Financial profile

In recent years, KPN’s financial position has been impacted by rising debt levels combined with increased commercial investments. KPN’s reported net debt / EBITDA has increased gradually over the last 12 months from 2.3x as of Q4 2011 to 3.0x as of Q4 2012, when including the payment of EUR 1,352m for the Dutch spectrum auction (paid in January 2013). When including the impact of the consolidation of Reggefiber (ceteris paribus) the ratio would be 3.2x. Looking ahead, KPN’s strategy is based on further stabilizing its market positions and its financial performance in The Netherlands, using its recently acquired spectrum and upgraded nationwide fixed network, while the increasing commercial activity in Germany and Belgium is expected to lead to service revenue growth and renewed market outperformance, albeit at lower margins in the short term.

To align its financial position with its strategy KPN has announced a EUR 4bn rights issue. The transaction will strengthen KPN’s balance sheet and is intended to provide a stable financial position in the coming years. The proceeds will increase KPN’s financial and strategic flexibility and will be used to continue to invest in KPN’s operations and reduce KPN’s net debt level. The EUR 4bn rights issue would lower KPN’s reported net debt / EBITDA at the end of 2012 by approximately 0.9x. KPN targets net debt / EBITDA between 2.0 - 2.5x at the end of 2013. KPN believes that the rights issue will support its commitment to maintain an investment grade credit profile. The rights issue is subject to shareholder approval and therefore an EGM is convened for 19 March 2013. KPN may consider whether, subject to market conditions, part of the EUR 4bn capital raise could alternatively be raised through equity-linked or other capital instruments.

Per Q4 2012 KPN had a net debt outstanding of EUR 12.0 billion and EUR 1.3 billion of cash. KPN intends to maintain a positive free cash flow quarter on quarter.