Koninklijke KPN NV Q3 2024 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Andrew Lee - Goldman Sachs - Analyst : Good afternoon, everyone. Two questions. The first was on your comments around the free cash flow cadence over the next couple of years, which aren't dissimilar to what you've said in the past. But obviously, you're making -- it looks like you're making the point about the back end loaded nature of free cash flow generation given the cadence that consensus models has higher growth in 2025 for free cash flow, meaningfully higher than 2024 and higher than 2026 as well. I wonder if you could just talk about what -- how we should think about that low single digit -- low to mid-single digit free cash flow growth. I know you don't necessarily want to provide 2025 guidance today, but just giving us a little bit of extra color in terms of the phasing of the person takes given the consensus, obviously has struggled and everyone's struggled to reflect that? Second question was just on fixed -- consumer fixed. So broadband net adds were around flat and given the high degree of competition. I wonder if you could just comment on how fixed service revenue growth is playing out versus your expectations at the back end of last year. Has the competitive intensity been meaningfully worse than you expected? And does it undermine your kind of 2% to 3% service revenue midterm CAGR expectations? Thank you.

Question: Andrew Lee - Goldman Sachs - Analyst : Thank you.

Question: Andrew Lee - Goldman Sachs - Analyst : Thank you. That's very clear from both answers. Thank you.

Question: Dhruva Shah - UBS - Analyst : Hi, thanks for taking the question. Just continuing on the track of competitive dynamics and particularly on fixed Odido recently launched a fixed wireless access product at an aggressive price of, I think, EUR20 per month for existing customers or EUR25 otherwise. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 28, 2024 / 12:00PM, KPN.AS - Q3 2024 Koninklijke KPN NV Earnings Call So have you seen any impact from this so far in terms of the product launch or are you factoring in any impact going forward? So that's on fixed. And then just on postpaid again with Odido, I think the rebranding and the closing of the Tele2 brand has been somewhat of a tailwind for the other operators and then you obviously saw very strong net adds in Q3. But going into Q4 or latter quarters will Odido weakness and their inflection in terms of postpaid net adds be a headwind for KPN going forward? Thanks.

Question: Dhruva Shah - UBS - Analyst : Perfect. Thanks very.

Question: Maurice Patrick - Barclays - Analyst : Yeah, thanks very much. Indeed for taking the question. If I could just dive a little bit into your NPS comments, I mean, it seems to be quite clear from the call that you want to make the point that there was some pressure on the Net Promotor Score. I'm curious to understand what's driving that whether it's the macro side, like you said on the B2B side. I was intrigued that I was listening to Tele2 recently and they were saying they saw a huge consumer surplus still around pricing so they could see significant scope for price up in the coming years because the consumer is underpaying. I wondered how importantly price sits in that wider NPS comments. So thoughts about NPS would be super helpful. Thanks very much. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 28, 2024 / 12:00PM, KPN.AS - Q3 2024 Koninklijke KPN NV Earnings Call

Question: Maurice Patrick - Barclays - Analyst : So sorry -- just a quick follow up. So we shouldn't expect any major changes to your strategy in terms of how to address it as more just pushing furthermore and subtle shift just to understand.

Question: Maurice Patrick - Barclays - Analyst : Thank you so much.

Question: Joshua Mills - BNP Paribas Exane - Analyst : Hi guys. Thanks for the question. A couple from my side, one was on the wholesale business. So you talk about a sustainable improvement or inflection back to revenue growth. I mean, could you maybe give some other color on how you expect the line losses in broadband to trend over the next few quarters? I understand that this, of course, you had a slightly easier comp and then also revenues coming in from Glaspoort. But is your expectation that you will be growing your broadband lines in the medium term? That's the first question. And then secondly, insightfully so granular on this. But I think last quarter, Chris, you talked about a EBITDA growth rate in Q4 of north of 3.5%. Now that you've come in ahead of your expectations for Q3. Should we still expect that Q4 EBITDA growth to be in that region or will it be slightly lower? Thanks very much. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 28, 2024 / 12:00PM, KPN.AS - Q3 2024 Koninklijke KPN NV Earnings Call

Question: Joshua Mills - BNP Paribas Exane - Analyst : Got it. Thanks very much. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 28, 2024 / 12:00PM, KPN.AS - Q3 2024 Koninklijke KPN NV Earnings Call

Question: Siyi He - Citi - Analyst : Hello, hi. And thank you for taking your questions. I have two please. The first question is really following up on the comments on wholesale service revenue on B2B broadband. If you talk about you see some contribution now starting from Glaspoort, I wondering if you can quantify it. And maybe help us to think to understand how to think about this contribution going forward. And then my second question is on your comments on the cost cutting program and also maybe also help us to understand how it's contributed to your operating sales or free cash flow guidance. Then I think when I look at your OpEx, it hasn't really -- it has actually gone up for two years and maybe you can help us with how should we think about the cost cutting from this year onwards for next year and the year after. And following up on that, because I think you mentioned that we should see more reorganization cash out flow for next year. And it just want to quantify if that includes the EUR50 million step up, that you included in the EUR50 million step up to talk about the interest and tax. Thank you.

Question: Siyi He - Citi - Analyst : That's very clear. Thank you.

Question: Ajay Soni - J.P. Morgan Securities plc - Analyst : Hi there. Thank you for taking my questions. I just got a couple. First one is just to follow up on the EBITDA trend. So I think at Q2, you said you were guided to 3.5% growth year over year. And I know you kind of already answered this in an earlier question but on my calculations that gets your EBITDA for the year to around [2, 5, 10]. So just wondering why you maybe haven't upgraded your guidance for EBITDA for the full year. So that's the first one. And then the second was just around your slightly soft maybe ARRU growth in Q3. And is this being driven by the competitive environment? Are you seeing customers trade down or not willing to pay the slightly higher prices for the premium service of KPN? Any color on that would be useful. Thank you.

Question: Ajay Soni - J.P. Morgan Securities plc - Analyst : That's great. Thank you very much. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 28, 2024 / 12:00PM, KPN.AS - Q3 2024 Koninklijke KPN NV Earnings Call

Question: Keval Khiroya - Deutsche Bank - Analyst : Thank you. I've got two questions, please. So you talked about 2025 free cash from the context of the midterm guidance. I appreciate your guide with the full years. But how do you think about 2025 revenue growth in the context of the service revenue CAGR of 3% as we shift to lower price rises. And secondly, Netherlands is now moving closer to 100% FTTH coverage. Your plans would imply you would like to overbuild the alternate areas in some of their footprints over the coming two years. Do you think that's likely or do you think we get another end game to avoid overbuild? Thank you.

Question: Keval Khiroya - Deutsche Bank - Analyst : That's great. Thank you.

Question: Titus Krahn - Bank of America - Analyst : Good afternoon all. Thanks so much for taking my questions. Just two kind of follow up questions. If I may, the first one would be just on your earlier commentary around NPS in B2B. Any way you could provide more color on kind of which segment is that coming from? Is there in any way related to your SME growth slowing a little bit or is it basically coincidental? And then secondly, just a follow up question on your earlier comments on the mix shift in the B2C segment. And obviously net adds right now, how many do we kind of are coming from in Youfone from your second brand? And how many are actually on the KPN main brand? And how is that evolving over the last couple of quarters, maybe excluding the Youfone acquisition?

Question: Titus Krahn - Bank of America - Analyst : Super, thank you.

Question: Luigi Minerva - HSBC Bank Plc - Analyst : Yes, good afternoon. Thanks for taking my question. The first one is on the adjusted EBITDA after lease margin that decreases in this quarter to 45.3%, so that's 0.8% below last year. And I just wanted to understand better what is driving it? And if I read well, your comments in the release, it may be driven by other OpEx increasing by 12% due to higher marketing and sales. So yeah, I just wanted really to make sure that's the reason and how temporary or structural it may be. And secondly, the second question is on CapEx and the implications for free cash flow. So your guidance is for [EUR1.2 billion in 2023 you did EUR1.25 billion. So EUR50 million above EUR1.2 billion]. Year-to-date on CapEx , you are running EUR15 million ahead of your pace from previous year. So I'm just wondering whether this is like inflation. So the deployment is costing more just because of inflation or you are adopting a higher pace than you were thinking or whether eventually you have that kind of EUR50 million, EUR60 million of CapEx flexibility to still make your CapEx outlook and support free cash flow in the short and medium term. Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 28, 2024 / 12:00PM, KPN.AS - Q3 2024 Koninklijke KPN NV Earnings Call

Question: Luigi Minerva - HSBC Bank Plc - Analyst : Thank you so much.

Question: Steve Malcolm - Redburn Atlantic - Analyst : Yeah, thanks very much for taking the question. I'll go for two, Chris and I'll not wrap them up into (inaudible), I'll do my best. Just on wholesale it looks to me like the sort of revenue recovery was tilted towards the mobile business. You mentioned sponsored roaming, I saw the prepaid net adds were up [220,000] in the quarter. I guess that's it. I haven't heard the expression sponsored roaming before. Can you give us an idea of what that is? And it sounds sort of suspiciously low margin to and maybe you can kind of you can alleviate any fears I might have there? And then just on the B2B growth you mentioned north of 3.5% which is obviously brilliant for an enterprise facing telco. How sensitive is that to the economic outlook in the Netherlands? Is that sort of, under any imaginable scenario as far as you're concerned? I mean, I know not every scenario is imaginable but just sort of give us a sense of, how important is that economic growth doesn't disappoint to get to that 3.5% number. Thanks a lot. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 28, 2024 / 12:00PM, KPN.AS - Q3 2024 Koninklijke KPN NV Earnings Call

Question: Steve Malcolm - Redburn Atlantic - Analyst : Okay, great. Thank you very much.

Question: Nuno Vaz - Bernstein Autonomous LLP - Analyst : Hi, good afternoon. Thank you also for the opportunity to ask questions. So two topics from my side. One on fixed B2C. I've noticed if I track the number of units per household quarterly, this quarter saw a bit of a decline on fixed. So that would suggest you turn more TV and voice subscribers versus previous quarters. Just wondering what's happening there if that's true and if that may be related to (inaudible) rights and promos. Second question, a bit of a funny one and I've noticed that your EBITDA growth adjusted for Youfone so the data between the growth reported and the growth adjusted for Youfone sort of halved. So in second quarter was 1 percentage point, this quarter is about 0.5 percentage points. So that would suggest you be the contribution from Youfone sort of halved. It's not a big amount, but I'm just curious what's happening there. Thank you.

Question: Nuno Vaz - Bernstein Autonomous LLP - Analyst : Thank you very much for that. Thanks so much. Thank you.

Question: Usman Ghazi - Berenberg - Analyst : Hello, gentlemen, thank you very much. I just have one question please. On the Huawei situation, I know last time we spoke, you had mentioned you were going to approach the Dutch government with the German kind of compromise. And I was just wondering if there's any update on that. Thank you very much.