Koninklijke Kpn Nv

Ladies and gentlemen, welcome to KPN's second quarter 2022 earnings webcast and conference call. Please note this event is being recorded. At this time, all participants are in listen-only mode. We will be facilitating a question and answer session towards the end of today's prepared remarks. If you'd like to ask a question, you may do so by pressing star one on your telephone. I will now turn over the call to your host for today, Reinhard van Israert, Head of Investor Relations. You may begin.

Thank you and good afternoon, ladies and gentlemen. Thanks for joining us. Welcome to KPN's second quarter and half year 2022 results webcast. With me today are Joost Vaarwerk, our CEO, and Chris Vige, our CFO. As usual, before turning to our presentation, I'd like to remind you of the safe harbor on page two of the slides, which also applies to any statements made during this presentation. In particular, today's presentation may include forward-looking statements, including KPN'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. Let me now hand over to our CEO, Joost Vaarwerk.

Thank you, Reinout, and good afternoon, everyone. Our Accelerate to Grow strategy was launched in November 2020, and we are now halfway through the execution of this ambitious three-year plan. And today's results show our continued good progress on our strategy, despite the changing macroeconomic environment. A key highlight for the quarter was the performance of the business segment, which saw growth in service revenues for the first time in more than a decade. And this, combined with solid mass market service revenue growth, supported our overall group service revenues. Within the mix, we see positive signs in wholesale, in business, and consumer mobile. Consumer fixed shows a bit of a dip, but we are confident that the performance will improve going forward. We rolled out fiber to 102,000 households, or if one were to include Glassport's joint venture, 150,000 households in the second quarter. Moreover, we now have more retail customers on our fiber than on the copper footprint, a milestone moment for us. Our efforts in modernizing the mobile network continue to pay off. For the fourth time in a row, we've been recognized as the best mobile network in the Netherlands. And while we, like many organizations, see an impact for rising costs due to inflation, we also see encouraging group service revenue developments in this quarter, with the mentioned B2B inflicting to growth earlier than expected. Ultimately, this underpins our confidence in our ability to maintain healthy margins and growing free cash flow in the future. Driven by our solid performance and successful execution of our strategy in the first half of this year, we raise our 2022 guidance to at least 2.4 billion euros of EBITDA after leases and free cash flow of approximately 850 million euros. As you know by now, our compelling strategy is centered around three clear pillars to leverage and expand our superior networks, to grow and strengthen our customer footprint, and to simplify and streamline the operating model. Over the last year and a half, we've delivered significant progress on all three pillars and remain confident that this strategy will continue to create long-term sustainable value for all our stakeholders. Let's now take a look at the first pillar of a strategy, our best-in-class networks. In the second quarter, we've made solid progress and rolled out fiber to 102,000 households versus 75,000 in Q1. And together with the joint venture with APG, Glasport, we rolled out fiber to 150,000 households. And we now cover approximately 44% of the Netherlands with fiber. And we expect to reach approximately 80% of Dutch households by the end of 2026. And once we reach that point, we expect CapEx to drop to a much lower sustainable level. As we continue to roll out fiber, our growing fiber footprint will result in an improved customer base for retail and wholesale. In fact, we now have more retail customers on the fiber network than on copper. Fiber serves revenues, and this number is growing rapidly, driven by a growing base and attractive ARPU. All in all, fiber is clearly at the heart of our strategy to create long-term value for all stakeholders. On mobile, we are proud that Ookla once again, and for the fourth time in a row, recognized our leading mobile network. With this recognition, we retain our position as the best mobile network in the Netherlands, with the highest up and download speed, best coverage, and the fastest 5G in the Netherlands. Let's now move to the second pillar of our strategy. Adjusted consumer service revenues decreased by about 1% year-on-year. On the one hand, we see consistent mobile service revenue growth and the continued success of our fixed mobile convergence strategy. On the other hand, fixed service revenues were a bit lower. Consumer fiber broadband revenues showed continued growth, while copper and legacy maintained its anticipated decline. Customer satisfaction remains one of our top priorities, and it has been pleasing to see our efforts pay off in this area. Now let's take a deeper look into our second quarter KPIs. Our retail fiber base increased by 34,000 new customers and now exceeds the copper base. And like I said, an important milestone for us. This should provide support to start to grow our broadband base. Broadband NetEd showed a temporary decline as we witnessed a brief period of increased competition following the successful launch of our Viaplay proposition. Our fixed ARPU remained broadly stable at 52 euros. The service revenue trend is weaker than seen in previous quarters. And on the one hand, this is due to an anticipated decline in legacy services, fixed calling, lower voice traffic. On the other hand, this is due to the successful migration to Viaply, which causes a shift from gross to net revenue reporting, but has no impact on margin. We continue to see solid trends in mobile. Our postpaid base increased by 33,000, and our postpaid ARPU was broadly stable. And combined, this led to a 1.4% growth in mobile service revenues. Now let's move to B2B. I'm very pleased with the performance of our business segment, which inflected to growth a bit ahead of schedule. B2B adjusted service revenues grew almost 2% year on year in the second quarter. SME is the main driver of growth, driven by solid commercial momentum in both broadband and mobile. Alongside SME, also our tailored solution business increased. While the LCE service revenues are still in decline, the overall trend is also moving in the right direction. So this keeps us well on track to inflect LCE in the first half of next year. The NPS on business remains positive. It was a bit impacted in part by the volatile economic environment. Nonetheless, we are still leading in the Dutch market as customers continue to value KPM for stability, reliability and quality of our networks and services. As mentioned, across the board, we are seeing improving revenue trends. If we would strip out tailored solutions in the B2B revenues to give a good indication of our core telco performance, our business service revenues increased by 1.3% compared to the previous year. So that's supporting our strategy. In wholesale, service revenues increased 7% in the second quarter, supported by our open access policies. Year-to-date, we added 43,000 postpaid SIMs and 18,000 broadband lines. On the topic of regulation and the ACM, there's not much new to say at the moment. As you know, we've published our voluntary open access model for the future with adjusted wholesale tariffs, which was used for the consultation period. This consultation has been concluded and we expect the final decision from the ACM to be announced this quarter. With this, let me now hand over to Chris to give you more details on our financials.