customers of small business propositions (Q1: 8k, Q2: 7k, Q3: 7k, Q4: 7k)

12

Stable broadband network share

	~52%	~51%	~52%
Market share
KPN Consumer +
SoHo + Wholesale1
	Q1 2019	Q2 2019	Q3 2019
Broadband net adds (k)
KPN Consumer2	+1	-24	-17
KPN Wholesale3	+9	+28	+29

KPN invests in a future-proof network, benefitting all our customers

Significant Wholesale market share adds to KPN's strong position in the Dutch fixed market

1 Source: Telecompaper, company reported data, management estimates; Q4 2019 market share data not available

13 2 Corrected for migrations to and new customers of small business propositions (Q1: 8k, Q2: 7k, Q3: 7k) 3 Wholesale includes MDF, ODF and WBA/VULA

Business: stabilizing end-to-end Adj. EBITDA AL

2019 - 2021 strategy

Transformation of	Value over
operating platform	volume strategy
100% customer	LE &
SME and LE in 20201	Corporate
migrations from legacy portfolio
Future-proof, simplified product portfolio	Customer retention
Standardized converged solutions	Increase share of wallet
Up- and cross-sell opportunities	Improve customer lifetime value

Lean & digital operations

Simplifying IT infrastructure

>25% lower cost to serve KPN EEN by 2021

-75% of IT systems by 2021

Simplified end-to-end organization

14

1 Traditional fixed voice and legacy broadband eligible for migration

Business transformation

along customer segments

1	2	3
Small business (SoHo)	SME	LE & Corporate

KPN small		KPN EEN	KPN smart
business		SME	combinations
+30k		+158k		launched in 2019
net adds in 2019		net adds in 2019
small business proposition1

1 Incl. migrations from Consumer

15

Business: strategic actions in 2019

strong progress in operational transformation

Migrations from	Value over volume
legacy portfolio	strategy

Lean & digital operations

74%

			68%
		59%		53%
50%
	45%
		33%
25%
Q1 2019	Q2 2019	Q3 2019	Q4 2019

SME base migrated1

LE & Corporate base migrated1

1 Migrated from traditional fixed voice and legacy broadband services

Data-Driven Pricing model introduced to maximize value per order

Hardware only in combination with recurring services contract

>25% lower cost to serve KPN EEN realized

IT integration ongoing

Post-merger integration

Activities of telco and IT subsidiaries integrated into KPN organization

16

Business revenue trend

strategic actions considerably impacted 2019 revenue

Adjusted revenues y-on-y growth trend

	Q4 2019	FY 2019
Communication Services	-9.1%	-8.4%
Mobile service revenues	-11%	-9.1%
IoT	19%	15%
Broadband & Network Services	-7.9%	-3.1%
Fixed voice	-25%	-19%
Other	27%	0.5%
IT Services (a.o. security, cloud, workspace)	7.8%	0.5%
Professional Services	4.1%	4.3%
KPN Consulting	-7.1%	2.3%
Total	-3.7%	-4.4%

OrganicGraduallyrevenueimprovingtrend1 organic revenue trend1

-4.5%-4.3%-[xx]%

-5.9%

-7.3%

-8.6%

2015	2016	2017	2018	2019
2015	2016	2017	2018	2019

1 Revenues for FY 2017, FY 2018 and FY 2019 excluding M&A and additional hardware

17

Customer experience & recognition

Consumer NPS1

Business NPS1

Awards #1

17

18

193

1

#1 reputation2

Best mobile provider3

13

-1

-4

Q1 2019

Q2 2019

Q3 2019

Q4 2019

Q1 2019

Q2 2019

Q3 2019

Q4 2019

Strongest Dutch brand4

Best retail chain5

Global Microsoft

Security & Compliance

Partner of the Year 2019

KPN EEN nominated best offer for SME customers6

1 Source: Kantar TNS	4	Source: Brand Finance
18 2	Industry adjusted, source: Reputation institute	5	Category Telecoms, source: Retailer of the Year (Q&A)
3	Source: Consumentenbond (Dutch Consumers' Association)	6	Source: Computable awards

Acceleration of simplification & digitalization

From 20 to 2		From 5 core		Simplified
converged IT		networks to 1		end-to-end
stacks				organization

~€ 350 million	2019-2021 net opex
	savings program1

1 Indirect opex after leases adjusted for the impact of restructuring costs, incidentals

19

• 141 million net indirect opex savings in 2019 contributing strategic actions

Digital transformation

Agile based operating model

Simplified organization

Right sizing

Skill-based management

B2B transformation

Opex reduction

Portfolio rationalization

Brand rationalization

Contract (re)negotiations

Resource optimization

Energy and cost management

IT rationalization

TV platform optimization

Mobile IT consolidation following brand integration

Decommissioning legacy IT

20

Doing business in a sustainable manner

A-list CDP and #2 in Dow Jones Sustainability Index

Secure future-proof	Social and digital	Environmental
infrastructure - SDG 9	inclusion - SDG 11	impact - SDG 12
Facilitate private and public	Improve life in cities and remote	Commit to circular economy
partners	areas	principles
Drive future-proof innovation	Stimulate diversity and social	Enable customers to reduce
across various sectors	inclusion	energy consumption
	Avoid social exclusion of groups
	due to digital transformation

21

Financial highlights FY 2019

Adjusted revenues Adjusted EBITDA	Free Cash Flow
after leases	(excl. TEFD dividend)

€ 5,486m	€ 2,317m	€ 726m
-2.7%y-on-y1	+1.2% y-on-y1	-8.6%y-on-y1

2018: € 5,639m1

2018: € 2,290m1

2018: € 795m1

1 Key figures for FY 2018 and y-on-y trend are not corrected for impact of closed divestments (NLDC, International Network Services and Argeweb). For information purposes only, FY 2018 corrected for

22 impact of divestments to be found in the Appendix

Financial performance Q4 and FY 2019

€ m	Q4 2018	Q4 2019	y-on-y
Consumer	756	734	-2.9%
Business	548	528	-3.7%
Wholesale	158	146	-7.6%
Other	-26	-15	-42%
Adjusted revenues	1,436	1,393	-3.0%
Adjusted direct costs	354	362	2.1%
Adjusted indirect costs after leases	512	470	-8.1%
Adjusted EBITDA after leases	570	561	-1.6%
Reported
EBITDA	571	598	4.7%
EBIT	185	202	9.2%
Net profit	-47	84	n.m.

FY 2018	FY 2019	y-on-y
2,986	2,916	-2.3%
2,137	2,042	-4.4%
623	628	0.7%
-107	-100	-6.7%
5,639	5,486	-2.7%
1,332	1,301	-2.3%
2,017	1,868	-7.4%
2,290	2,317	1.2%
2,353	2,578	9.6%
820	1,041	27%
292	614	>100%

Key figures for Q4 2018 and FY 2018 and y-on-y trend are not corrected for impact of closed divestments (NLDC, International Network Services and Argeweb). For information purposes only, Q4 and FY 2018

23 corrected for impact of divestments to be found in the Appendix

Adjusted revenues declined in Q4 and FY 2019

€ m					FY 2019 € 5,486
		-3.0%
			-2.7%y-on-y
1,436
					FY 2018: € 5,639m
	22			11	1,393
		20
			12
					€ 2m negative
					impact from divestments1
Adj. revenues	Consumer	Business	Wholesale	Other (incl.	Adj. revenues
Q4 2018				eliminations)	Q4 2019

1 For information purposes only, Q4 and FY 2018 corrected for impact of divestments to be found in the Appendix

24

Slightly growing Adjusted EBITDA AL in FY 2019

supported by simplification and digitalization

€ m
			-0.1%
			-1.6%				FY 2019: € 2,317
570
						+1.2% y-on-y
					6	561
				17
							FY 2018: € 2,290m
			18
	43
		7					€ 6m negative
							impact from divestments1
Adj. EBITDA	Revenues	Cost of	Personnel	IT/TI	Other	Adj. EBITDA
after leases		goods &	expenses		operating	after leases
Q4 2018		services			expenses1	Q4 2019

1 Incl. lease-related expenses

25 2 For information purposes only, Q4 and FY 2018 corrected for impact of divestments to be found in the Appendix

Financial performance Q4 and FY 2019 - FCF

€ m	Q4 2018	Q4 2019	y-on-y
Adjusted EBITDA after leases	570	561	-1.6%
Interest lease liabilities	8	6	-27%
Depreciation right-of-use asset	36	33	-6.6%
Restructuring	-27	-22	-18%
Incidentals	-16	19	n.m.
EBITDA	571	598	4.7%
Interest paid / received	-77	-64	-17%
Tax paid / received	16	-	n.m.
Change in provisions	21	-19	n.m.
Change in working capital	90	148	64%
Other movements (incl. TEFD dividend)	2	-30	n.m.
Net CF from operating activities	622	632	1.7%
Capex	-368	-322	-13%
Proceeds from real estate	-	1	n.m.
Repayments of lease liabilities	-33	-27	-18%
Free cash flow	220	284	29%
TEFD dividend	-	-	n.m.
Free cash flow (excl. TEFD dividend)	220	284	29%

FY 2018	FY 2019	y-on-y
2,290	2,317	1.2%
33	28	-16%
146	138	-6.0%
-101	-115	13%
-16	210	n.m.
2,353	2,578	9.6%
-339	-329	-2.9%
-9	-7	-16%
56	-51	n.m.
-8	-9	16%
46	-176	n.m.
2,099	2,005	-4.5%
-1,106	-1,115	0.8%
5	1	-74%
-149	-141	-5.3%
849	750	-12%
54	24	-56%
795	726	-8.6%

26 1 For information purposes only, Q4 and FY 2018 Free cash flow (excl. TEFD dividend) corrected for impact of divestments to be found in the Appendix

FCF development in FY 2019

FY 2019

€ m		95	2,578						-8.6%y-on-y
	165
2,317
				329	7	51	9		FY 2018: € 795m
									€ 4m negative
									impact from divestments4
								1,115		726
									340
Adj.	Lease-	Restructuring	EBITDA	Interest	Taxes	Change in	Change in	Capex	Other1,3	FCF
EBITDA AL	related	&	FY 2019	paid	paid	provisions2	working			(excl. TEFD
FY 2019	expenses	incidentals1,2					capital			dividend)

FY 2019

	1 Incl. € 171m book profit from the sale of NLDC in Q3 2019 and € 25m book profit from	3 Incl. € 141m repayments of lease liabilities and € 5m book profit from the sale of Argeweb in Q4 2019
27	the sale of International Network Services in Q4 2019	4 For information purposes only, Q4 and FY 2018 corrected for impact of divestments to be found
2 Incl. € 20m release of revenue related provisions in Q3 2019	in the Appendix

Solid financial position

€ m	6,494			6,188
	5,832	5,920
			5,306	5,148

Leverage	2.5x	2.3x	2.2x
ratio

Q4 2018	Q3 2019	Q4 2019
Gross debt	Net debt

Refinancing in 2019 leading to ~€ 67m lower cash interest payments in 2020

• Q1 2019, € 465m 7.5% bond redeemed
• Q2 2019, £ 96m 6.0% bond redeemed1
• Q4 2019, $ 405m 8.375% senior bond repurchased

Other refinancing in 2019

• Q2 2019, € 300m EIB facility signed (undrawn)
• Q4 2019, € 500m 2.0% perpetual hybrid bond issued2
• • To replace £ 400m 6.875% hybrid bond which will be called in March 2020

1 Swapped to € 123m with a fixed rate of 4.58%

28 2 The perpetual hybrid bond is accounted for as equity under IFRS. The coupon is treated as a dividend payment and interest expense is not accrued through the P&L. Therefore the coupon payment is not part of KPN's Free Cash Flow definition

Outlook 2020 and 2019 - 2021 ambitions

Adjusted EBITDA AL

Capex

FCF

(excl. TEFD dividend)

Regular DPS

Outlook 2020

Stable to slightly growing compared to 20191

€ 1.1bn

At least mid-single digit percentage growth compared to 20192

€ 13.0 cents

2019 - 2021 ambitions

Organic growth

Stable at € 1.1bn annually

Three-yearmid-single digit CAGR3

Progressive dividend, supported by FCF

Outlook is based on composition of the Group as per 31 December 2019, also taking into account the completion of the sale of KPN Consulting, which is planned in Q1 2020. Outlook is based on comparable basis corrected for divestments1,2,3

The historical comparable basis figures are based on management estimates and are not audited

• FY 2019 Adjusted EBITDA AL of € 2,287m, corrected for divestments. This is € 30m lower compared to € 2,317m as reported for FY 2019
  2 FY 2019 FCF (excl. TEFD dividend) of € 718m, corrected for divestments. This is € 8m lower compared to € 726m as reported for FY 2019

29 3 Three-year CAGR calculated from the end of 2018 to the end of 2021, based on FY 2018 FCF of € 772m, corrected for divestments. This is € 23m lower compared to € 795m as reported for FY 2018

Value over volume. Lean operating model.

30

INFORMATION PACK

Q4 & FY 2018 corrected for divestments Tax

Debt portfolio

Treatment of hybrid bonds Fixed infrastructure Spectrum

Business go-to-market strategy

31

Q4 & FY 2018 corrected for divestments

divestments: NLDC, International Network Services and Argeweb1

€ m	Q4 2018	Impact	Q4 2018
		divestments	excl. divestments
Consumer	756	-	756
Business	548	-3	545
Wholesale	158	-12	146
Network. Operations & IT	5	-	5
Other	-31	13	-18
Adjusted revenues	1,436	-2	1,434
Cost of goods & services (direct costs)	354	11	365
Personnel expenses	272	-2	271
IT/TI	101	-1	100
Other operating expenses	137	-1	137
Lease-related expenses	44	-3	40
Incidentals	16	-	16
Restructuring	27	-	27
Adjusted indirectcosts after leases	555	-7	505
Adjusted EBITDA AL	570	-6	564
Free cash flow (excl. TEFD dividend)	220	-4	216

FY 2018	Impact	FY 2018
	divestments	excl. divestments
2,986	-	2,986
2,137	-3	2,134
623	-12	611
14	-	14
-121	13	-108
5,639	-2	5,636
1,332	11	1,343
1,103	-2	1,101
412	-1	410
439	-1	439
179	-3	176
16	-	16
101	-	101
2,017	-7	2,010
2,290	-6	2,284
795	-4	790

1 Estimated adjustments of Q4 and FY 2018 results for the combined impact of completed divestments of NLDC, International Network Services and Argeweb, as if the actual transfer of shares

32 (closing) had taken place 12 months earlier

Tax Q4 and FY 2019

		P&L
Regions (€ m)
Q4 2018	Q4 2019		FY 2018	FY 2019
The Netherlands	-132	54		-224	-49
Other	-	-		-5	-
Total reported tax	-132	54		-229	-49
Of which discontinued operations	-	-		-5	-
Reported tax from continuing operations	-132	54		-224	-49
Effective tax rate continuing operations	138.0%	-169.9%		42.7%	7.3%

	Cash flow
Q4 2018	Q4 2019	FY 2018	FY 2019
16	-	-9	-7
-1	-	-4	-
15	-	-13	-7
-1	-	-4	-
16	-	-9	-7

The effective tax rate for Q4 2019 was mainly influenced by the participation exemption, the tax rate changes and the Innovation Box facility

Without one-off effects1 the effective tax rate would have been ~22% in Q4 2019

For 2019, the effective tax rate was ~22%, excluding one-offeffects1

1 Among others, tax law changes, settlements with tax authorities, impairments, revaluations

33

Debt portfolio

Nominal debt1	Nominal debt1	Fixed vs. floating
by type	by currency	interest3
	1%		14%
21%			19%

7%	€ 6.7bn
			28%			58%
			71%
						81%
		Eurobonds			EUR			Fixed
		Global bonds			GBP2			Floating
		Hybrid bonds			USD2
		Other

Bond redemption

profile

€ bn	1.1
0.9					1.0
0.6
0.6 0.6
0.5	0.5				0.5
		0.4
										0.1
	'19 '20 '21 '22 '23 '24 '25 '26 '28 '29 '30 '32
	USD hybrid (1st call)				USD
	GBP hybrid (1st call)				GBP
	EUR hybrid (1st call)				EUR

• Based on the nominal value of interest-bearing liabilities after swap to EUR 34 2 Foreign currency amounts hedged into EUR
  3 Excludes bank overdrafts

Treatment of hybrid bonds

KPN & credit rating agencies

Hybrid bonds are recognized as 50% equity and 50% debt by the rating agencies. The GBP tranche is considered 100% debt as it has been replaced by the EUR NC2025 tranche

Definition of KPN net debt includes: '[…], taking into account 50% of the nominal value of any hybrid capital instrument'

• Hybrid bonds are part of KPN's bond portfolio
• Independent of IFRS classification
• In line with treatment by credit rating agencies

IFRS

EUR tranche is a perpetual instrument, accounted for as equity Coupon payments treated as equity distribution, hence not expensed through P&L, not included in FCF, but in financing cash flow1

GBP and USD tranche have 60 years specified maturity, accounted for as financial liability

• Coupon payments treated as regular bond coupon, hence expensed through P&L, included in FCF

Tranche	Nominal	KPN net debt	Maturity	Rates2	IFRS principal	IFRS coupon
GBP 0.4bn 6.875%	€ 460m	€ 230m	60 years (1st-callMar-2020)	6.777%	Liability	Interest paid (incl. in FCF)
USD 0.6bn 7.000%	€ 465m	€ 233m	60 years (1st-callMar-2023)	6.344%	Liability	Interest paid (incl. in FCF)
EUR 0.5bn 2.000%	€ 500m	€ 250m	Perpetual (1st-call Feb 2025)	2.000%	Equity	Financing cash flows
(not incl. in FCF)
Total	€ 1,425m	€ 713m

1 Cash flow item 'Paid coupon perpetual hybrid bonds'

35 2 Rates after swaps. GBP tranche has annual coupon payments in March; USD tranche has semi-annual coupon payments (March / September); EUR tranche has short first coupon in Feb 2020 (0.25 years) thereafter annual coupons in February

Fixed infrastructure

CO

CO

VDSL2

VDSL2 pair bonding

Download	Active in
speed	network
~50Mbps	
~100Mbps	

	SC	Vectoring
	SC	Bonded vectoring
	SC	Bonded VPlus
	PoP	FttH - P2P
CO	Passive	FttH - G-PON
split
CO	Passive	FttH - XGS-PON
split
	Fiber	Copper

~120Mbps	
~240Mbps	
~400Mbps
~1Gbps	
~1Gbps	
Up to 10Gbps

36

Spectrum in the Netherlands

800MHz

(Paired)

900MHz

(Paired)

1.8GHz

(Paired)

2.1GHz

(Paired)

2.6GHz

(Unpaired)

2.6GHz

(Paired)

Total

T-Mob

VodZig

KPN

2*30

2*10

2*10

2*10

VodZig

KPN

T-Mob

2*35

2*10

2*10

2*15

KPN

VodZig

T-Mob

2*70

2*20

2*20

2*30

VodZig

KPN

T-Mob

KPN

VodZig

T-Mob

2*59.4

2*14.6

2*14.8

2*10

2*5

2*5

2*10

T-Mob

KPN

T-Mob

1*60

25

30

5

VodZig

T-Mob

KPN

T-Mob

2*65

2*30

2*5

2*10

2*20

KPN

VodZig

T-Mob

578.8MHz

169.6MHz

179.2MHz

230MHz

T-Mobile including Tele2

37

Business go-to-market strategy

smartly positioned solutions for every customer

38

KPN Investor Relations

ir.kpn.com