Koninklijke Kpn Nv

Good day, ladies and gentlemen. Welcome to KPN's third quarter earnings webcast and conference call. Please note that this event is being recorded. At this time, all participants are in lesson-only mode. 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, Matthias von Leunhorst, Head of Investor Relations. You may begin.

Yeah, thank you. Good afternoon, ladies and gentlemen. Thank you for joining us today. Today we published our Q3 results. With me today are Jo Starwerk, our CEO, and Casey Gay, our CFO. And as usual, before we begin the presentation, I would like to remind you of the safe harbor on page two of the slides, 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.

Thank you, Mathijs, and welcome, everyone. Let's start with the highlights of the last quarter, third quarter. Our group service revenues increased by 1.7% with growth across all the segments. In the mix, consumer was supported by ongoing commercial momentum, both in broadband and mobile. Business was driven by mainly SME and LCE, As expected, growth slowed in the third quarter mainly due to the tailored solutions parts, and wholesale continued to grow mainly driven by sponsored roaming. Our EBITDA grew by 2.3% on a comparable basis, and as expected, our free cash flow rebounded in the third quarter up 12% year-to-date, driven by EBITDA growth. We further expanded our fighter footprint together with our joint venture, Glossport, and finally, we remain confident to deliver on the full year 2025 outlook and our 337 midterm ambition. As a reminder, our Connect, Activate, and Grow strategy is supported by three key pillars. First of all, we continue to invest in our leading networks. Second, we continue to grow and protect our customer base. And Third, we further modernize and simplify our operating model. And together, these priorities support our ambition to grow our service revenues and adjusted EBITDA by approximately 3% on average and our free cash flow by approximately 7% over the entire strategic period. And given that we are now nearly halfway through our strategic period, we look forward to sharing a strategy update with you next week, November 5th. And we hope you will join us online for the webcast. Let me now walk you through the business details. We lead the Dutch fiber market. In the third quarter, we expanded our fiber footprint by adding 74,000 homes past, together with Closport, and we connected 82,000 homes, bringing us close to 80% homes connected within the fiber footprint. The rollout pace slowed compared to previous quarters due to timings. We stick to our ambition to cover 80% of Dutch households with fiber. During our strategy update next week, we'll share how we will get there within our financial framework. Let's now have a look at the consumer segments. Consumer service revenues continue to grow, driven by consistent fiber and normal service revenue growth. Customer satisfaction remains a priority, and thanks to our CombiFordale offer, supported by super Wi-Fi, Our net promoter score rose to plus 15 year-to-date, and net promoter score even reached plus 17 during the quarter, showing how these improvements are making a real difference for our customers. Let's take a closer look at our third quarter KPIs. We saw another quarter of double-digit broadband-based growth, despite a challenging competitive environment. Thanks to a steady and healthy inflow of new fiber customers, combined with a growing RQ, our fixed service revenues continued to grow. In Momo, we maintained strong commercial momentum, adding 47,000 subscribers. And this was partly offset by ARCHU decline, driven by ongoing promotional activity in the no-fail segment. So overall, our mobile service revenue grew by 1%. Let's now turn to the B2B segments. Business service revenues increased by 1.4 year-on-year, driven by SME and LCE, and good commercial momentum. Net promoter score rose to plus five in the third quarter, reflecting customer appreciation for our stability, reliability, and the quality of our networks and services. SME service revenues increased by 3.3% year-on-year, driven by growth in cloud and workspace, broadband, and mobile. LCE service revenues increased by 1% year-on-year, supported by growth in mainly IoT, unified communications, and CPaaS. Mobile service revenues were impacted by ongoing price pressure, though this was partly offset by growing customer base. Finally, and as expected, I must say, tailored solution service revenues decreased by 2.5%, reflecting a further focus on value scaling. Then wholesale. Our wholesale service revenues continue to grow, mainly due to a strong performance in mobile, driven by the continued growth in international sponsored roaming. Broadband service revenues increased despite a decline in copper base driven by fiber. And other service revenues increased mainly due to an update in visitor roaming. Now, let me hand over to Chris to give you more details on financials.

Thank you, Joost. Let me now take you through our financial performance. First, let me summarize some key figures for the third quarter. First, adjusted revenues increased 2.4% year-on-year in the third quarter, driven by service revenue growth across all segments and higher non-service revenues. Second, our adjusted EBITDA after leases grew by 4.4% compared to last year, supported by higher service revenues, the IPR benefits, and contributions from tower company Altio. This is partly offset by the holiday provision effects. As a reminder, starting this year, most employees no longer register holiday leave, resulting in a lower provision released in Q3 compared to last year, impacting, therefore, the distribution of EBITDA growth over the year with a specific negative accounting impact in the third quarter. Finally, as anticipated, our free cash flow rebounded in Q3 and is now up 12% year-to-date. I'll share more details on the underlying cash developments later in this presentation. Group service revenues grew by 1.7% year-on-year, supported by all segments. And within this mix, consumer revenues increased by 1.1%, driven by, as Jo said, continued solid momentum in both fixed and mobile. Business service revenue growth tapered off somewhat in the third quarter compared to previous quarters, mainly due to developments in tailored solutions and timing effects. And finally, wholesale service revenues increased by 5.2% year-on-year, driven by ongoing growth in our international sponsored roaming business. Our DCT PDA grew 4.4% year-on-year in Q3, or 2.3% on a comparable basis if we adjust the IPR benefits, the LTO contribution, and the holiday provisioning effects. Direct costs remained broadly in line with last year, reflecting shifts in the revenue mix, particularly within tailored solutions, where our continued focus on value and margin steering is shaping direct cost dynamics. On a comparable basis, our indirect cost base decreased by €500, driven by lower energy and billing costs. We further scaled down our workforce, resulting in a reduction of over 300 FTEs compared to previous years. Our year-to-date operational free cash flow increased by 12% compared to last year, or 8.6% excluding the IPR benefit and LTO, driven therefore by avatar growth. As expected and communicated to you, free cash flow generation rebounded in the third quarter, mainly due to improved working capital and lower interest payments. Year-to-date, our free cash flow is up 12% compared to the first nine months of last year, again, supported by EBITDA growth and partly offset by higher interest payments and cash taxes paid in this year. Finally, we ended the quarter with a cash position of 373 million euros, absorbing the impact of the interim dividend over 25, and share by rate payments. We continue to run with a strong balance sheet. At the end of Q3, we had a leverage ratio of 2.5 times, in line with our self-imposed ceiling, and remained stable compared to the previous quarter. We expect our leverage ratio to return to 2.4 times by the end of the year, supported by increased free cash regeneration. Our interest comfort ratio was sequentially a bit lower at 9.5 times, and our cost of senior debt increased slightly, mainly driven by lower floating interest rates. Our exposure to closing rates, by the way, remains limited at only 16%. Our liquid position of around 1.4 billion euros remains strong, covering debt maturities until the end of 28. We are on track to deliver the 2025 outlook we shared with you in July. And on the 25th of July, we completed our 250 million share buyback program for the year. The cancellation of about 60 million treasury shares will be finalized in Q4. And August 1st, we paid out the interim dividend of 7.3 euro cents per share in respect of 2025. And finally, we reiterate our midterm, also known as our 337 targets, as presented at our previous Capital Markets Day. As outlined back then, both service revenues and EBITDA are expected to go 3% per year on average over the planned period, and our free cash flow by 7% per annum on average, with growth in cash back-end loaded due to our CapEx plans. Until 2026, our free cash flow growth is expected to grow at a low single-digit rate per year since we face increasing cash taxes year-on-year. Now, let me briefly wrap up with the key takeaways. We continue to see service revenue growth across all segments. While revenue growth moderated somewhat in Q3, we anticipate a recovery in the fourth quarter. Our commercial momentum remains solid, and we continue to lead the Dutch fiber market. Our net ad development in both fixed and mobile, and both in consumer and business, was quite satisfactory in Q3. As expected and planned for, EBITDA growth was relatively soft in Q3, but is set to recover in Q4. Cash regeneration was strong, up more than 10% year-to-date. Overall, we're on track this year and continue to make good progress towards our annual and mid-term targets, and we reiterate our guidance for the year. Finally, as we approach the halfway point of our strategy, We can't wait to look forward to providing you with a bit of our strategy next week on the conferences. Thanks for listening and turn to your questions.

Thanks, Chris. Operator, please open the line for the Q&A. Please limit your questions to two, please.

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. And our first question is from Polo Tang of UBS. Please go ahead.

Hi, thanks for taking the questions. I have two. The first one is, is there any update in terms of the Glassport acquisition of part of the Delta Fiber footprint? And my second question is, we have a general election in the Netherlands this week. Is this having any impact on on public sector spending in terms of your B2B segment. Thanks.

Yeah, Paulo, thanks for your questions. The Glassport acquisition, it takes our regulator a very long time to come to a final opinion. So, as you know, Glassport intends to acquire a rural fiber footprint of approximately 200,000 house parts from Delta Fiber, and it's still under ACM review. We expect, well, something within one, two months, because it takes really too long. We think it's still no reason to refuse it. This could reduce overbuild risks for both parties and support healthy market development. Then elections coming up in the Netherlands. That's tomorrow, by the way. We, on the midterm... We see limited impact on KPN. Major topics in the elections are immigration, healthcare, housing markets. Well, the government wants to build more houses, and we think it's a good plan because now we can take them into the House Fasting Print. Topics that could affect KPN on the longer term are about investments in defense, and we're in a good position on that. We are selected as the main digital provider for the Ministry of Defense. And discussions around fiscal affairs, for instance, the innovation box facility and the share by taxation, but that's a vacant, faraway remark somewhere from one of the left-wing parties. So all in all, I don't expect that much impact for KPM.

Just on public sector, can I just clarify if there's any freezing of public sector spend into an election or out of an election? Because we see that sometimes in other markets.

No, not really. We have some kind of a framework. So when elections are coming up and when a cabinet falls in the Netherlands, then they select a couple of topics that they have to continue to run. And we are all convinced in the Netherlands that we should keep on investing in the themes I just mentioned. And also when it comes to cybersecurity and digital, there's no... slowing down there from the government. We are heavily involved in there.

Thanks.

Thank you. And our next question comes from Molly Whitcomb of Goldman Sachs. Please go ahead.

Hi, good afternoon. My first question is on B2B. You have said that you've seen some price pressure in mobile and B2B. Could you give us a little bit more color on this? Are you seeing this dynamic both in LCE and in SMEs? And to what extent should we consider this when we're looking at longer-term trends going into 2026? And my second question is just on the B2C competitive environment. What are you seeing in terms of competition, and have there been any incremental differences versus last quarter? Thank you.

And your question on mobile price pressure, it's mostly in LCE and larger corporate tickets. There is some price pressure going on. I think that I would say from our point of view, there's still some decline, but the decline is declining. So technically, you could say the second derivative is positive, but that's a bit of a nerdy view. But I would say expect an LCE, some repricing of our base into next year, but then probably we could hope it's going to be bottoming out at least. So there is some price decline that's getting a bit better. We saw something similar in SME, but SME was especially able to counter debt with value-added services by selling more security solutions to customers, so keeping our RPU up. So there is some price pressure, most notable in LCE, but gradually abating. So we'll go into next year, but I think somewhere during the course of this year that affects we hopefully should pass. And to me, it's much less prevalent, and there we see and have experienced good opportunities to counter debt with additional value add services, additional bundling, but mostly security services around SME to keep your RQ stable there.

Yeah, and on the competitive environment, well, like in Q2, the market remains competitive in consumer markets. So Odido and Vodafone Ziggo especially. Vodafone Ziggo launched a new proposition broadband fix on their cable network, a two gig proposition recently announced. So interesting to see how they will do there, but impact on KPM expected to be limited because our first proposition is one gig, and we also offer four gigs. So most of the new customers land in one or four gigs via our fiber network. And for us, it's very important to play our own game. So we focus on base management, for instance, on convergence households via Combi4DL. resulting in lower copper and fiber churn and 11,000 net eps. We also are very happy with the acquisition of Ufone because on the lower end of the market, you call it that way, there's true competition going on. So Ufone covers that. And currently more than already two-thirds of our broadband base is on fiber, and that's leading to lower churn and higher EPS. So that's how we position ourselves in this competitive environment.

Very clear. Thank you. Thank you. And our next question comes from Paul Sidney of Barenburg. Please go ahead.

New growth. It's slow into Q3. At the group level, there's obviously lots of moving parts.

Can you hear me? We couldn't hear the first part. Could you start over again?

Thanks. Sure. Can you hear me now okay? Perfect. Okay, great. Yeah, just the first question on service revenue growth. We did see it slow into the course of the group level. There's lots of moving parts and you've given some great granularity in terms of the drivers of that. But as we head into Q4, how confident are you that we can see an acceleration in that service revenue growth trend? And then secondly, just looking at a bigger picture, your reports are very comprehensive KPIs, very detailed guidance. net ad, service revenue growth, NPS scores, free cash flow, returns guidance. I was just wondering, if we take a step back, which of those is most important to KPN as a business in terms of what really is sort of driving the business? And maybe we'll get more detail on next week, but just really interested to hear your views on that.

Yeah, Paul, let me give you some more granularity on how we see, you know, service revenue growth developing. I'm going to just walk you through a business. I think the second question is a typical CEO question. For sure. I'll leave that to you. Look, on consumer, fixed showing 1% service revenue growth. We've had tailwinds from a price increase, some headwinds from migration from, you know, front to back book growth. discounts, et cetera. I think overall, the good news is that churn is actually reducing. And churn is doing better than ever. It's one of the best churn quarters in fixed in some time to come. Also, please note, we have a combivoidal product in which we give customers with multiple products additional discounts leading to lower churn. That additional discount feeds through the top line. So that affects top line in fixed service revenue growth by almost half a percent this quarter and even more in next quarter. So For Q4, expect fixed revenue to come in at a 0.4%, 0.5%. But that really is the accounting, the upfront payment on these initial discounts that lead to churn. So the discounts, especially to, you know, multi-converged customers, and we're seeing benefits of churn on that. We'll give you more intel next week, so that feeds into fixed. In mobile, you see a price increase coming in, has already come in, has landed pretty well. I would expect mobile consumer to be around 1.5% in the fourth quarter. Fixed below 1% and mobile well above 1%. Then go to B2B. I see SME recover. I mean, there was some technicality in the SME numbers, but it's also, I think, good base in R2 developments, especially in the third quarter. And a little bit easier comes, I would say, SME should be 4% to 5% again in the fourth quarter and also in that into the next year. LCE hovering around zero, and on the Taylor Solutions business, there's always some volatility in this business that has to do with the timing of projects. For example, if you go back to last year, we saw growth, service revenue growth in Q3, Q4, and Q5 to Q2 back to Q5. There's always a bit of volatility in this business due to the nature of these activities. In the third quarter, you know, we saw the effects of KPM's addition more steering on margins. So we lost some business. Some of the ways we did actually mine because there was actually zero margin revenues. And underlying is growth in defense spending. So I'd expect the tailored solutions business to be back around 2% to 3% in the fourth quarter, which should bring B2B to around 3%. Wholesale, I'd say probably around 4% to 5%-ish in the fourth quarter. So that means overall service revenues in Q4 are I would say around 2%, probably, you know, 2% or a bit up. But that's the moving parts. Some of it has to do with technicalities. For example, as I said, fixed service revenues, the accounting for the coming quarter cost shows up to revenues. It is showing up to churns, or at least to real value. But, you know, short-term service revenues are a bit affected. Mobile should recover. SME should recover. And the rest, I think I explained to you, for probably around 2% base service revenue growth in Q4.

Yeah, Paul, and then your question on all the KPIs and the main target. I mean, we try to keep things simple in our strategy. We're a single country operator. We're healthy. We build a plan for all stakeholders. So we invest in the Netherlands. We invest in customers. We invest in our own people. And we want to reward our shareholders in a decent way. Uh, and the, and for that reason, you're right. We give a lot of KPIs, um, which is about, uh, broadband based grow or base growth and broadband mobile, uh, on, on, on, on, on, on revenue, uh, net promoter score. Uh, you name it all at the end, we simplified everything by saying it's a three, three, seven dagger. So it's a top line and cash. And if I have to make a choice, I say the seven, the cash is the most important one of those three. and the rest is all leading it. So sometimes you're a bit behind on the sub-segment. Sometimes you're a bit speeding up somewhere. Sometimes the MPS is lower or higher. But at the end, it's very important that we get to that financial promise, and we're on track. So it depends a bit on the stakeholder when it comes to the KPIs we focus on.

Really appreciate it. Thank you very much.

Thank you. And the next question comes from David Wright of Bank of America. Please go ahead.

Yeah, thank you, guys. Just on Vodafone's ego, they obviously announced their strategic shift earlier this year, pushing a little more into Q2. I'm sure we'll get a similar message on Q3. How are you observing their sort of retail market? pushback now? They've obviously branded the 2 gigabit product. We've got a slightly keener pricing. Do you observe anything else? Is there a lot more marketing spend? Is the marketing different than it was before? Just any casual observations you might have on how they've changed tack? Thank you.

Well, the change we saw was the announcement on super fast internet. I think For the market, that's not that bad. I mean, on mobile, we all three move to unlimited, which is a good development for the total market. And if the total market moves to a higher speed broadband, it wouldn't be that bad, I guess. But we play our own game. So, like I mentioned, customers come in on one or four gigs, and that's difficult to copy. So, so far, it's more an announcement than I see real movements in the market. Chris, anything to add on? Yeah, I mean...

Well, look at, for example, our world net assets and fibrin net assets. Fibrin net assets have been steady. Net net assets, if you exclude all the copper migrations, fibrin, real new clients come in around 60 to 70K for quite some time. So pretty steady. We've seen churn coming down. So we've seen churn coming down in both fibrin and copper. That churn reduction started in Q2 and continued in Q3. So that's actually positive. And we don't want to steer just by the month. We want to look at just the simple October numbers, the order balances, and the early indication of the month of October are fine. So at this point, it feels that we are obviously confident that it's a serious competitor out there, but in terms of underlying performance, no change in recent trends from where we are right now. As I said, the churn has come down, and things have not fallen off a cliff in the month of October. Okay, that's useful. Thank you, guys.

Thank you. Our next question comes from Joshua Mills of BNP Paribas. Please go ahead.

Hi, guys. A couple of questions from my side. Firstly, it's been about a year since Adido launched FWA services across the Netherlands. I wondered if you could give an update on how you think that's impacted the competitive landscape and whether it is impacting on your wholesale line losses as well or whether that's due to other factors. And then secondly, if I just build on that wholesale line loss question, trends look to be similar to the last couple of quarters. How would you expect that to develop over the next couple of years? And do some of the more aggressive promotions we're seeing from your ISP partners go any way to help with that trend going forward, even if it's paid for on the retail side? Thanks.

Yeah, I'll fix one of the tips. It's from Odido. They're... Yeah, we see activations on Fix Smart as Access, but it's also a different market than the broadband market in general in the Netherlands. So it's also a bit of a niche camp market for people camping, people on holiday, people in boats. So therefore it's useful. It's also used as another option than hold by on our network or on Delta's network. So for Obedo, their asset life is fixed and they are asset heavy on Molon. So they try to clearly sell more customers fixed wireless access to leverage the asset and to avoid the wholesale payments. But it's not really impactful when it comes to total broadband market share. So... We use it as well, by the way, in super rural areas, but we always use it in combination with the fixed line. So for us, convergence is, as you know, the strategy. So in copper areas, the speed of the internet connection can be supported by bonding via fixed wireless access. And probably we're going to use that more frequently in the rural areas.

Yeah, and Joshua, on the wholesale side, If you look at the line losses in wholesale, that's really only copper. So wholesale fiber is growing from our main customer, and wholesale copper is declining. As we understand, that decline is mostly related to the switching of the particular two brands. So the switching of a brand leads to customer migration. That's the main driver for losses in copper and wholesale. I expect that to continue in Q4 and possibly even in Q1, but that's the light at the end of the tunnel. I think that's the end insight on that development. And then, for example, broadband service revenues, I think we're up to about 2% this year. Broadband service revenues in mobile probably plus 2% this year. Next year around flatage, combination of fiber growth, indexation, and the decline in that copper part. So I think the way I look at it, it's mostly... a line loss in copper related to the switching up of a brand, and that is a project that will come to an end, I would say, next summer, mid to early Q1. I would expect that impact to really fade away.

Great. Thanks very much.

Thank you. And our next question comes from Keval Karoya of Deutsche Bank. Please go ahead.

Thank you. I've got two questions for you. So you've done quite well on consumer broadband, despite the competitive backdrop. But how do you think about the gap between front and back book pricing in broadband? Do you get many requests from customers to move to the current cheaper promos in the market? And secondly, helpfully, you commented on wholesale broadband. But how do we think about the level of mobile wholesale growth next? Obviously, sponsored roaming has been quite helpful recently. and does that continue? Any insights on the level of growth next would be helpful.

Yeah, so we shifted a bit on strategy as we announced last year, and that is invest more in existing customers instead of playing the acquisition game. We think it's very important to make a difference against the more challengers in the market, and investing in the customer base also leads to bad front-loop migrations. So, That's how revenues in broadband are impacted, and that's why you only see one point something on the service revenue growth while we do a price increase of three. Having said that, that's part of our plan. And so when we move customers into what we call combination, a combi-fordale, then they have to sign up for two years, and that's leading to a back-to-front boot migration. But so we made it part of our strategy.

Yeah, and Quetel, on the wholesale side, yeah, indeed, we've been quite successful in mobile service revenue growth at wholesale. I expect that to continue. I don't plan on this level of growth going forward, but we have a decent funnel of potential new counterparties signing up in these type of businesses. And then we have a number of these clients that we help win new business. So we work for them to win new businesses. So I expect continued growth in this business going forward. Perhaps not at the same pace. I think we also should be able to grow around 4% or so of top-line growth next year, all in with, you know, flat is broadband service revenue growth and the remainder is mobile. So continued growth, but let me be a bit conservative and not project the same level of growth, but also around 4% service revenue growth next year is definitely feasible with all this. That's clear.

Thank you.

Thank you. And our next question comes from AJ Sonny of JP Morgan. Please go ahead.

Hi, guys. Thanks for taking my question. Mine's just around the FT reduction. So I think you're 300 lower year over year, which seems to be around 3% of your employee base. So My first question is just around why is this not being reflected maybe more obviously within your EBITDA bridge? Are there any other headwinds which means it isn't reflected? And I think looking further ahead, can you accelerate this FT reductions over the next year so they are more meaningful in 2026? Thank you.

Yeah, thanks for the question. Next week, we will update you on what we are doing on transformation programs and how we look at the company in a couple of years from now and what kind of operating model we're building. And as a result of that, yes, we expect more FTE reduction. So why don't you see the minus 300 already impacting our EBITDA? First of all, we have a CLA increase. We have an increase in suspension pension costs. We have to cover up for, I don't know, 6% something of increasing wage costs. And secondly, it's also about the timing in the year. So the 300 will kick in on a higher scale next year than this quarter. But moving the company to a lower FTE base as a result of quality improvements and digitalization is very important also to cover costs and to make a step down.

Great. Thank you.

Thank you. And our next question comes from C.E. Hay of Citi. Please go ahead.

Hello. Hi. Good afternoon. Thank you for taking my questions. I have two, please. The first one is really on the comments of your Q4 service revenue growth of 2%. Just trying to think about the trends for next year. I think you mentioned that the B2B and wholesale trend probably is going to be similar level to Q4. And I'm just wondering if you can comment what kind of tailwinds you would expect to basically help the service revenue growth to accelerate from the 2% to the mid-term guidance of 3%. And my second question is basically on fiber rollouts, and I'm sure that you will cover it next week. I'm just wondering if you can give us some colors of how should we think about the fiber CapEx, considering that there seems going to be a decent acceleration to be done to meet the above 80% coverage target. Thank you.

Well, on the FIRA CapEx, we clearly guided the market that we will make a step down in 2027, and we still plan for that. So we expect a step down of at least $250 million. That's in our guidance, and we stick to the guidance. Chris?

Yeah, I mean, on the revenue growth, we'll give you a lot more details next week in our capital market strategy update, in the full capital market strategy update, we'll give you more details. But think of consumer to be growing about 1.5%, I think, B2B, Northwood 3, B2B around 4, and that should make, you know, for top-line growth. But more details next week. B3, wholesale 4, yeah.

Thank you. Thank you. And the next question comes from David Beckman of ING. Please go ahead.

Yes, thanks. Good afternoon, everyone. Thanks for taking my question. The first one, coming back on the competitive environment in broadband, if you can comment on your view, on your expectation, rather, on the potential ARPU evolution, everything in mind, you know, speed, tiering, but also competition, you know, the announcement of Vodafone Vigo and the tweaking of offers by Odido yesterday. And then, second question, on the broadband wholesale market in the Netherlands, also your expectation on the ARPU side for KPN. Thank you.

Yeah, so, I mean, the market is competitive. It will stay competitive, and I don't expect that to change. The difference between the Netherlands market and most other markets, is that we have a fully fiberized country already almost. So 90% of the households already are covered by fiber networks. All households are connected to at least two networks fixed. So what I want to say, our digital infrastructure fix is of a super high level compared to other countries. So there is competition between the fixed layers, but I don't expect much competition coming in from fixed wireless access or satellite or other things you see in countries covering more rural areas as well. Like, well, yeah. And then... So the competition will be firm, but we positioned ourselves, and I'm glad we did, by the way. We built the final footprint of almost 70%, more or less clean, and there's not that much appetite to overbuild us there. It will be more competitive in the new areas for us. So there we can say it's overbuilt. We're waiting for our regulator to see what they do with that Glossport deal. But compared to other countries, I would say, yes, it is competitive. It is challenging, but we build a strong fiber footprint in the core of our strategy.

Yeah, and to your point on also our views in broadband, a couple of things at play. Of course, every year we have indexation. There's a schedule approved and agreed with the regulator. Effectively, it's around 2% indexation every year. Our RFU is supported by the mixed shift from copper to fiber, so you see a declining copper and increase in fiber. That is supportive. And then any RFU actions that we do to support our broadband partners tend to be linked to retention, tend to be for specific higher speeds, or tend to be linked to volume commitments. So basically, I would say RFUs and wholesale broadband are pretty well sustained and often linked to a combination of mixed price increases and or specific agreements on retention and volume. Thank you very much.

And the final question is from... Oh, sorry. The final question is from Otavia Adarija of Bernstein. Please go ahead.

Good afternoon, gentlemen. A couple of follow-up questions. On slide 8, you exactly state that you expect bottoming up on the mobile. And during the call, effectively, you highlighted the price increases. But when someone looks at the chart, they can see that revenue trends bottomed up already in Q4 and deteriorated afterwards. So my question is that what makes you confident that the price increase will stick this time around? We don't go to promotion later on and the revenue trends deteriorate again. The second one is on the broadband. The trend for copper for your copper customers is stable. You state that one. But looking at the numbers, look at the migration from copper to fiber to be the lowest this quarter over the past two years. So my question is that there is any plan to encourage migration by reducing the price gap between copper and fiber? Thanks.

Yeah, on the first question, what will happen from Q3 to Q4, what happened last year? Well, Q4 last year was a very particular quarter where a few things happened. We saw a temporary drop, actually an accounting drop with roaming that actually reversed in the first quarter. You can see in the first quarter, revenue growth in mobile going up. It had to do with the accounting and booking of some roaming revenues. Second, we had an iPhone credit. If you recall well last year, we had some iPhone disturbances for which we gave some of our customers credit to compensate for that. I mean, the iPhone disturbance was not our fault, but it ended our customers. And thirdly, we had a special offer in the market in that very fourth quarter. So a couple of particular trends that took down growth in the fourth quarter to a low level after we rebounded in Q1 last year. So those were... particular impact on that third quarter, fourth quarter, and I don't expect it to repeat. So that gives me some comfort that that blip that you saw last year will not come again this year. And the second question on copper upgrades to fiber. We really try to upgrade customers to fiber. It's a function of network rollout. It's a function of planning. It's a function of access to customers. That fluctuates a bit over time. There's no... strategic or tactical retreat in this part, if you see what I mean. It has to do with timing and operation execution. We will continue to migrate customers to copper to fiber. We might actually, at a point in the midterm, try to accelerate that to enable the switch off of our copper network to accelerate. Jos, do you want to add?

Well, the unique Think of our fiber footprint that we're building a fiber footprint with 80% of the households, homes connected. And that's first of all to migrate all existing customers of KPN to the fiber network. That's the copper chain or the copper migration. Then we want to connect a lot of new customers. And then we want to connect as well a lot of wholesale connections. So there's more room on the network of households already prepared for an activation from a distance. So the copper migration is something that's really in our system to finalize to switch off the copper network as well.

Okay, one final question.

And our final question comes from Joshua Mills from BNP Paribas. Please go ahead.

Hi, guys. So possibly a pedantic one here. But if I look at slide number six in the presentation where you have homes past percentage of Dutch households, you have the target of 80 percent. And I don't see a year associated with that. I think in previous presentations, you were highlighting that you'd reach 80 percent homes past coverage by the end of twenty twenty six. Can you just confirm that that's still the guidance and there's no change there, just so I'm clear?

Well, you know, so yes, we are expanding our fiber footprint this year, next year, and years after. $74,000 passed, $82,000 connected this quarter. We stick to $66,000 because if you read it as well as you did in the last quarter, we also reported $66,000, but that's because of the annual addition of households by... the Central Bureau of Statistics in the Netherlands. And we stick to our ambition of 80% of Dutch households on fiber. But next week during our strategy update, we'll share how we will get there within our financial framework. So we aim for 80% and we confirm our midterm ambition of 337 targets, including the capex debt down to 1 billion in 2027.

Okay, so to be clear, the explicit target previously of reaching 80% by the end of 2026 is not there.

I've said in previous calls as well that there's a lot of KPS, like we just discussed, out there. Sometimes we're getting faster. Sometimes we're slowing down. The 80% is also a target, which is a very important one for us, and we will meet it for sure. But on the timing part, we will get back to you next week. And at the end, it's for us very important that the overall total strategy works, and that's working.

Understood. Thank you.

Okay. That concludes today's session. Obviously, we will meet online next week during our strategy and next Wednesday on the 5th of November. See you then. Speak to you then. Cheers.

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