Good day, ladies and gentlemen. Welcome to KPN's first quarter 2021 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 star one on your telephone. I will now turn the call over to your host for today, Reinout van Ierschot, Head of Investor Relations. You may begin. Thank you. Good afternoon, ladies and gentlemen. Thanks for joining us today. Welcome to KPN's first quarter 2021 results conference call. With me on the call today are Joost Farwerck, our CEO, and Chris Figee, our CFO. As usual, before turning to our presentation, I'd like to remind you of the safe harbor on page two of the slides, that also applies to any statements made during today's presentation. In particular, it may include forward-looking statements, including KPN's expectations with respect to its outlook and ambitions, which were also included in the press release published this morning. All such statements are subject to the safe harbor. I would now like to hand over to KPN CEO, Joost Farwerck. Thank you, Reinout, and good afternoon, everyone. Today's results mark the first quarter of our Accelerate to Growth Strategy we presented to you back in November last year. I'm pleased to report solid progress on all strategic pillars, which strengthens our confidence to deliver on our outlook and on our ambitions. The accelerated fiber rollout is well on track as we added over 100,000 households to our footprint in the first quarter. Last month, we announced a joint venture together with APG to accelerate further and create additional value for all our stakeholders. We've also successfully phased out copper in the first six pilot areas, which is an important milestone in our program to decommission copper on a large scale as of 2023. In the first quarter, the mass market service revenue trends continued to develop in the right direction. Mobile service revenues in B2C are already approaching a year-on-year growth trajectory. The broadband base in fixed stabilized further, and wholesale continued to show solid growth. This all adds to the confidence in our ability to grow our mass market service revenue by the end of the year. All in all, the encouraging revenue developments and strong free cash flow generating and balance sheet enable us to reiterate our 2021 outlook and our ambitions for 2023. As a reminder, our accelerate to growth strategy is supported by these three pillars. One, leverage and expand our superior networks. Two, grow and strengthen the customer base. Three, continue to simplify and streamline our operating model supporting the next wave of cost savings. We will touch upon our progress on all of these pillars in today's presentation. In the first quarter, we expanded our fiber footprint by 106,000 homes passed. The run rate was impacted by a two-week frost period during which we were unable to dig, and without this, we would have exceeded our fourth quarter results. In early April, we successfully shut down our copper network at nearly 40,000 household addresses in six pilot areas. This allowed us to test and evaluate the operational and financial impact of shutting down copper. When we start to do this on a large scale from 2023, this will result in significant savings related to the closure of technical buildings, reduced service tickets, lower maintenance costs, and lower energy consumption, et cetera. Last month, we announced the fiber joint venture with APG, which further accelerates the rollout of fiber in the Netherlands. This deal is important for us as it strengthens our strategy to be the leading fiber operator in the Netherlands. The joint venture will bring forward the fiber rollout in areas which were not part of our existing plans for the coming five years. We further accelerate on that, and the attractive valuation by a strong partner clearly underlines the value of our state-of-the-art fiber to the home network. Together, KPN and the joint venture will roll out more than 650,000 lines per year, reaching maximum rollout speed. We have already secured the majority of the construction capacity needed to meet these targets. Considering that the total fiber rollout in the Netherlands across all participants was just over 500,000 households in 2020, this is an important step for KPN and for the Netherlands. We now expect to reach 80% of households with fiber in 2026, up from 65% by 2025 in our original plans. This is important for two main reasons. It will speed up the copper decommissioning, leading to earlier cost savings. This allows us to significantly bring down our CapEx levels sooner, now already after 2026. This means we can settle at a much lower, longer-term sustainable CapEx level in the years thereafter. Let's move to the consumer segment. In the first quarter, the consumer service revenue trend was impacted by an EUR 8 million one-off correction. Excluding this, the underlying service revenue trend improved. Mobile service revenues declined only 0.7%, fully driven by prepaid as postpaid service revenues were already flat year-on-year. Fixed service revenues declined 1.8%. Looking at our new households focus disclosure, revenue growth in our fixed mobile portfolio was offset by lower revenues from legacy services. We've been able to stop the NPS decline. We're seeing encouraging underlying developments. Customer satisfaction remains one of our top priorities. We see that our investments in increased capacities are starting to pay off, and we should be able to gradually bring these down again in the coming periods. Now let's take a deeper look at our consumer KPIs. At our Capital Markets Day, we indicated that growth in consumer will come from two areas, fixed mobile and fiber. Although revenues in consumer were still lower year-on-year, we see encouraging KPI developments, which show that we are working according to line of a strategy. In Q1, fixed mobile households net adds were again positive and fixed mobile ARPA improved, resulting in higher revenues from these services. In our other area of growth, fiber, we also see a very positive trend in net adds. Our focused commercial strategy and upgrade for copper are resulting in better sales numbers on fiber. We're confident that the solid KPI development will fuel the growth of our consumer service revenues this year. Let's now move to the business segments. Although still declining, the overall revenue trend in business is starting to move in the right direction. In Q1, service revenues were down below 4% year-over-year, better than the previous quarters. COVID-19 and customer migrations continue to impact our B2B performance. Last year, the lockdown only came into effect in the final two weeks of March. In Q1, we saw lower roaming revenues due to travel restrictions and delayed IT projects. Business net promoter score improved to +2, mainly driven by customer migrations to our future-proof target portfolios, and that have much better customer satisfaction levels. In SME, we have come a long way with our customer migrations. Almost 90% of customers have been migrated away from traditional voice and legacy broadband services. The KPN EEN platform is well positioned to provide additional services to customers. A quarter of the base takes three services. There's enough room to grow this going forward. We also see a strong take-up of unlimited among our SME customer base. In the first quarter, almost half of the EUR 8 million year-on-year revenue decline was due to loss of roaming revenue. Without this, the effect on SME revenues would be less, and SME would have performed better. We see a clearly stabilizing trend on the SME service revenue level, which makes us confident in our ability to stabilize service revenues in SME by the end of the year, driven by the solid base developments both in broadband and mobile. In wholesale, service revenues continued to grow in the first quarter, mostly driven by broadband, which in turn is a result of expanding our fiber footprint. We added 22,000 broadband lines and 30,000 postpaid SIMs in the quarter. As we've always said, we continue our open network policy built on reasonable and non-discriminatory terms, and therefore, we offer a viable alternative for our current and future wholesale partners. This month, we announced a new long-term sustainability goal. KPN was already on track to reduce emissions in the chain by 50% in 2040. This ambition has now been scaled up to achieving zero net emissions in the chain, by the same year. This relates, for example, to improving the energy settings of TV receivers, more sustainable transport of products and equipment by our suppliers, and using less materials in the production of equipment for our customers. Now, for the financial results, let me hand over to Chris. Thank you, Joost. Let me now take you through our financial performance. Our financial performance was impacted by an EUR 8 million one-off non-cash correction in B2C fixed service revenues, which was related to the timing of revenue recognition in 2020. We exclude this one-off in the trend of a number of metrics to illustrate the true and fair underlying performance. Let me highlight a few key figures for Q1. Our revenues declined by 1.2% year-on-year, corrected for each one-off event and a sale of KPN Consulting in Q1 last year. Growth in wholesale and consumer fixed mobile was offset by lower revenues from business and consumer legacy services. We see the underlying trend in service revenues developing in the way we envisaged, and we're on track to meet our inflection target for the year. EBITDA effectively was flat year-on-year, corrected for the impact of the one-off. Lower revenues and temporarily elevated costs related to customer support were offset by continued progress on cost savings. In the year-on-year comparables, we absorbed a roaming delta versus Q1 last year and a temporary cost spike in B2C. Our free cash flows increased by 53% year-on-year to EUR 122 million. Our liquidity position, including the undrawn RCF, remained very strong at almost EUR 1.9 billion. Joost already indicated that the underlying KPIs are showing promising trends for growth in mass market service revenue soon. Wholesale growth remains strong, and B2C mobile revenue showed a step-change improvement in the right direction, with postpaid already flat year-on-year. Net adds in B2C fixed are stabilizing and nearing positive territory, while ARPA is already growing. Already in SME, we see ample opportunity to improve the revenue trend, which makes me very confident we'll deliver against our objective for the remainder of the year. Please note that SME revenues effectively have been stable for the last three quarters already. As I said, the one-off correction makes the trend somewhat hard to read. However, the year-on-year growth rate at the right-hand side of the slide show that we're getting close to growth in mass market service revenues. By the way, in the business segment, we observed favorable service revenue developments in LCE and tailored solutions. Of course, our focus is on SME stabilization first. We are continuously digitalizing and simplifying the company in order to deliver a combination of improved services, better customer experience, more efficient operations, and thereby creating long-term value for all stakeholders. In the first quarter of the new cost service savings program, we delivered EUR 21 million of savings, which is in line with the required run rate to reach the more than EUR 250 million of savings by 2023. That said, this cost number includes some temporary cost spikes. For the year, we see KPN still on track to move towards the aspired cost savings with the lion's share of the savings tilted towards the second half of the year. In Q2, in terms of cost and cost only, we'll face a tough comparison base, and last year's number benefited from COVID-related savings, which will lapse this year, and several digitization efforts that save costs and will kick in only in the latter part of the year. We'll continue to move towards our cost objective with the biggest effects backloaded in the second half of the year. At our Q4 results, we explained that we improved our working capital management last year, and we've continued to do so in 2021. In Q1, we were already able to reap some of the benefits with part of the improvement also due to entire year phasing. Normally, we have higher investment in working capital in Q1. Although still negative, that is, we still invest in working capital, the investments in working capital were significantly lower compared to previous years. During 2021, the rest of the year, we'll explore further options to keep improving our working capital within the normal course of business. This will help us not only today but also in future years to keep a healthy baseline of working capital. We started the year well in terms of cash generation. In Q1, we've seen a solid increase in free cash flow despite higher CapEx as a result of the accelerated fiber rollout. Free cash flow of EUR 122 million was a good 50% higher than last year, and the margin moved to 9% of revenues. This increase in cash was mainly a result of, first, the different phasing of working capital, importantly, lower cash interest, lower cash restructuring, partially offset by higher cash taxes. A few points are worth mentioning. First, our non-fiber CapEx was fully according to plan. The higher CapEx as of last year was the result of accelerated fiber investments, while other CapEx spend was in line with expectations. It declined a bit and absorbed an increase in consumer CapEx. This provides a proof, an early proof, that we can manage our non-fiber CapEx levels, which will enable us to sustainably lower our CapEx levels once the fiber roll is completed. Secondly, our free cash flow grew significantly in Q1. We are confident in our ability to reach our FCF target this year, but mathematically speaking, it's clear that we will not see a 50% growth rate every single quarter. Please expect some fluctuation of this number during the quarters. At the same time, we remain confident with regards to our free cash flow target for the year. We ended the quarter with a very strong cash position, despite redeeming a EUR 361 million senior bond that had a 3.25% coupon in February, giving room for further interest cost reductions this year and the next. We continue to have a strong and resilient balance sheet at the end of March. As a result of the bond redemption and other corporate actions we took last year, the average cost of senior debt improved by more than 30 basis points year-on-year. In Q1, net debt declined EUR 111 million, mainly driven by the free cash flow generation during the quarter. We maintained a leverage ratio just short of 2.3x, comfortably below our ceiling of 2.5x. We further enhanced our interest cover. Total liquidity remained very robust at the end of the quarter. It consists of EUR 640 million in cash and short-term investments, and the undrawn revolving credit facility. The sum of this covers our debt maturities safely for the next three years. Today, as we are reassured by our performance, we confidently reiterate our 2021 outlook. As a reminder, we expect the adjusted EBITDA after lease to come in at EUR 2.345 billion, broadly a 1% improvement versus last year. We'll ensure CapEx does not exceed EUR 1.2 billion. We'll expect a free cash flow of EUR 765 million, in line with last year despite higher CapEx level. We expect to pay a regular dividend of EUR 0.136 per share over 2021. Of course, the road to our objectives is never a straight line, and quarterly results will surely fluctuate, but we feel confident to deliver on the objectives for the year. In addition, we also reiterate ambitions for 2023, as provided at the strategy update last November. Having said that, we believe KPN is reaching a unique position. We're investing heavily by accelerating the fiber rollout to a maximum operating capacity, driving additional future cash flows and balance sheet flexibility. KPN is becoming a pristine and clean fiber company. We're at the point of returning to mass market service revenue growth, and we are aiming to accelerate organic cash generation in the next few years, giving rise to progressive dividends, and at the same time, de-leveraging. We have a prudent financial policy but don't intend to run an inefficient balance sheet. It's a combination of a fiber plan, CapEx rollout, mass market service revenue growth, and sufficient cash to grow our dividend and delever at the same time. We are very aware of the efficiency needed of our balance sheet. Our plan is only one quarter on the way, but progress has been good, which makes me confident we'll successfully continue to execute. To summarize, KPN had a solid financial quarter, displaying its cash-generating ability. We see encouraging signs in base and service revenues that will drive the mass market service revenue growth. This is driven by positive signs in consumer with fixed mobile and fiber net adds, and ARPA all in positive territories. SME is seeing good growth in broadband and mobile inflow, which is helping to stabilize revenues by the end of this year. In wholesale, we see the ongoing success of our open network policy leading to continued solid growth. Our fiber rollout run rate has maintained a good pace and has proven an attractive return profile. We reiterated our outlook for this year, plus the ambitions for 2023, and are strengthening our confidence when it comes to delivering on our strategy. Thanks for listening to our presentation. Now, let's turn over to your questions. Back to you, Reinout. Yes. Thanks, Chris. As usual, before we start with the Q&A, I'd like to ask you to please limit your questions to two. Over to you, operator, to start the Q&A. 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 one on your telephone. The first question is from Mr. Jakob Bluestone, Credit Suisse. Go Go ahead, please. Hi. Good afternoon. Thanks for taking the questions. I have two questions, please. Firstly, can you just share your thoughts around the KKR Deutsche Telekom fiber joint venture? How does that impact your thinking around overbuild? I guess, to what extent is there a land grab on building fiber? Secondly, on the fixed line side, I think you said it was a minus EUR 0.018 underlying decline in fixed service revenues, which I think is a little bit weaker than what you reported last quarter. You mentioned in the release more pressure from legacy. Can you maybe just expand on what's going on within the fixed line services? Why do you think you're seeing an acceleration in legacy pressure? Thank you. Yeah. Thanks, Jakob, for your question. I'll take the first one. Chris, you'll take the second one. Okay. Yeah, the new fiber initiative in the Netherlands, it's only a plan. I can't say very much about this. There's a high ambition of, if I'm not mistaken, 1 million households in five years. Like I said, it's a plan. We have a plan, but we're also doing it. We're executing the rollout last quarter above 100,000 this quarter above 100,000. We're rolling out on a level we never did before. We have our strategy. We're speeding up, and that is for us the most important thing. We anticipate on other initiatives to roll out fiber as well. That's why we say in 2026, we expect KPN to cover 80% of the Netherlands. The rest of the Netherlands will be covered by third-party initiatives. That means that in 2026, we expect all households to be connected to fiber. I also heard Deutsche Telekom saying our T-Mobile, that they try to avoid overbuild. That's always good. That is what we try to do as well. When we face an initiative somewhere in an area, most of the times we can come to an agreement to cooperate. Let's first see if this all really works out. For us, it's most important to focus on our own plans and execute and speed up what we're currently doing. Very good. Jakob, on your question on fixed, a couple of things to point out. Our fiber revenues and copper revenues, the combination of the two is showing still a healthy combination of growth. I mean, fiber added from Q1 last year to Q1 this year, about EUR 15 million of service revenues. Copper did the same thing if you adjust for the revenue correction. The fiber growth, even the numbers are lower, is canceling out some of the copper decline. Indeed, legacy products was the main delta. That tends to happen mostly around first of the beginning of the year. People cancel some of the old legacy subscriptions at the beginning of the year. That's an important driver for the delta between Q4 and Q1. If I look at the underlying fiber developments, the net adds we had there, the copper to fiber upgrades, if I look at the developments of ARPA and ARPU, ARPA on fiber and ARPU on fiber sec, those tend to be quite positive. We are still pretty confident that we will get to this revenue inflection. It's a legacy line item that costs change, and that to me, somewhat tends to happen more in Q1 than the other quarters. Got it. Thank you. The next question is from Miss Siyi He, Citi. Go ahead, please. Thank you very much for taking the questions. I have two, please. The first one is really a clarification. I saw you accelerate in fiber net adds, the corporate decline also accelerated. I was wondering if you can talk through the reason behind that. Is that just simply because, in the pilot areas, you phase out copper and you replace by fiber? Actually you see the decline and the growth coming from different areas? My second question is, you mentioned about the potential cost savings and the CapEx reductions after you phasing out copper and finalizing your fiber. I was wondering if you can give us some indications what kind of ballpark we should anticipate. Thank you. Good. Siyi, let me take the first question on fiber. What we're seeing is a couple of points. On fiber, an increased activation rate. You can see the activation percent going up. That is due to the fact that we've changed our activation processes somewhat, where, operationally speaking, when you draw a fiber line, you don't stop at someone's front door, but you connect to everybody regardless of them being customer or not. That actually is a more efficient process, saves cost and time, but also accelerates the take-up. We see an increase, what we call copper to fiber upgrades, so moving a client from copper to fiber. The numbers you see, the fiber and copper numbers, there's some transition of copper to fiber clients in there. Net of that, our fiber is still continuing to grow. It's still new net adds in fiber only is a significant positive. Copper churn, if you strip out that copper to fiber move, we saw copper churn moving up from Q4 to Q1 and then stabilize. I think in January, we moved to a higher level of churn, and then January, February, and March were stable. My estimate is still more in this lower speed copper environments. That's where the copper churn is. Overall, we see numbers improving from a combination of clean fiber net adds positive, copper to fiber upgrades, also because of the changed connection activation processes that we have, which eventually we believe lead to ARPU uplifts. Then an increase in churn up to January, and then staying flat, so no further increase in churn in copper. Siyi, and your second question was about cost savings and CapEx after 2026. We expect to be ready end of 2026 with the rollout of fiber. That means that after that, we will no longer invest in a fixed access network unless it's new build households who we have to connect. That's a complete different investment schedule compared to what we do today. That means that we can step down heavily on CapEx after 2026. That's about hundreds of millions EUR. On the cost saving side, decommissioning copper is very important. All incumbents talk about that, and some of them are starting to do it. It will save us on maintenance costs, on the cost of technical buildings. We're going to phase out most of our technical buildings. This is, by the way, an old dream to come true for KPN. We save on reconstruction costs, on power usage. That's also very important. That will start to kick in as from 2023, and we will continue to benefit from that savings program after 2026 as well. Thank you very much. The next question is from Mr. Michael Bishop, Goldman Sachs. Go ahead, please. Thanks. Good afternoon. Just two questions, please. Firstly, just picking up on the stronger performance in B2C mobile. I know in prior quarters you've mentioned three or four factors coming through, such as better low-end pricing, lapping the back book repricing from 2019. I was just wondering if you could give us a quick recap on what's happening there within the mix and why you've seen that nice improvement. My second question. Chris, you mentioned it, I think, a couple of times towards the end of the presentation about not intending to run an inefficient balance sheet. Given you seem to have quite a lot of visibility over the business, particularly around the big ticket items like fiber CapEx, have you had any more thoughts about what is a medium, long-term efficient balance sheet and what that looks like? Thanks very much. Yes, Michael. In consumer markets, we see mobile postpaid moving in the right direction. If I'm not mistaken, we're more or less flat year-on-year. That is really moving in the right direction. That's mainly because of how we positioned unlimited in the market. That's doing quite well. We see a strong inflow on the higher ARPU propositions. Indeed, we corrected pricing on the no-frills side. Of course, as you know, we eliminated Telfort in the past. We also repositioned our mobile propositions a bit in the market. We really try to move our customers to the higher ARPU, more unlimited kind of propositions. That's on the right track, I would say. We're not there yet, but I expect more to come from this in the coming quarters. We're pretty satisfied on the mobile performance in consumer markets. Yeah, Michael, allow me to give you a quick marketing scan then. We're investing heavily in fiber, as we said. Driving future cash flow with the point of return to mass market service revenues, and that we can do with a progressive dividend and organic deleveraging. Currently with 2.3x leverage, that will drop because also next quarter you see the proceeds from the transaction with HKLease. That means that leverage number will come down. Our ceiling is 2.5x. I think the floor that we announced, it's not a formal, but effective floor is around 2x. Below that becomes inefficient. Within that 2x-2.5x, management has some room to maneuver. Our strategy is good. We're only one quarter on the way now. Let's see if our strategy continues. Will give us more visibility on performance, especially on the return into mass market revenue growth, on the increased contribution of fiber, very sticky fiber revenues. If that continues, and we continue to delever, and the cash flow keeps coming in, I think we should be able to return to our shareholders somewhat more than just the annual dividend increase. That option is definitely there. In terms of inefficient balance sheet, I think the lower bound is 2x. We set a ceiling of 2.5x. If we get to organic revenue growth, more share of fiber, I think it's not inconceivable that we should aim to be for the upper end of that leverage and the lower end of leverage because simply our balance sheet could sustain that. To me, it's a function of getting the business to deliver on revenue growth, fiber client base, sticky fiber revenues. That would give us the anchor at which to move our leverage up a bit towards the upper end of the range, and that also gives opportunities for additional shareholder returns. Great. Thanks for the detail. The next question is from Mr. Matthijs van Leijenhorst, Kepler Cheuvreux. Go ahead, please. Yeah, good afternoon, gentlemen. The first question is a follow-up on an earlier question. Could you give us the CapEx to sales ratio after 2026? Could you give a number? The second question is on this Chinese vendor, Huawei, because the Dutch regulator is currently investigating access to your network. What is the risk of a full ban? In case that would happen, if we would see a full ban, what could be the cost for you? Okay. Well, Matthijs, your first question is about CapEx after 2026 and sales after 2026. That's a very difficult one. I'll hand over that one to Chris, let me first take the Huawei question. Like other telcos in Europe or like most of them, 10, 15 years ago, we decided to select Huawei in certain domains of our network, not only because of the price, but because they were much further than the other two main suppliers. Of course, we have a multi-vendor policy, we use lots of different vendors for all kind of networks. For instance, on the fixed side, we're fully Nokia. The investigation that this week started is all about an article in a newspaper, which was about a report drafted 11 years ago on behalf of KPN. KPN in those days was looking at the opportunity to source out the mobile network maintenance to Huawei and to do a risk analysis. As a result of that report, KPN decided not to source out maintenance of the mobile network to Huawei. We do that ourselves. The second is that some vulnerabilities were identified and fixed 11 years ago. Every year, we audit our mobile core network. We audit the way we work with vendors, so also with Huawei. That's also done by external parties. Every now and then, Agentschap Telecom from the Ministry comes in to audit as well. I'm happy with that audit that started this week because then we can talk about the facts that will come up instead of hearsay stories in the newspaper. We're not naive. We are talking about this topic for a long time already with our government. We completely follow the guidelines of our government. As far as I'm concerned, I'm pretty confident that we are fully aligned with our government, and we strictly follow their rulings. Matthijs on your first question on CapEx over sales, and of course, it's a bit reading tea leaves on what our CapEx over sales ratio in 2026 will be. Let me give you a few components of that. Today, our CapEx is, say, EUR 1.2 billion. Out of that is EUR 450 million in fiber. After 2026, that will only be new build and maybe some small remaining portions of it to be done and some maintenance. That will mean there's a significant chunk out of that spend will be going away. Secondly, the non-fiber. Today, non-fiber CapEx to sales is around 14%. I don't think we'll end at 14%, but I would be surprised if we hit an 18%. If I had to be prudent, I would say somewhere between 14% and 18%, and depending on how you look at the amount of new build spend, the amount of maintenance somewhere in there. I would pick a number in that range, and then you know what I model with. Without giving you a hard-coded number, because 2026 is still a couple of years away, but I think it's absolutely somewhere in that range, and I guess you'll be able to pick a number in there. Yeah. Thank you very much. Much appreciated. Just as a follow-on on the first question, what if the government decides for a full ban? Could you give any indication what it could cost or? Currently, we run our radio access network on both Ericsson and Huawei, so we know how to run a network on two suppliers. That's one. The second is that we don't expect a full ban because we are aligning, like I said, with the government. They know what we do, and we know what they want us to do, and that's what we're currently doing. We already announced that we will move non-Western vendors out of all critical systems. That was our own decision before the government started to talk to us, and that's what we are doing. For instance, the mobile core network will be migrated to Ericsson. That's a decision that we took before the summer. It will take some time, but we started it. There are other domains where we will migrate to Western vendors. We're in the same situation as a lot of other telecom operators on this topic, so it would really surprise me if suddenly that ban would be there, and certainly not within a short notice or a timeframe of one or two years. If you look at the U.K., for instance, there was a ruling there to migrate non-Western vendors out of critical systems in seven years. That kind of ruling I anticipate on, but not anything else. Thank you very much. The next question is from Mr. Keval Khiroya, Deutsche Bank. Go ahead, please. Thank you. Two questions, please. Firstly, you mentioned the impact of COVID on operations last year, but how should we think about the benefit to revenues from COVID impacts annualizing in Q2? I guess last year, you saw a negative impact from roaming and delayed projects, but also benefits from higher national traffic as well. Secondly, I think last year you were also quite pleasantly surprised about how well the market took the fixed line price increase. Could you share your thoughts on how you just think about the scope, and maybe size of fixed price moves going forward? Thank you. Keval, should I take the COVID question? What we're seeing in the first quarter on COVID is that we lost about EUR 6 million roaming revenues in the first quarter. Last year, of course, two months were still roaming revenues. We lost it in B2B mostly. We got EUR 2 million in B2C, we estimate. Combination of roaming, a little bit lower handset sales, and lower unlimited because of shop closure. Shop closure has an impact on handset sales, and handset sales has an impact on the unlimited bundles. We saw about EUR 6 million higher interconnect revenues, people calling 0900 COVID numbers. The net revenue delta was about EUR 2 million, where, of course, interconnect is much lower margin business than roaming. I think the net impact on our, what I'd say, contribution margin was about EUR 4 million in the first quarter, and we compensated some of that by cost measures. The overall impact on EBITDA has been neutral, possibly slightly negative, depending a bit how you look at the cost impact. Again, it was high margin revenues replaced by lower margin revenues, which you counter by cost savings. When it comes to roaming, when I look at data and voice traffic right now, it has of course come off. Last year, it fell completely off a cliff in Q2. That I think will not happen. It will continue at a slightly higher pace than last year, although, of course, travel is mostly within Europe, don't give much roaming benefits. The real roaming uplift or the roaming potential for the year is in Q4 on a year-on-year comps, because in Q4 last year, remember, we all went back to lockdowns. If the vaccination programs succeed, the world might be coming back to normalcy in Q4, then you can see year-on-year roaming benefits. To me, first quarter, EUR 4 million hit on contribution margin, countered to a large extent by cost savings. Roaming for the rest of the year, I could see a tiny support year-on-year in Q2 and Q3, but mostly within Europe travel. We've got good hopes for Q4. It's not an EBITDA outlook number. If there's any upside, that will be in Q4. In Q2 last year, we had cost savings due to the COVID shock. When it comes to Q2 comparison, I think that we have a slightly better outlook in terms of revenue growth versus last year, and slightly more challenged year-on-year comps in cost because last year in the second quarter, our cost really went down massively in that quarter, as you will remember. That would be the point I would love to make on COVID. Hope that helps to you. Yeah, that's very clear. Thank you. On your question on the fixed line price increase. Yeah. Usually, we do that yearly around the start of summer, to be announced in May. Last year, we did, if I'm not mistaken, a EUR 50 increase on the broadband pricing. Wouldn't surprise me if we move in the same line this year, but first, we will communicate this to our customers before we disclose it further. I expect us to announce something in the coming weeks. Okay. Thank you. The next question is from Mr. Usman Ghazi, Berenberg. Go ahead, please. Hi, gentlemen. Thank you for the opportunity. Just two questions, please. Firstly, on the 5G auction. I believe there's some litigation now or some further delays. If you could just provide an update on the 3.5 GH z auction, whether you see it still happening next year or whether it will be delayed further. The second question was just going back to the balance sheet and looking at it a bit differently. If I look at the capital employed, from the outside, there is no way for us to understand how much of your capital employed is actually related to the fixed infrastructure or in fiber. You're spending EUR 450 million in CapEx every year on fiber. It'd be just helpful to know how much of your capital employed now is either related to your fixed infrastructure or fiber. Any indications or any idea of how to get there would be quite helpful. Thank you. On the auction on 3.5 GHz, yeah, the Ministry of Economic Affairs is preparing for an auction in the first quarter of next year. I think it's an ambitious timeline, they aim for the first or the second quarter coming year. 300 MHz is becoming available for exclusive national licenses for 5G from end of the year, September 2022. That's the plan. They moved out the Ministry of Defence using the spectrum in the northern part of the Netherlands, which is helpful. There's still Inmarsat, another company making use of the spectrum for services at sea, and they are starting a process to delay the auction. I don't think that will happen. I'm not sure how it will be solved. The usage of that Inmarsat is about much less spectrum usage than the Ministry of Defence is doing currently. I'm not completely sure how they will solve this. That auction will happen next year. I'm convinced of that, yeah. To your other question, Usman, let me take it up offline with the IR to see how we can help you or improve our disclosure. I don't have the exact number on how much capital employed we have in fiber on top of my head. I do know that the ROCE of the group is continuing to improve. That, to me, is an important factor. Exactly what you'll be looking for, why we take it offline and see if it helps us, or we can help you with enhanced disclosure on this part. Thank you. The next question is from Mr. Luigi Minerva, HSBC. Go ahead, please. You're probably on mute. Sorry for that. Good afternoon. Hello. The first question is on the APG JV. I wanted to understand of the 910,000 lines, what's the extent of the overlap? Currently those lines, are they all on ADSL or some of them are on fiber to the cabinet, for example? What's also the overlap with the VodafoneZiggo footprint? Secondly, perhaps an update on the regulatory situation for the wholesale access terms. Can you tell us where the regulator stands and if they plan to make further progress? Thank you. Well, on the joint venture with APG, listen, we more or less have the same footprint as Vodafone Ziggo. We cover 98% of the Netherlands, 95% with a copper network. Vodafone Ziggo a bit less. You can assume that almost all households in the Netherlands have both a wireline from KPN or a cable moving into that household from Ziggo. The scope of the joint venture is the planning we have as from 2026. We announced a rollout plan to roll out 500,000 connections per year ourselves, adding up to two and a half million on top of the almost 3 million we already did. After that, in 2026, we would start in the more smaller villages, semi-rural areas. With this joint venture with APG, we'll start with these areas not after 2026, but in the second half of this year. That means an acceleration especially focused on the long tail of our own planning. It's all about fiberizing our copper network. There's no fiber networks there yet. It's about copper areas. Most of the areas are all on VDSL. That means that we already rolled out the backhaul fiber to the cabinet in most of these areas. When it comes to your question on the regulation. Look, two things at hand, of course, there have been a new EECC. I think the ACM is still working through how to apply, how to have a normative framework to actually apply that European regulation in the Netherlands. We've had the request by T-Mobile. Well, this request to our accept are both premature and inappropriate. Premature because you can only file a request when you have a conflict, which we don't. We're still discussing and negotiating with them. Secondly, if you look at our open wholesale access model, which has continued to be open, which has continued to be non-discriminatory. In our analysis, it's very viable for anyone to have, even if you are an attacker or someone new to the market, you can run a viable business case in a very capital light model being on KPN's network. We're very confident in our position. At the same time, we do not expect any news on this thing before the summer. I think it's quite premature, both where we stand in our discussions and when it comes to where the clarity also on the new regulation. I would not expect, we would be surprised if there would be any major news from ACM before the summer. Okay. Thank you very much. Can I have a quick follow-up on the first question? As the JV upgrades the VDSL lines to fiber, you will obviously lose some VDSL wholesale revenue. Can you give us an indication of how much of the wholesale revenues will be lost to the JV? It's our plan usually when we move from copper to fiber in an area, we go to penetration grades of 50% to 60%. That's both retail and wholesale together. We improve both on the retail and the wholesale side. We can still sell wholesale also on the network from the JV, because we have the wholesale interface with the most of the service providers in the Netherlands, and we deliver that on the active layer. The JV can do the same, because it's an independent company. I expect, because of these are specific areas with us on a lower market penetration rate than in the areas we choose for the first five years, I expect in total our position to improve there. Okay. Thank you. The next question is from Mr. Ulrich Rathe, Jefferies. Go ahead please, sir. Thank you. First of all, I would like to come back to this big jump in the fiber activation, which is very good to see. Could you comment a bit, you did already comment on some of the drivers, but I was specifically interested, are you giving temporary discounts for people outside of the areas where it's a switchover? What is the ARPU in the transition from copper to fiber in general, if that's possible to answer? My second question is a clarification on the one-off. You're saying the 1Q item was an overstatement that you're correcting in the quarter. I was wondering, the historical overstatement, where was that? Was it a particular quarter where it was a big item, or was it essentially just something you're correcting that was spread out over the quarters of 2020? Thank you. Yeah. On the fiber activations, I think the most important change we built in our company is that we organized really one organization being fully responsible for fiber and the rollouts, commercial activities, regional approach. There's far more and far better focus on the activation of fiber in all different areas. Every area is different. Every area has a different strategy. Sometimes we have to defend our position there. Sometimes we're more a challenger. That's now done with a far better focus. The commercial people in Elite, traditionally, we had operations in Elite. First roll out the network, and then try to sell. That's difficult because when we started to roll out fiber, then Ziggo could activate all their customers, locking them in for 12 months. Now we first sell and then roll out. What we also do is that we migrate customers more actively from copper to fiber, and after that, sell up. The churn on fiber is low, around 7% if I'm not mistaken. It's always good to also migrate customers more to fiber to create stickiness. It's our commercial performance, the focus on the different areas, the way we first sell fiber before we roll out, and the way we migrate customers more actively and in a more sufficient and one time right way. Yeah. When it comes to being commercially active, we of course, have a policy that you have the same speed for copper and fiber, the same price. If you had 100 Mb on copper and you move to 100 Mb fiber, you get, of course, the same price. That helps migrate customers. We have a plan, an action initiative in place where customers can temporarily experience the highest speed that we have. The highest speed you can have in that area for the same price for a couple of months. After that period, like you may go back to the old speed or you may stick to the higher speed. That customers experience the full fiber benefit. That I just started doing to see how sticky that is. Our plan is when you get fiber, same speed, same price, but you get the opportunity to experience the highest speed you have around, and the real benefits of fiber for a short period of time at no additional cost. After some points, your client actually choose, do I go back to my old speed or stick with the new speed? On your question with regards to the one-offs, it somewhat accrued during the year, but the focal point in the second half of the year, it has to do actually with the Telfort migration. That was the driving factor. It has to do with the physical migration of that. It mostly affected the second half of the year, Q3 and Q4. Thank you very much. Can I just follow up, just for clarification. On that changed go-to-market strategy, when would you say? When did that start really in the market? Was that something that started late last year, or was it started earlier? Thank you. Yeah. Well, we started that end of last year, and we're scaling up now. It is for us very important to change the way KPN's working and to reinvent ourselves. This is one of the very important focus areas we were, after summer last year, really working on. We are now seeing the first good results, but we are not done yet there. It is quarter after quarter, we will have to improve on our operational execution. Brilliant. Thank you very much. Thank you. The next question is from Mr. Joshua Mills, Exane. Go ahead, please. Hi there. Thank you for the questions. Just a couple from me. The first was just related to the consumer net promoter score. I think at the end of last year, you said you recognize you've had some friction points. We're going to invest and fix it, which has happened. You stabilized. The question is, can you give us some specific detail on what initiatives you've taken? Maybe an indication as to how much extra investment there was in the quarter to do that? The second question is just related to the copper shutdown trial period. You mentioned as well that a few operators have tried to do this. It takes some time. What kind of issues do you face or have you found when you started this? How long do you think it realistically take from identifying an area where you've built fiber, you no longer need copper, to actually fully removing the legacy equipment, et cetera, and realizing the saving? Thanks very much. Yeah, Joshua, on the first question on the NPS. The NPS was stable. Actually, we see an underlying improvement. The NPS was stable. Mechanically speaking, we re-weigh all these different customer groups every year again. Due to the re-weighing, actually had a negative impact on the NPS. The underlying improvement is about two to three points, officially, we reported it is 11 points. The underlying improvement actually is there. What did we do? I think we spent a lot of money and time stabilizing our iTV platform. Remember, at the time, our iTV platform was new, and our clients had to get to know it, and we had to stabilize it. Secondly, we equipped many of our DSLAMs with more batteries to deal with energy fluctuations, which actually caused, as we understood, more fluctuation in network quality than we had visited so far. It's re-equipping our DSLAM for batteries, stabilizing the improvement on our iTV platform. We scaled up our consumer support and mechanics team, and it took time for these people to work. Before you can have an experienced, well-effective support staff employee, it takes a bit of time before the people get fully effective. That is a combination where we took more money and trained them to be more effective and more efficient, and a few network changes. My estimate, it cost us around EUR 5 million-EUR 6 million this quarter. Q4, some similar number. When I now look at the simple drivers of those costs, call volume service tickets, we were flat with Q4 in terms of call number service tickets. At the end of this quarter, early April, we saw the volumes coming down. Bear with us, it all points towards a normalization and reduction of spend at the end of Q2, beginning of Q3, if the current trend of reducing call volume service tickets actually continue. What we did is it's all about end-to-end steering. Chris mentioned all kind of components and financial effects. What we did is end-to-end steering on a Wednesday morning every now and then. We joined those sessions, it's the network people, the platform people, the customer process people, the sales people. They fully have to understand what's happening when you change something in the back end of the company, then it's affecting the quality on the front end of the company. That is now fully under control. That's how this business should be run in the first place. That's very important, and then we ended up in all these components Chris mentioned, like TV. It's really to have good overview of what's happening in the total value chain of our business. On the copper shutdown, people always talk about the consumer market, but that's the easy part, to be honest. What we see in the six areas we just did is it's important to follow the S-curve, the first and the second wave of customers migrating from copper to fiber. Then there's a third wave, and that's what we call the complementary upgrade. Like Chris just mentioned, we migrate the final batch from copper to fiber against the same price on the copper broadband connection. If you are on a 50 Mb on copper, we move you to a 50 Mb on fiber. After that, we approach these kind of customers to upgrade the service and the RPU, of course. The more complicated part is ISDN2 and ISDN30 for B2B customers and all kind of exotic individual services via copper done for B2B customers. For ISDN2 and ISDN30, we created a solution. Everything has been migrated. All our SME customers have been migrated away from ISDN. That's also good to understand because in the first quarter last year, there were still SME customers on ISDN against a higher price. These kind of services are more complicated. At the end, what we saw is that the main distribution frame is almost empty, but there's always one or two working lines, and at the end you just have to disconnect them because otherwise you can't empty the network. In short, the consumer is more about straight direct migration. In B2B area, we really had to invest in complementary services to facilitate the migration. That's all done now, so that's why we're ready. Thanks for the answer. That's clear. Thanks. The next question is from Mr. Konrad Zomer, ABN AMRO. Go ahead, please. Hi, good afternoon, everybody. Two questions, please. The first one on your CapEx guidance. It was up 15% in the first quarter, obviously because of the fiber acceleration, EUR 43 million. It doesn't look like that acceleration will come down in the next three quarters. Is there any chance you will prefer to not meet your EUR 1,200 CapEx guidance for the year but accelerate fiber even faster? Do you think you have enough leeway to reduce your non-fiber CapEx in the remaining three quarters? There is clearly the risk, in my opinion, that your full-year CapEx guidance might not be fully met. My second question is a bit shorter. Can you indicate what proportion of your cost savings target of EUR 250 million is specifically related to the copper decommissioning? Thank you. Konrad, on your second question, a very small amount. I think you're looking at EUR 10 million, EUR 20 million, that order of magnitude. The copper decommissioning will really kick off in 2023. Yeah. As from. As of 2023. There may be some small savings, but think about a double-digit number, maybe EUR 20 million, EUR 30 million, but the most of it really is kicking in after the completion of this cost-saving program. Okay. CapEx? On CapEx, well, I think you're completely right. Look, we stick to our EUR 1.2 billion CapEx guidance. It's very clear. Of course, fiber spend has been significant. Non-fiber spend is coming down a little bit, even if you see some increase in consumer CapEx. It's just a bunch of programs that we were running last year to gradually have to scale down. You can't just turn off the tap. We had a plan, and have a plan to get non-fiber spend down significantly, and that requires scaling down some of the programs. Notably in the first quarter, we did spend some more money on mobile site swaps. I think our mobile site swaps is now well over half of total. If you do it traffic weighted, it's even more. On mobile, some of the other programs, it takes a bit of time to scale them down, but we do stick to the EUR 1.2 billion CapEx guidance. Okay, that's clear. Thank you very much. The next question is from Mr. Steve Malcolm, Redburn. Go ahead, please. Good afternoon, guys. I'll go for the two questions as I'm alone. Just coming back to the copper decommissioning. Can you just outline any regulatory requirements you need to meet? You may have touched on Joshua's question. If you did, I missed it. I apologize. What protections do your wholesale customers have here? Can you force them to migrate their existing VDSL customers to fiber? Does that go through some sort of regulatory arbitration? Just looking out to the sort of 2026, post-fiber CapEx point you talked about. This being the telecom sector, we penalize you when you generate too much cash, and we worry when you generate too little. When you start to generate too much, we worry it's going to get taken away. Have you had any discussions at all with the regulator about what the world looks like in your post-fiber world, and been able to get any sense of future regulatory protection for the investments you're making today? Do you think that the presence of APG as a co-investor could help you on that front? Thanks. Well, on the decommissioning, one of the reasons we really kick off as from 2023 is because of regulation. We cover one-third of the Netherlands on fiber, and in most of the areas we announced the decommissioning of the copper network. We agreed with our regulator on an announcement period of two or three years. After that, our wholesale customers have to be migrated to fiber just as we ourselves have to do that. Works quite well, by the way, because of the success of fiber, we see other players on our network being super successful on fiber. 22,000 connections added last quarter. Strong growth there. That's also because they migrate from copper to fiber in these areas, and they know they have to do it. We follow that. We follow our own migrations, and we follow the migrations of our wholesale partners because they all have to be there at the same time. That's why we announce it a couple of years upfront, we start the real decommissioning. Did you give a number in terms of penetration or reach that you've got to hit to decommission copper? I didn't catch that. Is it at your discretion? Well, it's at our discretion, but the most efficient way is of course to move to as low as possible penetration grade on copper before we start to decommission. Otherwise, we face a lot of customers to migrate. That's why we currently, in that new fiber approach, move. Our customers faster to fiber for two reasons: to sell off, the commercial flow works better, but also to, in the first two waves of the S-curve, as I call it, make sure that most of the customers of KPN are migrated to fiber. We see wholesale partners doing the same thing. We learned a lot on how to manage fiber and how to migrate customers to fiber since 2008. I think we do it in a much smarter and a more efficient way today than we did 10 years ago. The whole regulatory framework is followed by us. That's why we take 2023 as the real year to really kick it off on a large scale. Okay. That's very helpful. Thanks. On your second question on the future regulatory framework in 2026. Well, your crystal ball is as good as mine. I'll take that Chris. We're not regulated today, right? The current regulatory framework, the EECC, that's about to be in place that I think has a horizon that's supposed to extend for a few years, explicitly talks about protecting digital infrastructure investments. Secondly, it says, if you have to provide open wholesale access and have to give someone else a viable business case, viable economic case. We believe we do. As far as I can see, I don't have a reason why that would not be the case in 2026. Of course, it depends on a number of variables, but there's no deal or agreement at this point on what the world looks like post-fiber rollout. When I look at the current regulatory framework and the horizon it's supposed to cover, I don't see an immediate threat on the horizon. To add on that, of course, we discuss our fiber strategy with the government frequently because what we are doing is super important for the digitalization of the Netherlands and also very helpful for Dutch economy. For us, it's very important that we are supported by the government to make this possible and make it happen. When we discussed this at the Ministry, they're very supportive. It's not only important for KPN, but it's important for Dutch economy and the Netherlands as well. Okay, that's pretty clear. Thanks, guys. The next question is from Mr. Simon Coles, Barclays. Go ahead, please. Hi, guys. Thanks for taking the question. It's just on mass market service revenue guidance. We have pretty good visibility on consumer and wholesale is going well. I just wanted you give a bit more color on SME because I think in your comments, Chris, you gave something around, it's been stable for the last three quarters on an underlying basis. Can you give us some more color on sort of the moving parts? There's obviously a roaming impact this quarter, but then you're saying broadband looks strong and there's some interesting developments. Yeah, any more color around SME would be very useful. Thank you. Yeah, sure. On the SME, if you look at that presentation on the business page, you can see the quarterly SME revenue numbers. You see last year around EUR 140 something revenues in the Q1, Q2, stepping down to EUR 133-EUR 135 in the subsequent quarters. That step down was due to the PSTN, ISDN migration shutoff. That was a specific self-induced, self-inflicted markdown in service revenues. With that, you see the numbers on SME to be quite stable for the last three quarters, Q3, Q4, and Q1. That's one thing. Second element is it's mostly mobile. In our SME business, the mobile revenues weigh relatively heavily compared to large corporate clients. The share of mobile on SME is relatively significant. That means that the roaming step down, compared to the first two months of last year, is particularly visible in SME relatively LCE simply because the share of revenues. It's over 40% share of revenues in SME and about 20% in LCE. You could see that that roaming thing hits SME mid-corporate more than LCE. The point I'd want to make is roaming and mobile is going down. Mobile's going down or has some headwinds because of roaming. Also, there is price competition. Let's be clear, RPU is under pressure in mobile. That affects your SME. Broadband network service, IT service is doing quite well in SME. Base okay, but pricing good. That altogether leads to a step down in SME. Again, that really has been almost offsetting into the service revenues for the last three quarters. When you look at that, I would say, Q2 to Q2 will still be challenging because we're only today at EUR 135 or it's EUR 133 is service revenues of the quarter. Last year, Q2, you were at EUR 140, EUR 142, EUR 143, I believe. In the second half of last year, the year-on-year comps will become much more friendly, much more supportive. Also because of roaming. It's a comp issue. It's a issue of the shut off of ISDN, PSTN migration last year. The fact that mobile service revenues and the roaming delta and competition just weigh more heavily on SME than LCE. That's very clear. Thanks. On the competition, though, it's still tough in mobile, but you're not seeing any issues in the broadband side by the sounds of it? Not major issues. Well, life is not life stuff out there, but we're seeing more fierce price competition in mobile than in broadband at this point. That's great. Thank you very much. I think our strategy also is to increase cross-sell. KPN EEN is now at 25% of our customers have triple play services. That will and also needs to increase. One of the critical factors for us is to increase that cross-sell ratio. Critical factor is to increase the amount of unlimited to counter mobile competition. As I said, price competition is more heavy, more prevalent in mobile than in broadband at this stage. That's very clear. Thank you. Okay. Thanks. With that, we will conclude today's webcast. Thanks for your attention. If there's any further questions, as usual, please contact the Investor Relations team. Thank you. Thank you. Thank you. Ladies and gentlemen, this concludes today's presentation. Thank you for participating. You may now disconnect your line. Have a nice day.