Royal KPN N : KPN Jaarverslag 2023 (Engels)

KPN Integrated Annual

Report 2023

Connected growth

Contents

	Report by the Board		Report by the	Financial
Contents	of Management	Governance	Supervisory Board	Statements	Appendices

Report by the Board of Management Introduction by the CEO

Our purpose and the world around us Strategy and key performances

Value creation model and material topics Our valuable assets and resources

Our value for stakeholders

• Customer value
• Shareholder value
• Employee value

Our performance

• Network infrastructure
• Safeguarded security and privacy
• Environmental performance
• Responsible supply chain

Governance Corporate governance Tax and regulations Compliance and risk

Composition of the Board of Management

Report by the Supervisory Board Composition of the Supervisory Board Supervisory Board Report Remuneration Report

Financial Statements Consolidated Financial Statements Corporate Financial Statements Other information

	Appendices
4	Appendix 1: About this report	196
7	Appendix 2: Alternative performance measures	199
11	Appendix 3: Materiality assessment	201
16	Appendix 4: Non-financial information	209
22	Appendix 5: TCFD	213
	Appendix 6: NFRD	214
	Appendix 7: EU Taxonomy	215
24	Appendix 8: List of top risks	221
34	Appendix 9: Social figures	232
39	Appendix 10: Environmental figures	235
	Appendix 11: Tax overview for continuing operations	244
	per country
43	Appendix 12: GRI index	245
46	Appendix 13: SASB index	254
50	Appendix 14: Glossary	256
57

Statement - This copy of the Integrated Annual Report

1. is the PDF/printed version of the KPN Integrated Annual

1. Report 2023. This version has been prepared for ease

1. of use, and does not contain ESEF information as

1. specified in the Regulatory Technical Standards on

ESEF (Delegated Regulation (EU) 2019/815). The official ESEF reporting package is available on our website at:

85 https://annualreport2023.kpn/

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	Report by the Board		Report by the	Financial
Contents	of Management	Governance	Supervisory Board	Statements	Appendices

Introduction by the CEO

A sustainable digital future for all

Three years ago we initiated our Accelerate to Grow strategy to accelerate our investments in the best infrastructure, enhance business growth across all segments and further digitalize and simplify KPN. This marked a pivotal step in our long-term strategy that now sets us apart in the telecom landscape, particularly in Europe. In 2023, KPN advanced with solid results and a strong appreciation of our accomplishments by our stakeholders.

Fast and secure digital connections

Our networks have proved to be capable of handling the significant increase in data trafficgrowth and are ready to support future demand. Together with Glaspoort, we expanded our fiber footprint with a record number of 725k homes passed in 2023, and we are activating existing and new customers to our services.

Our fiber footprint now covers 57% of the Netherlands. We remain committed to our goal to connect 80% of the Netherlands to fiber by the end of 2026 via KPN and Glaspoort. Simultaneously, we are retiring obsolete networks and IT systems.

We have upgraded all our mobile network sites and redirected our efforts toward creating solutions that use this infrastructure, collaborating with other innovators. We are preparing the network for the 3.5 GHz spectrum auction, which is expected to take place before the summer 2024, so that we can utilize the possibilities of the 5G network.

4	KPN Integrated Annual Report 2023

	Report by the Board		Report by the	Financial
Contents	of Management	Governance	Supervisory Board	Statements	Appendices

Introduction by the CEO

And with customers making more use of our unlimited mobile propositions, we are providing users with a broadband-like experience on their mobile devices. This benefitsconsumers and holds advantages for businesses and governments that can leverage the advantages of 5G through a private network within their own domains or support specific business solutions.

KPN will further bolster its position by consistently investing in digital infrastructure, enhancing the user experience while prioritizing security. For example, for SME, we have a unique offering of extra-secure internet in the broadband line-up, at no extra cost. With approximately 40%1 market share in the SME segment, we play a crucial role in protecting entrepreneurs from cybersecurity threats. This aligns well with our societal commitment as a responsible company.

For a Better Internet: Responsible, Inclusive and Sustainable

KPN is committed to maintaining its leading ESG position in the telecommunications industry. With our Connect, Activate & Grow strategy, we have raised the bar and set ambitious goals on Responsibility, Inclusion and Sustainability, which are fully integrated in our business model. In the coming years, KPN will launch new initiatives and make cybersecurity an integral part of our ESG policy, contributing to societal value for the Netherlands. Our motto here is 'For a Better Internet'.

By promoting digital and social inclusion, we strive to make society better and help improve people's lives. With the KPN Mooiste Contact Fonds, KPN continues its efforts to reduce the digital divide for those who cannot easily participate themselves.

Growth across all segments

In the consumer market, positive developments are evident. There is a notable trend among consumers towards unlimited plans and postpaid subscriptions. Additionally, growth in broadband and the shift to most of the customer base being on fiber, generally opting for higher speeds, contribute to the positive uptake. I am very pleased with the services we have introduced, including new offerings and propositions for TV+ and gaming, super-fast internet based on 4Gbps, and the new mobile line-up. In addition, we also invested in the quality of the In-home experience.

For instance, we guide customers in making informed choices for smart equipment that seamlessly integrates with all their home devices.

The business market is on an upward path. Business service revenues continued to grow, with SME as the main contributor. The LCE segment has experienced a positive transformation on the way to growth. This upturn is the result of our investments in transitioning services to the cloud, simplifying processes, and the rationalization of our legacy portfolio. And the Tailored Solutions in B2B is clearly improving on revenues.

A noteworthy achievement is KPN's revenue growth, supported by all business segments. In 2023, KPN turned to organic growth, achieved by consistently executing our plan to attract more customers and encourage them to adopt more services from us. Offsetting the overall inflationary effects, including additional costs in energy and CLA increase, we managed to deliver solid financial results. This overall good performance not only results in attractive shareholder returns, demonstrating our commitment to delivering on our promises, but also leads to long-term value.

We are dedicated to acting on the global climate crisis, having worked on this for years, and taking further steps to make

a difference. Limiting our footprint, we actively strive for a greener future by focusing on energy efficiencyand circularity. And we are assisting customers in becoming more sustainable, for example through hybrid working, digitalization, and smart (cloud-based) solutions.

By 2027, KPN customers will browse the internet through a sustainable and efficientnetwork powered by green energy, largely generated from a new wind farm off the Dutch coast. By 2030, KPN's actual electricity consumption should have decreased by 48% compared to 2010. Additionally, KPN is aiming for net-zero emissions in the value chain by 2040.

Empowering team excellence

Building on a skilled and motivated workforce, committed to promoting team diversity, our goal is to position KPN as a leading workplace in the Netherlands. We consistently invest in strengthening both teams and individuals, fostering a culture where engagement and enhanced performance are intertwined. Modern facilities, favorable employment terms, and opportunities for talent development are imperative to achieve this goal. We focus on nurturing new talent and encouraging continuous development among our employees.

Working at KPN remains appealing due to contemporary employment conditions, a high degree of flexibility, and incentives for sustainable commuting options. Our employees are given the freedom to actively contribute to their personal growth and KPN's societal goals. The results of our investments and initiatives are evident in the robust employee engagement, with colleagues consistently expressing pride in their affiliationwith KPN.

1 Revenue market share (Telecompaper, Q3 2023)

5	KPN Integrated Annual Report 2023

	Report by the Board		Report by the	Financial
Contents	of Management	Governance	Supervisory Board	Statements	Appendices

Introduction by the CEO

While we thrive, the pursuit of talent remains an essential theme. I therefore welcome all talented individuals to see KPN as

the starting point for a successful and inspiring career. In our exceptional organization, there is something for everyone as we fulfillour mission for a better internet, to bring people together and let the power of connection flourish.

Looking ahead: Connect, Activate & Grow

In November 2023, KPN unveiled the Connect, Activate & Grow strategy that will guide our journey over the next four years. In essence, our vision and strategic imperatives will shape a future where KPN stands at the forefront of innovation, connectivity, and sustainability.

We aim to solidify our position as the #1 internet company in the Netherlands, lead in mobile-revenue market share, and be the preferred partner for digital services and innovations.

With our Connect, Activate & Grow strategy, we are dedicated to creating long-term value for all stakeholders and sustaining healthy revenue growth across our business. I firmlybelieve that KPN is strategically well-positioned to advance towards a sustainable future for all.

Finally, I warmly invite you to explore our online report website at www.kpn.com/annualreport, where you can share your opinion on thought-provoking topics that hold significance for us and our environment.

Joost Farwerck,

CEO and Chairman of the Board of Management of KPN

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Our purpose and the world around us

A central role in society

Our purpose

We go all out to connect everyone in the Netherlands to a sustainable future. This is because at KPN we believe in the power of connection. This is how we help our customers and propel the Netherlands forward on the path to a sustainable future where new possibilities are accessible to all.

A dynamic digital economy challenged by an inflationary environment

The Dutch economy continues to be one of the strongest in Europe. The Netherlands outperformed the Eurozone's Gross Domestic Product (GDP) in 2022. The country is recognized as highly digital-savvy. It ranks number eight in the Global Finance Ranking, which ranks the most technologically advanced countries in the world. The high population density in our country is one of the key ingredients for a successful telco. All this makes the Netherlands an attractive market to operate in.

The present economic landscape is challenging, characterized as it is by geopolitical tensions, inflation, high interest rates, labor market constraints and operational challenges arising from widespread price increases. Energy price hikes and inflation- related uncertainties, such as chip shortages, have impacted our supply chain. The ongoing uncertainty underscores the importance of cost control and risk assessment. As part of our efforts to mitigate the implications of inflation on our workforce, we have incorporated a collective salary increase in our Collective Labor Agreement (CLA).

Building the leading digital infrastructure

KPN is well positioned to deal with the key industry trends in the competitive Dutch market. This is important for our customers, as we are building a future-proof and secure infrastructure for the next generations. We believe digital networks and services should play a facilitating role and not pose a threat. Therefore, safety is our priority. We work 24 hours a day, 365 days a year to combat cybersecurity risks and to protect our own systems, data, and that of our customers.

Our networks have proved themselves very capable of handling the significant increase in data traffic,and are ready to support future demand. KPN is customer centric and innovates digitally to meet evolving customer needs. Our current focus is on expanding

data-driven solutions, benefitingremote work, healthcare and other industries.

In terms of infrastructure, together with Glaspoort our fast- progressing fiber footprint now covers 57% of the Netherlands. In a thriving fiber market, we actively engage with new entrants in the market to enhance our network infrastructure. Simultaneously, we retire obsolete networks and IT systems, which saves energy and reduces disruptions. For example, we recently retired almost three million old copper lines as part of the copper switch off program. Succesful agreements with municipalities played a crucial role in 2023 in overcoming challenges such as obtaining permits for fiber employment. Securing new locations for mobile cell towers, especially in urban areas, raise considerations around sustainability and local impact, making collaboration with government entities essential. We have modernized all our mobile network sites and shifted our focus to developing solutions that leverage this infrastructure, in collaboration with fellow innovators. However, uncertainties surrounding the 3.5 GHz auction pose challenges for telecom companies, who need clarity for long-term investments.

Commitment to a prosperous future

With a skilled and motivated workforce and dedicated to fostering team diversity, we are committed to helping to create a country, where everyone can participate. We advocate for reliable and secure services and conduct our business with integrity. Respect for human rights is paramount in our endeavors. In helping

to accelerate the digitalization of the Netherlands, KPN is contributing to innovations in healthcare, education, and mobility. Through promoting digital and social inclusion, we do our utmost best to enhance society.

A better internet is crucial in this endeavor, and this is something we have been working on for years. For us, a better internet goes beyond technological advances like secure cloud, Internet of Things (IoT), or the highest upload and download speeds. It is about human and social progress. Our focus is therefore on a responsible, sustainable, and inclusive internet where people can feel safe, free, and comfortable. To emphasize this, we have launched a For a Better Internet platform. This is how we aim to make the Netherlands the best-connected country in the world in the broadest sense of the word. Alongside this, we prioritize genuine social interactions, especially for vulnerable groups. For example, we have been supporting initiatives like the KPN Mooiste Contact Fonds, which address loneliness, since

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	Report by the Board		Report by the	Financial
Contents	of Management	Governance	Supervisory Board	Statements	Appendices

Our purpose and the world around us

2007. Loneliness is widespread in society: research shows that

49% of adults feel lonely.

Navigating AI and data possibilities

In our company, as well as in the overall labor market, the integration of data and AI is driving a transformation. Traditional job roles could rapidly evolve, meaning that employees who once focused on operational tasks must now shift their focus towards analyzing AI model outcomes and acting based on their assessments. As a responsible company, we are dedicated to assisting our employees in navigating this dynamic and challenging new landscape. A notable shortage of workers, particularly those with digital and AI skills, remains an ongoing and persistent challenge that we are working hard to overcome.

While safeguarding customers' privacy, we can extract valuable insights from their journey paths, creating a unique opportunity to leverage this wealth of information in ways that benefitboth us and our customers. Using AI and data analysis advances our service capabilities, allowing us to anticipate and respond to potential disruptions with agility and precision.

Less energy and raw materials

We are dedicated to helping to address the global climate crisis. We have been working on this for many years and are taking further actions to make a difference. To reduce our carbon footprint, and contribute to a greener future we are focusing on energy efficiencyand circularity. Despite the rising data usage, our absolute energy consumption continues to decline. We aspire to reduce energy consumption, enhance energy efficiency,maintain the use of 100% renewable electricity, and deploy the right energy at the right time. We help our customers to become more sustainable and environmentally friendly through supporting hybrid working and creating smart solutions for the various sectors we serve. We ask our suppliers to design products with circularity in mind, using materials that can have a second life. We collect, extend the lifespan of, reuse, and recycle our hardware. We are aware of the impact of critical resources in our supply chain.

What do you think?

Share your opinion now on the statement below and 9 other thought-provoking topics that impact our company and environment.

A circular approach and ongoing technological innovation do not go hand in hand

Scan and vote along!

8	KPN Integrated Annual Report 2023

	Report by the Board		Report by the	Financial
Contents	of Management	Governance	Supervisory Board	Statements	Appendices

Our purpose and the world around us

Strengths, weaknesses, opportunities and threats (SWOT)

We continuously review our business model and adapt our resources and capabilities to counter risks and create new opportunities. The overview summarizes our main insights and position in our operating environment.

Overview of our strengths, weaknesses, opportunities and threats

Strengths that make us stand out	Opportunities for growth
Network	Network
•	Best in class mobile and fixed network	• Improving fiber activation rate, leading to broadband base market share growth
•	Strategic network locations positioned close to the customer throughout	•	Network automation and simplification and switching-off legacy
whole of the Netherlands	•	Developments in infrastructure, software, 5G, IoT and virtual networks

• Largest fiber footprint in the Netherlands

Business activities

• Broad range of services
• Strong brand reputation
• Trusted provider of critical communication services to governmental bodies
• Best in class NPS
• Explicit commitment to ethical standards in doing business

People and environment

• Strong focus on circularity
• An employer with skilled and engaged employees
• Strong track record on reducing greenhouse gas (GHG) emissions with increasing data usage
• Fair tax contribution to society in line with the GRI standard for taxes

Financial

• Sustainable service revenue growth, with all segments contributing
• One of the industry leaders regarding EBITDA and free cash flow margins
• Steadily improving return on capital, reflecting shareholder value creation
• Robust balance sheet and liquidity position
• Fixed wholesale tariffs approved by ACM for coming seven years

Business activities

• Digitalizing customer interactions
• Further increasing customer value by cross- and up-selling opportunities, especially in security and cloud solutions
• Creating value from new 5G and fiber products and service offerings
• Utilizing data, AI and analytics capabilities to create more value in current and new business

People and environment

• Substituting existing products and services with more sustainable alternatives
• New products help customers to be more sustainable

Financial

• Streamline and digitize operating model

9	KPN Integrated Annual Report 2023

	Report by the Board		Report by the	Financial
Contents	of Management	Governance	Supervisory Board	Statements	Appendices

Our purpose and the world around us

Weaknesses to improve	Threats we face
Network	Network
• Dependency on worldwide supply chains for hardware (chips)	• Confidentiality, integrity and availability of networks, systems and data
• Remaining legacy network infrastructure	• Impact on our technical infrastructure due to impact of climate change
• Fiber conversion, in particular, in high-rise buildings	• Shortage of materials
	• Uncertain outcome and delay of spectrum auction
	• Cybersecurity threats
Business activities	Business activities
• Relatively high cost to serve due to complex IT systems and processes	• Disruptive technologies and new business models that we need to
• Long delivery times for fiber connections due to labor scarcity	adapt to
• Dutch legislation on net neutrality hinders us in launching all aspects of security	• Price pressure from fierce competition
services that we deem helpful for our customers
People and environment	People and environment
• Gender diversity, especially in scale 11 - 13	• Long and complex value chain is difficultto control
• Aging workforce	• Tight labor market resulting in high work pressure
	• Restrictions on supplier selection in our network
Financial	Financial
• Workforce cost pressure from increased workload for customer service employees and	• Cost inflation
service engineers	• Deterioration in general economic environment
	• Higher interest rates
	• Increased risk of customer spend optimization due to high inflation rates

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