Koninklijke KPN N.V.

Thank you, operator. Good afternoon, ladies and gentlemen, and welcome to KPN’s second quarter 2020 Results Presentation.

With me today are Joost Farwerck, our CEO and Chris Figee our CFO. Before turning to the core of the presentation, I would like to draw your attention to the Safe Harbor statement on Page 2 of the slides that also applies to any statement made during today’s call.

In particular, today may include forward-looking statements, including the company’s expectations with respect to its outlook and ambitions, which were also included in the press release published this morning. All such statements are subject to the Safe Harbor statement.

I would now like to hand over to Joost Farwerck.

Thank you, Bisera, and welcome to our second quarter results presentation. We delivered solid performance in the second quarter with stable adjusted EBITDA after leases and significantly higher free cash flow, excluding divestments.

Our balance sheet and liquidity position remained strong and we are living up to our 2020 dividends commitments. Demand for KPN's essential connectivity services remain high and our networks have proven to be robust through a period of unprecedented demand.

The execution of our strategy is well underway and we saw positive developments, particularly in the competitive consumer markets, where broadband and postpaid net adds showed clear improvement trends and we see some first signs of bottoming out there. In B2B we made again progress with customer migrations, though we recognized several challenges remain in the B2B segments as the economic activity in the Netherlands has decreased.

As we continue our open wholesale model, we see further growth in our wholesale broadband portfolio and we also continue to ramp up our fiber rollout. I would like to highlight a few key figures, corrected for divestments, adjusted revenues declined by 3% year-on-year.

Growth in professional services business and in wholesale was offset by lower revenues from mobile and roaming effect and fixed voice services. Adjusted EBITDA after leases was flat as the effect of lower revenues was fully offset by strong cost savings.

Free cash flow increased 70% year-on-year to €177 million, and ROCE which we will now be reporting semiannually increased 80 basis points year-on-year to 9.8%. Chris will give you more details on our figures later in this presentation.

The estimated net effect of COVID-19 on group financial result was a slightly negative in the second quarter. The estimated negative net effect on adjusted gross profit was around €5 million to €7 million driven by lower revenues from roaming and delayed IT projects.

This was partly offset by higher fixed and national mobile traffic. The estimated net impact on adjusted indirect OpEx was approximately €6 million to €11 million positive driven by for example lower costs related to travel, learning and developments, facilities, FTE costs, et cetera.

Uncertainty continues about the impact of COVID-19 on the Dutch economy and therefore KPN. With the Netherlands expected to move towards a recession, the ultimate impact remains difficult to predict, while we expect to see a higher negative year-on-year effect of roaming in Q3 due to the summer holiday season, we remain able to adjust our cost base in line with developing economic circumstances.

Our revenue risk assessments by type of customers is unchanged compared to the first quarter. Importantly, revenue and customs segments are the most exposed to the negative impact of COVID-19 and accounts for approximately 10% of total group revenue.

We remain committed to our strategy and to our 2020 outlook as provided in January this year. We delivered in the first half of the year an outlook for adjusted EBITDA after leases, CapEx, dividend per share is reiterated.

Combination of COVID-19 related downward pressure on revenues offset by strong cost control enables us to reiterate our 2020 outlook for adjusted EBITDA after leases. We reiterate our CapEx outlook of €1.1 billion and we also reiterate our dividend per share outlooks of €0.13.

An interim dividend of €4.03 cents will be paid in August. We remain fully committed to grow free cash flow with at least a mid-single digit percentage.

There could be some limited downside risk due to a potentially worsening trend in customer payment behavior as a result of COVID-19 in the second half of this year. However, we are not observing this and this is not impacting us today.

We remain committed to grow free cash flow with at least mid-single digits percentage. KPN is well positioned to absorb the short-term and medium-term effects of COVID-19.

Visibility of impact of the pandemic into 2021 is limited. So we remain fully committed to our three-year strategy.

Let me now give you an update on our strategy. In the first six months of the year we have seen solid progress on our strategic pillars, which as a reminder are building the best network, focus on profitable growth segments, and accelerating simplification and digitalization.

We have made good progress in building the best converged smart infrastructure. In fiber we added 76,000 additional households in Q2, which adds to a total of 250,000 households since we started to roll out last year.

We've also significantly improved XSPs [ph] for our customers. To date, we upgraded the total of nearly 1500 mobile sites with the latest equipment and we only have approximately 80,000 legacy lines left to migrate by the end of 2021.

We switched of ISDN 2 technology and we are currently migrating customers to a new OSS [ph] environment reducing the lead time of new broadband customers from around two weeks to three days strongly improving the customer journey. We have one of the largest fiber footprints in Europe with €2.6 million households or 32% of the nation covered by fiber-to-the-home and 55% of households covered by fiber-to-the government [ph].

Our ambition is to cover more than 40% of households with our all-fiber network by the end of next year and we expect to continue to fiber rollout thereafter as we are just getting the machine up and running. We acquired a small local fiber network consisting of 6000 houses past in May and this was a good opportunity to enlarge our footprint at value creating terms.

This month, we successfully tested our next-gen PON technology and reached up and download speeds of 8.5 Gigabit per second and this only shows what our investment in technology will bring to our customers in the future. We will continue to develop this to further shape the digitalization of the Netherlands.

As I mentioned, we added 76,000 households to our fiber network in the second quarter. We activated 32,000 customers, which means solid activation rate of 47% over the past 12 months.

Currently, we are rolling out an average of 5400 fiber-to-the-home connections a week and we're active in 83 areas and we are starting construction in the largest cities of the Netherlands. We are committed to our fiber investments and we see continued commercial proof points that our fiber strategy is driving value.

Fiber is now more than half of our consumer broadband net sales. We see a higher network penetration in fiber areas.

Fiber ARPU is 9% higher than copper driven by higher inflow ARPU and better take up of value added services. Convergence penetration of fiber is higher and NPS is higher resulting in lower churn.

Consumer fiber revenues grew 6.3% year-on-year in the last quarter driven by growing base and attractive ARPU. Overall our fiber investment generate returns that exceed the Group's cost of capital and have a positive net present value.

While the speed of our mobile network modernization was somewhat impacted by COVID-19 KPN upgraded its approximately 560 sites with the latest mobile RAN equipment in the second quarter. This brings the total modernized sites to around 1500 since we started in September last year.

In the latest spectrum auction we obtained an attractive combination of frequency licenses totaling 75 MHz for a total €460 million. We are satisfied with this outcome and the new licenses allow us to further improve the quality of our mobile services and we are excited to launch 5G services for our customers tomorrow.

KPN initially foresees the most potential 5G for new business applications such as innovations in the field of safety, healthcare, mobility, logistics, and the manufacturing industry. The first new services enabled by 5G, our first step in 5G development, more new developments will be added in the coming year.

And after the auction of the 3 to 5 GHz bands, which we expect in 2022, greater improvement in speed and capacity will be possible. Let's now move on to our second strategic pillar focusing on profitable growth.

In consumer, we aim to deliver sustainable value through our continued focus on the high value KPN brands and are running a targeted household approach. We've reached some important milestones integrating the Telfort brands and launching KPN Hussel.

In B2B we migrated a significant part of our customers to our target portfolio and we are rationalizing the IT environment. We are simplifying our product portfolio.

However, due to COVID-19 impact we expect B2B end to end adjusted EBITDA after leases to stabilize in 2021 based on current estimates. In wholesale we see continued growth of our wholesale broadband access and VULA portfolio.

Our third strategic pillar is accelerating simplification and digitalization of our company. KPN made good progress in the digital transformation program by migrating customers to a new operating support system.

This reduces the lead time of new broadband customers and strongly improves the customer journey. Also we've shutdown three data centers and terminated several applications resulting in structural cost savings.

The second quarter was the first in which we saw the full effects of COVID-19 measures on the Dutch society. While impacting performance in some areas, this dynamic also analyzed [ph] the importance of KPN's efforts to improve and enhance the quality of the Netherlands digital infrastructure.

This work is essential to the country's economic recovery as well as its ability to address the ecological and social challenges of the post COVID world sustainably. Throughout the crisis we have ramped up incident monitoring and waived fees for cybersecurity support for hospitals.

We offered free connectivity cards for venerable groups to stay connected and be homeschooled during the COVID-19 epidemic, and we signed a Green Recovery Statement calling on the government to start COVID-19 recovery plan sustainable. Our ESG efforts are recognized by various external benchmarks.

We are in the A list of CDP. We have AAA status at NIC [ph] and we have a Gold [ph] Class distinction at Dow Jones Sustainability Index.

Let's move to the performance of the segments. In the second quarter, fixed consumer revenues were slightly up while mobile service revenues declined 6.5% year-on-year partly driven by lower roaming revenues.

As mentioned before, this trend is expected a bit to worsen in Q2 due to lower roaming revenues during the holiday season. The market remains highly competitive with three players focusing on converged customers, competition from local fiber operators in rural areas and mobile competition now focusing more on the high end unlimited propositions.

MPS increased year-on-year to plus 15. We are highly valued for our best in class network coverage services and our fiber strategy.

Also we are pleased that our fiber network is recognized as the best fixed broadband network in the Netherlands by the Dutch Consumer Association. A few words on our consumer KPIs.

In the quarter our converged customer base returned to growth. Converged households grew by 3000 customers and we added 30,000 converged postpaid customers.

Looking at our broadband base, we added 17,000 fiber customers in the quarter, while the total broadband net adds declined with 3000. In mobile, our customer base remained broadly flat.

So this is for us an important trend to focus on. This quarter-on-quarter improvement of consumer net adds was driven by improvements by commercial strategy on fiber and our focus on the fiber strategy is important.

Our strong unlimited propositions we introduced, our new marketing campaigns and our SuperWiFi proposition in the Netherlands. Also we see that existing customers value the quality and stability of our network especially in this COVID-19 crisis resulting in lower churn.

Our focus on value is demonstrated by fixed ARPU growing 5% year-over-year and mobile postpaid ARPU being €17 for the sixth quarter in a row. In B2B we completed the sale of KPN Consulting on the 1st of April and as a result the second quarter results do not include any KPN Consulting revenues.

Corrected for divestments business revenues declined 5.7% year-on-year and this reflects the strategic actions in the segments and it is also relates to COVID-19 as we saw lower revenues from roaming and IT projects in particular. We have further simplified our B2B product portfolio and we removed already 37% of our offerings.

We are on scheduled to reach the 50% target by the end of next year. NPS and B2B increased to +2 driven by improved scores at SME and LCE customers.

KPN is mainly valued for quality and for reliability. The operational transformation of our B2B segments is taking shape.

We continue to simplify our product offerings and most of our customers have now switched to a future proved portfolio such as KPN Kleinzakelijk and SoHo, KPN ONE and KPN Smart Combinations. We've now migrated 84% of SME and 72% of LE customers.

We completed the phase out of ISDN too which is an important milestone, not easy in COVID times since migrations require physical access to offices and these were often postponed. Then on our customer segmentation within B2B in the first half of the year.

In the first six months of 2020, revenues from SME and LCE were declining mostly driven by mobile ARPU and the proactive customer migrations. Revenue from our integration customer segments increased as a result of more projects related work.

Now let's move to wholesale. Correcting for the sale of NLDC, adjusted revenues in wholesale increased 1.2% year-on-year driven by solid performance in our fix portfolio and mobile revenues were broadly flat despite lower roaming revenues.

Wholesale added 60,000 broadband lines and 7000 postpaid SIMs in the quarter. During the quarter we also renewed a new five-year MVNO contract based on commercial terms with Youfone.

Following the court ruling on wholesale fixed access regulation in March this year, KPN has reconfirmed its open wholesale policy based on its voluntary office for ODF wholesale broadband access in VULA and the long-term contracts it has in place with several parties. KPN believes its open wholesale policy is in line with the symmetric access policy outlined in the European Electronic Communications court.

While we have seen a slightly declining broadband base in consumer, the performance of our wholesale segment remained solid. This contributes to our strong and stable broadband network share in the Netherlands of around 52%.

Then over to network operations and IT, adjusted operating expenses after leases declined 9.3% year-on-year for the segment, mainly driven by reduction of personnel, simplification of networks, IT rationalization and contract renegotiations with suppliers. We are working with our main contractors to protect the 3000 jobs involved in our fiber rollout and we maintained the expertise around network build out in the Netherlands.

In spite of changed dynamics in the Dutch construction markets, we are securing long-term construction capacity to safeguard our rollout plans. Now this ends my part of the presentation.

I would now like to hand over to Chris, to talk you through our financials. Thank you.

Thank you, Joost. I'm proud to present our KPN results for today.

This is only my second quarter as a CFO, and it was an intense quarter of all of us. We navigated through uncharted territory, and I'm proud to say KPN delivered, both operationally and financially.

Our network held up very well despite a massive increase in units, and our base dynamics started to improve, not only quarter-on-quarter but also during the quarter and we achieved a few remarkable results. Our EBITDA after leases was flat in the quarter, despite the Corona headwind.

It was up over the first half year. Our net profit was up, 18% and we expanded our margin to over 44%.

ROCE that we disclosed for the first time is up towards nearly 10%, and we increased our free cash flow by almost 20% year-on-year. Under that, our working capital initiatives are starting to bear fruit.

On top of that, we've got a very strong liquidity, over €900 million in cash. Scheduled redemptions and the auction payments are payable out of existing cash.

We launched a Commercial Paper Program to increase our financial flexibility and we'll be able to pay interim dividends, and provide a safe haven to investors. Let me go through some detailed numbers.

On page 25, let me explain the like-for-like performance of our results corrected for the impact of divestments. Out adjusted revenues declined by 2.4% year-over-year.

The adjusted EBITDA after leases increased by 1.6% year-on-year. Lower revenues were more than offset by strong cost savings and our margin improved by 180 basis points.

Competition stayed intense, but we've been able to expand our margins in this challenging environment. Our operating profit was €39 million higher, due to a combination of lower restructuring costs, a book gain on KPN Consulting, partially offset by higher depreciations, and the same metrics drove our net profits €30.88 [ph] higher than last year, due to higher operating profit, lower financing costs, partially offset by lower finance income, due to the sale of KPN’s stake in Telefónica Deutschland.

Our cost savings program, on page 26 is well on track. We are ahead of a linear pattern in terms of reducing our cost base and achieving the €350 million targets.

In the quarter alone, we realized €33 million net indirect OpEx saving. This brings a total of savings at 60% of the €350 million or €231 million since start of the program.

These savings are driven by less personnel cost and by less IT/TI expenses. In the light of COVID-19, we decided to postpone new realization requests, until the first of June 2020.

In response to that we reduced the hiring of new employees to a minimum and also reduced external staff to compensate this effect. We restarted restructuring projects again after first of June.

In the quarter we scaled down effectively 178 employees, correcting for the sale of KPN Consulting. On top of that, we also reduced our staff by 35 external staff members.

Positively speaking, our running costs were notably lower in the quarter. Our monthly indirect cost base was an average close to €10 million lower in Q2 than Q1.

Also we noted that COVID-19 helped us deliver additional cost benefits in the areas of travel cost and housing & facilities. We continue to see good cost reduction opportunities.

Our self help optionality will help us going forward, and we're fully confident that we'll reach the €350 million cost objective by the end of 2021. Our operational free cash flow was strong.

For the first six months of the year ended at €588 million, a little lower than last year corrected for divestments, fully driven by the temporary of the timing of our CapEx investments. In the first half, we've seen a strong increase in our free cash flow despite higher investments in fiber.

Our free cash flow of €257 million are €40 million higher compared to the first half of 2019, and 20% up for the same quarter in last year. In Q2, we saw €26 million higher free cash flow compared to Q2 last year.

This all is a result of a higher adjusted EBITDA after leasing in the first half, lower cash restructuring, lower cash interest, lower investment in working capital and lower cash taxes, partially offset by increasing CapEx, or at least to increased timing of CapEx investments. We ended the quarter with a strong cash position in total of €907 billion whilst having paid the final dividend over 2019 in April this year.

Our CapEx increased €42 million year-on-year, in the first six months. The share of excess investments in CapEx has increased towards 50%, mostly in fiber.

We are confident and positive about the value case for investing in fiber. We also demonstrated the key metrics the key KPIs, to demonstrate that fiber actually creates value.

The increase in CapEx is mainly driven by different inter year phasing of these increased access investments. We invested €54 million less in commercial activities as a result of better inventory management, fewer active mechanics to COVID-19, and the reclassification of IT and TI.

Net-net IT/TI investments decreased €6 million following significant simplification of the IT and network architecture in prior years. Our investment in working capital were €152 million in the first half year lower than last year.

The main drivers were lower trade receivables following lower sales levels due to COVID-19, lower trade payables mainly driven by payment of end of year peak of incoming invoices, lower accruals driven by bonus payments, and our working capital was also positively impacted by a number of specific initiatives on billing, invoicing and payment terms. ROCE, return on capital employed, improved 80 basis points year-on-year to 9.8%.

We promised you we would disclosure this number and here we are showing our commitments. To show a commitment to value creation, and to demonstrate that we allocate cash and capital in a value creating matter.

Our ROCE is calculated on a four quarter rolling basis, i.e. the four quarter rolling average of our net operating profit after tax divided by capital employed.

We reported, as you can see, an improving operational efficiency, which was driven by our discipline cost control, offsetting lower revenues, consistent with our increasing operating margins. Capital efficiency was higher than last year.

It was a result of higher depreciation and CapEx and due to accelerated depreciation of our copper and mobile networks. Net-net an increase of our ROCE of about 80 basis points.

We have a strong liquidity position. The Group's total liquidity stood at €2.2 billion at the end of the second quarter, consisting of €907 million in cash and €1.25 billion in undrawn revolving credit facility.

Our total liquidity covers debt maturities until the end to 2022. In addition, KPN initiated €1 billion commercial paper program of €105 million outstanding at the end of the quarter.

We lowered our effective cost of debt to below 3% in the second quarter of this year. As a result of all of this, our financial position remained solid.

Out net debt to EBITDA ratio was 2.3 times. The interest cover ratio improved to 9.3 and as I said the weighted average cost of senior debt was 2.95%, 55 basis points lower than last year at this time.

As mentioned during previous quarters, we believe in investing and disclosure to our shareholders. We want to be open, clear and transparent.

We committed to you a disclosure agenda. In this quarter we continue to act on that agenda and we had ROCE, we have separate adjusted EBITDA after leases which you can find in the data pack, much more commercial information on our consumer fiber activities, the details behind the value creation that our access investments actually deliver, and a revenue breakdown for B2B customer segment.

In the future, we'll continue on this agenda and plan to further enhance disclosure as indicated on the slides. We deliver on our disclosure commitments to you like we deliver on our business commitments.

So to summarize, we continue to create value for our shareholders. We have delivered a stable adjusted EBITDA after leases in the second quarter and strongly increased free cash flow in challenging times.

KPN's balance sheet and liquidity remains very strong. And in consumer we see improvement in base dynamics, quarter-on-quarter, and during the quarter.

In B2B, we are progressing with customer migrations and simplified our product portfolio, although we recognize several challenges remain as the economic activity in the Netherlands has decreased. In wholesale, we see a growing broadband portfolio contributing to the Group-wide stable broadband market share of 52%.

With strong costs, we deliver on our plan and ahead of track, and we are accelerating the role of the fiber, which leads to positive net present value, and drives value for KPN. And finally, we remain committed to our strategy and to our 2020 outlook and are living up to our dividend commitments.

Having said that, thank you for your attention. Let's turn to questions.

Thank you, Joost and Chris. Ladies and gentlemen, we are ready to open the Q&A.

Could you please limit your questions to two each, and in case there's still time left at the end, you can always request for more questions later. Operator, please open the Q&A.

Thank you, two questions please. Firstly, you've highlighted that coming back from there is of course concern the midterm guidance around '20 and '21.

I understand there are top uncertainties, but is there any reason to think at least that the OpEx savings shouldn't continue at least at the current run rate, and if so, should we think about upside to the €350 million savings targets> And then secondly on CapEx, you've highlighted that the pace of fiber rollout continues to improve. Are you now at the maximum run rate or should we expect further increases there?

And is there anything you can say about whether we should still expect €1.1 billion of CapEx in 2021, which is what you had originally penciled in the original guidance and anything you can say, on midterm CapEx generally would be helpful? Thank you.

Let me start and then Chris will take over. When it comes to 2020 and 2021, we are fully committed to our strategy, and in that strategy we have a framework of CapEx €1.1 billion.

In that €1.1 billion we have to operate, and that is what we currently do. So I'm happy with the results of Q2.

That's why we can reiterate our 2020 EBITDA CapEx dividend guidance, and we're convinced that we remain committed to growth in free cash flow. For 2021 visibility of the impact of the COVID-19 crisis is currently limited, so also there we remain fully committed to our three-year strategy.

We have a cost saving program and we had one of three-years. This is the second one and as you can see, today we are a little bit ahead of the plan.

So if everything works out too well, I am convinced we can upgrade the plan in the future. Maybe you can add something on OpEx and CapEx.

Yes, on OpEx and CapEx, I said in the quarter itself, if you look at the monthly indirect spend, it is about €10 million a month less than the last quarter. Obviously some COVID tailwind in there, but underlying is the strong cost saving story.

Ahead of track as we said, at some point we will get back to you on our cost, but we're confident that we will reach our cost target and the current run rate is actually beyond what you would expect initial program. When it comes to CapEx and fiber rollout, we are not at our maximum speed, yes, we will continue to ramp up.

We want to achieve 1 million households at the end of next year. With that we will allocate a bigger chunk of our CapEx towards fiber.

We will fit it into current €1.5 billion envelope in our current ambition, yes we just have to find savings and other CapEx categories, but we want to move to 1 million households and therefore we need to speed up the ramp up of our fiber rollout, and continue on the path that we've set in.

Thank you.

Hi guys, thank you very much, just two questions from me. And the first around the tweaks you've made to the free cash flow guidance, and just to fully understand, how we should think about fiber-to-the-home M&A going forwards?

So I think maybe the first question would just be, what percentage of the fiber-to-the-home lines you plan to build this year and next you expect to buy, rather than build yourself and just, if you could give us a kind of rough guide about how many millions of euros you will be spending on that over the course of this year and next, that would be very helpful? And secondly, and related to that point, could you give us an idea of the total scale of opportunity you see to buy these smaller fiber-to-the-home providers?

Is it like kind of tens of thousands, is it larger than that across the markets? And what parameters do you look at when you decide between building a network yourself or and buying in those kind of assets?

Thank you.

Luke, thank you. On the question - on the acquisition of fiber lines, first let you know that the amount of money we spend on this is relatively small compared to the total CapEx budget, right?

We have a 1.1 CapEx envelope. I think to this point we spent 1% or less than 1% actually on fiber M&A.

So we should not get carried away with the amount of M&A we can do in this space. This is a funny thing, because what we buy is actually a network with a very small operation.

Mentally, I tend to think of this as M&A which you fund out of your balance sheet, but unfortunately, the IFRS like requires to classify this as CapEx. I can't frame it as a business combination but as a network acquisition, because we are rolling out fiber ourselves and we're buying small networks without too many activities on the side.

So whilst mentally this is M&A that you fund out of your balance sheet, effectively we have to present it as CapEx. How do we look at this?

It's opportunistic, it's on top of, so we have an organic fiber rollout plan where we have a very specific model and approaches, select regions, select areas and select zip codes, where we roll out fiber. But sometimes you are bumping opportunities to accelerate and to add more fiber to your fiber portfolio.

We tend to look at it from a couple of lenses. First of all, buy should be never more expensive than make, so you will ask yourself the question, if you wanted to put out fiber in this area, would it be more expensive or cheaper to buy it?

Secondly, is there a real value creation opportunity, because you add a network where a penetration is really low and your penetration is what drives ultimately, the fiber case? So can we add penetration to that network?

That together will drive the case and how we look at it. How much is there to do?

Hard to say, this is opportunistic. We don't pursue a truly active M&A strategy.

But when you bump into opportunities, you look at it. So it’s - you're looking at probably a couple of percentage points of the total CapEx envelope at max.

I can't tell you how much we do, when and where because these transactions we are opportunistically, if we see a good deal and create value, we pursue it. If not, we're happy to walk away.

So it's all about is this value creative to shareholders. But it's a couple of percentage points of our CapEx envelope.

That's kind of the maximum of what we could do. And unfortunately, IFRS requires to classified it as CapEx, although mentally this is you know an acquisitions that you fund from your own balance sheet.

So you talk about a couple of thousand, 10,000 of lines not hundred thousands of lines.

Right, I understand and so to ask the question in a slightly a different way. When you initially gave the guidance for 1 million homes, fiber-to-the-home households, and there's €1.1 million CapEx budget, I think the assumption was that you would meet that 1 million home coverage within that CapEx budget.

So if you're pursuing additional add-on M&A on top of what is an unchanged CapEx guidance, should we expect you to perhaps end up at more than 1 million fiber-to-the-home households by the end of next year or is this you are just putting a shift of costs into this area?

We’re not going to be cheeky, and say, I keep this out of my CapEx budget, but inside the 1 million home targets, it's either both in, both out. For all intents and purposes, both out.

So it's out of the CapEx. It is out of 1 million homes.

We meet - we make or we don't make the 1 million homes based on an organic rollout. We make or don't make our CapEx budget within the €1.1 billion.

So we're going to continue to compare apples-and-apples for you.

But please be aware, really, really a small opportunity for us, 6,500 lines, maybe there are two or three more of these kinds of networks in the Netherlands. We're not sure if we are going to buy it like resets.

It is all about the deal and we compare this against rolling out ourselves. But this is to be honest, limited opportunity, small stuff.

Very clear, thank you.

Hi, good afternoon. A quick question on your KPIs, both in mobile and in broadband and in the consumer segment.

So we saw nice improvement, but at the same time this is in the middle of a pandemic, which is pushing churn down everywhere. So looking ahead when we look at the next couple of quarters, should we expect that return to a more stable picture to remain or on the contrary, there is scope for churn et cetera to pick up in the back-end of the year and into next year?

Thank you.

Thank you. Yes, this is far super important.

I said before, we have to draw a line in the sense, when it comes to our broadbands and our mobile base and consumer markets. After eliminating the Telfort brand, we lost customers quarter-by-quarter over the last five quarters.

So I'm seeing a positive trend here with minus 3,000. I would say COVID is not against us, but it's really about the way we launched the new propositions.

It's about the way, we combined operations and commercial people in the regions to sell fiber and to connect people to fiber. It is about, how we launched unlimited our new marketing campaign.

So the market didn't stop rotating by the way. We saw an inflow on the wholesale side of broadband customers of 16,000 this quarter, we stabilized.

So for me, these are positive signals, and we will do all we can to improve this quarter our base in consumer markets. On the mobile side, we see the positive effect of our push to unlimited propositions, which is to support our ARPU.

Of course in Q3 we always have the biggest impact of roaming, but in general, this unlimited proposition is really supporting our ARPU, and the base is also developing in the right direction. So this is not a coincidence.

It is very important, every week, we look at this as a Board and the company is fully focused on improving our base churn.

Okay. Thank you very much.

Yes, thank you. Just two questions, please.

Firstly, on B2B, you mentioned in the slides that thing you're pushing back the stable EBITDA target until 2021. Could you just talk us through the dynamics behind that shift and effectively how much is COVID related?

And then secondly, picking up on your slight caution about the remainder of the year on free cash flow, and bad debts it doesn't feel like you're seeing too much today, but could you give us any extra color around your updated thoughts on bad debt and in relation to the 10% of revenues from potentially impacted areas that you identified at Q1? Thanks.

Yes, in B2B, the end-to-end stabilization is very important target for us. In general, we're on track.

In SME we migrated 84% and I think in SME we will stabilize this year. LCE migrated a loss of about 70%.

So it really has to do with the impact of roaming, that I think we're not going to make it this year in stabilization. Having said that, when we look at the whole value chain end-to-end, and knowing where we are in the migrations we are convinced that we can make it soon next year.

Free cash flow?

Yes, Michael on free cash flow. Look, this year we've delivered on our EBITDA and free cash flow objectives, right?

We delivered a better cash - free cash flow than planned than last year, despite an increase in CapEx. As you have said, we've confirmed our EBITDA guidance committed to our free cash flow guidance.

We increased our risk around free cash flow a bit, not our expectation, but just risk. And the notion is indeed that there is a risk in the second half of the year, when the economy needs to pick up and the government support will gradually vane, we will have to see how that affects payment behavior by our customers.

At this point, and as we talk about payment extension of our customers, we don't see massive risk of bad debts increasing. For your background bad debts are around 6% of trade receivables in basic [ph] consumer.

I think total exposure, about €25 million of bad debt provision hasn't changed, haven't really yet really materialized until we moved into first half of the year. We don't see an increase in bad debts.

We don't see an increase in payment terms, so it is 30 to 60 to 90 days, but you have to recognize that it is a possibility, that is happening. So it's not happening today, but it's a possibility.

So what we're saying is, look we're committed to our EBITDA, committed to our free cash flow. We expect to deliver our guidance.

But when it comes to extension of payment terms, payment duration, that does not affect your EBITDA, but it may temporarily affect your free cash flow in the year, because that's what we're seeing. We're not seeing it today, but of course, we're cognizant of what's happening in the outside world, the uncertainty on COVID and that could be a factor in the second half.

That's really helpful color.

Yes, good afternoon. Thanks for taking my questions.

The first is on the roaming impact in Q3 maybe can you give us an indication of what you expect? And secondly, I noted your positive comments on the wholesale and that you - what you're doing complies with the code.

Maybe can you give us a wrap up on where we stand on fixed line regulation in the Netherlands and whether you see at least of course no more intervention on KPN? Thank you.

Yes, so compared to other telcos our roaming impact is limited. Since we, as a Dutch incumbents are competing against T-Mobile and Vodafone in the Netherlands and they have international networks.

So they offered better on net propositions to B2B customers. And having said that, there is always an impact outside of EU.

So this is really a limited amount of revenues. But we know it will impact our revenues EBIT in Q3 as it did in Q2.

On wholesale, we have been regulated for 20 years. Last quarter, we won a case against our regulator and suddenly nowadays we're no longer regulated in fixed access in the Netherlands.

We appreciate regulation and we understand we need a supervisor in the Netherlands. That's very important.

We're not against regulation. I think having a regulatory framework is good.

That's why we suggested to follow our open access model in the Netherlands with all the pricing on the surfaces we do on the wholesale sites that used to be regulated, and we follow the same price scheme as before. The only thing we do not like is the idea of getting regulators on tariffs and that's why we have these discussions with our government.

We appreciate regulation. We think it fits in the European regulatory framework, and I think that we can make a good step by using the open access model of KPN as a voluntary model introduced by us, which is from a legal point of view possible, as a new regulatory standard here in the Netherlands.

Maybe on roaming I add. If you look at roaming traffic levels, meaning our own data our own voice since last year dropped by 50% to 60% of the comparable periods, first quarter [ph] data dropped by 30% to 40% over the comparable periods.

We saw some recovery in June to early traffic data in June recovered a bit, now the intelligent lockdown has gradually been released. Where do see the impact?

I would see it in B2B probably similar as in the previous quarter in Q2, you'll see some additional impact in the consumer business. You know, people don't travel abroad in the quarter.

We would expect to see some compensation in the form of more national calling out of bundle calling. But I can't rule out that in this very quarter for consumer, you may see a temporary dip in ARPU as you know, the roaming and national calling effect kind of tend to have impact, that should be temporary.

On an EBITDA level, I think we could still compensate with lower costs, but in terms of impact, continue the same impact on B2B and impact this quarter on consumers because of the holiday season, possibly, hopefully, and expectedly compensated by more out of bundled calling in home calling and compensated with lower costs. That's kind of the background that I would love to give to you.

And some first signs of gradual very small improvement in June, when data traffic levels start to bottom out a bit.

Thank you, both.

Thank you very much for taking my questions. I have two things.

And the first one is on just if I go back to the comments on mobile, especially in B2B, and this quarter we see another deterioration in the trends. And I wonder whether you can comment on how much of that is relating to roaming?

And can you now look at your B2B outflow [ph] is at a similar level to your consumer. And just wondering if you can say, we should expect some underlying stabilization of the B2B mobile ARPU?

And then my second question is related to your previous comment on the fiber acquisitions. I was wondering if you can give us some more data points in terms of the return on investment you see on it and how long will it take to cover the cost of capital?

Thank you.

Yes, your first question was referring to the roaming effect if I'm not mistaken and the mobile consumer ARPU. So we see an improving trend in mobile ARPU, because yes, not that long ago we were facing declining ARPU every two quarters and now for the sixth quarter in a row, we are around 17 euros, and we stabilize our base.

And that's all related to our commercial approach in the market. So, underlying development is good.

Like Chris just mentioned, there is a roaming effect in our current revenue trends. And Q3 is always a bit more higher on the roaming than Q2, although we have this EU roaming.

So in EU countries doesn't make any difference if you're in the Netherlands or outside same tariffs accounts there. So it's really outside EU we're talking about on the roaming.

So the effect in Q3 on roaming will be a bit more than in Q2, but not significantly.

And your second question was on the ROI of the Fiber acquisition. When we look at this, we always do first of all an NPV analysis, where we look at bespoke fiber specific cost of capital, which is higher than KPN's Group cost of capital.

We have got - it is NPV positive. For competitive reasons, let me not dive too deeply into the ROIC or IRR, but it's a low double-digit number that we think we can achieve on this transaction.

It all depends on us meeting our penetration goals, but we think we can do it, and you're looking at a low double-digit IRR over time.

Thank you very much. That’s clear.

And just I want to follow up on the mobile comments. Do you see the underlying trends also improving for your B2B mobile?

While the base for sure is improving in B2B. We added 61,000 net adds in this quarter if I'm not mistaken.

So I think there is lots to repair in the Netherlands when it comes to mobile. We all invested a lot in networks.

We have the best networks in Europe in the Netherlands. So it's super important that we all understand that we have to create value.

This market in the Netherlands is eliminating lower price points and moving more to unlimited high priced for us about €30, 27, 50 [ph] in the package in a converged package. So I'm a bit a little bit positive here.

But yes, let's wait and see, but today, currently, it's moving a bit in the better direction to put it that way, yes.

Thank you very much.

Hi, thanks for taking the question. And just on cost cutting, you said you're running ahead of expectations.

And I think before you said some uncertainty around the reduction given the macro environment, you said you started talked again at the beginning of June. I was just wondering if you can give us some more color on how that's going and does that mean that you could potentially still be on track?

Thank you.

Yes, so when Corona started, we froze all our reorganizations. We worked on how we could facilitate our people working from home.

But having said that, we still reduced on FTE, because we had a couple of reorganizations already ongoing and end of this quarter, we announced that we restarted our reorganizations because we think it's not fair to our people and doesn't make any sense to keep waiting with improving the operating model of KPN and simplifying our organization. And our people agree, as long as we do it according to plans and in a fair way, and that's what we always do.

So, we restarted our reorganizations, and we will in the coming six months reduce people. But having said that, in the way we always do in a very decent way.

On OpEx reduction, we're running ahead of plan and like I just said, yes we are ambitious. So we would like to beat our plan and not for today, but if we continue like this, we will upgrade the program.

Yes, when it comes to FTEs, I mean what we did was at some point once the lockdown started we froze our revalidation [ph] requests, restructuring charges requests. But in exchange for that, we started an effectively a hiring freeze, so new hires have dried up considerably.

And secondly, we reduce external staff significantly. For example, when we use have to have our shops around 200 external staff, we closed them and reopened them today, reopening is about 80 staff.

So we saved about 100 external staff members from the closing, reopening of our shops. So we compensated the slowdown of the freezing of our restructuring, we have less external staff and hiring freeze.

Now we have started restructuring again and basically the function if you simplify your business, digitize your business, that makes no sense to have people employed that do not and cannot make any meaningful contribution anymore, has been aligned to discuss with the unions and the Works Council. So that's kind of kicking off again and we are starting it again.

So it is fair to say the biggest restructuring will probably take place in Q4 of this year, and the coming summer in the coming Q3 we will focus on keeping a lid on internal inflows. You can't keep a lid on external staff and gradually ramp up restructuring requests for advice again.

Very clear, can I just ask a follow up link to the '20, '21 free cash flow guidance, and because you say you are confident that the B2B that that could stabilize in '20, '21 and mid late after start from 2020? And the cost cutting sounds like it's ahead of expectations and the conversations on redundancies are going well.

So we'll just take it as it's purely the COVID uncertainty that's causing you to have some apprehension for now and little else is going on? Thank you.

Yes, it's really all about COVID, which is really all about the impact of the pandemic that's uncertain to us. KPN underlying is delivering as planned, probably even better than planned.

Sometimes, Joost and I look at each other, what if COVID had not happened, what kind of quarter half year would we have had. So I think KPN underlying is delivering according to plan.

It's the uncertainty around COVID-19 and for example, the payment behavior or the depth of the recession that is hard to gauge, so that's kind of the only risk we are flagging.

Perfect, thank you very much.

Yes, thank you very much. Good afternoon.

And just a couple of questions from me, please. Firstly, the question on fiber and now that you're back up and running on the FTTH [ph] build, and you're seeing the clear benefits to our future and NPS, how much fiber do you think it makes sense to build in the long-term or how much could you economically see KPN building in the long-term, given those benefits you're seeing?

And then secondly, a question on the balance between the wholesale and consumer fixed voice and broadband lines. And the question is, are you less concerned over the retail customer trends, and now versus a year ago given that you're getting an offset on wholesale, and obviously, wholesale customers come with lower offering, but also lower costs?

So I was just wondering how you are thinking about the balance there and maybe how your thinking has changed over the last year? Thank you.

Yes, so when we look at the fiber case we see the proof that it's working. We are doing better than the original fiber case we built 10 years ago.

On ARPU on penetration we're doing good, and we aim to do better in existing fiber areas, because having a penetration of 60% still means that 40% is not active yet. So for us, it's important not only to focus on new built areas, but also on the existing footprint we built over the years.

Currently, we're working on a plan to roll out 1 million until the end of next year and that is very important. The machinery rebuilding means that we can build the fiber against lower costs per household, because the more we build the lower it gets, the more efficient we will become.

We innovated a lot in the rollout of fiber, so we can go faster in areas to connect more houses and against the lower price. So that is our focus for now.

Doesn't make any sense to stop end of next year, I don't think so. So we will probably keep on building fiber.

But of course, it's very important to stick in our capital framework as well. So this is where we are on fiber.

We're doing good and we're scaling up and this against a lower cost per household. The balance between wholesale and consumer I would say, we're playing this game for a long time.

I think over the last quarters we saw outflow on consumer, and a bit higher inflow on wholesale. So it's our leverage on the consumer side.

But having said that, it's not healthy to lose that much customers in consumer for a couple of years in a row. So I'm satisfied with the results of this quarter that we more or less stabilize consumer base.

A bit of loss minus 3000, but against that the inflow of 17,000 or 16,000 on the wholesale side means that others are losing customers and they are moved to our network. And all in that's a balancing act between consumer and wholesale delivers a lot of value I think.

That's perfect. Thank you very much.

Thank you very much for taking my questions. I just wanted to go back to mobile ARPU perspective.

[Technical difficulty] growth I would just ask directly, do you think it's reasonable to expect you to maintain the €17 [ph] local ARPU [technical difficulty]. And also, we talked about positive underlying trends related to consumer mobile.

I just wanted to double check whether you meant that underlying [technical difficulty] ARPU was actually positive and positive growth territory in Q2? And then the second question is just on Telfort broadband customer migration, could you give us some color where you stand on that and whether you've managed to migrate more customers in Q2 and how much of that remains to be done please?

Yes, I apologize because the sound is not that good, so difficult to hear you correctly. But if I'm not mistaken, you asked a question around mobile ARPU and the €17 and on the Telfort customer migrations.

Let me start with the Telfort customer migrations. We migrated the full mobile base of Telfort’s to KPN in a very smooth way.

That was done and all these customers have been migrated to KPN against the former Telfort price points, so that's done. On the broadband side, we are going to migrate the Telfort customers in the second half of this year to KPN.

And we are piloting that now with friendly users, as we call it. But it's also very important that it goes smoothly in a couple of batches and then to the new environment.

So that's an important migration, and we will do it in the second half of this year. And once that's done, the base is more stabilizing.

So that is important, you are right there. On the mobile ARPU…

Yes, on the mobile ARPU, a couple of trends at play. The underlying trend supporting mobile ARPU are positive.

I mean, if we look at the renewal of older cohorts of clients the drag - the ARPU drag from renewal is actually getting smaller and smaller. So there is still a bit of ARPU leakage from repricing older cohorts, but that leak is getting smaller and smaller.

Secondly, the inflow-outflow mix is also improving. Behind it is a bigger share of unlimited.

So we're up serving our clients towards unlimited propositions. So that together should provide some support to our mobile ARPU going forward.

As in the short-term in the summer, you may have temporary roaming effects, roaming fresh national calling that may distort the Q3 numbers. And thirdly the one thing that we just do not know is whether our clients will look for more no frills solutions as a response to COVID, will they look for a lower cost solution or not.

It's not happening today. We don't see it at all.

We see an increase in the share of unlimited, but something we need to be very mindful about. So my summary would be underlying trend from the renewals, inflow or outflow core repricing should be positive towards ARPU, a temporary dip in Q3, and the uncertainty around the COVID outlook.

But given the stuff that we can control, especially the increasing share of unlimited supports our mobile ARPU.

Okay. Thanks very much.

Hello, thank you for taking my questions. I've got two and a half questions please.

The first question is from the capital employed at the group level, I was wondering if you could tell us how much of that is related to FTTH? And just related to the ROIC, which is pretty impressive at around 10%, I mean, logic would dictate if you're generating ROIC of 10% versus if that's a cost capital, I don’t know, 5% to 6%, then you should be increasing CapEx to create more value provided obviously that the income returns stay this high and I'm assuming that fiber-to-home returns are even higher than the group ROIC of 10%.

So how do you manage that almost inconsistency between, in theory how to create value versus what the equity markets would like to see, which is CapEx either flat or even come down? So, that was the kind of broad question around ROIC.

And then the second question was around B2B. You've disclosed that SME and large corporate are around similar in terms of size of revenues at €300 million each in H1.

I mean, is the – are the margin dynamics different for these segments in the end 2020 but now is it broadly similar kind of contribution? Thank you very much.

To start with your B2B question, SME is not the largest segments when it comes to revenues, but from a profitability point of view, it is very important to for us. So it's the highest profitable B2B segment for us.

Why is that? Because we standardized the portfolios called KPN1.

We can migrate 82% of the base to KPN1 and we can support that full base with less people than we do in LE or Corporate. At Corporate we migrated 73%, but against the lower margins and that's what we are focusing on.

Yes, maybe your on ROIC?

On ROIC.

On your question on the share of fiber in total capital employed, let me look it up for you. I think we'll get back to you with that detail.

But I do agree that ROIC of around 10% is a nice number. Would love to grow it actually grow it further.

Wouldn't you want to do more CapEx if you had ROIC of that? I think it is the marginal ROIC that counts.

So we do monitor that carefully. But to put it – we are comfortable that the ROIC on fiber is actually value creating without giving you the details on the numbers.

I think they shared the numbers in the sheets we always present show you that there is value creation in fiber. Could we do or would we want to do more?

That is a $64 million question, something for us to think about. One thing we'd note, of course, you may want to do more but you need to have the construction capacity locked in.

So there's no point throwing money at fiber if you can't have the field services work as dig holes and pull these lines. So step one is looking into construction capacity.

Step two is make sure you've got the operational capability if you convert all those homes spots into active clients. So it's a logistical and commercial operation that needs to count as well.

Because if you look at the fiber case, it is actually the penetration that counts. If you look at the fiber NPV, I am sorry to give you a bit of a lecture here, but it's not so much the cost per home passed that makes a difference because the amount of penetration and the ARPU realized that actually drives the NPV.

So versus the question, can we get the building capacity if you build these lines and make this money work? And secondly, can we get our operations if you sell those homes passed to homes activated and get the revenues?

If you're there, you're right theory would predict that more CapEx is actually is better, but we're cognizant of the sensitivity of the shareholders over capital markets of our higher CapEx, so something else to think about to chew on and to communicate very carefully about, but I mean theoretically, you're absolutely right.

Adding to that, we report CapEx at €1.1 billion in the total year, which is a lot in the Netherlands, considering a rollout of let's say 300,000 fiber lines that is not most of the €1.1 billion. So 300,000 households is representing less than €300 million CapEx.

So it is also important for us to really focus on all the CapEx buckets in that €1.1 billion and trying to reallocate CapEx from one bucket to another bucket. And the more we migrate to CapEx, the more profitable it is when it is to our concern.

So it's also about reallocating CapEx from one theme to fiber-to-the-home.

Thank you very much.

Thanks. So for my two questions, the first one would be on the coming back to theses quiet five operators.

And I mean, you're framing this as a bit of a build or buy choice I think. And could you just send in that context explain where the acquires operators, and also the ones you would further look at in this area, where they would stand on the priority list for the build?

And I mean, I suppose the thesis behind that is, is that's why you're currently buying, it is not where you probably would build next. So just trying to figure that out, or whether there's actually a big overlap, that it's really like you would build in that sort of area or you would sort of buy in that sort of area that's actually the question you're currently answering?

The second question is on the payment behavior. Now you are calling this out as a risk and then you insist that you're not – is the natural behavior?

So I'm struggling to understand why you then call it out. Is it prior experience from prior situations, is it from the conversations that you have with the purchasing managers in these companies?

It just feels that you're adding a degree of uncertainty here that some of your peers aren't adding and there must be a reason, I'm just not entirely sure what that reason is? Thank you.

Yes, so we have fiber initiatives in the Netherlands and that's also had to do with the slow rollout of KPN over a couple of years ago. We gave them room to maneuver.

There has been fiber rollout in rural areas where we didn't roll out, we prioritized in other areas. And so the business case in the Netherlands, a third party rolls out fiber, then you sell to KPN and this is not the way we would like to do business.

But it's important that we speed up our rollout to lock in all the capacity to avoid others to do it. Secondly, our message to these initiatives is, go to Germany, there's more room there to maneuver.

There are more rural areas, probably better business model as well because we are now in an elite of rolling out fiber and so it's not that they all can roll out fiber we buy it. The consolidation we recently did was very small one, 6000 lines.

For the first time we had to book it in CapEx because we didn't buy a company we only bought the excess network. So it's really a network we both that's it.

No people involved or whatsoever. But we know these people from the beginning.

So we know where they were rolling out, and we didn't roll out there ourselves. There are also areas in the Netherlands where others start and we go in because to protect our customer base and because we have that area on our list as well.

Currently, we worked out a plan for all municipalities in the Netherlands. So, in 295 municipalities in the Netherlands KPN has a network plan and currently we are working in 85 regions.

So that is a big operations in the Netherlands, we are a small country and I think that will delay and decline the introduction of more parties in the Netherlands. And only when we can do a good deal and only when it fits our network, we consider to buy.

There is no overlay in the Netherlands. There's no overlap.

And it is very important that we make sure that it will not happen in the Netherlands. So that's why it's again important that we speed up our rollout as well.

And when it comes to the payment behavior, you're asking the question, is it fair to flag a risk when you don't see it yet? If you look at what happened in the first quarter, the one thing we are really cautious about is payment behavior.

So we had a very intense monitoring scheme and a very clear protocol how to deal with requests for payment extensions. We did receive some requests.

We granted some. We did not grant others.

We had a protocol in place. I think in total cost us a couple of million of working capital in this quarter, so at this point, very limited.

Because something like this, you want to be very mindful and vigilant about. Maybe other Telcos don't show it.

I don't know. I think we perhaps have a slightly bigger business market because it's a business market thing rather than consumer market thing, so that maybe there is between us and them.

But again, at this point, it's not there yet. We want to be able to flag it.

It is naive to flag it if it is not there, perhaps if it's honest, yes for sure. We want to be transparent and clear to you that this is a risk.

I want to be honest with you. But again, we'll need to see how it evolves.

Right. Thank you very much for both answers.

Yes, good afternoon guys and I also want to express my thanks to your honesty, I think you were just expressing a fairly common sensical honest view with the free cash flow. Look, which I think is very sensible in the circumstances.

I had a question related to that though. I guess just from financial priorities.

And clearly, you're flagging this visibility is not great, things remain pretty opaque. There is a lot of economic uncertainty.

As you look into the next 12 or 18 months, can you just sort of help us understand your financial priorities? Should we think that the €1.1 billion of CapEx is written in stone, and that you're going to build that fiber almost come what may?

If your EBITDA slips and working capital slips and cash flow comes under pressure, would you be committed to building that fiber because the returns are so good? And how do you weigh that up against your dividend commitments?

Are you confident under sort of most foreseeable circumstances, the balance sheet can take a bit of strain on the dividend and continue to the pay the CapEx? So that would be very helpful.

And just coming back to the sort of fiber machine that you said you've got up and running, clearly one the big problems last year was that sort of big shift in working capital that you flagged were you previous also Chris flagged, sort of shifting payment terms. Now, I guess is one of the most reliable payers of construction crews in Holland at the moment, have you been able to take advantage of COVID to sort of change those payment terms and may be give yourself a better runway in terms of payment over the next two or three years to improve the cash outflow on building more fiber, it would be interesting to know that?

Thank you.

Well, before I hand over to Chris, I must say I'm happy with Chris coming in, because we improved the way we run our CapEx, and we improved the way we run our working capital when there is room to improve there and that's what we currently see. We always said fiber rollout means that we have to pre-finance a lot, but on the other hand, if we are responsible for fiber chain in the Netherlands, with 3000 to 5000 people at work, and with all the construction going in 85 areas, we can do better in the negotiations on payment terms, than where we only do 100,000 lines per year.

So I would say that we improved there and that's why the impact is less than we mentioned when we presented our fourth quarterly results.

Yes, the other point, on the working capital environment and payment environments, we do see some of course underlying pressure on working capital from fiber access investments and working capital stream from that, and we've been able to counter or do some of that already. We're going to use it we're going to work on capital program ongoing that consists of both the incoming side and the outgoing side to its payments and invoices together.

That allow us to mitigate it to a significant extent, possibly not all of it, but at least a significant chunk of it. And to your first question, is your €1.1 billion CapEx cast in stone?

I tend to think, yes we've committed $0.13 dividend per share and that is cast in stone. So we've even got a balance sheet where your leverage is less than 2.3 times EBITDA.

Our dividend is cast in stone, not our CapEx. At the same time, if you look at the value creation that we're able to be to achieve with our CapEx, it would be a shame to pause it if you've got a balance sheet that is able to support like this.

So our dividend, that is rock solid, that's pretty sacred, certainly the $0.13 that we've committed also showing the fact that we're paying an interim dividend on basis of $0.13 per share. So that is cast in stone.

CapEx would be a function of, can we create value to our shareholders by deploying all this capital? If we can, and I think we should do it as long as we can save current dividends.

Can I just ask one more quick one Chris? You obviously had – you've had a few weeks of the price rise now, which I guess was not something anticipated you could do a few months ago.

Can you just give us an update on how the price rises landed and you know the sort of competitive response to you and benefits like raising prices?

The competitive response has been very benign. I mean, interestingly, the newspaper wrote that KPN and [indiscernible] had a more moderate price increase in last year, which is factually true.

It was a more moderate price response. It was a price response of the response that we'd hoped for.

So I think the price increases landed reasonably well. Of course, most of our customers rather see a price decline than a price increase, but in the standards, the linked to for example, the wage inflation, the wage price, wage increase we experienced.

So we have not seen any major fallout in terms of volumes from the price increase. I mean the price elasticity has still worked for us.

Great, thanks very much.

Okay, thank you everybody. This ends today's webcast.

If there are any further questions, please let our IR team know. Thank you very much, and operator, you can close the call.

Thank you.

Thank you.