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Executives

Wouter Stammeijer - Senior Investor Relations Officer

Eelco Blok - Chairman of Management Board and Chief Executive Officer

Steven Van Schilfgaarde - Interim Chief Financial Officer

Joost F. E. Farwerck - Member of Board of Management and Managing Director of KPN Netherlands

Thorsten Dirks - Member of Board of Management and Chief Executive Officer of Kpn Mobile International

Analysts

Polo Tang - UBS Investment Bank, Research Division

Stephen Paul Malcolm - Arete Research Services LLP

Akhil Dattani - JP Morgan Chase & Co, Research Division

Dimitri Y. Kallianiotis - Citigroup Inc, Research Division

Timothy Boddy - Goldman Sachs Group Inc., Research Division

Robin Bienenstock - Sanford C. Bernstein & Co., LLC., Research Division

Paul Sidney - Crédit Suisse AG, Research Division

Guy R. Peddy - Macquarie Research

Parin Shah

Frederic Boulan - Nomura Securities Co. Ltd., Research Division

Koninklijke KPN N.V. (OTCPK:KKPNY) Q4 2013 Earnings Call February 4, 2014 9:00 AM ET

Wouter Stammeijer

All right. I hope we have everyone in the room who is in the building. Okay, let's start. Good afternoon, everyone. I would like to welcome you to KPN's Q4 and Full Year 2013 Results Presentation. Let me briefly point out that Safe Harbor statement applies to this presentation and that any forward-looking statements made in this presentation do not differ from those already made in the press release published this morning.

I would now like to hand over to Eelco Blok, CEO of KPN.

Eelco Blok

Wouter, thank you, and good afternoon, ladies and gentlemen. With me today are Steven Van Schilfgaarde, our interim CFO; Joost Farwerck, Head of The Netherlands; and Thorsten Dirks, Head of Mobile International.

Today's presentation will be a bit shorter than usual because we will not go into too much detail on strategy. Instead, we will be holding a separate Capital Markets Day on February 19 at our office in The Hague. There, you will meet our wider executive team: Erik Hoving, our group CTO; John van Vianen, responsible for our business market; Jaap Postma, responsible for consumer; and Jos Donvil, CEO of BASE. All of them will explain on the 19th our strategic and operational progress on their different areas.

In 2013, we continued our clear focus on improving operational performance via high investments in networks, products and services. However, overall, our revenue and EBITDA in 2013 were lower, mainly due to the continued pressure in the Consumer Mobile and Business markets. This was partly offset by revenue growth in Consumer Residential. Our operational performance is on track. We made strong progress with our top priority areas of rolling out 4G commercially, using TV to drive the growth of triple play and making an excellent start in quad play. And we were successful in Belgium with our focus on postpaid and data. We also completed the staff reduction program we started in 2011, which had led to a significant reduction in personnel costs in The Netherlands. And in Germany, the team made good progress on all strategic pillars and was successfully in reaching underlying service revenue growth inflection throughout 2013. I'm proud on the fact that the team in Germany and the leadership of Thorsten delivered on all of their promises for 2013, given the pending sale of E-Plus.

Our investment-led strategy centers around a strong customer focus via best-in-class networks and market-leading products. The consistent execution of our strategy is the main driver behind our improving operational performance. Today, we will share more details with you about our major new simplification program, which will start to deliver results in 2015. Together, this will lead to stabilizing financial performance towards the end of 2014 and free cash flow growth in 2015. I will say more on that shortly.

Subject to the sale of E-Plus, we will recommence paying dividend to our shareholders in respect of 2014. Furthermore, we will potentially benefit from additional excess cash by receiving dividends via our 20.5% stake in Telefónica Deutschland. In the next 2 slides, I will summarize what our strategy has delivered in the past years and look ahead to our strategic priorities in '14 and '15.

The investments in our networks over the last 3 years has put us not just ahead of the competition, but we feel ahead of the curve in Europe overall. In mobile, we have secured the best spectrum we need and have nearly reached nationwide 4G coverage in The Netherlands.

In fixed, we are commercially deploying successive new techniques to enhance copper and the Fiber-to-the-Home rollout has passed nearly 1/4 of Dutch households.

Some of these investments are nearing completion, and therefore, we see reduction in CapEx and reducing execution risks around our strategy. At the same time, we have made commercial investments in new propositions, distribution and customer support. We are de-risking the ARPU profile in mobile, have built an important position in our IPTV and are offering new innovative solutions in the tough business market. Looking ahead, we aim to reach nationwide 4G coverage in Belgium at the end of this year and will further increase capacity of our 4G network in The Netherlands.

In fixed, we have unique opportunity to offer bonded vectoring with speeds of 200 megabytes per second, and as a result, are able to slow down the rollout of Fiber-to-the-Home. Keeping a leading position with our networks and products, especially 4G and IPTV, will drive the take-up of multi-play and reduce churn. In 2013, we have already seen the benefits of our strategy with improved operational performance, visible and strong 4G, IPTV and multi-play growth. We're continuously making steps in the right direction, and I'm confident that by building on the fundamentals that we have put in place, we'll see further operational and financial benefits in the coming years.

In July last year, we told you we will be announcing a new simplification program to follow on from the now completed FTE reduction program. This program is about simplifying our product lineup, related processes and network and IT. The program will result in 1,500 to 2,000 less FTEs in The Netherlands by 2016 and yearly run rate CapEx and OpEx savings of at least EUR 300 million by 2016. Although these savings are very important, that's not the only reason why we are starting this program. We are convinced that moving to a leaner operating model will make us faster and better at responding in a rapidly changing telco environment. Joost will elaborate on this in his part of today's presentation and share further detail on the simplification program on February 19.

Year 2014 will be a year where KPN will see important changes. We expect to close the sale of E-Plus, and we expect to consolidate Reggefiber. Also, externally, we see important changes in the market. We'll remain disciplined in the market and focus on the balance between profitability and market shares. On this basis, we expect a stabilizing financial performance towards the end of 2014.

As I said, we'll be able to moderate some of our investments, and we expect CapEx this year to be less than EUR 1.4 billion, and in 2015, to be less than EUR 1.5 billion, including the assumed consolidation of Reggefiber at the end of this year.

Our cash flow generation will also benefit from the simplification program from lower interest payments in 2015 on lower debt once E-Plus is sold and from much lower taxes we expect to pay. In all, we expect free cash flow to grow in 2015. This does not yet include potential dividends from our stake in Telefónica Deutschland.

If the sale of E-Plus closes as expected, we will recommence dividends in respect of the year 2014. We aim to remain the right balance between our strength in financial profile, investments in the business and a sustainable dividend, which we intend to grow in 2015 based on a growing free cash flow profile.

We expect the payment for the full year to be EUR 0.07 per share, split 1/3 interim and 2/3 final, as we have done in the past. We've said that the majority of the cash proceeds from the sale of E-Plus will be used to increase our financial flexibility and support the execution of our strategy. Clearly, excess cash might originated via dividends received on the 20.5% stake in Telefónica Deutschland that we will retain.

We maintain flexibility around the utilization of excess cash. We stay committed to an investment grade credit profile and appreciate the financial flexibility to adjust our investment strategy if market circumstances requires or opportunities arises. We have no expectation of major acquisitions, but will consider smaller value-creating in-country transactions. Depending on the financial position and outlook at the time, we would assess returning excess cash to shareholders.

Let's look at where we are on the E-Plus sale. In line with expectations in December, the EC announced it would start an in-depth or Phase 2 investigation. In principle, they have 90 working days to make their decision, which brings us to May this year. We are confident that the proposed transaction will receive regulatory approval. After that, we would expect completion in December. And post-completion, we'll own a 20.5% stake in Telefónica Deutschland, which will give us exposure to the strong synergies of the combination and also potentially dividend income.

Now over to Steven for the financial review.

Steven Van Schilfgaarde

Thank you, Eelco. Good afternoon, everyone. My name is Steven Van Schilfgaarde, and I'm the interim CEO since September last year. I will start with the financial profile of the group.

In the fourth quarter, our net debt level remained relatively stable Q-on-Q at EUR 9.8 billion. The slight increase is mainly related to the take-off of EUR 222 million of the Reggefiber shareholder loans from Reggeborgh on the 1st of October.

On a pro forma basis, including the expected net cash proceeds of the sale of E-Plus and including the expected consolidation of Reggefiber, net debt at the end of Q4 2013 was EUR 5.8 billion.

At the end of the fourth quarter, pro forma net debt over EBITDA was around 1.9x. The small increase compared to the third quarter is mainly due to a EUR 76 million lower 12 months rolling EBITDA.

We are committed to maintain an investment grade credit profile also following the sale of E-Plus.

Let's now take a look at our capital expenditures. Group CapEx for our continuing operations for the full year 2013 was, again, around EUR 1.6 billion. Looking back at 2012 and 2013, we can see that our investment levels in these years have been high, not only in our fixed and mobile networks in The Netherlands, but also in Belgium.

With respect to our mobile network in The Netherlands, we swapped all 2G antennas and upgraded to 3G network in 2012 and started our rapid 4G rollout in the beginning of 2013. We approach nationwide 4G coverage next month.

In fixed, we continued the upgrades of our corporate infrastructures towards even high speeds, but also invested in increasing the number of sites connected to fiber and further strengthened our core network.

Customer-driven investments were somewhat lower in 2013 compared to 2012. This was mainly driven by lower transaction prices for customer premises equipment at Consumer Residential.

In Belgium, the high CapEx in 2013 was mainly related to the rollout of 4G and the introduction of 3G dual carrier. We aim to reach nationwide 4G coverage in Belgium by the end of 2014.

As Eelco already indicated, we expect CapEx for the group to remain below EUR 1.4 billion in 2014 and below EUR 1.5 billion in 2015, driven by simplification program and less elevated investment levels going forward, for example, due to the finalization of the 4G rollout in The Netherlands. The CapEx related to Reggefiber is not included in the pie chart on the left side of this slide. We expect this to be less than EUR 200 million per year going forward. When Reggefiber is consolidated into KPN, the expected decline of regular CapEx will partly offset this additional Reggefiber CapEx, meaning as we will be able to consolidate up to EUR 200 million Reggefiber CapEx, while only increasing CapEx of the group therefore by half of that amount.

And other point to make here is the planned lower pace of Fiber-to-the-Home rollout, given the increasing speeds of our copper network.

Let me now take you through our Q4 results. The total revenues for the fourth quarter were down 14% year-on-year or 7.9% on an underlying basis, which is more or less in line with our previous quarters. The revenue decline was mainly due to our Business, Consumer Mobile and NetCo segments. This was partly offset by the continued positive performance at Consumer Residential.

The operating expenses, excluding D&A, were down 5.3% in the fourth quarter, mainly due to lower employee cost in The Netherlands. This was partly offset by the phasing out of handset lease propositions at the KPN and Hi brands, which has led to higher subscriber acquisition costs related to handset that is now recognized as OpEx instead of CapEx.

The amortization charges are much lower than in Q4 2012. This can be explained by the impairment of goodwill at Corporate Market of EUR 314 million in that quarter.

EBITDA, excluding restructuring cost, decreased EUR 257 million or 30% year-on-year. On first sight, it seems that the financial performance in Q4 has deteriorated compared to the first 3 quarters of 2013. However, these are driven by negative one-off factors in the fourth quarter, which I will explain on the next slide.

Reported EBITDA in Q4 2013 was impacted by several factors. First of all, the underlying EBITDA for Q4 2012 was lower than the reported amount of EUR 820 million, mainly driven by a positive incidental as a result of tower sales in The Netherlands. If you complete the same exercise for Q4 2013 and also adjust for the negative impact as a result of phasing out of handset lease, we come to an adjusted EBITDA of EUR 742 million in Q4 2013. This led to an adjusted EBITDA decline of 7.3% in the fourth quarter, which is awfully in line with previous quarters.

Let's skip 2 slides now and move to the group cash flow for 2013. In 2013, our continuing operation generated EUR 489 million in free cash flow, EUR 148 million less than in 2012. This delta can be explained as follows: EUR 463 million lower reported EBITDA and high CapEx due to increased mobile network investments in The Netherlands and Belgium. These negative effects were partly offset by EUR 263 million positive change in working capital year-on-year, mainly due to prepayments made at the end of 2012 and more cash from change in provisions and lower taxes paid.

Please note also that the tax recapture payments were finalized in the last quarter of 2013 and totaled EUR 176 million for the year.

Finally, a quick word on the status of our pension funds. At the end of the fourth quarter, the coverage ratio of the KPN pension funds was again above 105% at 109%. This means that we expect to make no recovery payments in the first half of 2014.

I would now like to hand over to Joost for the review of The Netherlands.

Joost F. E. Farwerck

Thank you, Steven, and good afternoon, everyone. Over the last 2 years, we have invested in our networks, in our customers and in our propositions, all of which have created strong fundamentals on which we can build. We have a consistent and clear operational strategy in The Netherlands, and we aim to give our customers the best services on the best networks. Bundling of services is at the heart of our strategy as the only integrated access provider in The Netherlands.

KPN has the best mobile network in The Netherlands. We will reach nationwide 4G coverage at the end of the first quarter, and this provides us with a strong advantage of at least 12 months compared to our closest competitor. We've also modernized our backhaul with the vast majority of sites connected to fiber.

In fixed, our network speeds we deliver over copper and Fiber-to-the-Home are significantly ahead of customer demand. Further upgrades of our copper network are planned for 2014 to increase speeds to more than 200 megabits per second by a combination of VDSL, pair bonding and vectoring. And with our combined telco and ICT infrastructure and capabilities, we have a strong leading position in the business markets.

Now our mindset is centered around the benefits products and services can bring to our customers, and we are offering market-leading converged products in both the consumer and business markets, such as 4G, IPTV and cloud services. And by leveraging our best-in-class networks and through a strong customer focus, we intend to further improve customer loyalty and to reduce churn.

We have communicated a lot on the topic of simplification, often related to the reduction of FTEs in The Netherlands over the last years, but we see a great opportunity in further simplifying our operating model in The Netherlands. For the coming years, we launched a new simplification program, which, as Eelco already indicated, is not just about cost savings, but also about creating flexible, adaptive and the lean organization that is able to respond quickly to changing market dynamics. This program is in place with the right people and the matching budgets. We are running the plan based on 3 important key pillars: simple products and services, supported by a clear product roadmap for our consumer and business customers; simple design processes aligned with this portfolio roadmap; and removing legacy and cutting complexity of our networks and IT systems.

Like I said, we have a roadmap on the services, and this brings focus in our organization. By moving to simplified processes, we are able to gain efficiency. To give you one example, currently, we are moving our Telfort sales and services online, which really enables us to optimize our distribution and call center activities and to fulfill the customer demand in a far more efficient way. Also, phasing our legacy and our infrastructure is very important to reduce operational activities and costs, and we are progressing according to our plans.

As you heard from Eelco, our simplification program will initially result in at least EUR 300 million run rate savings in CapEx and OpEx by 2016; 1,500 to 2,000 FTE reductions in the coming 3 years; and further clean, quality improvements leading to increased efficiency, customer loyalty and customer satisfaction. I will provide further details on the simplification program at our Capital Markets Day in 2 weeks.

Let's now move to the performance of the Dutch businesses. Revenues and EBITDA at Consumer Residential increased again year-on-year in the fourth quarter. This was driven by growth of our customer base, growth in RGUs, as well as an increasing ARPU. We've reached financial inflection at Consumer Residential in 2013, and we've reached a good balance between growth and margin, and we aim to maintain that going forward. Despite aggressive promotions from cable competition, our operational KPIs continue to grow. We've continued to grow interactive TV by adding another 80,000 in the fourth quarter. IPTV is the main driver for growth in triple play, which I will show you on the next slide, and including digital, our TV base is now close to 2 million customers.

Our broadband base continued to grow and market share remained stable, around 41%. And this is a result of our hybrid VDSL and Fiber-to-the-Home strategy. We've reduced churn in areas where we upgraded our copper infrastructure, and we continued to focus on increasing the penetration of Fiber-to-the-Home customers in fiber areas.

On this next slide, you can see the increase of the penetration of triple play within our base, and this is currently at 44%. We intend to leverage this strong momentum into quad play.

In fourth quarter, we doubled the numbers of quad play subscriptions, and this was supported by a larger addressable base as customers from the Hi brand were added.

Now let's move to Consumer Mobile. The mobile market in The Netherlands remained competitive with new arising players, mainly in the no-frills segment. Service revenues at Consumer Mobile were impacted by the shift to SIM-only, by lower above bundle usage and continued pressure on pricing levels. This results in a somewhat lower mobile market share in The Netherlands of 43% in the fourth quarter.

Lower service revenues explained a part of this EBITDA decline. However, there are 2 special factors explaining the large drop in EBITDA margin in this quarter. The largest impact was due to the phasing out of handset lease at KPN and Hi. This had a negative impact on EBITDA of around EUR 52 million. However, this was compensated in the CapEx in the same quarter. Furthermore, we increased specific subscriber acquisition costs in the fourth quarter by approaching customers that had 6 months to go, instead of the usual 3 months, and this retention action led to a one-off of EUR 16 million additional acquisition cost, and this will support our net adds going forward.

Although the mobile market remains competitive, we are convinced that we have created a unique position for ourselves, which should lead to better performance in the periods to come. The combination of our multi-brand strategy, our position in 4G and conferred offerings cannot be matched by any of the existing or newly arising players. At least for 1 year, we will have the unique position with nationwide 4G coverage. We have introduced KPN Compleet, the only real corporate product in The Netherlands. And at the end of the third quarter, we've improved the KPN and Hi propositions, all on 4G, and we see the first benefits coming in. And we recently announced our 4G proposition on our value for money brand Simyo. Postpaid retail net adds were positive at 9,000, and I expect a strong growth in the coming quarters following our commercial planning.

We are pleased with the first-mover momentum we are getting in 4G. We've seen a significant step-up in 4G customers, and in Consumer Markets this quarter, we gained a customer base of 323,000, and this was driven by the additional acquisition costs spent in the fourth quarter and the new mobile propositions we introduced for KPN and Hi as of this quarter.

We also see the data usage of 4G customers is strongly increasing. KPN users are more than doubling their data usage, while Hi customers use around 4x more data on 4G compared to 3G. Postpaid ARPU remained under pressure, driven by the shift to SIM-only, by lower above bundle usage and continued pressure on pricing levels.

Market circumstances in Business Market remained down. The economic performance in The Netherlands in 2013 was again weaker than expected. Despite the challenging market circumstances, we have again maintained our stable market positions. I will give you the most important facts now, and in our Capital Markets Day, we will explain our strategy in the Business Markets in more detail.

Revenues and EBITDA were lower year-on-year due to price pressure as a result of challenging market environments, the continued decline of high-margin traditional services and some negative impacts from incidentals. To mitigate the negative impact on top line, we focused on a number of elements: offering the best services through KPN ONE, 4G and cloud; increasing the percentage of committed revenues through bundling and flat fees; our vertical approach towards certain specific industries; and the introduction of new innovative services.

In the fourth quarter, we've seen a strong take-up of 4G customers in Business Market more than doubling to 220,000 customers. Of those 4G customers, about 2/3 take a data bundle of more than 1 gig. As we announced last year, we integrated IT solutions into our business segments beginning of this year, and this enables us to combine our propositions and sales towards our business customers in a far more efficient way.

I will skip 2 slides and continue with the analysis of the operating expenses of The Netherlands.

Total Dutch OpEx, excluding D&A restructuring costs and the phasing out of handset lease at KPN and Hi, continue to decrease in the fourth quarter by 6.4% year-on-year. The main elements, which contributed to this decline, are lower personnel costs due to our FTE program, lower cost of materials adjusted for the phasing out of the handset lease. And this was partly offset by higher content cost for TV and higher fiber access cost to Reggefiber, as well as slightly higher outsourcing costs.

So to conclude for The Netherlands, 2013 was still a difficult year financially for our Dutch businesses, especially in the financial performance of Business and Consumer Mobile was not yet good enough. However, we are fully convinced that we are following the right strategy.

Over the last 2 years, we have invested significantly in our networks and our customers and in our products. We've created strong fundamentals for us to build on with a unique position in 4G, IPTV and bundled services. And the simplification program will support the next phase of improvements to our underlying cost structure, with a run rate saving of at least EUR 300 million by 2016. All in all, this should lead to stabilizing financial performance in The Netherlands.

I will now hand over to Thorsten. Thank you.

Thorsten Dirks

Thank you, Joost, and also from my side, good afternoon, everyone. Before we'll start with a review of E-Plus, I would like to point out that between now and the expected completion mid-2014 of the sale of E-Plus, there will be no change, no change in the company's strategy and we remain fully focused on executing our plans.

Now let's take a look at the performance of E-Plus. We have made very strong progress in all strategic pillars that I outlined to you exactly a year ago. We have enhanced the quality and capacity of our network and increased the competitiveness of our data network significantly.

Independent research, e.g. Computer Bild has shown that E-Plus has realized the strongest improvement of all operators. On data speed, E-Plus now outperforms O2 and is on par with Vodafone. We're looking at 3G, which, I really have to say, is the most relevant network for our customers today. These improvements support our net add performance, more than 250,000 postpaid net adds this quarter, adding up to nearly 950,000 postpaid net adds in 2013. For 6 quarters in a row, postpaid net adds have been above 200,000, and by offering attractive smartphones at the right price, bundles with our leading and tiered all-in data propositions, we have been able to convince more and more customers to use mobile data. This helped our data revenues to grow by almost 60% in Q4 2013, making it the driver of our service revenue growth.

Another key driver behind our high postpaid net adds is the successful targeting of the underpenetrated regions responsible for nearly 60% of all postpaid net adds in this quarter. These quoted numbers have come at lower cost, following the growing online distribution.

A year ago, I told you that we will invest more into the market and our network to grow stronger in postpaid and data, to heal top line growth and that this would lead to lower EBITDA margin compared to previous years. But I also promised you to deliver underlying service revenue growth in Q4 and an EBITDA margin back towards 30% by the end of 2013.

I am proud, I have to say, together with my whole team, to show you the promised inflection in underlying service revenues, plus 0.5% this quarter, and also as promised, at margins over 30%. Growing postpaid and data and stabilizing prepaid led to this service revenue inflection. By implementing new ways of attracting customers, we were able to reduce our acquisition and retention cost, which led to an increase in EBITDA margin.

Nonetheless, the German market remains very competitive, and customers are still optimizing their voice and messaging usage, which result in a slightly lower ARPU in postpaid. However, due to our high level of net adds, we managed to increase our service revenue market share towards 16%.

Let us now continue with Belgium. Also here, we have seen good progress on all strategic pillars. The new portfolio we launched in April 2013, revolving around postpaid and data, is proving to be very successful. Due to our clear message of high quality and service, combined with low prices, we saw this quarter a high number of postpaid net adds, as well as a reduction in churn. Moreover, also in Belgium, our targeting of underpenetrated regions is fruitful, with an increasing part of our customer base originating from Bologna. In October 2013, we launched our 4G services, now being offered in around 203 areas, and 1 month later in November 2013, we acquired an 800 megahertz license at the reserve price, supporting us in our aim to obtain nationwide 4G coverage by the end of this year 2014.

Let me elaborate a bit more on the quality of our network. We have the highest speeds on 3G and compete easily with Belgacom, the incumbent in Belgium, on 4G. A very favorable position for us being a challenger and our baseline for the future. Also, Belgium remains a competitive mobile market with the declining service revenue trend. The success of our postpaid offerings is partly offsetting this trend, especially as both smartphone penetration and data usage increasing strongly.

As already highlighted, we saw another quarter of strong postpaid net adds and improving churn. On ARPU, we see high ARPU customers optimizing their tariff by migrating to new offering. This leads to a continued ARPU decrease for postpaid. On the other hand, the customer mix within the new portfolio is very good. We have a higher ARPU today on the new portfolio versus ARPU of customers remaining on the old tariff plans.

The base pricing strategy is also designed to push customers to higher tariff plans by offering limited data to low-end tariff plans.

Concluding, both Germany and Belgium made very strong progress on the strategic pillars. In Germany, we will stick to our successful strategy, and Belgium is looking very promising with a high-quality network and services at low cost.

Thank you very much, and now back to Eelco.

Eelco Blok

Thank you, Thorsten. To sum up, we spent the past 3 years making major investments to build and enhance best-in-class networks and customer propositions. Now today, we have a stronger and more flexible business. This is our platform to deliver improving operational performance that will underpin our outlook of stabilizing financial performance and our shareholder remuneration policy.

Now we will be happy to take your questions. Thank you. Wouter, you will manage the questions?

Wouter Stammeijer

Okay. We would like to start the Q&A. If you would like to ask a question, you have to switch on your microphone. There's a red button. And please, after your question, switch it off again.

Question-and-Answer Session

Wouter Stammeijer

Would like to start here on the left, in the front. Polo?

Polo Tang - UBS Investment Bank, Research Division

It's Polo Tang from UBS. Just a few different questions. The first one is on Dutch Consumer Mobile. When can we actually expect that business to start turning around? I supposed I'm looking at it from different levels. So how optimistic are you in terms of net adds turning around? What about EBITDA? And then finally, when can we expect Dutch revenues, Dutch mobile revenues to turn around? Is this going to be a replay of what we saw in fixed line back in 2011? That's the first question. And the second question is, in terms of Tele2 and what might happen there, is it possible for you to actually take out Tele2 and acquire it? Can you maybe just talk about any potential regulatory issues? And the third point -- or question rather, is just on Germany, very strong turnaround. You're talking about improvement in terms of market share. So if you're winning, who's losing?

Eelco Blok

Thorsten, will you tackle the [indiscernible]?

Thorsten Dirks

Yes, well, you've seen in Q4 the same result more or less that you have seen the quarters before. If you then look at what happened the quarters before, you see that, clearly, Vodafone is losing at the moment. And by the way, we will expect this also happening in Q4, but we will see the results the day after tomorrow for Vodafone.

Eelco Blok

Joost, will you take the question on Consumer Mobile?

Joost F. E. Farwerck

Yes, so, everything we do on Consumer Mobile is, of course, focusing on growth, just like we did on the residential business when we started on this in 2011. And it is about investing in quality and investing in your propositions, focus on your existing customers and then the growth will come. Now where we see a market with a movement to SIM-only, Tele2 being aggressive in the no-frills segment, less about the bundle revenues in the double segments. So that's where we are. We rolled out 4G, almost nationwide coverage. We positioned the KPN and Hi brands end of the third quarter, so recently, in a much better way. SMS and voice flat fees, We have bundles, everything, on 4G. You can double the bundle if you go to KPN Compleet. Simyo will be on the 4G coming months. So everything we do now is to position ourselves to accelerate and to get in growth. We did put additional SOC in the fourth quarter, and not to acquire new customers, but to keep our existing customer base with us. The good thing is that you lock in customers. I really believe that we have to focus on existing customers in the first place. The negative part of that, that it's not really showing positive net adds since these customers are already in our base. But we migrated more than 0.5 million customers in the fourth quarter already to 4G. So I really believe in that as well. So I think we are well positioned. I'm confident that growth will come in the coming quarters on net adds, and that's where those starts. Now it's a little bit too optimistic to already announce when I will see the inflection, but of course, as you can understand, everything we do is focusing to create value and maximizing our value and to create growth.

Eelco Blok

Joost, maybe to add to this. Also, the simplification program Joost explained to you will have a positive impact on the performance of this part of our business.

Joost F. E. Farwerck

Yes, we have multi-brand strategy. So we have distribution channels. I just gave you the example of going more online, like we do on Telfort now. And that's a very efficient way of running your sales and services on that brand, and that really enables us to optimize cost on distribution channels we have in The Netherlands. And we are, of course, also focusing on cost reduction broadly in the consumer segments.

Polo Tang - UBS Investment Bank, Research Division

And just in terms of regulatory issues, any potential Tele2 takeout on some of that?

Eelco Blok

Yes, talking about taking out Tele2. In-country consolidation, when the price is right, is almost all the time very value creating. From a regulatory point of view, it will be very, very challenging. But when the opportunity is there, we, of course, will look at in-country consolidation. But today, there are no plans. And as I said in my part of the presentation, we have not taken into account major acquisitions.

Stephen Paul Malcolm - Arete Research Services LLP

It's Steve Malcolm from Arete. I'll keep it 3 as well as I can. First of all, a question for you. Can you just elaborate on the decision to go early on the retention on those customers from 3 months to 6 months of contract remaining? And it seems a necessary move of your 4G networks. What was the sort of motivation, decision behind that to go early and spend that extra money? Secondly, just on the subject of consolidation, looking at the cable situation. Are there any circumstances that you can envisage where the outcome would have a detrimental impact on the Dutch market, whether the regulator decided that the combined entity has significant market power for open access to cable networks, that sort of thing? Does that color your thinking at all as far as that goes? And finally, just looking forward post E-Plus, you mentioned lower interest costs. I presume you have a sort of large bond tender in mind. Can you give us an idea of the scale and the costs that might go with that? And would you sort of possibly take out the hybrid even if that's only a year and a bit old?

Eelco Blok

Let's start with the question about the potential consolidation impact for us. It's very important that the regulator will create a level playing field in The Netherlands, level playing field between the combination of UPC, Ziggo and KPN. Looking from a distance to, well, UPC, Ziggo and KPN, same coverage, similar product portfolio, being able to reach almost all households in The Netherlands. And therefore, we believe that the similar market shares on broadband, cable somewhat higher -- well, yes, higher market share on TV. And therefore, we think that the regulator should establish a level playing field and that could either be by regulate the combination in the same way as KPN or the other way around. For us, the most important objective is to have that level playing field. That's one. Secondly, will the market be more competitive, less competitive, given the fact that UPC and Ziggo today have a cable monopoly in their current region? For us, there will be no major differences from that perspective. Looking from another perspective, will they become more aggressive than the combination of UPC and Ziggo? We really don't believe that. That is part of the strategy of the new entity. Will it be easier? Will the market dynamics change positively? I think that we will continue to see the, well, similar market dynamics in the near future even after the approval of the UPC-Ziggo merger.

Stephen Paul Malcolm - Arete Research Services LLP

If cable were to be regulated, that would be equivocally good for you?

Eelco Blok

I don't know if that will be really good for us. For sure, we'll not make it -- they'll make it more difficult for us. And it will put pressure on UPC and Ziggo. They have to do a lot of work on preparing the wholesale offerings and things like that. So maybe we could benefit from it, but we have not taken that into account. And then the question on Consumer Mobile, the retention offer of the last quarter.

Joost F. E. Farwerck

Yes, so when you have a nationwide network, we have the 4G services ready, we really would like to find ways to upgrade. A question on the 4G. Now in The Netherlands, we have a system that our customers are in contract for 2 years. So we find ways to upgrade our customers during the contracts to lock them in, to keep it simple. Now The Netherlands is an aggressive market, so our competitors are, every now and then, approaching our customers 3 months before the contracts ends, so we decided to really target for high-value customers, and we offer them to upgrade to 4G with 4G handsets 6 months before the contract ended, and by that, locking them in. And you have to hear us but also making our customers happy on 4G network. Because every time you migrate a customer to 4G, you really see the usage of data going up and customers are very satisfied by that. It's not that a thing we will do every quarter. It's a one-off. So it's -- we can do a lot of things, of course. But this was an action in the fourth quarter to a certain high-value customer group.

Eelco Blok

Talking about use of proceeds of the sale of E-Plus. Of course, an accelerated bonds redemption program is on the list of options. But we will take decisions just before the sale is closed, what we will do with the proceeds and also looking at an accelerated bonds project program. It will be a balance between the cost of the buyback of the bonds and the return the years later.

Wouter Stammeijer

Steve, kindly switch off your microphone. Thank you. I'll start in the middle. Akhil?

Akhil Dattani - JP Morgan Chase & Co, Research Division

Yes, it's Akhil from JPMorgan. Just a couple of follow-ups from some of the previous questions. First, on the Dutch mobile. I understand the message you've provided on the retention initiative that you've launched this quarter. But combined with that, we've seen your service revenue growth deteriorate, even underlying x MTRs. So can you talk us through what's driven that? Does that mean that you've been discounting the tariff for those customers who are migrating to 4G or rather maybe some other competitive or strategic factors that -- underlying that deterioration? And then combined with that, could you maybe help us better understand how you think about the underlying EBITDA trend when we look forward over the next few quarters, beyond that exception investment you made in the quarter? Secondly, on the simplification program, I appreciate you probably want to leave the bulk of those questions until the Capital Markets Day, but just in terms of some of the big picture thoughts around that, you're talking EUR 300 million of cost reductions by 2016. Could you give us some sense as to the OpEx, CapEx split of that? How much of that is driven by the FTE program? And do you expect any restructuring charges to result from that initiative? And then very finally, just on the guidance. When we look to the commentary you've provided about the stabilizing trends by the back end of this year, do you interpret that as meaning a broadly flat Q4? Or do you just mean a reduced level of decline? And when we think about 2015, do you see the possibility to actually grow the EBITDA, even excluding the contribution of Reggefiber? Or is it maybe too early to comment on that yet?

Eelco Blok

Mobile.

Joost F. E. Farwerck

Yes. On the service revenue first, I recognize the question, and that's mainly what we see in the last quarter due to a move to SIM-only in The Netherlands. So there's an addressable market out there, which we position Telfort and Simyo against, more or less, Tele2. And we also see less above bundle usage. Now what I would like to do is grow stronger on KPN and Hi, our high-value brands that will be good for share of revenue and for ARPU. And what I expect is in the coming quarters, we will grow in this due to the commercial plans we have and actions we took. Your question on the simplification program is, in 2016, we see at least a EUR 300 million expense reduction. That's indeed blended OpEx and CapEx. I expect this to be roughly 50-50. And there's a partition FTE reduction, that's also above in OpEx and CapEx. And there's a reduction in external cost, IT spend and things like that. And so we are going to reorganize. We announced 1,500 to 2,000 FTEs for the coming 3 years and the costs will come with that. But we already took provisionings. We have currently roughly around EUR 100 million provisionings for restructuring in the books. And I think that we'll be at least sufficient for, yes, the coming year. And so very important to reorganizing very efficient workforce.

Steven Van Schilfgaarde

The question related to the guidance, talking about the [indiscernible] we will see a continued negative trend around SPFs in the fourth quarter. But towards the end of the year, we will see an improvement [indiscernible]. I'm talking about 2015 [indiscernible] give you anymore guidance than we have delivered. We are taking into account the Reggefiber EBITDA in our long-term guidance. I'm talking about the free cash flow, growing free cash flow in 2015, compared to '13 and '14. That's how we should be growing free cash flow in our guidance.

Akhil Dattani - JP Morgan Chase & Co, Research Division

Just one follow-up. Do you have a number for the proportion of revenues that now has a bundle in Dutch Mobile?

Joost F. E. Farwerck

Not today.

Wouter Stammeijer

Next, Dimitri.

Dimitri Y. Kallianiotis - Citigroup Inc, Research Division

Dimitri from Citi. Just -- so a couple more questions on mobile in The Netherlands, especially following on your comments in terms of de-risking the profile for mobile. You're moving a lot of subscriber, it seems, on your more no-frills or low-end brands. Just to ask you if you could share with us what's the proportion of gross adds that are coming on the no-frills brands or lower-end brands as opposed to the main KPN brand and how it compares to your current presentation? Just to see how much we could -- again, share with us how much of the subscribers you think will have to move on those lowered brands and if you can share any details in terms on ARPU, what sort of ARPU you're making on those no-frills brands as opposed to the main ones.

Joost F. E. Farwerck

So yes, we, as you know, presented the blended ARPU, so I can't give you more details today than that. That's 28 in Consumer Mobile. It's very important to note on net adds, that we see healthy growth, as I call it. So I'm really focusing on our high-value brands. For the coming quarters, I expect most of the growth in our KPN and Hi rents because that's where we focus on related to 4G. So you're right, it's very important, not only to count net adds, but to really make sure that these are valuable net adds, and that's exactly what my strategy is.

Dimitri Y. Kallianiotis - Citigroup Inc, Research Division

Then maybe if I can add just one more question, actually, on Belgium. I mean, you've seen the rest of the -- I mean, the trends actually deteriorating. Service revenue is the most down, 15%, and in fixed, you didn't show any data in terms of base. It seems it's getting little momentum. That market is going to quad play. Obviously, you're using quad play in The Netherlands. Would you consider doing -- changing something in terms of the strategy? Obviously, cable may be regulated in Belgium or would you consider, if things don't improve, to sell again that business, which was at for sale at some point before?

Thorsten Dirks

We're not talking about selling the business in Belgium. And if you look at the performance, Belgium is delivering at the moment. We see the market as going down from quite high compared to other European markets, quite high ARPU levels. We have seen the impact of Telenet as a force entrant and now the force player in the market with [indiscernible] offering as of August 2012. Around the world, the change in our postpaid portfolio, which we launched last year and we are quite happy with the results. You've seen the increasing -- especially postpaid net adds, we've seen increasing numbers in ports, mobile number ports. So looking at the business overall and also compare it a little bit with what we have seen in Germany, the inflection is not yet there in Belgium. But if you look at the underlying trends and if you look at the operational KPIs you've seen in Belgium, then you will also see this reflected in the financial KPIs, first. Second, there is an advantage, if you look at Belgium compared to Germany, and this is on the network performance. As I told you, we are ahead of Belgacom and Mobistar on 3G. We are easily competing with Belgacom on 4G, which, as I said, is a very favorable position being a challenger. And again, this is the baseline for our future. And we are above on those. And also in Belgium, we see data service revenue growing almost 60%.

Wouter Stammeijer

Next question, Tim?

Timothy Boddy - Goldman Sachs Group Inc., Research Division

Yes, Tim Boddy from Goldman. I wanted just to follow up a little bit on the question about cable consolidation. I guess when I was thinking about it, I mean, as these companies come together, you essentially face a much stronger competitor for content. I know so far we haven't seen that much content competition, but, I mean, that's something that might change a bit. Very helpful to understand your view on that. And also, we'd probably see a much more effective mobile competitor in the nationwide footprint and the nationwide ability to offload. And if they get forced to wholesale, which may well be an outcome, then you actually have a wholesale competitor as well whereas you didn't before. So I guess, when I thought about it, I was concerned that, that would be an increasing competition in those ways. I guess the flip side of that is, as you pointed out, it doesn't seem that likely that they'll want to be price competitive in the core fixed line business and it would be good to understand if you raise prices again this year and the outlook for the kind of core broadband and TV pricing in the business.

Eelco Blok

Okay. On the consolidation of content, mobile and wholesale, looking at wholesale, yes, the, well, increased regulation could create a wholesale competitor. But that will give us also the opportunity to start using the cable network in areas where it makes no sense to roll out fiber or it makes no sense to upgrade our corporate network. So that is an opportunity also for KPN. Talking about mobile competition, I really don't believe that the combination of UPC and Ziggo could be, well, a better mobile competitor than either UPC and Ziggo on its own. They both have MVNO agreements. We've recently seen Ziggo becoming more aggressive with offerings targeting their triple play customers, and UPC is somewhat less aggressive on mobile. I really don't believe that we will see major changes compared with what we see today already in the market with Ziggo recently offering their mobiles. On content, so far, content was not really a differentiator in the Dutch market. Yes sometimes, we had an advantage of 3, 4 months on some content, and sometimes one of the cable TV operators. And given the structure of the Dutch market, I really don't believe that we will see major changes on content even after the consolidation of UPC and Ziggo because the structure of the market in The Netherlands is -- will not change after the consolidation of UPC and Ziggo. And on price changes, we have not announced any price change and, well, that's where we are. But we know exactly what competition is doing and also looking to attract record. I think it's easy for you to conclude on what we have planned.

Wouter Stammeijer

Next question, Robin?

Robin Bienenstock - Sanford C. Bernstein & Co., LLC., Research Division

Three questions, if I may. The first is, just do you believe that Vodafone and Tele2 is more aggressive? What are the strategy in the last quarter? Is it being sustained now so far in Q1? And do you think it is sustainable? The second is just, can you give me a sense about your confidence in achieving your guidance and whether you think you have something left in the tank lest revenue is weak this year and next? And then lastly, can you tell me whether Telefónica Deutschland has made any formal or informal undertakings to you with regard to a dividend conditional on the conclusion of a sale? I know you can't tell me what a number is, but has there been and was that part of -- was an undertaking part of your agreement?

Eelco Blok

Joost, can you take the pricing on competition, specifically Vodafone and Tele2?

Joost F. E. Farwerck

Yes. It's an aggressive market in The Netherlands. And we saw aggressiveness from UPC and Ziggo last quarter. Now they reap there a little bit, you could say. Tele2 has been aggressive, especially in the lower-priced segment on the mobile side. To be quite honest, I'm not quite sure what the Tele2 strategy in The Netherlands exactly is. They announced a converged strategy, but it looks like they come back from that. So we followed that, of course, and now they announced a flat fee pricing model to launch, I think, in 6 weeks from now. It's not a real surprise. We encountered -- we anticipated on that. It's more or less what we thought, put it that way. Vodafone, every now and then, is aggressive on the discounts, not really on the pricing, but they can be aggressive. So it's very important that we will understand what they do when we follow that. They now are back on the normal track, to put it that way. And because I think you can't keep on playing these games forever. They paid as much as we did for all the licenses. It's on their balance somewhere. And I expect Vodafone, the CEO of Vodafone Netherlands to have a target to make money at the end. So I'm confident that they will be reasonable. But it's, of course, up to Vodafone. But that's why we made a decision to launch our 4G pricing as we did, and we are confident that we will grow like we did. Thank you.

Eelco Blok

And looking at the sustainability of especially the business model of Tele2, mainly based today on an MVNO basis, I can assure you with the current price levels in The Netherlands, the current subscriber acquisition cost levels in The Netherlands, that's not a sustainable model, especially when you also take into account that they have to invest a lot of money in their new 4G network. On guidance, I can assure you that although the guidance is not really specific and you probably would have expected more out of it, that we have been very prudent in taking decisions on the guidance we have given. The CapEx guidance less than EUR 1.4 billion and less than EUR 1.5 billion in '14 and '15 are absolutely less than EUR 1.4 billion and less than EUR 1.5 billion. We believe that it will be, at the end of the year, clear that what less than means on growing cash flow, growing compared to '13 and '14. Also here, I can assure you that we have been very prudent and that there are opportunities to, well, improve the free cash flow even more than we have now put in our business plan, looking at the proceeds we will receive when the sale of E-Plus closes.

Thorsten Dirks

To the last part of your question, Robin, tough Germany undertakings formally -- non-formally and formally, not that I'm aware of.

Paul Sidney - Crédit Suisse AG, Research Division

It's Paul Sidney, Crédit Suisse. And just a couple of questions, please. Just returning to Consumer Mobile and I've been trying to sort of put everything together, is the message you're trying to give today, the minus 13% service revenue figure in Q4, perhaps that gets worse before it gets better, but at some point during 2014, we will see an inflection point? Is that what we should take away from this from your comments? And just the second question on FttH, what level of FttH coverage eventually makes sense for you? And at what level of run rate do you expect to go into homes passed over the next few years?

Joost F. E. Farwerck

Yes, although I decided to push in a lot of additional OpEx in the fourth quarter, I'm not happy with the results, of course, on Consumer Mobile. So if you ask me, when will you repair, that's the $100 million question, but I can assure you that everything we do on our strategy is focusing on repairing our results. And I can't predict if it's going to be in the first or in the second quarter. But everything in our strategy, of course, is to inflect. On FttH coverage, we have a 25% coverage currently in The Netherlands, which is a fast rollout on a, yes, worldwide level, you could say. We are satisfied with the penetration in the areas. But I'm really focusing on improving that penetration. It's not that we have the ambition to roll out to 50%, it's really a hybrid access strategy we do. We are very enthusiastic about the upgrade of the copper networks we can do. We are enthusiastic about the bonded vectoring we are going to launch. We have already seen the first test on G-Dolf Fast [ph] for the longer-term future. So we are convinced that we can do a lot more with our copper network. So we really roll out Fiber-to-the-Home in the weak areas we can't really upgrade. So for me now, it's very important also to keep the business gauge working in the existing regions. It's a regional business gauge we built. So area after area, we really focus the penetration curve. And we really focus on boosting up connecting customers over there. That's very important.

Eelco Blok

And when you talk about rollout speeds going forward, we've taken the decision to decrease the investments in the Fiber-to-the-Home rollout, and you should think of around 200,000 home spots added to the customer base we have today for this year and going forward.

Guy R. Peddy - Macquarie Research

It's Guy Peddy from Macquarie. It's just a bit of a conceptual question. I've been listening to KPN presentations for a long time now, listening to declining CapEx, increasing free cash flow stories. That hasn't necessarily helped in the past. So I'm intrigued. Given you're going to have a relatively strengthened balance sheet in 6 months' time, why didn't you sort of do away with free cash flow guidance and actually go after your revenue problem, which is your major driver of your business and actually take 2014 as an opportunity to actually re-base your tariffs and get yourself on a sustainable long-term footing, given it is a competitive market and pricing in some things is still high?

Eelco Blok

This is exactly what we are doing. We have gone through the cycle in our fixed business, and now we are going through the same cycle in the mobile business. There's one major difference between fixed and mobile in The Netherlands. The mobile market is much more competitive than the fixed market. As Joost has explained to you, we have repriced our KPN and Hi propositions. In the fourth quarter, we are pushing 4G on, well, the KPN and Hi brand, and within a very short time, we will also use the Simyo brand from 4G and Delford [ph] brand will follow somewhere over time. And we are really aggressive on pushing 4G. Our core play offering, also very aggressive marketing and sales helping us, and we believe that next to the simplification program, this will help us to recover also in this part of our business. And as Joost said, it's difficult to pinpoint one certain quarter on net adds, on revenue, on EBITDA. But I can assure you that all the things we have done and Joost and his team has done in the last few months of last year are delivering results. Net adds, postpaids in the fourth quarter, 9,000; over the full year, 10,000. So we did everything in the first quarter and can assure you that we see a continued improvement of net add growth in the first weeks of this year. So we will use, for sure, 2014 to try to recover on Consumer Mobile and also on the Business Market.

Parin Shah

It's Parin Shah from Espiritu Santo. I just got a few questions on the Dutch market. Number one, what would you be assuming for Ziggo and UPC in terms of mobile gains? Question two, do you think there's going to be more competition, specifically in the Business segment? And three, if these 2 plans are going to come together in H2, why do you think then that free cash flow trends improve in 2015?

Eelco Blok

Free cash flow trend is not only -- depends not only on what we are doing in the Consumer Mobile or fixed market. It's, of course, about our operational performance. But we -- but also, free cash flow will be supported by lower interest payments in 2015 due to the fact that we have -- that we will have lower debt after the sale of E-Plus closes and we will have much lower tax payments starting in 2015. Also related to the sale of E-Plus, where we had already agreed with the Dutch Tax Authority that after the sale of E-Plus, we will have to pay much lower tax payments. So it's a combination of operational improvements and other improvements on free cash flow. And therefore, we are convinced that we will be able to grow free cash flow in 2015. So that's about free cash flow. Will we see more competition in the business market? We don't believe that we will see major changes in competitiveness in the business market going forward given the structure of the Dutch market. But John van Vianen will share on the Capital Markets Day much more insights on what is happening in the business market and what our detailed strategy is in the business market. And then Joost on mobile, Ziggo-UPC mobile question. Can you maybe repeat the question?

Parin Shah

The question was what would you be assuming for Ziggo and UPC mobile gains?

Joost F. E. Farwerck

Yes, that will be guessing, of course. I can advise that, but I'm not sure if that's a good idea. But Ziggo will launch this Wi-Fi solution, really focusing on their own customer base to add this. And I think Wi-Fi's a good solution, but it's not replacing mobile. So if they really want to play the game, they should have a nationwide mobile and could be on an MVNO like they do today and could also be via further consolidation, but that's, I don't know, to be quite honest. But of course, they claim convergence, and until today, that's tough against us because that's where we come in as the real integrated assets player. We hold the assets ourselves. And if you want to really introduce converged services, it's very difficult to do that on a mobile -- on a wholesale model. You -- it's very difficult to offer flat fees in the market if you have to pay on the wholesale side per minutes or data usage. And that's what we see.

Wouter Stammeijer

Okay, we'd like to just one question, sorry, in the back, just final question.

Frederic Boulan - Nomura Securities Co. Ltd., Research Division

It's Fred Boulan from Nomura. Jut one quick clarification on your guidance. So you talked about improving free cash flow from '15? So again, just confirm that for 2014, we should see the level of cash flow you posted this year of about EUR 455 million post hybrid as a high-end level. So you'll come below that in 2014. And secondly, if you could expand a little bit more on sync revenue. You talked about, for an hour, on the business and that coincide where we saw a pretty sharp deterioration in Q4 in both businesses. When you see those 2 assets also turning around, is it a short-term blip? Or do you see structural pressure here from a pricing and macro perspective?

Eelco Blok

About the free cash flow guidance, I'm not going to give you a specific number on '14. But you'll, you'll, well -- at the end of the year, you'll see no major differences when you compare the '14 cash flow to '13. I think that's the best answer I can give so you conclude yourself on the '15 number.

Wouter Stammeijer

Can you repeat the question?

Frederic Boulan - Nomura Securities Co. Ltd., Research Division

Yes, question was, we have a pretty sharp deterioration in both NetCo and Corporate in Q4, so just want to know if this is temporary or structural.

Joost F. E. Farwerck

Yes, NetCo is always difficult. What you see is that the fourth quarter of last year, we did the sale on assets, in my head, that's about EUR 70 million in the margin of last year, Q4 2012, of NetCo. So if you compare without incidentals, then there is a decrease, but it's far less than what you see in the graph. Of course, in our network company, it's very important that we have the simplification program. We'll be very dominant in there. There are a lot -- there's a lot of complexity on platforms and ICT spend. So I really expect a lot of benefits in the simplification program in the NetCo. Business market view [indiscernible] business, it's like Eelco said, we are very well positioned in the business markets. That's because not only we have the 4G network, which is really interesting for our business customers, but also because of the combination of ICT and telco where business is one company. It's the only one in The Netherlands. There is pressure on pricing, of course, and there's pressure in the Dutch economical environment. So what we see is that our business customers try to rationalize on workspace, on mobiles. They have less people in the company and that's, for us, the challenge. And therefore, we really focus on offering them total solutions and really take away a lot of hassle for them. We have very strong positions in the business markets. So at the end, I believe in inflection there. When it will come, I can't really predict. It's not about our position. It's not about how we are offering services to our customer, but it's both price pressure and it's the economical environment in The Netherlands.

Eelco Blok

And also in this segment, the simplification program will have a major impact because the majority of the FTEs in The Netherlands are positioned in the business segment. So next to NetCo, the impact of the simplification program will be large in Business Market, already supporting the performance this year.

Wouter Stammeijer

With that, thank you all for coming, and of course, we hope to see many of you at our Capital Markets Day on the 19th. Thank you.

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