Third Quarter Results 2007 - KPN · – Additional € 0.5 bn share repurchase program started in...

Third Quarter Results 2007

30 October 2007

2

Safe harborCertain statements contained in this presentation constitute forward-looking statements. These statements may include, without limitation, statements concerning future results of operations, the impact of regulatory initiatives on our operations, our and our joint ventures' share of new and existing markets, general industry and macro-economic trends and our performance relative thereto, and statements preceded by, followed by or including the words “believes”, “expects”, “anticipates” 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 our control that could cause actual results to differ materially from such statements. A number of these factors are described (not exhaustively) in our 2006 Annual Report and Form 20-F.

All figures in this presentation are unaudited and based on IFRS as endorsed by the EU. In preparing this presentation we have applied IFRS 8 “Operating Segments”. IFRS 8 has not been endorsed yet by the EU but has been recommended for endorsement by EFRAG and ARC. Formal endorsement by the EU is expected in the near future. This presentation contains a number of non-GAAP figures, such as EBITDA and free cash flow. These non-GAAP figures should not be viewed as a substitute for our GAAP figures. Our non-GAAP measures may not be comparable to non-GAAP measures used by other companies.

All market share information in this presentation is based on management estimates based on externally available information, unless indicated otherwise. Certain figures may be subject to rounding differences.

3

DisclaimerWe define EBITDA as operating profit before depreciation and impairments of PP&E and amortization and impairments of intangible assets. The measure is used by financial institutions and credit-rating agencies as one of the key indicators of borrowing potential. Many analysts use EBITDA as a component for their (cash flow) projections. Note that our definition of EBITDA deviates from the literal definition of earnings before interest, taxes, depreciation and amortization. Either definition of EBITDA has limitations as an analytical tool and you should not consider it in isolation or as a substitute for analysis of our results as reported under IFRS or US GAAP.

We use EBITDA as a component of our guidance. In view of the possible volatility of impairments under IFRS, we believe that this is the most appropriate way of informing financial markets on certain aspects of future company financial development. We do not view EBITDA as a measure of performance. In all cases, a reconciliation of EBITDA and the nearest GAAP measure (operating result) is provided. In the net debt/EBITDA ratio, we define EBITDA as a 12 month rolling average excluding book gains and restructuring costs, both over € 20 mn.

We define Free cash flow as “Cash flow from operating activities” plus “Proceeds from real estate” minus “Capital expenditures”, being expenditures on PP&E and software.

We have prepared unaudited pro-forma financial information for KPN Mobile the Netherlands and Fixed (including Other and intercompany eliminations) based on the former organizational structure in place as at December 31, 2006 and on the Intercompany charges associated with that former structure. Although we believe the pro-forma financial information is based on reasonable assumptions, it is provided for illustrative purposes only and we cannot assure that this information would be identical to the actual results which might have been reported had our organization structure not changed.

4

Agenda

Ad Scheepbouwer, Chairman and CEOOperating review Mobile Int’l

Ad Scheepbouwer, Chairman and CEOConcluding remarks

Ad Scheepbouwer, Chairman and CEOOperating review The Netherlands

Marcel Smits, CFOFinancial review

Ad Scheepbouwer, Chairman and CEOChairman’s review

5

Highlights Q3

• Mobile International: foundations laid for further profitable growth– E-Plus Post Paid net adds accelerating, EBITDA margin well above 35%– New propositions and strengthened distribution through acquisitions by BASE

• The Netherlands: resilient performance, increasing share of new services– Improved line loss from successful customer retention and upscaling KPN VoIP– Record TV net adds following new strategy– Continued growth in Business, EBITDA up 14%, driven by IP-based new services– In former Fixed, deceleration of revenue and EBITDA decline

• All-IP strategy: well on track– Preparation for All-IP mass rollout at advanced stage, installation capacity committed– Sale of real estate top portfolio in H1 ’08 under consideration, value ~€ 300 mn– MoU’s signed with unbundlers for access to All-IP infrastructure

• Business profile strengthened by iBasis merger and Getronics acquisition

p

6

Financial highlights

• On track to meet full-year guidance following solid Q3 results– Revenues and other income flat (YTD -0.5%)– EBITDA up 1.8% (YTD 0.0%)– Capex of € 0.4 bn (YTD € 1.0 bn)– Free cash flow1 of € 0.6 bn (YTD € 1.8 bn)

• Shareholder returns increased to € 2.5 bn for 2007– Interim dividend of € 0.18 per share paid in August, € 0.3 bn in total– Initial € 1 bn share repurchase program completed, following acceleration in August– Additional € 0.5 bn share repurchase program started in September, 47% completed

to date

1 Defined as cash flow from operating activities plus proceeds from real estate minus Capital expenditures p

7

Strategic focus The NetherlandsSignificant progress on strategic priorities

• Preparations for All-IP at advanced stage

• FTE reduction / cost savings on track

• Platform for wholesale growth with iBasis merger

• Deploying next generation network and IT

• Achieving operational excellence

Wholesale & Operations

• Market leader in voice and IP connectivity

• Getronics acquisition closed

• Step-up in Fiber-to-the-Office initiatives

• Moving up the value chain towards managed ICT services

• Expanding position in voice and data services

Business

• Sustained growth of market shares

• Portfolio rationalization initiated

• Focus on three key brands: KPN, Hi and Telfort

• Leveraging market shares

• Bringing focus by simplificationConsumer

Recent key eventsStrategic focus

p

8

Strategic focus Mobile internationalSignificant progress on strategic priorities

• Continued profitable growth in the Netherlands

• MVNO in Spain ready for launch in near future

• Leveraging wholesale partnerships

• Expanding business model into Western European markets

Mobile Wholesale NL

• Step up in commercial efforts to reignite growth

• Strategic acquisitions to strengthen distribution

• Acquisition of Tele2 Belgium to enhance sales capabilities

• Regaining commercial initiative

• Strengthening distributionBASE

• Continued market outperformance

• Growth in new brands with high profitability

• Non-core activities outsourced

• Profitable growth through Fixed-Mobile Substitution

• Operational excellenceE-Plus

Recent key eventsStrategic focus

p

9

Agenda






10

1,220

0.19

355-182537

-142-1

680

2,357380160

3,0373,007

Q3 ’07

1,198

0.17

342-109451

-1252

574

2,463473151

3,0373,028

Q3 ’06

1.8%

11.8%

3.8%67.0%19.1%

13.6%-

18.5%

-4.3%-19.7%

6.0%

0.0%-0.7%

%

3,684

0.57

1,068-393

1,461

-4072

1,866

7,1071,235

583

8,9738,882

YTD ’07

3,685

0.57

1,157-347

1,504

-3597

1,856

7,1621,393

436

9,0188,919

YTD ’06

0.0%

0.0%

-7.7%13.3%-2.9%

13.4%-71.4%

0.5%

-0.8%-11.3%33.7%

-0.5%-0.4%

%

Earnings per share2

Profit/(Loss) after taxes

EBITDA3

TaxesProfit/(Loss) before taxes

Financial income/(expense)Share of profit of associates

Operating result

Operating expenses– of which Depreciation1

– of which Amortization1

Revenues and other income– of which Revenues

€ mn

1 Including impairments, if any2 Defined as Profit after taxes per ordinary share / ADS on a non-diluted basis (in €)3 Defined as Operating result plus depreciation, amortization & impairments

Group results Flat revenues and EBITDA year to date, in line with guidance

• Q3 results broadly in line with previous quarters (incl. € 30 mn book gain on real estate)• Higher tax charge in Q3 ’07 due to adjustments in tax returns for previous years• EPS up 12%, driven by continued share repurchases

p

11

Group cash flowContinued strong free cash flow and cash return to shareholders

1 Including impairments, if any2 Including other income, change in provisions, change in working capital and share based compensation3 Including Property, Plant & Equipment and software 4 Defined as cash flow from operating activities plus proceeds from real estate minus Capital expenditures

>200%35124>100%2042Proceeds from real estate

-24.9%

5.0%-34.4%

-16.3%

-11.1%

-16.6%

18.5%-13.5%-12.0%>200%

-

%

2,156

9821,174

1,821

981

2,678

1,8661,818-348-80

-578

YTD ’07

2,496

9821,514

2,174

1,117

3,256

1,8561,829-251213

-391

YTD ’06

-13.6%1,3361,003Cash return to shareholders

0.0%-22.5%

3211,015

337666

Dividend paidShare repurchases

-16.2%748626Free cash flow4

-12.2%

-17.8%

0.5%-0.6%38.6%

--47.8%

%

574624

-108-164

680540-95-38

-125

Operating resultDepreciation & amortization1

Interest paid/receivedTax paid/receivedOther cash flow2

Capex3

Net cash flow operating activities

€ mn

425378

1,153962

Q3 ’06Q3 ’07

• Continued strong free cash flow of € 626 mn, € 1.8 bn YTD• Shareholder returns increased to € 2.5 bn completed, € 2.2 bn YTD

− € 0.6 bn final dividend ’06 and € 0.3 bn interim dividend ’07− € 1.2 bn share repurchases, 2006 including € 0.7 bn repurchase from Dutch State in September

p

12

Performance versus Guidance On track to meet guidance

1 Reported numbers excluding acquisitions of Tiscali, iBasis and Getronics2 Defined as Operating result plus depreciation, amortization & impairments3 Defined as cash flow from operating activities plus proceeds from real estate minus Capital expenditures

• On track to meet guidance following Q3 results– Excluding € 18 mn revenues and € 4 mn EBITDA from Tiscali acquisition

• Higher cash outflows anticipated for Q4– Higher Capex due to All-IP and seasonality– Interest payments– Cash taxes

• Reiterating free cash flow guidance of > € 2 bn for 2007-2009

€ 0.6 bn

€ 0.4 bn

1.5%

-0.6%

Q3 ’07

€ 0.6 bn

€ 0.3 bn

-0.5%

1.0%

Q2 ’07

€ 1.8 bn€ 0.6 bn> € 2 bnFree cash flow3

€ 1.0 bn

-0.1%

-0.7%

YTD ’07

-2.6%FlatRevenues and other income1

Capex

EBITDA1,2

Item

€ 0.3 bn€ 1.6 - € 1.8 bn

-1.4%Flat

Q1 ’07Outlook FY ’07 as given 6 Feb

p

13

2.11.91.81.91.9

• Net debt / EBITDA1 up to 2.1x – € 0.3 bn interim dividend – € 0.7 bn share repurchases– € 0.2 bn Getronics shares bought

• € 1.25 bn backstop facility signed in September

10.710.19.710.0

11.0

9.4 9.28.8

9.310.0

Debt€ bn

Q3 ’06

Gross Debt

Financing policy

Net Debt / EBITDA1 Financial framework rangeNet Debt

Group financial profileLeverage increased following shareholder returns, liquidity maintained

2.0x

1 Based on 12 months rolling EBITDA excluding book gains/losses and restructuring costs both over € 20 mn

Redemption profile

Q3 ’06 Q3 ’07

€ bn

Q4 ’06Q4 ’06 Q1 ’07Q1 ’07

2.5x

Q2 ’07 Q2 ’07

1.0

0.7

1.3 1.4

0.90.7

1.0

0.4

1.0

0.4

0.9

'08 '09 '10 '11 '30 '16'13 '14'12 '15 '17 '18 '19

Q3 ’07

p

14

Tax position GermanyNew fiscal legislation with lower tax rates as of 2008

New fiscal legislation

StatusNOLs

• € 18.8 bn net operating losses for corporate income tax (YE ’06)– No significant tax payments for the medium term

– 60% tax shield in case of profitable fiscal results

• Lowering of effective tax rate from ~40% to ~29% as of 1 Jan ’08– Corporate income tax rate from 26.4% to 15.8%

– Trade income tax rate from 18.4% to 15.8%

• Tax losses no longer transferable in case of change of control– € 6 bn losses from prior impairments not affected

– Further review of fiscal implications and alternatives

15

MTAVisibility on MTA regulation improving

The Netherlands

Belgium

Germany

• New MTA proposal under discussion, currently valid until 30 November– T-Mobile / Vodafone € 8.78 cents per minute– E-Plus / O2 € 9.94 cents per minute

• E-Plus arguing for more asymmetry in MTA tariffs

• BIPT proposal for less asymmetry under review

• Former glide path with more asymmetry remaining in place for now

• New MTA regulation, estimated impact of ~4% on service revenues in 20081

4.3712.7510.1315.81

Previous

3.6410.168.09

12.76Current

3.033.39Avg. asymmetry9.387.48

11.821 Jan ’08 1 July ’08Proposal 11 Aug ’06

8.21Mobistar6.56Proximus

10.41BASE

1.412.411.011.0

Previous

1.12.41.41.4Avg. asymmetry11.410.010.0

15 Aug ’07 1 July ’091 April ’091 July ’08€ cents per minute

8.110.410.4T-Mobile7.09.09.0Vodafone7.08.09.0KPN

1 Based on 2006 volumes and conservatively assuming no elasticity effects

16

Financial highlights the NetherlandsPerformance in line with previous quarters, headwind from MTA and roaming

• Solid performance wireless: 2.1% service revenue growth, despite MTA and roaming cuts

• Resilient performance Consumer wireline with improving line loss and TV growth

• Continued upward trend in the Business segment from migration to new services

• € 30 mn book gain in W&O on sale of real estate

• FTE reductions on track

39.5%

836-0.7%

489

1,627347

2,116-0.6%

6762.1%

Q3 ’07

39.6%

842

429

1,699413

2,128

662

Q3 ’06

1,4591,385Operating result

41.2%

2,594-2.6%

4,9181,209

6,303-1.0%1,9945.8%

YTD ’07

41.8%

2,663

4,9091,204

6,368

1,884

YTD ’06

Operating expenses– of which D&A

Revenues and other income% change– of which wireless Service revenues1

% change

EBITDA margin

EBITDA% change

€ mn

1 Revenues and other income minus equipment sales and other income p

17

€ mn EBITDA (margin)€ mn Revenues and other income


497 521 477 521 470

51.3% 52.4% 52.0% 54.8%50.8%

Q3 '06 Q4 '06 Q1 '07 Q2 '07 Q3 '07

Financial review the Netherlands by segment

165 178 196 190 188

22.6%22.5%23.1%21.0%20.4%

Q3 '06 Q4 '06 Q1 '07 Q2 '07 Q3 '07

810 847 849 846 832

Q3 '06 Q4 '06 Q1 '07 Q2 '07 Q3 '07

184 163 181 196 179

17.2% 15.4% 17.5% 19.0% 17.0%

Q3 '06 Q4 '06 Q1 '07 Q2 '07 Q3 '07

1,070 1,057 1,037 1,032 1,053

Q3 '06 Q4 '06 Q1 '07 Q2 '07 Q3 '07

Business

926951917994968

263252284289 261

Q3 '06 Q4 '06 Q1 '07 Q2 '07 Q3 '07Revenues and other income External revenues

Consumer

EBITDA margin reported EBITDA

1 EBITDA margin excluding € 55 mn book gain on sale of real estate: 52.0%2 EBITDA margin excluding € 30 mn book gain on sale of real estate: 49.1%

12

p

18

• E-Plus: Outperformance on key metrics, ahead of H2 ’07 guidance– Post Paid net adds accelerating, EBITDA margin well above 35%– Further acceleration of service revenue growth expected in Q4 ’07

• BASE: Continued headwind, actions taken to secure further profitable growth– New propositions launched and strengthened distribution through acquisitions

• Mobile Wholesale: Continued growth from wholesale partnerships in the Netherlands– Expanding business model to Spain, ready for launch in near future

Financial highlights Mobile InternationalContinued profitable growth despite challenging markets and regulation

37.2%

3767.7%

184

827192

1,0111.1%

9712.1%

Q3 ’07

34.9%

349138

862211

1,000

951

Q3 ’06

340499Operating result

37.9%

1,10714.8%

2,422608

2,9213.4%2,7984.6%

YTD ’07

34.1%

964

2,486624

2,826

2,675

YTD ’06

Operating expenses– of which D&A

Revenues and other income% change– of which wireless Service revenues1

% change

EBITDA margin

EBITDA% change

€ mn

1 Revenues and other income minus equipment sales and other income p

19

Financial review Mobile International by segment€ mn EBITDA (margin)€ mn Revenues and other income

248 220 253 293 289

32.6%29.5%

36.2% 39.8% 37.6%

Q3 '06 Q4 '06 Q1 '07 Q2 '07 Q3 '07

71 64 60 65 55

36.4%41.9%39.5%40.0%43.8%

Q3 '06 Q4 '06 Q1 '07 Q2 '07 Q3 '07

33 28 28 35 32

36.4%41.2%33.7%32.9%

41.3%

Q3 '06 Q4 '06 Q1 '07 Q2 '07 Q3 '07

BASE

Mobile Wholesale NL

E-Plus

1 EBITDA margin excluding € 23 mn restructuring costs: 35.7%

1


769736698747760

714 692 660 700 735

Q3 '06 Q4 '06 Q1 '07 Q2 '07 Q3 '07

159 157 149 151 147

151155152160162

Q3 '06 Q4 '06 Q1 '07 Q2 '07 Q3 '07

80 85 83 85 8879

86 85 9084

Q3 '06 Q4 '06 Q1 '07 Q2 '07 Q3 '07

Revenues and other income Service revenues

p

20

Pro forma disclosure FixedContinued deceleration of revenue and EBITDA decline

41.7%

534-117

1,282-79

-5.8%

Q2 ’07

43.5%

570-101

1,311-99

-7.0%

Q1 ’07

41.7%

568-84

1,361-67

-4.7%

Q4 ’06

42.2%

550-60

1,304-33

-2.5%

Q3 ’07

45.6%EBITDA margin (excl. notable items3)

610-69

1,337-93

-6.5%

Q3 ’06

EBITDA (excl. notable items3)Y-on-Y decline

Revenues and other income (excl. notable items3)Y-on-Y declineY-on-Y %

Fixed (incl. Other and Intercompany)1,2

• Continued deceleration of revenue decline– Deceleration in Consumer net line loss, growth in VoIP, broadband and TV– Increasing revenues in Business segment despite migration to new services– Internal voice revenues in W&O continue to decline, resilient external revenues– Tiscali acquisition adding € 18 mn revenues and € 4 mn EBITDA

• EBITDA loss at € 60 mn, much lower than previous quarters– € 30 mn book gain on real estate in Q3 not included– H1 ’07 impacted by non-recurring items, e.g. € 45 mn additional VoIP costs

1 Sum of Revenues ‘Fixed’, ‘Mobile Other’, ‘Other’ and ‘Intercompany’ in old reporting structure2 See Annex for detailed reconciliation3 Book gains from sale of real estate in 2007 and disposal of Xantic in 2006 p

21

Pro forma disclosure KPN Mobile the NetherlandsContinued Post Paid subscriber growth, headwind from MTA and roaming

3.7 3.9 4.0 4.1 4.2

4.8 4.84.8 4.8 5.0

Service revenues up 1.6%

752 735 731 755 764

47.5% 47.2% 47.2% 47.0% 47.1%

Q3 '06 Q4 '06 Q1 '07 Q2 '07 Q3 '07Q4 ’06 Q3 ’06

Post Paid share up 2%-point

Q1 ’07 Q2 ’07

€ mn

Q3 ’07

1 Management estimates, amongst others based on revenues as per industry filings

Post PaidPre PaidPost Paid share

SAC / SRC down 9.0%

188 180159 165 171

Q3 '06 Q4 '06 Q1 '07 Q2 '07 Q3 '07

€

Service revenues Service revenue market share1

EBITDA up 10%€ mn

294269 302 328 296

34.6%38.4% 39.8% 41.8%

37.8%

Q3 '06 Q4 '06 Q1 '07 Q2 '07 Q3 '07


46%44% 45% 45% 46%

mn

8.5 8.7 8.8 8.9 9.2

p

22

Agenda

Business




Consumer




23

• Quality of base continuously improving– Continued migration to Post Paid, 41% of base– Declining churn from successful CLM

• Service revenues up 2.3% despite negative impact from MTA and roaming

– Impact MTA reduction -/- 1.4% – Offset by continued minutes growth, in part from

Fixed-Mobile substitution– Further uptake of data services

• Rising momentum in non-SMS data services, both in active subscribers and usage

– Increasing demand for Hi data bundles– ‘Surf & Mail Unlimited’ introduced by Telfort– Average usage per subscriber doubled

• Sustained profitability growth with SAC/SRC down 15%

169 161 129 131 144

435 412 416 432 445

Q3 '06 Q4 '06 Q1 '07 Q2 '07 Q3 '07

Consumer wireless servicesContinued Post Paid subscriber growth, service revenues up 2.3% despite MTA cut

Post Paid share up 3%-point

€ mn Service revenues up 2.3%

Service revenues SAC/SRC

2.2 2.3 2.4 2.4 2.5

3.6 3.53.7 3.5 3.6

Q4 ’06 Q3 ’06 Q1 ’07 Q2 ’07 Q3 ’07

Post PaidPre PaidPost Paid share

41%38% 39% 40% 41%

mn

5.9 5.9 5.9 5.9 6.1

Non-voice as % of ARPU

20%17% 16% 18% 18%

p

24

• Market share retail broadband 44.3% – Broadband penetration increase to 75%– 500k new KPN connections since Q3 ’06 – Limited contribution from VoIP growth

• Successful Telfort brand expanded as Fixed-Mobile challenger to drive further growth

– Low-cost / no-frills multiplay offerings– Portfolio with Mobile, VoIP and Broadband– Rebranding of Tiscali and Speedlinq to Telfort

• Market leadership consolidated with 39% share– 53k KPN VoIP net adds in Q3– Market growth slowing down to ~10k per week– 38% of broadband market converted to VoIP

• KPN gradually scaling up VoIP order intake – Ambition for up to 8-9k gross adds per week– National advertising resumed in September

• Additional VoIP costs less than € 10 mn in Q3

44.3%40.3% 40.9% 41.0% 44.6%Broadband connections1

Consumer VoIP and broadbandGradually scaling up VoIP and driving broadband growth further

mn

2.02 2.14 2.23 2.43 2.52

1.86 1.97 2.03 2.09 2.160.86 0.89 0.90 0.75 0.71

Q3 '06 Q4 '06 Q1 '07 Q2 '07 Q3 '07

4.7

Other ADSL2KPN Cable

1 Based on management estimates, approximately 80% consumers and 20% businesses 2 Excluding Bitstream

5. 0 5.2 5.3

Market share

0.27 0.52 0.65 0.73 0.790.60

0.700.85 0.91 0.980.25 0.25 0.26

1.0

1.41.8 1.9 2.0

0.21

0.16

Q3 '06 Q4 '06 Q1 '07 Q2 '07 Q3 '07

VoIP connectionsmn

25%36% 37% 39%38%

5.4

p

25

Line lossNet line loss at 100k due to successful retention offers and VoIP

• Retention offers successful in driving down PSTN/ISDN line loss

– Discount on flat fee bundles in traditional voice– Broadband combined with traditional voice– Special winback offers– Market share in traditional voice up 6% to 72%

• Outflow to WLR decelerating– 103k in Q3 vs. 133k in Q2; total 283k– Limited financial impact from WLR migration

• As a result, net line loss decelerates to 100k– Continued reduction in net line loss– Lowest since Q3 ’05

• Net line loss in Q4 expected to be on par with Q2 and Q3

– Increased traction of retention offers– Gradual upscaling of KPN VoIP

-267

-357 -353 -291

-247

Q3 '06 Q4 '06 Q1 '07 Q2 '07 Q3 '07

x 1,000 PSTN / ISDN trends

VoIP migration Loss to competition

x 1,000 Net line loss1

-140 -130-165

-110 -100

Q3 '06 Q4 '06 Q1 '07 Q2 '07 Q3 '07

1 PSTN/ISDN line loss + growth VoIP Consumer + growth ADSL only + growth WLR; management estimates

WLR

43%

69%

38%

13%

46%

29%

42%

21%

p

26

TVFurther acceleration in TV growth, driven by new strategy

• New TV offerings highly successful– Record net adds of 77k to 414k in Q3– ~60% share of gross adds in digital TV market– 4%-point market share increase to 17%

• Improved business model and pricing schemes to create foothold in TV market

– DVB-T starting at € 6.95, 50% discount to cable– Rental model for set-top box– IPTV starting at € 9.95, with several add-ons

• Increasing demand for value-added services– Over 10% of Digitenne customers subscribing to

live football package (€ 6 / month)– Video-on-Demand portfolio for IPTV expanded

• Launch of ‘MobielTV’ as value-added service– 11 TV channels on mobile phone based on 3G– Consumer pilot for DVB-H

245 265 296 337414

Q3 '06 Q4 '06 Q1 '07 Q2 '07 Q3 '07

TV subscribers up 69%

Digital TV market Total TV market

17%14%13%13%13%

3% 4% 4% 5% 6%

Q3 '06 Q4 '06 Q1 '07 Q2 '07 Q3 '07

Market share up 4%-points

+8%+12%

+14%

+23%

p

x 1,000

27

Agenda

Business




Consumer




28

Business marketContinued migration from traditional to new services

• Continued migration from traditional to IP services especially managed services

• Phase out traditional services, e.g. SDH1

• Continued growth in housing and hosting services

Wireline services• Service revenues up 1.8%

– MTA impact -/-1.3%– Usage growth, partly FMS

• 14% subscriber growth– Data cards and Blackberry’s – M2M represents ~15% of base

Wireless services

1413131111

35 6

4

7

Q3 '06 Q4 '06 Q1 '07 Q2 '07 Q3 '07

IP data services

Business DSL M-VPN E-VPN

7162544578

Wireless services

1.1 1.2 1.2 1.3 1.3

231235235232227

Q3 '06 Q4 '06 Q1 '07 Q2 '07 Q3 '07

Service revenues (€ mn)Customers (mn)

Traditional services

1.71.81.81.81.8

38 35 3436 34

Q3 '06 Q4 '06 Q1 '07 Q2 '07 Q3 '07

PSTN/ISDN (mn) Leased lines (x 1,000)

• Step up in FttO, driven by demand for higher bandwidths

• 42k companies connected with FttO at Q3 ’07

• 61k or nearly 10% of companies connected by YE ’07

Fiber-to-the-Office (FttO)

p 1 Synchronous Digital Hierarchy, legacy platform for data communication

29

Business contract wins in Q3Strengthening position, predominantly in (managed) data services

5 years• Storage and back-up servicesAccounting

3 years• Managed IP telephony solution for all branches

• Replacement of backbone hardwareFinancial services

5 years• WAN networks and international datacenter backboneFinancial services

Not disclosed• Framework agreement for wireline data services

• Leased lines, Ethernet, DSL and internet accessDutch Government

5 years• Hosting services for 500 servers

• Servers transferred from client to KPNTransportation

5 years• ICT outsourcing in partnership with Getronics

• Housing, hosting and storage servicesTransportation

Not disclosed• WAN solution based on new International Ethernet VPNAsset management

ScopeServicesSector

30

Online applications

KPN ICT ServicesStrong growth in online applications for SME and SoHo

Internet security

Exchange

Document sharing

Accounting

Back-uponline

PC online

• KPN ICT strategy launched two years ago– One-stop-shop for telecom and ICT services– Online applications for SME / SoHo since 2007

• KPN as reliable partner for SME and SoHo– Upselling voice and data connections to

workspace management through dedicated sales force

– Standardized ICT applications ordered online – Unique positioning vs major ICT companies

• Strong customer growth following national advertising in May and September

• Portfolio expanded to nine workspace management services, e.g.

– Back-up online– Accounting online– Document sharing

KPN ICT services

31

Global ICT service provider with focus on workspace managementGetronicsWorkspace management

• Global ICT service provider– Top 5 player in workspace management worldwide

among HP, IBM and EDS– Global footprint with direct presence in 20

countries and over 90 local service partners – Strong customer base with major (inter)national

accounts– Presence in all industry sectors

• Focus on workspace management– Services to improve employee productivity, e.g.

e-mail, telephony, helpdesks and storage– Generating over 50% of total revenues– Market leader in the Netherlands

• Workspace management complemented by other services

– Application management– Consultancy and transformation services

Print

E-mail

Supportservices

Storage& back-up

CommunicationsInfrastructure

Security

CollaborativeTechnology

Telephony

Business applications

p

32

• Telecom operators and IT service providers increasingly converging through IP

– Customers requiring all Telco and IT services from a single end-to-end vendor

– KPN and Getronics already partnering for large outsourcing contracts

• Getronics acquisition allows KPN to make major step in moving up the value chain

– Instantly market leader in the Benelux– In line with stated Business market strategy– Complementary assets in Telecom and IT

• Combination KPN-Getronics creating platform for further growth

– Cross- and upselling IT services to KPN SME and SoHo customers

– Integrated end-to-end solutions for large and medium enterprises

Moving up the value chain into (managed) ICT services

Telecomoperator

IT service providers

Convergence between Telecom and IT

Focus Getronics

Voice

Data

Security

Call centers

Data centers

Desktop services

Business applications

Business processes

Connectivity

IT services

Network related IT services

p

33

Integration focused on operational improvements and evaluation of core assets

• Acquisition announced on 30 July, officially settled on 22 October

• Net consideration of € 1.3 bn– € 766 mn for all ordinary shares– € 161 mn for preference shares– € 263 mn for convertible bonds

• New Board of Management1 and simplified organizational structure

– Erik van der Meijden (CEO)– Steven van Schilfgaarde (CFO)– Gary Cawthorne (Americas)– Tara Brady (UK)– Jos Schoemaker (Global Service Operations)

• Intention to delist Getronics as soon as legally possible, expected before year end

Deal closed within 3 months• Focus on operational improvements

– Achieve short-term cost savings– Acceleration of profit improvement initiatives– Alignment between strategy and portfolio

• Rationalization process ongoing – Deals signed for Iberia and Hong Kong / China

disposal, presence maintained with partnerships– Further evaluation non-core assets post closing

• As of H2 ’08 integration of KPN ICT Services and Corporate Solutions into Getronics

– Build and grow leading position in ICT services market in the Benelux

– Managed as ICT company rather than Telco

• Significant benefits expected– Cross- and upselling opportunities– Annual synergies of at least € 50 mn as of 2009– Tax asset on opening balance, >€ 100 mn NPV

Integration program

1 Board positions other than CEO and CFO still subject to shareholder approval

34

• 5.5% organic service revenue growth3 in H1 ’07

– Strong momentum with (inter)national clients due to favorable economic conditions

– Organic service revenue growth 3.9% in Benelux, 3.5% in the Netherlands

• Continued margin pressure in H1 ’07– 2.3% group EBITAE margin, 4.4% in

Benelux– Getronics guidance for group EBITAE

lowered to 3.0-3.5% for FY ’07

• Getronics fully consolidated into KPN P&L as of 23 October 2007

• Separate disclosure for Getronics to allow for comparability with peers

Service revenue growth from higher ICT demand, continued margin pressure

Group financials1

0.4%1,1301,135- Service revenues

-28%

-2.1%

%

3.1%

40

1,308

H1 ’06 1,280Revenues

EBITAE margin

EBITAE2

€ mn

2.3%

29

H1 ’07

0.8%589594- Service revenues

-32%

-1.2%

%

6.4%

41

645

H1 ’06 637Revenues

EBITAE margin

EBITAE2

€ mn

4.4%

28

H1 ’07 Benelux financials1

1 Financials as disclosed by Getronics, not consolidated with KPN accounts2 EBITAE defined as operating result from continuing operations before amortisation of acquired intangible assets, acquisition integration expenses,

impairment of goodwill and gain/loss on sale of group companies and associates3 Net of divestments, acquisitions and forex impact

p

35

Agenda

Business




Consumer




36

Wholesale & OperationsContinued focus on costs and network efficiency, FTE reductions on track

• Lower internal revenues due to decline in access lines and traditional voice traffic

• Good progress in network rollout– DVB-T coverage 67% by end Q3– DVB-H rollout started in 2007, available in 2008

• Increased network efficiency– Telfort core network integration process initiated– Portfolio rationalization initiated

• All-IP on track– MoU’s for MDF Access alternatives with unbundlers

(Tele2/Versatel, BBned and Orange)– Selective participation in FttH and FttO initiatives– Restructuring and FTE reductions on track

• € 30 mn book gain on sale of real estate

289 284 252 261 263

4.8 4.94.54.4 4.6

Q3 '06 Q4 '06 Q1 '07 Q2 '07 Q3 '07

670 708 664 635 632

5.1 5.3 5.1 4.5 4.2

Q3 '06 Q4 '06 Q1 '07 Q2 '07 Q3 '07

Internal revenues

External revenues

€ mnbn minutes

€ mnbn minutes

Originating / terminating minutesInternal revenues

International / transit minutesExternal revenues

p

37

All-IP Preparations for mass rollout at advanced stage, installation capacity committed

Status VDSL rollout

Fiber initiatives

Sale of real estate

• € 42 mn proceeds from sale of real estate in Q3

• Sale of top portfolio real estate in H1 ’08 under consideration

– Value top portfolio estimated at € 300 mn

– Part of total real estate portfolio with value of ~€ 1 bn

• Step up in Fiber-to-the-Office initiatives– 42k companies connected with FttO by end of Q3

– 61k connections by YE ’07, or nearly 10% of Dutch companies

• KPN partnering with building corporations and municipalities– Participating in FttH initiatives in Enschede and Almere

• Preparations for VDSL mass rollout at advanced stage– Building capacity committed by 2008

– Launch pad for mass VDSL rollout in 2008

• Simplification in progress for network platforms, IT, customer propositions and delivery processes

• Preparations for All-IP at advanced stage

• Committed to mass rollout in 2008

• Sale of top portfolio under consideration

38

• Focused international wholesale carrier– Unique IP-based platform, more flexibility at

lower cost– Limited own infrastructure, mainly active in

(re)routing traffic

• Portfolio expanding, over 600 clients– Traditional telcos, e.g. BT, C&W, Verizon– New entrants, e.g. Yahoo!, Skype

iBasis

Top three international wholesale carrier with unique IP-based infrastructure

• International wholesale carriers connect foreign Telco A with foreign Telco B

• Market previously dominated by incumbents, facing challenging markets

– Declining traffic volumes from home markets– Strong growth in VoIP and Mobile

• Consolidation driven by need for scale

International carrier market

IP infrastructure

Foreign Telco A

27

19 1720

12 11 9 9 9 9

Veriz

on

AT&

T

VSN

L /

Tele

glob

e

KPN

/iB

asis IDT TI FT DT

Sprin

t

C&

W

2006 CombinedTraffic

Wholesale traffic volumes worldwide1bn min

1 Source: Telegeography 2007, calendar year 2005 traffic data; (iBasis/KPN 2006 run rate added by iBasis)

Foreign Telco D

Foreign Telco B

Foreign Telco C

p

39

iBasis and KGCS1 merger creating platform for further growth

• Merger rationale– Access to state-of-the-art VoIP platform– Increased scale in international wholesale– Complementary footprints – Combined strengths in VoIP and Mobile, the

fastest growing segments

• Transaction closed on 1 October– One-off cash payment by KPN of $ 55 mn– Integration of KGCS assets into iBasis, including

$ 21 mn cash– KPN owns 51% of iBasis shares with a market

value of ~$ 0.3 bn

• Two KPN executives on iBasis Board

Transaction closed• Build premier international voice carrier

– Increased scale from KGCS traffic and lower costs

– Further develop new IP wholesale portfolio for both Fixed and Mobile

• Become lowest cost provider by leveraging scale and IP capability

– $ 20 mn synergies in medium term– 35% of current EBITDA

• Strong financial position to drive further growth

Next steps

1 KPN Global Carrier Services

40

• New iBasis showing profitable growth– Revenues up 33% Y-on-Y, driven by increased

scale, minutes up 28% Y-on-Y

– EBITDA up 46% Y-on-Y, driven by increased scale

• Guidance for iBasis on stand-alone basis– Revenues of $ 600-650 mn for 2007

– Increase of 15-25% compared to 2006

• Expected impact on P&L KPN in Q4 ’07– 100% consolidation, 49% minority interest

– Additional revenue contribution of ~$ 140 mn

– Small EBITDA contribution

• Separate disclosure for iBasis to allow for comparability with peers

Sustained growth in international wholesale

4.9 7.811.1

6.97.9

9.011.8

15.7

20.1

2004 2005 2006iBasis KGCS

Rapidly growing traffic volumesbn min

5.7%

45

8.9%

70

786

KGCS

4.4%2.3%Adjusted EBITDA margin

5712Adjusted EBITDA3

10.3%

133

1,297

New iBasis

511Revenues

Gross margin

Gross profit

Financials 2006 ($ mn)1,2

12.4%

63

iBasis

+33%+28%

1 Exchange rate on 29 December 2006: € 1 = $ 1.322 Financials as disclosed by iBasis, not consolidated with KPN accounts3 Adjusted EBITDA used as non-GAAP measurement to provide further information about operating trends p

41

Acquisition track recordSignificant value created through in-market consolidation

Telfort

AcquiredOctober 2005

• Market leader in broadband at ~45%– Organic market share growth 4%– Acquisitions market share growth 9%– Cross- and upselling opportunities

• Value creation of ~€ 150 mn from additional EBITDA

• Acquisition of various broadband ISPs since 2005

– Tiscali, Demon, Speedlinq, HCCnet, Cistron, Freeler

– ~500k subscribers, ~9% market share

• Total consideration ~€ 350 mn

• Telfort acquired for € 980 mn net of tax assets

– Acquisition of 2.4 mn subscribers– Market share up 9% to 46%

• Margin diluted to 34% due to Telfort– 19% EBITDA margin Telfort– 38% EBITDA margin KPN Mobile NL

Position before turnaround Successful turnaround

• Telfort successfully integrated into KPN– Telfort brand and wholesale activities– Network integration on track– Continued SAC/SRC reductions

• EBITDA margin of combined operations up 6%-points to ~40% in 2007

• Value creation of over € 1 bn1

Broadband ISPs

Acquired2005-2007

1 Assuming 8.0x EV/EBITDA multiple and net consideration of € 980 mn

42

Agenda






43

467367 459

252372

5522

6788

111

289220248 253 293

37.6%39.8%36.2%29.5%32.6%

Q3 '06 Q4 '06 Q1 '07 Q2 '07 Q3 '07

Operating review E-PlusOutperformance on all key metrics, ahead of H2 guidance

13.2% 13.4%13.7%

14.0%13.5%

Q3 '06 Q4 '06 Q1 '07 Q2 '07 Q3 '07

714 692 660 700 735

760 747 698 736 769

Q3 '06 Q4 '06 Q1 '07 Q2 '07 Q3 '07

€ mn Continued strong EBITDA (margin)Service revenues up 2.9%

1 Management estimates, based on service revenues2 Excluding € 23 mn restructuring costs: 35.7%

13.613.112.712.214.1

Customer growth accelerating

Revenues and other incomeService revenues

Q3 ’06 Q4 ’06 Q1 ’07 Q2 ’07

€ mn

Service revenue market share1

2

Q3 ’07

Service revenue share up 0.8%

Post Paid net adds (k)Pre Paid net adds (k)Customers (mn)


p

44

E-PlusPost Paid net adds accelerating, platform for continued service revenue growth

Propositions

Mobile data

Operational excellence

• Continued SAC/SRC reductions, SAC down 16% to € 74– Increasing proportion of SIM-only propositions, including E-Plus classic

• E-Plus among best German operators in survey on network quality

• Extension of network operations/management outsourcing until 2012

• Mobile data continues to grow in addition to Fixed-Mobile substitution

• Rapid increase in data usage following launch of flat fees in November ’05– Predominantly used for internet connectivity, no ‘walled garden’

• UMTS investments in selected regions with proven data demand– No impact on overall Capex

• Value for money fastest growing segment, >10% of Mobile market– Competitors launching new brands, e.g. Congstar (T-Mobile) and FONIC (O2)

– Continued growth E-Plus’ new brands to 6.7 mn subscribers, 48% of total base

• Post Paid net adds accelerating, platform for service revenue growth– BASE portfolio with increasing customer pull, launch of BASE Zero

45

6471 60 65 55

36.4%

41.9%39.5%40.0%

43.8%

Q3 '06 Q4 '06 Q1 '07 Q2 '07 Q3 '07

Revenue share up 1%-pointNet adds driven by wholesale partnerships

Operating review BASESolid performance despite challenging market conditions

~16%~16%~16%>15%~15%

Q3 '06 Q4 '06 Q1 '07 Q2 '07 Q3 '07

Service revenues impacted by MTA cuts

159 157 149 151 147

Q3 '06 Q4 '06 Q1 '07 Q2 '07 Q3 '07

94122112 137100

3417

623

2.72.62.52.42.2

Q3 ’06 Q4 ’06 Q1 ’07

Revenues and other income

Revenue market share1

Service revenues

162

EBITDA (margin)

Q2 ’07

160€ mn

€ mn

Q3 ’07

152

1 Management estimates, based on revenues

Post Paid net adds (k)Pre Paid net adds (k)Customers (mn)


155 151

p

46

BASESolid performance in challenging market, regaining the initiative

• Solid underlying performance– Market share up 1%-point– Underlying service revenue growth

~2%, excluding regulatory tariff cuts

• Significant headwind in Q3– MTA and roaming tariff cuts, impact on

service revenue growth of -/- 10%– Additional marketing costs for new

commercial launches– Competition copying offers

• Regaining commercial initiative in a more competitive market

Q3 performance

• Step-up in commercial efforts– Launch BASE Platinum/Gold– JIM Mobile targeting youth market– Expanding wholesale partnerships

• Strategic acquisitions to strengthen distribution in Wallonia and SME/SoHo

– Allo Telecom retail shops– Tele2 Belgium

• BIPT decision on lower MTA tariff asymmetry suspended

Latest developments

Regaining the initiative

47

2833 28 35 32

41.3%

32.9% 33.7%

41.2%36.4%

Q3 '06 Q4 '06 Q1 '07 Q2 '07 Q3 '07

36111

32

90 8245

39 18

15

33

Operating review Mobile Wholesale NLContinued profitable growth from wholesale partnerships

79 86 84 85 90

Q3 '06 Q4 '06 Q1 '07 Q2 '07 Q3 '07

80


Q1 ’07 Q4 ’06 Q3 ’06

EBITDA margin reported EBITDAService revenues

Q2 ’07

85

Q3 ’07

83

Momentum Post Paid net adds mn

Post Paid net addsPre Paid net adds

1.8

1.4 1.5 1.6 1.7

Subscribers up 26%X 1,000

Service revenues up 14% EBITDA (margin)€ mn € mn

Q3 ’06 Q4 ’06 Q1 ’07 Q2 ’07 Q3 ’07

85 88

48

Agenda






49

Concluding remarks

• On track to meet full-year guidance following Q3 results

• Foundations laid for further profitable growth in Mobile International

• Further market share gains in new services in the Netherlands

• In former Fixed, deceleration of revenue and EBITDA decline

• Preparations for All-IP mass rollout at advanced stage

• Business profile strengthened by iBasis and Getronics transactions

• Shareholder returns for 2007 increased to € 2.5 bn, on par with previous years

p

AnnexFor further information please contactKPN Investor Relations

Tel: +31 70 44 61583Fax: +31 70 44 [email protected]

www.kpn.com/ir

52

Analysis of resultsKey items worth mentioning in results interpretation

-18-18NLTelfort network integration costs

207W&OEnergy tax reimbursement

11NLRelease NMa claims

-54-32-22W&ODepreciation effect Telfort network integration

-116W&OAmortization effect Telfort network integration

-47-26-35-12GroupRestructuring charges

-14-34-4-11NLIntegration / migration costs

-195-113-72-47GroupRevenue effect MTA tariff reduction

-69-60-30-27GroupEBITDA effect MTA tariff reduction

764OtherBook gain on sale of subsidiaries

2386930W&OBook gain on sale of real estate

Q3 ’06

-24

-55

YTD ’07

-12NLAll-IP implementation costs

YTD ’06

NL -10Additional costs to solve VoIP issues

Q3 ’07 € mn

53

Guidance reconciliation

1,198

1,1982006

1.5%1,216

-41,220

2007Q3

3,6853,680Comparison with guidance

20062007€ mn

-4Consolidation impact Tiscali acquisition

-0.1%

3,684 3,685

YTD

Reported

EBITDA1

3,037

3,0372006

-0.6%3,019

-183,037

2007Q3

9,0188,953Comparison with guidance

20062007€ mn

-20Consolidation impact Tiscali acquisition

-0.7%

8,973 9,018

YTD

Reported


1 Defined as Operating result plus depreciation, amortization & impairments

54

Impact MTA reduction1

1 Additional decline compared to 20062 Defined as Operating result plus depreciation, amortization and impairments

-113

2

-12

-6-3-3

-103

-73-29

-1

Revenues

YTD ’07

-60

-5

-4-1

-55

-36-18

-1

EBITDA2

-27

-5

-4-1

-22

-13-8-1

EBITDA2

-47

2

-12

-6-3-3

-37

-24-12

-1

Revenues

Q3 ’07€ mn

Intercompany

ConsumerBusinessWholesale & Operations

Mobile International

E-PlusBASEMobile Wholesale NL

KPN Group

The Netherlands

MTA tariff reductions• E-Plus: lowered from 12.4 to 9.9 cents as of 23 November 2006• BASE: lowered from 19.6 to 15.8 cents as of 1 Nov ’06, further lowered to 12.8 cents as of 1 May ’07• The Netherlands: lowered from 11.0 to 10.0 cents as from 15 August 2007

55

Restructuring charges

-12

-8

-4

-1-3

-

Q3 ’07

-13Other

-26

-13

-1-3-9

-

YTD ’07 € mn

ConsumerBusinessWholesale & Operations

Mobile International

E-Plus BASEMobile Wholesale NL

KPN Group

The Netherlands

56

Operating expenses

15.4%-26-30Own work capitalized-3.6%168162Other operating expenses

-19.7%473380Depreciation1

6.0%151160Amortization1

-4.3%

-1.5%10.2%-4.6%

%

2,4632,357Total

1,1431,126Work contracted out and other expenses206227Cost of materials348332Salaries and social security contributions

Q3 ’06 Q3 ’07 € mn

Operating expenses as % of revenuesOperating expenses excluding D&AD&A

81.3%

88.4%

81.8%79.9% 78.4%

€ mn

1 Including impairments, if any

1,839 1,887 1,735

540624 785 626652

1,8171,737

Q3 '06 Q4 '06 Q1 '07 Q2 '07 Q3 '07

2,4632,672

2,387 2,363 2,357

57

348 355 364 349 332

Analysis operating expensesSalaries & Cost of materials

Cost of materialsSalaries and social security contributions

Salaries

Cost of materials

11.5% 11.7% 12.5% 11.8% 11.0%

206 266 207 200 227

€ mn

€ mn

% of Revenues

Q3’06 Q1 ’07Q4 ’06 Q2 ’07

Q3 ’06 Q1 ’07Q4 ’06 Q2 ’07

7.5%6.8% 6.8%7.1%8.8%

% of Revenues

Q3 ’07

Q3 ’07

Y-on-Y decrease• Continued headcount reduction, partly offset by

acquisitions

Q-on-Q decrease• € 15 mn release of salary related provision

Y-on-Y increase• € 7 mn energy tax reimbursement in Q3 ’06

Q-on-Q increase• Shift from handset sales in external distribution

towards own channels

58

37.4%35.9% 36.2%35.7%37.7%

Analysis operating expensesWork contracted out & other

1,143 1,078 1,047 1,069 1,126

214161 148 162168

% of RevenuesWork contracted out and other expenses

% of RevenuesOther operating expenses

Other

Work contracted out

7.1%5.5% 5.0% 5.4%5.5%

€ mn

€ mn

Q3 ’06 Q1 ’07Q4 ’06 Q2 ’07 Q3 ’07

Q3 ’06 Q1 ’07Q4 ’06 Q2 ’07 Q3 ’07

Y-on-Y decrease• Lower MTA tariffs, partly offset by increased MoU• Lower wholesale roaming costs• Lower traffic volumes Fixed, offset by Mobile

Q-on-Q increase• Higher roaming costs due to holiday season

Y-on-Y decrease• Lower restructuring costs, partly offset by

additional VoIP costs

Q-on-Q increase• Lower marketing costs in Q2 ’07• € 3 mn OPTA fine in Q3 ’07

59

5.0%

11.4%

5.3%7.1%7.3%

151 346 213 210 160

Analysis operating expensesDepreciation & Amortization

473 439 439 416 380

15.6%14.5% 15.0%

14.1%12.6%

Depreciation

Amortization

Amortization1

Depreciation1

% of Revenues

€ mn

€ mn

1 Including impairments, if any

% of Revenues

Q3 ’06 Q1 ’07Q4 ’06 Q2 ’07 Q3 ’07

Q3 ’06 Q1 ’07Q4 ’06 Q2 ’07 Q3 ’07

Y-on-Y decrease• Fixed depreciation trending down due to lower

Capex

Q-on-Q decrease• Additional depreciation from Telfort network

integration in Q2 ’07 (€ 13 mn)

Q-on-Q decrease• Accelerated amortization on Telfort license

following radio network integration in Q2 ’07(€ 59 mn)

60

PersonnelContinuing decline, predominantly in the Netherlands

• Personnel reduction Y-on-Y of 1,031 FTE

– 1,063 FTE reduction in the Netherlands

– Excluding acquisitions reduction of 1,543 FTE in the Netherlands

• FTEs flat compared to Q2– Increase of 466 FTE in personnel

abroad at SNT International and Allo Telecom acquisition

– Underlying reduction in the Netherlands of 464 FTE

6,787 6,992 6,235 6,819

19,134 18,984 18,564 18,528 18,071

6,353

Q3 '06 Q4 '06 Q1 '07 Q2 '07 Q3 '07

Personnel abroad1Personnel domestic

-1,063

-1,031

25,921 25,976 24,799

1 Including ~3,000 FTE in call center activities abroad, reported under Consumer the Netherlands

24,881 24,890

61

Tax

-1-38-110-167Dutch activities

-109

-1

Q3 ’06

-182

-6-9

Q3 ’07

P&L

-38

--

Q3 ’07

Cash flow

-1

--

Q3 ’06

German Mobile activitiesBelgian Mobile activitiesTotal

Fiscal units (€ mn)

• € 38 mn Dutch corporate tax paid as NOLs at KPN Mobile are exhausted

• Higher P&L tax in the Netherlands due to additional tax charges for previous years– Partly offset by lower Dutch corporate tax rate as of 1 January 2007

• German and Belgian operations have recorded profitable results for tax purposes

62

Net cash flow from operating activities

351242042Proceeds from real estate

748

-4251,153

90

-132

-2180

1,063

574624

-108-1-92

-19

Q3 ’06

626

-378962

-30

33228

-93

992

680540-95-38-31

2-66

Q3 ’07

1,821

-9812,678

-296

-5-3

-98-190

2,974

1,8661,818-348-80-91

7-198

YTD ’07

2,174

-1,1173,256

-177

10-6

-20019

3,433

1,8561,829-251213-99

7-122

YTD ’06


Free cash flow 2

Capex1

Net cash flow from operating activities before changes in working capital

Change in working capital

InventoryTrade receivablesOther current assetsCurrent liabilities

Operating ResultDepreciation, amortization and impairmentsInterest paidIncome tax paidOther incomeShare based compensationChange in provisions

€ mn

1 Including Property, Plant & Equipment and software2 Defined as Net cash flow from operating activities plus proceeds from real estate minus Capex

63

Total cash flow

-292

-986

-321-1,015

3428

-459

-425-5220

3-5

1,153

Q3 ’06

40

-303

-337-666698

2

-619

-378-300

4216

1

962

Q3 ’07

-111

-1,423

-982-1,174

70825

-1,366

-981-533124

31-7

2,678

YTD ’07

68

-1,827

-982-1,514

6645

-1,361

-1,117-360

3572

9

3,256

YTD ’06€ mn

Dividends paidShare repurchasesDebt financingOther

Net cash flow from investing activities

Capex1

AcquisitionsDisposals real estateDisposals otherOther


Changes in cash and cash equivalents

Net cash flow used in financing activities

1 Including Property, Plant & Equipment and software

64

-11.1%

-87.5%

0.0%

96.0%

-11.0%

5.2%

-37.1%

12.5%

-100%

-28.3%%

42514.0%

8

363.4%

253.1%

16317.0%

23311.0%

15119.9%

3219.8%

11.3%

18418.4%

Q3 ’06

37812.6%

1

363.4%

495.9%

14516.2%

24511.8%

9512.4%

3623.8%

00.0%

13213.1%

Q3 ’07-20.1%463

16.4%370

12.7%Mobile International% Revenues Mobile International

-22.1%

-13.8%

0.0%

36717.1%

9420.3%

20.9%

28613.0%

8117.7%

20.8%

E-Plus% Revenues E-PlusBASE% Revenues BASEMobile Wholesale NL% Revenues Mobile Wholesale NL

98111.0%

1

1213.9%

1044.1%

37113.7%

6109.8%

YTD ’07

1,11712.5%

15

1213.8%

652.6%

42014.4%

63910.1%

YTD ’06

-12.2%

-93.3%

0.0%

60.0%

-11.7%

-4.5%

%

The Netherlands% Revenues the Netherlands

Total% Revenues

Other

Consumer% Revenues ConsumerBusiness% Revenues BusinessWholesale & Operations% Revenues Wholesale & Operations

€ mn

Capex1

1 Including Property, Plant & Equipment and software

65

Balance sheet

1 Including other intangibles2 Including Property, Plant & Equipment and software3 Both cash and gross debt include approximately € 0.4 bn of non-netted cash balances per Q3 ’07 4 Including minority interest

2.32.3 2.4 2.4 2.4

9.59.4 9.2 9.0

4.34.2 4.0 4.0 3.9

4.74.6 4.6 4.7 4.7

1.6 0.70.70.90.8

9.0

Goodwill

Licenses

Other non-current assets

Current assets

Cash

Group equity

Provisions

Non-current liabilities

Current liabilities

Assets€ bn

2

4

1

22.4

30 Sep2006

Equity and liabilities€ bn

5.3 3.9 3.6 3.8

11.711.6 11.6 11.6

1.61.6 1.5 1.5

3.84.2 4.4 3.9

4.5

11.5

1.4

3.3

22.4

3

3

31 Dec2006

21.3 21.3

31 Mar2007

21.1 21.1

30 Jun2007

30 Sep2006

31 Dec2006

31 Mar2007

30 Jun2007

20.8 20.8

30 Sep2007

30 Sep2007

20.7 20.7

66

12.3425.4313.5Q2 ’07

11.4611.9136.8Q1 ’07

12.067.287.3July

11.5711.86

11.41

Avg. share price (€)

57.8669.9Q3 ’07 10.1120.2September

40.5462.4August

mn sharesValue (€ mn)Date1

Share repurchase progress

• Share repurchases increased to € 1.5 bn for 2007– Initial € 1.0 bn share repurchase program completed following acceleration in August– Additional € 0.5 bn share repurchase started on 1 September, running until 31 December, 237 mn shares

repurchased at € 12.18, 47% executed to date

• Current number of outstanding shares 1,885,783,672– 42,767,654 shares cancelled on 5 October– Remaining 42,301,459 shares from € 1.0 bn share repurchase program to be cancelled before year end

• 608 million shares cancelled since October 2004, or 24.4% of total number of outstanding shares

11.85

12.54

104.41,237.3Total

9.3117.1October

1 Figures based on transaction date of share repurchases

67

Debt summary

9.34

0.72

0.71

10.06

9.307.321.98

0.520.440.08

0.24

Q2 ’07

10.9610.66Total debt

9.40

1.56

1.87

8.196.022.17

1.911.860.05

0.86

Q3 ’06

9.99Total net debt

0.67Cash and cash equivalents1

1.08– of which short-term

9.217.291.92

1.141.060.08

0.31

BondsEurobondsGlobal bonds

Other debtOther loans at Royal KPN1

Consolidated debt

Fair value financial instruments

Q3 ’07 € bn

1 Both cash and gross debt include approximately € 0.4 bn of non-netted cash balances per Q3 ’07

68

28%

72%

Fixed Floating (incl. swapped)

20%

10%

70%

EUR USD GBP

Financial instruments

3%Other11%

Eurobonds68%

Global bonds18%

Debt portfolioBreakdown of € 10.7 bn gross debt1

22

1 Book value of interest bearing financial liabilities plus the fair value of financial instruments related to these financial liabilities2 Foreign currency amounts hedged into Euro

69

-1%532525Gross profit

-77%9923Operating result

7%

-18%

7%

4%

%

2,1212,280Service revenues

22,95724,656FTE’s (average)

5.7%

143

2,525

2005

2,627Revenues

EBITAE margin

EBITAE2

Group (€ mn)

4.5%

117

2006

15%

52%33%

Getronics financial profile1

Application Integration /

Management

By business area

Workspace management

Consulting and Transformation

services

15%

27%

48%

10%

By geography

Netherlands

Rest of Europe

North America

Other

1 Based on Getronics Annual Report 20062 EBITAE defined as operating result from continuing operations before amortisation of acquired intangible assets, acquisition integration expenses,

impairment of goodwill and gain/loss on sale of group companies and associates

Revenue breakdown

4%282292Gross profit

37%5778Operating result

13%

9%

16%

10%

%

9491,098Service revenues

9,15410,321FTE’s (average)

9.5%

103

1,079

2005

1,184Revenues

EBITAE margin

EBITAE2

The Netherlands (€ mn)

9.5%

112

2006

Key financials

70

0

100

200

300

400

500

'01 '02 '03 '04 '05 '06 '07 '08 '09

1 Based on Telegeography 2006 and 2007

International carrier market

4.2%

28

9.6%

65

674

New iBasis

6.2%1.7%Adjusted EBITDA margin

235Adjusted EBITDA

8.6%

32

373

KGCS

301Revenues

Gross margin

Gross profit

2007 H1 ($ mn)

11.0%

33

iBasis

0 5 10 15 20 25 30

Verizon

AT&T

Teleglobe

New iBasis

IDT

TI

FT

Sprint

DT

BT

C&W

TEF

TLSN

Traffic volume outgoing minutes1

20042005

bnKey financials new iBasis

Total market volume1bn

4.0%

Y-on-Y growth

10.4%

4.1%

33.1%

10.9%

6.3%

5.9%

6.3%

11.4%

12.9%

37.1%

4.3%

5.4%

71

Unbundling tariffsSLU and colocation set by OPTA, backhaul and WBA based on deal pricing

Unbundling in current network

Unbundling in All-IP network

€ 8.00 / lineFully unbundled (LLU)

€ 7.50 shared€ 15.18 non-shared

Wholesale ADSL

Deal pricingMDF backhaul

€ 473 / footprint / yearMDF colocation

€ 0.37 / lineLine sharing (LLU)

Monthly tariffsCategory

€ 8.05 / lineFully unbundled (SLU)

Deal pricingWholesale Broadband Access (WBA)

Deal pricingSDF backhaul

€ 50-100 / cabinet One-off € 3,000-6,000

SDF colocation

€ 6.17 / lineLine sharing (SLU)

Monthly tariffsCategory

SDF MDFcolocation

NodeKPN / Telco

LLU(regulated)

MDF colocation(regulated)

MDF backhaul(fiber, not regulated)

Wholesale ADSL (not regulated)

SDFcolocation

NodeKPN / Telco

SLU(regulated)

SDF colocation(regulated)

SDF backhaul(fiber, not regulated)

Wholesale Broadband Access (WBA)(not regulated)

~28,000 street cabinets

1,350 local exchanges

~28,000 street cabinets

~138 Metro Core locations

72

E-PlusContinued growth in new propositions, driving service revenue growth

3,586

4,345

5,149

5,880

6,706

Q3 '06 Q4 '06 Q1 '07 Q2 '07 Q3 '07

New propositions as % of E-Plus subscriber base

Subscribers new propositionsX 1,000 Service revenue growth

2.4%

2.4% 2.4%

4.2%4.0%

3.9%

3.7% 3.4%

0.9%

8.4%

2.5%

10.0%

2.9%

10.9%

Q3 '06 Q4 '06 Q1 '07 Q2 '07 Q3 '07

29.4% 34.3% 39.2% 43.4%

Reported

Impact from football World Cup 2006

VAT impact MTA impact

9.5%

14.7%14.0%

15.1%

47.5%

8.7%

73

BASEStrengthening distribution to create platform for further profitable growth

Allo Telecom

Tele2 Belgium

• Acquisition of voice, internet and data provider

• Cross- and upselling in broadband and mobile – Bundled offers through BASE network– Strong distribution in non-retail channels– Subscriber base consisting of Consumer, SME and SoHo

• Consideration € 95 mn on debt and cash free basis– € 162.4 mn revenue in 2006 with 180 FTE– 131k DSL and 190k CPS customers

• Remains separate entity, independent of BASE

• Strengthening retail presence with acquisition of 51 shops

– Strong presence in Wallonia– Active in SME and SoHo segments– Distribution doubled to over 100 points of sale

• Remains separate entity, independent of BASE

• Well known Allo Telecom brand to be retained

• Strengthened distribution, especially in Wallonia

• Foothold in SME and SoHo segment

• Platform for further profitable growth

74

Pro forma disclosure KPN Mobile the Netherlands Financials and KPIs

8,4838,8669,158Customers (x 1,000)

75230

75529

76428

Service revenues (€ mn)ARPU (€)

47.5%47.0%47.1%Market share service revenue1

171

3,318123

Q3 ’07

165

3,550134

Q2 ’07

3,215128

Total traffic (originating, terminating in mn min.)MoU (originating, terminating min.)

188

Q3 ’06 KPN Mobile the Netherlands

SAC / SRC (€)

1.8%7.8%

10.0%-4.9%

1,198319269610

1,220344296580

EBITDAE-Plus & BASEKPN Mobile the NetherlandsFixed (incl. Other)

0.0%-0.2%0.6%

-0.2%

%

3,037922778

1,337

Q3 ’06

3,037920783

1,334

Q3 ’07

Revenues and other income E-Plus & BASEKPN Mobile the NetherlandsFixed (incl. Other and Intercompany eliminations)

€ mn

1 Management estimates, amongst others based on industry filings

75

Pro forma disclosure Fixed (incl. Other)Reconciliation for noteworthy items

-6.8%

5,469

-92

5,561

FY ’06

-2.5%

1,304

-30

1,334

Q3 ’07

-5.8%

1,282

-55

1,337

Q2 ’07

-7.9%-7.9%-6.5%-4.7%-7.0%Y-on-Y %

1,311

-4

1,315

Q1 ’07

-831-3-6XanticBook gain real estate

1,4931,3641,3371,367Reported

1,410

Q1 ’06Q2 ’06Q3 ’06Q4 ’06

1,3611,3371,361Excluding notable items

Revenue & other income € mn

-266

2,500

-76

2,576

FY ’06

-60

550

-30

580

Q3 ’07

-117

534

-55

589

Q2 ’07

-49-64-69-84-101Y-on-Y decline

570

-4

574

Q1 ’07

-672-3-6XanticBook gain real estate

738654610574Reported

671

Q1 ’06Q2 ’06Q3 ’06Q4 ’06

651610568Excluding notable items

EBITDA € mn

1 Book gain on sale of Xantic of € 65 mn, revenues Xantic of € 18 mn2 Book gain on sale of Xantic of € 65 mn, EBITDA Xantic of € 2 mn

45.7%

46.3%

FY ’06

42.2%

43.5%

Q3 ’07

41.7%

44.1%

Q2 ’07

43.5%

43.7%

Q1 ’07

49.4%47.9%45.6%42.0%Reported

47.6%

Q1 ’06Q2 ’06Q3 ’06Q4 ’06

47.8%45.6%41.7%Excluding notable items

EBITDA margin

76

Dutch Consumer voice market1

6.63

1.17

0.11

1.89

0.730.910.25

3.46

3.280.18

Q2 ’07

6.62

1.17

0.11

2.03

0.790.980.26

3.31

3.040.28

Q3 ’07

6.62

1.15

0.15

1.03

0.270.600.16

4.29

4.29-

Q3 ’06

Cable voice analogue

Mobile-only

mn

KPN VoIPCable VoIPAlt DSL VoIP

Total traditional voice

KPN PSTN / ISDNWholesale Line Rental (WLR)

Total households

Total VoIP

1 Management estimates

77

1 VoIP lines in % broadband connections, excluding peer-to-peer applications2 Share in total consumer voice (including VoIP)3 Share in traditional voice (excluding VoIP)4 PSTN / ISDN line loss -/- growth VoIP Consumer -/- growth ADSL only -/- growth WLR; management estimates

KPIs Consumer Voice

1.79

-110

4,0172,961

323733

>55%38%

~70%

36%

Q2 ’07 22%38%VoIP penetration1

-140-100Net line loss4 (x 1,000)

1.65

3,8232,733

304786

~60%39%

>70%

Q3 ’07

2.17

4,5553,872

413270

~60%25%

>65%

Q3 ’06

Traditional originating minutes (bn)

Voice connections (x 1,000)– PSTN– ISDN– VoIP packages (Voice / Broadband)

Market share– Voice2

– VoIP– Traditional voice3

Wireline

6,072445

25107144

Q3 ’07 5,944

43525

103169

Q3 ’065,891

43224

114131

– Customers (x 1,000)– Service revenues (€ mn)– ARPU (€)– MoU (originating, terminating min)– SAC / SRC (€)

Q2 ’07 Wireless

78

KPIs ConsumerInternet & TV

2,382629585522294352

2,518

44.3%46.8%

75%

Q3 ’07 66%73%Broadband penetration

1,911534589401262125

2,344607592514294337

Broadband ISP customers (x 1,000)– Het Net– Planet Internet– Direct ADSL– XS4ALL– Other2

2,0232,427ADSL connections

44.6%46.0%

Q2 ’07

40.3%42.7%

Broadband market shareKPN (ISP) retail1Broadband connections1

Q3 ’06 Internet

1 Including DSL and Cable, based on company estimate2 Including acquired customers which will be migrated to one of KPN’s multi-brands over time

414

Q3 ’07 245

Q3 ’06337– Subscribers (x 1,000)

Q2 ’07 TV

79

KPIs Business

32.510.9

5.60.90

33.113.1

7.61.45

32.014.0

8.61.54

Managed network services (x 1,000)– IP-VPN connections– M-VPN routers– Housing services (# m²)– Hosting services (# servers)

38.23.3

45.3

34.15.9

71.2

33.96.6

77.7

Network services (x 1,000)– Leased lines– E-VPN connections– Business DSL

1.66

1,710825874

11

~55%

Q3 ’07

1.911.80Traditional originating minutes (bn)

1,757852895

10

>55%

Q2 ’07

1,840915925

-

>55%

Q3 ’06

Access lines (x 1,000)– PSTN– ISDN– VoIP

Market share voice

Wireline

1,276231

61242359

Q3 ’07 1,121

22769

277324

Q3 ’06 1,245

23564

277351

– Customers (x 1,000)– Service revenues (€ mn)– ARPU (€)– MoU (originating, terminating min)– SAC/SRC (€)

Q2 ’07 Wireless

80

KPIs Wholesale & Operations

99%57%

0.90.30.6

3,3891,932

9.212.721.562.402.53

Q3 ’07

99%57%

0.90.30.6

3,3271,959

9.442.941.722.452.33

Q2 ’07 9.693.032.232.072.36

Minutes (bn)– Terminating services– Originating– Transit services– International wholesale services

0.90.50.4

Unbundling3 (mn)– Shared unbundled lines– Fully unbundled lines

99%57%

DSL coverage– ADSL– ADSL 2+

2,9732,258

Local loop (x 1,000)MDF access lines1

– of which line sharing1,2

Q3 ’06

1 Including Bitstream2 Includes KPN ADSL connections, line sharing other telcos and KPN Bitstream3 External lines based on management estimates

81

KPIs E-Plus

74158

15

136254

46

19%

1832

7

735

14,1126,1707,9426,706

14.0%15.1%

Q3 ’07

714700Service revenues (€ mn)

2033

7

1731

6

ARPU (€)– Post Paid– Pre Paid

17%19%Non-voice as % of ARPU

76161

13

133246

43

13,5656,0827,4835,880

13.7%15.1%

Q2 ’07

114200

34

MoU (originating, terminating min)– Post Paid– Pre Paid

88159

14

12,2155,9386,2773,586

13.2%14.8%

Q3 ’06

SAC/SRC (€)– Post Paid– Pre Paid

Customers (x 1,000)– Post Paid– Pre Paid– of which new brands

Market share1

Service revenueBase


82

KPIs BASE


163713

134370

80

17%

185211

147

2,722494

2,228

~16%~23%

Q3 ’07


256415

205212

ARPU (€)– Post Paid– Pre Paid

14%16%Non-voice as % of ARPU

224918

147419

83

2,581490

2,091

~16%>22%

Q2 ’07

129356

71

MoU (originating, terminating min)– Post Paid– Pre Paid

174513

2,219444

1,775

~15%~21%

Q3 ’06

SAC/SRC (€)– Post Paid– Pre Paid

Customers (x 1,000)– Post Paid– Pre Paid

Market share1

RevenueBase

83

KPIs Mobile wholesale NL

90

1,791449

1,342

Q3 ’07


1,710413

1,297

Q2 ’07

1,419347

1,072

Q3 ’06

Customers (x 1,000)– Post Paid– Pre Paid

Third Quarter Results 2007 - KPN · – Additional € 0.5 bn share repurchase program started in...

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