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“Strengthen”, “Simplify” and “Grow” are the three principles on which we base our strategy: Our aim is to fulfill our main ambition: to be the best service provider for our customers.

Following a period of market share decline KPN has been able to stabilize its market positions in The Netherlands as a result of the ‘Strengthen-Simplify-Grow’ strategy outlined back in May 2011. In 2012, KPN’s domestic market positions have stabilized, albeit at lower profitability as a result of increased investments. KPN operates in a challenging environment impacted by regulatory pressure, a slow macro-economy and strong competition in all mobile markets. The telecom sector is at a crossroads with new technologies maturing and potential increasing clarity as to European long-term regulation. Today, KPN covers ~18% of the Dutch population with FttH and operates an upgraded VDSL network, reaching ~70% of Dutch households with broadband speeds of at least 40Mbps. In mobile, KPN’s goal is to realize nationwide coverage with 4G LTE in The Netherlands in 2014, while HSPA+ has largely been rolled out in Germany and Belgium. These networks are the platform for KPN to offer enhanced customer experience and, following the current period of increased commercial and infrastructure investments, the prospect of improved profitability in its different markets in the medium-term.

• Reaching85% of German population with HSPA+.

• KPN covers~18% of the Dutch population with FttH

With the aim to further stabilize its leading domestic market positions as well as stabilize its financial performance in The Netherlands, KPN will focus on balancing profitability and market share objectives. The strategy in The Netherlands is based on a strong customer focus by providing the highest quality services, based on a full product range on best-in-class networks while striving for a lean operating structure. Consumer Mobile is facing a changing market structure but has the opportunity to differentiate itself from the competition by offering the best customer experience by combining 4G LTE with a nationwide fixed network. Consumer Residential has been successful in 2012 with its strategy to focus on selling an increasing number of products per customer driven by IPTV, combined with growing ARPUs and will continue to pursue this strategy. To address the increasing need to access information everywhere on all devices, as of 1 January 2013 KPN has integrated parts of Corporate Market with the Business segment into a one-stop shop for B2B, offering integrated packages with virtually all ICT & Telecom services.

In Germany, E-Plus was able to significantly grow its market share for several years accompanied by high profitability, however its market share growth has been less significant of late. In 2012, E-Plus experienced a slowdown in service revenue growth, but maintained a strong margin. In the past two years, E-Plus upgraded its network with HSPA+ reaching more than 85% of the German population. The upgraded network is the platform for the next phase in the Challenger strategy, which is intended to transform E-Plus into a data-centric Challenger and which is expected to provide new growth opportunities. Market share growth will be targeted in underpenetrated regions, based on a high quality network combined with expanding on- and off-line distribution capacity, increasing commercial activity and attractive customer propositions. This strategy is expected to lead to service revenue growth and market share growth, combined with lower margins in the short-term, and improving from such base in the longer term.

The Belgian mobile market has experienced a change in market structure in 2012. In Belgium, as in Germany, KPN’s upgraded network forms the platform for the next phase of its Challenger strategy. KPN Group Belgium aims to realize growth through creating a competitive edge by network speed differentiation at low cost based on innovative partnerships. 4G LTE is expected to be available in the majority of the country by end-2014. This will be combined with a strong commercial focus via attractive propositions and increased presence in underpenetrated regions. In addition, KPN Group Belgium is seeing opportunities to challenge the fixed line market. This strategy is expected to lead to service revenue growth and market share growth combined, however, with lower margins.

We have made progress with our social themes. Our aspiration to have the best ICT infrastructure in the Netherlands is one of those themes. In 2013, 51% of consumers considered KPN’s mobile and fixed network the best in the Netherlands. We are continuing to make improvements in our network and services. We are making progress in healthcare too. We are already connecting more than 4,000 healthcare locations and over 20,000 healthcare consumers make use of our personal comfort services. We aim to enhance our contribution in 2013 by further developing and rolling out our healthcare products and services. We achieved a 17% growth with our services that facilitate The New Way of Living & Working. We want to increase that percentage to 20% in 2013, partly through improved propositions and communication. We helped customers save energy and in 2013 we will develop a method of keeping track of energy savings. Even though the volume of data traffic increased substantially, we achieved an energy saving of 6.2% in our own organization. Our target is no longer a maximum energy growth of 5%, but we have now set ourselves an energy reduction target for 2020. With the development and launch of our IT Security Top Priority Program, which we will pursue in 2013, we have made an investment in the security of our network. In addition, we will offer our customers even more products and services that will benefit the security of their information.