Good day, ladies and gentlemen. Welcome to KPN's Q3 2022 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 * 1 on your telephone. I will now hand the conference over to your host for today, Reinout van Ierschot, Head of Investor Relations. You may begin. Thank you, and good afternoon, ladies and gentlemen. Thanks for joining us. Welcome to KPN's Q3 2022 results webcast. With me 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 2 of the slides, which also applies to any statements made during this presentation. In particular, today's presentation 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. Let me now hand over to our CEO, Joost Farwerck. Thank you, Reinout, and welcome everyone. Let me first walk you through some of the highlights of this quarter. We continue to make good progress against our strategic and financial ambitions. Group service revenues grew for the fifth quarter in a row. We saw a healthy customer inflow in consumer and business, especially in mobile. Business service revenues grew for the Q2 with SME again making a strong contribution, and we see ongoing growth in consumer mobile service revenues, partly offsetting the competitive dynamics in fixed. The improving revenue trends and sequential improvement in net promoter scores in business and consumer show that our commitment to customer centricity has paid off. ACM declared our improved fiber wholesale offer binding. The new offer has been effective since the end of August and is applicable for a period of eight years. This enables us to continue to roll out fiber at a fast pace and maintain our successful open network policy. With solid adjusted EBITDA growth in the Q3 and a strong year-to-date free cash flow, we remain confident to deliver on our recently upgraded full year 2022 outlook despite the current economic environment. Looking ahead, we keep working hard on mitigating inflationary headwinds. We are fully committed to our accelerate to grow strategy. We stand out as a stable company and taking into account the pricing mechanisms we have in place, our cost reduction program and a stable CapEx envelope, we are confident we will deliver some growth next year as well. In the Q3, we've made solid progress and rolled out fiber to 76,000 households. We are on track. The rollout speed in terms of homes passed slowed a bit in the Q3, partly due to the holiday season, but also because of a change in rollout strategy where we accelerated rollout in streets and delayed a bit in connecting households to optimize the use of labor capacity available. Together with Glaspoort, our joint venture with APG, we connected fiber to 123,000 households, and we currently cover approximately 46% of the Netherlands with fiber. As we continue to roll out fiber, our growing fiber footprint will result in an improved penetration rate for retail and wholesale. We feel all this effort bearing fruit in our financials. Looking at our Q3 results, we currently generate about EUR 940 million of annualized fiber service revenues, and this number is growing rapidly, driven by a growing base and improved and attractive ARPU. All in all, fiber is clearly at the heart of our strategy to create long-term value for all stakeholders. Let's now move to the consumer segment. Adjusted consumer service revenues decreased by 0.8% year-on-year as consistent mobile service revenue growth was offset by lower fixed service revenues. Consumer fiber broadband revenues showed continued growth while copper and legacy maintain its anticipated decline. Customer satisfaction remains one of our top priorities, and it has been pleasing to see our effort pay off in this area with an NPS level that is rising again to 18. Now, let's take a deeper look into our Q3 KPIs. Our retail fiber base increased by 37,000 new customers offsetting copper churn. This led to 4,000 broadband net adds, which we consider solid given the aggressive promotion by our main competitor in a part of Q3. Our fixed ARPU remained broadly stable at EUR 53. As you can see, the fixed service revenue trend is slightly better than seen in the previous quarter and appears to be bottoming out. We continue to see solid trends in mobile. Our postpaid base increased by 38,000, and our postpaid ARPU was broadly stable. Combined, this led to 2.2% growth in mobile service revenues. Let me now move to the B2B segment. We saw continued service revenue growth in our business segment. B2B adjusted service revenues grew more than 3% year-on-year in the Q3. SME is the main engine of B2B growth, driven by solid commercial momentum in both the broadband and mobile portfolio. LCE service revenues were almost stable, partly supported by a small one-off. Nonetheless, underlying the overall trend continues to move in the right direction, and we expect inflection in LCE next year. Tailored solutions continue to perform in line with expectation. As you know, this business always remains subject to timing in projects and related sales, but also on the tailored solution side, a good performance in Q3. Business NPS returned to +4 despite the volatile economic environment. Customers continue to value KPN for stability, reliability and quality of our network and services. I'm happy with both on the consumer and business side, the high NPS, especially when you compare KPN with our competitors. As you can see on this slide, we see improving revenue trends across the board. This, combined with the sequential improvement in Net Promoter Score bodes well for the future. In wholesale, service revenues increased around 1% in the Q3. The growth rate leveled off a bit compared to the other quarters, but this was mainly due to a tougher comparison base. Adjusted for positive one-offs in the Q3 last year, underlying growth was still around 4%. In Q3, we've added 18,000 post-paid SIMs and 10,000 broadband lines. Now, with this, let me now hand over to Chris to give you more details on our financials. Chris? Thank you, Joost. Let me now take you through our financial performance. Let me start by summarizing some key figures for the Q3. First, adjusted revenues increased 1.9% year-on-year, mainly driven by growth in business and consumer mobile and higher non-service revenues. Please allow me to point to the cumulative 92,000 net adds in consumer mobile we've gained since the beginning of the year. Second, adjusted EBITDA after leases increased by 1.8% year-on-year. In this inflationary environment, we were able to keep EBITDA margins stable at 46.2% as cost savings from further simplification and digitization were partly offset by inflationary effects, such as wage indexation and rising energy costs. This all translated into EUR 30 million of net indirect OpEx savings in Q3, or EUR 34 million year-to-date. Please note that in this EUR 30 million, we absorbed EUR 3 million of increased energy costs. Third, year-to-date free cash flow increased 26% compared to previous year. This is mainly due to higher EBITDA and lower CapEx because of inter-year phasing. Our free cash flow margin has improved further this year. More on the underlying cash developments later in this presentation. Group service revenues increased by 1.1% compared to last year. It is mainly underpinned by strong growth in our business segment, while mass market service revenues continued to grow as well. Business service revenues grew by more than 3%, driven by continued strong performance in SME. While the trend in LCE is gradually improving, the shrinkage is declining according to plan. Wholesale grew about 1% year-on-year despite facing a tough comparable quarter from last year. In consumer, our service revenues declined by about 1%. The trend improved a bit compared to previous quarter, though still negative. In this number, mobile service revenues continued to grow and record a 2.2% increase. In fixed, we report a decline in service revenues of 2% as growth in fiber was still offset by declining legacy services, less voice traffic and the accounting effect for content packages. For the remainder of the year, we still expect to see some technical headwinds, but the trend in consumer fixed is clearly bottoming out, supported by implemented price adjustments and commercial improvements. Of course, by Q1 next year, we'll see the lapping of the accounting effect. Overall, we're proud under all definitions, whether it's mass market or group revenues, service revenues or total revenues, in any perspective, our revenue base grew in the Q3. Adjusted EBITDA grew by 1%, 1.8% compared to last year, driven by service revenue growth and lower indirect costs, partially offset by EUR 27 million higher direct costs. Factors for the increase in cost of goods sold were the impact of higher non-service revenues, such as handset and hardware sales, third-party access costs such as cross-connect, and a change in service revenue mix in B2B. Our personnel expenses decreased by EUR 13 million, despite a one-time employee benefit of about EUR 5 million paid out in July. This reflects a structural shift in personnel efficiencies due to the digitalization of KPN, as well as some natural attrition. Although OpEx was up almost 6%, mainly due to higher energy costs. For 2022, we expect energy costs to be about EUR 10 million higher than last year. As said before, year-to-date, we saved EUR 34 million of indirect costs after having absorbed this increase in spend on energy. With respect to 2023, next year, we expect energy usage to decline about 5%, driven by several measures. We have now hedged about 75% of our expected energy consumption for 2023 at an average price which is unfortunately nearly twice the level of this year. At current energy prices, and taking into account the 25% energy consumption we want to buy on the spot market, we expect about EUR 50-60 million higher energy costs next year. In 2022, we have been able to offset the industry-wide inflationary pressures on energy and labor costs. We are, of course, not completely immune to this, and next year will be more challenging. To manage the impact of inflation on our EBITDA, we've increased prices and even have implemented a series of additional cost-cutting measures. This year, we've seen strong underlying cash generation. At EUR 673 million, our free cash flow year-to-date are substantially higher than last year, and the cash margin over revenues moves up to 70%. An improvement mainly a result of EBITDA growth, lower CapEx due to inter-year phasing and less cash interest paid. We continue to have a strong and resilient balance sheet at the end of September. As a result of higher interest rates on floating debt and other corporate actions, the average cost of senior debt increased by 46 basis points year-on-year. Early September, we issued a new hybrid bond and put out a tender for our March 2023 dollar hybrid. The successful placement in combination with the tender enabled us to protect our hybrid equity credit from the rating agencies, while limiting interest costs as we managed to match the existing interest rate of the new and the old bond. Our next bond redemption only takes place in 2024, which gives us plenty of time and flexibility in the current volatile markets. In Q3, net debt increased by EUR 184 million compared to the previous quarter, driven by the final dividend payment in August and our share buyback program. This, of course, was partially offset by the free cash flow we generated during the quarter. Our leverage ratio now stands at 2.3 times EBITDA, comfortably below our ceiling of 2.5 times. The acceleration of growth of our cash margins increases our flexibility around capital deployment. Total liquidity of KPN remained robust at the end of the quarter. It consists of EUR 1.4 billion in cash and short-term investments and our undrawn revolving credit facility. This cash, this liquidity comfortably covers debt maturities for the next two years. In Q3, we made very good strategic progress and delivered solid financial results. Therefore, we repeat and confirm our recently upgraded 2022 guidance of at least EUR 2.4 billion EBITDA and a free cash flow of about EUR 850 million. CapEx will remain stable at EUR 1.2 billion in 2022, but also, let me stress, but also for 2023. With this, we believe KPN demonstrates resilience in the current economic climate. Looking ahead, though, there is obviously a degree of uncertainty about the impact and duration of inflation, mainly on energy. We continue to work hard on mitigating measures to help offset these headwinds. Moreover, demand for our essential connectivity and communication services remains solid, and we have a robust liquidity position. We continue to manage our business and closely monitor several business drivers, including payment behavior of our customers and our dynamic credit quality. So far, we've seen limited impact on this front, but we remain alert. Even though our earlier set of EBITDA and free cash flow for 2023 ambitions are now not likely to fully materialize, KPN's positioning remains stable and defensive in a dynamic environment. At current inflation levels, we actually expect to deliver slight EBITDA growth next year. Hence 2023 will not dip below 2022. As some say, we're not immune, but we are quite stable and resilient. As is customary, we'll specify our full year 2023 outlook at the Q4 2020 results. To summarize, KPN generated solid results in the Q3 and is trading well. We see sustainable growth in group service revenues with positive signs across all segments. Our EBITDA and cash margins continue to grow, and we feel confident about the cash generating ability of our group. To me, KPN demonstrates healthy margin, earnings and cash flow resilience in turbulent times. Our fiber rollout program has maintained a solid pace and has a proven attractive return profile. As such, driven by our solid performance year-to-date and successful execution of our strategy, we repeat our 2022 guidance. Obviously, there are headwinds out there, particularly around inflation, and we're implementing measures to mitigate this impact as much as possible to remain on track financially and operationally, and still deliver some slight growth next year. Thanks for listening. Let us turn to your questions. Thanks, Chris. We're now moving to Q&A, and as usual, please limit your questions to two each. Operator, over to you, please. Thank you. Ladies and gentlemen, we'll now start the question and answer session. If you would like to ask a question, you may do so by pressing * 1 on your telephone keypad. We will now take the first question from Keval Khiroya from Deutsche Bank. Please go ahead. Thank you for taking the questions, and I've got two, please. Firstly, Chris, you mentioned that you don't expect 2023 EBITDA to dip below 2022. Is it possible for you to say anything more about free cash flow and whether we still expect the 2023 free cash flow to be above 2022? Secondly, you've previously described buybacks as being part of the structural additional return of capital. Should we still expect you to carry out a buyback in 2023, bearing in mind the current backlog? If so, should it still mean you're distributing roughly 100% of free cash flow through dividends and buybacks? Thank you. Yes, Keval. Indeed, on EBITDA, I said we've given some indication. Obviously, we'll give you a more detailed, specific, a number, if you wish, around our Q4 results, as we always do. EBITDA shows slight growth, but not to the initially, yeah, aimed for level. On free cash flow, we're looking at a similar story. In free cash flow, there are multiple moving parts. If you peel down, you peel the onion, your EBITDA will be up slightly. CapEx will be stable around 1.2. We'll obviously pay more taxes next year. We flagged that before. The way the government enables us to treat our net operating loss changes, our taxes will go up significantly. You'll save some of our interest costs. We see opportunities on working capital. I think on what the line item delta provisions will improve. I think the cash element of our earnings will go up. Restructurings are stable, and pensions, I think there's a small opportunity. If you take all those moving parts with, you know, slight growth in EBITDA but increase in taxes, I think our free cash flow will show a similar pattern, similar growth profile as our EBITDA. Flat to slightly up, certainly not below this year. We see opportunities for slight growth in free cash flow. Again, we'll give you the formal guidance by Q4. Your other point on capital return. Look, our balance sheet is healthy. We're still running at 2.3 times net debt EBITDA. That will probably drop to around 2.2 times by year-end, as in the last quarter, we generate cash but have limited cash outflows. I mean, you've got significant headroom and, for all intents and purposes, I still work on the assumption that we return our free cash flow to our shareholders in a mix of dividend and buyback. At this point I see no reason to change that. That's very clear. Thank you. The next question comes from Georgios Ierodiaconou from Citi. Please go ahead. Yes. Good afternoon. Two questions from my side as well. The first one is just a bit more clarity around energy cost. I believe, Chris, in the previous conference call you mentioned around a 1.5% impact. Now it looks like it could be roughly EUR 20 million more than the Q2. Do you mind just giving us indications as to how you arrive at this outlook for next year? Are you being a bit more conservative because of how the prices turned at during September? Or is it purely spot that you are using right now? My second question is around the fiber deployment. I appreciate you just mentioned the EUR 1.2 billion for next year as far as CapEx is concerned. I was wondering, you mentioned also the bottlenecks you are facing now in terms of the rollout and the fact that you are prioritizing connections. Should we assume perhaps a slightly slower rollout than previously guided, given some of the inflationary pressures in terms of labor costs? Or do you still stand by the previous rollout targets? Thank you. Okay. Georgios Ierodiaconou, on energy, I think it's our sad fate that we're all becoming energy specialists these days. I'm gonna give you a comprehensive answer to how we look at energy, right? On total energy consumption, we're reducing our consumption. Think about 2020. We had a total 460 GWh energy consumption. We'll move it down to 435 next year and possibly down below 420-425 next year. Step one is to reduce the energy consumption. For 2023, we're now 77% hedged, so 77% of our energy consumption has been bought forward. The remainder we'll buy on the spot market. Some details. The average price is about EUR 145,000 per GWh, which is, you know, a mix of different purchasing moments, right? The remainder will be bought on the spot market. You know, the spot market is trading around, depending whether you use peak load or base load, around EUR 330,000-350,000 per GWh. That will buy the remaining 23%. With that, you get to about EUR 50-60 million more on the commodity for next year. That's mostly a function of, you know, the hedges that we took, the energy we purchased during the summer. Now it has come off a bit. Let's see where it is. We feel comfortable that we are moving towards spot purchases from here on. The futures is on average so far, 145K. The remainder will be probably north of 300. At least if you look where current trading is, that will give you a EUR 50-60 million energy price increase. The volatility around it is relatively limited in the sense that if you look at our aim to reduce the energy spend, the remaining 23% and reasonable volatility in energy prices, I think the range around is probably ± EUR 8-10 million, right? It could be EUR 8 million better, could be EUR 8 million worse. To some extent, we've got a reasonable visibility on the energy spend as we've bought 77%. As I said, EUR 8 million ± is the range that we can see around it for next year. To some extent it has been locked in. The biggest question is where the spot market will come. Interestingly, if you look at spot energy for the spot market today is still a lot below the forward market. The way the spot and forward energy price will converge will drive where you end up in that EUR 8 million bandwidth. Hope it gives you a bit of comfort on control details on our energy spend. When it comes to fiber, indeed, our CapEx will be EUR 1.2 billion next year. When it comes to our rollout strategy, there are two things at play. One is KPN rolled out 76,000, but Glaspoort did more. The entire KPN ecosystem, KPN plus Glaspoort together did 120,000 fiber rollout. That's actually still on track. KPN and Glaspoort together will have a record year in terms of how much fiber we roll out. We don't intend to slow down the pace. I think we're trying to see if we can actually increase the pace a bit. How will it fit into the CapEx envelope? Optimizing the rollout strategy by optimizing our Homes Connect percentage, as Joost said, by looking at how we mix and manage the Homes Connect strategy and how well you balance going to the street and connecting homes. I don't see us slowing down on fiber. That would be strategically unattractive. It will be kind of keeping up the pace. Probably do a bit more on the KPN side, but optimizing the way we roll out. Very clear. Thank you. The next question comes from Luigi Minerva from HSBC. Yes, good afternoon. Thanks for taking my questions. The first one is on the broadband promotions that we saw in September. I mean, generally, it's a question about the competitive environment going forward. You know, I'm wondering, you know, what is your view, in terms of, you know, what kind of prompted your competitor to launch those promotions that obviously you followed? What was the trigger there? Most importantly, how to avoid that this becomes a sort of a recurring pattern in the market? Because, I mean, the market structure is actually, you know, a very constructive one, I find. It should be possible to avoid this recurring promotions. The second question is about the cost of debt now is going up because 36% of your debt is on variable rates. I'm wondering, Chris, you know, how do you feel about this and how to reduce the rates risk going forward? Thank you. Yeah. On the broadband promotions, indeed, in the Q3 we saw a pretty aggressive discount on prices, yeah, on the competitor side. I think it was for almost two months in the market, so that's a bit of a traditional approach, to be honest, I think, and also something we really should try to avoid. In total, I see the market value of the total market growing. ARPU's go up in general in the Netherlands. Mobile's growing on all service provider sides. On broadband, I think there's a lot of value for all to protect. But every now and then, people, I don't know, get nervous. Sometimes there's a lot of pressure. I mean, we did grow last quarter, 4,000. Other players on our network grow faster. There's a bit of pressure then on the other side. For us, it's very important to stay away from that and to differentiate ourselves in a different way, not on pricing, but on the services we deliver, on the quality we deliver. There are things one can do with fiber you cannot copy with coax, for instance. I mean, we can go to every household with 10GB. We can go to every room with 10GB. We can offer 3 or 4 connections to a household via one fiber connection. In the future, we will for sure, that is one of our strategic objectives, make sure that we differentiate on the services and not only on the tariffs. For now, we did pretty okay. We did grow 4,000, although that campaign was out. I think all in all, super important that we do not follow all kind of pricing things out there in the market. We should play the game of being market leader on quality, and people pay for that. Chris, cost of debt? Yeah. On cost of debt, you said rightly so, our book is at 36%, floating. This year our interest expense will be roughly flat. We're just ahead of last year interest savings, but there will be some coupon payments at the remainder of the year. This year, interest payments will be flat. I think next year a few things are at play. Of course, we've got some senior bond redemption this year that we issued. We did a tender on the US dollar hybrids. I think net-net we reported interest in our free cash flow will be down about EUR 10 million next year. That's under the assumption that in the scenario that the short-term rates six-month Euribor gradually moves towards 3%, which I think also is the consensus where the ECB ends up with its rate hiking process. Under the assumption short-term rates move to about 3%, our reported interest will be going down by EUR 10 million next year. Now, that's a bit not a completely fair comparison because the new hybrids will be no longer in our free cash flow. It's an equity credited instrument. If you correct for that, the underlying cash out from rates will be up about EUR 10 million next year. I think it's a manageable amount. Of course, if we do refinancing earlier or change our refinancing of the 2024 bond, that changes. Underlying, assuming on the scenario that short-term rates move to 3%, we'll be paying EUR 10 million more, but are reporting EUR 10 million less simply because the reclassification of the hybrids. I think that's all a very, you know, manageable amount. Can we do something about it? Well, we could restrike some of our floating rates to fixed. We're always looking at opportunities. It depends a bit on, frankly, on the steepness of the curve, how the yield curve looks. We look at some Euribor restriking, but overall, I think the floating rate exposure is, you know, manageable given that it's a EUR 10 million swing in the year that should be manageable in light of our total free cash flow. Great. Thank you very much. The next question comes from Andrew Lee from Goldman Sachs. Please go ahead. Yeah. Good afternoon, everyone. I just had one question on your 2023 guidance, to come back to that, and the lowered EBITDA guidance you gave today. Could you clarify if that's simply a timing issue of a lagged impact from your price rises in 2023 that won't fully offset cost inflation until the back end of 2023, and therefore, there should be no change to 2024 expectations? Or have you changed your structural view on your ability to offset cost inflation with price rises? Is it either a timing issue or a structural change in your view on your ability to mitigate cost inflation? Thank you. Good question. It's too early to say what's gonna happen in 2024 because what energy price will be in 2024. I think we have been able so far to reflect all the price increases or cost increases into price increases, right? Still reasonably moderate. Our estimate is that our price increase will give us EUR 100 million plus into revenues next year. If you just simply multiply delta price by base. I think that will then be absorbed by energy costs, labor costs, and lease costs. I think if I'm completely fair, the total now of price increases given the energy increase is slightly above what we can price to customers. The difference is that compared to last year, price increases cannot at this point be used to expand your margins, right? You use your price increase to compensate for cost, not to boost your margins. Margin growth will have to come from volume increase in sales or lower unit costs. Look if energy prices correct later on and if your spend in 2024 becomes less, the whole thing looks pretty rosy because then you'll see a significant price increase, EBITDA increase. I mean, look, if you look at EBITDA next year on like EBITDA ex energy, even if there would be a significant increase. I think my answer is this. One is price increases at this point are very close to compensating for cost increases, but cannot expand margins. Yeah. For 2024, it depends on how energy evolves. If energy prices correct and normalize, then we can discuss what normal is, the lease drops, then you see a lot more tailwind for 2024. Unfortunately, I can't promise that. Thank you. Very helpful. The next question comes from Joshua Mills from BNP Paribas Exane. Hi there, thank you for the two questions. The first one, which is related to cost savings. I think you said in the past that while your overall ambition to deliver the EUR 250 million of cost savings remains, it might take longer to deliver. Modeling through the headwinds you've talked about so far during the call, it looks like your delivery on costs next year will be one of the key drivers of getting that EBITDA positive again. My question on costs is, based on run rate you see today, what kind of magnitude do you expect to save next year? Will it be higher than in 2022? That's the first question. The second question, Chris, is coming back to your comments on free cash flow being possible to grow in line with EBITDA next year. Are you referring there to the KPN defined free cash flow or the real free cash flow post the hybrid coupon interest, which as you say, is gonna be higher? Thanks very much. Yeah. On the cost savings, of course, we've built a track record on saving costs in the past. Two years ago, we moved to the wish to accelerate the growth of our top line. For the fifth quarter in a row, I'm satisfied with the growth we are developing. It's important for a company like KPN to shift from only cost cutting to grow. Having said that, and looking at inflation effects on costs, we are installing an additional cost saving program to make sure that we will gain additional cost savings. Last quarter was better than the previous quarters on OpEx, and we think it's super important to make sure that wherever we can, we drive the company to more efficiency than before. Having said that, it's also important that we cut in the right cost, indirect OpEx, and that we are sure that we do not make the mistakes as KPN has made in the past, that we go so far on cost cutting, that we also cut in the direct OpEx, the good cost that is supporting the revenue growth. That is very, very important. Having said that, indeed we will focus very tight on cost savings for the quarters to come. Yeah, just shown on your, on our free cash flow, I refer to the KPN free cash flow, which is a reported free cash flow that will deliver similar performances as EBITDA. Of course, if you adjust for the reclass of the hybrid interest expenses, there's more work to do. It's our aim to have it grow as well. We definitely will be working on that, but would like to give a commitment on the KPN free cash flow. Understood. Thank you. The next question comes from Usman Ghazi from Berenberg. Please go ahead. Hello. Thank you for taking the question. I've got two please. The first question, Chris, is just on, again, on the free cash flow bridge that you built out for 2023. I mean, it's interesting that you said that for pensions there could be a small opportunity given obviously the decline in asset values and KPN does have a defined benefit scheme. Could you talk us through how you see this as a potential tailwind rather than a headwind? And then on working capital as well, given you know the comments from peers that you know they might have to support SMEs and things. It's just, I mean, if you could give us some comfort that those two areas could be tailwinds for 2023, that would be helpful. My second question was on the copper shutdown that will start in Q1 2023, I mean, 2.3 million premises. Is that on plan? Is there? Because I know that the wholesalers are pushing back against this. I mean, is there any risk that that gets delayed? If you know, assuming it does go through, you know, just from the outside, it would seem that that could have quite a transformative effect on your cost base, given it's a big portion of the homes passed or the homes that could be shut down. How are you thinking about that? Thank you. Yes, on free cash flow on pensions, indeed, we by and large, we pay a DC free cash flow or DC pension arrangement, that doesn't really affect us because we're paying a fixed set of premiums. However, we still have some old Getronics pension funds in the U.K. and the U.S. that are defined benefit, for us. There's about a EUR 70 million DBO on our balance sheet. Interestingly, it's actuarial magic, but because interest rates increase, and the rate curve has changed, that DBO is declining. There might be opportunity to close those pension funds, do lift outs, buyouts, et cetera, and reduce on pension payments there. It's a matter of trying to use the opportunities that the U.S. rate, U.S. and U.K. rate environment provides to the actuarial provisioning for these pension funds. That's actually a small opportunity to optimize cash flow this year and next year. Our working capital, we still see opportunities. We have really not used any handset financing or hardly any. We've some vendor financing, but not a lot in place. That don't mean I really want to massively go out of active handset financing because we have to look at rates of that. But there are definitely opportunities there. The fact is that, for example, we see some opportunities to bill earlier, to optimize the sending of invoices earlier, to manage our inventory levels a bit smarter. And also to point out that legally there will be a requirement in the country to pay our SME clients within 30 days. That's what it take will happen next year. We've already implemented that this year, so we're trying to reduce risks in cash for next year as much as possible and bring forward as much as possible around payment terms, around invoicing times, and then see if we can optimize some of our handset and vendor financing without going overboard on financial engineering or paying too much interest rates. Yeah. On the copper shutdown, you could say we are on track, although perhaps you could also say we should have started a couple of years ago on shutting down some of the areas. We had long discussions with our regulator on how to communicate the shutdown per area. That rule we now follow. That's why we announced lots of areas to start with in 2023. We're in full preparation for that. Of course, some of the players on our network complained about that. Also recently, some complaints have been received, and also T-Mobile started a lawsuit against KPN on us shutting down copper areas where they're still active on the passive layer, but they lost that, or rather, in my words, we did win that. That's all because we just followed what we agreed on with our regulator years ago. We're migrating actively customers in old copper areas to fiber in a copycat kind of portfolio. After that, we're well positioned to upsell to these customers. I expect us to start early in 2023 with the shutdown of the first copper areas. Of course, in the beginning, on the cost saving side, that will not be that significantly noticeable. Moving on in time, it will be significant because it's always related to the usage of energy, the maintenance on the network, maintenance on real estate, and especially on service tickets on the copper network. All in all, the fiber network is far more efficient than a copper network. That will kick in. At the end, the whole idea is that we're building a fiber co. longer, further up on the road, KPN, yeah, will be completely 100% fiber co with all our customers on fiber. That is then an end-to-end, far more efficient company to run than where we are today. I consider that copper migration from copper to fiber as very important and a strategic milestone for us to start with. Just to follow up on your last point, I mean, are the bulk of these savings gonna come when every last copper firm has been shut down or can they start to come in already? No. The most important part is really the maintenance and service costs on a copper network in general. The more customers we have on a fiber network in an area, the more efficient we are. With service tickets, I mean, customers calling our company with a problem. A field engineer goes out to fix it. On a copper network, we have far more to fix than on a fiber network. Fiber you can really run from a distance. In copper, we have to do all kind of things in street cabinets, main exchanges, at the customer's premises. I think it's really on the costs how to run that network. Okay. Thank you. The next question comes from Jakob Bluestone from Credit Suisse. Hi, thanks for taking the question. Got two fairly short questions. One, getting back to the issue of cost inflation. Can you just update us on when you have your next round of negotiations on wages? I'm not sure if you'll be able to sort of comment on, you know, the sort of parameters of those discussions, but I think the Dutch minimum wage went up by 10%. Secondly, can you maybe just comment on how your latest price hike in mobile landed? I think you put through 6% price hike in October. Just sort of curious if, you know, we're seeing any higher churn on the back of, I guess, what are a bigger increases than previous years. Thanks. Yeah. On wages, we expect our formal meetings with the unions to start beginning of November. Of course, we're preparing for that, also together with the unions. We are not communicating on that topic. We first wanna sit together and see where we can find a reasonable outcome. Yeah. Hopefully later in the year we can communicate on that. The mobile price increases, I think they landed quite well. We did a steeper increase of prices than previous years, almost 6%. We also communicated that we kept it at EUR 2, so no increases above EUR 2 per month. That landed quite well in the market. I would say all in all, our price increase on the mobile side landed very smoothly in the Dutch market. Okay, thanks. The next question comes from Stephen Malcolm from Redburn. Yeah. Hi there. Stephen Malcolm. I'm sure you probably realized that. Yeah, afternoon guys. A couple of quick questions if that's okay. First of all, just on the wholesale business, can you maybe, I mean, I know underlying growth is around 4% this quarter. You're gonna sort of make a few tweaks to get there. In light of the recently sort of slightly tweaked wholesale agreement you have with the Dutch regulator, can you just kind of give us a sense of whether you think you can maintain sort of low mid-single digit growth going into Q4 and going into 2023? As we look at the different mix of WBA versus ODF, I guess upselling to fiber and all those different moving parts, that'd be super helpful. Just on the cost saving, as you've mentioned, you know, I guess in the past KPN has been a little guilty of cutting into muscle, you know, instead of fat. You know, as a company, I think we all recognize you're very efficient, you're very lean. Maybe you can give us a bit of help as to where these incremental cost saving opportunities are, you know, as you try and offset the obvious sort of inflation in 2023. Thanks a lot. Yeah. On wholesale, growth in service revenues in Q3 was low, but that was really due to comparables to last year. If you look at the numbers, you see broadband growth actually nice. Mobile growth is nice, but the category other was less, which has to do with the one-off benefits last year in the category other. If I look at the underlying drivers, we saw in the summer reasonably, you know, small broadband upticks, but in September already good number. Let's see how it goes. Somehow my intuition tells me that broadband growth. And we see solid growth in postpaid. I don't think wholesale will grow 7%-8% like we did last year, but we could do up to mid-single-digit service revenue growth, is definitely feasible into next year. Maybe even especially on the back of our new wholesale ACM arrangement, where it is okay not unattractive for a third party to sell KPN line. The trend of broadband, I guess, will be fairly okay. ODF, possibly some VULA. VULA will be ARPU enhancing for that mobile, for the wholesale business, and postpaid continues to be strong. I would say low- to mid-single-digit growth in wholesale revenues is really not a strange idea. Yeah, Steve, on the cost reduction side, one of the pillars of our accelerate to growth strategy is simplification and digitalization of everything we do. We have a lot to do there. We're super convinced that we can do far better than we do today. Here at KPN, we have more or less 10,000 people working for KPN, and we probably hire around 2,000, so that's 12,000 people working on a daily basis for the company. I expect that in the future to be much less. It's about end-to-end steering and simplifying customer processes where we can benefit from. We also added programs like looking at overhead. There's a difference between people working on a daily basis on the customer interface that we simplify, and then we can reduce on FTE. We're also looking at FTE reduction on the overhead side, how can we simplify the way we work in offices and that we will do next year as well. Although I know that we should not focus on direct costs that is supporting revenue growth, I'm convinced that we can do a lot there. We started to also close down offices. Our former head office in The Hague, we will close at the first of January to reduce our costs. There are more buildings we will close off also, since people work in a different way today. The way we work is different than post-COVID or before COVID started. There's a lot of opportunities we identified to do on top of the simplification and digitalization to make sure that we can boost the OpEx reduction a bit for coming quarters. Perfect. Can I ask one quick follow, just on your fiber build? I mean, you mentioned the sort of restriction of resources. I mean, are you seeing your competitors having to rein in their ambitions? You know, it sounds like you're still costing a bit more. Are Are you seeing it slow down for, like, the KKR, or is that not something you've noticed so far? No, I think others are struggling there, even more than we are. We locked in a lot of capacity. It's fair to say that the field mechanics are different today because there's a lot to do in construction, anyway. We're working a lot with foreign teams to roll out in the streets. We're working more with Dutch teams to connect in households, and the blend of that is different than it used to be. Staffing is really at the top of our list, and we have deep discussions with contractors how to, in the longer term, reinvent ourselves. The way we connect households is completely different than three years ago. I mean, we always moved into a house to pre-connect. We now do that from the outside, which is an innovation we did together with contractors. It is with the labor capacity available, we try to be more efficient than in the past. I think in the blend, and compared to the others, we have by far the most capacity, but overall in general, labor capacity is scarce and is a challenge for the whole industry. Okay. Thanks a lot. The next question comes from Konrad Zomer, ABN AMRO - ODDO BHF. Please go ahead. Hi. Good afternoon. I'd like to ask a couple of questions on CapEx. Year to date, your fiber rollout has been slightly below expectations every quarter, for reasons you just explained. As a result, your CapEx has also been on a run rate, let's say below the EUR 1.2 billion that you guide for the end of this year. Do you really think you're going to spend, I think it's like EUR 385 million in the final quarter of the year, given that labor scarcity and fiber will continue to be tough? And does that imply that you're gonna spend it on other things than fiber? As a follow-up on that, let's say you end the year with CapEx below EUR 1.2 billion. Does that make it easier for you to look at your free cash flow and the fact that you've done a really good job there to maybe come up with a slightly bigger share buyback in February next year? Thank you. Well, before I hand over to Chris for the difficult part of this question, I would say that I think Q4 on fiber rollout will be better than in Q3. The way we organize our CapEx management is that there's no communication between the fiber CapEx bucket and other things we do where we invest in. If we will perform below the plan on fiber, that will be visible in our CapEx. Yeah. It's pretty clear. The fiber CapEx and non-fiber CapEx are two different buckets, and there's no communication between the two. As you look at our CapEx spend year-to-date, fiber is spending less. Also non-fiber is spending a bit less than last year. I think we'll still get close to EUR 1.2 billion, given the run, and we may end up a little bit below the EUR 1.2 billion. Let's see where we end. There's still a quarter to go. What does it do for our free cash flow? I think we're still sticking to our free cash flow guidance. I mean, this will give us ample of opportunity to also manage our working capital smoothly over the coming years. Do we then come up with a bigger share buyback? I'm not gonna prelude to what we're gonna announce in January. In January, we'll announce our free cash flow and our e-final specific EBITDA guidance and the corresponding remuneration strategy, where our principle is we return our free cash flow to shareholders and take a bit of a long-term view there as well. Mm-hmm. Okay. I think the most important thing to us as a management team is that there's no flow between fiber and non-fiber CapEx. You're not gonna spend more in one bucket because you spend less in the other. Right. Right. Right. That to me is a very important principle how we run the group. Okay. Maybe just as a quick second question on your guidance. Several investors that I spoke to today still refer to your old 2023 EBITDA guidance as a slight improvement versus 2022, i.e. the EUR 2,450 versus the EUR 2,400. That's like a 2% increase. You obviously do not consider a 2% increase to be slight. Is that the correct assessment? Well, look, we're saying indeed the guidance or the ambition we gave at the Capital Markets Day back in 2020, when the world was rosy, the sky was blue. We said we aim for 24% to 2% EBITDA growth for next year. We said the updated guidance, given all that's happening, is above this year, so it's above 0%, but less than 2%. I'd leave it to your models to figure out what number to pull in, what's the number in between. It's slight. It's a bit less than 2%, so I think our growth in EBITDA will be between 0% and 2%. I leave it to your imagination to see what number you can come up with. Okay. That's clear. Thank you very much. Next question comes from Maurice Patrick from Barclays. Hi, guys. Thanks for taking the question. Two very quick ones from me. First one, you know, you talked about LCE inflation next year being sort of broadly flat or slightly down this year. Just curious as to why you're confident it will grow next year. I mean, clearly it's gonna be a difficult macro climate. What do you know that we don't in terms of the drivers of that? Second one is, if I understood correctly, you talked about energy consumption being down 5% next year, so actually falling 5%. If you could articulate a bit about what will drive that decline, that'd be super helpful. Yeah, thanks. On LCE, it's a long roadmap we follow. It's not that we hope for the best. By the way, we almost inflected this quarter, but that's a bit too early to call victory because there was EUR 2 million, so one-off in it. Still, I think organically the run rate is improving in a bit better than planned for. What we do there is that we migrate the whole customer base to a new platform, like we did in SME, but then a different platform. It goes a bit slower. It's more difficult to handle because these are larger customers, and sometimes they don't wanna swap hardware on their side. Now we're over 85% of the migrations, and the last 5% you never do. Learning from what we did on SME, and following the plan and the roadmaps, I think that mid-next year, we for sure will show inflection on that. That is, sometimes it's just following the run rate and keep on executing on the plan, and then it will inflect. SME is a good proof point that it works that way. That's what we're doing on LCE. Although it's a difficult market, what we do is that we migrate these customers to the future. It's lower priced, it's all IP, it's much better, simpler. There's at the end, not that much of a reason to disconnect from KPN once you're on the new platform. That's also why SME is growing as it is today. I'm pretty confident that we will do that. To be honest, I missed your second question. Oh, sorry. The second one was about the 5% energy reduction that you spoke about. Yeah. Maurice, on the drivers of energy reduction. If you think very big numbers on our energy spend, it's about 60% of our energy spend is in our network, which is basically all the central locations, the fiber and the copper network. 25-30% is in the mobile network, so the network of towers and rooftops that we have. Another 10% is the rest, which is offices, buildings, cars, et cetera. Where we'll be saving then, of course, we're shifting from copper to fiber. Shutting down part of the copper network will move us to a much more energy-efficient fiber network. We're trying to optimize heating and cooling, especially in our larger locations. Experimenting with different degrees of temperatures and optimize our cooling there. When you look at the mobile network, there is now increasingly services software available that optimize energy spend and the application of certain spectra on different mobile sites. You look at your individual sites, you look at traffic, you try to forecast traffic, and you might shut down individual sites or take out local spectra on local sites. That will take out energy. As Joost said, we are really thinking our office footprint to see if we can shut down our offices. That is a potential saving. Finally, I think it's mundane in shops, we say, "Let's close the door more often. Use less neon advertising in shops." All the small things together. It's a big chunk on our core network and fiber network. It's a chunk on optimizing energy and congestion or energy and traffic on our mobile sites. There's offices and shops in which you can also do things. Super clear. Thank you. The last question comes from Polo Tang from UBS. Please go ahead. Yeah. Hi. Thanks for taking the questions. I have two. The first one's really just on mobile pricing. You mentioned that your recent mobile price increases landed well, but given that CPI is now double digits, do you think Dutch consumers can absorb double-digit price rises in mobile going forward? My second question is really just to come back to fiber CapEx. Because if you look at Delta Fiber, they appear to be building faster than KPN and spending more than KPN in terms of their fiber rollout. So as a result, does it actually make sense for KPN to accelerate the fiber rollout in order to reduce the risk of overbuild from competitors? Thanks. Yeah, Polo. On first on mobile pricing, for as you know, mobile customer, the life cycle of a mobile customer is roughly 2.5 years. The life cycle of a broadband customer is over 10 years. It's super important that we have the price increase in the contracts on the mobile side, which we have. In our system is that we can do more or less the full CPI correction in mobile yearly. Of course, if yeah, for next year, we see what we have to do, but it's also about communication. That's why I said that we did a pretty heavy, from our perspective, pretty heavy price increase around 6% on the 1st October. It has been communicated in such a way that people accepted this positively. That's because we installed the price cap on EUR 2 all in all. End result, Net Promoter Score improved three points. That can go hand in hand if managed well, I would say. On fiber CapEx, I mean, you're right, Delta is building. You're not right if you say that they go faster than KPN, but they pick areas. When we show up, they withdraw. ODF, that's KKR, is also rolling out fiber in the Netherlands, so it's a bit crowded in our opinion. That's why I also said that we changed the rollout strategy a bit. We go faster in streets, we claim areas, and we take more time to connect households. That's a temporary difference in rollout phasing. All in all, I think that we have a plan in place that makes us go fast. Of course, whenever we can accelerate, we will. Thank you. Okay. Thank you very much for attending this call. If there's any further questions, please contact the KPN Investor Relations team. Thank you very much. Thank you. Ladies and gentlemen, this concludes today's presentation. Thank you for your participation. You may now disconnect. Have a nice day.