KPN Q2 2026
Results
Wednesday, 22nd July 2026
Wednesday, 22nd July 2026
KPN Q2 2026 Results
KPN Q2 2026 Results
Operator: Good afternoon, ladies and gentlemen. Welcome to the KPN’s Second Quarter
Earnings Webcast and Conference Call. Please note that this event is being recorded. At this
time, all participants are in listen-only mode. We will facilitate a question and answer session
towards the end of today's prepared remarks. If you would like to ask a question, you may do
so by pressing pound key five on your telephone keypad.
I will now turn the call over to your host for today, Matthijs van Leijenhorst, Head of Investor
Relations. Please go ahead.
Matthijs van Leijenhorst: Yeah. Thank you, operator. Good afternoon, ladies and gentlemen,
and thank you for joining us for KPN's second quarter and H1 2026 results webcast. With me
today are our CEO, Joost Farwerck, and our CFO, Chris Figee.
Before we begin, please note the safe harbor statements on page two. Today's remarks may
include forward-looking statements, including KPN's expectations regarding its outlook and
ambition, as also set out in the press release published this morning. All such statements are
subject to the safe harbor.
With that, let me hand over to our CEO, Joost Farwerck.
Joost Farwerck: Yes. Thank you, Matthijs, and welcome, everyone. Let me start with the
highlights of last quarter.
Group service revenues increased by 0.8%, and that's driven by consumer, SME, and wholesale.
In the mix, Consumer showed an improving growth trend across both fixed and mobile. In
Business, SME continued to perform strongly. Overall growth was impacted by a decline in lowmargin Tailored Solutions division and LCE. And Wholesale continued to grow with international
sponsored roaming as the key driver.
Our EBITDA increased by more than 3% on a comparable basis, supported by revenue growth
and lower costs. Free Cash Flow rebounded in the second quarter as planned and is up to 7%
year-to-date. And together with Glaspoort, our joint venture, we remain clear leader in the
Dutch fiber market. Of course, we are disappointed by ACM's decision prohibiting the proposed
Glaspoort’s DELTA fiber transaction but our commitments to disciplined fiber expansion remains
unchanged and fully aligned within our financial framework.
We partnered with Schwarz Digits to bring a European sovereign cloud to the Dutch markets to
serve our larger customers and the governments.
And finally, we expect Group service revenue to grow and to accelerate to approximately 2%
to 2.5% in the second half of the year. Trends in Tailored Solutions and LCE led us to moderate
our full-year 2026 service revenue outlook. But of course, the exit run rate is the most important
indicator for the future when it comes to service revenues.
Importantly, we remain confident in delivering our full-year EBITDA, [and] Free Cash Flow
guidance while preserving our mid-term ambitions, including shareholder distributions.
Chris will take you through the financials later. First, let me briefly revisit our strategy and our
operational performance.
Last year in November, we confirmed we are well on track to deliver on our Connect, Activate
& Grow strategy, which is built on three pillars: one, we continue to invest in our leading
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KPN Q2 2026 Results
Wednesday, 22nd July 2026
networks; two, we continue to grow and protect customer base; and three, we further
modernize and simplify our operating model. And together, these priorities support our ambition
to grow service revenues and EBITDA by approximately 3% and Free Cash Flow by
approximately 7% on average over the full strategic period.
Let's review our operational performance starting with fiber. We continue to lead the Dutch
fiber markets. As our fiber roll out matures, we are focused on turning coverage into active
customers, and this is translating into continued growth in fiber broadband net adds, which now
accounts for 72% of the retail broadband base.
Consumer service revenue grew 1.9%, the strongest performance in five quarters, with growth
improving across both fixed and mobile. Higher year-on-year customer satisfaction reflects
what differentiate KPN: secure, high quality networks, excellent service, and a seamless digital
experience.
Our fixed mobile convergence base continued to grow and now represents 61% of the
broadband base and roughly two-thirds of the mobile base, supporting customer loyalty and
value growth.
Let's take a deeper look into our second quarter KPIs.
We delivered another quarter of broadband base growth, supported by a healthy inflow of new
fiber customers, despite a challenging competitive environment. And combined with a growing
ARPU, our fixed service revenues continue to grow. In mobile, we added 18,000 postpaid
subscribers. And together with ARPU growth and value-added services, this drove mobile
service revenue growth to 3.2%.
Now let's go to the B2B segments.
Business service revenues declined by 1.1% year-on-year as continued strong SME growth was
more than offset by the declines in Tailored Solutions and LCE. At the same time, commercial
momentum remains solid across both fixed and mobile. And this quarter, for instance, we
onboarded all seven University hospitals in the Netherlands.
Customer satisfaction improved significantly year-on-year, reflecting the quality of our
networks and services and reinforcing KPN's position as a trusted and secure partner . And
building on this strength, we recently partnered with STACKIT to bring a European sovereign
cloud solution to the Dutch market, responding to our customers' growing demand for secure
and sovereign digital services.
Within business, growth continues to be driven by high-margin SME, with a growth of almost
7%, with strong demand across Broadband, Mobile and Cloud & Workspace. In LCE, growth in
Mobile, Security and CPaaS was more than offset by declines in legacy services and low-margin
Cloud & Workspace. We expect LCE to grow next year and to remain under pressure for the
remainder of this year.
Tailored Solutions revenues declined, reflecting a tough period year-on-year comparison, and
our continued focus on the value and the contract quality. And we expect Tailored Solutions to
flip back to growth in the second half of the year [with]gradual improvements in the second
half.
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KPN Q2 2026 Results
Wednesday, 22nd July 2026
And despite lower reported service revenues, the contribution margin increased year -on-year
in B2B.
And finally, Wholesale. While the Broadband service revenues remained under pressure from
the decline in copper, Mobile performed strongly, supported by international roaming. Other
service revenues also increased. That's driven by visitor roaming.
Now, before we move to the financials, as you all know, Chris will be leaving us on 1st
November. While we still have Q3 to work together, I would like to thank him for his dedication
and significant contributions to KPN. In the meantime, we are ensuring a smooth transition,
and we remain fully focused on executing our strategy.
And with that, I'll hand over to Chris.
Chris Figee: Thank you, Joost. Let me walk you through our financial performance, and first
let’s summarize some key figures for the second quarter and the first half of the year.
To start, adjusted revenues decreased by 0.5% year-on-year in the second quarter, as higher
Group service revenues were more than offset by the decline in non-service revenues and other,
which reflected the absence of prior year IP sales and IPR settlement benefits. Excluding these
one-off effects, adjusted revenues increased by 2.5% year-on-year.
Second, adjusted EBITDA after leases decreased by 0.3% compared to last year, or an increase
of 3.4% on a comparable basis. So again, excluding IP sales and IPR benefits. This underlying
growth was driven by higher revenues and lower costs. The reported EBITDA margin improved
by 8 basis points to 45.6% of total adjusted revenues. And as previously highlighted, our fullyear EBITDA guidance assumes a U-shaped year-on-year growth pattern over the year, with
continued lower growth year-on-year in Q3 and a planned pickup in Q4.
Third, our net profit decreased by 1% year-on-year, driven by lower operating profit, partly
offset by the absence of one-off costs related to hedge accounting recorded last year. And
finally, as anticipated, our Free Cash Flow rebounded in the second quarter and increased to
about 7% to €29 million compared to the first half of last year, mainly driven by EBITDA growth
and changes in working capital. I'll provide more detail on the underlying cash developments
later in this presentation.
In the second quarter, Group service revenues grew by 0.8% year-on-year, driven by
Consumer, SME, and Wholesale. Excluding the effect of Tailored Solutions in the quarter, the
underlying Group service revenue growth was 2.2% year-on-year. And as previously guided,
we expect Group service revenue growth to improve in the second half of the year.
Within the mix, Consumer service revenues increased by 1.9% over the year, showing improved
growth in both mobile and fixed. Looking ahead, mobile is expected to remain our primary
growth driver. Business service revenues declined by 1.1% year-on-year, mainly driven by
Tailored Solutions and reflecting our focus on margins and contract quality. Excluding the
Tailored Solutions business, Q2 growth was 3.1% year-on-year.
And for the second half of the year, we expect B2B to return to top line growth, driven by
continued strong growth in high-margin SME and Tailored Solutions normalizing, partly offset
by a softer performance in LCE.
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Finally, Wholesale delivered 1% year-on-year growth in the quarter, driven by international
sponsored roaming and an uptake in visitor roaming, while copper declines continued to weigh
on broadband.
Our adjusted EBITDA grew by 3.4% year-on-year on a comparable basis, ahead of our midterm CAGR ambition, whilst the EBITDA margin improved by 40 basis points to 45.6%. Growth
was supported by revenue growth and continued cost discipline.
Higher direct costs mainly reflected increased handset and hardware sales, as well as higher
third-party access costs. We also continued to make solid progress on efficiency, with indirect
costs declining by € 15 million year-on-year, supported by a lower workforce, lower energy
costs, and ongoing operational improvements.
Compared to last year, our workforce reduced by more than 330 FTEs. Year-to-date, we've
reduced indirect Opex by € 18 million. While the current run rate includes some phasing effects,
underlying progress remains in line with plan and we reiterate our ambition to deliver € 15
million to € 20 million of structural net indirect Opex savings in 2026, and a full €100 million of
net savings in 2030 compared to 2025.
Looking ahead, we expect a temporary € 4 million to €5 million headwind in the third quarter
related to a one-off CLA payment, but remain confident in delivering our full-year EBITDA
guidance.
In the first half of the year, our Operational Free Cash Flow increased by 3.1% year-on-year or
6.7% on a like-for-like basis, so excluding the IP sales and IPR benefits. The strong cash
conversion reflects the continued strength of our underlying business and was primarily driven
by EBITDA growth.
Now let's look at Free Cash Flow. Free Cash Flow increased 7% to € 329 million in the first half,
supported by EBITDA growth and favorable working capital developments. This was partially
offset by higher cash taxes, interest payments and restructuring costs. Interest payments were
temporarily higher in the first half and are expected to normalize in the second half of the year,
while the movements in provisions mainly reflects timing effects. Overall, our cash margin
remains broadly stable at about 11% of adjusted revenues.
Looking ahead, we expect a small Free Cash Flow drag in Q3 from EBITDA and working capital
phasing relative to last year. And for the full year, Free Cash Flow is expected to be more
weighted towards Q4, supported by the timing of EBITDA generation and working capital
effects. We therefore remain fully confident in delivering on our full-year 2026 Free Cash Flow
outlook.
Finally, we ended the first half with a cash position of € 365 million, absorbing the final dividend
payment over 2025 and the completion of the € 250 million share buyback program.
Let's focus on return on capital. KPN remains focused on creating long-term value, evidenced
by a strong return on capital employed. ROCE was 14.4%, remaining at a strong level. The 20
basis points year-on-year decline reflects higher capital employed from continued network
investments and higher spend on restructurings.
Looking ahead, we scope to further enhance our ROCE, reaching our 2027 financial ambition of
15%, consistent with continuous creation of shareholder and stakeholder value.
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We continue to run a strong balance sheet. At the end of June, our leverage ratio was 2.5 times.
Leverage increased slightly during the quarter, reflecting the usual seasonal impact of dividend
payments and share buybacks, partially offset by Free Cash Flow generation. Looking ahead,
we expect leverage to end the year at or slightly below our self-imposed ceiling of 2.5 times,
supported by stronger cash generation in the second half.
Our interest coverage ratio remains strong at 9.1 times. The average cost of debt declined
slightly following the partial unwind of interest rate hedges, slightly increasing our exposure to
short-term floating rates. Even so, floating rate exposure remains limited at 18%.
Finally, with a liquidity of € 1.4 billion, we remain well-positioned to cover debt maturities
through the end of 2028.
We expect Group service revenue growth to accelerate to 2% to 2.5% in the second half of the
year. Combined with the 0.7% achieved in the first half, which reflects the decline in our
Tailored Solutions business, this brings our expected full-year 2026 Group service revenue
growth to approximately 1.5% year-on-year.
Importantly, our full-year EBITDA and Free Cash Flow guidance remains unchanged. This is
supported by a favorable mix with Consumer and SME performing somewhat better than initially
expected, alongside continued cost discipline. We therefore remain confident in delivering our
full-year financial outlook. Our mid-term ambitions remain unchanged, including cumulative
share distributions.
Let me conclude with a few key takeaways. We delivered a solid first half with improving
Consumer trends and continued momentum in SME, driving healthy service revenues and
underlying EBITDA growth. In fact, for the second quarter in a row, underlying EBITDA growth
came in above the 3% hurdle. We expect Group service revenue growth to accelerate 2% to
2.5% in the second half of the year, up from 0.7% in H1.
We remain the clear leader in Dutch fiber, with almost three quarters of our retail broadband
base now on fiber. And despite the competitive market, we continue to see healthy consumer
inflow across both Consumer and Business, supported by strong customer satisfaction levels.
Cost discipline remains strong, and Free Cash Flow is progressing according to plan. We
strengthened our digital service portfolio through the partnership with Schwarz Digits, and we
successfully completed our € 250 million share buyback, underlining our commitment to return
all our generated Free Cash Flow to shareholders.
Overall, we remain on track to deliver our full-year EBITDA, Capex, and Free Cash Flow outlook.
All mid-term ambitions, including cumulative share distributions, remain unchanged.
Thank you for listening. With that, happy to take your questions.
Matthijs van Leijenhorst: Thank you, Chris. Operator, please could you open the floor for
questions? Analysts, please limit your questions to two, please.
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Wednesday, 22nd July 2026
KPN Q2 2026 Results
Questions and Answers
Operator: Ladies and gentlemen, we will start the question and answer session right now. If
you would like to ask a question, you may do so by pressing pound key five on your telephone.
Our first question of today is from Mr. Joshua Mills from BNP Paribas. Please go ahead.
Joshua Mills (BNP Paribas): Hi, guys. Thank you for taking the questions. So one from me
on the B2B side, and then a second one on the Consumer side. So, on the B2B side, it looks
like this is the reason why you’ve downgraded the service revenue guidance for the year . I just
want to understand within that, was the bigger negative surprise on Tailored Solutions or LCE?
Because I think Tailored Solutions you had always said would face a tough comp s, and this is
more about the lapping of contracts last year. So it does not seem like much has changed. And
you’d highlighted a couple of times during the call that LCE is going to remain soft and Cloud &
Workspace is part of the reason for that. So some more color around whether it is LCE or
Tailored Solutions which is disappointing would be helpful.
And then secondly, on the Consumer side. I think in the past, you’ve given some quite granular
detail on where you expect service revenues to develop in Q3, Q4. Could you just remind us of
where you expect to see Consumer service revenues land, whether accelerates, and then
whether there is any other price increases to come through that will help with that? Thank you.
Joost Farwerck: Yeah. Thank you, Joshua, for your questions. And I will start. Chris will followup. Yeah, you are right. The downgrading of total service revenue this year is related to the
B2B effects, because in Consumer, we consider our growth pretty strong in the competitive
environment where we are. SME did very good. Wholesale is in the plus. So it is all about
Tailored Solutions and LCE.
We guided for 2% to 2.5% service revenue on full year, but already last quarter, we saw that
we’re moving more to 2% than to 2.5% when it comes to Tailored Solutions and LCE. And the
effect of Tailored Solutions is slightly more negative than we planned in the beginning of the
year. It’s low margin. We’re cleaning up there, so I am not that worried about the margin effect.
But the impact on the service revenue is a bit stronger than we expected . And also, LCE, we
tried to flip it around in the coming six months, [but] we expect that to happen only next year.
So in all honesty, when it moves below 2%, we think it's prudent to adjust our service revenue
guidance.
Having said that, in total, we will move up above 2 [percent] in this coming quarter and the
second half of the year. And I think that's the most important message we have on service
revenue. We will end the year [H2’26] on the level between 2% and 2.5%, and we will exit the
year on that level.
Chris Figee: Yeah, Joshua, to add on that on the B2B side, look, we reported a decline in B2B
growth. Ex Tailored Solutions would be around 2.5% to 3% in each quarter. And I think in the
second half of the year, you'd expect total B2B growth in the segment also to be north of 3%
in each of the coming quarters, driven mostly by SME.
I think on the flip side, where LCE as Joost said and Tailored Solutions are a bit below our plan,
a bit softer. SME is doing better, so you'd expect SME to grow around 7% in the second half of
the year. That continues actually to do better than planned. But total B2B will be growing about
3% plus in the second half of the year.
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And when you look at the Consumer side of things, I'd expect Consumer service revenues to
be around 2%. We did 1.9% in the second quarter. I think Q3 and Q4 will be similar, so 2%
plus or minus a bit on each of the quarters. I'd expect mobile to accelerate because our base is
up significantly, about 100,000. Mobile ARPU doing better. We have indexed mobile service
revenues, we have additional price increase on our security solutions that will add to ARPU.
I think we successfully managed renewal delta front and back. I think we're getting better at
that as well. And when you look at the premium side of the market, we obviously increased our
front book pricing. Odido did the same. So I would say that the upper end, the premium part
of the mobile market is in a quite decent place. And in the no-frills segment, in the noncommitted part, we've seen stabilization and increasing of roaming revenue. So I'd expect
Consumer revenues to be around 2% with mobile up. It could be above 4% in the second half.
On fixed. I think the underlying fixed growth is close to 1%. It will moderate a bit in Q3. It has
to do with the comps last year. For example, last year, we increased our pricing of our second
set-top box. That's not happening this year. So you see a little bit more volatility in the fixed
service revenues in the second half of the year. I think underlying 1%, 1.5% is feasible certainly
into next year. But to be very precise, in the second half, you see mobile north of 4%, fixed
below 1% for a total service revenue growth in Consumer around 2%, and again, B2B, north
of 3%.
Joshua Mills: Thank you for that. Sorry, guys, just one very quick follow-up on the LCE
softness. Is there anything structural here? Is it that you're seeing more competition from AI
players on the cloud side or something like that? Or is it just normal course of business?
Chris Figee: Well, I think what we're seeing is on the other Cloud & Workspace is going down
a bit, but they're lower margin business. I think mobile is doing actually quite well in LCE.
There's some price pressure, but good volume wins. I think the pressure is more on corporate
VPN, corporate connectivity, which a bit of broadband and a bit of voice where we see somewhat
more competition.
And then finally, it's IoT as well. I mean, IoT is a business where you have strong volume
growth and then the occasional repricing, right? So you grow volumes and then to your large
customers, reprice the price per tick a bit. So a bit of a sawtooth revenue pattern, and we're
now coming this year in the downward part of the sawtooth, and that we'll grow again. So I
don't see any AI companies coming in.
Joost Farwerck: No.
Chris Figee: But Joost, you want to add to that?
Joost Farwerck: Well, we have more or less the same strategy as in SME. But we started on
SME because that's generating far more cash than LCE, but it's a decline in legacy, like Chris
said, and it's making the new business grow, move your customers to future-proof business.
Takes more time than we expected. It's also more complicated than more mass market steering
on SME.
But in principle, we have the same strategy there. Move our customers to future-proof portfolio,
and then it will grow. It takes some time, but yeah, I'm pretty convinced we will end up there.
Joshua Mills: Thank you.
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Operator: The next question is from Mr. Ajay Soni from JP Morgan. Please go ahead.
Ajay Soni (JP Morgan): Hi, guys. Thanks for taking the question. My first one is around the
KPIs we saw on the net adds side. I think some were expecting a bit of a tailwind from the
Odido security breach, which didn't really materialize. Is this due to competition stepping up
within Q2 which maybe offset this tailwind?
And the second one is just looking into next year. You mentioned H2 service revenue around
2% to 2.5%. Within this, there still feels as though there are headwinds from LCE and Wholesale
broadband. So looking ahead into 2027, could we actually see service revenue growing higher
than this? Or what other headwinds or tailwinds do you see for next year? Thank you.
Joost Farwerck: Yeah. So on the broadband net-adds, your first question. I think Q2 was,
taking into account that we live in a competitive broadband market, still a rough quarter for us.
So first of all, we had this Odido breach that provided temporary uplift. But on the other hand,
VodafoneZiggo is far more competitive. They drew a line in the sand. They don't want to lose
customers. So the competitiveness intensity has moderated, also because Odido's trying to
fight back from that breach effect.
So recent pricing moves by KPN and Odido, early July were there. Odido implemented some
mobile front book price increases. And that leads to a more rational market we see compared
to Q2. Q3 starting on a much lower level, less, yeah, like I call it, rough. But Q2 was, according
to the last five quarters, the most competitive one. It started with our competitors, one
impacted by a negative incident and the other really trying to fight back and spending a lot of
costs on that to make the decline less or turn it around.
At the end, we follow our own strategy. We believe in investing in our base and not hunting
after all the price seekers. And until now, that works quite well. So taking everything into
account, I'm pretty satisfied with the plus 4 [thousand net adds]we reported this quarter. It's
not as before, but taking into account everything that happened, I'm pretty okay with that.
Chris Figee: Yeah. To your question, Ajay, on the service revenue growth. I think we've got
fair visibility on the second half of the year. The 2% to 2.5%, we feel pretty comfortable to
underwrite that. Obviously, it's July, so it's early to say what service revenue growth in 2027
will be. I would say 2% to 2.5% is probably the right ballpark. If I have to look into my crystal
ball or read Joost's tea leaves, I would say, if anything, Consumer should be around 2% to
slightly higher.
SME is growing at 7%. I don't count on that continue, although SME has been outperforming
expectations for a few years now. But I wouldn't count on SME growing by 7% again. Some
moderation is expected, although it will probably be the highest growing business that we have.
But I wouldn't count on that staying at 7%.
LCE and Tailored Solutions normalizing and improving a bit into next year. And then Wholesale
will be similar to this year. I think it depends a bit on how we end the year. So, as I said, it's
hard to say, give full guidance on service revenue growth for next year. That was already in
June. But if I look at the moving parts and what we see in the second half of the year, I would
say bank on 2% to 2.5%, same range with slightly different compositions.
Ajay Soni: Great. Thank you.
Operator: The next question is from Mr. Polo Tang from UBS. You can go ahead.
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Polo Tang (UBS): Thanks. Firstly, congrats to Chris on the new role. Secondly, I've got two
questions. The first one is just about EBITDA growth. So you briefly touched on it in your
prepared remarks. But can you talk in a bit more detail through the phasing of EBITDA growth
in terms of Q3, Q4, and quantify some of the puts and takes? So looking at Q3, from memory,
you've got one-off gains from last year dropping out, plus you called out the [new] wage
agreement impact. So therefore to clarify, should we expect Q3 EBITDA growth to be another
quarter in terms of – well, actually, should Q3 EBITDA growth actually be declining, is the
question. And then will you get any further IP sale benefits this year?
Second question is, can you comment on the level of fiber overbuild in the Dutch market
currently? Also can you confirm if you still intend to build to 80% to 85% fiber coverage longer
term, or would you consider Wholesaling from the likes of DELTA Fiber and ODF? I'm just asking
the question, as KPN covers roughly 70% of the Netherlands and ODF and DELTA Fiber cover
the remainder of the market. Therefore, if all your fiber build from here is overbuild, will this
not increase competition in the Dutch broadband market going forward? Thanks.
Chris Figee: Yeah. Polo, let me take the first question. So, indeed on Q3 last year, in the third
quarter, we had € 16 million of earnings from the IPR settlements. Obviously, they will not
come back this year. So I would expect headline EBITDA in Q3 to show a small decline versus
last year, simply due to this effect. Underlying small growth, a bit less than this quarter. If I
look at the distribution of EBITDA through the year, it's more tilted towards Q4.
So full year guidance firmly intact. I mean, you can now figure out what Q4 will be like, but it's
a little bit more back-end loaded than in Q3, both on the headline, but also on an underlying
basis. Those are mostly one-offs and effects as we alluded in our voiceover. We have [in] our
Collective Labor Agreement a one-off payment this year of 4 to 5 million that hits us in Q3. So
those things feature into the Q3 numbers.
So full year's EBITDA confirmed, reiterated, a little bit more tilt towards Q4 than Q3, and on a
headline basis, a small decline.
Joost Farwerck: Yeah. And Polo, on the fiber roll out. We guided for a fiber footprint up to
85% in the future. That is including small M&A now that deal between us or Glaspoort and
DELTA is blocked by negative decision by the ACM. Of course, we disagree with that outcome.
It took them two years to get on paper why they block it. We can't follow the line of reasoning.
So we have decided to appeal the ACM's decision, but that will take time.
So if we cannot buy anything, we cannot do small M&A, then we will move up to 80% probably,
and let us see where we end up after we fight that ACM's decision. It is not all overbuilt, by the
way. There are still regions where we’re building that where we are the only ones. It’s also
related to new build. We expect 70,000 to 80,000 new build houses in the Netherlands every
year, so we will connect these.
Our strategy is not today that we serve our customers via wholebuy deals with third-party fiber
networks. But of course, one of the strategic questions for us is, okay, how do we serve our
customers outside the fiber footprint? We do that today with a mix of copper, bonded copper,
Fixed Wireless Access bonded with copper, etc. So there are several solutions we use today.
And how we move further to 2030 is what we are working out now. It’s a relevant question.
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Besides the whole ACM decision, it’s important anyhow. But that’s something for us to first
decide on and then to inform the market. We’re not changing our fiber roll out plan. It’ all within
the financial framework we guided for, and we believe that for the overbuilt areas – overbuilt
is not a good business case. So we have to decide how to serve our customers there. But that’s
for the future.
Polo Tang: Clear. Thanks.
Operator: The next question is from Mr. David Wright from Bank of America. Please go ahead.
David Wright (Bank of America): Yes. Thanks, guys. I know you've given great deal of
granularity, far more than most of the telco providers would provide, I think, on the next couple
of quarters. But I guess it was just a bit more on the ’27 service revenue CAGR, the mid-term.
You've obviously brought down the ’26. I think it's probably fair to say that some of the LCEs
may be just a little bit less visible. I know we have been expecting some improvement, that's
been pushed out a little. So was there no temptation just to take a little edge off the sort of
2027 service revenue guidance with this particular move? Or are you sort of still confident that
the building blocks are there to get you back there? I appreciate that circa 3% could be 2.6%,
but just wondering how you thought about that. Thank you very much.
Joost Farwerck: Well, let me start, and then Chris can give his view on ’27, although. Yeah.
It's no longer his horizon. We're working on a plan to get on 2027. So we have pretty good
view, but this call is about Q2 and not about 2027. But we're not skipping our guidance for the
full strategic period. That's the first thing.
So if we have anything to change there for the full period, then we'll be formally communicating
to the market. Like we said, we're uplifting service revenues in the second half of the year. If
it's 2%, it's more difficult to get it up to 3%. If it's 2.6%, then we're in a better movement. But
I'm pretty convinced that we are – well, we're increasing prices every year in Consumer, both
on broadband and mobile. In between, we increase prices. We do it in SME. We're good in SME
by approaching the markets ourselves and via partners.
Mobile is great. We're building on our fiber footprint. So, we still believe in the plan for the full
strategic period. If it's going to be 2.45%, 2.6%, that I don't know yet.
Chris Figee: Yeah.
David Wright: And sorry, Chris, after you.
Chris Figee: David, look, as I said, we're pretty confident underwriting the 2.5% growth
forecast for the second half of the year. The exact number for service revenue growth in ’27, I
believe, yeah, it's still a couple of months out. Depends a bit how you end the year, but at this
point, I see no reason to deviate from that same range.
But in the end, EBITDA growth in the end is also more important than service revenue growth,
right? So that’s why I'm pretty okay with the cost performance this year. That gives a cushion
for EBITDA growth for next year.
Joost Farwerck: And finally on this, when Chris and I started together, we made an overview
for the company, where we make our money, and it's mass market. So it's Consumer, SME,
and Wholesale. That's where, Chris, 85% of our cash comes from?
Chris Figee: Yeah.
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Joost Farwerck: Of course, we try to fix the Tailored Solutions and the LCE parts, but that's
why we started in fixing Consumer, SME, and we have a challenge in Wholesale, but still it's
growing. So we're really also focused on the value steering of things. So we really prioritize
SME above LCE, for instance. I'm convinced we can fix it, but it takes more time. It's a lowermargin business.
David Wright: And just very quickly, my second. The fiber deal that obviously fell through, it
did seem a little bit of a surprise, and perhaps not going so consistently with the direction of
wider EU regulation. Has there been any sort of more commentary that indicates what the
pushback was to that particular deal? Or is there something? – I mean, I'm assuming that you
can appeal in the court.
Joost Farwerck: Yeah. Well, I mean, listen, for us, it is not a surprise. If it takes a supervisor
and a competitive regulator two years to work on a decision that you know is going to be a
negative one. So we have good conversations with the ACM. They are probably listening in as
well, so we are not going to disclose what we are discussing with the ACM about this, but we
will appeal. That’s one thing.
And second, it’s a bit, they are flipping around the regulatory model. And according to me, a
long time ago, I was a lawyer, but the way this has been built up is a bit strange for us. You
refer to European movements. That’s completely opposite. So the Netherlands is an exception
there, but we think it’s also a very strange decision. And I am convinced that we can fight it.
70% of these cases, we win. It’s not an appeal we do on the ACM, but it is in the court of
Rotterdam. And let us see.
So yes, it is strange. And on the other hand, it is also naïve to anticipate on further consolidation
in the coming 12 months because of this decision. So that’s why we have to take it into account.
But let's see, what happens.
David Wright: Very good. Thank you, gents.
Operator: The next question is from Ms. Molly Whitcomb from Goldman Sachs. Please go
ahead.
Molly Whitcomb (Goldman Sachs): Hi. Thank you for taking my questions. Firstly, just on
cost savings. I know we've discussed potential phasing for the rest of this year, but you've
maintained your kind of € 15 million to € 20 million cost savings guide for the year. You've
managed € 15 million so far this year. I understand there's a bit of a drag in Q3, but is there
any potential to outperform on full-year cost savings?
And then secondly, just to come back on LCE again. You said you're expecting there to be some
sort of improvement into 2027. I understand it's early days, but I'm still not really
understanding what's giving you the confidence that you're going to see an inflection there.
And secondly, I think as part of this question, I think you've spoken to the tough operating
environment in LCE. Is there one particular kind of main aggressor that you're seeing? Just a
little bit more color on that would be great. Thank you.
Joost Farwerck: Well, like we said, it's mid-year ’26. For me, it's a bit unusual to talk about
next year. So, of course, I appreciate your question around LCE because it's weak. It is a very
fragmented market. We are the main player there, and we have the largest position. We're
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competing against international players, ICT players, smaller players, but it's mainly us against
foreign companies like whatever, BT International, ICT providers, etc. So it's pretty fragmented.
We try to move away from being a workspace provider. We're the largest workspace provider.
But yeah, according to us, doesn't make sense because there's not enough margins on there.
We're good at reselling workspace nowadays, so we're shifting that. So part of the impact on
the revenues is also by decision of us. And we're really focused on the connectivity part.
So the traditional connectivity part on the fixed side, on fiber, but also on the CPaaS, new kind
of business when it comes to communications. So we're launching new portfolio there. And it
takes longer to build it, to migrate customers, to sell it, to sign-off contracts, etc. So it's a tough
environment and not that easy to steer as the mass market.
But like I said, I think we will fix it one day or the other, but it's not going to happen coming
months.
Chris Figee: Yeah. And Molly, on your cost question. Obviously, indeed, the reported cost
reduction was about € 15 million to € 16 million, so add up to more than 50% of the €15 million
to €20 million that we guided for. There's two things. One, there's a bit of phasing in the year
in that, and then in Q3, obviously, you have this CLA increase. So I think in the Q3 set, the
third quarter will probably report a small increase in cost.
But for the full year, we'll make the guidance of € 15 million to € 20 million. I think we could
end at the upper-end of that range. I feel pretty okay with that. And the most important thing
is to be on track with the €100 million net savings by the end of this decade. So that's what
we're working against. But I would say the results so far, tell us we're still on track to deliver
that. And by this year, the € 15 million to € 20 million is reasonably secured.
Joost Farwerck: Yeah.
Chris Figee: But there will be a bit of phasing again. Q3, as I said, cost will be a bit higher. In
Q4, it'll be lower again. That's just going through the motions of the year. But with that, we
feel confident with the rate we've given and are on-track towards the € 100 million savings.
Molly Whitcomb: Makes sense. Thank you very much.
Operator: The next question is from Mr. David Vagman from ING. Please go ahead.
David Vagman (ING): Yes, hello. Good afternoon, everyone, and thanks for taking my
question. And first of all, Chris, thanks and wishing you all the best. On my two question. The
first one on the regulation. So looking at the regulatory and legal reasoning of the ACM, I
understand clearly you disagree, but are you looking at the regulatory truce that is expiring, I
think, in 2030? So do you see any read-across basically on how the ACM has been looking at
this case, at the Dutch market, and hence reason for you to appeal right now?
And then second question on the next incoming, let's say, mobile spectrum auction. If you could
give us your rough expectation. I know it is early, of course. Thank you.
Joost Farwerck: Yeah. So, on regulation, I mean, this is more a competitive regulation topic
than the telco regulation part. So on the last part, we are no longer regulated. That was a battle
we also fought in court. And by the way, we succeeded there in two steps. So KPN, a couple of
years ago, suddenly was no longer regulated on the telco regulatory parts. And then we came
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out with that voluntary wholesale proposal for the markets. It's up to 2030, and that is
supervised by the ACM. But that's the model.
So, of course, also this is the ACM, but the ACM is about two things. The left part is telco
regulation part, and the other part is more the competitive environment. This one is in
competition, so not about specific telco regulation. And they just say, listen, on the wholesale
side, you have more or less 75% of the country in your hands. You are dominant, as they call
it. So the more you buy, the more dominant you become, and that's not good for the market.
That is more or less in a very short what they say.
In moving up to 2030, we will, of course, perhaps change the model for a longer period of time,
and we will work on that and discuss that with the telco part of the ACM move into 2030. But
so far, no changes there.
And on mobile spectrum, we are discussing that with the Ministry of Economic Affairs. That's
not a part of our government. That, I think, will happen in 2028 or 2029, somewhere there. It’s
multiband auctions, so an important one. And there we aim for the same strategy for our
government as well as last auctions, that they encourage us to invest in our infrastructure and
in our mobile networks, so that they don't make us pay too much for the license, but they
encourage us to invest in certain areas and in the quality of the networks.
Outcome of that is that we have the two best mobile networks in the world in the Netherlands.
So that's pretty convincing KPI for our government as well. But we're in the middle of that, and
it's up to us to make it happen and to come to a clear model in the Netherlands together with
our governments and the other telcos.
David Vagman: Okay. Thanks very much.
Operator: Our next question is from Keval Khiroya from Deutsche Bank. Please go ahead.
Keval Khiroya (Deutsche Bank): Thank you. Well, two questions. So firstly, what do you
think it would take for the fixed ARPU growth to improve more materially? There is a competitive
backdrop you've talked about, but you've also now got an impressive 72% of the retail base on
fiber. But isn’t there something you think you can do to drive that fixed broadband ARPU growth
higher, a bit like the security feature in mobile, or does it ultimately need the market to improve
overall?
And then secondly, can you give us a view on how we should think about the Wholesale mobile
revenues in the second half and beyond, and how the sponsored roaming elements will support
versus H1? Thank you.
Joost Farwerck: Well, fixed ARPU, I mean, the competitiveness is one thing, that the more
competitive the market, the more we have to fight for our base, and the more back book, front
book movements will happen. So the investing in our base is one thing. Adding more in the
portfolio for households is also important part of our strategy, especially on the security side,
like you mentioned.
But cooling down the market is important one for us as well. It's not healthy if we all hunt for
the same customers. There's a lot of rotation in the market, and all the more or less customer
bases are the same as previous quarter.
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So I think cooling down the market, following our own strategy, adding more services on the
portfolio, in-home security, etc., that will work. But to get it above 3 [percent growth], that's
hard work. So I'm pretty okay with the last quarter. I think above 1 [percent growth] for now
is good, and we try to lift it further up. But it also relates, as you said, to the market
developments.
Chris Figee: Yeah, I guess to me, the most important thing is market developments, and we've
been able to limit migrations from front book to back book to a relatively low amount. But still,
the biggest big threat to ARPU is that delta between acquisition pricing and back book pricing
as customers try to take advantage. So if that thing normalizes, that would actually help ARPU
a lot. But that takes more than one player to make that happen, I think.
On sponsored roaming in Wholesale, yeah, it's a good business. It reflects international travel,
eSIM adoption, IoT connectivity. And I think where we're good at, we've got over 600 roaming
agreements, and we're an independent provider. We have unsteered roaming commitments.
That is worth a lot, and I think a business that is now used to and able to connect and onboard
customers pretty quickly. So that gives you a bit of competitive advantage in this space.
Will this continue to grow at this pace? I mean, at some point, it will flatten down a bit. I think
there's a bit of margin pressure coming on over time. So I'd expect the second half of the year
to be good, possibly to flatten out a bit over time. It’s not a level of growth you will sustain in
the long run, but it's nice margin business that will help you grow.
Generally speaking, I do see more opportunities from broader Mobile in Wholesale, a bit more
on the national level in the medium to long-term. So in summaries, we've got a good business
in sponsored roaming. Continue to grow in the second half of the year. At some point, this level
of growth will be fading as other people join the party. But we do have a number of like clear
on-hand opportunities also in domestic national mobile partnerships that will support Mobile in
Wholesale in the medium term. So they will carry the baton from a few years down the road.
Keval Khiroya: Understood. Thank you, both.
Operator: The next question is from Mr. Paul Sidney from Berenberg. Please go ahead.
Paul Sidney (Berenberg): Great. Thank you very much. Good afternoon to everyone. Just
two questions from me, please. First one, a bit of a follow-on. I mean, as the industry moves
to a value over volume approach, particularly in consumer, pricing is more important than ever .
We've seen Deutsche Telekom putting up back book broadband prices earlier this year.
Swisscom's done a similar move. We've seen AT&T putting up prices on some of their old legacy
products.
I just wondered, is there potential and desire for KPN to be a bit bolder on price increases,
particularly on the back books, given that I think we all believe that the service that you're
giving is being priced too cheaply, and if customers want to churn, then so be it, because it'll
be low-end customers.
And then just secondly, apologies, Chris, I ask you this every quarter, but in terms of capital
allocation, you're committed to returning Free Cash Flow to shareholders. But are there any
initiatives that are bubbling up under the surface within the company that may be not obvious
to us that KPN can invest in to create value, given all the optionality you have, given the very
strong cash flow generation we expect over the next few years? Thank you.
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Joost Farwerck: Well, the whole point you touch on value steering. That, of course, is on our
radar screen as well. I mean, compared to other years, prior years, I mean, we did more than
we used to. Of course, we use CPI increase more or less every year on full broadband and
mobile-based consumer on the SME base and in the part of the contracts in LCE as well.
And in between, we did some price increases in broadband, in mobile, related to improving the
proposition on security, etc. Of course, we don't want to scare off our customers, but so yes,
when we can offer our customers more quality on KPN, there's good reason to increase prices,
and if we can explain it, then it's good. Let's put it that way.
So that's on our minds. Yeah. Do we scare off customers? Well, we have no-frills brands as
well, so we follow a balanced approach, high-quality, higher priced is KPN. Works quite well.
The mobile side, unlimited gets the higher price, but also supported by security packages, etc.
And then there's on the Youfone side or on the Simyo side, you can buy a cheaper proposition
with less guarantees and lower speeds. So in that balance, we think we can play this strategy
excellent. Well, you referred to other telcos. We're looking at that as well. We're doing more or
less the same in the Netherlands, but we have to play it in. It's a delicate balance we try to find
here. Let's put it that way.
Chris Figee: Yeah. And to your second question, Paul, on capital allocation and other
investments, look, we made a clear commitment. We return all our Free Cash Flow to
shareholders and we stick to that commitment. And part of it is a €0.20 dividend over year
2026 and €0.25 over next year.
Are there other opportunities to invest? Well, in that commitment is even for next year after
the Capex step down, still €1 billion in Capex. That's still a heck of a lot of money, even at the
higher end of the European telcos. So we continue to invest in this business from a Capex
perspective. If there would be other opportunities bubbling up, as you say, we've got a balance
sheet that has a 2.5 times net debt-to-EBITDA leverage, and because of EBITDA growth, it
gradually goes down, right.
If you wouldn't do anything, this thing gradually drops by 0.1, 0.15 terms every year . So that
means that if additional opportunities would come up, you've got a balance sheet that gives us
room to invest. And obviously, you need to save a bit of money for spectrum auctions, you
need to save a bit of money for the future Glaspoort consolidation. But we think that the ability
of KPN to invest into new opportunities if they come up is still there, is fully there, given the
fact that we still have the balance sheet, we invest €1 billion, and then we can still pay out all
this cash to shareholders. So the model still stands as far as we're concerned.
Paul Sidney: That's great. Thank you very much. And Chris, all the best for the future.
Chris Figee: Thank you.
Operator: We'll now go ahead with today's final question coming from Carl Murdock from Citi.
You can now go ahead, please.
Carl Murdock: That's great. Thank you very much. Two from me. Firstly, just following up on
Paul's question, but kind of on the Capex step downs 2027. How do you operationally manage
such a big step-down in Capex? What are the key steps and risk factors around such a big
change in the Capex budget? And should we be able to see the step down immediately from
Q1 next year?
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And then secondly, just on the sustainability and the growth differential between SME and LCE.
Is there any risk of contagion between the issues in LCE and SME, or are they just totally
different markets and competitive dynamics, given what you were saying about LCE facing
mostly international competitors? Thanks.
Joost Farwerck: Yeah. So, on Capex step down. I mean, Capex, the way we run it, is more or
less six to eight quarters in advance. So today we're not steering 2026. Today, we're steering
2027. If we're building fiber, we're planning it almost two years in advance. So the step down
is mainly related by the way to the fiber rollouts. So that is what we are more or less currently
already booking in. So it's not that suddenly on 1st January, we have to decide where to cut on
the Capex. It's completely or more or less fully related to the fiber rollouts. And that's steered
today. So my message is 2027 Capex is steered today and not next year.
So yes, we do it in advance and it's pretty prudent how we run it. So pretty predictable as well.
Joost Farwerck: SME versus LCE, these are, as far as I'm concerned, completely different
markets. So there's a consumer and then there's a SOHO, and then followed up by SME, which
is really about 10 to 500 employees at the max. And far above that, that's where LCE starts.
So lots of SME customers are still in the residential households, to give you an example.
So we moved a part of LCE, in our own definition, to SME because we saw an opportunity there
and we have a better sales system and a better platform and a better machinery supported by
AI already on the SME part. So for us, these are two different markets, that's according to our
own definitions. And the more we put in SME, the more successful we are.
So the way we look at LCE today, the more really the larger companies are in there, and the
rest is SME.
Chris Figee: Yeah. I mean, on your point on Capex, look, as Joost said, we're planning the
Capex next year right now, right? So the plan is nearly done. Obviously, there's value creating
scarcity, I always say, and the plan for next year is nearly ready. We've got a few more things
to solve, but then we have the plan ready, fully operational for Capex next year.
And operationally, yeah, some parts will be slimmed down. For example, when you step down
your fiber rollout, you can scale down your fiber department. So that will be scaled down in
staff levels as well to re-use aside for that factory, that operation. And that's actually being
executed in parallel.
And the second point to make on SME, a lot of our SMEs are going through partners, right?
Distribution through third-party intermediaries that work with our KPN ÉÉN platform, and that
are paid commission also based on the revenue they generate. So they also have an interest in
keeping ARPUs at a healthy level. So the distribution model in SME, selling via partners to small
employees, small and midsize companies, is different from selling to professional procurement
officers in large corporates. I think that makes these markets really different.
Matthijs van Leijenhorst: Okay. Thank you, Chris. That concludes today's session. In case of
any other questions, you know where to find us. Cheers.
Operator: Ladies and gentlemen, this concludes today's presentation. Thank you so much for
participating. You may now disconnect your line.
[END OF TRANSCRIPT]
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