CEO's review

Over the past five years, KPN has made significant strategic progress. Now, we are sharing with you our updated strategy and ambitions for the period 2008 to 2010. This will add a growth phase to KPN, combined with continued attractive shareholder remuneration.

Our 'Back to Growth' strategy will return KPN to growth in the period 2008 to 2010, both in terms of revenues and EBITDA.

As with the launch of 'Attack-Defend-Exploit' in 2005, the 'Back to Growth' strategy follows an extensive strategic review and has been devised to address the challenges of today's telecoms markets. With this 'Back to Growth' strategy, KPN will remain a top performer among European telecom operators and will continue to be a front-runner in the sector in identifying the market challenges, and setting strategic benchmarks accordingly.

Growth will be the result of the Netherlands reaching inflection, continued growth at Mobile International and additional growth from recent acquisitions, as will be achieved with Getronics and iBasis. Growth is set to be achieved in the face of regulatory tariff reductions and the impact of shrinking traditional wireline services in the Netherlands. Key components of the strategy are the ramping up of new services launched in recent years and cost reductions.

In the period to 2010 the Netherlands business will undergo a radical transformation. The All-IP network announced in March 2005 will move into its final phase with the implementation of a new access network. In addition, KPN will pursue a radical simplification of its business, both at the front-end in retail segments and at the back-end in network operations. The significant cost reductions that will be generated by this simplification will be used firstly for re-investment in revenue growth, leading to acceleration of recent growth initiatives, such as broadband and TV in Consumer and IP-based services in Business. Secondly, cost reductions will lead to margins improving.