KPN Full year results 2007 and strategy update 2008-2010

Solid performance in the Netherlands

Milestone of 500k TV subscribers reached

In January 2008, KPN reached the milestone of half a million TV subscribers. Growth continued to accelerate in Q4 2007, adding 83k new customers, compared to 77k in Q3. TV growth was mainly driven by Digitenne, KPN’s DVB-T proposition. Growth in KPN’s IPTV proposition ‘Interactieve TV’ accelerated, adding customers at a rate of ~1,000 new subscribers per week by the end of December with positive consumer feedback.

Growth in wireless data

Wireless data will be an important source of future revenue growth. In 2007, the volume of data bundles increased rapidly, following the introduction of flat-fee data bundles. Even though revenues from wireless data are so far small in the context of the wireless voice business, they are expected to have a significant contribution by 2010. In addition, Mobile TV based on DVB-H will be commercially launched by mid 2008, following successful pilots in the second half of 2007. By early 2008, KPN expects to have network coverage in almost all Dutch cities.

Step up in TV

In TV, KPN will further step up its value-for-money DVB-T product Digitenne. KPN is poised to reach its earlier communicated share of the TV market of 10% well before 2010, with the vast majority of Digitenne subscribers cancelling their cable connection. Alongside Digitenne, KPN’s ‘Interactive Television’ based on IPTV is positioned as a premium TV offering. The IPTV service is used as the stepping stone for providing TV in the fiber roll-out that will start in 2008. IPTV is expected to make a significant contribution to KPN’s share of the triple-play market in 2010.

Fiber roll-out as of 2008 with a mix of FTTC and FTTH

KPN will start the mass roll-out of its All-IP access network in early 2008. In the Consumer market, KPN will deploy a mix of Fiber-to-the-Curb (FTTC, based on VDSL) and Fiber-to-the-Home (FTTH).

FTTC provides a superior offer compared to those currently available in the market, with a full triple-play capability and with bandwidths of up to 50 Mb/s. KPN will engage in selective regional FTTH initiatives, partnering with building corporations and municipalities. Early examples include Almere and Enschede where KPN has partnerships to connect c.100k households by 2008. FTTH will offer up to 100 Mb/s with voice, broadband, multi-room TV, pilots for HDTV and potential ARPU uplift amongst others from value-added services.