Koninklijke Kpn Nv

Good day, ladies and gentlemen. Welcome to KPN's first quarter earnings webcast and conference call. Please note that this event is being recorded. At this time, all participants are in listen and remote. We will be facilitating a question and answer session towards the end of today's prepared remarks. If you would like to ask a question, you may do so by pressing star 1 on your telephone. I will now turn the call over to your host for today, Matthijs van Leeuwenhorst, Head of Investor Relations. You may begin.

Matthijs van Leeuwenhorst, Head of Investor Relations. You may begin. Matthijs van Leeuwenhorst, Head of Investor Relations. You may begin. Matthijs van Leeuwenhorst, Head of Investor Relations. You may begin. Matthijs van Leeuwenhorst, Head of Investor Relations. You may begin. Matthijs van Leeuwenhorst, Head of Investor Relations. You may begin. Matthijs van Leeuwenhorst, Head of Investor Relations. You may begin. Matthijs van Leeuwenhorst, Head of Investor Relations. You may begin. Matthijs van Leeuwenhorst, Head of Investor Relations. You may begin. Matthijs van Leeuwenhorst, Head of Investor Relations. You may begin. Matthijs van Leeuwenhorst, Head of Investor Relations. You may begin. Matthijs van which applies to any statements made during this presentation. In particular, today's presentation may include forward-looking statements, including KPM's expectations regarding its outlook and ambitions, which were also included in the press release published this morning. All such statements are subject to the safe harbor. Now, let me hand over to our CEO, Joost Farberg.

Thank you, Matthijs, and welcome, everyone. So let's start with the highlights of the first quarter of this year. On group service revenues, we increased by 3.8%, of which 0.7 is related to U-Fund. And in the mix, in consumer, the service revenue trend slightly improved in the first quarter, mainly driven by mobile. Our business segment continued to show solid growth, and wholesale service revenues accelerated, mainly driven by mobile. We delivered solid EBITDA growth, partly due to contributions from Ufone and Altio. And as expected, our free cash flow declined, partly due to high interest and tax payments, as expected, and this is also expected to recover in the second half of the year. We further expanded our FABU footprint together with our joint venture, Glassport, and we received an award from Umlaut for having the best mobile network in the Netherlands, with the highest score ever measured in the world. Our new tower company, Altio, began its operations in mid-February, and therefore we upgraded our full year 2025 outlook accordingly, which we are confident in achieving. Overall, we started the year well. Of course, there is uncertainty given the current economic and geopolitical environment. but we are confident that the direct impact of U.S. trade tariff measures on us is limited and consider our business resilient with strong demand for our essential connectivity and communication services. As a reminder, our Connect, Activate, and Grow strategy is supported by three key pillars. One, we continue to invest in our leading networks. Two, we continue to grow and protect our customer base. And three, we further modernize and simplify our operating model. Together, these strategic priorities support our ambition to grow our service revenues and adjusted EBITDA by 3% and our free cash flow by 7% per annum on average in the coming years, or simply put, our 337 CAGR framework. Let me now walk you through the business details. We continue to lead the Dutch fiber markets. In the first quarter, we expanded our fiber footprint by adding 100,000 homes together with Closport, now jointly covering 64% of Dutch households. Our efforts in connecting homes and activating customers have paid off, reaching 78% of total homes on our network, while two-thirds of our retail base now enjoys the benefits of fiber. Let's now have a look at the consumer segment. The consumer service revenues increased 4.6% year-on-year, of which a bit more than 3% is related to Ufone. We are satisfied with Ufone's performance, which enables us to better address the no-frills segment of the market. Our increased focus on loyalty and base management is further strengthened by the recent launch of our new household proposition, Combi4Deal, which rewards customers for taking multiple products for households. Currently, 60% of our fixed households have adopted the fixed mobile proposition. Our consumer net promoter score declined, influenced by challenging consumer sentiment, especially at the start of the year. However, customer satisfaction trends improved during the quarter, supported by the launch of the new household proposition I just mentioned. Now let's take a deeper look into our first quarter KPIs. We saw another quarter of broadband-based growth despite the challenging competitive environment. We maintained a constant healthy inflow of new FibreCorn customers, which combined with the growing ARPU led to continued growth in our fixed service revenues. As expected, our mobile service revenue growth improved sequentially, mainly driven by commercial improvements. And our post-paid pay increased by 21,000, while the post-paid ARPU, excluding U-phones, remained relatively stable. Let's now move to B2B. B2B delivered another strong quarter with 5.1% year-on-year growth, driven by SME and Payless solutions. Commercial momentum remained solidly mobile, and the majority of our B2B broadband customers now utilize the fiber network of KPM and Salesforce. And despite the volatile economic environment, our business net promoter score remained stable. B2B customers appreciate KPM for stability, reliability, and the quality of our network and the quality of our services. In today's complex world, we help Dutch businesses to become digitally resilient, supporting them in their digital transformation to work more securely and more efficiently. And SME continues to grow, driven by strong performance in cloud and workspace, broadband, and ongoing momentum in mobile. And to protect sleep customers from digital threats, KPN offers extra safe internet services, enhancing their digital strength against rising cybercrime. I believe more than 70% is currently already making use of that, 70% of the base. LCE service revenues remain stable with solar performance improvement, IoT and cloud workspace offset by some price pressure in mobile. And Taylor Solutions delivers S-plans, with strong growth driven by higher project revenues. And this business always remains subject to project timing and seasonality. Then our wholesale service revenues continue to improve, mainly driven by mobile as well. Broadband service revenues increased despite the declining base, mainly driven by higher fiber service revenues. Mobile service revenues remain strong, driven by ongoing growth in international sponsored roaming volumes. Furthermore, we extended the contract terms for some of our largest wholesale partners. All the service revenues in wholesale represented a slight increase, mainly due to an uptick in visitor rolling. Now, let me hand over to Chris to give you more details on our financials.

Thank you, Joost. Let me now take you through our financial performance. Now, let me start by summarizing some key figures. First, the adjusted revenues of KPM increased 3% year-on-year as organic service revenue growth across all segments outpaced lower non-service revenues. Second, our adjusted EBDA after leases grew by 4.7% in the quarter, or plus 3.1% excluding all contributions from youth loan and Altio. This growth was mainly driven by higher service revenues. Our EBDA margin increased 72 basis points to 44.7%. And in the first quarter, we managed to lower our indirect cost base despite wage indexation, but it was partly due to the intra-year phasing effect as well. Our plan for the full year is to have a slightly declining overall index cost base. So far, we had a solid start to the year and we're confident in our ability to reach this year's EBITDA targets. Third, our reported net profits decreased despite EBITDA growth due to one-off costs related to the alt-zero transaction. Our free cash flow decreased 70% over 26 million euros compared to last year, but will pick up in the second half of the year. I'll share a little bit more detail on underlying cash developments later in this presentation. In the first quarter, group service revenue growths sequentially improved to 3.2% on an organic basis. And within the mix, consumer service revenues increased by 1.2% year-on-year, corrected for U-phone, primarily driven by the improved performance in mobile. Business service revenues recorded another strong quarter and grew by 5.1% year-on-year organically, driven by SME and pay-per-solutions. And finally, wholesale service revenues grew by 6.1% year-on-year, corrected for Ufone, mainly driven by the ongoing success of our international sponsored roaming business. Our operational free cash flow increased by 12% year-on-year, well ahead of mid-single-digit growth guidance. This growth was partly driven by the contributions from Altio and Ufone, along with slight lower capex due to phasing. Our total spend, so combining operating and capital expenditures, is broadly stable. For the full year 2025, we expect high and solid single-digit growth rate and operational free cash flow, supported by LTOU funds and effectively stable capex. Obviously, if not for the gradual normalization of taxi space, the operational free cash flow would largely flow directly into our free cash flow. Now let's talk a bit more about the moving parts of the free cash flow. Our solid operational free cash flow did not yet translate into a full free cash flow growth yet due to higher interest payments, phasing of working capital, and higher cash taxes. In fact, the timing increase of interest and cash tax payments explained a delta in free cash flow compared to the first quarter of last year. And as guided, our free cash flow generation will be stronger in the second half of the year, driven by continued operating cash generation and normalization of tax and interest payments, and we therefore reiterate our free cash flow guidance for the year. At 128 million euros, our free cash flow margin was about 9.1% of revenues, and we ended the quarter with a robust cash position again. We continue, therefore, to have a strong balance sheet. At the end of March, our leverage ratio stood at 2.4 times, comfortably below our self-imposed ceiling of 2.5 times, even after absorbing the full effect of the Altio transaction. Our interest coverage was sequentially a tiny bit lower as we faced higher interest costs, and we successfully issued an 800 million euro senior bond and redeemed the remaining part of an outstanding hybrid. These transactions increased the average maturity of our outstanding debt and lowered the average cost of debt. Our average cost of debt is now 3.7%, and exposure to floating rates about 16%. Our liquidity of around 2.5 billion euros remains strong, covering debt maturities until the end of 2028. Now let's turn to our outlook and midterm ambitions. Following the closing of Altio in mid-February, we upgraded our full-year 2025 outlook for adjusted EBITDA after leases to more than €2.6 billion and a free cash flow to about €920 million. These outlooks remain fully intact. Other outlook items have also been reiterated, namely group service revenue growth, set at approximately 3%, driven by organic growth across all segments, and CapEx to remain stable at a peak level of around 1.25 billion euros. The updated 2025 guidance illustrates that the consolidation of Altio will have a modest positive contribution to KPM's future financial results, on top of the existing three 3.7 financial ambitions that we presented at our Capital Market Day in 2023. Now let me briefly wrap up with some takeaways. First, we had a solid start to the year, with continued group service revenue growth across all segments, leading to healthy EBDA growth fully consistent with our 337 ambitions. In fact, our first quarter underlying service revenue and EBDA growth came in well above the 3% hurdle. We continue to lead the Dutch fiber market with ongoing delivery of connected homes. Currently, two-thirds of our retail base and more than half of our B2B base are in fiber, which bodes well for the future. As planned, our free cash flow generation will be back-end loaded, and we are confident in our ability to reach our 2025 and mid-term outlook. We are currently at approximately 25% completion of the €250 million share buyback program for this year, effectively distributing all of our free cash flow to our shareholders. Overall, we think we will live solid results in the first quarter. As mentioned, uncertainty remains of the future direction of U.S. tariffs and the wider economic implications. We are confident that the direct impact U.S. and reciprocal trade tariffs on our operational KPIs and financial results is limited. Any impact can be managed within our capital envelope. Obviously, we keep a close watch on the impact of global trade and economic developments on a Dutch economy when we consider our business to be resilient. Thanks for listening. Now, let's turn to your questions. Yes.

Thank you, Kitsch. As always, before we start the Q&A session, I kindly request that you limit your questions to two. Operator, please proceed with the Q&A.

Thank you. Ladies and gentlemen, we will start the question and answer session now. If you would like to ask a question, you may do so by pressing star 1 on your telephone. Thank you. We will now take our first question from Paulo Tang of UBS. Your line is open. Please go ahead.

Hi. Thanks for taking the questions. I have two. The first one is on consumer broadband. Can you maybe just talk through what the customer reaction was to your 3.3% price rise and what has been the impact of Vodafone CEO cutting its broadband pricing by €5 per month? And are you seeing any signs of consumer NPS improving in Q2? My second question is just on your fiber build rate, because it slowed down to about 100,000 homes a quarter from the peak of 168,000 in Q1 2024. So why have you slowed down, and how should we think about the build rate from here?

Thanks. Yeah. Thanks, Paulo. Yeah, so in consumer broadband, we increase prices and... most of the service providers increase prices on the other hand that goes hand in hand with discounts but the price rise of ktn landed well in the market because we can perfectly explain why we do this in line with cpi indexation and of course we invest a lot in the quality and also then hand in hand with launching the new Proposition Combi-4 bill, where we really focus on the existing base of customers, and we explain that we do not want to surprise existing customers only with price increase, but we also surprise them with free OTT services in combination, landed quite well. So we started the quarter with a bit of a dip in the net promoter score, but during the quarter, we already saw the net promoter score climbing up So I expect that to improve, and also that will be visible in the second quarter. Now fiber, you're right, we're slowing down a bit. We focus more on connect and activate than homes past only, to put it that way. The strength of our fiber rollout is, compared to competition, that we really connect most of the households while rolling out. So, it goes a bit in batches. I expect the second half of the year, especially, much stronger on Holmes Pass than this Q1 with 100,000 average. We still aim for 80% end of 26. Approximately 80% could be a bit more, a bit less, but we will continue to roll out. And in this pattern, I expect it to come close to that 80%. And in 2027, we still foresee a material step down in our capex, dropping to below a billion, and that is completely locked in in our strategy.

Thanks.

Thank you. We will now take our next question from Andrew Lee of Goldman Sachs. The line is open. Please go ahead.

Thanks, Nathalie. Just one question really on the competitive environment in the Netherlands. You, I think, had been saying that you felt that the consumer growth could recover in the second quarter and you now are saying that the recovery comes in the second half. I think that's a bit of a shift. So I just wondered if you could talk through what's changed and also how confident are you that price rises just in line with inflation will be enough to support that recovery. Thank you very much.

I think the first one, Andrew, I think it is all marginal. We see really on mobile, actually, the recovery from the fourth quarter came earlier. So actually, I think we said that mobile would recover in the second quarter, recover in Q1. I think mobile has actually done better than we planned, and we think the current growth rate in mobile in Q2 will be similar to Q1, so more or less around 2% or 2% plus. And on fixed, I think it will be similar to what it is today, around 1% growth. I think it's really on the margin. The good news, I think the mobile recovery that we predicted in Q4 came a bit earlier in Q1 and seems to continue. With that, I think consumer market is not going to be the gross champion of the group, but probably gross between 1% to 1.5% for the full year. So don't read too much in it. I think it's just a fact that mobile recovered earlier than we envisaged. And your question on price increases, again, I think they've landed relatively well. I mean, we announced them. There was no real, I think, impact on NPS. I think there was some NPS impact on talk by the ACM around know willingness or supporting customers to switch but especially the combi portal that joe's described really did we did well and and we boosted our mps and i think the price increase that we've announced is in not just simply indexation nothing more nothing less so that that actually feels have been absorbed pretty well by most of our customers

Thank you. I'm just trying to get a bit of an insight into the competition from Godzigo and Adido. Obviously, that's been more intense over the last 6 to 12 months, but you're just trying to get a sense as to whether it comes as a second derivative of what you're seeing, i.e. has anything changed in their behaviour or nothing's changed, therefore you don't see things changing. getting materially worse, and therefore you get easy comps into the second half of the year? Or are you seeing any kind of canaries in the coal mine that give you a suggestion that actually competitive intensity is abating in some way?

There's certainly no canaries in the coal mine. I think when you look at price development, both did a, you know, either way had a backdoor price increase for the first of January, around 3%. Odito, I don't know, is probably also something similar. I mean, so that price adjustment on that front book I mean, they were more expensive than we were, so I think that price is now more or less in line with us. And so I think the competitive intensity is not really changing. In fact, I think we've seen running up into the second quarter, our order balance has improved. So typically the order balance goes before the net ads. So early indicators into Q2 at the end of the first quarter, so early March, we saw the monthly order balance is also basically competition doing better. I would say competitive intensity is stable. Price changes by competitors are within the range, within the margin, not really changing. Our combi 4.0 lands actually quite well, should lead to lower churn. And I wish there was some encouragement around the operational KPIs into Q2 because of the order boundaries. Now, obviously, Q2 is still a few months to go, but I think the momentum at the end of Q1 going into Q2 was reasonably supportive.

And a good step we made is really two fixed mobile converged brands in the market as the only players. So KPN on one side, Ufone on the other side, both covering convergence, but the lineup completely different. So above 200 meg of fiber for KPN and below for Ufone. Also when it comes to mobile, Ufone completely different price and position than KPN, but but both fixed mobile together. That's really helpful.

Thank you. That's helpful.

Thank you. And our next question comes from AJ Sony of JP Morgan. The line is certain. Please go ahead.

Hi there. Thanks for taking my question. Mind you, around the EBITDA phasing for the year, I think previously you said that Q1 would grow to be around 2%, 2.5%. I think even if you strip out the towers, you still get a 4% for Q1. And you said you expected material to step up into Q2. So do you still see that going ahead into Q2? And how do you see that phasing over the other quarters to get to your 3% growth for the year? Thank you.

Yeah, good question. On the phasing, I think Q1 is actually better than expected. I think Q2 will be similar to Q1 in terms of if I include the tower company, I would expect EBITDA grows north of 4. I expect it to step down in Q3 below 2 and then above 3% again in Q4-ish. One of the factors is, and I was getting a bit, you know, wonkish around accounting is the way you account for your holiday provisions. And you may have seen we've changed basically the way people book the holidays. So the classical pattern where you donate to your holiday provision in Q1, Q2, and Q4, and you release in Q3. That is changing for the year. So that supports a bit the EBITDA growth in Q1, Q2, and Q4, and detracts a bit from Q3. It's a technical thing that basically is distribution of earnings across the year. So that means I would see Q1 was a 4.7, including LTO. I'm pretty bullish on Q2. Certainly north of three could be starting again with a four-handle in Q2, including with our company. Q3 will then be a bit less with the year-on-year comes around this holiday effect. Historically, you always had a release from your holiday provision in Q3. You don't have it right now. So Q3 will be around less than two, and Q4 again back to three. So full-year guidance, full intact, but distribution is quite high in the first two quarters, a bit lower in Q3. and a back end Q4 and this and that. The technical accounting around all the provision is like working through it on the interim you're facing. But that's kind of the outlook for the year. We feel pretty confident with that. And also, I'm pretty cool looking at the full year guidance for the year if you add up all the quarters.

Okay, thanks. And just a quick follow-up on that because the numbers you've given there would kind of give us the sense that you would beat your 3% target for 2025. I know you haven't changed guidance, but... Is that the right way to think about it? Unless Q3 is significantly lower than your guidance of 3%, it feels like you're going to be comfortably above that 3% mark. Q3 will be low too, right?

Q3 will be low too. You can do the math and solve for the Q3 number now. We started the year pretty well. I think we're confident on the year, but it would be odd to see in March or April with volatility across the globe to be increasing your guidance for the year. This way, we feel pretty okay with how we're trading, and we're confident in reiterating our guidance for the year. It's just that the Q3 will be below 2, and the other quarters will be, again, below about 3.

That's great. Thank you very much.

Thank you. And our next question comes from C. Your line is open. Please go ahead.

Hello, good afternoon. Thank you very much for taking my questions. I have two, please. The first one is, I wonder if you could comment on the competition on your infrastructure side. It seems that broadband wholesale has turned gross because of the inflation and also because of the contribution from Glassport. Just wondering whether you think this low single-digit growth could be sustainable going forward. And the second question is on the cost cutting. Chris, I think you mentioned that you expect OPEX to only moderately down for this year. But looking at your FTE reduction, especially in your own FTE, it seems has picked up since Q4 last year. I'm just wondering why shouldn't we expect higher OPEX reductions given the FTE changes? Thank you.

Well, let's start on the fixed infrastructure question. So on the infrastructure side, we cover more or less a clean footprint of 64%, not that much overbuilt compared to the up-coast in other areas. So moving forward, we will face more overbuilt, but we have Delta and ODF running a bit more than a million households in different footprints. um yeah we you know in our you know in our lineup and in our strategic approach we differentiate by focusing on the base management instead of acquisition i think that's a very important step we made there and that's where we expect growth to come from so like i just said rewarding loyal customers offering speed upgrades free security services things like that we have a strong base currently uh 35 or more is in the contract and we expect that to improve looking forward uh already five on the fiber footprint two-thirds of the total kpm base uh is already on fiber so that's an important drawdown because the fiber customers are happier customers and they turn slower than other customers and besides that we positioned you from So, yes, we see a growth of North, a bit more than 1% on broadband. And the way we position ourselves now with the growth income to KPM both and DuFont, we expect it to continue because we also will, well, probably, it's not totally fully already decided on, but usually we do another price increase middle of the year. But that decision is up for somewhere coming month for us to take or two months from now. But so all in all, following the run rate, I expect the broadband to continue.

Yes, on your cost question, I think you're right. We are now running about 200 FTEs below last year, dropped in our, I think, 56 FTEs in this quarter. The plan for the year is to reduce FDs by at least 300 towards 400. That would be very supportive. And again, the lowering spend on energy was guided from minus 50. That also kind of comes in the back. I think the two caveats, one is if you reduce your cost right now, you have the eBays right now, it really starts to impact full year 26 more than full year 25. So basically, the full year effectively sells more next year than this year. So that's one. The second thing is the competitive intensity in the market and our own actions, say the combi voodoo, also drive more customer interactions. The number of service tickets or calls are quite high, but it requires us to keep our support staff at elevated levels, higher than we initially thought and planned. So in the 200 step down is already an increase in your support staff to keep your customers happy. It depends also on how that evolves. So we have a plan and a mission to reduce FTEs in that part of the business considerably, but then you also need to have the activity level to come down, and that has not happened yet. So I think all in all, FTEs are down 300 to 400. If you end up at the higher end of the range, that's a function of how good we're managing back customer interaction, moving our customers to the app, to digital interaction, et cetera. That should help us. But then again, it's probably more 26 impact run rate thing than a 25 thing to reduce your FTC. But overall, the statement of flat to slightly declining cost base that we guided for, that seems also reasonably secured from where we sit today.

Thank you very much.

Thank you. And we'll now move on to our next question from Kivel Kiroya of Deutsche Bank. Your line is open. Please go ahead.

Thank you. I've got two questions, please. So first, the Glassport Delta deal is still under review. What's your latest view on when we should get the final ruling? And do you still think the initial regulatory concerns can be overcome? And secondly, as you mentioned, two thirds of your B2C base is now on fibre and churn should be low. Can you give some colour on just how the fibre churn compares to the COP customers? Thank you.

Yeah, so Glassport is working on that deal with Delta. I think it's encouraging, especially that Delta is willing to sell off potential overbuilt households to Glassport, so that is a positive signal for us. And we're still waiting for our regulator to come up with the final decision. Regulators in the Netherlands, they like regulating, but they especially take a lot of time on everything they do. But I'm very confident that one way or the other, that will be, at the end, a successful deal, since I do not see any serious ways to block this from a legal standpoint. Yeah, we have to wait and follow the procedure. We expect a decision before summer.

And on your churn question, you're right. Two-thirds is now on fiber, one-third on copper. What does it mean for churn? We've seen, if you look at the underlying churn trend, we've seen copper churn gradually moving up, in all fairness, and fiber churn also moving up a bit, but substantially below. Copper is north of 10% per year. fiber substantially below. So that should, that mix gradually help us. But then again, the amount of clients on copper at a certain amount, that's still something you feel. I think the movement of the two, the fact that one is getting more and more customers from copper to fiber, and then the copy for the thing, which really is all about convergence and having multiple products of TPM, so fixed, mobile, and entertainment, that should over time drive turn down so in the long run when your copper base declines relative to fiber and the impact of the copy voidel kicks in we should see that material reduction on turn uh but for reference copper churn is north of 10 and fiber churn as well below 10 percent i think the cyber is like 60 percent or so of the copper sorry okay thank you for that

Thank you. And our next question comes from David Wegman of ING. Your line is open. Please go ahead.

Good afternoon, everyone, and thanks for taking my question. The first one is on the cost. Could you give us more insights on the direct cost year-on-year evolution? And, for instance, on the split between the wholesale cost from Glassport and the change in mix that might be at play? And secondly, on the indirect cost evolution, can you discuss the drop in IT expense? Thank you.

I think on the direct cost, look, on transport for a full year, the total cost charged by transport is about 25 million higher, about 6 million and a quarter up from last year. So there's about 25 million a year going through your direct costs. There's more direct costs going in. There's a part of it roaming. Roaming costs are going up. To some extent, we've got more sponsored roaming business, which we also procure roaming services. NetNet is still a very good margin business, but there's still more direct costs coming through. And the third element is the cost around the spend to acquire broadband customers. That is, I think, notoriously high in this market. So product plus actions and spend is quite high too. let's say, wind broadband customers. So the direct cost increase for the full year, about 25 million of that, is plus 46 million a quarter. I think we're almost to be four to five million a quarter in terms of extra spend. And the remainder is, the combination is cost around B2B and B2C customer acquisition costs. On IT expenses, There's a bit of timing, but it's something else. We're renegotiating our total lease costs. Our licenses costs are getting better. So we've made a considerable effort on reducing them of licenses, renegotiating licenses over time. But still, there is underlying upward pressure on IT costs in general. The way to battle this is to limit licenses, renegotiate for longer terms, and they limit legacy systems. So that will fluctuate a bit during the year.

Okay, fantastic. Thanks.

Thank you. And we'll now take our next question from Steve Malcolm of Repton Atlantic. Your line is open. Please go ahead.

Yeah, thanks. Thanks for taking the question. Two questions, please. First, just pulling up on your comments, Chris, on the consumer revenue outlook. I guess when we look into the second half of the year, you know, it's pretty obvious. You lap Uphone and and you've got a lower price rise this year than last. I think it's sort of plus 3 versus plus 4. So I guess, as you said, we should be thinking kind of, you know, the underlying 1 to 1.2 that we saw in Q4 and Q1. It feels like a reasonable run rate. Looking beyond 25, I mean, is there any reason to think that that consumer revenue, service revenue, you know, growth rate will improve? It seems like sort of 1 to 1.5 is going to be hard to break out of. And if that is the case, you know, just to be clear, you know, we should be looking for sort of 4.5 to 5. and the rest of the business, i.e. wholesale and B2B, and you're kind of broadly comfortable with that. Is that kind of the shape of the three divisions? And then just a quick sort of detail one on tailored solutions this quarter. That was obviously a pretty big driver of the revenue upwards in B2B. Can you just give us a bit more color on that and how we should think about tailored solutions for the rest of the year? Because, you know, we don't normally see plus 15%. That'd be very helpful. Thank you.

Yeah, so I'll jump on this one, Jorgen. You were on consumer? Yeah. I think you're right. This year, 1% to 1.2%, up to 1.5% for the year, but say 1.2-ish is probably the right number. I think mobile better than fixed. Uphone will come in. Uphone growth will come in, right? So we've now excluded all Uphone business, including the growth of Uphone. So you might say we've not done ourselves justice because the growth of Uphone is deliberately part of the strategy. That will start to contribute. I think on mobile, you'll see for the rest of the year, growth around 2-ish, right? Structuring around 2%. and possibly higher in Q4 when the price typical indexation kicks in. On fixed, it's a bit lower. I think around 1% and some chance of flattening off in the second half of the year, depending a bit on how competitive intensity evolves. But that leaves you with between 1% and 1.5% for the year. Is it hard to break out of? Yes. What would be the drivers? Well, I think if churn goes down, right, that would be the key driver for this thing, because then you get more of your fiber. Because I think mobile will probably be around is actually feasible in the long run. And then the strategy is to bring up fixed. That's a function of the amount of churn in the market and ease in the market. So in order to get to the 3%, indeed, you have to have higher growth rates in business and wholesale. We feel pretty confident on that. I mean, wholesale is doing quite well. Mostly on the mobile side, both the national carriers and sponsored roaming. And there is no Reduction in growth there. We see new wholesale customers signed up as well. There's a good pipeline of wholesale clients waiting to be signed up on this type of business. And in business markets, I would say continuing. The risk is, of course, a massive recession and bankruptcy, but that's not running in the card. If not, we will see LCE gradually, during the quarter, gradually inflecting in the second half of the year. As per the plan, SME growing about 5%. And indeed, data solutions is quite lumpy. It was very high in the first quarter. I predict it's going to be very high in the second quarter and gradually taper off. And it's a function of when projects come on Steam. So expect the second quarter to be data solution. So that could be with a 10% handle as well in the second quarter. And then gradually going down in the second half due to year-on-year comps and the time of projects coming on to Steam. So basically, I think it's a very long story short. Brilliant assessment, Steve, as always. Because you want 1% to 1.5%, the rest combined with 4% to 5%. Confident on that. For that to break out, fix to 2% to 1.5%. And for that to happen, you need to have larger.

And perhaps adding to that, I mean, we're a base company, right? And so price increase is very important. And you mentioned looking beyond 2025. So the step we are doing is really accepting we're a base company. Usually telcos hunt for acquisitions. and report on net ads. We consider that for us, not the game to play. That's the step we made. We think that really reducing churn should make the base grow. And that is the question mark is going to work. We invest now in existing customers, reward existing customers, and try to lower the churn. And for a company like ABN, the most efficient way to make the base grow. So there's a lot of customers, we think, in the Dutch market looking for a discount, and every year they rotate for a new Samsung TV or a discount of 400 euros on the Zygo site. We're not looking for these kind of customers. That is a mistake. So we want to create value out of the base we have and make that base grow by adding more valuable customers. So that's why we are... Of course, keeping an eye on everything that's happening on discounts and on the acquisition side, but also that's why we focus so much on that churn reduction and that you fit as well.

Just a quick follow-up. Do you think you can get the churn down without pulling back on the price rise just by having more fiber customers? Because I guess that does play a big role. Just on that tailored solution business, Chris, is it good margin business?

So, I mean, on price basis, we understand the discussion every now and then in the market. But the real problem in the Netherlands is not internet prices, but the energy prices. That's, by the way, done by our own government. So I think we should have that discussion better on the table. But to our customers, we're perfectly able to explain why we increase prices. And to be honest, it's quite modest. We only follow CPI while we invest a lot in fiber. We give to all the consumer customers away a free security package. Only 10% use it today, but we expect to lock in a lot of customers via the security. We're the only one providing that security solution to the consumer base, and we do the same in SWE. 70% is in that base already, and it's for free. So we're not only communicating price increases to our customers, we're also communicating about the increase of quality and the additional services we give them, and where we really differentiate from competition. And Taylor Solutions, that's a completely different ballgame, of course. We cleaned it up in the way that we are not hunting for revenues only, but for revenue streams where you really can create margins as well. They're doing a great job there, especially through the government and the Ministry of Defense. The Dutch Army is one of our most important customers. We run large projects, and every now and then such a project kicks in in the revenue. So it's not that we're going to do this number every quarter, but it's a bit in cycles. But we expect a decent performance from Taylor Solutions, not on the level as Q1, but much better than we did a couple of years ago.

On all the margins, Steve, I mean, Joost and I, we've been through the cleanup of the business, so we walk around with a massive margin paranoia when it comes to trade solutions. We have every deal looking at margins. And this is also a business that's CapEx light, right? It's network service management. So when you look at the free cash flow margin, I mean, EBITDA margin is less than typical Delco, but there's hardly any CapEx involved. So the free cash flow margin of this business is not that far off of the free cash flow margin of the group. But rest assured that the first thing that Joseph and I ask when a data solution deal comes for a signature is like, before we sign, can we please walk through the margins in all details to make sure we're right in good business?

Yeah.

Right. So hold on to that paranoia, Chris.

That's great. Thanks very much.

Thank you. And we will now take our next question from Luigi Minerva of HSBC. The line is open, please go ahead.

Yes, hello. Thanks for the presentation and for taking my questions. The first one is on the net promoter score for consumer. Now, I noticed from the annual report that in 2024, the MPS was the metric where management STI compensation was not paid because you missed on it. Now, in Q1, we see a further step down. So I guess the question is, what kind of measures you've taken to inverse the trend? I appreciate the color you gave earlier on, that Q2 looks a bit better, but it would be keen to understand better what measures have you taken. And then the other question is on following up on... on the B2B question from Steve earlier. When it comes to LCEs, do you still expect to deliver positive growth in 2025? This quarter is marginally down, and I was wondering if it's a kind of early sign of macro uncertainty. Thank you.

Yeah, so Luigi, thank you, Net Promoters, for we made it very important in the company, especially for consumer mass market, I should say. And it's also a financial target for management in the company. Yeah, so mine is 14 instead of 16, which is more or less our target for this year. We're still the leading telco when it comes to Net Promoter Score, but every now and then we face dips. We're doing a lot of work outside on rolling out fiber, and every now and then it creates a lot of customer traffic. But the main thing really was media discussions around how expensive is the internet, and especially exactly around that period of time we did the Net Promoter Score measurement cycle. um so uh and also in the customer interface every now and then we well when we have when we face an outage of a customer system and that happens in this first quarter as well it immediately impacts your network motor score but i mean we've been in ups and downs on that promoter score and we know how to run it so i'm pretty confident that we will lift it up in the coming quarters to a decent level and that we still can outperform our main competitors in this market. And, yeah, on Ufone and Simio, we do plus 40. We're not reporting on that. So that also means that, indeed, especially in the Netherlands, pricing is an important part of how customers experience the service. But besides that, KPN is targeting for around the level of 60.

And on LCEWT, yeah, we are still expecting and planning and hoping for a hopeful return for positive service revenue growth in the second half. You'll see a decline in Q2, I think, and then, you know, we trend according to Q4. And if you open that business up, you look under the hood, in that business, obviously, there is a pressure on mobile, where, obviously, there's price competition. We are able to sustain our base, but there is actually pressure on mobile, which is countered by all the other businesses in NLCE, where there's growth, and there's actually quite some demand by dirty businesses for, support and digitization of their operations. The demand is quite good in all this. There's quite good development in IoT and machine-to-machine solutions. So I think with that, I would expect for the full year of LCE, when we're looking back on the year 2025, a small positive net growth, below 1%, but small positive net growth on LCE service revenues for the year. having turned the corner then in the second half of the year. That means that LCE to me really is about 2026, right? If we're enabled, as we plan, as we expect, to turn this thing around in the second half of the year and make it sustainable, then LCE will be a contributor to growth next year. That's the whole plan. It's about the run rate 26. But when you look at the numbers, expect some decline in Q2 and then a turnaround in the quarter for Q3 and Q4 for a net net small positive growth for the year and then more a better run rate into 2026.

That's great. Thank you so much.

Thank you. And we will now take our next question from Joshua Mills of the BNP for RebagSafe. Your line is open. Please go ahead.

Hi, guys. Thanks for the questions. The first one on B2B and then the second on wholesale. So on the B2B side, you sound very confident about the medium-term resilience of those companies revenue streams despite the macro backdrop. And I guess KPN suffered more than most on the B2B side over the last 15 years. So the question is, what makes you more confident that you can be so much more resilient now versus in the past? Is it that the pricing is just a lot lower, having been rebased, or the business mix has changed enough and there's longer-term contracts that give you that visibility? And perhaps some really detailed breakdown of where you expect the individual B2B revenue lines to go over the next 12 months. But in order of conviction and where you have more visibility, is it fair to say that you maybe have more confidence in the LTE than the SME and the tailored solutions segments in that order? That would be slightly longer, but first question on the B2B side for you guys. And then the second question, just around wholesale, the line losses were a bit better than last quarter. Previously, you've given some indication of the impact you see from the alt-nets and also your wholesale partners. So I was hoping that you could give a bit more of an indication on the dynamics you're seeing in the wholesale net ads and alt-net markets as well today.

Thanks. Yeah, Joshua, on B2B, If you compare KPM, I would say with others in other markets, then the difference is that we started on the cleanup probably a decade ago. So where we faced super high tariffs on legacy business, and we really had to do the migration, not only to IP-based kind of services, but also to much lower tariffs. So usually when you start fixing your telco B2B business, then you take a hit Uh, by starting the migration and that's why, uh, a lot of, uh, other telcos waited for that because you, in the first place, you start eating up your own residents to put it that way. And that's what we did in the past. So we know where we are because we've done the migrations and we know where we are on LC because we're not completely done with migration, but on SME to take an example, we migrate full base to our KPM, one platform. And by doing that, lost a lot of customers because, or a lot of connections, I should say, because during the migration, customers find out, hey, we can optimize a lot. We do not need 10 connections. We can only do with one fiber line and good Wi-Fi, et cetera, et cetera. But that is behind us. So now we have a base of pretty good customers. We try to log in via free security services. We try to add mobile or fiber. But a pretty good clean base with decently priced services. And the tailored solution, like Chris described, we cleaned it up. Well, that was also a trip of probably eight years. So all kinds of leaders really focused on the top line instead of on the valuable things. We've been through all the contracts, through all the large customers. And of course, there's a huge price pressure on mobile. And of course, with every tender, price is lower. But we also decided on that part to use it to approach it more like a wholesale customer approach. So we're interested in creating value by adding more volumes on the network and not in our pews when it comes to large, super large customers. So I think there we are in a pretty good shape. And in LC, we're somewhere... we passed the midpoint. So ending the phase of migrations and fixing the portfolio, and then you know where you are. So in short, the difference between us and other players is that we've done, I mean, look at KPN over the last 10 years. It was always like 100 million down on B2B, and we had to cover up in other segments. And that improved over the last five, six years. So I do not expect expect big spikes. That's also why we think that LCA will lift up, but we will not surprise you with suddenly 5% to 10% or something. And SME did 10%, and we already announced it's more likely that it will move back to 5% growth, but still, that's a decent growth. So, all in all, looking under the hood, that will be different a lot, like we said, and I think that it's all about fixing the base, fixing the pricing, and move everything to IP, new platforms. So all in all, we did a lot over the last eight years, and that's why we are more confident, probably, I would say, than ours to predict our business on B2B.

And in your second question, just on wholesale online losses, a little bit less. There's some support from customers that move from B2B to wholesale, so that distorts the picture a bit. I think underlying, it's similar trends as last year. So I would say wholesale competition is as it was around Q4, Q3 last year. That's kind of continuing. We are in conversation with most of our wholesale customers and actually in pretty good spirits. Obviously, we try to protect our base. We try to protect the revenue per line as well. We also try to help them achieve growth in wholesale markets. The intensity in wholesale is similar to what it was last year, even if the numbers show a bit of better outcome. I think the difference is we see more willingness now most of our customers to work with us to grow. and to find the best growth on the KPM base. Obviously, it has to set the real numbers. So numbers are what they are. Underlying trends, it's all a bit better. But expect the intensity to continue for the coming quarters. But there is some underlying improvements in our ability to talk to a customer's work event to see what we can do to grow with them. Great. Thanks very much.

Thank you. And the final question is from Michael Dicklack of KDC Securities. Your line is open. Please go ahead.

Yes, hi. Thanks for taking my question. The question would be on the FTE reduction that you touched upon earlier between 300 to 400 potentially this year. I was just wondering, can you give a bit of a breakdown where or in which department these reductions will take place. I assume it's mainly customer interactions and maybe also looking a bit forward, what do you think that the potential is beyond 25, let's say going into 26 as we see of course the chatbot and AI capabilities improving which should be a bit of a tailwind for you. And then also a small follow-up again on the B2B. I recall that During the capital market days, you assumed that the revenue growth or the service revenue growth between B2C and B2B would converge, let's say, or get a bit narrower. I understand, of course, the improvement in 26 following the transition, but given the competitive pressure in mobile, is it maybe fair to assume that the original conversion that you assumed in during the capital market day, that it will be maybe a bit less than originally planned. Those would be my questions, please.

OK, well, on FT, 300 to 400, Chris mentioned. I think the good news is that we're already below 200, so 200 less than the end of last year. And one important thing there is indeed customer interaction. If you compare KPM to others, I think we still have a lot of people working on the customer interface. It all has to do more or less with the fiber thing. So I think we're good on track to make the 300 to 400 step down happening. More important is that we have a couple of transformation programs in place, which is really about how we run the company end-to-end on the main portfolio. And the big one there is, of course, mass market broadband. But also in B2B, we're looking at how we run more end-to-end. And so this all has to do with the implementation of AI tools, how we run data. We're having a program in place which is called Autonomous Operations. And that all has to do with less people working in a far more efficient way and improving productivity. So it's not only on customer interface, but we expect there to continue, especially when we slow down the fiber rollout, it will be easier to get this thing more efficient and more under control. But it's also about staff reduction in general. So we're not only looking at the customer interface, it's also the indirect FTE, as you call it, so people that are not daily working in the customer interface, but are working in an office behind a laptop, there we can optimize as well. So we're pretty confident also in the years to come that we can benefit from these transformation programs to simplify the company further when it comes to people, but also improving the output of the company hand in hand by that.

Yeah. Your second question on the convergence, I love the word convergence, on growth in B2C and B2B, obviously compared to the capital markets, I think, you know, the overall growth of the two together is in line with the plan. But you're right, the mix is a bit different. I mean, we find it, you know, B2C finds it tougher to go up and B2B finds it easier to stay high. So in comparison, right? So some of the two, the growth is the same. I think we find it more difficult than what we originally planned for to have our B2C growth go up due to, I think, competitive intensity in the markets and the fact that we, as Joe said, We're a base company, and you need to behave like a base company not to pursue growth at the expense of everything. And in B2B, as Jo said, there is underlying strength in a distribution scheme, strength in still employment in the Dutch markets. I mean, the labor market is still very tight, so most of our SME and mid-corp customers will not let go of staff because you can't rehire them. And as long as they keep their staff, they keep their all their devices, subscriptions, and what have you. And I think we see also more growth in what we call mission-critical business coming towards us, driven by security concerns, data concerns, et cetera. So I think compared to the capital market, your observation is right. The sum of the growth, the sum of the two is actually where we want it to be, but a bit more tilted towards B2B than to B2C.

Yes, thank you.

All right. Thank you all for your attention. That wraps up today's webcast. If you have any further questions, just reach out to the Investor Relations team. Thanks again.

Ladies and gentlemen, this concludes today's presentation. Thank you for participating. You may now disconnect your line. Have a nice day.