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Royal KPN N.V. Investor Presentation 2016

Sep 19, 2016

3858_ip_2016-09-19_a189222d-8cce-483f-88e7-2f6e17f87e57.pdf

Investor Presentation

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Investor presentation

September 2016

Contents

1 Strategy

2 Performance

3 Appendix

Strategy Strategic choices embedded in organization

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External environment reassuring

Macro-economy stabilizing with improving competitive position

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1 CBS and CBP (issued 2015)

2 World Economic Forum; The Global Competitiveness Report 2015-2016 & 2014-2015

External environment reassuring (cont'd)

KPN strongly positioned as only integrated service provider

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1 Telecompaper(Q4 2015)

2 Independent market survey (Consumentenbond; Q3 2015)

3 Independent market survey (Q4 2015)4 Total Dutch (Consumer and Business) mobile service revenue market share (Q4 2015)

Improve profitability and stabilize revenues

Strengthening & deepening customer relations

Leverage leading position in Telco to grow market share in IT

KPN well positioned to deliver on customer needs Standardized building blocks to deliver productivity

Applications & Data

  • Data Management & Analytics •
  • Hosted & Cloud Applications •
  • App Development (with partners)
  • Cloud Contact Center •

Cloud Infrastructure & Hosting

  • (Mission) Critical Hosting
  • CloudNL •
  • Storage & Backup
    • Colocation •

Digital Workspace

  • Workspace as a Service
  • Unified Communications
  • Modular & Hybrid
  • Omni Support

Access & Connectivity

  • 2G / 3G / 4G, VDSL, Fiber
  • Private Connect, VPN, Network
  • IoT, LoRa, M2M, Internet
  • Service Operator

Finalizing transformation is key priority

De-risk revenue profile and stabilize revenues in medium-term

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Finalizing transformation is key priority (cont'd) Improve profitability by stabilizing revenues and reducing indirect costs

Reduce indirect costs Simplification program • Portfolio rationalization• Automation of delivery and service • Online self-care portal • First Time Right • Agile working environment • FTE reductions in supporting roles 2015IT/TIPersonnelcostsOther2016 2018 CAGR-4.5%

Key priorities for the coming years in Consumer

Consumer strategy centered around household

Grow revenues, increase loyalty and reduce cost to serve

Successful bundling strategy…

Strong increase fixed-mobile penetration

1 Retail postpaid customers

Household at center of service model in Consumer

Significant opportunities to increase share of wallet per household

Strong competitive positioning in Dutch market

Covering all segments: focus on fixed-mobile bundling and high value

Content aggregation via smart partnerships Revenue share model facilitating popular content via IPTV platform

Strong focus on partnerships to deliver rich content offering Basic contentUpsell content Exclusive content• Partnerships with broadcasters • Attractive interactivefunctionalities for customers• Revenue share model • Access OTT services &Pay-TV packages via IPTV user interface• Smart partnerships • Only available for KPN customersRevenue share modelContract content supplier Non-exclusive agreement Integrated in IPTV user interface Consumer fee ₠ 10Revenue share KPN 50%ILLUSTRATIVE ✔✔

Expanding superior network position

Ensuring best-in-class customer experience

Simplifying our operating model

Second wave of Simplification program to deliver significant savings

SIMPLIFICATION PROGRAM RUN-RATE OPEX AND CAPEX SAVINGS (in m)

Best mobile access provider

Investment-led strategy enabling superior customer experience

Staying ahead of demand for mobile data

Fully utilizing spectrum position for excellent customer experience

1 Rebased to LTE 800 sites end 20142 Excluding small cells 1913

Best fixed access provider

Investment-led strategy enabling superior customer experience

Ready to upgrade if demand changes

Cost and time efficient upgrades with FttC investments largely completed in 2016

Build flexible and simplified integrated network Three steps to achieve objective

Network rationalization to prepare for virtualization

Reducing complexity and associated costs to enable flexibility

1 Subject to regulatory approval 2 Reduced energy consumption FY 2015 vs. FY 2010 level 3 Run-rate opex savings FY 2019 level vs. FY 2014 level

Ahead of the Capex curve

KPN built strong fundamentals in past years

1 Capex adjusted to include Reggefiber Capex before consolidation 2 Euro Telco sector based on company reports, management estimates

Growing free cash flow to drive shareholder value Developing towards highly cash generative company

Strong free cash flow potential Solid financial position

Grow revenues in Consumer, stabilize in Business

Rigorous focus on driving down costs

3 Capex levels trending down

1

2

4 Lower interest payments going forward

5 Limited cash taxes in The Netherlands

  • Committed to investment grade credit profile
  • 15.5% Telefónica Deutschland stake provides additional financial flexibility

Commitment to growing shareholder returns

  • Free cash flow growth to drive growing shareholder remuneration
  • Intention to distribute large part of excess cash to KPN shareholders

Medium-term ambitionsAmbition for coming three to five years

Key priorities for the coming years

Contents

1 Strategy

2 Performance

3 Appendix

  1. As % of broadband customers

Increasing penetration of fixed-mobile bundles in Consumer Continued growth

Strong growth bundled services within residential households Increasing share of wallet drives growing ARPU per household

Value focus in Consumer mobile

Strong competitive position driven by high value KPN brand and fixed-mobile bundling

    1. Reported net adds of +1k were adjusted for a 22k one-off impact for KPN brand related to migration to new order management IT platform
    1. KPN brand
    1. Bundle includes fixed-mobile bundles and multiple SIMs within a mobile-only household; management estimates

On track to deliver on key priorities in Business Simplifying portfolio and organization

New multi-year contract with large corporate client for hosting services on top of >10,000 workspaces

Agreement with city of Amsterdam for Managed Hybrid Cloud services

Leveraging strong market positions and distribution reach for growth in IT

Developing as best-in-class service provider

Further improving customer satisfaction across all segments

  1. Source: TNS NIPO. Consumer residential (all brands), Consumer mobile (all brands), Business (KPN brand)

Revenue development Q2 '16

Strong focus on growing bundled service revenues

  1. Excluding tax benefit in Q2 '15 and Q3 '15

Adjusted EBITDA1 trend improving vs. last quarter

Positive impact of cost savings not yet fully compensating declining revenues

    1. All figures based on continuing operations, unless stated otherwise
    1. The presented categories differ from the opex breakdown as presented in KPN's Integrated Annual Report 2015

The Netherlands2 (€ -12m) € mAdjusted EBITDA1 declined by 1.7% 356 2Adj. EBITDA Q2 '15 602Adj. EBITDA Q2 '16 592Other 2iBasis0Other operating expenses Revenues Cost of goods & services14Personnel expenses IT/TI 3512 3 4

Financial improvement expected in H2 2016

Positive impact Simplification, Business transformation and commercial progress

  • Lower innovation spend following completion large projects
  • Phase out of legacy
  • Procurement management
  • FTE reductions
  • Portfolio rationalization
  • Process automation
  • FTE reductions
  • Growing revenues in Consumer

Free cash flow1 influenced by usual intrayear phasing Strong growth in FCF expected in H2 '16

3 Frontloaded network investments in H1 '16

  1. All figures based on continuing operations, unless stated otherwise

Solid financial position

Reduced gross debt resulting in lower cash interest payments

    1. Gross debt defined as the nominal value of interest bearing financial liabilities, excluding derivatives and related collateral, representing the net repayment obligations in Euro, taking into account 50% of the nominal value of the hybrid capital instruments
    1. Including short-term investments (not taking into account 15.5% Telefónica Deutschland stake)

  • Fitch Ratings upgraded KPN to BBB, stable outlook

  • Net debt € 1.4bn higher vs. Q1 '16
  • € 1.2bn capital repayment in June 2016 related to proceeds BASE Company and 5% TEFD stake
  • Payment € 5ct final dividend per share over 2015

Debt portfolio

  • Renewal € 1.25bn revolving credit facility completed at improved terms
  • Additional financial flexibility via 15.5% Telefónica Deutschland stake

Financial flexibility

Contents

1 Strategy

2 Performance

3 Appendix

KPN ADR program

KPN has a sponsored Level 1 ADR program

ADR program

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Depositary bank's local custodian

  • Mooiste Contact Fonds (MCF) connects chronically ill children
  • 723 children virtually present at school

  • Collaboration with Nederlandse Hartstichting to put young people with a heart condition in touch with their peers

  • Award winning Late Rembrandt campaign

  • 2016 Corporate Engagement Award
  • ESA Excellence Award 2015
  • KPN is main sponsor of the Rijksmuseum
  • Introduction of child friendly app Mybee
  • Safe internet browsing for children of 2-6 years old

Corporate Social Responsible Strategy

  1. Dutch people that believe their data is safe with KPN

Social and environmental achievements

Dutch wireless disclosure

  1. Includes mobile-only (mainly SME) service revenues and partial allocation of multi play (mainly SME) and customized solutions (mainly

  2. LE/Corporate) revenues to mobile service revenues

    1. Includes amongst other Wholesale mobile service revenues and visitor roaming
    1. Including handset subsidies, commissions and SIM costs
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Debt portfolio

Breakdown of € 8.8bn nominal debt1 including hybrid bonds

  1. Based on the nominal value of interest bearing liabilities after swap to EUR, including EUR 1.1bn hybrid bond, GBP 400m hybrid bond and USD 600m hybrid bond

    1. Foreign currency amounts hedged into EUR
    1. Excludes bank overdrafts

Fixed infrastructure

Non-GAAP measures and management estimates

This financial report contains a number of non-GAAP figures, such as EBITDA and Free Cash Flow ('FCF'). These non-GAAP figures should not be viewed as a substitute for KPN's GAAP figures.

KPN defines EBITDA as operating result before depreciation (including impairments) of PP&E and amortization (including impairments) of intangible assets. Note that KPN's definition of EBITDA deviates from the literal definition of earnings before interest, taxes, depreciation and amortization and should not be considered in isolation or as a substitute for analyses of the results as reported under IFRS as adopted by the European Union. In the Net Debt / EBITDA ratio, KPN defines Net Debt as the nominal value of interest bearing financial liabilities excluding derivatives and related collateral, representing the net repayment obligations in Euro, taking into account 50% of the nominal value of the hybrid capital instruments, less net cash and short-term investments, and defines EBITDA as a 12 month rolling total excluding restructuring costs, incidentals and major changes in the composition of the Group (acquisitions and disposals). Free Cash Flow is defined as cash flow from continuing operating activities plus proceeds from real estate, minus capital expenditures (Capex), being expenditures on PP&E and software. Revenues are defined as the total of revenues and other income unless indicated otherwise. Adjusted revenues and adjusted EBITDA are derived from revenues (including other income) and EBITDA, respectively, and are adjusted for the impact of restructuring costs and incidentals. The term service revenues refers to wireless service revenues.

All market share information in this financial report is based on management estimates based on externally available information, unless indicated otherwise. For a full overview on KPN's non-financial information, reference is made to KPN's quarterly factsheets available on ir.kpn.com

Forward-looking statements

Certain statements contained in this financial report constitute forward-looking statements. These statements may include, without limitation, statements concerning future results of operations, the impact of regulatory initiatives on KPN's operations, KPN's and its joint ventures' share of new and existing markets, general industry and macro-economic trends and KPN's performance relative thereto and statements preceded by, followed by or including the words "believes", "expects", "anticipates", "will", "may", "could", "should", "intends", "estimate", "plan", "goal", "target", "aim" or similar expressions. These forward-looking statements rely on a number of assumptions concerning future events and are subject to uncertainties and other factors, many of which are outside KPN's control that could cause actual results to differ materially from such statements and speak only as of the date they are made. A number of these factors are described (not exhaustively) in the Integrated Annual Report 2015.

Safe harbor

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Earnings Release 2026
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Transaction in Own Shares 2026
Apr 28
Board/Management Information 2026
Apr 27
Transaction in Own Shares 2026
Apr 21
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