Koninklijke Kpn Nv

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

Yes, thank you, operator. Good afternoon, ladies and gentlemen. Thank you for joining us today. Welcome to KPN's fourth quarter and full year 2025 results webcast. With me today are Joost Vaarwerk, our CEO, and Kirstie Geij, our CFO. As usual, before we begin our 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, Joost Farberg.

Thank you, Matthijs, and welcome, everyone. Let's start with some highlights of the fourth quarter and the full year. We delivered on our 2025 outlook and group service revenues increased by 2.7% with all segments contributing. Adjusted EBITDA and free cash flow exceeded guidance. We maintained strict cost control across the organization. Indirect costs were 10 million lower than last year, marking a clear turning point in indirect OPEX. In the fourth quarter, we saw consumer delivering another quarter of strong commercial momentum, especially in broadband with the record net additions for the full year. Business growth was mainly driven by SMIC and wholesale continued to grow, mainly driven by sponsored roaming. Last year, we expanded our footprint by adding 440,000 fiber homes and around 400,000 homes connected. And we strengthened our mobile network with the launch of our travel company, Alpio. And through ongoing investments in cybersecurity, we ensure a resilient network that protects all users. For 2026, we expect service revenue growth of 2 to 2.5%, EBITDA of approximately 2.7 billion, CapEx of about 1.25 billion, and free cash flow of more than 950 million. Our dividend per share is expected to grow by 10% and we intend a new share buyback of 250 million euros in 2026. All in all, we closed the year in a good way and we are well positioned to sustain healthy service revenue growth in the coming years supported by our leading positions in consumer and business markets and continued growth in wholesale. At the same time, we are accelerating our transformation to deliver around 100 million in annual net indirect OPIC savings by 2030. and reducing CapEx below 1 billion by 2027 next year will drive strong cash generation and deliver attractive shareholder returns. Later, Chris will give you more details on our financials and 2026 outlook. We delivered on our 2025 outlook. Service revenues grew by around 3%. EBITDA slightly exceeded guidance. Pre-cash flow was strong at 952 million ahead of the upgraded outlook we gave at the half-year results, despite slightly higher capex. We reiterate our dividend commitment, and we will pay a regular dividend per share of 18.2 cents over 2025, following AGM approval mid-April. At our strategy update in November, we reaffirmed that we are well on track to achieving our connect, activate, and grow strategy, which is supported by three key pillars. One, we continue to invest in the leading networks. Two, we continue to grow and protect our customer base. And three, we further modernize and simplify our operating model. And together, these priorities support our ambition to grow service revenues in EBITDA by approximately 3% on average, a free cash flow by approximately 7% over the entire strategic period. Let me now walk you through the operational performance in more detail. We hold a clear lead in the Dutch fiber market, both in homes fast and connected and in business parks through our joint venture in Glassport. And together with Glassport, we now cover nearly 6 million Dutch homes for around 70% of the country. And to maintain our network leadership, we further optimized our rollout process and shifted focus from passing homes to connecting and activating households. And this approach is paying off with a record number of homes connected in Q4 and continued growth in fiber broadband net ads. Consumer service revenues continue to grow, driven by consistent fiber and mobile service revenue growth. A commercial momentum remains strong across both fixed and mobile, with subscriber growth exceeding our fair share. Throughout the year, our net promoter score improved, supported by operational excellence, our Pompi 4DL offer, and initiatives launched to strengthen digital engagement. Now let's take a closer look at our fourth quarter KPIs. Thanks to strong execution and proactive base management, we delivered double-digit broadband net ads growth for the third quarter in a row, supported by a healthy inflow of new fiber customers. A fixed RPU helped firm despite continued investments in our base and the competitive markets. Together, these achievements drove service revenues growth of 0.4%. In mobile, we added 24,000 post-paid subscribers, and post-paid RPU increased year-on-year, supported by the price increase in October, partly offset by the ongoing promotional activity in the Northfield sector. Combined, these factors led to 2.9% growth in mobile service revenue. Now let's turn to B2B. Business service revenues increased by 2.3% year-on-year, mainly driven by SME. And also here, Net Promoter Score improved throughout the year, reflecting the continued trust from our B2B customers for stability, reliability, and the quality of our networks and services. SME remains B2B's main growth engine, driven by broadband, mobile, and cloud in Workspace. LCE service revenue growth trend remained relatively stable, supported by continued growth in unified communications, CPaaS, IoT, and a growing customer base, partially offset by continued price pressure in mobile. Finally, tailored solution service revenue decreased, reflecting a focus on value steering. Wholesale continued to grow, mainly driven by the strong performance in mobile, Broadband service revenues increased, driven by fiber, and the growth trend leveled off compared to previous quarters, driven by the decline in the wholesale copper base. Mobile remained strong, driven by continued growth in international sponsored roaming, and other service revenues increased, mainly due to an uptake in visitor roaming. ESG remains a core element of our strategy. And on this slide, we show you the progress on carbon reduction, circularity, and diversity. To further reduce our carbon footprint across the value chain, we increased our green energy sourcing at 2025, supported by a solar energy partnership with Eneco. And our scope two emissions have further decreased by 70% year-on-year, while scope three emissions slightly increased, but this was due to an expanded scope. Next to this, We, of course, remain committed to improving our diversity targets, although achieving gender balance and recruitment remains challenging, diversity and inclusion continue to be top priority for us. To summarize, we end 2025 in a strong position, and we carry that momentum into 2026. with strong commercial execution, a healthy base inflow, and improving output, we are well-positioned and confident in delivering on our 2026 outlook. Now, at the end, I'm pleased to give you more details on the financials.

Thank you, Joost. Let me now take you through our financial performance. First, let me summarize some key figures for the fourth quarter and the full year. First, the adjusted revenues were up 2.7% year-on-year in Q4. by service revenue growth across all segments and also higher non-service revenues. Second, our adjusted EV at the leases grew by 5.1% compared to last year, supported by higher revenues and lower indirect costs. Underlying EBITDA growth, excluding Altio, was 3.7% in Q4. And our EVDA margin improved by 100 basis points to 44.6% of total adjusted revenues. Third, our net profit increased 12% year-on-year, supported by a one-off tax gain of about $20 million from the recognition of a deferred tax asset. Finally, for the full year, our free cash flow increased by 5.8% year-on-year to $962 million, mainly driven by EBITDA growth. Also, our free cash flow margin over total adjusted revenues grew by nearly 40 basis points. With our ongoing share buybacks reducing the number of shares outstanding, our free cash flow per share growth is even stronger at 7% year-on-year. I will share more detail on the underlying test developments later in the presentation. In the fourth quarter, group service revenues grew by 1.8% year-on-year, supported by growth in all segments. In this mix, we saw consumer service revenues increase by 1.2%, due to continued solid commercial momentum in both fixed and mobile. For 2026, we expect consumer service revenue growth about 1.5% year-on-year, supported by base growth and commercial improvements. Business service revenue growth was 2.3% year-on-year, mainly driven by SME. Data solutions remain negative, reflecting our focus on margins and contract quality. For 2026, we expect B2B to grow about 3% year-on-year, with growth weighted towards the second half of the year, giving the segment strong performance in the first half of 2035, and therefore the comps that we'll weigh against pair solutions revenue growth. Our higher-margin SME business will continue to show growth in the 5% region throughout the year. And finally, wholesale service revenues increased by 3.9% year-on-year, driven by ongoing growth in international sponsored roaming business. For 26, wholesale is expected to grow by about 3%, supported by mobile. For the full year and on a like-for-like basis, excluding IPR benefits and the contribution from LTO, our adjusted EBITDA grew by 3.1%, exceeding our 3% CFD hurdle. This growth was driven by higher service revenues and supported by strict cost control. Direct costs, or cost of goods sold, increased mainly due to the service revenue mix effects in B2B, and higher third party access costs within Plusport. In 2025, we reduced indirect costs by about 10 million, marking a clear inflection point after two years of inflationary pressure. The savings came from disciplined cost management, automation, digitalization, lease portfolio optimization, and workforce reductions of over 300 FTEs year-on-year. For more than 500, it can include contingent external staff. As shared in our strategy update, we are targeting 100 million in net indirect OPIC savings over the next five years under our transformation programs. In 2026, we expect about 15 to 20 million in additional savings driven by fast digital transformation, AI-enabled process improvements, and continued cost-based optimization. Our cost reduction program clearly builds momentum and will show gradually accelerating benefits over the coming years. Our operational free cash flow continues to show healthy growth of nearly 10%, or about 6% excluding IPR benefits and LTO. The growth determined by EBITDA, while CAPEX was marginally higher than last year, primarily due to a non-cash accounting reassessment relating to cable damages. For 2026, on a like-for-like basis, excluding IPR benefits and excluding IP sales, we expect to deliver mid-to-high single-digit growth in operational free cash flow, in line with our CMB guidance. This underlying growth in operational free cash flow will be driven by EBITDA growth and effectively stable CAPEX. In 2026, after completing the heavy lifting phase of our FIBA rollout, we expect and confirm a significant step down in CAPEX of about 250 million, bringing total CAPEX to below a billion. With EBITDA growth and this capex stepped up in 2027, operating free cash flow is set to grow by about 10% annually on average over the strategic period. This strong cash conversion will lift operating free cash flow margins from 24% today to about 30%, placing us among the top performers in Europe. This underpins our long-term value creation model and reinforces our confidence in delivering sustainable cash flow growth in the years ahead. Turning now into the moving parts of our free cash flow. At €962 million, our free cash flow was about 6% higher, driven by EBITDA growth and partially offset by changes in working capital and an increase in cash tax and interest payments. Excluding the cash component of the RPR benefits, our free cash flow grew at low single-digit rates. Note that the delta in provisions is related to lower pension effects, pension provisions, and some timing effects. Our cash margin over revenues improved by nearly 40 basis points to 16.3%. reflecting the solid cash generation momentum of KPN, and we ended the year with a cash position of €552 million. KPN remains focused on creating long-term value, which is evidenced also by the strong return on capital employed. Our ROCE improved by 30 basis points, year-on-year to 14.7%, nearing and marching towards our mid-term ambition of 15%, driven by operational efficiency, demonstrating our continued commitment to create value through operations and investments. We maintain a strong and resilient balance sheet. At year-end, with a leverage ratio of 2.4 times, stable compared to previous year, and below our self-imposed ceiling of 2.5 times. Our interest coverage ratio also remains strong. Our average cost of senior debt decreased by 30 base points year-on-year, mainly due to optimization of our during-test portfolio, and our exposure to floating rates remains limited at 14%. Our total liquidity position of around 1.6 billion euros remains strong, covering debt maturities until the end of 2028. At our strategy update, we reaffirmed our mid-term 337 financial ambitions. We see healthy service revenue growth in the coming years while accelerating our transformation to deliver about 100 million in Net Inventory Open Savings annually by 2030. Which means for 2026, group service revenue growth is expected between 2% and 2.5% with all segments contributing. We expect adjusted EBITDA after leases to be around 2.67 billion euros or around 3% growth on a like-to-like basis, i.e. excluding IPR benefits and IP sales, and in line with our mid-term ambitions. Growth will be driven by continuous service revenue growth and lower indirect costs. We anticipate net indirect OPEC savings of 15 to 20 million next year. Throughout the year, EBITDA year-on-year growth is expected to be strong in Q1 and Q4, while Q2 and Q3 will face tougher comparisons. CapEx will remain at around 1.25 billion euros, in line with our midterm guidance, and we expect a free cash flow of over 950 million euros. On the like-for-like basis, so including the aforementioned 1SFX in 2025, Free cash flow expected to grow low to mid-single digits, primarily driven by EBITDA growth, partly offset by higher cash taxes. And finally, over the entire CCT period, we reiterate our financial ambitions to grow service revenues and adjusted EBITDA by 3% and free cash flow by 7% per annum on average, as reflected in the 3-3-7 CAGR model. Note that our underlying 2026 guidance and our daily training are both in line and on track with this multi-year ambition and we feel confident to reach our planned level of cash generation and shareholder distributions. On that very matter, our financial framework is centered on long-term value creation for all stakeholders. In this respect, we are committed to returning all free cash flow to our shareholders. Our free cash flow per share was up 7% during the year, providing ample room for growth in our dividends per share as well, which means we intend to pay a regular dividend of €20 per share over 2026. up 10% compared to the DPS over 25, and fully in line with what we communicated at our strategy update. For 2027, we aim for a further increase to about 25 euro cents or 25 cent increase year on year. And in addition, as announced this morning, we will launch a share buyback program of 250 million euros and 25, notably starting tomorrow. Let me conclude with some key takeaways. We delivered on a 2025 outlook. Consistent service revenue growth across all segments. Adjusted EVA and free cash flow came slightly above guidance, and disciplined cost management delivered a $10 billion reduction in indirect OPEX, marking a clear inflection point after two years of inflationary pressure. We saw solid commercial momentum in consumer and business, including record growth in net ads in consumer. And we continued to lead the Dutch fiber market with accelerated delivery of fiber-connected and activated homes. Our strong progress in 2025 confirms the successful execution of our strategy and positions us for future growth. We reaffirm our 337 financial framework and the announced 2026 targets are fully aligned with this multi-year plan, including the CAPEX deadline in 2027 to unlock and announce cash conversion. We are accelerating transformation, targeting 100 million in indirect open savings over the next five years. And beyond 27, we expect this single-digit free cash flow growth supported by strong fundamentals and disciplined execution. And cash momentum was very strong and saw it going into 25, providing us with confidence. Finally, we are committed to shareholders returning all free cash flow to shareholders with growing dividends and buybacks and a lever striking tomorrow. Thanks for listening. Now back to your questions.

Thank you, Joost and Is. We will now start the Q&A session. Please limit your questions to two, please. Operator, could you please open the line for the Q&A?

Thank you. Ladies and gentlemen, as you've heard, we will start the question and answer session now. If you'd like to ask a question, you may do so by pressing pound key five on your telephone keypad. The first question comes from Mr. Paulo Tang from UBS. Your line is open. Please go ahead.

Afternoon. Thanks for taking the questions. I have two. The first one is just about consumer broadband net ads. So they've been very solid for the past three quarters at more than 10,000 a quarter. But do you think this level of net ads growth is sustainable going forward? I'm just asking the question because you referenced taking more than your fair share earlier in the presentation. Also, you've got Odido gaining subscribers with FWA. Vodafone's ego seems to be making progress and stabilizing its broadband base and also start wholesaling in the Delta fiber footprint. So I'm just interested in how you're thinking about competitive dynamics for the broadband market going forward. Second question is just on B2B. Do you think that B2B service revenues can grow? in Q1 and Q2, given that you've got that tough comparable and tailored solutions? And what's your view on the Dutch macro environment? Now, are you seeing any signs of caution from your B2B clients? Thanks.

Thanks for the question, Paolo, and I'll start, and then Chris will join me, I guess. Yeah, on consumer broadband, that's your right, three strong quarters in a row. And meanwhile, we operate in a very competitive market that remains competitive. This is more or less normal course of business for us nowadays. And I think what we can more or less conclude is that the new strategy of ours is working, where we focus on base management instead of acquiring new customers who leave in a year for a free TV set from another service provider. So we invest a lot in our customer base, and that seems to work. Is it sustainable, you said, while you mentioned FWA from Odido, changes in the photo from Ziggo strategy. I think FWA is a niche market that's in a country where households have two or three fixed lines into a household where one gig is the standard and four gig is becoming quite normal fixed. Unlimited is the standard on mobile. as broadband connection is more for a niche segment than anything else. We more or less have, by the way, the same for rural areas. They're clearly now making noise around being a full, always-on provider when it comes to quality and content. But let's see. I think for us, the best answer to everything for the last years was believe in your own plan, believe in your own strategy, and execute on that. Last course, we're good. Of course, we plan to continue, perhaps not always above 10, but we plan for strong growth, healthy growth on broadband this year as well. And on B2B service revenues, I mean, the Dutch economy is growing and also expected to grow in 2026. SME is a very important segment for ours. That will grow probably around 5% like we did last year. Yeah, you see some changes in our top line in B2B because what we mentioned focus on value steering. That is mainly in the tailored solutions part where we say goodbye to revenues that are not really contributing when it comes to margins. So, of course, for us, it's very important to explain that to you in the quarters to come. But when it comes to healthy margin-rich revenues, I think we will do fine in B2B. Chris?

Yeah, on your first point on broadband, there's two points to add, is that obviously the important drivers behind the solid net ads were lower churn and lower migration. So churn has been consistently lower and lowering or declining during the last half year. I think it also has to do with the fact that our copper base is gradually shrinking, so the vulnerable part of our business is declining. Migrations from front to back books have, we've managed that successfully, come before it overworked. So the churn side has been very positive. And if you look at fiber, our real net ads, you know, fiber net ads excluding copper upgrades of plants moving from copper to fiber, has been pretty consistent now for multiple quarters in a row. So I know it's recent to see that stop. And on B2B, as Joost rightly pointed out, on the tailored solution side, we've been, you know, focusing on value and margins, which means that SME will continue to grow north of 5% basically during the year. I mean, that's the highest margin business that we have, and it continues to grow nicely across all quarters. I expect the LCE business to also show positive growth across the quarters. Data solutions will be negative, I guess, in the first half year due to the comps. That means that reporting-wise, B2B across the entire year will be growing around 3%. but heavily tilted towards the second half of the year and run flattish, I guess, in the first half of the year. But it's really the only set of pure tailored solutions effect. The high margin businesses, me and LCE, will continue to show steady growth throughout the year. And then when the comps start to work for us, you can see the acceleration of reported growth. But I mean, the 3% for the year is pretty well supported. It just will be, as you rightly pointed out, tilted toward the second half of the year.

Clear. Thank you very much.

The next question comes from Joshua Mills from BNP Paribas. Your line is open. Please go ahead.

Hi, guys. Thanks for the questions. A couple from me. The first one was on the consumer side. So I think, Chris, you might have mentioned the annual service revenue guidance for consumer. If you could just remind us of that. I assume it will be accelerating throughout the year. And my question is, what's going to drive that? Is it continued volume growth or are you also expecting ARPU to improve as well? And then secondly related to that, if I look at the price increases last year, you were broadly in line with both Adido and FODZIGO. On the broadband side, I think you're a bit ahead on the mobile side. Now that you are outperforming your net ad share relative to your market share in the Dutch market, And given some of the more aggressive price increases we've seen from the likes of Swisscom yesterday and incumbents taking advantage of their network leadership to put prices up, how are you thinking about the value versus volume mix going forward? And is there the opportunity with this fiber network to be a bit more ambitious on price take? Thanks.

Yeah, we're now considering, guys, one and a half percent growth throughout the year. In the continuation of what we do today, I would say mobile itself should continue to grow nicely. It should be north of three during the year. We're now hovering around three. That should be fine. Continue with that. We're pretty healthy. than growth and support in our view uh i think i think something similar you talked about the the base dynamics uh current improvements and a flat to up our rpu so during the year i'd expect a continuation of reasonable net growth and flat to increasing rpu supported by some pricing stations Obviously, we're looking at back book and front book alike to make sure we are fully consistent with a value orientation. So strategy-wise, to also take on your second question, we are a value over volume business. We'd love to take a bit more than our, you know, running market share, which we do. I think that's a reflection of the networks and the quality that we've built. We see some effects on network quality, both in mobile and fixed, positively reflecting on us. So that should allow us to get, you know, continued inflow of net ads. But it will remain value-oriented than anything else. And that means for a consumer, one asset grows during the year. I would say during the year I would expect mobile to be stronger in their first half of the year and the second half of the year possibly some of the combi border effects will fade. We're fixed, you know, carrying the baton from the second half of the year a bit more.

And on price increases, I mean, that's a call we make every second quarter. of the year on broadband, and the last year it was more or less centered around the CPI, so inflation.

Got it. Thanks very much.

The next question comes from C here from Citi. Your line is open. Please go ahead.

Hello, and thank you for taking my questions. I have two, please. The first one is just going back on the consumer R pool comments, and it seems that the mobile R pool has stabilized, and despite that, you have the combo discount on the fixed products, and you still delivered a stable fixed R pool. I'm just wondering if you could comment on what you see in the R pool development. Should we expect there is a solid reason for us to believe that our pool is going to be stable and growing going forward. And the second question is really a quick one. Just wondering your feels on the increasing rigid stance from the EU on the Chinese vendors, and if you could comment on what's your exposure there, and what do you think it could potentially impact your CapEx plan? Thank you.

Yeah. The first question, I think for both mobile and fixed, we expect, So stable to a modest increase in our view. Unfixed, driven by price indexations, a shift towards higher speed levels that we had this year as well, and a relatively manageable amount of migrations from front to back. The latter are obviously margin diluted, but the effects tend to be increasingly limited. We were able to manage that pretty well. A big chunk of our board brought up invasions and contracts. So with that, I expect fixed RPU to be stable to have modest growth over the year. Something similar for mobile. Obviously, we had a step down in mobile in last year or at least lower growth, mostly in the no-frills part and driven by the non-committed part of the RPUs. I think that is – it feels like stabilization in that space, let's say. So what to drive mobile RPU, it is – indexations, surely in BackBook, possibly more. It is a gradual continued move to unlimited customers. A significant amount of our new sales are now in unlimited. We basically add our targets that we want to have in unlimited. And I think also gradual stabilization of the market in a no-frills segment with, I would say, less pressure on the non-committed parts. So in summary, This makes both fixed and mobile hardware to be at least stable or deliver some modest growth during the year.

Yeah. And on transvendors, yeah, we are well on track on implementing 5G toolbox, swapping non-Western suppliers from critical systems while we introduce European vendors there. And we already started down this path many years ago, and we are fully aligned with the Dutch and the EU security guidelines. Of course, there's some discussion in the market about the Cybersecurity Act. It seems it's proposing a further ban on high-risk vendors. For me, too early to tell what the full consequences are, and I expect extensive debate there and, yeah, more finalization in that towards the end of 2027. I think the main message is we already started this many years ago, and we follow this lifecycle of assets in our approach, so we do not see any impact on our CapEx envelope in the future.

Thank you. The next question comes from from JP Morgan. The line is open. Please go ahead.

Thanks for taking the questions. I've got a couple. The first is on your 26 wholesale growth. You've got it at 3%. Median term target here is 4%. So what are the headwinds you see this year which you expect to fade into the median term? Then the second one is just around the convergent impact on your fixed service revenue. So just wondering what the impact was in this quarter versus Q3 and then how you expect that impact to evolve over 2026. I think you've already said it will kind of fade by H2. So just some clarity on that. Thank you.

Yeah, let me take both of them. On wholesale, we need also broadband and mobile. Mobile is continuing to do well, both on the national solutions as well as international sponsored roaming solutions. There's a very good funnel of customers waiting to be connected or to be contracted. In broadband, we've seen a huge decline in our total base, mostly copper. So we're declining copper, increasing fiber. has to do with our main wholesale broadband customer shutting down the brand. That effect will probably continue into Q1, but then gradually expected to fade towards the half year, although you should ask the client for more intel. But I think that happened last year and that effectively shows up in the numbers this year. So basically a stabilization this year will mean supporting service revenue growth in 2037. There's always like a bit of a year lag between base development and what you actually report in terms of service revenue. So to me, and also it's, Moderation of broadband service revenue growth in this year and support next year. And this, you know, brand's fadeaway, brand effect starts to fade away supporting growth in 2017 onwards. And continuation of the sponsored roaming effect. And on the conversion, the combi-foidal effect, we reported a fixed service revenue growth of 0.4% in Q4. uh if we hadn't made this investment fixed revenue would be around one percent per year um as fixed only so that's kind of the magnitude of things if you look at the total service revenues of next year the total effect for the year is probably around 15 basis points of growth for KPM as a whole. So it's a small amount, but as we were talking about a few digits after the comma, it actually has an effect. So basically, fixed would have been around 1% in Q4, so that's 0.4, and for the full year, 26. I think the effect on service revenue growth of this investment is about 15 basis points of growth. I expect this gradually to stay the second half of the year towards the end of the year. More like Q4, you'll see less and less. And basically the investment will continue, but then the base of the subject to the plan will be big enough so you can see the effect of lower churn already for those customers who've been part of the CombiFoto plan have shown markedly lower churn. So that will start to weigh in the numbers in the second half of the year. and let's be conservative more towards Q4 than Q3.

Great.

Thank you. The next question comes from Keval Kiroya from Votes a Bank. The line is open.

Please go ahead. Thank you. I've got two questions, please. So, firstly, you talked about mobile growth within consumer of 3% in 2026. Q4 was at that level, but benefits from quite an easy comp. So can you just elaborate a little bit more what's going to drive the acceleration to that 3% in mobile for 2026? And secondly, Delta and ODF have now pretty much completed their fiber rollouts. What's happening to your customer churn in these areas? Is it slowing as they've ended their rollout, or is churn still at similar levels, given they're still ultimately trying to penetrate these networks? Thank you.

If you've got different, more challenging comps, but at last we've done both front book and back book repricings last year. We look at a more for more price increase last year, and we might as well just repeat that action this year. So there are a number of pricing actions we do on our mobile business, and the more I think that's one. Secondly, our base has grown. Our total mobile base has grown by 129,000 over the year. I mean, 24 was a fantastic year. That makes 25 look like a lesser year. But remember, 25 was actually still a lot better than 23 and 22. So still, it's still one of the best mobile years in history in terms of that. So basically, next year, you have the benefit of a higher starting weeks in in this year and then you have another round of price indexations and possibly a more for more uh indication as well for customers so that should support um mobile revenue growth and secondly obviously the big unknown is amount of traffic and uncommitted that has declined a lot but it feels that um well hopefully reach the bottom of that as well so that gives us confidence

in general mobile growth should be healthy also in the different first half year comps you're right now Delta and the ODF are no longer expanding their fiber footprint they're clearly focusing more on trying to connect households. These are footprints of different qualities in the Delta footprint. We originally in some places have a lower market share and the ODF built that footprint in mainly the strong Zinco area, the larger cities. So it's a bit of different dynamics in both footprints. And in the ODF area, we're building as well. And yeah, our strategy there, of course, is to not only pass households, but also connect and activate. And I think that's a big difference between us and the others. So on fiber, by overbuilding in the cities, we're doing good. And market share is on stopper in other fiber areas are, of course, lower than we represent the fiber areas. but still doing okay. And I think expanding our footprint to 70% and connecting so many households, and at the end, moving up to 85, the turn in the copper area is also slowing down. Thank you both.

The next question comes from Paul Sidney from Berenberg. Your line is open, please go ahead.

Yeah, thank you very much. Good afternoon. A couple of questions for me, please. Just the first one, just perhaps building on a few of the earlier questions around customer behavior. You've made some very positive comments around churn, retention, network quality appreciation, especially interesting given the price increases that you've been putting through over the past few years. But just a very high-level question. Does this really suggest a wider appreciation of the services you provide? for consumers and businesses and the follow-on from that is it feels like there's substantial room for price increases to continue over the next few years and again just coming back to an earlier analyst comment around the Swisscom move yesterday it does feel like a bit of a shift but I'm just interested to hear your comments around that and then just secondly Chris on capital allocation your decision to return all the free cash flow to shareholders over 26 is a fair assumption but there is therefore no sort of small bolt on acquisition opportunities on the horizon. And could there be such opportunities perhaps beyond 2026? Thank you.

Yeah, Paul, I'll start. Yes, well, I think one of the most important changes we started in our strategy beginning of 25 was that we said, let's focus more on the customer base. So giving away discounts, or Netflix for free or free TV sets to new customers while all loyal customers get a price increase every year is a bit annoying for the customer base. Since we represent the largest customer base, we shifted to building more quality in the base. So CombiVoidal is a service where you can combine your services and you get more loyalty points. And at the end, you can get something for free. a free security package for all households they can activate themselves we launched a new mykbn app where you can really organize everything yourself order or deorder connectivity or whatever very simple so i think the whole message to our customers is we invest in you and we invest in your loyalty and that of course is something you can't measure on a daily basis acquisition you can But after a couple of quarters, we can say the churn is really slowing down, and that promoter score went up. So doing things like that handyman with a price increase works much better. So I think this is an important switch we made, and we will continue to focus on this strategy because it's also far more positive.

Yeah, and on the point also on network quality, network stability, we have seen, especially in the business segment, some corporate customers turning to us recently. So more interest volume-wise for corporate customers to select KPN simply because of network quality, network stability, which I think is a positive, right? It does, it's a payoff. And that's not necessarily massive pricing, but it would at least give you a volume and competitive advantage in that market. On your second question, returning all cash for the shareholders, that's what we do. We ended the year with a 2.4 times leverage below our self-imposed ceiling of 2.5 times. We typically, by growing our EBITDA, deliver by 1.1 turn per year. If we wouldn't return our cash to the shareholder, we deliver faster. But typically, if you grow your EBITDA, you deliver by 0.1 turn per year. That gives a reasonable headroom towards a self-imposed seeding. So I think... fall our war chest is big enough for bolt-ons that doesn't mean we're going on a massive acquisition spree but if we bump into something interesting we have the rooms and means to do it and obviously um especially for bolt-ons the first you know uh hurdle is does it create value for us is it value creating for shareholders for the business how does it compare to buying back shares yeah we always check whether um and acquisition does something strategically and financially under the stack up to buying back our own shares. But if we find so opportunities, we have the room to do so simply because our balance sheet gives us sufficient headroom whilst returning all cash to shareholders. Yeah. That's really helpful. Thank you very much.

The next question comes from Andrew Lee from Goldman and Sachs. Your line is open. Please go ahead.

Yeah, hi, guys. I had two questions. One was just a follow-up on that Chinese vendor question that CE asked. Could you help us understand, so does the extent of the risk extend to just you having to fast-track the swap-out you're doing anyway out to 2027, or could it mean even greater swap-out of equipment? And can you just give us a sense as to the scale of that, if you were to fast track it and do it in one year, how much does that cost you? Any help on the scale would be useful. Then just secondly, on the carbon migration competition on wholesale that a few questions have been asking around, and specifically the ODF and Delta Fiber competition, are you getting a sense that, now that the build is slowing down or has slowed down, that the ability for those operators to actually win customers is starting to decrease, or are you seeing the real let up in the near term from their ability to gain customers? Thank you.

Yeah, so like I said, Andrew, with respect to Chinese vendors in particular, I mean, we made good alignments with our government years ago and we're fully on track to move out like we mentioned like we call this non-western vendors out of the critical systems mobile core fixed for mobile course ericsson fixed course nokia that's all known in the market um and we're almost done there so so we're pretty good on track and we do this like i say in the life cycle thing so when it comes to water assets we're also good on track and we do not see any acceleration or uplifting capex uh on any risks i mean there's a discussion around this um uh cyber security act but that's all taking time and uh taking into account where we are and our plans are um uh we we invest by the way every every year in in our mobile network as well and uh and and we have a multi-vendor approach so we like to uh not to be dependent on one vendor so um Can't give you all the details, but I think what I can tell you is that we're good on track. We do not see any risks there in capex uplifts in the coming years.

We have a capex envelope and a capex level, so if we had to fit it in, we'd make it fit in. So you think you have to give priority to one project over others. That would be, so I think with the visibility that we have today, whatever we have to do, as you said, it most likely fits within our lifecycle plans anyway. if we had to fast track it uh we'd make it fit into the cap example of and prioritize this thing over something else um on your question on the whole set and over in the in the the old maps um possibly probably yes that's been we're seeing less churn in our business altogether um i don't have a full economic model explaining it to you but i do relate to the fact that You know, most people are effective in getting new customers upon rolling out fiber in the street. So you open the street, you know, people are working in your street, and that's the moment it becomes visible. And the moment you sell, that's the easiest way to sell fiber. So once the rollout stops, actually getting new customers in is more difficult, certainly if you don't have a household brand. And thirdly, also, if you see the feedback from some of these parties on their door-to-door sales have not been very effective. So, I would say, I don't have a full proof, scientific proof for you, but it feels as if that actually helps us. And in the wholesale side, we also see most of our customers not actively migrating customers. If you don't just start to migrate a customer from one network to another, the churn risk is way too high. we do see that the end of the run of the third parties benefits us on the turn side. So long story short, this is . Thank you.

Next question comes from from ING. The line is open. Please go ahead.

Good afternoon everyone and thanks for taking my question. First one on mobile. So we recently saw Vodafone Vigo being more aggressive on speed. Do you expect speed tiering to become more difficult to monetize and does this affect your view on mobile app evolution? And then my second question on the Glassport Delta deal, what do you think is the end game here? Have you noticed any progress in the conversation with the regulator? Do they want remedies or something else? Thank you.

On the first one, on the speed tiering thing, the fact that some of our competitors do not have speed tiering, we don't see it as a sign of strength, it's a sign of a network from our point of view. So at this point, no feedback on that, no market fallout from that. I think people do value and understand the quality of the KPM network. And quality is more than speed, but it's also coverage and stability, the risk of disruptions and distortion. So I think in a broader sense, not having speed tiering is not always a good sign. It could also be a sign that you don't have the network to deliver it. But our view is that customers value the KPI network extensively and should be able to defend it off. Yeah, so.

Not much of a change there. And on transport, yes, well, it was since December 24 that we're waiting for our regulator to come up with a verdict. It takes very long, so it's clear that they find it very difficult to give it a go. We're still waiting and no news there. And I think whatever the outcome will be, we'll decide on the next step. Like we said before, it's not a super significant deal. It's about 200,000 households, which is representing more or less four months building. So yeah, in hindsight, it took us very long to get where we are today on the discussions with the government or the regulators. So probably they will come up with something But let's see. It's the Netherlands. Everything takes long when it comes to legislation and decision-taking on the government side. So let's wait.

Okay. Thanks very much.

The final question comes from David Wright from Bank of America. Your line is open. Please go ahead.

Hello, guys. Thank you for taking my call. I just wondered if you could give us a little guidance into the cash flow, perhaps, Chris, just where you're expecting that cash tax to come in. I know previously you talked about 80-odd million. It looks like that could be a little lighter. Where you might expect working capital to show and any other items that you might just be flagging in advance. It would just be super helpful for the modeling. Thank you.

David, thank you so much. I've been so much waiting for this question. There he goes. There he goes. No, let me give you quick, let me give you quick perspective on 25 and 26, right? operating cash flow up 120. Positive on delta provisions basically means the cash quality of earnings went up as well, so basically more cash earnings. This year in August of 2025, interest went up 30, taxes up 32, so together interest and taxes took more 60 million, and then working capital was flat. That gave you basically and 50 million pre-catheter increase in the year. Obviously there's some IPR benefits in there as well. So that means the way I look at it from 24 to 26, you get an activity at 2.7% annual CAGR. Next year or 2026, we said APDA will be 2.67 billion, obviously 33 million up, but including the fading of the IPR benefits. CapEx is stable. It might be slightly down, the stable is like stable, So it means you're operating cash flow of about 40 million. If you get the guidance, cash flow structuring will be around stable. I would say interest about stable to this year, possibly a little lower. We're always trying to optimize our interest spend. Taxes up 40 million estimate is about 225 to 230 ish to 25 million next year. Working capital flats, Possibly a negative, we're cautioned working capital. And then others flat, that gets about 950. So just modeling-wise, EBITDA, you know, 2.67. CapEx stable, slightly down a few million. It gives you operating cash flow increasing of 40 million. Interest stable, taxes up 40 to 225. Cash extraction stable and working capital flat to a small negative if you're basically flat free cash flow, but that includes, of course, the compensation for the fact that we don't have IPR and IP benefits again this year, which means that effectively we're growing our free cash flow by 2.7% year-on-year from 24 to 25 to 26. So I can't make it more easy for you, David. This is a pretty clear guidance. Yeah, job's done for me. Thank you so much.

Okay. Thank you all for your questions. This concludes today's session. In case of any questions, you know where to reach out. Thank you.

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