Release Date: October 28, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Koninklijke KPN NV (KKPNF, Financial) reported a 3.4% organic increase in group service revenues for the third quarter, with growth across all segments.
- The company achieved healthy EBITDA growth and maintained a stable year-to-date free cash flow compared to last year.
- Koninklijke KPN NV (KKPNF) expanded its fiber footprint to cover 62% of the Netherlands, with plans to reach 80% by the end of 2026.
- The company reported strong commercial momentum in mobile, with a 6.7% service revenue growth driven by an increase in postpaid subscribers.
- Koninklijke KPN NV (KKPNF) is confident in delivering its full-year 2024 outlook and midterm ambitions, supported by its 'connect, activate, and grow' strategy.
Negative Points
- The company faced increased competition in the fixed broadband market, leading to elevated churn and pressure on service revenues.
- Net Promoter Score (NPS) showed some adverse movements, particularly in the consumer segment, due to rising costs of living impacting customer sentiment.
- The EBITDA margin decreased slightly to 45.3% due to higher operating costs related to third-party access costs and inflation.
- Koninklijke KPN NV (KKPNF) experienced a decline in its broadband base by 9,000 due to a competitive environment and migration to fiber.
- The company anticipates a deceleration in year-on-year service revenue growth in Q4 due to less tailwind from price increases and tougher comparisons, especially in B2B.
Q & A Highlights
Q: Can you provide more color on the free cash flow growth expectations for the next couple of years, especially given the consensus models?
A: Chris Figee, CFO, explained that the free cash flow growth is expected to be low to mid-single digits due to higher interest and tax payments. The operational cash flow (EBITDA minus CapEx) is growing, but annual increases in taxes and interest payments are impacting the free cash flow growth.
Q: How is the competitive environment affecting your fixed service revenue growth, and does it impact your midterm CAGR expectations?
A: Joost Farwerck, CEO, noted that while there is increased competition, especially in the low-end market, KPN is focusing on base management and rewarding loyal customers. The fixed service revenue growth is in line with expectations, and the company remains focused on rolling out fiber to strengthen its position.
Q: What impact has Odido's fixed wireless access product had on KPN, and do you foresee any challenges from their rebranding?
A: Joost Farwerck, CEO, mentioned that Odido's product is mainly targeting rural areas and is not comparable to KPN's fiber offerings. He does not expect significant headwinds from Odido's rebranding efforts.
Q: Can you elaborate on the pressure on Net Promoter Score (NPS) and its implications?
A: Joost Farwerck, CEO, highlighted that the NPS pressure is partly due to the rising cost of living affecting customer sentiment. KPN is focusing on improving customer service and quality to enhance NPS, which is a key differentiator for the company.
Q: How do you see the wholesale business evolving, particularly in terms of broadband line losses and revenue growth?
A: Chris Figee, CFO, explained that while there may be a small decline in broadband lines, mainly in copper, the overall service revenues are expected to stabilize. Growth is anticipated from mobile and sponsored roaming services.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
