KPN Aktie

Good day, ladies and gentlemen. Welcome to KPN's First Quarter Earnings Call Webcast and Conference Call. Please note that this event is being recorded. [Operator Instructions]

I will now turn the call over to your host for today, Matthijs van Leijenhorst, Head of Investor Relations. Please go ahead.

Yes. Thanks, operator. Good afternoon, ladies and gentlemen, and thank you for joining us for KPN's first quarter results webcast. With me today are our CEO, Joost Farwerck; and our CFO, Chris Figee.

Before we begin, please note the safe harbor statement on Page 2 of the slides. Today's remarks may include forward-looking statements, including KPN's expectations regarding its outlook and ambitions as also set out in the press release published this morning. All such statements are subject to the safe harbor.

With that, let me hand over to our CEO, Joost Farwerck.

Yes. Thank you, Matthijs, and welcome, everyone. Let me start with the highlights of this first quarter of the year. Group service revenues increased by 0.6% with contributions from Consumer, SME and Wholesale. Consumer trends were positive with healthy broadband and postpaid inflow, reflecting our continued focus on loyalty, base management and secure propositions. In Business, SME remained strong. And as expected, overall growth was impacted by a decline in the low-margin Tailored Solutions segment. And Wholesale continued to grow, driven by international sponsored roaming mainly.

We delivered solid EBITDA growth and maintained tight cost discipline with indirect costs down EUR 3 million year-on-year. Year-on-year free cash flow declined as expected due to the phasing of interest payments and working capital. And together with Glaspoort, our joint venture, we remain the clear leader in the Dutch fiber market. Once again, we received the Umlaut Award for having the best mobile network in the Netherlands, with the highest score worldwide as well.

Overall, we remain on track with the execution of our strategy and therefore, reiterate our full year 2026 outlook and midterm ambitions.

Chris will take you through the financials later. First, let me briefly revisit our strategy and operational performance. At our strategy update in November last year, we confirmed we are well on track with our Connect, Activate & Grow strategy built on 3 pillars: One, we continue to invest in our leading networks; two, we continue to grow and protect our customer base; and three, we further modernize and simplify our operating model. And together, these priorities support our ambition to grow service revenues and EBITDA by approximately 3% on average and free cash flow by approximately 7% over the full strategic period.

And let me now walk you through our operational performance, starting with fiber. In the first quarter, we continued our fiber rollout with an increased focus on connecting and activating homes to support penetration and value creation. And this approach is paying off with continued growth in fiber broadband net adds, which now represent 70% of our retail base.

Consumer service revenues continue to grow, supported by the consistent fiber and mobile service revenue growth. Customer satisfaction, our Net Promoter Score improved again, driven by operational excellence, the success of our CombiVoordeel offer, our secure propositions and seamless digital experience. Fixed mobile convergence remains a key strength and now accounts for 61% of the broadband base and roughly 2/3 of the mobile base.

Now let's take a closer look at our KPIs for the quarter. In fixed, our focus on loyalty and base management resulted in 9,000 broadband net adds. Fixed ARPU held firm despite continued base investments and a competitive market, supporting service revenue growth of 0.8%. In mobile, the base development remains supportive. We added 90,000 postpaid subscribers. Growth remains healthy in the high end with around half of the inflow via unlimited. In the no-frills segment, we see promotional activities putting some pressure on ARPU, leading to 2.3% mobile service revenue growth in total.

Let's now turn to the B2B segment. As expected, Business service revenues declined by 0.6% year-on-year. The strong growth in SME was mainly offset by decline in Tailored Solutions. At the same time, commercial momentum across both fixed and mobile remained solid. Customer satisfaction improved further, highlighting the quality of our network and services and reinforcing KPN's position as a trusted and secure partner. And against this backdrop, data and operational sovereignty are becoming increasingly important for our customers, and we are well positioned to support them.

Within Business, growth continues to be driven by SME with strong demand across Broadband, Mobile and Cloud & Workspace. LCE growth moderated as continued IoT growth was offset by lower activity in low-margin Cloud & Workspace in LCE. Tailored Solutions declined as expected, reflecting a strong prior year performance and the impact of contracts we decided not to renew. We expect revenue improvement in this segment in the second half of the year. Despite lower service revenues, the total contribution margin improved year-on-year in B2B, reflecting our focus on value steering.

Wholesale continued to grow, mainly driven by mobile. Broadband service revenues decreased due to the ongoing reduction of the copper base, partly offset by ongoing growth in Fiber. Mobile remains strong, supported by international sponsored roaming. And other service revenues declined due to lower traffic and softer visitor roaming, which we expect to recover from next quarter.

Then ESG remains fully embedded in our strategy. Here, we show you our progress across our 3 pillars: responsible, inclusive and sustainable. On responsibility, we continue to deliver services that are secure and reliable by design. Our data safety reputation remains strong, supported by a growing number of security certified employees and secure by design services. Inclusivity also continues to improve with higher employee engagement in 2025 and diversity remains a clear priority for us. And on sustainability, we again reduced Scope 1 and 2 emissions year-on-year while maintaining high levels of reuse and recycling.

In short, we are making steady progress across all ESG areas, reinforcing our long-term value creation.

And with that, I'll hand it over to Chris for the financials.

Thank you, Joost. Let me now take you through our financial performance, and let me first summarize some key figures for the first quarter. First, our adjusted revenues were up 2.1% year-on-year in the first quarter, driven by service revenue growth and higher non-service revenues. Second, our adjusted EBITDA after leases grew by 3.1% compared to last year, supported by higher revenues and continued cost discipline.

Our EBITDA margin improved by 40 basis points to 45.1% of total adjusted revenues. Our indirect expenses were EUR 3 million lower despite wage indexation, and we remain on track to deliver EUR 15 million to EUR 20 million of indirect cost savings this year. Elevated energy prices will have no material impact on our EBITDA this year. As previously highlighted, our full year EBITDA guidance assumes a U-shaped year-on-year growth pattern over the year, with somewhat lower growth in Q2 and Q3 and a planned pickup in Q4.

Third, our net profit increased by 19% year-on-year, mainly driven by a higher operating profit, partly reflecting the absence of prior year one-off costs related to the Althio acquisition. And finally, our free cash flow declined by about 20% compared to last year, fully driven by timing effects that will reverse in Q2, and I'll explain this in more detail shortly.

In the first quarter, group service revenues grew by 0.6% year-on-year, supported by Consumer, SME and Wholesale. We expect this lower level of top line growth to continue into Q2 but with momentum then picking up again in the second half of the year. And within the mix, Consumer service revenues increased by 1.3% year-on-year, and we expect this trend to improve steadily. Business service revenues declined by 0.6% year-on-year, partially driven by Tailored Solutions and reflecting our focus on margins and contract quality. Excluding the Tailored Solutions business, B2B would have grown by about 2.5% year-on-year. For the full year '26, we expect B2B to recover with growth weighted towards the second half of the year.

Our high-margin SME business will continue to show growth in the 5% region throughout the year. And finally, Wholesale grew by 0.8% year-on-year, driven by mobile, while copper decline continues to weigh on broadband.

Our operational free cash flow increased by 10% year-on-year. This was driven by EBITDA growth and temporarily lower CapEx related to weather-related delays and fiber rollout. For the full year, our CapEx outlook remains unchanged. And on a like-for-like basis, that means excluding IPR benefits and IP sales, we remain confident in delivering the mid- to high single-digit operational free cash flow growth, fully in line with our CMD guidance.

Let me now focus on the moving parts of free cash flow. Our free cash flow in Q1 came in at over EUR 100 million or around 7% of revenues, supported by EBITDA growth and lower CapEx, but temporarily impacted by timing effects related to interest payments and working capital movements. Although our free cash flow was lower in the first quarter, we expect to recover in the second quarter as these interest cost effects reverse, leading to year-on-year growth in cash generation across the first half over the full first 6 months. From then on, cash generation normalizes, and we stay fully on track to meet our full year free cash flow guidance.

We ended the quarter as we started with a very strong balance sheet. At the end of March, we had a leverage ratio of 2.4x, comfortably below our self-imposed ceiling of 2.5x, and also our interest coverage remains strong. In Q2, our leverage ratio will increase somewhat due to shareholder distributions, and we expect to end the year at or below our 2.5x ceiling.

Our exposure to floating rate is limited and the average cost of debt decreased further to around 3.5%. Liquidity remains strong at EUR 1.8 billion. And early Feb, we executed on our refinancing plan for the year. And with that, we extended the average maturity of our debt at a lower average cost.

Credit rating agencies acknowledge our strong balance sheet and market position, which is evidenced by solid ratings and stable outlook. We remain on track to deliver our full year 2026 outlook. While quarterly phasings may fluctuate, our full year expectations and midterm ambitions remain unchanged.

So let me conclude with a few takeaways. We delivered solid commercial momentum across Consumer and Business, which we expect to continue into Q2. Customer satisfaction continued to improve with higher NPS scores in both Consumer and Business markets, reflecting the quality and reliability of our network and services.

We remain the clear leader in the Dutch fiber market with an increased focus on connecting and activating homes to drive value creation. Group level service revenue growth moderated as expected, but is set to recover in the second half of the year. Cost discipline remains strong, and cash generation is solid, giving us confidence that our full year free cash flow targets are well within reach. We're also making good progress with our share buyback program for the year, effectively again returning all our free cash flow to our shareholders.

Overall, we remain on track with the execution of our Connect, Activate & Grow strategy. While the geopolitical and economic backdrop remains volatile, KPN's financial results have proven to be resilient. We therefore reiterate our full year '26 outlook and midyear ambitions.

Thanks for listening. With that, we're happy to take your questions.

Thank you. Operator, please open the floor for questions. And let's -- please keep your questions to 2 or 3s as well. Thank you.

[Operator Instructions] Our first question comes from Samuel Bruce from Bank of America.

It's actually David Wright here. I think I may have just taken Sam's login. I apologize for that. Yes, a couple of questions for you, please. The Wholesale revenue growth versus maybe some of the softer guidance you gave last year, Chris, looks to be a little behind the curve. And I know you have indicated that could recover. So just a little help with the sort of moving parts there in terms of line loss, mobile customers, et cetera.

And then it's probably the same question really for B2B, just looking a little behind the curve. Again, any sort of visibility you can give us on the jigsaw pieces on why and how that improves in the second half would be very much appreciated.

Yes. Should I start with Wholesale? So David, on Wholesale, the moving parts are a couple of line items. On the broadband side, we saw a decline in copper and some growth in fiber. I think we were affected by the final phasing out of the Tele2 brand, one of our main peers. And obviously, one of our main competitors. And clients suffered from cyber attacks. I think we also saw some of the outflows from that, mostly on the copper base. So you can see less copper -- or more copper outflow, less fiber inflow that we relate to the phasing out of the Tele2 brand, which I think is basically nearly done, but also the market effects of the -- of the hack that affected basically Wholesale broadband service revenues.

Mobile and sponsored roaming continued strong. The biggest impact is expected in the second half of the year. We have quite a healthy funnel of clients to be onboarded. That's going to happen as of late Q2 and the second half of the year. So then you'll see more mobile, sponsored roaming clients becoming connected on the system.

And the third leg is visitor roaming, which is a bit less than we expected. It has to -- I think with less tourist traffic to the Netherlands. It's early days. So if you look at those moving parts, compared to expectation at the beginning of the year, I think revenues from our largest customer and visitor roaming were less than what we expected -- that we anticipated. On mobile, it's according to plan, but more tilted towards the second half of the year.

Yes. And David, to get to B2B, most significant impact on the B2B service revenues was, of course, the minus 14% in Tailored Solutions. And that has to -- is related to 2 large contracts we decided not to prolong or, at least, to increase tariffs to make sure that the margins would be better than we saw over the last year. So these contracts are stopped. It doesn't have any impact on our margins. And I expect that in the third quarter to move up again because of the year-on-year effect.

So without that Tailored Solutions effect, B2B service revenues would have been 2.5% this year. Total KPN, I think Chris mentioned it as well, 1.7%. But this is really a temporary effect. So looking forward, we expect SME to continue to grow at 5%, around 5%. Tailored Solutions to move back in the plus in the third quarter. LCE will continue to move around the 0% growth in the coming quarters.

And just very quickly on the Wholesale side. I think, Chris, you may have talked about potential targets, if I remember rightly, around about 3% in Wholesale this year. Is that still achievable? Or could we just be a little short of that, do you think?

I think given the effects of our main clients, that is affecting that number. So you see Wholesale a bit lower obviously in Q2, then picking up in the second half of the year. I would say probably around 2% for the year. Next year is a different story, but I think for this year, probably more around 2-ish than 3%, I think. And I do think that the combination of visitor roaming and the effect of the broadband base for our main client are the key explaining factors for that.

The next question comes from Paul Sidney from Berenberg.

I had 2, please, fairly steady, sort of high level, but it would be great to get your thoughts. The first one is on mobile upsell. I just wondered, do you see an opportunity to drive additional revenue growth from upselling products to your customers, like data security, other services? I know in particular, Elisa has been very vocal about being able to monetize the upsell of security services. Just wondering if that's becoming more of a theme within KPN as a business and maybe it applies to business customers as well.

And just secondly, Chris, on capital allocation, we're seeing a bit of a flurry of M&A activity over the last couple of weeks, both in our sector, but also across Europe. I was just wondering, is your view of M&A changing in light of this? I know you're giving free cash flow back to shareholders pretty much over 2026, but looking at valuations in Europe, potential in market bolt-on acquisitions. Just wondering how you're thinking about potential opportunities for M&A, if there are any, this year and beyond?

Yes, so in general, our strategy is to enrich the mobile proposition for our customers, first of all, by combining it with broadband, of course, but also to enrich it with more services. We've been building a KPN app, which is facilitating our customers in a much easier way so they can upgrade or downgrade themselves. And the example you mentioned is one of the most important things we introduced lately, that is an additional security package for mobile customers. We do it on broadband as well. So there's a free package, which is more or less a base security environment. But taking into account how important cybersecurity is and everything that's happening in the market, we also introduced a package customers have to pay for. And so not only making sure 50% of the inflow is unlimited, but also by enriching our unlimited propositions, it is our intention to upsell.

Capital allocation?

Yes. Look, on M&A, look, first of all, we have a fair amount of headroom on our balance sheet as we have today. But most importantly, I think on M&A, it's important to be very disciplined and look at the value creation and whatever -- every file you look at needs to meet a ROCE or ROIC hurdle or a cash generation hurdle, right? And whatever is happening in Europe is not really affecting us. It's like -- you look -- we always look out for interesting additions to our business, but from a very strict disciplined perspective.

So no -- we're not especially active rather than last year at this point in time, given where -- what's happening in Europe. I think we've got the same level of scrutiny and then the same level of, I would say, thresholds for transactions to occur. They need to make strategic sense, have a clear, synergetic value and then meet clear ROIC and cash generation hurdles. And then first, we have -- if they were to occur, we've got a significant headroom on our balance sheet. And then yes, in theory, of course, you could always say that's sort of buying back shares by business, but that -- the hurdle for that is quite high.

So I would say, in summary, no particular increased interest by KPN as a function of what's going on in the markets. Same level of intensity as always. The same framework as we always have.

Perfect. So is it fair to assume, Chris, if nothing is meeting your return on capital employed hurdle, then all the free cash flow pretty much goes back to shareholders?

Yes.

The following question comes from Andrew Lee from Goldman Sachs.

I had 2 questions, one on Consumer price rises and one on cost efficiencies. On the Consumer price rises, has your expectation changed at all on your ability to land those price rises that have typically been more than offsetting cost inflation, just in light of the competitive environment across your businesses? And on that subject, I would just note that at one point, it had sounded like you had expected a greater tailwind from the competitors' data issues that doesn't appear to have transpired. I'm wondering whether that's due to greater competition. Anything changed in the inflationary environment you anticipate? Just a broad question there.

And then secondly, on cost efficiencies, a lot of European incumbents are increasingly noting lower CapEx intensity requirements post the fiber build and growing OpEx efficiencies as softwareization accelerates. We've only had a strategic or mini strategic update from you last year. But even in that time, other companies are finding new efficiencies. Are you finding your opportunities here are growing as you continue on that cost efficiency path? Any kind of color there would be helpful.

Okay. Andrew, I will start and then Chris will follow up, I guess. Yes, on price increases, in general, subscription-based business, every year, we look at price increases. We did one in mobile on the front book. And annually, we take decisions on price increases mainly to at least equalize CPI impact. And I don't expect that to change.

I think you mentioned the tailwind from things happening in the market on data breaches or -- am I correct there?

Yes, exactly. Yes. I think the thing that -- one point, a couple of months ago or a month and a bit ago, there was some optimism that, that could present a greater tailwind that seems to have transpired. I appreciate that some of that tailwind may slip into the second quarter, but it doesn't sound like it's as big a tailwind.

Yes. So I think it's important to stay focused on our strategy and not to jump on an event. Of course, a data breach in the market is not good. And it's clear how impactful security is and cybersecurity, how relevant cybersecurity is for the whole society. This is where we are on pole position. This is our strategy on broadband, on mobile, but also on B2B, we are the best secured provider for the Netherlands, and that is clearly visible. So not related to pricing, but on the inflow, especially this quarter, it will probably be better, but that's a temporary event.

But I think in general, you could say that KPN is the most secured connectivity provider for households, SME, B2B customers, the government, ministry of Defense selected us for a cloud solution. So no matter what will happen in the market with competition, I think it's important for us that we understand the value of our strategy there.

And on cost efficiency, yes, we have launched a couple of transformation programs, as we call it. We think there's a huge potential in it. That's why we raised the bar for EUR 100 million net OpEx reduction in 5 years. That is not gross but net because, I mean, the difference should be visible. And that's all related to a couple of big change programs, which is all about the operating model of KPN. It's more digital-first and human-assisted instead of the other way around. We launched the first AI agents in the customer interface. And slowly, we see traffic slowing down, traffic from customers coming in. So less tickets, less calls, less conversations. So that's kicking off quite well. We have a program called autonomous operations, which is really changing the way we run our technology in the company. So there's a lot in there. And at the end, it all leads to less FTE and lower indirect OpEx.

So EUR 100 million down in 5 years. If we think it could be more, of course, we will grab it and increase the target. But let's first see how far we come here.

Yes, Andrew. And on your question on the data-breach effect, I mean some of it will show up in Q2, some of it in increased new sales and improved order balance. These customers take a bit of time to be activated, right? So my view is that the event led to some churn at the other side in the beginning that showed up on our side on Wholesale, but maybe lowest churn on our side in retail in the first quarter. I think that effect, by and large, has faded, but we look at structurally improved order balances at this point in time. So a greater share of gross sales in the market and lower churn at KPN, and that will probably feed into the second quarter of the year. You can imagine if this thing happened at the end of February, March when sign-up customers then are only activated in the second quarter. So some of that effect will show up in the second quarter.

The next question comes from Keval Khiroya from Deutsche Bank.

I have 2 questions, please. So with the full year results, you talked about 1.5% Consumer service revenue growth for the full year. Do you think that's still valid? Or do you think there could be a bit of a higher number than that 1.5%? And any comment on fixed and mobile within that mix would be helpful.

And secondly, you've done a good job at converting the copper base to FTTH. How much of that remaining copper base is currently covered by Fiber or will be over the next 3 years, given I guess that's where you have the best scope to convert and protect that remaining copper base?

On the first one, Keval, I think there's upside for Consumer to do a bit better than 1.5% year-on-year. Again, it will show up mostly in the second half of the year. It has to do with the effect that I just explained to Andrew about some additional inflow from the data breach but I think also structurally a better order balance. Now that will show up really in the numbers into Q3, right? Then you have a full quarter of all these benefits. And then the price indexations, and also Joost has talked about our ability to monetize some of the security features.

So I'd say for the Consumer side of things, I wouldn't be surprised if the second half of the year shows a run rate of growth higher than 1.5%. So there's a bit of upside in there.

On the copper question, at this point, 70% of our base is in fiber, 30% is on copper. So that's actually much reduced in the past. And you can see the benefit from that, that churn on broadband is structurally trending down. You can see the smaller copper base, the bigger churn, bigger share of fiber leads to a much improved churn position.

How much of that remaining copper is yet to be converted to fiber? I don't know. Joost, if you...

Well, we cover 70% of the Netherlands on fiber and 70% of our broadband base is on fiber, but that's not the same 70%. So within the fiber footprint, we can uplift our base probably around 80%. So I would say that in some areas, copper areas, we see, especially in the larger cities, a market share of 20% in KPN retail. Some, it's a bit higher. So there's clearly an opportunity of migrating customers in some areas to fiber. It's also an opportunity to serve our customers better well on copper and in combination with fixed wireless access or so to support the gateway. But there's a lot of potential in the current fiber footprint to move up more customers to fiber.

The following question comes from Polo Tang from UBS.

I have 2. The first one is, just can you kind of -- it's a bigger picture question in terms of competitive dynamics. Can you comment on what you're seeing in terms of both the Consumer market and also the B2B market? And has there been any change going into Q2?

My second question is really just on B2B trends. Are you seeing any change of behavior among SMEs or LCE clients just given the macro environment? Alternatively, are there any changes in consumer behavior just because of the current macro environment?

Yes, Polo. Yes, you do know the Dutch market, and it remains competitive, but that, we consider normal course of business. So from the first to the second quarter of this year, not a big change, of course, on the broadband side, DELTA and VodafoneZiggo being active. Odido, on our network but also on the DELTA network nowadays. And on mobile, we see increased competition mainly on no-frills. So still, I would say, the unlimited markets, that is a healthy market where we see a strong inflow. And most of the competition is really in the lower-priced ranges, but that's already ongoing for a while.

And in B2B, that's a different. We don't face 1 or 2 big competitors there. That's a fragmented market. In SME, we are super strong. We really worked on not only a very simple digital portfolio, but also on our go-to-market strategy. So we are in control of not only our own channels, but also third-party channels to reach out to our customers. So in SME, we expect ourselves to keep on growing. We don't see a lot of macro environment impact yet, I should say. So of course, we keep a close eye on that. But until now, we also expect Dutch economy to grow a bit, not sure what, 1% -- 1.5%. So it's super relevant because we're a SME economy in the Netherlands. But until now, we're in control.

I would say, Polo, on the Consumer side, I mean, the effect of higher gas prices is really only felt for really lower income households, right? And that's typically not our customer base. So I would say the majority of the Dutch people may have some impact but relatively limited and certainly not the customer base that we typically target.

In the corporate segment, I see SME growing nicely. I see some upside for SME to beat the 5% mark for this year. From what I see, there is a more determination by our SME customers to digitize their business. So that's an opportunity for us as a response to any economic pressure is a target by our clients to digitize their business, implement AI tools, enhance connectivity.

So actually, I think on the SME side, it's a positive. If anything, you could see a little bit more price orientation on the LCE side, if anything, but it's not there yet. But if I look forward, I would say, on the SME part of the economy, that feels pretty strong and robust. And in SME, growth could do better than 5% in this year, if anything. So I would say, limited -- and maybe for ourselves, you haven't answered it -- asked it, but I'm still answering the question, is very limited, right? We basically hedged our energy exposure for the full year. We're very pleased with the solar PPA we have this year and one -- the wind one coming on stream next year, which basically means that the energy impact on KPN is negligible and won't affect anything this year and also not next.

[Operator Instructions] Our following question comes from David Vagman from ING.

The first one on the Consumer ARPU side. Can you give us an updated view -- your view on how you expect them to evolve for mobile and fixed for this year? And then second question, can we get your latest updated view on FTE reduction for this year?

Yes. So I think on fixed and mobile ARPU, I think we're pretty positive on those. We will push through typical indexations for broadband in early July, Mobile tends to be October. Think about 3% range of indexations. I mean we have yet to decide and communicate, but that's probably the range that we're thinking of. And then I'd say fixed ARPU developments have, in any case, been quite positive in this year, better than we planned. So I would say pretty upward potential on the -- on fixed ARPU. On Mobile, we've seen so far, I'd say, good developments on the unlimited side, a bit of pressure on the no-frills segment of the market.

So I'd say a moderate improvement in ARPU in mobile driven from indexations, monetization of security features, an improved mix. And then against that, we'll see some continued pressure in the no-frills part of the market. And net-net, I would say, really positive outlook for mobile indexations.

And on FTE reductions, I think we're now a good 400 below this time last year. I expect us to end the year with certainly 400 below the year as well. So basically, for the full year, around 400 FTE reductions.

Yes, I would say, at least, I mean, we don't have a plan to suddenly do a big reorg and reduce a couple of thousand FTE. We're step-by-step digitalizing the company in a prudent and healthy way. So currently, good on track. A bit ahead of the plan, like Chris mentioned, minus 400. And of course, we want to accelerate there. It's for us not the most -- I mean, it's not an FTE target we have but an indirect OpEx target. And so we have a bit less than 10,000 FTE in the company, but we also hire a lot of people every day. So there's a flexible skill around that we also keep an eye on because it's really about controlling indirect OpEx.

The following question comes from Siyi He from Citibank.

I guess I have 2 follow-ups, please. The first one is on the price increases. KPN has raised the front book prices this year. And just wondering if you can talk us through how it's landed and also whether you could consider making this also an annual exercise as well going forward?

And the second question is on your answer on the fixed ARPU. I think a couple of quarters ago, you mentioned that the fixed ARPU was affected by the combo discount. And just wondering if you can give us some data on how far are you with pushing the discount? And when do you think that this drag will start to lift off?

Yes. On the front book price increase, I think they landed really well. I mean, it went through unnoticed. What I think is on the positive side on mobile, we always look at the renewal delta, basically, which always tends to go up once you do your price indexation. And then you work your way to get it down again. Because of this, it's actually much lower than it was same time last year. I think, about 40% reduced compared to last year. That does help any renewal leakage.

So I think we're pretty happy with the front book price increase because it landed well, and it reduced that renewal delta significantly. Will we do one again next year? Ask me again next year. I mean, that's hard to predict. But so far -- I'd say so far so good in terms of how this has landed.

On the fixed ARPU, the CombiVoordeel, you're right, that feeds into the service revenues in fixed. So that effect will really wash out next year. We see next year, the combination of the spend on the constructs that we have actually optimized and reduced, a bit to optimize the structure and what the giveaways are against the cross-sell and lower churn levels. That is still planned to be positive next year. So that effect will wash out and will have a positive contribution next year.

Having said that, I think we reported fixed service revenue growth around 0.8%. That was a bit better than we planned. So I think overall, fixed service revenues will be better -- it will be better than planned in any case. And I think the 0.8% of this quarter will be the lower bound of what we will communicate this year unless something really strange happens. But given the current trends, I would say, first of all, to answer your question precisely, the effect will wash out next year. But most importantly, we see some better fixed service revenue growth numbers than we anticipated.

The last question comes from Ajay Soni from JPMorgan.

Just 2 questions, please. My first is just a follow-up on the fixed service revenue growth. So what was the headwind from the Combi discount within Q1?

And my second one is around the H1 free cash flow, which you mentioned will be higher versus the same period last year. So I think that implies free cash flow in Q2 around well over EUR 200 million. Is it purely just coming from working capital and interest being better versus last year? Or is there anything else that we should be considering?

Well, on the fixed, I would estimate that the Combivoordeel discount is about 40 basis points in a quarter, roughly. That's kind of what I estimate it to be. That gives you a feel that the underlying fixed service revenue growth, excluding Combivoordeel, is around 1.2-ish.

In terms of the H1 free cash flow, like the effect one is, of course, the interest rate payment. We did actually replace a bond with a coupon in April for a bond with a coupon in Feb. So basically, compared to last year, the coupon falls in the first instead of the second quarter. That's about a good EUR 27 million. And there will be working capital deltas. It has to do with specific salary and bonus payments, has to do with the cycle and the CapEx flow throughout the year, Q4 last year versus Q1 this year. And typically, I would say, we always have a particular situation where we pay more cash out in the first half of the year, in the first quarter of the year than the second quarter.

All in all, I would expect definitely free cash flow in the second quarter to be materially higher than EUR 200 million. So I would say expect the full 6 months of the year to be up versus the full 6 months of last year. And that's interest, which is probably in the back, which is for sure going to happen. It is working capital shift that also for sure are going to happen. That too. And with that, for full year free cash flow, our guidance was above EUR 950 million. We still feel confident and comfortable with that guidance. So we should definitely make that.

Okay, all. Thanks for dialing in. I would like to conclude today's Q&A. As always, in case of any questions, feel free to reach out to the IR team. And yes, see you soon. Cheers.

Bye-bye.

Good morning, good afternoon, everybody, and thank you all for joining our inaugural Capital Markets Day presentation. This is a hybrid event. So we have a number of people with us here today in-person, and we also have a number online. We've got -- this morning, we put out a fairly comprehensive presentation and outlook for Gold Fields. This was delivered on the -- on our website. We will try and go through this at a fairly rapid pace and obviously pause at the appropriate moment. Obviously, we will be open to taking questions.

So during the course of the presentation, there will be some questions that we'll take. But we also look forward to engaging with the investors and analysts in due course as well so that we can really unpack some of the questions in due course. So I don't believe this is the only opportunity we're going to have to talk about it.

Clearly, when we think about at Capital Markets Day and delivering what we are delivering today, there's certainly degrees of risk in putting this out there. But the one thing that we stand for as Gold Fields, and you've been around long enough to know that what really we value is not just getting caught up in the hype of today, but really setting up our business for the long term and delivering steady, reliable ongoing performance. And we certainly think that in time, that will set us apart rather than getting caught up in the hype of today.

Having said that, we have got some really good news and some really good story that we're going to talk about our portfolio as well as capital allocation when we get to it. But again, just the important framing here, when we think about our business, we think about multigenerational business rather than just the business of today. So with that, I just want to draw your attention to the disclosures on Page 2 and 3. It's the first time I've seen disclosures on 2 pages. So clearly must be kind of worried about what we're going to say.

So just on an introduction, I think the first thing that I'll just set the scene on it is, we absolutely believe that we have got a business that's set to outperform our peer group in the sector. We have a best-in-class production profile relative to our peers with both near- and long-term optionality to sustain our business. What is really important for us is that we think about our business in three horizons. So we've got a very clear focused 5-year plan, which we're going to talk about today, which sets the first horizon. In this first horizon, we are going to be investing in our business for the second and third horizon. So we are making clear capital allocation decisions, again, which we can unpack and talk to.

What we'll also demonstrate is that we have very clear opportunities across many of our assets to extend life. And when we think about the levers of growth and life extension, clearly, investing in our business is the lowest form or the lowest cost options to extend life and improve our business. And so we've kind of really focused on unearthing those opportunities. Again, our focus and our strategy, it isn't about growing size and production ounces per se. We're focused on improving the quality of our business, and quality comes from growing cash flow per share on a relative basis. So everything that we decide on and we look to is how are we improving the relative margin of our business.

So today, again, we'll talk about the 5-year guidance. We'll unpack capital as well. So what are we doing? We have got a significant -- if you look at our cash profile over the next 5 years, we will deliver significant cash, even at consensus, which today is nearly $1,000 below what we're seeing on spot. And Alex will unpack later, even with the small additional discretionary investments we're making, it doesn't detreack the ability to again pay very significant returns to shareholders during this period as well as putting significant amounts of cash back into our balance sheet to create flexibility in line with our ambitions.

What is also important, and we show this up here is ultimately, whilst we're really focused on predictable, reliable, safe operating performance and safe and reliable delivery of our projects and improving our business. Ultimately, those outcomes are a function of the inputs that you have in your organization. So we are also very focused on building organization capability to deliver a safe, reliable and predictable organization into the future. And we see many opportunities, which I'll unpack later around optimizing our organization to deliver this performance into the future.

So just quickly on the agenda. What we'll do is we've split this session up into three portions. Firstly, we will talk about our portfolio. I'll cover the guidance. Chris will talk to the levers for growth that we have in the business, and we'll then break for a Q&A session. We then go into the second session, which is around our portfolio quality. Jason Sander, acting Chief Technology Officer; and Bernadette Dippenaar, Vice President, Strategy and Strategic Planning, will cover those sessions.

Again, we'll take a bit of a break during that session as well as taking some questions. We'll continue through the rest of our portfolio and then also deal with Windfall Project update at the back end of it. And then we'll close in the third session where Alex will talk about capital allocation, and we'll close again with some questions at that point.

For those that you've probably seen this, this is our Gold Fields leadership team. Everybody is here with the exception of Francois Swanepoel, our Chief Operating Officer, who unfortunately was not able to be with us for personal reasons. But we do have a full representation and the team is fully aligned and committed to the plan that we're presenting to you. We also, as I said, in addition to Bernadette, have Thomas Mengel, our VP, Investor Relations, and [indiscernible] Govinda our Head of External Communication.

As customary in Gold Fields, we don't start any meeting without a safety or value share. And in that context, I'm going to ask Mariëtte Steyn to join me here and provide the safety share.

Thank you, Mike, and good afternoon. Our mining industry has a terrible record of really poor safety performance, and every year, we report of the number of people that loses their life under our watch.

At Gold Fields, we believe that it is possible for us to run operations and projects without serious injuries or fatalities. Now when you look back at our history, you will see that our results does not necessarily reflect that belief yet. And as a result of that, over the last 18 months, we have made significant investment in changing the culture of our organization, building people capability and systems and processes that will help us guarantee a change in our safety outcomes. The investment that we make has very clear benefits. We can deliver that aspiration of reduction in serious injuries and fatalities over multiple years through that -- our investment. But it also has a very clear link to our social license to operate for two very important stakeholder groups.

First of all, our own people, and secondly, those people out of our communities that they entrust into our employment. But we also know from our own experience and from our own assets, that safety performance is linked to really good, predictable operating outcomes. So you might ask and argue today, why are we starting an Investor Day with a discussion about safety? And Mike talks about it, and it's culturally important for us to build that belief.

But it's also because we deeply believe that safety is an outcome, of an operation where you have engaged people, where work is well designed and well executed. And that safety performance is a telltale of the maturity of the discipline of our operating culture. So when we talk about our safety improvement plan, it is important because what we are building into our culture and our systems delivers predictable, safe operating outcome. That's how we deliver our strategy. And ultimately, the story we're going to tell you today, this is the foundation of how we believe we build long-term sustainable value creation. Thank you, Mike.

Thank you, Mariëtte. Thanks for that share. I'll now move on. And again, just to reinforce, that's such an important part of the DNA that we stand for, is creating that predictability and reliable delivery because we can put any kind of slides up here about what we're committing to, but if we don't deliver it, then it doesn't stand for anything. And it ultimately comes back to the organization that we're building.

So I just wanted to show this. This is just a truncated slide of Gold Fields history. Gold Fields is proud history of over 138 years as a pure-play gold producer. It was one of the pioneers of developing the and unlocking the [ Vardenis ] Gold Fields, but in the last 30 years, you've seen that migration to be a globally-diversified gold producer. One of the key transformations in this slide is obviously what happened in 2012 with the unbundling of the Sibanye assets in South Africa. And that was a very deliberate strategic pivot to say, South Africa, hugely labor-intensive, deep underground, low mechanization and obviously, pure single country risk. That migration, which you've seen to being a globally diverse company that has now highly mechanized operations is really where Gold Fields has emerged to.

Some of the key highlights, if you look at this slide is the entry into Ghana in 1993. The initial move into Australia in 2001 with further growth in 2013, 2016 and ultimately, the consolidation of Gruyere that we saw this year. The acquisition of Cerro Corona in 2003, the discovery of Salares Norte in 2011 and ultimately, the two transactions that allowed us to get the entry into Canada. And I think the key message around this is just to demonstrate that if you want to be a pure-play gold miner, portfolio optimization and continue to be active in improving the quality of your business over the long term, whether it's investing in your current assets, whether it's finding new opportunities, Gold Fields has got a really good track record of delivering that.

And to me, that in addition to the investments that we're making along the lines that Mariëtte has spoken about of being able to deliver predictably, the combination of that really sets us in a unique position to be a very good investment going forward. If you just look at this portfolio and how it's evolved, these are three charts, which just shows our geographic mix prior to 2012, 2018 and where we are today. What's interesting is that Africa has continued to become a smaller part of it. It's not because we don't believe in the opportunities in Africa. But as we thought about growing our business, the opportunities on a risk-adjusted basis have certainly presented themselves very differently in other parts of the world. And if you look at our mix going forward, if you fully consolidate the potential of Windfall in Salares Norte, we'll have around 70% of our production coming from OECD countries in the next 5 years.

And again, if I can talk to the uniqueness about what Gold Fields offers, we are very comfortable in delivering and performing in emerging markets. But we have got a really stable production base in OECD jurisdictions. So it's kind of a unique mix that we're able to deliver on. If you -- as a result of these deliberate efforts, you can see our portfolio today. We have a highly diverse portfolio of high-quality assets across a number of jurisdictions. We also have a really interesting number of exploration properties, and Chris will talk to that later. We have well in excess of 20 exploration targets through partnerships that we're working on. And those again form a very interesting part of our growth story.

I just wanted to spend a minute on this. So what's important is having a very clear strategy. And our strategy is unchanged from what you would have seen before. It's very simple, three pillars. One, is we operate and deliver in a safe and reliable cost-effective way. Secondly, we deliver positive social and environmental impact on the communities that are around us. And thirdly, we continue to focus on growing the quality of our portfolio.

What is new and what you haven't seen before is our 2035 strategic aspirations. So what was important when we came together as a leadership team last year is to say, how do we think about where we want to go in our business? We can have a strategy, which kind of sets what we're going to do, but how do we really focus on setting clear and measurable objectives about what we're going to do?

And really, they cover a number of things. It's about our people. So how do we deliver safe outcomes? How do we create an inclusive culture? How do we become a trusted partner for the communities and governments where we operate? How do we continue to improve the quality of our portfolio and how do we deliver results that are superior to our peer group?

What we have done as a result of this exercise is actually set our own very clear aspirations in quantitative terms, and we measure that. We measure that. We share that with our Board. So we've got a very clear goal of what we're trying to create in our business, and the 5-year plan that we're showing is a key component of taking us towards that journey. Ultimately, as we've shared now twice before, is that we believe that outcomes are a function of the organization that we have to deliver that. And so we are also really focused on building a reliable, resilient organization that is simple, that is efficient and is effective in delivering these outcomes. And we've made a lot of changes already, starting with the culture work following the Elizabeth Broderick report in 2023.

We've invested very heavily in leadership development. We've also developed our safety improvement plan. And I must say, whilst we are still seeing significant near misses, so we're not out of the woods, but the impact of that program is having actually on safety performance has been actually remarkable. And the great thing about that is it just demonstrates to me that within Gold Fields, we've got that capability. If we apply our minds to something, we can deliver change and we can deliver positive outcomes.

We've also changed our operating model, which has helped us to really get much tighter and much more connected and aligned in the journey that we're under. We've also continued to invest in leadership capability through all of our layers because acknowledging that culture change and performance comes in having aligned leadership. We've also aligned reward systems. You think about that as a pretty basic thing. But if you can -- everybody aligned to one scorecard for the organization so that everyone is targeting the same outcomes, it makes a huge difference.

We are also investing in our AO programs. And one of the key levers that Alex is pushing now is we've never really had a global supply organization to look at opportunities to unlock value from working together on major categories. We are also looking at work on simplifying our operating systems. We have multiply duplicative IT systems. We have lots of duplication on OT systems, and it's a function of how we were organized in the past. These are all opportunities to simplify, reduce cost and drive efficiencies and more predictable outcomes.

As we think about our business, we look at our business across three time horizons. So what we're going to unpack today is the next 5 years, and we're going to provide specific cost, volume and capital guidance over that 5 years. But again, to reiterate, the investments that we are making in the next 5 years is to really set ourselves up for the longer term. What we can see is that our business has got a very clear pathway to the upper part of 3 million ounces by the end of the decade. We'll be firmly in the 2.5 million to 3 million ounce range in the next horizon. And in our current portfolio, we deliver over 70% of our current production profile beyond 2035, and I think this is something, again, when I joined 18 months ago, I heard a lot of noise about Gold Fields is a short-life business. It needs to go and do a lot of things. It needs to go and do a lot of M&A to bolster its profile.

It didn't help that we did do two transactions, but those two transactions were opportunistic and they've added quality. And as Chris will show, these were perfectly timed opportunities to bring into the portfolio, but we didn't need to necessarily do those transactions. And again, the key message is M&A will always be opportunistic and our preference will always be to invest in our business because we've got great opportunities to extend life and unlock value as Jason and Bernadette will show a little later.

So this is the money slide, and I'm sure this is the one that's going to generate quite a lot of questions here. And it's the first time that we've really, as a company, put out guidance that's been longer than 12 months, with the exception maybe of Salares Norte, where we provided probably 2 years out and a little bit further. So we've kind of -- the way that we're thinking about this now is that this is our current outlook.

Clearly, what we -- we don't sit on our hands and only deliver this, but we will continue to look at ways of further optimizing this, particularly in the area of cost. But for me, the most important thing is that, again, in the journey that we have in becoming a great company is we focus on safety first and organization culture. Then we drive effectiveness and outcomes and ensuring that we predictably deliver and safely deliver on the production outcomes. And then we can drive efficiency in the organization to deliver that margin expansion.

And so when we think about this profile over the next few years, you can see that actually we show a really neat growth profile within the portfolio. And this comes across a number of assets. It's incremental ounces at St Ives, it's incremental growth at South Deep, there's some incremental ounces out at Tarkwa. We show improvement at Gruyere, we're showing, obviously, the addition of Windfall at the back end of the decade. And again, this is what is great about this portfolio is you're going to have ups and downs depending on different investments at different points in time. But overall, our portfolio is growing, and I can show you a slide later, which, in our view, is certainly a best-in-class growth profile.

What you'll also see at the top bar, the kind of lightly shaded blue bar is the all-in cost profile. And that all-in cost profile shows an increased trajectory, but that's reflective of the $2 billion of discretionary investment that we're going to be making into the business over the next 5 years as well as the Windfall capital that we're going to add into delivering that production growth. Again, as Alex will demonstrate later, all of that will be self-funded, and it will be able to be delivered in a way that it doesn't detract our ability to deliver upper quartile shareholder returns as well as improving the flexibility and quality of our balance sheet.

If you look at our all-in sustaining cost, largely what we're able to demonstrate is a flat-real all-in sustaining cost profile over the next 5 years. Some of the investments that we're making, particularly into the material handling system at St Ives and Granny Smith will deliver cost outcomes into the second horizon. So into the second horizon, to reiterate, we are expecting real reductions in all-in sustaining costs on the base portfolio. Just to call out on our guidance for 2025, as we shared last week, our guidance remains intact. We believe production guidance will be towards the upper half of the guidance and our cost guidance will be comfortably within our group cost guidance.

Just going to 2026, you'll see there is a slight step-up in sustaining costs. And this comes from -- just to unpack that slightly, there's around $100 an ounce as a result of inflation. There's about $25 per ounce of business improvement that offset some of that inflationary improvement. We have $50 negative impact on strengthening producer currencies within that. We have around $30 per ounce from Cerro Corona because they migrate to treating stockpiles. So again, that's a negative item. And then we do see the offsets of about $100 an ounce at a portfolio level from the Salares Norte having fully ramped up. So what you can see is there's kind of a mix of things that are playing into it. But what we do then see is some of that benefit flowing into '27 as we kind of see the offsets again coming back through.

Just again, turning into the capital in a little bit more detail. We look at capital in three buckets. Firstly, it's the sustaining capital. Historically, that's in that $350 to $400 per ounce, and that's sustained over the next 5 years. That's the dark blue bar. We then have discretionary capital, which is around $2 billion over the next 5 years, which I'll talk to you in a minute of what that entails. And then we have Windfall growth capital of about $1.7 billion to $1.9 billion in the range, and I'll talk to that in a little bit more detail because it needs a bit of a conversation. And again, those discretionary investments that we can make in the next couple of years are about unlocking the future potential of our existing ore body. And again, to reiterate, this is the best type of investment that we can make and the highest yielding and highest returning investments.

So just again, moving on to unpacking what these discretionary capital investments are, and we've got the detail of what those are on the right-hand side of this chart. Importantly to note is of this investment, nearly 35% of it is stripping activities at Agua Amarga, and that's all about providing life extension at Salares Norte. So again, high-quality, really good investment to be making. We have around 20% of that capital going into material handling system, both at St Ives and Granny Smith.

These give us life extension as well as absolute cost reduction because we're changing our mining costs. As a byproduct of that, for example, Granny Smith gets an almost 6 years life extension by the addition of the Material Handling System. Again, to be clear, these are all discretionary investments. So at any point in time, prior to sanction, we can turn these things off. But we've got the best opportunity now with the cash flow profile that Alex will share to actually make these decisions -- make these investments decisions to set ourselves up for the future.

And then probably just to kind of move on to what this actually means? On our production compound average growth rate over the next 3 years, you can see we are at the top end of our peer group. And on an all-in sustaining cost, those are also very competitive against our peer group. And this is against the peer set at the bottom of the page. What is also important, if you project this through to '28 to '30, and unfortunately, the data gets a bit weaker in terms of the analysis, we still, based on the data that we can see, are highly competitive and at the bottom end of that peer group.

I think the real issue here that exercises us despite this best-in-class production and cost outlook, we continue to trade at a relative discount against the peer average. And that's certainly an opportunity in our view to -- if we consistently deliver against this plan that we will be able to see sustained out-performance on a relative basis going forward. And ultimately, this isn't a 1-year wonder. This is a company that's got 138 years of track record. We are building a business for the next generation, and we have a business that's delivering fantastic results today. And we believe that more upside remains available on a relative basis in Gold Fields.

I'm now going to hand over to Chris to talk about the various growth levers we have in our business.

Over to you, Chris.

That's great. Thank you, Mike. Again, I'm Chris Gratias, EVP of Strategy and Corporate Development. I'm very excited to be a part of, as Mike said, Gold Fields inaugural Capital Markets Day. And it's -- thank you for everyone in the room coming. It's nice to see a number of familiar faces, and I know there's a big group online. So we really appreciate you taking the time to spend a few hours with us today.

Mike talked about the strong outlook for our portfolio over the next 5 years. I have the pleasure to really address what are those future levers for growth that will help grow and sustain our business, not just around the current Horizon, but Horizons 2 and 3. Brownfields exploration is a core strength at Gold Fields. And as Mike said, one of the most cost-effective ways to grow and extend our reserve life. We are currently spending over $100 million a year within our brownfields program, and our success has been demonstrated by continued extension of our reserve life at our core assets.

For example, we have consistently grown the average reserve life in Australia at less than a cost of $50 per ounce. We have reinvigorated our growth on greenfields exploration, the next lever. And as Mike said, have built up a current portfolio of over 20 projects with a lot of recent momentum. Our objective is to find the next 1 or 2 projects to sustain our portfolio into Horizon 3.

We're open to multiple structures that could involve wholly-owned projects, earn-in joint ventures or strategic equity investments, and we can be quite flexible given the specific opportunity, and finally, around bolt-on M&A, we've been very fortunate to have been able to complete two transactions in what we all know is a very dynamic market environment. We're very pleased with the staged acquisition of 100% of the Windfall Project and obviously, the recent Gold Road acquisition to consolidate Gruyere.

I'll go into more detail on both deals later in the presentation, but each does demonstrate a measured approach to improving the quality and value of our portfolio, and we continue to assess new opportunities, but always with the same key principles in mind.

Let's go into each of these levels, and I'll try to unpack some of them in a bit more detail. So as I mentioned, one of Gold Field's biggest strengths has always been our ability to reinvest smartly through brownfields exploration to extend life on a sustainable basis. And as you can see on this slide, across a number of our key mines, Tarkwa, St Ives, Agnew, Damang, Granny Smith to highlight a few, we've been able to consistently replace and grow reserves over decades. It really shows the Gold Fields model in action, acquire well, explore effectively, reinvest with discipline and convert good mines into multi-decade assets.

We have seen this continued early success at Gruyere and are very excited about the opportunity ahead of us as a result of the Gold Road acquisition and access to the exploration land around Gruyere to extend and drive life.

Next on to greenfields exploration. We really have reinvigorated this program with a clear strategy to discover and build the next generation of assets that will sustain our production well beyond 2035. We focus on high-margin discoveries with the potential for 200,000 ounces of production for over 10 years of life with district scale potential. Gold Fields already operates in world-class jurisdictions and expanding our footprint within these regions will remain the key priority for greenfields exploration opportunities. However, given our current balanced portfolio that Mike talked to, this does provide us with strategic flexibility to look at new and emerging jurisdictions, but we'll only go there where the risk/reward profile stacks up.

With over 20 projects across 4 continents, we have a strong capability uplift following the Osisko and Gold Road acquisitions, where we have brought on exceptionally strong talent to supplement our existing team in this area. We are targeting around a USD 50 million spend a year on maintaining the existing portfolio and looking at new opportunities, but we will step out for deals like the recent Founders Metals investment we announced last week when the quality of the opportunity presents.

To talk about some of our recent momentum activity in this space, I'll talk about four separate things here. So I'm mentioning Founders Metals, a great example of what we see as a measured approach to investing in a new and emerging prospective jurisdiction. We announced last week a CAD 50 million investment for a 10.5% equity stake with an investor rights agreement in the formation of a technical committee.

In a short time, Founders has built real momentum with a quality and experienced management team delivering standout drill results that point to the potential for multiple discoveries along a 20-kilometer gold trend and recent land consolidation has strengthened this district potential. It's a classic orogenic gold belt, which is right in Goldfields wheelhouse. It's the same deposit style we've operated and grown successfully across a number of our assets within our portfolio.

Moving to Chile with the Santa Cecilia JV, which is we're advancing under Torq's capable operator-ship. Again, early drilling has confirmed large-scale mineralization across multiple phases and the project's position right beside Newmont and Barrick's Norte Abierto joint venture places it in one of the best addresses for gold, copper systems in South America. With the Stage 2 spend now approved, we will earn into a 51% ownership position by mid-'26, while Torq continues as operator driving the next campaign. We also own a 15% equity stake in the company.

Moving on to Canada, which we're obviously very excited about. We're building on a consolidation strategy around Windfall and broadening our reach into new opportunities in other nearby proven mining districts. Through the Osisko Mining acquisition, we inherited a number of greenfield investments that we have continued to invest in. The Phoenix joint venture with Bonterra continues to advance high-grade satellites near Windfall, and we will earn-in to a 70% interest, which is on track to be achieved in the first half of 2026.

We've also increased our equity stakes in Onyx Gold to about 10%, and then got promising assets in Timmins and the Yukon, and Vior, we have a north of a 20% equity position. This is backing and providing exposure to high-quality discovery teams that are showing strong early results. Mike and Jason will specifically speak to the exploration potential at Windfall later in the presentation.

Now on to Australia, where we've had a good reset. There's been great recent progress. At Edinburgh Park, for example, in Queensland, we now have our first greenfields drill rigs turning in over a decade, which is a major milestone. The Gold Road acquisition added 9 new projects, driving an approximate 200% increase in our land package across Australia and brings a major uplift in our technical capability. We're excited about unpacking all of that and building on what Gold Road had created over a number of years. We're now focused on optimizing that portfolio, integrating the best, some we will divest and really concentrating capital where discovery potential is the strongest.

And obviously, a great example of greenfields when it works well. Salares Norte was a Gold Fields discovery. So with a consistent focus that dates back to 2004, that led to the discovery of Salares in 2011. The project was found for around $75 an ounce to the maiden reserve, which is an exceptional outcome for a greenfields discovery. And fast forward to look at Salares today, as we know, delivering -- has reached commercial production to deliver over 500,000 ounces a year at below $600 AISC. Consensus NAV on that project today is over $4 billion. So just a great example of when we get it right in greenfields, it can really create transformational value.

And finally, to unpack a little bit our two recent acquisitions. As Mike said, in M&A, you could never predict timing, but you do need to be ready to act. We have positioned ourselves to be opportunistic to take advantage of these opportunities when they presented. Both of these transactions fit exactly into what we are trying to achieve strategically from this growth lever, which is building and adding to the value of our value and quality of our portfolio.

Tier 1 jurisdictions, asset scale, lower operating costs and extension of average mine life in the portfolio. Hindsight is obviously easy around timing of these transactions, but clearly, we feel very good about the timing that we were able to achieve here. Cash-funded deals made sense in the circumstances. And given that each deal is meaningfully accretive across all of our key metrics and will drive significant improvement in our cash flow per share metrics, which Mike talked to as one of our core strategic objectives.

M&A will generally be a more expensive alternative to growing the business relative to brownfields or greenfields, but it is an important lever that we must continue to have in our toolkit. Well, we'll unpack both Gold Road and Osisko in a bit more detail, a few points.

On Gold Road, it had long been an objective to consolidate this land package around Gruyere and simplify the structure. The deal adds potential for meaningful life extension and brings significant G&A and in particular, tax synergies, which is in the hundreds of millions. The net acquisition cost of about $1.5 billion, which is after the sale of the Northern Star block, which we did at no risk to Gold Fields, resulted in an approximately 0.6x net asset value purchase multiple using current consensus, which obviously generates very attractive returns for our business.

And on Osisko, again, this was a very measured and staged approach to entering into a new highly attractive jurisdiction. The ability to acquire this size land package in the Abitibi will provide huge future opportunities for our business. Again, our net acquisition cost was around $1.5 billion, driving a purchase multiple of 0.7x net asset value based on current consensus at the time. Even with the CapEx inflation we are seeing, our returns have been meaningfully enhanced from our base investment decision in the current environment. Windfall will be a cornerstone asset in our portfolio for years to come. So with that, I think we'll stop and pause for some Q&A.

Thanks. Chris. So because we've got participants both online and in-person, I will alternate the questions and take two questions from the room and then the ones online. So for the room participants, if there's anyone with a question on this session, I'll happily take those. Okay. There we go. If you could just introduce yourself and the organization.

It's Chris Nicholson from RMB Morgan Stanley. Thanks so much for the presentation today. I know we're going to get into more of the details as the presentation continues. You've lifted your reserve price assumption to $2,000 an ounce. You're presenting this morning quite a material step-up in CapEx, the $2 billion in discretionary CapEx Windfall project.

Do all these make a return at $2,000 an ounce? Or are you using different prices, different metrics? How do you assess a return against the gold price framework?

Chris, thanks for the question. I'm going to probably delegate that to Alex to answer because he holds the capital allocation.

So I think, Chris, when we look at it, obviously, these do all to meet -- a lot of these capital investments do meet the threshold of a reserve at $2,000 an ounce. So these make $1 at that price. So they comfortably meet that.

And then when we do model returns, we model them at both that is sort of our low price scenario to go, does it still reach our cost of capital, which it does. Then we go and model it at consensus prices where we're obviously looking for sort of double-digit returns, and they all do that. So we're quite comfortable that these investments make sense. But what I think is really important on that slide and that $2 billion of discretionary investment is a lot of those are still in early conceptual stage of studies. We're going to advance them through the different stage gates. We haven't made the final investment decision on any of those. And we will be very disciplined in how we allocate that capital when we get to that final investment decision. But we wanted to show the optionality out there.

But even at the conceptual level, we've done the early economics and the early economics indicate that these are all hugely accretive. And again, they come in on an incremental basis, cash basis much lower than the reserve price.

[indiscernible] at Investec Bank. If you can talk a little bit more about the discretionary CapEx, the $2 billion and the impact if that spend was not actually incurred. I think you actually did say if conditions change, it's CapEx that you could pull off. If that CapEx was not invested, what will be the impact on the business?

Yes. Good question. And I think we haven't covered all of that in specific detail. I think Jason and Bernadette can touch on where those investments are going into each of the assets.

But if you think about the big buckets, the first one would be 35% of that capital is going into Agua Amarga spend, which is the additional ounces out of Salares Norte. And that would take 4 years out of the life of Salares Norte if we didn't do that. So that's one.

I think the other big bucket would be the two investments in material handling at both St. Ives and Granny Smith. Again, we've spoken in Granny Smith, that would probably take 6 years of the extended life that we're presenting in the plan today. But those all come in the 2030s, 2040s. So you can kind of discount it.

But St. Ives, it does allow us to ramp up production to on average, 450,000 ounces into the early 2030s. So that would probably take that away from it. And it would probably add costs into the Second Horizon that we talked to because we wouldn't be able to mitigate the mining cost inflation of using the current mining method of haul trucks through a deep decline. So that's probably another one.

There's 15% of that discretionary capital is on brownfields investments, so brownfields drilling. And again, if we take that out, we'll probably reduce the further extension of our assets into the second and third Horizon. Yes, South of Ranch at South Deep, that gives us a potential 20% lift in ounces at South Deep into the second horizon. The renewables investment is really mitigating the energy-supply risk in South Africa, but also helps us to reduce cost and decarbonize at South Deep.

Our investment in renewables at South Deep is the single biggest return on investment in energy across any of our assets in the business. So that kind of gives you an idea maybe of how it unpacks. But we can -- as we dive into this, we can maybe just call out a few of those things as well.

Thank you. Just a few questions on the online. So there's two from Adrian Hammond, which I'll read together. He says, what is driving the production uplift at group level in 2031? It's some 200,000 ounces. So that's the first one.

His second one says regarding greenfields prospects, how soon could these projects be brought into reserves and then into production?

Thank you. I'll ask Chris to answer the question on greenfields. But in a minute, just on the 2031, that's largely driven by the Windfall ounces coming in as well as the Agua Amarga ounces coming back in from Salares Norte because if we go into the presentation, you'll see in '29, there's a bit of a drop-off in Salares as we're doing the big strip to get the access to those ounces. Now again, I must just say that we will push really hard to see if some of those ounces of Salares can come back earlier and we can shift that profile, but that's our best view today.

And it probably just reflects how we think about guidance as well. Whilst we put a range guidance out there, our internal plan is the top end of guidance. That's how we're driving and planning our business. But again, we want to be smart about how we guide and how we think about the business because in mining, not everything goes according to plan. And so we do, do probabilistic determination of the inherent variability in our portfolio, and therefore, that's where the range comes from. So there's a bit of science behind it. And clearly, what we are wanting to do is to provide a high likelihood of delivering in our guidance consistently quarter-by-quarter.

And just to add to that, and Adrian, there are also the incremental benefits of the two Material Handling Systems at both St Ives and Granny Smith as well as the benefit of the stripping campaign through '27, '28 and '29 at Tarkwa, delivering high grades.

There was a question on greenfields.

When are the greenfields opportunities coming in?

Yes. I guess the easy answer is, it depends. Look, we've got across the portfolio, a number of investments that are at different stages, some more advanced, some very early stage. Look, I think if you look at the history of greenfields exploration from initial investment, to when you can have a project that's in production, it's 15 years plus. The question on when can you get something into reserves. I think there are things in our portfolio that are quite well advanced that maybe could come on earlier in Horizon 2. But I think realistically, greenfield is really about solving that bucket around Horizon 3.

Yes. Thanks, Chris. And maybe just to add to that, again, it's how we think about those growth levers. If you think about the cost of replacement, brownfields has probably been around $50 per ounce of discovered reserve. Greenfields have been that $75 to $100 and then M&A adding reserves is probably multiples of that.

So the greenfields opportunity is really about saying our portfolio, obviously, we're going to add brownfields, but the real gap and opportunity is to bring some of these in into that third horizon post 2035 because we're kind of fine for the next 10 years within our existing business. And so building that portfolio out, we spend $50 million a year on greenfields, over 10 years and you come out with two really advanced projects that you're taking into development pipeline, that's a really, really good acquisition cost. So that's how we think about it. And so we shouldn't -- we're not modeling in our business that those ounces will be in, in the next 10 years.

Perhaps talking to the levers of growth, there's a question from David Hart from Global Mining Research. He says there's been a lot of M&A activity in Australia by domestic players. Would you consider selling into that activity, for example, Agnew or maybe Granny's?

Look, Chris can answer this. But I think the way we look at it is that everything has got value, both an internal view of value and a market view of value. And if the market view of value is far outside of our perception of value, then everything should have a price on it.

And I think the question specifically on Agnew and Granny Smith, absolutely, if you look at our portfolio, we call those assets that have upside optionality. And Granny Smith, in particular, we've now got a clear pathway through the exploration efforts, we really want to understand what Agnew can offer. But these are two assets that have just consistently delivered upside for us over a long period of time. And so again, if we did one to be active in placing them, we'd have to be very clear about what that predictability means for us as well.

And maybe the only -- the other way I'd answer it is everything is for sale at the price. So if there's the right opportunity, as Mike said, where we see a value that's above where we see value, of course, we would consider it.

But I'd sort of frame it in the context of as we think about the M&A context and what we're looking for around extending life, quality of the portfolio, and we're going to go buy that externally. If we can continue to invest in our existing assets, again, compare that cost versus external M&A, like you would continue to invest in your own assets. So again, why sell something when -- like at Agnew when as you think about M&A, that's what we're trying to find as well is a life extension quality asset in a place like Australia.

Thanks, Chris. We're going to come back into the room. I just want to see if there's any hands up for questions.

It strikes me that you're sort of going from a decentralized model to a centralized model. You can just sort of map out the pitfalls that might find, especially in Australia, where it seems to be quite a successful model in the past.

Yes. I think it's a good question, and it's something that we have agonized quite a bit about is to say what has happened in the past. But if I look at our business today, yes, we're global, but we are a simple business. We've got 8 to 10 assets. We produce a single commodity. We don't have a massive big commercial back end that's trying to market into a market. So we explore, we develop, we operate assets. And what we've allowed ourselves to do is to actually get quite complex on a simple business because we've had these regional structures that have actually gone down their own pathways.

You've got things like -- and Alex pulls his hair out, but we've got 5 different SAP platforms across the business that's actually really simple. We have different standards across our business. We were probably too short-term focused is kind of my argument. We're very focused on short-term delivery. So what we've been trying to do now over the last 2 years is really elevate the horizon of the business. And this is what we're trying to demonstrate that we've done today.

What that does, though, is it's important as you elevate that horizon is make sure that you've got true competition for capital across your business. And if you've got these regional elements, it's much harder to kind of allocate capital. At a practical sense, probably some of the downsides are as you're making this migration to a simpler, more kind of streamlined business and efficient business is that there is sometimes quite a heavy lift on time zones because you've got Mariette and Kelly sitting in Perth and Bernadette and now servicing assets in Canada.

So we're very mindful of making sure that we try and get those wheels oiled very quickly so that we can take some of the lift out of it. And we do that by getting our leaders aligned and being very clear about where our focus is, where our effort needs to be applied. Our rhythms and routines are quite clear so that we can take away the kind of ad hoc effects of the drag that could occur in a global business.

So I still think on balance, it's absolutely the right view in my mind, and I'm sure each of the team would answer that in the same way because in the absence of that, it's really hard to kind of have full control, unless you go back to that old model of saying, look, it's all -- free for all and the only way we control you is how we pay you and whether we hire or fire you. And frankly, then you just liberate the entire asset base. It's another way of thinking about it. Alex, I don't know if you want to add to that?

Just a couple of questions. How much of your Horizon 2 ambition is dependent on the gold price? Obviously, if gold is at $4,000 for 2 or 3 years, you'll have way too much cash to invest. And I suppose a lot of that will go into accelerating some of your greenfield or making more of those discretionary CapEx sort of part of your base case. So just in terms of what will be the scenario if gold remains at $4,000, what would be the Horizon 2 look like? Is it 3.5 million to 4 million ounces? Or is it still 3 million to 3.5 million ounces or 3 million maybe the first one?

Yes. Maybe I can answer that quickly because this is a good question. I mean I think it comes back to the core part of who we want to be as a DNA. To us, it's quality and cash flow growth per share rather than ounces growth. So it's really focusing on how are we growing that cash flow per share. And if you get -- continue to hooked up into growing ounces, the replacement of those ounces don't come easy. And you can then get trapped into -- to try and maintain your headline number, get trapped into making really poor investment decisions just to maintain the headline. And then you detract from your main game, which is growing the value of the company and growing cash flow per share.

So the -- to answer your question, the investments that we're making, the discretionary investments over the next few years is really about locking in at a very low cost, that profile, helping us to reduce costs in the second Horizon and enabling us to again grow that relative margin per share. If gold prices hold at $4,000, I think Alex has got that cash flow graph, which says in 5 years, we're going to generate $20 billion of free cash. You add another $10 billion at least on top of that.

And then you're in kind of an interesting territory because you've probably squeezed a lot of the internal options that we can successfully prosecute in the next 5 years because there's also a capacity issue of what we can do. And then you've got a decision to say, well, do you just kind of grow your balance sheet? You clearly have to return some additional amounts to shareholders. But that's a good place to be.

And the $50 that you're going to spend on greenfield or $50 million, sorry, is that a net number, i.e., kind of that includes kind of disposals of properties that you wouldn't hold? Or is it a gross number?

I think the way to think about it is a gross number, but it's an evolving portfolio. So maybe in a different way, what's the right number of investments? Again, it's a capacity question as well.

So I think we're probably in the right range of in the 20s around investments, you just need to consistently cycle those. Some are going to drop out and you'll divest, but you need to continue to add to the front end of that. It's all about where you are in that quality spectrum and the results you're getting. So I think it's -- $50 million is more of the growth number versus a net number.

I think realistically, the challenges with these juniors is that they tend to be quite illiquid. In the moment, the drill results on that promising, you probably see the stock coming off and become less liquid.

There's three remaining online. So I'm going to pull those together. The first one says, why are we hanging ourselves to a fixed dividend? Could we stay with a linear dividend policy of 30% of basic earnings, zero the debt and buy back with the spare cash?

Thank you. I think -- I mean, I guess the first principle is it isn't a fixed dividend. We have a variable base dividend with a targeted minimum. So basically, it is linked to free cash flow now, free cash flow before discretionary growth investments. So that's before any of the discretionary capital you saw that Mike talked to before Windfall capital, before exploration spend as well. So that is the free cash flow figures linked to and it's 35% of that.

Then we will obviously look at -- and I'll unpack it in detail in the capital allocation section, but we will then obviously look at what is the right amount of de-levering of the balance sheet, what are the additional returns we could give to shareholders. And when we're looking at additional returns to shareholders, we will look at both special dividends, share buybacks or a combination of the two.

Thank you, Alex. The next one is from Herbert Kharivhe. He says, is it fair to think of Gold Fields as a $1,700 per ounce gold producer going forward?

Herbert, good question. And I think if you look at our profile, you can kind of bring that conclusion to the numbers. But I do think that we still have more work to do, and it's how I spoke about what we're doing with the business is really driving effectiveness, consistent delivery and our AO program is probably still playing a bit of catch-up. I think some of the investments that we're making now will deliver improved outcomes into the early 2030s.

You will also get a bit of portfolio effect again into the 2030s. So I think the $1,700 in real terms should be -- we certainly would not be comfortable with that as a sustainable long-term number.

And Herbert, as we unpack the asset deep dives, you'll see what kind of the targets for each of the assets are that we're driving.

The next one is from Rene [indiscernible]. He says you've spent a lot of money on acquiring 100% of Gruyere for quite a low, in my view, extra 5 years of life. Could you expand on your thinking on this? And what could the 5 years extend to on a best case scenario?

Thanks, Rene. I think what we'll do is unpack Gruyere. And certainly, we believe the economics of that transaction worked on the known reserve and the addition of the known reserve, but there's certainly upside, which both Jason and Bernadette will cover a little later.

Yes. Look, I think when we looked at it, one, bringing in what Gold Road had, Gilmour and the exploration potential as we modeled that and the upside, we saw significant life extensions. Obviously, a lot of work to do to unpack that. But I would say even in a base case, if you use that 5-year life extension, it's still extremely attractive from a return standpoint relative to what we paid. But again, we see a lot more upside than what is just a 15-year life ore body.

Chris, Mike and Alex will take you off the hot seat and also Jason and Bernadette up there for the asset deep dives into Session 2. I appreciate that it might be a bit warm in here, and I do apologize. We are trying to get the aircon resolved, and we'll also just maybe try and open the windows for those that are in the room.

We'll dive into the next session. And then halfway through it, we'll take a bit of a comfort break and a leg stretch, if that's okay with everyone.

Okay. Thank you, everyone. We really appreciate Bernadette and I the opportunity to showcase the portfolio quality that we have at Gold Fields. So from the brownfields exploration track record slide that Chris presented earlier, I would like to reiterate one of Gold Fields' biggest strengths and part of our DNA is its ability to acquire quality assets and then reinvest through brownfields exploration and growth projects.

During 2025, we have been able to increase our reserve base through dedicated exploration, asset optimization and initiatives, changes in the gold price, we anticipate this year of exceeding our 2021 reserve position. From last week's Q3 2025 operational results release, we were -- where we announced a reserve growth at Tarkwa of 3.2 million ounces that now has Tarkwa's reserve at 7.4 million with an inclusive mineral resource of 11.2 million ounces. This has extended life at Tarkwa with the reserve case now being 17 years, and the resource life now being over 21 years. We are also expecting reserve growth at all our Australian assets over the next 12 months.

So if we deep dive into the Australian assets in terms of their reserve position. This slide demonstrates how targeted exploration from committed and dedicated teams have unlocked value at our highly prospective Australian assets. At St. Ives, the reserves have grown beyond depletion through the development of the Invincible underground and Santa Ana open pit complexes. St Ives has a wealth of early-stage exploration opportunities that we hope to develop in coming years.

Now I'll hand over to Bernadette.

Good afternoon. The asset guidance details that we're going to provide in the coming slides is based on showing you a managed basis. So with guidance showing our planned numbers as the upper limit and the lower limit as a risk-adjusted number. Our plans are deterministic and consider risk events and resourcing in them.

We've decided to start talking to you today about St Ives. St Ives is our longest life asset in Australia. It has been in our hands since 2001 and has produced 9 million ounces across its life. The story for St Ives, we think, is not as well understood as it should be. And so we're going to unpack that a little bit for you in terms of the Invincible underground and the Santa Ana pit and what's coming in the future.

St Ives for us is a long-life asset with a great reserve growth story. Since 2021, we've increased reserve by 40%. It's a medium -- in its medium-term future, it's an asset producing at 450,000 ounces per annum, supported by the Invincible underground and the Santa Ana pit, peaking at above 500,000 ounces from 2030 and beyond. The cost profile is somewhat variable in the next few years. And that's based on a few things.

First, us completing the Invincible underground and investing in the materials handling solution to support it, which will complete in 2029. This will give us a 90,000 ounce bump up, which is a critical bump so that we can hit the 400,000 ounce mark a year. It's also going to help us reduce our cost profile for the years that follow. We will be completing our dewatering and development of the Santa Ana pit in 2026, and Jason will be talking to you more about what Santa Ana looks like in the coming slides.

The other thing is that we will be completing the investment in our renewables project which will complete in 2027, giving us a micro grid that helps us reduce our cost base from '27 and beyond. And then finally, in 2028, we're planning a mill replacement. Now that mill replacement is still a few years out. So we're working on optimizing what that time frame will be and the extent of the replacement. These investments in the medium term are based on us believing in the historical replacement we've seen. So we believe that St Ives has a long life ahead of it and well beyond 2045. In 2029 and 2030, we expect all-in sustaining costs to settle at around the $1,500 an ounce mark.

Over to you, Jason.

Thanks, Bernadette. Here, we show the Invincible complex. And you can see that there is 3 distinct zones there, Invincible North, Invincible and Invincible South. We believe Invincible is a world-class deposit. From the first discovery hole all the way back in 1994, then with the follow-up program in 2012, Invincible has come a long way and now has a strike length in excess of 3 kilometers, and it's still growing.

Invincible has progressed to potentially having the 3 areas, but we are -- importantly with the 3 areas is that they can be mined independently. So essentially, you've got 3 mines within a mine. On top of that, the deep drilling has confirmed the continuation of the mineralization along the plunge of the main zones. Additionally, confirming drilling is underway to further scope out the extent of the system to support the materials handling solution that we are wanting to take to investments.

What's interesting about Invincible is that Invincible is now the deepest underground mine in the St Ives entire complex. And St Ives has been an operating asset since 1980. So -- and is still open at depth, so which is quite exciting for us. So the intent of the minerals -- the materials handling solution is that we want all the ore and waste to be taken up the twin decline system as well too. This will unlock further production capacity within the Invincible complex.

Go to the next slide. So here, we look at what is the potential alternative sources to supplement a world-class Invincible ore body. Excitingly, we are returning to an extended period of open pit mining at St Ives. And we are commencing with the Santa Ana operation here in the dark green. Santa Ana is only 2 kilometers away from Invincible. This has the potential of having at least 16 years of continuous open pit mining to supplement Invincible. Further work is needed to increase the mill capacity again. This work is underway. A balanced exploration -- brownfields exploration is a critical component to deliver reserve growth and to support our production ambitions and capital decisions. So go to the next slide. Thanks.

So here we got is the whole lease that we have at St Ives so, all the tenements as well too. So from this slide, you can see that we have tens of kilometers of prospective exploration corridors. They're marked in yellow around the yellow lines there. St Ives since the acquisition has discovered more than 10 million ounces with the rate of discovery still increasing. We have 10 years of reserve in front of us right now. However, we've got line of sight to 20 years. And with the allocation of around about $90 million over the next 3 years in terms of exploration to unlock that potential. Predominantly at Invincible, however, there's other perspective, particularly in the open pit sense as well. All this has provided confidence in our value-accretive investments that we believe will secure our long-term future. Thank you.

Our second largest mine in Australia is Gruyere, the open pit mine. We acquired the first 50% of Gruyere exactly 9 years ago for $350 million, what a bargain. A month ago, we acquired the other 50%. Underpinning this investment is our belief that Gruyere is a multi-decade asset. Current mining is exclusively from the Gruyere open pit. And in the next few years, we will transition to adding the Golden Highway extension, as well as the Gilmour area, which came with the Gold Road acquisition in 2029. 2025 has seen a minor production downgrade between 300,000 and 320,000 ounces. This is based on volume and plant issues we had early on in the year.

Gruyere has seen -- has been in a ramp-up phase for the past 2 to 3 years. The Gold Road acquisition consolidates our position and provides us with the full benefits of the ramp-up and additional ounces in the exploration package which Jason will talk to in the coming slides. In the last 2 years, the total volume movement at Gruyere has doubled, building to the critical 70 million tonne mark, which will stand us in good stead to get to the 75 million tonne mark in 2026.

For -- on this slide here, you'll see that in '26 and '27, we've had a technical assumption change, which has seen the ounces come down slightly in our mining model. From '28 and 2030, you see the increase again when we add the Golden Highway and the Gilmour profiles. Areas like Gilmour gives us flexibility in terms of potentially delaying more expensive CapEx but also we are able to bring in a grade uplift at the same time. It's early days since our acquisition. There's still a lot of work for us to do, but the options are significant, and we're pretty excited about it.

The increased production to 400,000 ounces post 2030 and beyond will enable us to leverage the infrastructure already in place at Gruyere from a camp perspective, a mill perspective and other areas, which will then help us exploit the Yamarna land package which we've just acquired. As with St Ives, our aim is to focus on providing operational flexibility that can be used to ensure safe, predictable ounces. Jason will talk to you about the opportunities at Gruyere in the next slide.

Thanks, Bernadette. So with this slide here, you can see the current Gruyere pit, and you can see the potential of the last stage, which is Stage 7 at this here. So then you can see the potential of the underground as well. And the underground model is still open at depth.

So we conducted a scoping study that was completed earlier this year and which highlighted that we do have a positive NPV with a bulk underground. What you see here is the scoping study design which is based on a concept model. We are actively engaged in assessing the underground, as well as the potential of taking another cutback at the Gruyere main pit. The underground drilling is underway and it's progressing well, and we are ahead of plan.

We are option-rich at Gruyere and -- one being the underground, but also we have multiple options in the Yamarna belt now as follows in the next slide.

With the Yamarna belt, we believe there's high potential with -- as we believe it is underexplored. Like the Gruyere main pit, the multimillion ounce Tropicana deposit is also along the Yamarna belt towards the south. The expanded Yamarna belt landholding that we now have has at least 5 additional mining options that we are looking at. Gilmour, Smokebush, Warbler and Renegade. This is on top of the potential we see in growing the Golden Highway deposits as well, too.

Of particular interest to Gold Fields is the potential Gilmour which Chris and Bernadette had mentioned earlier. When Gold Road declared a main reserve back in January 2024, we at Gold Fields are now undertaking further studies in 2026 to see if we can grow that further and have a viable mine life extension at Gruyere on top of what we know already, thank you. Bernadette?

Granny Smith was acquired in 2013, and it will shortly hit 10 million ounces produced. It's also interestingly enough, one of the first mines in the world to have 4 GLTE underground. All production currently comes from the Wallaby underground mine, which is known for its world-class ore body and long-term production potential. For 2025, production guidance is approximately 25,000 ounces, and we are on track to deliver this.

Granny Smith is a consistent deliverer of ounces for us with future potential in the Zone 135, 150, 160 and beyond. Once executed, the investment in the materials handling solution will reduce the cost of the future zones. Jason will talk you through what those zones look like and where we believe they go to. For context, we are currently mining in Zone 120, and preparing for Zone 135 and 150. We are currently mining at a depth just below 1,200 meters and taking out around 1.6 million tonnes per annum. We're looking at utilizing technology to allow us to safely mine below 2,000 meters at Granny Smith.

The initial increase in all-in sustaining cost is driven by 3 main things. The investment in ventilation and power upgrades, the development of Zone 150 and 160, and the drilling to shore up our understanding of Zone 150 and 160. The benefit from these structural investments is that in the long term, we expect all-in costs to settle to around $1,300 an ounce. The future of Granny Smith is to continue production from Wallaby and take advantage of the latent capacity. Jason will take a look at some of the options for us.

Thank you, Bernadette. So here on this slide, you can see the Wallaby ore body as we know -- as Bernadette said. So as you can see, there's multiple, what we call stack lenses, as well from the open pit. The open pit was mined by a previous mining company, and that finished back in 2007, and we went underground in 2005. So we've been underground at Wallaby so far for 20 years. And what is really interesting is that as we're going deeper, every zone is getting bigger and the grade is improving, which is really quite exciting for us.

This graphic clearly does not give justice to the size of what Z150 which we are in well-advanced feasibility in and Z160 loads. It is important to note they are significantly larger compared to what the other zones are. We believe that they have potential greater than 1 million ounces per load. And in terms of overall size, we're thinking they're around about 1,000 meters -- by 1,000 meters, so roughly 1 square kilometer. So to put that in context, that's roughly the same distance as the [ mall ] here just outside the Buckingham Palace. So it's quite substantial.

We are doing drilling underway at Z160 right now. As Bernedette did mention, we are actively looking at technology that will help us safely and importantly, go deeper and extract more of the ore body. For instance, we tried autonomous trucking underground as one example. Further to this, we are looking at a materials handling solution, which Bernadette mentioned earlier, and that can readily be extended and we go deeper underground at Wallaby. The proposed materials handling solution will need to be established at the Zone 120, where we're mining now, and with works planned to be undertaken in 2026. This approach will reduce the cost to mine the future zones. As we reduce congestion in the mine, which will allow us to also derisk delivery by mining multiple zones at the same time.

Like St Ives, we see a 20-year-plus horizon here at Wallaby through the investment in the materials handling and also through further exploration. So if you look at the greater land package here at Granny Smith and in terms of its overall prospectivity, the thing that strikes us now, which has got the most potential is the Granny Smith open pit, which was mined all the way back in the early '90s. So we like this because it's obviously very close to the existing 3.3 million tonne processing facility. So further study work is underway to potentially bring this into resource as we recently received approval to dewater the pit when required. We will continue to look for opportunities to complement the world-class, we believe, world-class Wallaby ore body as even small discoveries can have a material impact as we have seen at St Ives.

Thank you. Bernadette?

Agnew has a long history in Gold Fields and in Western Australia, with the first gold being found by Patrick Lawlers in 1894. Shortly thereafter, the Waroonga mine was opened in 1904. We are still mining the Waroonga extension today. Proved and probable reserves sit just below 1 million ounces at around 972,000. Our internal strategic plans see it going well beyond that. The site tenement package covers 714 square kilometers, which Jason will talk to in the coming slides.

Our immediate focus is to capitalize on the existing infrastructure in Waroonga, Redeemer and New Holland with the expectation that production will remain fairly consistent over the 5 years and beyond at around 230,000 ounces. The cost increase in '26, '27 and '28 is based on underground infrastructure and exploration and maintaining life for the lower cost ounces to come. Given our continued commitment to exploration at Agnew, we are actively working with our asset optimization team to address the increase in the cost profile over the 5 years. Jason?

Thank you, Bernadette. So this slide here shows you the outline of the Waroonga ore body as well. What's interesting near where that picture of the pit is there's a small underground working there. That's actually part of New Holland. And one of the reasons why Gold Fields was interested in the Yilgarn South acquisition back in 2013, which was Lawlers, which was part of that New Holland mine, Granny Smith and also Darlot at the time. So New Holland and Waroonga are only 600 meters apart. So we're calling New Holland, Waroonga pretty much the same complex now.

It is the second oldest underground operation that we have in our Gold Fields portfolio, only second behind only South Deep. Waroonga continues to be the high-grade backbone for Agnew. Waroonga has multiple exploration targets as shown in this long section. But this is also the case elsewhere at Agnew as well. In the Waroonga long section, the sub areas in yellow, these are potential future targets that we are looking at in terms of the depth extensions, but also those lateral extensions of that, for instance, the Saint area and also that Fitzroy area towards the south of ore 2.

So we go to the next slide. Thanks, Bernadette. So with this picture, you can see the Agnew tenements is quite long. It's all up, it's 80 kilometers north to south. So it's quite substantial. One thing I would like to remind the audience with Agnew despite the fact it's got a very low reserve number, its reserve multiplier is the highest of old Gold Fields assets. The current exploration focus is discovering value-accretive ounces that will extend the life of mine at Agnew, which has been 3 years for the last 30 years. And no doubt, it can be more than 3 years in 30 years' time.

The mine central corridor, which is from Waroonga all the way down to Songvang, which is Vietamese for River of Gold, has -- this is where 80% of all the ounces ever mined in the Agnew Lawlers area since the 1890s has come from. And the thing about it is still high prospective. Thanks, Bernadette.

Jason. I -- just to break this up, we'll take a couple more questions, and then we'll have a next stretch and a bit of a refresher break. Just one second, first question from Raj.

This is Raj Ray from BMO Capital Markets. First up on your St Ives. You talked about Santa Ana pit. And if you look at your open pit throughput, it's around 2 million tonnes per annum just over with Santa Ana coming on. Expect that open pit throughput to remain around those levels?

Thank you. Raj, that's a great question. So we have the ability to bring the mill back up to the 4.8 million tonne capacity that it had when it was originally commissioned back in 2005. So that is one of the studies that we are looking at as well is how do we actually bring the mill back up to the 4.8 million tonnes. So there is capacity within the existing plant.

Okay. And so your underground is going to over 3 million tonnes by 2029 and the remaining will be coming from the open pit?

That's right. That's right.

And if you look at your CapEx profile for St Ives, you've spoken about the all-in sustaining cost. On top of that, what's the nonsustaining element over that period in terms of bringing that material handling system in place?

Master of Finance.

Sorry, Raj. Let's get front of the [indiscernible] so I'm on TV. So I think from the capital perspective, the materials handling system is about AUD 300 million to AUD 400 million, and that is in the growth element. And then there's very limited -- because from a growth capital perspective, we only classify pre-strip and at Santa Ana because it's previously been mined, it's about AUD 40 million of pre-strip. Then all the other strip or the capitalized strip will go into sustaining capital, 2 investments there.

Okay. One more question from me. When you look at Granny Smith, I mean, your ore body is moving away from the infrastructure. You talked about the material handling system. Can you give some more details on what you're thinking about? Is it a new shaft and the amount of capital that's built into your estimate at this point at Granny?

So in terms of the materials handling solution, one of the key options that we're really looking at is a [ Warbler ] as well too. So the beauty about Wallaby is that it's a twin decline arrangement. So what we're looking at is converting one of the declines to a railveyor decline. So all the haulage will go through that, which is the reason why once we extend further down to Z135 and then Z150, we can actually bring it down with us as well, too.

And if you look at -- I mean, compared to South Africa, the stress levels in Australia, 2 kilometers is much higher than what you see at South Deep, for example, right? You talked about other ore bodies getting wider at depth in terms of your ability to pull the same amount of throughput as you're starting to go deep and while controlling the geotechnical stresses can comment on that?

One thing about Wallaby is that we've got a very well-established team within the Gold Fields team, we've got very strong geotechnologists also. It is very much a mine sequence constrained operation that requires backfill, and we have backfill readily available at Wallaby. And that's how we actually control things as well. So we believe that we can still mine down at Z150 and below as well.

It's Chris Nicholson from RMB Morgan Stanley again. If I look at these slides, look, I understand it's a Capital Markets Day, so you're trying to put the best foot forward. But if you look at the next 2 years in both these slides across most of these operations in Australia, actually production reset slightly lower before it rebounds. Maybe could you just make some comments as to maybe why that is? Has there been a bit of a catch-up of CapEx required, a bit of underinvestment in the last few years? Are you a bit late on this?

And then just to expand on Raj's question, you're showing the all-in sustaining cost profile. How much CapEx in addition to that is going to be needed? I know you've given the [ 2 billion ] discretionary CapEx. Is that all growth? Or is that in sustaining costs and specifically in relation to the Australian region?

So I can take both of those, Chris, if you want and Jason can add in. But I think probably if you look at the Australian assets, I think one of the fundamental issues with the raise boring fatality we had at St Ives a few years ago, which put a moratorium on the rate boring activity. So we are catching up on an infrastructure perspective from a ventilation perspective, to get the power and the ventilation and the underground mine so we can increase our extraction rates back up. So I think that's part of what's driving the production and the higher capital in the next years. And that is why materials handling is also such a big opportunity at both St Ives and Granny Smith because it will increase our extraction rates as we go to depth at the underground mines. So that's probably one of the major things we're solving for.

When you look at all of that capital -- discretionary capital is included in the -- not in the all-in sustaining cost, it all goes into growth all-in costs. And it's those charts on the earlier pages. I can help you unpack that in more detail, Chris, as you go, but it's not included in the all-in sustaining cost numbers that you saw.

So for the group then, okay, so that's on top. So for the group, then I know you're kind of guiding to $400 to $500 an ounce of sustaining capital for the group. In Australia, particularly in particular, is it higher than that?

It is higher, yes.

So it's higher and then you get the discretionary CapEx on top?

Yes, that's right. They are more -- due to the nature of the ore bodies, they're more capital intensive than the other assets.

Nkateko Mathonsi Investec Bank again. Can you talk a little bit more about your grade profile for the whole portfolio? I think you spoke about Gruyere and Granny Smith that you're potentially going to see a grade uplift. But in the mining industry as a whole, we've seen pressure on grades. So I just want to know compared to now, what is that grade profile for Horizon 1 and also going into Horizon 2?

So the grade profile will stay relatively static. However, we are cognizant is that one of the reasons why we're wanting to turn, say, Invincible into -- 3 mines into 1 is because the grade is lower than what we have mined historically. We have to become more efficient. We have to be able to get the ore out and up to surface more efficiently. And with Wallaby, yes, we have higher grade there, but the key is how do we get it from Z150 is 1.8 kilometers below surface.

So how do we get it more efficient? Is that's also that cost versus grade argument. So we're starting to talk more about value accretive ounces more so than just grade. It's just grade for the sake of grade.

And I think just one other to really call out and what really attracts us about the acquisition is Windfall. That's going to significantly change the grade profile of the group as we bring on the high-grade deposit at Windfall. I think probably worth calling out that the likes of Tarkwa which is our low-grade mine, that's really consistent grade. We're going to see a similar grade profile over life. Gruyere, we see options with those satellite pits to increase the grade of the Gruyere pit. So those are probably the key ones worth calling out.

Good. There's two online, and then we'll take it to the comfort break. The first is, for Gruyere, what scale of underground development can you see in terms of mine tonnage and grade and timing of a possible start? That's also from David [ Houghton ] from I think it's GMR Research.

So we're currently doing the underground drilling, and we're progressing to a pre-feasibility study. The pre-feasibility study will be ready in 2027. So we'll really ascertain actual size of the price that we have at the main Gruyere operation.

The key thing now that we've got the full control over Gruyere is to really understand what are the potential that we have there as well too. And Gilmour is a high-grade operation compared to what the potential underground is at Gruyere. So that's what our focus is moving forward is continuing on with the PFS study for Gruyere underground, but also looking at Gilmour open pit and underground.

I just want to add to that. So I think it's important to note that from the slide that we showed that you have two options that you can trigger there. So you've got Stage 8 or the underground. You could do both. You could do either, you can sequence them. So probably the underground for us is a second horizon, so we're post 2030 at the moment. We're concluding the study so we can do the trade-off, but we have so many options in the shorter term that, that won't come in until the second horizon.

There are no ounces from either of those options, including the profile included in the profiles we showed.

Yes. It's over and above.

Last one before we break. What is the landscape like for labor in Australia? Is competition increasing? And how is this affecting your cost profile?

Thanks, Jongisa. Australia labor market and then the current sort of growth, specifically in the areas in which we are operating at the current gold price is a very competitive labor market. I think one of the benefits that we have, although our sites are significantly fly in, fly out, they're actually relatively easy fly-in, fly-out sites compared to others. We can get someone back to Perth on any given day of the week, which is quite unique for a FIFO operation. And that gives us the ability to attract more diverse talent, and we've certainly seen that increase in our labor portfolio and our labor profile over the last couple of years.

We are a largely outsourced organization. So we still see that from own employees, it's relatively stable, where we probably see higher turnover in our contractor employment.

Just Mariette while we have you up there, there was one earlier. What are you doing to improve your healthy and safety track record? And also to improve productivity? So if you could speak to health and safety.

Yes. Thanks, Jongisa, thanks for this question from Tanya. Thanks for that question. We touched on that briefly in the safety share but there are really 4 key areas that we're focusing on. As Mike talked to earlier about just what we found with having such a federated model is that we don't have a consistency in our health and safety system across the organization. So we're building real foundational health and safety basic health and safety systems.

So our first effort was into putting into safety leadership. So we're really getting top-down people in the field safety leadership whilst we're building our system of risk management. Since Mike talked to the time line of Gold Fields, since 2013 in Gold Fields as we know today in the spin-out of Sibanye, we've had 22 fatalities. And being able to have a consistent safety standard that captures the learnings out of all of those are really important components of what we're doing from building the safety system of work in Gold Fields.

The third component of that is bringing our frontline and the voice of our front line in and bringing this hyper social aspect of safety management so that people are not afraid to speak up when it's not safe to do work. And fourthly, the most -- but unique probably to other organizations, the Gold Fields, 70% of our workforce don't actually are not employed by us. So how we integrate our business partners and contractors into our business is a really important part of our safety journey and the work that we're doing so that the experience on site is, one. One Gold Fields experience are not different and the standards that we set in Gold Fields are equal and integrated with the experience of our contractors.

Okay. We're just over halfway through. So we will have a 10-minute comfort break for everyone. Just for those that are in the room, there's some waters and coffees outside. I'm sure you're desperate for some fresh air. And for those that are online, we will recommence at 14:50, or 16:50 South African time. Thank you.

[Break]

It's been in the portfolio for nearly 20 years and has the world's largest gold ore body with 31 million ounces as at the end of 2024. We're on track to deliver our '25 guidance. Our focus at South Deep is to keep things stable and predictable. We've seen really good performance in 2025 and look forward to continuing that into '26 and beyond with small incremental changes each year. In particular, we're looking to stabilize the North of Wrench area, which Jason will talk to the 2 areas in the next slide, and then open up our South of Wrench area to give us more flexibility and ounces in Horizon 2.

We're targeting 380,000 ounces by 2030. And as I said, those are small incremental steps we would like to take upwards. As per our strategy with our Australian assets, flexibility is key for us and using South of Wrench to bring that flexibility is our plan. The short-term increase in costs in '26 and '27 relate to underground development, renewables expansion and shaft maintenance that we'll be undertaking. The inclusion of South of Wrench ounces post FY '28 will help bring our all-in sustaining costs down to the $1,500 an ounce mark for the medium term and beyond.

Jason is going to talk you through the areas underground.

Thanks, Bernadette. So I guess to try and describe what we're seeing here on this picture. So the top half of the picture is what we call current mine and north of Wrench. In the bottom half where that red line is below that is South Wrench. So we're currently mining in that where that light green color is, that's the current mine/Wrench area as well too. So there's 4 distinct corridors or fingers that we're currently mining as well too. So that shaded area sort of towards the top of the page, that is where the actual twin shafts where we're actually holding the material out of the mine and also bringing people in and out of the mine as well too.

So with the South of Wrench, which has got in its own right, a 20 million-plus ounce reserve, which extends our mine life out to 80 years. That has actually been mine designed all the way out at this stage as well. However, as Bernadette mentioned earlier, it is an 80-year mine life.

How do we actually future-proof this operation? And this is the work that we're currently doing. We have a study underway where we really want to understand how we can actually future-proof it with embedding that transformational optimization as well too. How do we, I have to say the word again, future proof as well, too. What kind of technology will be around in, say, 20 years, 50 years' time as well, too. So this is the work that we're doing because we've got over 20 million ounces there, probably even more. So how do we future-proof it? And this is the work that is underway currently.

Tarkwa has been in the Gold Fields stable for over 20 years. We have a strong connection with the local community, given our continued investment in the region and its supporting infrastructure. In its life, it's produced over 15 million ounces for us. Tarkwa is a consistent deliver of ounces to our portfolio at around 500,000 ounces a year, with an opportunity to increase to 600,000 ounces in the medium term and beyond.

We have just last week announced a significant life extension, both Mike and Jason have spoken about that earlier, taking Tarkwa to a multi-decade asset, on the back of which we'll be submitting a lease extension application shortly. We've done extensive work to improve our cost base and believe we see a clear path to a $300 an ounce decrease in sustaining cost. The all-in sustaining cost increase in '26 and '27 that you see here is based on strip ratio increase, discretionary investment in infrastructure relocation and development to facilitate the increase in ounces in '29 and '30. Jason?

Thank you, Bernadette. So this picture here outlines what the reserve and resource is for the Tarkwa lease as well too. So what we got here is we got on the left-hand side is Kottraverchy, in the middle there is Akontansi where that green is -- where that dark green is just north of that is where the processing plant is at Tarkwa. And then as we go around to the top there, you've got Pepe, Mantraim and Teberebie. So Tarkwa is a paleoplacer ore body, which is essentially a very old ancient river bed essentially and how it's formed. But what is really interesting for us is that yes, we have seen growth, but the growth has come mostly from the gold price, but also 20% of it is from some asset optimization work in terms of the benches, increasing the benches as well as also those design optimizations that we've done as well.

So we have 17 years of reserve and 21 years of resource with every likelihood that we'll be able to extend that even further into the future. So it is very much exciting times for us at Tarkwa, and we have confidence to continue to invest in Tarkwa. Thank you.

Thank you. As you heard earlier, Salares Norte was a Gold Fields discovery in 2011 based on diligent exploration efforts and now is our high altitude mine set to be our largest producer in 2026. Salares is a 3.4 million ounce resource -- sorry, reserve with 2025 guidance being well on its way to being achieved. The Salares plant recently achieved commercial production. Salares has been an exceptional investment and will be fully paid back by 2026. The ramp-up ounces you see in '25 and '26 here relates to processing of in-situ high-grade stockpiles mined from Brecha Principal.

The Agua Amarga extension, which Mike spoke about earlier, is a development that will commence stripping in 2027 through to 2030. The profile on the screen is based on 4 years of stripping for Aqua Amarga and then considering, which is slightly delayed from what you've seen before, and it's based on what we understand from our Chinchilla relocation and capture program. We are hoping to expedite this, but the work is still underway.

As you know, we have provided 2031 production here, which is slightly different from the other assets we showed you previously. That's to show the extent of the ramp-up given the investment in Aqua Amarga. Jason is going to talk to our exploration efforts in Salares.

Thanks, Bernadette. So we do remain committed to growth around Salares Norte. We do have a large [indiscernible] holding that we are still really active in. But in terms of the brownfields exploration potential, we are looking at growth opportunities through cutbacks in both the existing Brecha Principal, where we're currently mining and also potentially in the Aqua Amarga open pit, which is right next door to Brecha Principal, pending on Chinchilla rockery clearances. We're also continuing to explore the Horizonte deposit, which is more closer to the village and the processing plant, but still very close. And also looking at underground opportunities potentially at Aqua Amarga once the open pit is finished. So there's still a pipeline of growth at Salares Norte that we're definitely interested in exploring further.

Thank you. We're handing over to Mike for Windfall project.

Thank you, Bernadette.

Thank you.

Thanks, Bernadette. So just moving on to Windfall. And I think, firstly, I'd just like to say that this is -- we are super excited about the addition of Windfall into our portfolio. I think the investment in 2023 was a very -- a smart investment, which allowed us access at a very low entry cost.

And I think when Osisko decided to put themselves up for sale last year, we were absolutely convinced this was the right deal for us. It may have come -- at that time, it felt like a little bit early in the piece for us on the development, but in hindsight, that was absolutely perfect timing. And the fact we now have 100% control on the asset at a very low entry price, I always say, I think if this asset at 100% terms was available in the market today, we probably would not be able to be competitive, I think, to put it fairly bluntly. So we feel very privileged to have a stewardship of this remarkable footprint.

And I think this slide, again, which just puts it in context, this is a multi-decade district opportunity here. If you look at the top right, the gray -- the dark gray blocks is really our land package. It's around 2,400 square kilometers across the Urban-Barry and Quévillon camps. If you put that in context, Val-d'Or is around 1,400 square kilometers and has produced 100 million ounces over the past number of years and has a current resource inventory of around 47 million ounces. So you can just see the potential of this just on a pure visible perspective.

What's also interesting is this is highly underexplored. 80% of the drilling on this property has only taken place after 2016 and only 10% of this land package has really been effectively explored. What is really great about the acquisition is we've largely kept our exploration team in place. So the team that we've got on the ground deeply understands this.

And I think the working relationship between our current -- our Gold Fields greenfields team who are bringing some of that technology overlay into really understanding this land package has been truly great. So again, I think this is a long journey for us, whilst we talk about the Windfall deposit and the development of that in a few minutes, we've got to just put this in context.

So let's just talk to Windfall and the main project, which really forms the foundation for the development of this future land package. Again, we have an initial phase project, which is 300,000 ounces over initial 10-year period. We're already looking at what the next phase of that is doing further optimizations, both on plant yields, potential shaft infrastructures, et cetera, for a later stage of development. But this is the first phase, and that underpins the current environmental permitting.

We have secured hydro energy for this plant through a very innovative agreement with the First Nations. Again, that puts us in a very unique position where the ounces that we will produce will be very low carbon intensity and reduce our overall intensity across our portfolio.

Relationships with the First Nation are incredibly good. They're very supportive of the development. And ultimately, the economic interest through the hydropower line means that they are fully aligned economically to see this project being developed and again, spoken about the upside of it.

On the project capital, and I see Josh in the room, and I know Josh has kind of guided probably a slightly lower capital number in the range. But we were very thoughtful about what we wanted to come out and provide guidance on in terms of numbers. I mean, first and foremost, we want to make sure that we deliver within the guidance range. So that's what we're guiding for.

Put this in context, we also haven't taken it to the Board fully for an FID. So once we get there, obviously, we'll unpack then how the full numbers have ramped up. But importantly, what we've also done is on schedule, we've spoken in the past about first gold in H2 of 2028. This plan assumes a delayed case. So it assumes first gold only in 2029. We are still working very hard on delivering a potential upside case of H2 2028, but it really depends on permitting.

And we've done a huge amount of work. We've now got a really good team in Canada that are helping us with the engagements with the First Nations and the provincial government to get these permits over the line. And our target is if we can get permitting in place by Q1 of next year, get through FID, we're ready for taking this to our Board for an investment decision, then we should be able to claw back some of that time. And if we can claw back some of that time, that obviously has a capital benefit for us because we have the project on foot for a shorter period of time. So there is a little bit of upside, but we're kind of being appropriately conservative in the plan and saying, look, based on what we expect is potentially a bit of delay on permitting, this probably sets the best schedule on it.

Again, just for those that don't understand, we do have a mine. We've got a well-developed mine under the old bulk palm exploration permitting process. We have an underground workshop developed. So we have an effective operating mine. And most of the capital really is going to -- around 45% is the plant and surface infrastructure. Then it's labor and flights and accommodation, et cetera, and contingency, obviously, which is included in this number.

In terms of operating costs, so we're currently assuming all-in sustaining costs of circa $1,000 an ounce. Again, this probably needs a little bit more scrubbing. The current base case is that -- and it's included in the capital is that it will be an owner mining operation rather than a current contractor operation that we have at the moment. So that kind of obviously adds to some of the initial capital estimates.

Just on schedule very quickly, again, starting at the bottom, assuming first gold in H1 '29, for us to do that, we do need most of the permitting in place by at least Q3 of next year. We want to do camp clearing, camp construction, allows us then into '27 to start doing all of the civils and clearing with plant construction in '27 through '28, commissioning maybe at the back end of '28. So that's kind of the rough time line that we're working to at the moment. I've spoken to the opportunities of potential upside.

And just on that upside, whilst you might think it's just kind of a flight of fancy, we're working really hard with the First Nations as well as the provincial government, working through the Secretary General, who will essentially act as a shopper on both the primary and secondary permitting. So we're working really hard to try and keep the original schedule intact. But I think for the purposes of today's guidance, we feel appropriately conservative on that.

Okay. I'm now going to hand over to Jason to talk just about the geological potential of the current Lynx deposit.

Thank you so much, Mike, for that. So basically, we have the Lynx, which is -- that's where the current development is as well. So we're down 700 meters at Windfall already. And you've got the main load, which is the next one that we want to target and then there's Underdog. But what we see with the Triple 8 and even extensions of the Lynx is that with the previously Osisko drilled holes, we do see that there is life extensions with what we know currently. And that is super exciting for us as well, too.

We have started to do more drilling ourselves in that lower Lynx area and Triple 8 determine. And you can see on the infographic there is that the grades are quite impressive. So it's very exciting times for us at just the Windfall deposit alone. We believe it's going to be like very much a multi-decade deposit. And also, it will allow us to look at further capital investments for the long term, including its own materials handling solution as well. Thanks, Mike.

So what we see here in terms of the Windfall district, I mean, it's very much like what we see so nice as well too. It's multi-decade, multimillion ounce potential as well too. So our goal is clear, we do want to find the next Windfall. We believe that there is a Windfall somewhere in there. We just got to find it. So -- but right now, our idea is to extend the life of Windfall so that we have the time to find the next Windfall. On that note, I'm done. Thank you, Mike.

Thanks, Jason. We'll now go to Q&A, I guess.

Okay. Thanks, Mike and Jason. So we'll take some questions related to this section. But if there's any from earlier, I see there's some that have filtered into the online one as well related to the Australian assets. So we'll take those as well. Okay. First one is from Josh.

Josh Wolfson, RBC Capital Markets. For Windfall, when will you have more clarity on what the time lines are? I guess, what's the sort of date you need to receive the permits by? And then in the event that you can accelerate the time lines, what would be the opportunity on CapEx?

Yes. I think it's a very good question, Josh. And so I think from a time line, what we're working really hard to do to say is can we get all the permitting in place by the end of Q1 of next year because what's crucial for us is to do tree clearing during the course of April next year. And if we missed the tree clearing period, then we go into kind of May and then we probably run out of time to get the camp constructed and completed before you get into the winter season. So that's kind of the first window for us to be on track for the upside case, which is H1 -- H2 2028.

If we lose that, then the next critical date is for us to get primary and secondary permits in place by September of 2026, which then allows us to build -- to do clearing in the back end of H2 and also have the pond collection dams in place during Q4 of 2026, which sets us up for civils works in early 2027. So kind of roughly. So '26 is an important period. either by achieving Q1, which is an upside case or probably Q3 for the secondary case.

And then sort of one more.

And sorry, let me answer the second part of your question, which was around the upside on capital opportunity. So what we are talking about is what then cash conservation can you take place if you do delay case? And what demobilization could you have without losing access to the skills that you need for the long-term project. So there is ongoing work that we're doing around optimization of our holding costs. And secondly, does that bias more time to kind of optimize and scrub the capital if there's a slight delay case.

And one more question sort of tangential to permitting for the delay for the Agua Amarga stripping, that was, I think, previously planned in late 2026. Now it's bumped to '27, the prior plan was for the Chinchilla movement to be done for the rockery, I think, by May, at least. Is there a change in that time line? Or sort of what basically is causing the Agua Amarga strip delay?

Do you want to talk to the Chinchilla program, Mariette?

Thanks, Mike. And I think the original plan value Chinchilla to be finished in the next summer. But we currently are seeing with the way we look at the rockery removal now, there's probably an additional summer of rockery removal before we can get there. So it is slower than what was initially in the plan, but gives us the guarantee of being able to do that successfully with the experience we've had in the last 2 years.

Just the one thing that we haven't factored in, which we will continue to explore, is there a way of advancing and accelerating the stripping activity because the stripping activity on Agua Amarga assumes 40 million tonnes a year. So I think there's an opportunity potentially to resequence that, but that's not our current base plan, and that would be upside if we can do that.

A couple of questions. First up on South Deep. Can you talk to -- so previously, the plan was to potentially get to somewhere around 350 to 400 with North of Wrench itself. What's been the challenge in terms of ramping up production in North of Wrench? And then as you start to develop into the South of Wrench, what sort of infrastructure challenges or additional infrastructure you will need because you're working in a high stress environment? So that's the first one.

And then on Tarkwa, if you can talk to -- so big increase in reserves, positive to see, also positive to see that the grades actually stayed or increased slightly. If you can talk to what's driving that grade increase at Tarkwa despite you moving your reserve gold price from $1,500 to $2,000 and some details around the infrastructure that you need to move.

Maybe we start with the South Deep question.

Yes. So in terms of North of Wrench, the reason why we have capped it, I guess, one for a better word is to make sure that we have a sustainable mine as well, too. The last thing we want to do is mine too hard and then all of a sudden, we have a rehabilitation cycle as well too. So we're trying to manage what we have open so that we can actually maintain that safe, predictable mining, and that's really important. And we've seen that in the past at South Deep, and we want to try and make sure that we enable that into the future.

So the learnings that we have from North of Wrench, we are definitely going to try and move across to South of Wrench. With what we know of South of Wrench, we believe it's very much an anagram of what we see North of Wrench as well too. So the key thing for us at the moment is to put those drives in to start to get to the South of Wrench, then go and start to open up the ore body to ascertain are those assumptions still valid. So -- but from what we know so far, we believe that it is.

As you're starting to develop in South of Wrench, you're using the same infrastructure that you have for North of Wrench or you can access it through a different...

So if you want, what we can do is we can go back to that picture. So the light gray is -- and I will point and I apologize for people online as well. So here's twins. So to access North of Wrench is these levels here across, and then you go down in terms of these fingers here. This here is the South of Wrench infrastructure. So it's independent of the North of Wrench.

Part of the study is also an options analysis, right? So there's the basic study of how do you access what you want to do now. But then also, this is an 80-year mine life, right? And South of Wrench is like 30 of that. So to look at what are the options that you can do because with 30 years, there's a lot that you can do. So we're testing ourselves on that.

I think the other point on North of Wrench, just on North of Wrench is the -- I think the plan currently is based on, as Jason has said, is kind of a consistent improvement and steady as she goes rather than trying to put the foot on the accelerator hard because we've known that, that hasn't worked always. But what we have seen pleasingly in the last 12 months is really an improvement in stope turnover. And that's really the key constraint. And as we improve the performance of stope turnover, we could start seeing more performance, but we're not going to commit to that today. And maybe you want to talk to Tarkwa grade and infrastructure.

So the first one about, if we go back to that picture, sorry, Bernadette, in terms of the reserve and resource, so...

So which one do you want to go back to?

So the actual Tarkwa R&R picture.

Sorry, I'm going to make you all seasick now.

So once again, I apologize to the people online. I just want to -- I'll start to point to the picture.

That's one you were looking for?

No.

No, sorry, it's not changing. It will sink in a second, Jason, so just go ahead.

No, no, no, it's not -- the actual plane view. I apologize.

All right. My apologies, the reserve view.

So as much as Tarkwa is a paleoplacer ore body, there's a degree of consistency. There are elements of it which are better grade than others. And where we're seeing the potential is in this Akontansi area as well. So this is where we've seen the biggest growth at Tarkwa as well. So where we got here, this is where the actual -- the plant is. This is where the heavy vehicle workshop is. This is where the Genser power station as well too.

So we've got plans underway now to move the Genser outside of the future envelope that we have of Tarkwa. That includes moving the heavy vehicle workshop as well too. So we've always known about this potential for a long time at Tarkwa. So now that we've done the work and we realize [indiscernible] and so that's where the grade is as well too, and that's what's driving the big increase.

Nkateko Mathonsi, Investec Bank again. Can you please talk to the key learning points out of Salares Norte that you are applying on Windfall to potentially reduce the execution risk, especially on potential CapEx overruns?

Yes, excellent question. And Jason should talk to some of the technical aspects. I'll talk to some of the organizational factors that we went through. And we did do a detailed review post Salares to just understand, well, what went -- not what went wrong, but what could we have done better. And I think we put it in a couple of categories.

I think, firstly, don't approve a project in the middle of a global pandemic. Frankly, that -- and we didn't know. I mean, just to kind of put it out there, I think nobody would have known in the beginning of 2020 what that could have meant to the world. And quite clearly, that in combination with probably hiring a contractor who was kind of priced at the low end of the spectrum and was always going to try and maximize margin through -- additions through the contract period. The moment that you had this global pandemic playing out really impacted productivity, which meant that the contractor was under a lot of financial stress. There was a lot of contestation right from the beginning with the contractor. And that really created a lot of stress between and tension between the project team and the contractor through that period. That resulted in delays, costs, et cetera.

I think the second part organizationally is that there was a kind of a huge fixation, and I know we talk about first gold, but huge fixation on first gold as the kind of primary metric of what you're solving for. But actually, what you're solving for is an effective and safe ramp-up in line with your project schedule. And I think because we were so fixated on this concept of first gold is that we kept on kind of pushing first gold date, which meant that we weren't really thinking about a safe ramp-up.

And probably where it kind of broke down and look at myself and Mariette, we said in December of 2023, I attended a meeting where everyone says, okay, it's not going to be December of 2023, first gold. It's now going to be April. But once you got to April, you were right at the front end of winter. And we now know, and this is a lesson for Windfall and we get told by all of the Canadians don't ever start trying to do a ramp-up of a project ahead of winter. So that was a miss, I think, from our point of view.

And I think the third thing from an organizational factor is that we, in our old operating model, essentially make a capital investment decision and delegate it to the local team to deliver a $1 billion project. In the way that we're working today with our new model, the Project Director actually reports into Jason. And we separate the operating team and the project execution team. So you have the right level of separation of accountability and governance and oversight. So we now have clear organization standards, clear assurance right throughout the execution process and separation accountability. So I think those kind of factors we've absolutely taken on board. But I don't know if there's any other technical lessons that you want to...

Yes. Thanks, Mike. One of the key things is that we have learned from Salares and we also learned from Gruyere as well too. So we are trying to compartment-wise in terms of individual work packages, we do have an oversight with Hatch being involved in a process as well. But we are trying to have those individual packages. One of the big differences about Windfall compared to, say, Salares Norte is that we actually got a mine there already as well too. So the focus has been on the actual -- on the plant as well too in terms of how we get the plant. So -- and we've got people who are actively involved in trying to engineer that.

And if we can compare to what the Osisko plan was, as well too, we've done a lot more engineering work as well too compared to what was originally proposed as well too. So this is ultimately about to try and derisk once we can get the project to FID, which is what we're currently doing.

Thank you. I'm going to take a few offline. There's quite a bit that's come in, and I'm going to pick up pace a little bit, Mike. So I'm going to take 3 from Tanya. The first one says the Windfall CapEx range, which is $1.7 billion to $1.9 billion, is that including 2025 spend? Or does it start when you break ground, hopefully, in 2026 after the permits are approved?

Happy to take that. So that does not include 2025, that is spend from 2026 onward with FID.

And perhaps a follow-on with that, how are negotiations with the First Nation going? Can you share what some of the times of interests are and what is taking time to conclude? And also with the permitting, what else is taking so long?

Yes. Look, the key pathway is that it's a very sequential process. So we need through -- there's 2 key agreements that we need with the First Nations. The first is the impact and benefit agreement, which is progressing now, and that's been a journey over the last 12 to 18 months. So we're making good progress on that. But probably the biggest impact on delay has been the recommendation from COMEX, which is the independent body of both -- that includes the First Nations as well as the Government of Quebec to make a recommendation to the Environmental Ministry to approve the EIA.

We know that we have support from the government and there's support from the First Nations. There's just a kind of pretty pedestrian way in which they approach this. The key work to hit our upside case of Q1 of next year would mean that we close out the IBA negotiations within the next 2 months. And we also get to public participation in January of next year, which would then lead us to potentially a recommendation and approval by February or so and secondary permits shortly thereafter. So that's our high road case that we're working to, and we're trying to get full alignment around that at the moment.

Thanks, Mike. Just going to -- the last one from Tanya is what's required to get production from 500,000 ounces to 600,000 ounces at Tarkwa?

It's stripping.

It's stripping ramps up to 140 million tonnes per annum at the current rate of 85. And the key thing around that is that we also have an asset optimization opportunity around bringing in a larger fleet. And ideally, you'd want to bring in the larger fleet before we do the big heavy load on the strip because that's inefficient otherwise.

Thank you. There are a few from Adrian. First one is South Deep represents some 60% of the group reserves, but only 12% of the production, which sets the company apart from most of its global peers. Does this contrast concern you? And what does the market perceive your jurisdictional risk is per your reserve metrics?

Look, good question, and it's probably not something that we've thought that the reserve profile really translates into jurisdictional risk because I think most people would manage us on -- or value us on fundamental financial metrics rather than reserve necessarily. But I do think South Deep and the reason that we still like it and call it a cornerstone asset is it's got a huge reserve potential. And I think that reserve potential can translate into higher ounces over time.

We've got in our next 2 horizons a kind of fairly big step-up in production, at least on its own. But then there's a huge amount of other opportunities, which could be further dated. And you have to believe in the work that we're doing at South Deep through technology will unlock that ore body into the future. So I absolutely believe that whilst the market doesn't fully value South Deep today, we can see a pathway for greater value creation. And I think we're setting it up to have the potential for the -- at least not our generation, but the next generation to take full advantage of it.

Thank you, Mike. I'm just going to check if there's any questions in the room.

My name is Frederic Bolton from BMO. Just circulating back to Windfall. So with the -- just follow on, on the point that you made about the IBA for the mine. When you get the approved IBA and approval, will that apply to the wider Windfall exploration ground? Or would you have to restart that process again if you were to find another Windfall? And the second part of my question is, how do you prioritize exploration in that land package given the scale of it?

Yes. So I can ask Jason to talk about how we're looking at exploration. But I think in terms of the IBA and the negotiation, it really is around the current -- the Windfall Project. So if we developed a new project, we'd probably go back and reengage on that, and that would require a new permit as well. So that's not inconsistent with how it works elsewhere. So all of our peers, every time there's a new project they renegotiate.

So there's one thing that Mike mentioned in his intro about Windfall is that we've been lucky, we've kept the majority of the Osisko exploration team who know that ground. So we're leveraging off their knowledge for us to try and find that next Windfall.

Just testing if there's one more in the room. So at Windfall, what do you see as -- sorry, this is from [ David Houghton ]. At Windfall, what do you see as the life of mine sustaining capital? And the capital and operating costs look well up from previous estimates. It looks like inflation and possible scope changes. Are these the main drivers for the higher costs?

I can take that. So on a sustaining capital level basis, it's mainly the underground development as we develop the ore body, and that's in the area of about CAD 80 million per annum. And then on the OpEx side, I think there are a couple of fundamental differences between how we've costed it and how it was cost in the feasibility study. The first is we've gone for owner operations, owner mining operations and we've included all the maintenance costs for the fleet, which they didn't have in there. So that's probably one large element.

Another one is also all the costs around clearing of roads of snow, running the camps, flights. They didn't have any of the indirect costs in the valuation. That was all just left out. So we've included all of that.

And then the third one I'd probably like to call out is the general and administration costs. They didn't have anything in for that for running a Montreal office. We allocate all our management fees of the overhead of the group to all our assets. So those don't sit outside of any underlying asset costs, including all of that in as well. So those are probably the key ones and then obviously inflation.

Just mindful of time, we are going to wrap up this Q&A and just hand over to Alex to do the good stuff on the money.

Apologies. Thank you, everyone, and thanks, and welcome, and thank you for having us today. I suppose I didn't expect to have said so many words already today. So I was getting ready to say hi, I'm Alex Dall, the CFO, who many of you do know, but I suppose I've answered a few number of questions today. Jongisa obviously wants to keep us under a bit of time pressure. So luckily, I prefer numbers over words.

So I think I'm going to unpack the capital allocation section. I mean, I suppose you've seen the great growth opportunity we see in the group, and it's how do we wisely spend this money to get the levers right, and that's what we're trying to balance. Up here, I put a slide that we have previously presented, but it has been refined. It's a refinement of the previously communicated framework.

And I think the core thing is from our cash flow from operating activities, we want to ensure that we do 3 main things, firstly, which is invest in our assets to ensure the safe, reliable and cost-effective operations, and that's what we would call sustaining capital expenditure as well as maintain our investment-grade credit rating and to pay a sector-leading base dividend.

After this, in this gold price environment, we will then deliver significant additional cash flow. And it's really about getting that competitive tension about what do we do with that cash. It's either allocating it and investing in our future, building balance sheet flexibility and additional shareholder returns. We are confident that we will be able to do all 3. I would like to call out the change in the base dividend policy, and I will unpack this further in the next slides.

This next slide is our capital profile over the historically as well as looking forward in the next 5 years. We have consistently spent the capital to sustain our operations and to fund growth, the major one in the past being Salares Norte, which has now reached commercial levels of production.

Sustaining capital over the next 5 years is expected to average between $350 and $400 an ounce. As highlighted by Bernadette and Jason, as we invest in the future of our assets to deliver both Horizon 2 and Horizon 3, this will be slightly higher over the next 2 years. This includes underground development and capital strip at Gruyere, St Ives, Granny Smith and Tarkwa as well as a number of key infrastructure spend items at the Australian operations, including power and ventilation at Granny Smith for Zone 135 and Zone 150.

In addition, we continue to maintain our investment-grade credit ratings, which we are very proud of as being the only South African company who can say that, with a stable outlook at both S&P and Moody's and very strong financial metrics.

Key to delivering on our growth and per share metrics is ensuring that we effectively use our balance sheet. We do not want to issue equity that dilutes shareholders, and we believe that the balance sheet is a strong lever we have to fund our growth ambitions. A great example of this is how we use the balance sheet to fund the acquisitions of both Gold Road and Osisko to grow the quality of our portfolio.

I'll call out that in September 2024, our net debt position was $1.1 billion. After spending approximately $3 billion on the Osisko and Gold Road transactions, paying shareholders over $700 million and spending the capital necessary to deliver Salares Norte to commercial levels of production, we are forecasting to end 2025 in the same net debt position of $1.1 billion.

At current consensus gold prices, we are forecasting to hit net cash towards the back end of 2026. I'd also like to call out our very strong debt maturity profile. In the 2025 year, we do have the Gold Road, the bridge that was taken out to fund the Gold Road acquisition. We are currently in the process of refinancing that, looking at a term loan in Australia. And after this, our first material debt repayment will be the $500 million notes in 2029. We will continue to ensure that we delever and build flexibility into the balance sheet for future opportunities.

Here's the money slide for everyone. So our aspiration is to pay sector-leading shareholder returns. We believe we have historically always done that, and we believe we can continue to do so. We have updated our base dividend policy to link this to underlying cash flows before discretionary investments. So this includes all those items we saw on the earlier slides being the $2 billion of discretionary expenditure or $400 million a year over the next 5 years, the $1.7 billion to $1.9 billion of Windfall expenditure or roughly $600 million per 12 months over the 36-month construction period. It might flow over 4 years, but that's roughly -- and between $100 million to $150 million of exploration expenditure.

What we are trying to ensure here is we see that we have significant investment opportunities in our business, but we do not want us investing in those opportunities to impact the base dividend given back to shareholders. And we believe that a change from earnings to cash flow is more aligned to our capital allocation framework, which is a cash flow model.

We will target a payout ratio of 35%, and we will pay a minimum of USD 0.50 per share per annum paid semiannually at $0.25 per share. If the minimum is less than the 35% of free cash flow before growth investments, we will pay a top-up to ensure that we give the higher gold price back to shareholders.

In addition, we are pleased to announce that based on our current forecast, we should be in a position to deliver our proposed additional shareholder returns of up to $500 million over 2 years. This will be either through share buybacks, special dividends or a combination of both. The mechanics and quantum of this will be declared as part of the final 2025 dividend in February 2026.

On this slide, we show that we have continued to grow our dividend through the higher gold price environment, and we have been able to deliver top quarter yields. We are confident that through our new base dividend policy and the use of additional returns, we'll be able to continue doing this based on sector-leading year-on-year cash flow growth.

In FY 2025, the forecast 35% of free cash flow before growth investments will deliver about 45% of normalized earnings, which is towards the top end of the range of our old policy, and of total free cash flow. When modeling additional shareholder returns, this amount increases even more to about 50% of normalized earnings and slightly more than 50% of free cash flow and a yield of about 5% based on the current share price.

As our growth expenditure increases in the future, as outlined in the earlier slides by Mike, Bernadette, Jason and Chris, this payout ratio of total free cash flow will be well in excess of 50%.

So I put this slide together, which sort of unpacks how we see the cash generation over the next 5 years. Based on consensus gold price and our forecast ranges that were shown earlier on in the presentation, we'll generate circa $20 billion of cash flow from operations. In addition, we have significant leverage at spot prices. This will increase by another -- approximately another $10 billion. This enables us to deliver on our capital allocation priorities in a very disciplined manner, ensuring we get the tension right between the 3 core pillars.

Firstly, reinvesting in the business with over $5 billion of sustaining capital, discretionary investments of $2 billion and the Windfall capital of between $1.7 billion and $1.9 billion, delivering strong shareholder returns through distributing about $6 billion as a base dividend, which is more than our sustaining capital, I'd like to call out, and additional returns of up to $500 million over 2 years. This will be reassessed on a continuous basis as we look at both our interim and final dividends, and we see strong potential to continue building on these returns over time.

While doing both of these, we'll be in a position to delever and build balance sheet flexibility. I do want to call out that in the spot prices, when we talk about the extra $10 billion, I think that really has the potential to enhance total shareholder returns. As to Mike's earlier view, we don't have -- we've sort of mapped out all the growth potential opportunities within the portfolio.

So in closing, we'll generate strong cash flows over the next 5 years, and we are confident that we'll be able to deliver on all our capital allocation priorities, including investing in our future, delivering sector-leading returns and building balance sheet flexibility. We will remain disciplined in how we allocate this capital to ensure we maximize value.

Thank you. And I'll hand back to Mike to wrap up.

Thank you, Alex. And that didn't excite anybody, then I'm not sure what will. I don't know when you think about it, those kind of capital -- those cash flow returns, it's kind of quite eye-watering when you think about what the market value of the company is. So it's generating a massive amount of cash at the moment.

And I think when we kind of decided on this, the dividend policy was quite interesting because even the gold price was slightly different when we spoke about this 4 months ago. So I just want to kind of just close out on the messaging for today. I don't know where we're going. It's out of sync. Sorry, guys and ladies. I'm not sure what happened with that. Okay. Good. So I'm now completely out of sequence here. But look, I think just a couple of things.

I mean, one message I'd like you to take away is that Gold Fields has got a really strong history of just kind of improving the quality of its portfolio over time. We've been very active in portfolio management. I think all of these have been really disciplined in investments and have really set the platform for the company we have today.

I think what's also important as we thought about the growth and the point that Alex has made, we've been really disciplined about using equity to fund this growth. And we much prefer funding it through our own internal cash generation because it really ties back to what we're trying to solve for is growing the value of the company by growing those relative per share metrics. Ultimately, that's what we stand for.

We've got a very clear plan, which we've now set out over the next 5 years. We're not going to -- as I said right upfront, we're not going to sit on our hands and say this is the best that it can be. We're working really hard every day to see what we can do to further optimize and improve our business. A lot of that improvement is really going to come back through the investment in the core capabilities of our organization that gives people the confidence to continue to drive predictable outcomes and drive improvements because ultimately, improvement comes off a very stable base.

So I've got every confidence that our plan over the next 5 years really sets our business up to be sector-leading in terms of the cash generation in the business, allows us to deliver sector-leading shareholder returns and set our business up for the next generation to be a continued high-quality company in the sector.

And again, with the cash generation that we're delivering, it allows us to do all of those things, both invest in our business, continue to optimize our portfolio and provide sector-leading returns to shareholders. So I just want to thank everybody again for being here. I know we've got a few minutes left for questions, and I'll hand over to Jongisa.

Thank you very much. I do see one in the room from Ravi. Just one second.

On the cash flow waterfall generation, you still at the end, have got about $4.4 billion to $7 billion balance sheet flexibility left on consensus gold prices, which are arguably $1,000 to $1,500 below where we are today. That's 3 windfalls worth of CapEx to sort of put it in that perspective. What would you say is the order of priority of using that additional balance sheet flexibility? Is it one more Windfall? Is it additional returns? Or is it sort of more other projects?

No. And thanks a lot for that question, Ravi. I think one of the key things I want to call out is we've only modeled in that waterfall, the $500 million of additional returns. We -- Mike and I are confident that if these prices maintain, we'll continuously top up that program. We just couldn't put a number in today. As obviously, we've got to have all the sort of approvals in place to put those top-ups in. So I do definitely believe a significant chunk of that remaining balance will go towards additional returns. We are also today sitting in a sort of net debt position of just over $2 billion after funding the Gold Road transaction. So I do think there is room to use some of that to delever the balance sheet as well to put us in a sort of similar position that our peers sit at the moment.

Please go ahead, Chris.

[ Chris Salvator ] from [indiscernible]. I have a question on just given the horizons and the focus on the long term, how have incentives changed, particularly given the structure of centralizing. Have you changed any of the long-term incentives? Anything you can update?

Yes. And Mariette can provide the color, but that was an important cultural lever for us. So we had -- our incentive programs, whilst we had a common program, they were very much driven by regional targets and regional goals. So what we've done this year for the first time is we have one group scorecard, which is kind of a balanced set of commitments that we commit to delivering to the Board.

That forms the basis for determining the short-term incentive bonus pool. And that then defines what we have available, and we cascade it down to individual assets functions depending on their relative performance and contribution to that. So ultimately, everybody is tied and aligned to the Gold Fields Group performance.

As it relates to our long-term incentives, we kind of certainly haven't made as many changes to that. But the one fundamental difference that we've done is that for the first time, we're actually going to buy shares on market to fund any of our executive incentive programs, whereas in the past, we issued shares. And we're kind of saying, "Look, given where we believe shares are undervalued, that's probably the worst thing for us to do." So those are 2 of the big changes we made. But Mariette, anything you want to add to that?

I think maybe just talking to that sort of long-term incentive as a result of now buying shares is that we actually -- where in the past, we have a very small percentage of our executives really participated in owning shares and that would be benefiting today because of our share price uplift and everybody else would have got it in cash because we had constraints about the number of shares we could issue. We now have over 600 people in the organization actually will be shareholders through this plan. So ensuring driving through our senior leadership that long-term alignment and what we want to get right is a lot more linked to our reward process.

Yes. And probably there was one other element I should have mentioned is that our [ SDR ] program, we changed as well so that only half is delivered in cash and the other half is converted to shares and delayed for 2 years. So there's kind of a further delay on the delivery of the short-term incentive, whereas I think historically, there was like big upfront payments rather than...

And I think it is worth just on the LTI calling out 50% of the vesting percentages related to shareholder returns, 25% to some financial metric and 25% to ESG metrics.

Okay. Great. One more from online from Herbert Kharivhe from Absa. If all the projects are executed, growth included, is the new CapEx run rate of $1.7 billion to $1.9 billion per annum over the next 5 years ending 2030, and what does it look like beyond?

So I think it peaks in the first sort of 3 years with Windfall. I think that number then drops off in 2029 and 2030. So we've probably come down sort of more to the $1.4 billion to $1.5 billion sort of area. And we see a similar profile through the remaining horizons. That is obviously -- I'd love for Bernadette and Jason to find something nice and exciting that's going to add value that we could invest it.

The next one is from Arnold Van Graan from Nedbank. He says, it's an old question that always comes up, but have you looked at the redom question again? And is the cost still prohibitive?

So I mean, it's an interesting question. And every time it comes up, I kind of go down a rabbit hole of trying to understand it. But I think there's actually 3 parts of -- you got to ask yourself, what are you solving for? Are you solving for a listing? Are you solving for a jurisdictional redomicile? Or are you solving for changing your tax base? And I think we've got to continue to evaluate that. If it's simply a lift and shift of the corporate entity because you want to redomicile the entire organization, then that comes with a cost.

And I think where we stand today, and we'll continue to do the work and evaluate it is I'm not sure that the cost of doing that actually warrants the capital to be allocated to that execution because I'm not sure the shareholders would see the return out of that exercise. But we continue to evaluate it and to see whether that would translate into a value uplift and a relative rerating of the stock. But at this point, it's inconclusive is kind of our take.

Thanks, Mike. Two more from Tanya and then we've got 2 minutes to go. So first is, with all your projects or expansion in place, do you have the key necessary people, labor in place to deliver on this? Or do we need to add to the organization? And the second one is, what is the minimum cash balance you want to keep to run your business?

Should I take that second one first and then we can hand over to Mariette. So I mean, I assume we're talking not a net debt position, just the cash balance around the business that's sort of in the area of $600 million to $700 million.

I think that's a great question, Tanya. Thank you. When we think about just the mere size of projects that goes with the capital spend, as part of our organizational model redesign, we've built significant project capability in the center. And I think Mike was referring earlier to just sort of having approved Salares and left it to the regional team to deliver. We now have a group team that oversee that work, both from the planning and execution component of that as well as from doing the first second line assurance over ensuring that we are designing projects to Alex's point to the hurdle rates as well as the technical components of what's required to deliver that.

Does it mean that as we go into this project execution that we need to ramp up significant project skills every time? Absolutely. And we've seen that, that sometimes perhaps something that we don't model as accurately in our project time line, certainly in our Windfall experience, finding French-speaking specific project skills in Quebec has not been as simple, perhaps as what it looks on paper. So -- and similarly, we're seeing quite a significant capital expansion in Australia, where we have a more dedicated team of people that we can access and have relationships with.

Thanks, Mariette, and that brings us to the top of the hour. So thank you very much to Mike and Gold Fields team. And that is it. And thank you to those who joined us online. That brings our sessions to a close. Thank you.

Thank you.

Good afternoon, ladies and gentlemen. Welcome to KPN's Fourth Quarter Earnings Webcast and Conference Call. Please note that this event is being recorded. [Operator Instructions] I will now turn the call over to your host for today, Matthijs van Leijenhorst, Head of Investor Relations. You may now begin.

Yes. Thank you, operator. Good afternoon, ladies and gentlemen. Thank you for joining us today. Welcome to KPN's Fourth Quarter and Full Year 2025 Results Webcast. With me today are Joost Farwerck, our CEO; and Chris Figee, our CFO. As usual, before we begin our presentation, I would like to remind you of the safe harbor on Page 2 of the slides, which applies to any statements made during this presentation. In particular, today's presentation may include forward-looking statements, including KPN's expectations regarding its outlook and ambitions, which were also included in the press release published this morning. All such statements are subject to the safe harbor.

Now, let me hand over to our CEO, Joost Farwerck.

Thank you, Matthijs. Welcome, everyone. Let's start with some highlights of the fourth quarter and full year. We delivered on our 2025 outlook and group service revenues increased by 2.7% with all segments contributing. Adjusted EBITDA and free cash flow exceeded guidance. We maintained strict cost control across the organization. Indirect costs were EUR 10 million lower than last year, marking a clear turning point in indirect OpEx.

In the fourth quarter, we saw Consumer delivering another quarter of strong commercial momentum, especially in Broadband with record net additions for the full year. Business growth was mainly driven by SME and Wholesale continued to grow mainly driven by sponsored roaming. Last year, we expanded our footprint by adding 440,000 fiber homes and around 400,000 homes connected. And we strengthened our mobile network with the launch of our tower company, Althio. And through ongoing investments in cybersecurity, we ensured a resilient network that protects all users.

For 2026, we expect service revenue growth of 2% to 2.5%, EBITDA AL of approximately EUR 2.67 billion, CapEx of about EUR 1.25 billion and free cash flow of more than EUR 950 million. Our dividend per share is expected to grow by 10%, and we intend a new share buyback of EUR 250 million in 2026. All in all, we closed the year in a good way, and we are well positioned to sustain healthy service revenue growth in the coming years, supported by our leading positions in consumer and business markets and continued growth in Wholesale. At the same time, we are accelerating our transformation to deliver around EUR 100 million in annual net indirect OpEx savings by 2030. And reducing CapEx below EUR 1 billion by 2027 next year will drive strong cash generation and deliver attractive shareholder returns.

Later, Chris will give you more details on our financials and 2026 outlook. We delivered on our 2025 outlook. Service revenues grew by around 3%. EBITDA slightly exceeded guidance. Free cash flow was strong at EUR 952 million ahead of the upgraded outlook we gave at the half year results despite slightly higher CapEx. We reiterate our dividend commitment, and we will pay a regular dividend per share of EUR 0.182 over 2025 following AGM approval in mid-April.

At our strategy update in November, we reaffirmed that we are well on track to achieving our Connect, Activate and Grow strategy, which is supported by 3 key pillars: one, we continue to invest in the leading networks; two, we continue to grow and protect our customer base; and three, we further modernize and simplify our operating model. And together, these priorities support our ambition to grow service revenues and EBITDA by approximately 3% on average and free cash flow by approximately 7% over the entire strategic period.

Let me now walk you through the operational performance in more detail. We hold a clear lead in the Dutch fiber market, both in homes passed and connected and in business parks through our joint venture in Glaspoort. And together with Glaspoort, we now cover nearly 6 million Dutch homes or around 70% of the country. And to maintain our network leadership, we further optimized our rollout process and shifted focus from passing homes to connecting and activating the households. And this approach is paying off with a record number of homes connected in Q4 and continued growth in fiber Broadband net adds.

Consumer Service revenues continue to grow, driven by consistent Fiber and Mobile service revenue growth. And commercial momentum remained strong across both fixed and mobile with subscriber growth exceeding our fair share. Throughout the year, our Net Promoter Score improved, supported by operational excellence, our Combivoordeel offer and initiatives launched to strengthen digital engagement.

Now let's take a closer look at our fourth quarter KPIs. Thanks to a strong execution and proactive base management, we delivered double-digit Broadband net adds growth for the third quarter in a row, supported by a healthy inflow of new fiber customers. Our fixed ARPU held firm despite continued investments in our base and the competitive markets. Together, these achievements drove service revenues growth of 0.4%. In Mobile, we added 24,000 postpaid subscribers and postpaid ARPU increased year-on-year, supported by the price increase in October, partly offset by the ongoing promotional activity in the no-frill segment. Combined, these factors led to 2.9% growth in Mobile Service revenue.

Now let's turn to B2B. Business service revenues increased by 2.3% year-on-year, mainly driven by SME. And also here, Net Promoter Score improved throughout the year, reflecting the continued trust from our B2B customers for stability, reliability and the quality of our networks and services. SME remains B2B's main growth engine driven by Broadband, Mobile and Cloud and Workspace.

LCE service revenue growth trend remained relatively stable, supported by continued growth in Unified Communications, CPaaS, IoT and a growing customer base, partially offset by continued price pressure in mobile. And finally, Tailored Solutions service revenue decreased, reflecting a focus on value steering.

Wholesale continued to grow, mainly driven by the strong performance in Mobile. Broadband service revenues increased driven by fiber and the growth trend leveled off compared to previous quarters, driven by the decline in the wholesale copper base. Mobile remained strong, driven by continued growth in International sponsored roaming and other service revenues increased mainly due to an uptake in visitor roaming.

ESG remains a core element of our strategy. And on this slide, we show you the progress on carbon reduction, circularity and diversity. To further reduce our carbon footprint across the value chain, we increased our green energy sourcing in 2025, supported by a solar energy partnership with Eneco. And our Scope 2 emissions have further decreased by 70% year-on-year, while Scope 3 emissions slightly increased, but this was due to an expanded scope.

Next to this, we, of course, remain committed to improving our diversity targets. Although achieving gender balance and recruitment remains challenging, diversity and inclusion continue to be a top priority for us. And to summarize, we ended 2025 in a strong position, and we carry that momentum into 2026. With strong commercial execution, a healthy base inflow and improving ARPUs, we are well positioned and confident in delivering on our 2026 outlook.

Now let me hand over to Chris to give you more details on the financials.

Thank you, Joost. Let me now take you through our financial performance. First, let me summarize some key figures for the fourth quarter and the full year. First, the adjusted revenues were up 2.7% year-on-year in Q4, driven by service revenue growth across all segments and also higher non-service revenues. Second, our adjusted EBITDA after leases grew by 5.1% compared to last year, supported by higher revenues and lower indirect costs. Underlying EBITDA growth, excluding LTO was 3.7% in Q4 and our EBITDA margin improved by 100 basis points to 44.6% of total adjusted revenues.

Third, our net profit increased 12% year-on-year, supported by a one-off tax gain of about EUR 20 million from the recognition of a deferred tax asset. Finally, for the full year, our free cash flow increased by 5.8% year-on-year to EUR 952 million, mainly driven by EBITDA growth. Also, our free cash flow margin over total adjusted revenues grew by nearly 40 basis points. And with our ongoing share buybacks, reducing the number of shares outstanding, our free cash flow per share growth is even stronger at 7% year-on-year. I will share more detail on the underlying cash developments later in the presentation.

In the fourth quarter, group service revenues grew by 1.8% year-on-year, supported by growth in all segments. In this mix, we saw Consumer Revenue -- Service revenues increased by 1.2%, driven by continued solid commercial momentum in both Fixed and Mobile. For 2026, we expect Consumer Service revenue growth about 1.5% year-on-year, supported by base growth and commercial improvements.

Business Service revenue growth was 2.3% year-on-year, mainly driven by SME. Tailored Solutions remain negative, reflecting our focus on margins and contract quality. For 2026, we expect B2B to grow about 3% year-on-year with growth weighted towards the second half of the year, given the segment's strong performance in the first half of 2025 and therefore, the comps that will weigh against Tailored Solutions revenue growth. Our higher-margin SME business will continue to show growth in the 5% region throughout the year.

And finally, Wholesale Service revenues increased by 3.9% year-on-year, driven by ongoing growth in international sponsored roaming business. For '26, Wholesale is expected to grow by about 3%, supported by Mobile. For the full year and on a like-for-like basis, so excluding IPR benefits and the contribution from Althio, our adjusted EBITDA grew by 3.1%, exceeding our 3% CFD hurdle. This growth was driven by higher service revenues and supported by strict cost control.

Direct costs or cost of goods sold increased mainly due to the Service Revenue mix effects in B2B and higher third-party access costs within Glaspoort. In 2025, we reduced indirect costs by about EUR 10 million, marking a clear inflection point after 2 years of inflationary pressure. The savings came from disciplined cost management, automation, digitalization, lease portfolio optimization and workforce reductions of over 300 FTEs year-on-year or more than 500 if we include contingent external staff. As shared at our strategy update, we are targeting EUR 100 million in net indirect OpEx savings over the next 5 years under our transformation programs.

In 2026, we expect about EUR 15 million to EUR 20 million in additional savings driven by fast digital transformation, AI-enabled process improvements and continued cost base optimization. Our cost reduction program clearly builds momentum and will show gradually accelerating benefits over the coming years. Our operational free cash flow continues to show healthy growth of nearly 10% or about 6%, excluding IPR benefits in LTO. The growth was driven by EBITDA, while CapEx was marginally higher than last year, primarily due to a noncash accounting reassessment relating to cable damages.

For 2026 and on a like-for-like basis, so excluding IPR benefits and excluding IP sales, we expect to deliver a mid- to high single-digit growth in operational free cash flow, in line with our CFD guidance. This underlying growth in operational free cash flow will be driven by EBITDA growth and effectively stable CapEx.

In 2026, after completing the heavy lifting phase of our fiber rollout, we expect and confirm a significant step down in CapEx of about EUR 250 million, bringing total CapEx to below EUR 1 billion. With EBITDA growth and this CapEx step-down in 2027, operating free cash flow is set to grow by about 10% annually on average over the strategic period. The strong cash conversion will lift operating free cash flow margins from 24% today to about 30%, placing us among the top performers in Europe. This underpins our long-term value creation model and reinforces our confidence in delivering sustainable cash flow growth in the years ahead.

Turning now into the moving parts of our free cash flow. At EUR 952 million, our free cash flow was about 6% higher, driven by EBITDA growth and partially offset by changes in working capital and an increase in cash taxes and interest payments. Excluding the cash component of the IPR benefits, our free cash flow grew at low single-digit rate. Note that the DELTA provisions is related to lower pension effects -- pension provisions and some timing effects. Our cash margin over revenues improved by nearly 40 basis points to 16.3%, reflecting the solid cash generation momentum of KPN, and we ended the year with a cash position of EUR 552 million.

KPN remains focused on creating long-term value, which is evidenced also by the strong return on capital employed. Our ROCE improved by 30 basis points year-on-year to 14.7%, nearing and marching towards our midterm ambition of 15%, driven by operational efficiency, demonstrating our continued commitment to create value through operations and investments. We maintain a strong and resilient balance sheet at year-end with a leverage ratio of 2.4x, stable compared to previous year and below our self-imposed ceiling of 2.5x.

Our interest coverage ratio also remained strong. Our average cost of senior debt decreased by 30 basis points year-on-year, mainly due to optimization of our derivatives portfolio and our exposure to floating rates remains limited at 14%. Our total liquidity position of around EUR 1.6 billion remains strong, covering debt maturities until the end of 2028.

At our strategy update, we reaffirmed our midterm 337 financial ambitions. We see healthy service revenue growth in the coming years while accelerating our transformation to deliver about EUR 100 million in net indirect OpEx savings annually by 2030, which means for 2026, group service revenue growth is expected between 2% and 2.5% with all segments contributing. We expect adjusted EBITDA after leases to be around EUR 2.67 billion or around 3% growth on a like-for-like basis, i.e., excluding IPR benefits and IP sales and in line with our midterm ambitions.

Growth will be driven by continued service revenue growth and lower indirect costs. We anticipate net indirect OpEx savings of EUR 15 million to EUR 20 million next year. Throughout the year, EBITDA year-on-year growth is expected to be strong in Q1 and Q4, while Q2 and Q3 will face tougher comparisons. CapEx will remain at around EUR 1.25 billion, in line with our midterm guidance. And we expect a free cash flow of over EUR 950 million. On a like-for-like basis, so including the aforementioned one-off effects in 2025, our free cash flow expected to grow low to mid-single digits, primarily driven by EBITDA growth, partly offset by higher cash taxes.

And finally, over the entire strategic period, we reiterate our financial ambitions to grow Service revenues and adjusted EBITDA by 3% and free cash flow by 7% per annum on average, as reflected in the 337 CAGR model. Note that our underlying 2026 guidance and our daily trading are both in line and on track with this multiyear ambition, and we feel confident to reach our planned level of cash generation and shareholder distributions. On that very matter, our financial framework is centered on long-term value creation for all stakeholders. In this respect, we are committed to returning all free cash flow to our shareholders.

Our free cash flow per share was up 7% during the year, providing ample room for growth in our dividends per share as well, which means we intend to pay a regular dividend of EUR 0.20 per share over 2026, up 10% compared to the DPS over EUR 0.25 and fully in line with what we communicated at our strategy update. For 2027, we aim for a further increase to about EUR 0.25 or 25% increase year-on-year. And in addition, as announced this morning, we will launch a share buyback program of EUR 250 million in '25, notably starting tomorrow.

Let me conclude with some key takeaways. We delivered on our 2025 outlook, consistent service revenue growth across all segments. Adjusted EBITDA and free cash flow came in slightly above guidance and disciplined cost management delivered a EUR 10 million reduction in indirect OpEx, marking a clear inflection point after 2 years of inflationary pressure. We saw solid Commercial, Consumer and Business, including record broadband net adds in Consumer. And we continue to lead the Dutch fiber market with accelerated delivery of fiber connected and activated homes.

Our strong progress in 2025 confirms the successful execution of our strategy and positions us for future growth. We reaffirm our 337 financial framework and the announced 2026 targets are fully aligned with this multiyear plan including the CapEx step-down in '27 to unlock enhanced cash conversion. We are accelerating transformation, targeting EUR 100 million in indirect OpEx savings over the next 5 years. And beyond '27, we expect mid-single-digit free cash flow growth, supported by strong fundamentals and disciplined execution. And cash momentum was very strong and solid going into '25, providing us with confidence.

Finally, we are committed to shareholders to returning all free cash flow to shareholders through growing dividends and buybacks and the latter starting tomorrow. Thanks for listening. Now back to your questions.

Thank you, Joost and Chris. We will now start the Q&A session. [Operator Instructions]. Operator, could you please open the line for Q&A.

[Operator Instructions]

The first question comes from Mr. Polo Tang from UBS.

I have two. The first one is just about Consumer Broadband net adds. So they've been very solid for the past 3 quarters at more than 10,000 a quarter. But do you think this level of net adds growth is sustainable going forward? I'm just asking the question because you referenced taking more than your fair share earlier in the presentation. Also, you've got Odido gaining subscribers with FWA. VodafoneZiggo seems to be making progress in stabilizing its broadband base and also start wholesaling in the DELTA Fiber footprint. So I'm just interested in how you're thinking about competitive dynamics for the broadband market going forward?

Second question is just on B2B. Do you think that B2B service revenues can grow in Q1 and Q2, given that you've got that tough comparable in Tailored Solutions? And what's your view on the Dutch macro environment? And are you seeing any signs of caution from your B2B clients?

Thanks for your questions, Polo, and I'll start and then Chris will join me, I guess. Yes, on Consumer Broadband net adds, you're right, 3 strong quarters in a row. And meanwhile, we operate in a very competitive market that remains competitive. This is more or less normal course of business for us nowadays. And I think what we can more or less conclude is that the new strategy of ours is working, where we focus on base management instead of acquiring new customers who leave in the air for free TV set from another service provider.

So we invest a lot in our customer base, and that seems to work. Is it sustainable, you said? Well, you mentioned FWA from Odido, changes in the VodafoneZiggo strategy. I think FWA is a niche market. That's in a country where households have 2 or 3 fixed lines into a household where 1 gig is the standard and 4 gig is becoming quite normal fixed. Unlimited is the standard on mobile. Fixed wireless access as a broadband connection is more for a niche segment than anything else. We more or less have, by the way, the same for rural areas.

VodafoneZiggo, they are clearly now making noise around being a full always-on provider when it comes to quality and content. But let's see. I think for us, the best answer to everything for the last years was believe in your own plan, believe in your own strategy and execute on that. Last quarters were good. Of course, we plan to continue, perhaps not always above 10%, but we plan for strong growth, healthy growth on broadband this year as well.

And on this B2B service revenues, I mean, the Dutch economy is growing and also expected to grow in 2026. SME is a very important segment for ours. That will grow probably around 5% like we did last year. Yes, you see some changes in our top line in B2B because we -- what we mentioned, focus on value steering, that is mainly in the Tailored Solutions part where we say goodbye to revenues that are not really contributing when it comes to margin. So of course, for us, very important to explain that to you in the quarters to come. But when it comes to healthy margin-rich revenues, I think we will do fine in B2B. Chris?

Yes. Polo, on your first point on broadband, there's 2 points to add is that, obviously, the important drivers behind the solid net adds were lower churn and lower migration. So churn has been consistently lower and lowering or declining during the last half year. I think it also has to do with the fact that our copper base is gradually shrinking. So the vulnerable part of our business is declining.

Migrations from front to back book have -- we've managed that successfully. Combivoordeel will work. So I would say the churn side has been very positive. And if you look at fiber, our real net adds, fiber net adds, excluding copper upgrades of clients moving from copper to fiber has been pretty consistent now for multiple quarters in a row. So I have no reason to see that stop.

And on B2B, as Joost rightly pointed out, on the Tailored Solutions side, we've been focusing on value and margins. which means that SME will continue to grow north of 5% basically during the year. I mean that's the highest margin business that we have, and that continues to grow nicely across all quarters. I expect the LCE business to also show positive growth across the quarters. Tailored Solutions will be negative, I guess, in the first half year due to the comps. That means that reporting-wise, B2B across the entire year will be growing around 3%, but heavily tilted towards the second half of the year and then flattish, I guess, in the first half of the year. But that's really only a pure Tailored Solutions effect.

The high-margin businesses, SME and LCE will continue to show steady growth throughout the year. And then when the comps start to work for us, you can see an acceleration of lease-up reported growth. But I mean the 3% for the year is pretty well supported. It just will be, as you rightly pointed out, tilted towards the second half of the year.

The next question comes from Joshua Mills from BNP Paribas.

A couple from me. The first one is on the Consumer side. So I think, Chris, you might have mentioned that the annual service revenue guidance for consumer. If you could just remind us of that. I assume it will be accelerating throughout the year. And my question is what's going to drive that? Is it continued volume growth? Or are you also expecting ARPU to improve as well?

And then secondly, related to that, if I look at the price increases last year, you were broadly in line with both Odido and VodafoneZiggo on the broadband side. I think you're a bit ahead on the mobile side. Now that you are outperforming your net add share relative to your market share in the Dutch market, and given some of the more aggressive price increases we've seen from the likes of Swisscom yesterday and incumbents taking advantage of the network leadership to push prices up, how are you thinking about the value versus volume mix going forward? And is there the opportunity with these fiber networks to be a bit more ambitious on price take?

Yes. On Consumer, we guided 1.5% growth throughout the year. It will be a continuation of what we do today. I would say Mobile itself should continue to grow nicely, should be north of 3% during the year. We're now hovering around 3%. That should be fine continuing that with pretty healthy net add growth and supporting ARPU. I think I picked something similar. Joost talked about the base dynamics, churn improvements and a flat to up ARPU. So during the year, I'd expect a continuation of reasonable net add growth and flat to increasing ARPUs supported by some price indexations. Obviously, we're looking at back book and front book alike to make sure we are fully consistent with orienting with a value orientation.

So strategy-wise, to also take on your second question, we are a value over volume business. We'd love to take a bit more than our running market share, which we do. I think that's a reflection of the networks and the quality that we've built. We see some effects on network quality, both in Mobile and Fixed positively reflecting on us. So that should allow us to get continued inflow of net adds. But it will remain value-oriented if anything else. And that means for Consumer, 1.5% growth during the year. I would say, during the year, I would expect Mobile to be stronger in the first half of the year and the second half of the year, possibly some of the Combivoordeel effects will fade with Fixed carrying the baton from the second half of the year a bit more.

And on price increases, I mean, that's a call we make every second quarter of the year on Broadband. And last year, it was more or less centered around the CPI, so inflation.

The next question comes from Siyi He from Citi.

I have 2, please. The first one is just going back on the consumer ARPU comment. And it seems that the Mobile ARPU has stabilized. And despite that you have the combo discount on the Fixed products and you still delivered a stable fixed ARPU. Just wondering if you could comment on what you see in the ARPU development. Should we expect there is a solid reason for us to believe that ARPU is going to be stable and growing going forward?

And the second question is really a quick one. Just wondering your feels on the increasing rigid stance from the EU on the Chinese vendors. And if you could comment on what's your exposure there? And what do you think it could potentially impact your CapEx plan?

Yes. Siyi, let me take the first question on ARPU. I think for both Mobile and Fixed, we expect stable to a modest increase in ARPU on fixed driven by price indexations, a shift towards higher speed levels that we have this year as well and a relatively manageable amount of migration from front to back book and the latter obviously margin dilutive, but that's -- the effects tend to be increasingly limited. We're able to manage that pretty well.

A big chunk of our Broadband base is in contract. So with that, I expect fixed ARPU to be stable to have a modest growth over the year. Something similar for Mobile. Obviously, we had a step down in Mobile in last year or at least lower growth, mostly in the no-frills part and driven by the noncommitted part of the ARPUs. I think that is -- it feels like stabilization in that space. So what should drive mobile ARPU, it is indexations, for surely in back book, possibly more. It is a gradual continued move to unlimited customers, a significant amount of our new sales are now in unlimited. We're basically at our targets and we won't have in unlimited. And I think also a gradual stabilization of the market in the no-frills segment with I would say, less pressure on the noncommitted part.

So in summary, I'd expect both Fixed and Mobile ARPU to be at least stable or deliver some modest growth during the year.

Yes. And on Chinese vendors, yes, we are well on track on implementing 5G toolbox swapping non-Western suppliers from critical systems while we introduce European vendors there. And we already started down this path many years ago, and we are fully aligned with Dutch and EU security guidelines. Of course, there's some discussion in the market about the Cybersecurity Act. It seems it's proposing a further ban on high-risk vendors.

For me, too early to tell what the full consequences are, and I expect extensive debate there, and yes, more finalization towards the end of 2027. But I think the main message is we already started this many years ago, and we follow this life cycle of assets in our approach. So we do not see any impact on our CapEx envelope in the future.

The next question comes from Ajay Soni from JPMorgan.

I've got a couple. The first is on your '26 wholesale growth. You guided to 3% and medium-term target here is 4%. So what are the headwinds you see this year, which you expect to fade into the medium term? Then the second one is just around the convergent impact on your Fixed Service revenue. So just wondering what the impact was in this quarter versus Q3 and then how you expect that impact to evolve over 2026? I think you already said it will kind of fade by H2. So just some clarity on that.

Yes. Let me take both of them. On Wholesale, indeed -- on Wholesale, Broadband and Mobile, Mobile is continuing to do well, both on the national solutions as well as our international sponsored roaming solution. There's a very good funnel of customers waiting to be connected or to be contracted. In Broadband, we've seen a reasonable decline in our total base, mostly copper. So we declined in copper, increased in fiber. It has to do with our main wholesale Broadband customer shutting down the brand.

That effect will probably continue into Q1, but then gradually expect it to fade towards the half year, although you should ask the client for more intel. But I think that happened last year, and that effectively shows up in the numbers this year. So basically, a stabilization in this year will be supporting service revenue growth in 2027. There's always like a bit of a year lag between base development and what you actually report in terms of service revenue.

So to be -- and also, it's moderation of Broadband and Service Revenue growth in this year and support next year as this brands fade away -- brand effect starts to fade away supporting growth in '27 onwards and continuation of the sponsored roaming effect. And on the convergence, the Combivoordeel effect, we reported a fixed service revenue growth of 0.4% in Q4. If we hadn't made this investment, Fixed Service revenue would have been around 1% for the year as fixed only. So that's kind of the magnitude of things.

If you look at the total service revenues of next year, the total effect for the year is probably around 15 basis points of growth for KPN as a whole. So look, it's a small amount, but as we're talking about a few digits after the comma, it actually has an effect. So basically, Fixed would have been around 1% in Q4, like 0.4%. And for the full year '26, I think the effect on service revenue growth of this investment is about 15 basis points of growth.

I expect this gradually to fade in the second half of the year, towards the end of the year. More like Q4, you'll see less and less. And basically, the investment will continue, but then the base that is subject to the plan will be big enough so you can see lower -- the effect of lower churn already for those customers who've been part of Combivoordeel plan have shown markedly lower churn. So that will start to weigh in the numbers in the second half of the year. And let's be conservative more towards Q4 than Q3.

The next question comes from Keval Khiroya from Deutsche Bank.

I've got 2 questions, please. So firstly, you talked about Mobile growth within consumer of 3% in 2026. Q4 was at that level, but benefited from quite an easy comp. So can you just elaborate a little bit more on what's going to drive the acceleration to that 3% in Mobile for 2026? And secondly, DELTA and ODF have now pretty much completed their fiber rollouts. What's happening to your customer churn in these areas? Is it slowing as they've ended their rollouts? Or is churn still at similar levels given they're still ultimately trying to penetrate these networks?

Well, regarding Mobile, actually you've got different -- more challenging comps. But as last year, we've done both front book and back book repricings last year. We look at a more-for-more price increase last year, and we might as well just repeat that action this year. So there are a number of pricing actions we do on our Mobile business with gradual indexation and the more for more for existing customers. I think that's one.

Secondly, our base has grown. Our total Mobile base has grown by 129,000 over the year. It's quite good. I mean '24 was a fantastic year. That makes '25 look like a lesser year. But remember, '25 was actually still a lot better than '23 and '22. So it's still one of the best Mobile years in history in terms of net adds. So basically, next year, you have the benefit of a higher starting base to continue and base continues to grow in Q4 and also the first weeks in this year. And then you have another round of price indexations and possibly a more for more indexation as well for customers. So that should support Mobile revenue growth.

And secondly, obviously, the big unknown is amount of traffic and uncommitted. That has declined a lot, but it feels that -- well, hopefully, we reached the bottom of that as well. So that gives us comfort that in general, Mobile growth should be healthy also in the tougher first half year comps.

Yes, Keval, you're right. DELTA and ODF are no longer expanding their fiber footprint. They're clearly focusing more on trying to connect households. These are footprints of different qualities. In the DELTA footprint, we originally, in some places, have a lower market share and ODF built their footprint in mainly the strong Ziggo area, the larger cities. So it's a bit of different dynamics in both footprints.

And in the ODF area, we're building as well. And yes, our strategy there, of course, is to not only pass households, but also connect and activate. And I think that's a big difference between us and the others. So on fiber by overbuilding in the cities, we're doing good. And market shares on copper in other 5 areas are, of course, lower than we represent the 5 areas, but still doing okay. And I think expanding our footprint to 70% and connecting so many households. And at the end, moving up to 85% makes the churn in the copper areas also slowing down.

The next question comes from Paul Sidney from Berenberg.

A couple of questions from me, please. Just the first one, just perhaps building on a few of the earlier questions around customer behavior. You've made some very positive comments around churn, retention, network quality appreciation, especially interesting given the price increases that you've been putting through over the past few years. But just a very high-level question. Does this really suggest a wider appreciation of the services you provide for consumers and businesses? And the follow-on from that is it feels like there's substantial room for price increases to continue for the next few years. And again, just going back to an earlier analyst comment around the Swisscom move yesterday, it does feel like a bit of a shift, but I'm just interested to hear your comments around that.

And then just secondly, Chris, on capital allocation, your decision to return all the free cash flow to shareholders over '26, is it a fair assumption that there is, therefore, no sort of small bolt-on acquisition opportunities on the horizon? And could there be such opportunities perhaps beyond 2026?

Yes, Paul, I'll start. Yes. Well, I think one of the most important changes we started in our strategy beginning of '25 was that we said, let's focus more on the customer base. So giving away discounts or Netflix for free or free TV sets to new customers while all loyal customers get a price increase every year is a bit annoying for the customer base. Since we represent the largest customer base, we shifted to building more quality in the base. So Combivoordeel is a service where you can combine your services, you get more loyalty points and at the end, you can get something for free.

We launched a free security package for all households, they can activate themselves. We launched a new MijnKPN app where you can really organize everything yourself, order or deorder connectivity or whatever, very simple. So I think the whole message to our customers is we invest in you and we invest in your loyalty. And that, of course, is something you can't measure on a daily basis, but acquisition you can. But after a couple of quarters, we can say the churn is really slowing down. Net Promoter Score went up. So doing things like that hand-in-hand with a price increase works much better. So I think this is an important switch we made, and we will continue to focus on this strategy because it's also far more positive.

Yes. And on the point also on network quality, network stability, we have seen, especially in the Business segment, some corporate customers turning to us recently. So more interest volume-wise for corporate customers to select KPN simply because of network quality, network stability, which I think is a positive, right? That's a payoff. And not necessarily massive pricing power at least give you a volume and competitive advantage in that market.

On your second question, returning more cash to the shareholders, that's what we do. We ended the year with a 2.4x leverage below our self-imposed ceiling of 2.5x. We typically, by growing our EBITDA, delever by about 0.1 turn per year, right? But if we wouldn't return our cash to shareholders, we delever faster. But typically, if you grow your EBITDA, you delever by about 0.1 turn per year. That gives a reasonable headroom towards a self-imposed ceiling.

So I think, Paul, our war chest is big enough for bolt-ons. That doesn't mean we're going on a massive acquisition spree. But if we bump into something interesting, we have the rooms and means to do it. And obviously, especially for bolt-ons, the first hurdle is, does it create value for us? Is it value creating for shareholders, value creating for the business? How does it compare to buying back shares? We always check whether an acquisition does something strategically and financially and does the stack up to buying back our own shares. But if we find opportunities, we have the room to do so simply because our balance sheet gives us sufficient headroom whilst returning all cash to shareholders.

The next question comes from Andrew Lee from Goldman Sachs.

I had 2 questions. One was just a follow up on that Chinese -- on the Chinese vendor question that Siyi asked. Could you just help us understand, so does the extent of the risk extend to just you having to fast track the swap out you're doing anyway out to 2027? Or could it mean even greater swap out of equipment? And can you just give us a sense as to the scale of that, if you were to fast track it and do it in 1 year, how much is that -- how much does that cost you? And any help on the scale would be useful.

Then just secondly, on the copper migration competition on wholesale that a few questions have been asking around and specifically the ODF and DELTA Fiber competition. Are you getting a sense that now that the build is slowing down or has slowed down, that the ability for those operators to actually win customers is starting to decrease? Or are you seeing no real let up in the near term from their ability to gain customers?

Yes. So like I said, Andrew, with respect to Chinese vendors, in particular, I mean, we made good alignment with our government years ago, and we're fully on track to move out like we mentioned -- like we call the non-Western vendors out of the critical systems, mobile core, fixed core; mobile cores, Ericsson; fixed cores, Nokia, that's all known in the market, and we're almost done there. So we're pretty good on track.

And we do this, like I say, in the life cycle thing. So when it comes to other assets, we're also good on track. And we do not see any acceleration or uplift in CapEx on any risks. I mean there's a discussion around this Cybersecurity Act, but that's all taking time. And taking into account where we are and our plans are -- we invest, by the way, every year in our mobile network as well. And we have a multi-vendor approach. So we like to not be dependent on one vendor. So I can't give you all the details, but I think what I can tell you is that we're good on track, and we do not see any risks there in CapEx uplifts in the coming years.

Andrew, we have a CapEx envelope and a CapEx level. So if we had to fit it in, we'd make it fit in. So you have to give priority to one project over others. That would be -- so I would say with the visibility that we have today, whatever we have to do, as you said, it most likely fits within our life cycle plans anyway. If we had to fast track it, we'd make it fit into the CapEx envelope and prioritize this thing over something else.

On your question on the wholesale and the [indiscernible], possibly probably, yes. So that we are seeing less churn in our business altogether. I don't have a full econometric model explaining it to you, but I do relate to the fact that most people are most -- are effective in getting new customers up on rolling out fiber in the street. So you open the street, people are working in, and that's the moment it becomes visible and the moment you sell. That's the easiest way to sell fiber. So once the rollout stops, actually getting new customers in is more difficult, certainly if you don't have a household brand.

And thirdly, also if you see the feedback from some of these parties, their door-to-door sales have not been very effective. So I would say I don't have a full proof, scientific proof for you, but it feels as if that actually -- that helps us. And in the wholesale side, we also see most of our customers not actively migrating customers. So if you don't just start to migrate a customer from one network to another, the churn risk is way too high. So we do see that the end of the rollout of third parties benefits us on the churn side. So long story short.

The next question comes from David Vagman from ING.

First one on Mobile. So we recently saw VodafoneZiggo being more aggressive on speed. Do you expect speed tiering to become more difficult to monetize? And does this affect your view on Mobile ARPU evolution? And then my second question on the Glaspoort-DELTA deal, what do you think is the end game here? Have you noticed any progress in the conversation with the regulator? Do they want remedies or something else?

Joost, you want to take the first one?

On the first one, on the speed tiering thing, the fact that some of our competitors do not have speed tiering, we don't see this as a sign of strength, the sign of the network from our point of view. So at this point, no feedback on that, no market fallout from that. I think people do value and understand the quality of the KPN network. And quality is more than speed, but it's also coverage, its stability, the risk of disruptions and distortion. So I think in a broader sense, not having speed tiering is not always a good sign because also we signed a deal, we don't have the network to deliver it. But our view is that customers value the KPN network extensively and should be able to defend it off. Yes, so...

Not much of a change there. And on Glaspoort, yes, well, it was since December '24 that we're waiting for our regulator to come up with a verdict. It takes very long. So it's clear that they find it very difficult to give it a go. So we're still waiting. No news there. And I think whatever the outcome will be, we'll decide on the next step. Like we said before, it's not a super significant deal. It's about 200,000 households, which is representing more or less 4 months building.

So yes, in hindsight, it took us very long to get where we are today on the discussions with the government or the regulators. So probably they will come up with something coming months. But let's see. It's the Netherlands, everything takes long when it comes to legislation and decision-taking on the government side. So let's wait.

The final question comes from David Wright from Bank of America.

I just wondered if you could give us a little guidance into the cash flow, perhaps, Chris, just where you're expecting that cash tax to come in. I know previously, you talked about EUR 80-odd million. It looks like that could be a little lighter, where you might expect working capital to show? And any other items that you might just be flagging in advance, it would just be super helpful for the modeling?

David, thank you so much. I've been so much waiting for this question. Let me give you a quick perspective on '25 and '26, right? So '25, we had EBITDA up by EUR 129 million. Operating cash flow up EUR 120 million. Positive on DELTA provisions basically means the cash quality of our earnings went up as well. So basically, more cash earnings this year. And also 2025, interest was up EUR 30 million, taxes up EUR 32 million. So together, interest and taxes took more than EUR 60 million and then working capital was flat. That gave you basically a EUR 50 million free cash flow increase in the year.

Obviously, there's some IPR benefits in there as well. So that means the way I look at it from '24 to '26, you get effectively a 2.7% annual CAGR. Next year or 2026, we said EBITDA will be EUR 2.67 billion, obviously EUR 33 million up, but including the fading of the IPR benefit. CapEx is stable. It might be slightly down, expect stable. So that means operating cash flow up about EUR 40 million if you take the guidance. Cash restructuring will be around stable. I would say interest about stable towards this year, possibly a little lower. We're always trying to optimize our interest spend.

Taxes, up EUR 40 million, estimate about EUR 225 million to EUR 230-ish million to EUR 25 million next year. Working capital flat, possibly negative. We're cautious with working capital. And then others flat, that gives about EUR 950 million. So just modeling-wise, EBITDA, EUR 2.67 billion. CapEx is stable, slightly down a few million. It gives you operating cash flow increasing of EUR 40 million. Interest stable, taxes up EUR 40 million to EUR 225 million. Cash restructuring stable and working capital flat to a small negative, gives you basically a flat free cash flow, but that includes, of course, the compensation for the fact that we don't have IPR and IP benefits again this year, which means that effectively, we're growing our free cash flow by 2.5% to 2.7% year-on-year from '24 to '25 to '26. So I can't make it more easy for you, David. This is, I think, a pretty clear guidance.

Okay. Thank you all for your questions. This concludes today's session. In case of any questions, you know where to reach out. Thank you.

Ladies and gentlemen, this concludes today's presentation. Thank you for participating. You may now disconnect your lines. Have a nice day.

Good afternoon, everyone, and welcome to KPN's Strategy Update 2025. We are now at the midpoint of our Connect, Activate and Grow strategy. And today, we will share our progress so far and provide a vision of what KPN will look like in the future.

Before I hand over to our CEO, Joost Farwerck; and CFO, Chris Figee, I would like to outline today's agenda. First, we will reflect on where KPN stands today. Then we'll update you on our infrastructure and transformation journey, followed by how we're unlocking customer value. Finally, we share with you our financial ambitions before moving to the Q&A.

Before we start the presentation, I would like to point out that today's presentation, just as this morning's press release, includes forward-looking statements and ambitions. Please note that these statements as well as any other statements made during this presentation are subject to the same safe harbor that was included in this morning's press release.

Now let me hand over to our CEO, Joost Farwerck.

Hello, everyone, and thank you for joining us. Two years ago, we introduced our Connect, Activate and Grow strategy, a four-year plan to drive growth and transformation. And now that we're halfway through that journey, it's time to share the progress we've made and show how it sets the stage for our future.

As a pure Dutch operator, we offer strategic simplicity, transparency and minimal geopolitical risk. The resilient Dutch economy continues to outperform the Eurozone with inflation slightly higher, around 3% versus 2.1% due to strong domestic demand and wage growth. The Netherlands ranks amongst Europe's most digital savvy economies and our future-proof networks are ready to power the next generation of connectivity. And with best-in-class margins, strong cash flow visibility and disciplined capital returns, we lead among European incumbents.

Let's take a quick look at our achievements over the past two years. We are the market leader in fiber for both consumer and business. Our 5G network is recognized with the highest score worldwide. And this year, we launched tower company Althio, and last year, we acquired Youfone. By 2027, 2/3 of our energy will come from renewable sources. We serve over four million broadband and 15 million mobile users and now hold the top spot in both segments. Security is of central importance to us, and we invest heavily to protect privacy. Our customers are our top priority, and we maintained industry-leading Net Promoter Scores.

All our achievements are made possible by team KPN, over 10,000 professionals who drive innovation and connectivity across the Netherlands. Our total workforce includes approximately 9,000 KPN FTE and around 1,500 flexible contingent workforce. Employee engagement is consistently high, reflecting strong commitment. And we invest in our people every year, giving everyone the opportunity to grow and prepare for the digital future enabled by our transformation programs.

Our purpose is clear. We go all out to connect everyone in the Netherlands to a sustainable future. As launched during our Capital Markets Day in '23, our Connect, Activate and Grow strategy is built on three key pillars: one, we continue to invest in our leading networks; two, we continue to grow and protect our customer base. And three, we further modernize and simplify our operating model. And together, these priorities support our ambition to grow our service revenues and adjusted EBITDA by approximately 3% on average and our free cash flow by about 7% over the entire strategic period.

ESG is at the core of our strategy. We've set clear ambitions to be nearly 100% circular by 2025, to have a zero carbon emission fleet by 2030 and to be Net Zero by 2040. And supporting these ambitious targets, we've significantly reduced electricity consumption over the past decade despite rising data demand. And our efforts have earned us top ESG ratings. And our ESG journey covers a lot more. We are fully committed to our mission for a better Internet, fostering a much faster, greener, safer Internet for everyone. And to that end, we've launched nationwide campaigns about online gaming and online exclusion, supporting our belief that Internet should be a safe and social place that connects and empowers people.

All these efforts have translated into solid results. Service revenues and EBITDA are growing with industry-leading margins. Operating free cash flow remains strong with further improvement expected in 2027 as CapEx falls below EUR 1 billion. In line with the plan, free cash flow growth has been modest due to cash taxes, but is expected to step up in '27 following the same CapEx step down. And our return on capital employed is advancing towards 15% target, confirming our long-term value creation model, and that's working. And as such, today, we confidently reaffirm our midterm ambitions.

Let's now have a look at our infrastructure. KPN is entering a new phase of value creation, driven by our strong infrastructure and digital transformation. We have shown we can monetize our fiber and 5G infrastructure, laying a solid foundation for growth. The next wave of value could come from our edge infrastructure with leading, industry-leading fiber, the best 5G network and a wide footprint of site locations, we're building a distributed platform ready to support the future of digital services. And this platform has launched a private network service, 5G campus and is ready to support new use cases such as AI-as-a-Service, advanced edge services and sovereign data processing. And this positions us and our infrastructure as a clear differentiator in the Dutch market.

Fiber is now the leading infrastructure in the Netherlands, holding 47% market share, while copper and cable continue to decline. Nationwide coverage now exceeds 90% with overbuild of estimated around 900,000 or around 50% of Dutch households at year-end. We, KPN holds a clear lead in the Dutch fiber market in homes passed and connected and in business parks through our joint venture Glaspoort. And this ensures that both consumers and businesses have access to the fastest, most reliable network. And this strong position sets us up for sustained growth and future-proof connectivity.

We want everyone in the Netherlands to have access to high-speed connectivity. And over the past years, we've built a strong fiber foundation. Together with the joint venture, Glaspoort, we now cover 2/3 of the country. And including call option agreements on small third-party fiber networks, our coverage is even broader. And with most of the country already covered by fiber, the next wave of our fiber deployment will focus mainly on new build and overbuild areas. And with that, we're entering a new phase, shifting our focus from passing homes to connecting and activating them to deliver superior value and profitable growth. And while we remain committed to expanding fiber coverage, this adjusted rollout means that our original target of 80% household penetration by the end of 2026 will most likely take longer.

Fiber deployment will continue, but in a more sophisticated and capital-efficient manner, aligned with our transformation programs and the planned CapEx reduction to below EUR 1 billion in '27. Still, nationwide high-speed coverage remains a long-term ambition. And from 2030 onwards, we expect our fiber network to reach up to a maximum of 85% of Dutch households with fiber. The remaining households will be served by hybrid solutions such as high-speed copper supported by fixed wireless access.

We are shifting towards connecting and activating homes, which is key to boosting penetration and ARPU. On the right, you see the trends. In fiber areas, we gained about 8 percentage points market share one year after the first connection, and this keeps rising over time. All fiber areas show where we can land, and this is how we turn coverage into profitability. As our fiber network matures, we are moving to a full fiber operating model to drive efficiencies. And by that, we are simplifying our architecture, rationalizing IT, automating networks and digitizing customer interaction. And all of this enables us to run our operations much more efficiently and deliver a first-time right service to our customers.

We lead in mobile connectivity with a stronger foundation than ever. Over 5,000 sites, we deliver above 99% 4G and 5G coverage and almost all fiber connected. Our mobile network has been awarded with the highest score globally. And we've boosted capacity for gigabit speeds and introduced 5G campus I just mentioned, our private network service. And we also launched a 5G edge service based on a 40 milliseconds latency. And looking ahead, we will monetize this strength by rolling out 5G stand-alone, shifting to cloud native by 2027 and expanding C-band coverage while simplifying our core for greater efficiency. And across the Netherlands, we operate around 130 metro core locations, key assets in our distributed infrastructure. And by combining fiber, 5G and these metro core sites, we enable super low latency, secure and decentralized connectivity, and this unlocks advanced use cases such as enterprise applications, real-time data processing and AI-driven services. And by transforming these sites into strategic edge locations, we're unlocking new revenue opportunities for the coming years.

Let's now move to our transformation program. We are driving a bold transformation across every part of our business, across the customer interaction layer, across the platform layer and across the infrastructure layer. And our ambition is clear. First, to become the undisputed leader in customer experience; second, build an autonomous core through AI-driven automation; and third, unlock the full potential of our network turning into a smart, flexible platform for all users. And to make us faster, leaner and more sustainable, we are driving efficiencies across every layer. Customer engagement is shifting to digital. platforms are being simplified. And third, infrastructure is modernized and the results are already here, more app usage, lower energy consumption, a leaner data center footprint and the indirect cost stabilizing this year after increasing in the previous years.

Looking ahead, we will accelerate our transformation to improve customer satisfaction and cut costs. And we have set clear goals in each. By 2027, half our customers use digital apps, while call centers will become increasingly automated. IT sourcing becomes 30% more efficient, supported by AI. And infrastructure consolidation continues, cutting energy costs and copper phaseout.

We are on track to switch off over four million copper lines this year. And by '27, 90% of our copper lines in our fiber footprint should be done. The copper switch-off is expected to improve quality, reliability and cost efficiency. And these savings are expected to accelerate towards the end of the decade.

AI is at the core of our transformation and embedded in the three ways. First, always on AI for seamless customer journeys; second, AI-driven automation for smarter insights and security; and third, AI powers operations for speed and resilience. By '27, we aim to automate more than half of today's operational activities, resulting in lower cost and superior customer service. So, to summarize, a lot is happening at KPN and the transformation is moving faster. Our goal is clear, a multiyear savings program, targeting approximately EUR 100 million net indirect OpEx savings annually by 2030.

Let's now move to each of the business segments, starting with Consumer. Consumer is expected to deliver steady low single-digit growth with about 1.5 service revenue CAGR expected through 2027, driven by our fiber expansion, our strong mobile propositions and targeted upsell. Using multi-brand strategy, we address all market segments. KPN serves the mass market with premium quality and security, while Youfone and Simyo address the no-frills segment.

Our fiber network keeps driving solid cyber subscriber growth as customers choose secure, fast and high-quality connectivity. And as a premium brand, we deliver top speeds up to 4 gig and seamless, secure in-home experiences with easy setup through the MyKPN app. High-speed adoption is accelerating with about half of new broadband sales at 1 gig and above and with plenty of room to grow. Ongoing upsell and upgrades are fueling double-digit growth in fiber revenues.

In mobile, our best-in-class network and multi-brand approach have helped expand our customer base. And unlimited is now the new standard for the KPN brand, supporting ARPU. We stand out with targeted offers such as plans for kids and teens and loyalty features like MB sharing. Premium value is added through high-end security and speed tiering, ensuring a safe and flexible experience. And the focus on innovation and customer-centric features is expected to continue to drive subscriber growth across all our brands.

And of course, our strategy remains centered around households with three clear priorities: deliver the fastest and most reliable fiber and 5G networks, redefine convergence with Household 3.0; and thirdly, personalize every customer interaction. A key enabler is the combination of services for customers within the same household. Our Combivoordeel package launched in this year, February. Combivoordeel is a strategic investment in our base. It requires investments upfront, but as more customers adopt it, lower churn and more upsell will drive higher service revenues and EBITDA. And we're already seeing the first positive signs. ARPA is increasing, churn is reducing, customer satisfaction is rising and the household base is growing.

Let me now move to B2B. In 2023, we set clear priorities for our business segments to drive service revenues and grow profitability. And this approach has delivered consistent top line growth over the past two years. And by that, we were outperforming the broader market. Looking ahead, our strategy remains focused on protecting core connectivity with pricing and cost discipline. We expand in high-growth areas like security, CPaaS and IoT. And we continue to strengthen our distribution partner network, always with strict margin focus. As a result, we expect B2B to keep growing above the market at approximately 3% service revenue CAGR through 2027.

KPN is the trusted partner for SME, built on operational excellence, a strong brand and a top-quality network. We lead in mobile and broadband with over 70% of our SME customers protected by Extra secure Internet. Our integrated KPN ONE solutions enables seamless cross and upselling. And combined with our growing IT business, we are positioned as a unique one-stop shop for entrepreneurs and mid-market clients. We drive growth through our strong multichannel strategy with partners generating over half of SME service revenues. As app adoption accelerates, we expect robust online growth, and we aim to unlock new revenue streams via strategic distribution agreements.

Turning to LCE. Our strategy is built on three pillars: first, protect and monetize our core connectivity by focusing on pricing discipline, quality, value-added service and security; second, accelerate growth in high potential areas. Our CPaaS business almost tripled in size and our IoT base will reach nearly 14 million SIMs by the year-end. And third, we operate with a lean, efficient model powered by digitalization, AI and value steering. And these strategic priorities should drive consistent service revenue growth in LCE. And for our largest customers, we deliver tailored solutions built on core connectivity, cloud and cybersecurity. We are a trusted ICT partner in defense and security with mission-critical service revenues growing over 10% annually. And not only for our government, but also for private organizations, we provide secure, reliable connections, for example, through NL-ix, our own Internet exchange. And while partnership opportunities expand, we always stay focused on the value.

Turning to wholesale. Our open access portfolio keeps growing with fiber expanding and mobile accelerating. In broadband, we are expanding our fiber footprint while facilitating the copper phaseout and in mobile growth mainly comes from our international sponsored roaming business and travel eSIMs as many MVNOs leverage our existing roaming partnerships for seamless global services. Sponsored roaming has doubled over the past year, and growth is expected to continue, but on a slower pace. Now looking ahead, we expect around 4% wholesale service revenue growth through 2027.

Now investing in innovation is key to driving growth. And at KPN, innovation starts within our business segments. And this is further strengthened through strategic partnerships with leading technology innovators via KPN Ventures. And today, our portfolio spans around 23 companies. And through co-innovation, scale and speed, we bring these benefits to customers across all our segments.

And with that, I'll hand over to Chris for the financials.

Thank you, Joost, and good afternoon, everyone. I will now walk you through our financial framework and our outlook.

Let me start by highlighting some of our key figures. We've delivered so far on nearly all our financial promises, reflecting strong execution across the board. Over the first half of our plan period, group service revenues have grown by 3% or more annually with all segments contributing. While consumer growth has been softer than initially expected due to competition, both business and wholesale markets have outperformed expectations.

Our contribution margin decreased slightly, mainly driven by third-party access costs from Glaspoort and from service revenue mix effects. Our indirect cost savings have been slightly below plan, primarily due to inflationary pressure on labor costs. While we've reduced our workforce by over 500 FTEs since 2023, our personnel expenses have increased by around 5%. And in spite of these inflationary effects, we've delivered more than 4% EBITDA growth on average and our margins of around 45% remain best-in-class from a European perspective. Also excluding the contribution from Althio and IPR benefits, our EBITDA growth was still north of 3%.

Operational free cash flow grew at a high single-digit rate, and our margins remained very strong despite being in the midst of a fiber investment cycle, demonstrating our underlying strong cash conversion. The attractive operational free cash flow profile did not yet fully trickle down into our free cash flow, mainly due to higher cash taxes, which are driven by the consumption of our historical operating tax losses. Free cash flow growth so far was low single digit per annum, in line with our CMD guidance.

For the remainder of the strategic period, our focus is clear: operational excellence with a strong emphasis on profitable growth. We're accelerating our transformation to drive down costs, targeting EUR 100 million net indirect OpEx savings by 2030. And we see CapEx step down of about EUR 250 million in '27. Our main message here is that we are on track to reach our 337 ambition set in 2023 over the full period, also excluding the contribution from Althio.

Total shareholder returns, including dividends and buybacks, are now targeted at about EUR 4 billion, up from around EUR 3.8 billion guided in 2023, driven by the operational performance and IPR benefits. This implies a further distribution of almost EUR 2.2 billion over the next two years or around 15% of our current market cap. And our return on capital employed remains very solid and industry-leading. We aim for around 15% ROCE during the plan period, maintaining a 700 to 800 basis point spread over our cost of capital. And we're fully on track to reach that objective. So, in short, our strategy is working. KPN remains a healthy company with robust margins and a proven track record of operational delivery and value creation.

We reaffirm the 3% EBITDA CAGR ambition at group level announced two years ago over the full plan period. And looking ahead, over the next two years, group service revenue growth is expected to moderate somewhat towards 2% to 2.5%, a trend already visible in the Q3 figures. And within the mix, consumer is projected to grow around 1.5% annually, business around 3% and wholesale about 4%, supported by Joost said, international sponsored roaming business. Direct costs are expected to stay under pressure due to third-party access fees, service revenue fix effects and inflation. At the same time, our transformation programs are fundamentally reshaping our operating model, enabling us to structurally reduce indirect costs.

As we said, via this multiyear transformation program in 2030, our indirect OpEx will be about EUR 100 million lower than today. For this year, we target EBITDA of at least EUR 2.63 billion, representing growth of around 5%. Obviously, our financial performance this year has partly benefited from IPR statements, which are unlikely to recur next year. For 2026, we'll provide you with a detailed outlook during the presentation of our full year '25 results.

Our disciplined approach to capital expenditure is central to our plan. Through 2026, CapEx will be stable at around EUR 1.25 billion despite inflation. And in '27, after completing the heavy lifting phase of our fiber rollout, we expect a significant step down of around EUR 250 million to below EUR 1 billion. In recent years, we've operated with one of the highest CapEx intensities in Europe, over 23% of our service revenues, excluding investment in Glaspoort. And by '27, our CapEx intensity is expected to normalize to around 70% to 80% of service revenues while maintaining fiber leadership. Add note, please, that we manage our CapEx not as a percentage of revenues, but as a nominal hard euro envelope each year.

With EBITDA growth of 3% and the CapEx step down in 2027, operating free cash flow is set to grow by about 10% annually on average over the strategic period. This strong cash conversion will lift operating free cash flow margins from 24% today to approximately 30%, placing us amongst the top cash performers in Europe. Beyond 2027, CapEx is expected to remain stable at around EUR 1 billion with a clear focus on infrastructure leadership, customer enablement and simplification.

Free cash flow CAGR is reaffirmed at around 7% for the entire strategic period, driven by EBITDA growth and the CapEx step down. Let's look at the key moving parts. Cash taxes are set to increase as we utilize our deferred tax assets. This will result in a step-up in cash taxes of around EUR 80 million in '26 and a further EUR 80 million to EUR 90 million in '27. After that, cash taxes will align with P&L taxes. Interest expenses are expected to remain broadly stable, assuming, of course, no significant change in the shape and level of the yield curve. Working capital is expected to remain steady over the plan period, though, of course, periodical fluctuations may come from time to time.

For next year, keep in mind that we won't benefit again from the IPR settlements. So excluding the IPR, our free cash flow is still expected to grow low single digit, in line with our CMD guidance, driven again by EBITDA growth and partly offset by a step-up in cash taxes. In 2027, as capital intensity normalizes to EUR 1 billion, we expect a material inflection in free cash flow. This supports a 7% CAGR over the '23 to '27 period. Later in this presentation, I'll share some more details on cash flows beyond '27.

We continue to have a strong balance sheet. At the end of September, our leverage ratio stood at 2.5x, fully in line with our self-imposed ceiling, and we expect this ratio to improve to 2.4x by year-end, supported by increased free cash flow generation in Q4. Credit rating agencies continue to recognize our solid financial position, reflected in investment-grade ratings and a stable outlook. We plan to maintain a net debt-to-EBITDA ratio below 2.5x in the short term. Looking ahead, as major fiber investments wind down and capital intensity declines, we may consider gradually raising the leverage ceiling after '27, whilst remaining fully aligned with a strong investment-grade profile. This financial flexibility enables us to continue our policy of in principle, distributing all free cash flow to shareholders while still investing in growth and preserving strategic optionality. In short, our healthy balance sheet supports long-term value creation.

Now let's turn to our outlook and financial ambitions. We reiterate again our outlook -- our 2025 outlook as we already confirmed at our Q3 results last week. Looking further ahead, we also reaffirm our midterm ambitions for the period 2024 to 2027, sustained service revenue growth, continued growth in EBITDA, sustained free cash flow generation and a CapEx maintained below EUR 1 billion in '27. For the next two years of the plan period, this implies annual service revenue growth between 2% and 2.5% EBITDA growth of about 3% per annum on average over the next 2 years based on the 2025 EBITDA, excluding IPR benefits. Most of this growth will likely come in 2027 as cost measures planned for 2026 take full effect. A free cash flow growth in 2026 of about 2% to 2.5% based on the '25 cash flow, again, excluding the IPR upgrade and a big step-up in cash flow growth in '27, fully in line with the guided CapEx step-down.

Looking beyond 2027, we expect mid-single-digit free cash flow growth, driven by strong fundamentals and disciplined execution. This ambition aligns with today's free cash flow growth, normalized for changes in CapEx, interest and taxes. And beyond '27, KPN will enter a new phase of sustainable growth with capital intensity stabilizing at around EUR 1 billion. Free cash flow rests on a solid foundation, namely EBITDA growth from service revenues and cost discipline, stable CapEx and interest payments and normalizing taxes at an effective rate of 23%. This positions us for consistent mid-single-digit cash flow growth well into the future, fully aligned with a strong investment-grade profile.

And there's more. Consolidating our joint venture Glaspoort at the end of this decade adds roughly 1% of incremental free cash flow growth from the end of this decade onwards. Organic deleveraging from EBITDA growth will allow to absorb the impact of full consolidation, which is about 0.3x leverage. So the bottom line is KPN is well positioned for healthy, sustained free cash flow growth, giving us flexibility to invest for shareholder returns and continued balance sheet strength.

Our shareholder distribution policy is simple. We return all the free cash flow we generate to our shareholders. Today, that means 7% annual dividend growth with the remainder through share buybacks. In 2025, this translated into approximately EUR 690 million in dividends and EUR 250 million in share buybacks completed in July. We feel very confident in the group's ability to deliver sustained free cash flow growth. And as this free cash flow growth, it's natural for a dividend to step up as well. That's why in 2026, we are increasing the share of free cash flow distributed via dividends to about 80%, a level that still strongly covered and leaves room for buybacks.

This shift brings an immediate uplift to the dividend per share of around 10%, targeting the dividend per share to about EUR 0.20 in 2026 on a declared basis and a further uplift of 25% to around EUR 0.25 per share in 2027. Through this, we doubled the committed DPS growth over the plan from 7% to 14%. And looking ahead, this also means that over the 2026 to 2030 period, we expect to return approximately EUR 6 billion through dividends and share buybacks to our shareholders, equal to about 40% of our current market cap. In summary, our capital allocation policy remains clear, disciplined and focused on shareholder value.

With that, let me turn back to Joost for some final remarks.

Thanks, Chris. Let me briefly summarize the key takeaways. First, our mission for a better Internet is at the core of everything we do. Our focus shifts from infrastructure expansion to connecting and activating households, and we expect to cover up to a max of 85% of the Netherlands with fiber by 2030 with hybrid speed solutions for the remainder.

We reaffirm our 3-3-7 financial framework, and we confirm the CapEx step down in 2027, unlocking strong cash conversion. Our transformation is accelerating, targeting around EUR 100 million in indirect OpEx savings over the next 5 years. And beyond '27, we expect mid-single-digit free cash flow growth driven by strong fundamentals and disciplined execution. So we remain fully committed to our shareholders, returning all free cash flow through growing dividends and buybacks. We're delivering on our strategy with disciplined execution, fiber leadership and attractive shareholder returns, positioning us for sustainable growth well into the future.

And with that, we now welcome your questions. Matthijs?

Yes. Thank you, Joost and Chris. Please note, before we start the Q&A, that the presentation will be available on -- is now available on the website. And we will now open the floor for the Q&A session. Please as always, limit your questions to two, please. Moving to you, operator.

[Operator Instructions] First question is from Keval Khiroya of Deutsche Bank.

I have two, please. So, firstly, you've pushed out the target to cover 80% of homes with fiber, but the CapEx spend out to 2027 remains the same, implying fiber rollout costs per premises are higher. Can you talk a bit more about what you're seeing on fiber rollout costs and also how much of the EUR 1 billion of annual CapEx from 2027 is still on fiber?

And then secondly, slowing down the fiber rollout means you avoid early overbuild of the altnets in some areas, but you still have copper customers in the areas covered by the on. How do you think about the vulnerability or not of your retail and wholesale copper base in the altnets footprint?

Yes. Thank you, Keval. I will start and then hand over to Chris. So, like I said in my presentation, we will continue fiber rollout, but at a more moderate pace. And that's very important because we have to slow down the rollout to connect our fiber rollout system more to the transformation programs and the copper switch-off. So it's very important for us to slow down, to improve the fiber co-steering to improve customer processes, et cetera. And we're already seeing a coverage of 90% fiber in the Netherlands. Altnets that already stopped selecting new areas. And we don't stop. We continue, but we think it's more healthy for the company to go to a slower pace and end up north from 80% in five years from now.

And I think that's the most healthy strategy for KPN, more smarter and prudent approach and all kind of small projects to finalize the switch-off of number exchange areas for the copper decommissioning. So that's important. We stepped down EUR 250 million in CapEx in '27. That's mainly fiber CapEx of a total of, I would say, EUR 550 million, but there's also a lot in customer equipment as well. So we will still keep on investing in fiber in the years to come, and we do a step down of EUR 250 million.

Yes. Keval, on the fiber side, I would say the land grab phase has stopped. So we can take a moderate pace in rolling out. We have more HC rather than HP orientation, I think, as well. And we'll connect it more to our copper switch off and that all is aligned. And then from a tactical perspective, that means you start doing smaller projects, more precise in the country, more granular, so less large countrywide building programs. And that also enables us to increase our cost reductions related to that.

On your question, what does it mean for your CapEx? I mean our fiber CapEx going forward will be around EUR 150 million to EUR 200 million a year. And I think implicit what's the rest of the EUR 1 billion look like? So think about EUR 150 million to EUR 200 million on fiber, EUR 50 million to EUR 100 million on remaining broadband-related backhauls, some remaining copper, some service tickets or what have you. EUR 100 million will be linked to mobile typically every year. We do spend about EUR 200 million or something, EUR 250 million on customer-related CapEx, both for business and consumer, EUR 200 million to EUR 250 million in digitization and the remainder tends to go into network optimization.

Your other question was what do we do with the customers in those fiber areas? And how do you protect churn? It's mostly around convergence. We have a strong convergence program. Joost talked about the Combivoordeel proposition that is really aiming to reduce churn. And I think we're seeing the benefits from that in the last Q3 and Q2, we saw churn gradually coming down. So basically, protecting your base in these areas where other altnets are present is all about convergence, Combivoordeel and speed upgrades where we can.

And perhaps to add because you also asked on our position in copper areas. We have a very interesting proposition in those areas, combining two copper lines, so bonding two copper lines for household and adding fixed wireless access on top of that. So we're developing new high-speed services for the non-fiber areas and some of these are very rural areas. So we're confident that we can also serve our customers in non-fiber areas in the coming years.

And our next question is from Polo Tang of UBS.

Thanks for the presentation. I've got two questions. The first one is, if you're getting EUR 100 million in new savings and you're building out your fiber footprint at a slower pace, why have you not increased your free cash flow guidance? So can you maybe just talk about what some of the offsets might be?

And the second question is really just on content and TV. How important a differentiator is TV for your broadband business? And can you remind us what exclusive content KPN has? And what do your competitors have that is exclusive?

Yes, Polo, on the question we have a net savings program of EUR 100 million. We're slowing down our fiber. I mean the slowdown of fiber is fully embedded, of course, in the EUR 1 billion CapEx guidance going forward. So I just gave you kind of the rough break on what the EUR 1 billion consists of. I think against the net indirect OpEx savings is an upward pressure on direct costs. So direct OpEx that has to do with a couple of things. It's traffic and roaming-related costs. It is, to a large extent, it's content costs. It is a bit of business mix. And importantly, it's the increase of cost allocators to Glaspoort. So you see that the Glaspoort allocated costs are increasing about EUR 25 million to EUR 30 million every year, almost 1% of EBITDA growth. So basically 1% of EBITDA growth is allocated towards Glaspoort that we own 50%. But as long as we do not consolidate, that only shows up below the EBITDA line, not above. So these numbers are all excluding Glaspoort consolidation. If you add a Glaspoort consolidation, suddenly, the EBITDA will jump up significantly and at some point start to add growth.

So basically, the completing element of the equation, if you wish, is direct OpEx, and that increase is mostly driven by some content costs, inflation on direct costs, some product plus activation costs, but mostly the class allocation.

And Polo, on our content strategy in -- so to -- in my words, six years ago, seven years ago, we were doing less on infrastructure quality, and we were doing less on content compared to the main competitor. And nowadays, we are running the best network in the Netherlands, and we are at least on par when it comes to the content proposals. So for us, it's not that we want to own exclusively content.

But in Combivoordeel, in households, it's very important that we facilitate our customers in the most easiest way to content. And that's done in Combivoordeel. You can select whatever you want, swap from one to the other. The choice is broad. So we are an aggregator and we facilitate content to the households. We don't want to own it exclusively.

And our next question is from Joshua Mills of BNP Paribas.

I just wanted to quickly dig into the free cash flow growth on Slide 42. So it looks like the mid-single-digit CAGR by the end of 2030 includes a contribution from Glaspoort. Could you confirm how much that's going to be? And I do understand that that's equity free cash flow will be consolidated once you buy Glaspoort in? Or does it include anything like dividend payments from Glaspoort?

Related to that, it does look like the mid-single-digit free cash flow growth between 27 and 30 is a bit back-end loaded. So if you could give a bit of color there?

And then finally, all in the same question, what would the CAGR for free cash flow if we just looked at the green bars, for KPN stand-alone be?

Well, Josh, on the free cash flow, let me first, if you take a look at the '24 to '27 period, so the current plan period, our free cash flow growth is driven obviously by EBITDA growth. And there are a few big moving parts. Obviously, we start to pay more in interest. So the entire period, our interest expense has gone up by about EUR 30 million. Over the entire period, we pay a lot more taxes as we burn through net operating losses towards EUR 330 million. And obviously, at the end of the period, the CapEx step down of EUR 250 million.

Interestingly, if you think look at the delta in taxes, the impact of the using of net operating losses is almost of equal size as the CapEx step down. It just happens earlier. So that means the underlying free cash flow growth over the current plan period, if you were to normalize for all these effects, is around 5% to 5.5%. So if you normalize for interest rate, the operating losses that we use and the CapEx step down and you CAGR it out, you're looking at that 5% to 5.5% free cash flow growth over this period, which is what KPN roughly delivers.

If you then look forward to the period after that, we assume something similar like that. So the numbers we present are basically all mid-single-digit numbers is about KPN. It's KPN delivering that growth. Glaspoort could add about 100 basis points of CAGR over that time period, but that's back-end loaded as we expect to consolidate Glaspoort towards the end of this decade, '28, '29, think about that year.

But even if you were to strip out Glaspoort, KPN stand-alone, which is the bulk of it, would still deliver, I would say, mid-single-digit free cash flow growth in line with what we delivered in the past. And obviously, looking forward, there's no detailed plan towards 2030, right? That would be -- this is not a nostradamus approach to cash flow forecasting. But if you look at the moving parts of our cash flow, if you look at what's reasonable, I think it's fair to say that KPN stand-alone will continue to deliver similar free cash flow growth that we've done right now. And there could be a kicker of about 100 basis points CAGR at the end of this decade as we consolidate Glaspoort. Is that clear?

Yes. So you're saying that the green bars, the CAGR for the KPN stand-alone free cash flow is still going to be mid-single digit even if you don't buy in Glaspoort. And then...

On Glaspoort, the Glaspoort -- it's really the free cash flow of Glaspoort, not the dividend, so the consolidated free cash flow. And Glaspoort will be cash flow positive around '28, '29, and we start to add real cash in 2030. So the bulk of it is really driven by KPN and Glaspoort is the kicker that could be happening at the end of the period.

And our next question comes from Andrew Lee of Goldman Sachs.

I wanted to follow up on quite a lot of the questions on the free cash flow growth that you've guided from out to 2030 over the last couple of years out to 2030. So I hear your points on the traffic and roaming costs and content costs. But can I just maybe challenge you a little bit on the kind of mid-single-digit free cash flow growth. If we kind of just build the blocks of what drives that growth, I think you're kind of increasingly saying kind of 2% to 2.5% service revenue growth. I know you won't explicitly guide on that now, but just bear with me on this one. And then we typically get operational gearing in the sector, which adds another couple of percentage points to get to EBITDA growth. And then further operational gearing to get to free cash flow growth, plus you're doing this cost transformation program.

It just seems to me that the traffic and roaming costs, there has to be a big acceleration and content cost also seems a bit of a strange drag in terms of explaining why you're getting to a kind of mid-single-digit free cash flow growth and a mid-single-digit free cash flow growth even when you include with the kicker as you put it, the Glaspoort costs. So is there something else I'm missing? Or is there something specific about the traffic and roaming costs and content costs that is disproportionate for KPN versus every other telco?

I think we noticed a couple of components. It's roaming and product -- roaming cost is one thing, content cost is one thing. It's a bit of a margin mix, right? So some of the growth is to slightly lower margins that we take into account. It's acquisition cost in broadband that feeds in there and there's the Glaspoort allocation cost. So it's a sum of multiple things. I'm not sure whether we're different from others. I think the Glaspoort element is unique. I think the other things are probably in line with what others have. But we've given you a reasonably conservative, feasible outlook for the midterm based on historical trends in these direct costs that we've extended and extrapolated, including the known or reasonably predictable allocation of cost to Glaspoort.

And again, the moment you consolidate that business, that suddenly comes back in and then you suddenly add about -- I think the moment you consolidate Glaspoort, you probably add over EUR 100 million of EBITDA overnight consolidated to the group. So it's the historical trend of contribution margin, and that's just -- it's roaming, it's content, it's discounting and product plus. It's a bit of revenue mix effects and then a class allocation to get that all feed into this.

Numerically speaking, give you one example, for 4% free cash flow growth, you need to get around 2% EBITDA growth. If you get to 2.5% EBITDA growth, you could get to 5% free cash flow growth. So that's kind of the -- the 5% free cash flow growth is actually quite reasonable given the amount of EBITDA growth that we -- that you have to assume for that. So I hope that gives you a bit more color on the ingredients for modeling out towards 2030.

And we're building our I mean the way we're building our plans on different building blocks, for us, it's very important to deliver on the plans every quarter and deliver on what we promise to project where we are in 2030 is always more difficult than to project where we are next year. So mid-single digit, if we meet all the targets we have built in the plans or we do better than that, then of course, we can do better. But we prefer to overperform than to, yes, surprise the market in a negative way. So I think it's a good plan we built with different building blocks, and let's see if we can accelerate.

Can I just ask a quick follow-up? Just your -- obviously, your 3-3-7 plan out to 2027, you had identical service revenue growth outlook and EBITDA growth outlook. Do you expect to see a very similar service revenue growth and EBITDA outlook between '27 and 2030 as well?

Well, I think we both explained that looking forward from '27 to 2030, we expect top line to be lower than 3% on average for the whole KPN Group. But of course, it's very important there to give you more guidance in '26.

Yes. I think it's -- I mean, looking forward, next year, we said 2% to 2.5% service revenue growth to me in the medium term, 2% service revenue growth would be the lower end of what I find a reasonable expectation. Obviously, who knows what the world looks like in 2030. But in terms of reasonable assumptions, at least 2% to -- but towards 2% to 2.5% service revenue growth should be feasible. And then EBITDA growth probably in line with where we are these years.

And our next question is from Maurice Patrick of Barclays.

Just one for me on the CapEx side. So you've signaled you're likely going to stick around EUR 1 billion, just below EUR 1 billion CapEx for the '26 through 30 period. Just curious to understand if there's any sort of view in there in terms of any projects which might shift the mix of CapEx that you indicated. So things like, for example, I think you've been modestly densifying your wireless network with 5,500 sites now. Is there any sort of desire to kind of densify that further for growing capacity? Is there anything in there for sort of data center related projects? We talked a lot about sovereign cloud and how that might drive the CapEx cycle. Curious for your thoughts on that.

And then just one very small follow-up. On Slide 21, when you talk about the ongoing copper switch-off, is it fair to assume that your 2030 guidance doesn't really assume the full benefit of the copper switch off, which will come beyond that? Or is that mostly baked into that guidance?

Well, on the copper switch off, I mean, what we currently are doing is decommissioning through the Netherlands, and now we want to sweep fiber areas empty up to 90% in the coming years. That's a couple of years, we already explained to the market that we run like EUR 30 million OpEx and EUR 70 million CapEx still around copper. So there's savings to do there. And also important to understand that we will keep 15% to 20% of the network open depends on where we land on the fiber rollout. And that will be an important component of the transformation program.

On the CapEx mix, well, there's not a super capital-intensive program facing us. I mean, we've just -- we're in the middle of rolling out fiber, which is super capital intensive. Almost 23% of our revenues we invest. So it's very important for us on a certain moment to go to a more decent level, but it's still 70% of CapEx we do compared to our revenues.

And of course, we keep on investing in mobile, but we have an excellent mobile network, best in the world. The coverage is super good. You don't need 7,000 sites in the Netherlands. The Netherlands is a small fed country where we're in a good shape there, perhaps a couple of hundreds. In the transformation programs, we already invested a lot. That's all related to AI tools to new software. So especially in the digital customer layer, we have to invest a lot, but that's we're shifting a bit from capital-intensive investments to more less capital intensive. So that's an important shift, and that's why we can step down to EUR 250 million.

Yes, to add, I think mostly on the product side, the products to sell are all there. So you talk about 5G campus, hybrid solutions, CPaaS solution, the products we have ready to be sold. So there's less product development CapEx. You will see from time to time a temporary emphasis. So at some point, there will be a revisit of our radio access network and it runs. So at some point, when you think about 6G, it's far out, but at some point you think about that. At some point, you have to look through, Joost talked about our edge solution, our data centers. We have 133 decentral locations that are very well suited for low latency and ultra-low latency solutions. You don't need to upgrade all of them, but 20 to 30 are probably eligible for an upgrade and then you take the rest more gradual.

So I would say, in the years within the EUR 1 billion, you may see shifts from time windows of one to two years where you have different emphasis and then going back again. And I think underlying gradually, I see more investment into, let's say, customer solutions, customer CapEx and innovation for clients. And next to that, network shifts from time to time depending on which part of your network is subject to an upgrade or redevelopment.

Just very quickly, so the things like a potential rent swap that does sit inside the EUR 1 billion number.

Yes. it will all be done inside the EUR 1 billion. That's something you get time well it's all inside the EUR 1 billion envelope.

We'll now take our next question from David Wright of Bank of America.

It's maybe a little apology here because I'm still a bit confused, maybe my colleagues aren't. There's a lot of numbers being thrown around. So just to confirm that you said on '26, you could look for 2.5% free cash flow growth, I think, is what you said. But you also said an EUR 80 million step-up in cash tax. So I just wanted to just double check, are there any other kind of cash items playing in that, that allows you to get to that 2.5%. Because it just seems that, that cash tax step up, it's a struggle to get there. Maybe I'm just confused.

And then 20 -- the longer-term CapEx guidance, I think you've said historically that Glaspoort when consolidated about 50 million or so of CapEx. So when you said below EUR 1 billion for the kind of '27 outlook, I assume then that could shift back above EUR 1 billion a little as you take Glaspoort on in '29, '30. Is that reasonable?

Yes. So, David, on next year on '26, we said about -- I think free cash flow growth, what I would do, I would take this year's guidance, I would take out the IPR benefits because that's a one-off and then add about 2% to 2.5% free cash flow growth for next year. In that, indeed, we will absorb a cash tax increase. So basically, what happens is that you -- the cash income from EBITDA will significant extent be absorbed by increasing taxes. And then we have to optimize interest rates, working capital around it to compensate for that.

So the numbers are aligned. You take the '25 outlook, take out the IPR benefits, add 2% to 2.5% growth. That's the bottom line number. But in that is a sum of EBITDA growth and cash tax increase, possibly a bit better on interest rate savings, possibly a bit better on what I call Gay other and then there is working capital optimization that allows us or should enable us to get there.

Just would you mind, Chris, just give us that -- could you just remind us of that one-off impact just so we can literally get these numbers on the...

It's about EUR 20 million. So basically, it's the IPR benefits in EBITDA minus the withholding taxes we pay on that. So about EUR 20 million.

That's right.

And then for CapEx, look, could CapEx in '29, '30 be a bit above EUR 1 billion? Possibly, but that's a relatively small amount. To us, running KPN at EUR 1 billion is a pretty sacrosanct number. So we'll do everything we can to stay within that envelope and anything you asked us to solve inside the EUR 1 billion.

What the Glaspoort CapEx is in 2030, it's hard to see. I think it's -- EUR 50 million is probably really at the higher end. But that is not embedded in the language we use to describe our CapEx, so to speak. So basically, we're running towards or below EUR 1 billion next year, run at EUR 1 billion. And perhaps in 2030, will be a little add-on from Glaspoort, but that should be a very manageable amount.

Yes. And Chris, if I could just sneak in just a quick question. You mentioned about you could consider balance sheet recapitalization from 2027. What will be the factors that support that decision? Will it be the fiber build-out is where you expect? Obviously, the operational performance. Is there anything else? Or do we just get to 2027 and say, yes, we're in line with guide, we can nudge up. And are we talking a quarter of return? Are you able to give any granularity on that? I appreciate it.

Yes, sure. Look, maybe one more point on Glaspoort. Look, we will consolidate Glaspoort as soon as it's not if it's cash flow negative, right? So the trigger for consolidating Glaspoort is probably a cash flow neutral to cash flow positive. So whatever CapEx Glaspoort then brings in, it will be compensated by operating cash flow as well. So basically, we will look at the free cash generation of Glaspoort as a trigger for consolidation. So if at that point, Glaspoort were to add a bit of CapEx, it would, in the end, have to bring in a positive free cash flow number. I mean that's the trigger. So maybe that gives you a little bit more comfort on that effect.

On leverage, look, after '27, the way I look at KPN is we have a balance sheet full with very high-quality modern assets, right, a 5G fiber network. Our operating cash generation is then amongst the highest in Europe. I mean operating cash flow over margin is about 30% cash turn. So EBITDA minus CapEx over EBITDA is about 60%. So you have a highly cash-generative business. By that, I think we were able to run this business with a slightly higher leverage than we run today.

Organically, if you wouldn't do anything, right, if you just let the whole thing run its course, just by the sheer increase in EBITDA, you would say that our leverage ratio moves towards 2.1x, 2.2x at the end of this decade. I mean that's how it models out. Consolidating Glaspoort will give about full consolidation about 0.3x leverage gets you to 2.4x. So then I think this group should run with a leverage below 3x. I mean that would be wise that we consider to be investment grade, but with reasonable margin below 3 is what this business could sustain after the fiber rollout has peaked.

So when you have this high-quality asset base, a massive amount of cash generation, this business could run with, I don't know what the number is, around 2.8-ish type of leverage, I think. And that will give us a lot of flexibility to both absorb Glaspoort and be willing and able to invest and gives us some strategic and financial flexibility. And that, of course, assumes at that point that Glaspoort brings in net cash.

And we'll now take our next question from -- sorry Ajay Soni of JPMorgan.

I've got two. The first is around mission critical. So we've heard this a lot from other telcos. So what are the size of these revenues now? And I think you mentioned 10% growth. So how material is this to the overall group growth you're seeing?

And then the second question was just around the increasing of the leverage beyond 2027. So just using the numbers you've just spoken about at the end of 2030, you have a leverage of 2.4x, let's say, which still gives you 0.4x leverage with. So what would you use extra leverage for? Is it extraordinary returns? Is it other projects? A bit of guidance there would be helpful.

Yes. So, in our B2B organization, we have a group of people responsible for mission-critical services, very closely connected to the government. Business is growing double digit, and we're doing excellent, and we're selected as the main provider for the Ministry of Defense Services, et cetera. And then we have a relationship that goes back very long. And we're investing into that part of the business as well. Current top line total revenues roughly around EUR 200 million, and we expect that for the coming years to grow on different levels.

Yes. And Ajay, to leverage indeed, if the numbers that you predict are kind of right, if you have like 0.4x like headroom, what would you be using for? I mean, the most important thing that we can safely say KPN will return all free cash flow to shareholders. Dividend remains really well covered. So there's very little hesitance in our side to return all our free cash flow to shareholders. That's point one, because there's balance sheet headroom either to invest to grow or to absorb some shocks. I mean that's to me the first element that we would like to give.

Second is what could you use the headroom for? Well, the money would not be burning in our pockets. We'd be very careful how to spend. Obviously, there is spectrum that we could -- spectrum that needs to be acquired. The remainder could be around possible small bolt-on investments, but let me reassure you, always only when it's value creating and meets a return hurdle. And secondly, yes, it could also be used to round up some shareholder distributions. But I think it's the free cash flow return every year would really be the main part of our return to shareholders. But that's also pretty safe and secured.

And we'll now move on to our next question from Paul Sidney of Berenberg.

Yes, a couple of questions. Apologies, I did join the Q&A a little bit late. So apologies if there's any repetition. But just on fiber in terms of the rollout slowdown, and part of the driver of this slowdown seems to be what your competitors are doing or what you're seeing in the market. I just wondered if you could maybe elaborate on what you're seeing and just how influential that's been on your decision to slow the rollout?

And then just a quick one on return on capital. You've given very good granularity in terms of free cash flow growth beyond 2027. But would you expect that ROCE metric to continue to rise beyond 2027 and kind of get well above, sorry, the 15% you're targeting in '27.

Yes. Thank you. Well, six years ago, people told us that the math you can do in the Netherlands on fiber rollout is roughly 350,000 homes passed per year. And well, we challenged that and together with the Glaspoort joint venture, we went up to a level of 600,000, 700,000 one or two years per year to get to the level of 70% coverage. So that is a huge operation, very well executed by our people. But it's also very important to go to a more moderate pace to get things better in control and that comes to the quality steering, the customer, first-time right delivery, optimizing our operating model. You can't just push that forever.

Also taking into account altnets stopped selecting new areas, also taking into account 90% of the Netherlands is done. We now move to a more moderate rollout pace, smart and really connected to the transformation programs, copper switch off to facilitate that.

So I think it's optimizing value. We move from homes passed to really connect and activate. I mean we passed 70% of the Netherlands, but a lot of these customers are still not on KPN or on a wholesale customer of ours. So there's a lot to do to activate more customers, and that's what we show somewhere in the presentation, activations of 60% in the areas before 2019 to 40% in the areas where we recently built. So there's also a lot to do to improve the penetration because the whole business case on fiber is about penetration.

All in all, in a more moderate pace, we will end up 80 -- north from 80%. We set the target on 85%, somewhere in between. So I think it's the best strategy for the coming years also to get more control on our transformation programs.

Yes. And Paul, your question on return on capital, what we could do beyond '27. First of all, we're pretty pleased with reaching 15%, so about 700 to 800 basis points above the cost of capital. So it's clearly consistent. We've continued to create value. And if you look at the moving parts beyond '27, it's, of course, the continued CapEx versus depreciation. I think we'll continue to invest a little bit more than we depreciate, so that extends our balance sheet a bit. So that's a bit of a negative maybe on return on capital in the short term. At the same time, as Joost said, we'll be using -- getting more penetration on our fiber networks, getting more usage of our other networks like in mobile. There's growth in wholesale and in B2B growth in IoT, CPaaS, 5G campus. So it's more about the usage of our assets.

So my estimate would be to stay north of 15% with some opportunity for some small growth. I don't see us immediately go to 20%, but a gradual increase of ROCE, ROCE from 15% gradually drifting upwards, that will not be impossible, but certainly consistent with creating value.

Could I just have a quick follow-up, Joost, on your answer. In terms of -- you mentioned the altnet, but what about VodafoneZiggo? What are you seeing in terms of the build-out? And how concerned are you about what they're doing in terms of investment looking forward?

Well, they announced some kind of a new strategy where they will launch higher speed connectivity via their own network by upgrading the network. And they mentioned 2 or 4 gig, if I'm not mistaken. So that's probably not bad for the Dutch market in the first place and something that's really a challenge for them, but that's up to them. We follow our own plans. Mainly, we sell 1 gig and 4 gig on our fiber network, but asymmetrical. So, on their side, it's always upload max to 100 and everything they say is a max 2. And for us, it's confirmed speeds up and down. So at the end, like I always say, they're always welcome to talk to us to join us on our fiber network.

And our next question comes from Ottavio Adorisio of Bernstein.

We'll now move on to our next question from Siyi He of Citi.

I have two, please. And the first question is really on the combined discounts that you're offering to the consumers. I think in Q3, we've seen that ARPU in both mobile and fixed consumers has been flattish and under a little bit pressure. And by the look of it, as long as you're pushing the penetration of the combined services, it seems that there's going to be some pressure on ARPU. I was just wondering if you can help us to think in the coming quarters, whether the ARPU has the development of ARPU in consumers? And how long do you think investors will see some ARPU increase in consumers?

And my second question is on the fiber deployment. I think your midterm target is 85%. I guess some of them you could consider consolidate some of the existing fibers in the market. Just wondering if you can talk about potential opportunities on that, which could bring forward the fiber deployment before 2030.

Yes. So, for us, the question in some cases, rises buy or build. So sometimes there's a third-party fiber network available willing to sell to us. And then, of course, we are willing to start negotiations. And that's also what we did in the past years. There's still a couple of opportunities out there in the market. And already for a very long time, we are waiting for a clear signal from our regulator about a deal between our joint venture Glaspoort and Delta Fiber, where the joint venture is trying to acquire 200,000 -- roughly 220,000 households from Delta. So, yes, we are always interested in M&A when it comes to fiber assets, of course, it depends on the price, but it also, in some cases, depends on our regulator, and that's always a bit of a very long discussion here in the Netherlands at least.

On consumer, yes, so the whole Combivoordeel strategy of us is different than what the challengers do. That's more an acquisition kind of strategy where you really try to push in the net adds growth, and we are now really investing in our customer base by Combivoordeel. And like we showed in the presentation, that's an upfront investment -- that will be shown later on. So we have to be patient when it comes to this kind of a strategy because it's all about churn reduction instead of the acquisition numbers. And that's -- well, I'm positive here because the first signals are good. Churn is going down.

ARPU is a bit under pressure. That also has to do with back book, front book migrations and all these additional services we're doing in Combivoordeel. So we increased prices, but that's only visible for 1.5%, while the increase was something like 3%. But all that has to do with mainly the investments we do in our customer base and the back book, front book movements related to that, by the way.

Yes to that, on the Combivoordeel deal, the proposition is when you combine more, get more. So if your existing customer has multiple products, you get like combination advantages like you get a free Netflix or other services. So as Joost said, it's really aimed at your base at loyalty at churn, not to acquire customers. Obviously, in the first year, that will cost us. I mean, think about, for example, we said in Q4, I would expect fiber service revenue growth in Q4 to be 0.4% and there's like 80 basis points to like drag from this amount of money.

Next year, that will probably continue. It's embedded in the 1.5% consumer service revenue growth. So the 1.5% is including the Combivoordeel, the Combi Advantage, the Combi benefit program. So the net number is 1.5% for consumers as a whole. But I would think that Fiber as such will probably grow about 0.5 percentage per quarter. And then you could see gradual movement probably improving in the second half of next year into '27 when the churn benefits start to outweigh actually the annual spend. But it's a situation where the investment goes first, the benefits come later.

So, to me, the key is think about the fixed side of things to grow about 0.4%, 0.5% with is like 80 basis points to 1% drag on reported service revenues, but it's embedded, included in the 1.5% guidance for consumer for next year. And I would expect in '27, you would see the churn benefit to gradually outweigh the cost of the program.

And our next question is from David Vagman of ING.

The first one, maybe just a clarification because you've already partly answered my question. But on the 85% coverage by 2030, could you explain or give a bit more clarification how you intend to get this additional 15% over five years' time? Is it all organic? And by that, I mean, KPN, you have in mind some M&A? Is it also Glaspoort, which is about to expand its footprint? And then does it imply basically also that you get some overbuild with Delta Fiber? So that's my first question.

Second question, and sorry to come back on Glaspoort and on the contribution to the free cash flow growth by 2030. I would have expected Glaspoort to contribute a bit more given that you have wholesale cost, I think, by '27 guided of EUR 150 million. And I would have thought that the CapEx of Glaspoort would have come down really significantly after the rollout.

Yes. So we said we're going to a more moderate rollout pace when it comes to fiber, very much needed to get the operational quality higher. So we will get to the 80%, but later in time. If it's going to be 85% without any M&A, I don't think so. So, organically, we will roll out to at least 80%, up north from 80%. But if we would really hit for the number 85%, we probably need some small M&A. So -- but we would like to set ourselves -- well, a firm target where we have to work on.

Yes. On Glaspoort, on your question, look, when you look at the CapEx profile and the rollout profile of Glaspoort going forward, about '27 will be the last year for Glaspoort on the retail rollout. So the peak will be next year and some retail rollout remainder in '27. In 2028, we expect Glaspoort to do some fiber rollout and business parks, more fiber to the business and business park fiber. And there afterwards, pretty scaled down reasonably quickly.

That means that in principle, if you were to consolidate that the EBITDA contribution of Glaspoort would quickly be EUR 100 million plus but there still CapEx in '28, mostly around the B2B program that they're running and B2B is mostly around business parks, and those tends to be relatively high cost per HP connections. So that means that Glaspoort really in 2028 will probably still be cash flow negative, will be cash flow positive in 2030 and substantially more positive in '29 and a lot more positive in 2030.

So that's kind of the cash flow profile of Glaspoort, mainly to do it in 2028. I'd expect them to continue to invest or to finish the program around the B2B side, which is quite capital intensive. Obviously, we're in continued discussion with them to see how we can accelerate and fast track, but this is the base plan. If we can do faster, obviously, we won't hesitate. But this is the base plan for Glaspoort, which means they'll probably be cash flow positive really in '29 and significantly cash flow positive in 2030.

And the final question is from Ottavio of Bernstein.

My question is a follow-up from the previous one. I will start from Glaspoort. You gave a lot of details about the impact on consolidations. The main impact will be on the debt Glaspoort is basically having on the books. Could you tell us how much you would pay for the equity? And you will be increasing the gearing. You said that anyway, your cash flow will be better quality by then. But have you already engaged with the agencies will be happy with 2.8x roughly net debt to EBITDA going forward?

And moving to the second one, on the OpEx, you effectively give a lot of visibility in terms of the cost cutting between 2025 and 2030 on the EUR 100 million savings on the indirect OpEx. My question is that how much of this is already embedded on the '27 guidance? And how much will be delivered between 2027 and 2030? And the third one is on the targets for 2030. You provide tons of numbers. But my question is about how you're going to achieve these numbers, a bit of granite on the KPI. It looks that you are also confident on winning market shares from the cables, but it's very likely that VodafoneZiggo will continue repricing. They're not happy to losing a line. So do you have embedded in your guidance any potential repricing on the broadband markets, potential from Odido? And what about wholesale? There is any loss you project to the ultimate or gains? Because it looks to me that on your wholesale segments, you effectively project wholesale new customers coming in rather than losses on the wholesale side.

Yes. On the first question on Glaspoort, on the consolidated, we basically will buy the consolidating shares. So there will be no equity out for consolidation. There's the one remaining share, which is the price of one share. So that would not require any additional investments. It's the one consolidating share.

On leverage, look, when you look at our leverage today, I think we're on the safer end in the rating agency bandwidth. That also what we understood talking to them. I would say, if you want to stay below 3x with a certain buffer, we'd stay safely in the investment-grade range. I mean, already today, we're on the safer end of our range today. So I think a moderate increase as we discussed, should be well absorbable and achievable within the current rating band.

Maybe on the third question on '23, look, we give one number, right? It's the free cash flow. There are lots of moving parts in there, but the free cash flow, what we think we can get. And obviously, there might be compared to the current expectations, some number moving towards a bit to the left, some number moves a bit to the right. But I think the continuation of mid-single-digit free cash flow growth is feasible, giving various scenarios and permutations on the numbers.

Do we think there will be repricing in broadband? Who knows? It might be. At this point, that's not in the card. So we don't project or plan for repricing of broadband. I don't think there's any necessity to it because pricing in the Netherlands is in line with European markets. We've done some studies, even the Ministry of Economic Affairs has done work against that and showing that interest -- the broadband pricing in the Netherlands really is average compared to the rest of Europe.

Losing wholesale to all that, that's relatively limited. At this point, you've obviously noticed that -- there are some line losses in broadband, which really has to do with the repricing of the Tele2 band from our main customer. We'd expect that to be ending in the first quarter of next year. And then when you assess the overlap between what I say, the copper base that we -- the overbuild risk to our wholesale portfolio is relatively small after that. I mean there are some overlap, but we think that's probably be able to -- we can counter that with a combination of growth in fiber, annual indexation, a mix effect shifting from copper to fiber, that whole set of developments could probably counter any -- the risk of old nets in wholesale.

So to me, first -- could there be repricing in broadband? We can never rule anything out, but it's not in the plans. And certainly, we don't intend to initiate that, and we think there's no need when you look at pricing in the country. And wholesale, as I said, there's a line loss we've gone through. It probably go through in Q1 next year. But after that, it feels like that actually could be stabilizing quite neatly and the amount of remaining overlap is actually limited.

Yes. On the OpEx savings you mentioned, it's gradually growing in. It's typical OpEx savings in 1 year are more -- the real effect is the year after. It's almost doubled then. So take 2025 -- now let's take last year, we saw the indirect costs increasing, and that's because CLAs went up due to inflation, all kind of costs went up. So it was a cost uplift of almost 5%, 6% -- we have to fight against that first and then step down, and that's what we do this year. So this year, we will be more flat on the cost, and that's already saving a lot to equalize that all these price increases we see a headwind. And the effect of that will be better next year because of this year, we do like 300 FTE reduction, but that's also done in the last six months of the year. So next year is for the full 12 months.

So typically, a program like this will be a first step down of 10, 15 visible, first flat and then 10, 15. Well, we do very good 20 perhaps. And then we go faster on the cost savings because of the effect as well and also because of the programs we run and coming more to an end.

And very quick on Glaspoort. So you only buy one share. So effectively, the remaining will be minorities. So this minority will have any put option to sell at some stage. And I guess they will be -- they want to be served. They will be paying any dividends, Glaspoort to these minorities?

Yes. So there is no put option. So basically, it's a call option. And I think our co-shareholders in it for the long term to enjoy the yield that this business gives. And then the plan is for that for the dividends of Glaspoort to be equal to the cash flow that it generates. Possibly think about how you use the debt on that balance sheet, but the whole thing is that the dividend of Glaspoort would be definitely equal to the cash it generates.

Okay. Thank you all for your questions. Joost, Chris, thank you. That concludes today's session. In case of any questions, do not hesitate to reach out to the Investor Relations team. Thank you all.

Good day, ladies and gentlemen. Welcome to KPN's Third Quarter Earnings Webcast and Conference Call. Please note that this event is being recorded. [Operator Instructions] I will now turn the call over to your host for today, Matthijs van Leijenhorst, Head of Investor Relations. You may begin.

Yes. Thank you, operator. Good afternoon, ladies and gentlemen. Thank you for joining us today. Today, we published our Q3 results. With me today are Joost Farwerck, our CEO; and Chris Figee, our CFO. And as usual, before we begin the presentation, I would like to remind you of the safe harbor on Page 2 of the slides, which applies to any statements made during this presentation. In particular, today's presentation may include forward-looking statements, including KPN's expectations regarding its outlook and ambitions, which were also included in the press release published this morning. All such statements are subject to the safe harbor. Now let me hand over to our CEO, Joost Farwerck.

Thank you, Matthijs, and welcome, everyone. Let's start with the highlights of the last quarter -- third quarter. Our group service revenues increased by 1.7% with growth across all the segments. In the mix, consumer was supported by ongoing commercial momentum, both in broadband and mobile. Business was driven by mainly SME and LCE. As expected, growth slowed in the third quarter, mainly due to the tailored solutions parts and wholesale continued to grow mainly driven by sponsored roaming. Our EBITDA grew by 2.3% on a comparable basis. And as expected, our free cash flow rebounded in the third quarter, up 12% year-to-date, driven by EBITDA growth.

We further expanded our fiber footprint together with our joint venture, Glaspoort. And finally, we remain confident to deliver on the full year 2025 outlook and our 337 midterm ambition. As a reminder, our Connect, Activate and Grow strategy is supported by 3 key pillars. First of all, we continue to invest in our leading networks. Second, we continue to grow and protect our customer base. And third, we further modernize and simplify our operating model. And together, these priorities support our ambition to grow our service revenues and adjusted EBITDA by approximately 3% on average and our free cash flow by approximately 7% over the entire strategic period. And given that we are now nearly halfway through our strategic period, we look forward to sharing a strategy update with you next week, November 5, and we hope you will join us online for the webcast.

Let me now walk you through the business details. We lead the Dutch fiber market. In the third quarter, we expanded our fiber footprint by adding 74,000 homes passed together with Glaspoort, and we connected 82,000 homes, bringing us close to 80% homes connected within the fiber footprint. And the rollout pace slowed compared to previous quarters due to timing. We stick to our ambition to cover 80% of Dutch households with fiber. During our strategy update next week, we'll share how we will get there within our financial framework.

Let's now have a look at the consumer segment. Consumer service revenues continue to grow, driven by consistent fiber and mobile service revenue growth. Customer satisfaction remains a priority, and thanks to our CombiVoordeel offer supported by super Wi-Fi, our Net Promoter Score rose to plus 15 year-to-date and Net Promoter Score even reached plus 17 during the quarter, showing how these improvements are making a real difference for our customers. Let's take a closer look at our third quarter KPIs. We saw another quarter of double-digit broadband-based growth despite a challenging competitive environment. Thanks to a steady and healthy inflow of new fiber customers, combined with a growing ARPU, our fixed service revenues continue to grow.

In mobile, we maintained a strong commercial momentum, adding 47,000 subscribers. And this was partly offset by ARPU decline driven by ongoing promotional activity in the no-frill segment. So overall, our mobile service revenue grew by 1%. Let's now turn to the B2B segment. Business service revenues increased by 1.4% year-on-year, driven by SME and LCE and good commercial momentum. Net Promoter Score rose to plus 5 in the third quarter, reflecting customer appreciation for stability, reliability and the quality of our networks and services. SME service revenues increased by 3.3% year-on-year, driven by growth in Cloud and Workspace, broadband and mobile. LCE service revenues increased by 1% year-on-year, supported by growth in mainly IoT, Unified Communications and CPaaS.

Mobile service revenues were impacted by ongoing price pressure, though this was partly offset by a growing customer base. And finally, and as expected, I must say, Tailored Solutions service revenues decreased by 2.5%, reflecting a further focus on value steering. And then wholesale -- our wholesale service revenues continue to grow, mainly due to a strong performance in mobile, driven by the continued growth in international sponsored roaming. Broadband service revenues increased despite a decline in copper base driven by fiber and other service revenues increased mainly due to an update in visitor roaming. Now let me hand over to Chris to give you more details on financials.

Thank you, Joost. Let me now take you through our financial performance. First, let me summarize some key figures for the third quarter. First, adjusted revenues increased 2.4% year-on-year in the third quarter, driven by service revenue growth across all segments and higher non-service revenues. Second, our adjusted EBITDA after leases grew by 4.4% compared to last year, supported by higher service revenues, the IPR benefit and contribution from tower company, Althio. This was partly offset by the holiday provision effect. As a reminder, starting this year, most employees no longer register holiday leave, resulting in a lower provision release in Q3 compared to last year, impacting therefore, the distribution of EBITDA growth over the year with a specific negative accounting impact in the third quarter.

Finally, as anticipated, our free cash flow rebounded in Q3 and is now up 12% year-to-date. I'll share more details on the underlying cash developments later in this presentation. Group service revenues grew by 1.7% year-on-year, supported by all segments. And within this mix, consumer revenues increased by 1.1%, driven by, as Joost said, continued solid momentum in both fixed and mobile. Business service revenue growth tapered off somewhat in the third quarter compared to previous quarters, mainly due to developments in Tailored Solutions and timing effects. And finally, wholesale service revenues increased by 5.2% year-on-year, driven by ongoing growth in our international sponsored roaming business.

Our adjusted EBITDA grew 4.4% year-on-year in Q3 or 2.3% on a comparable basis if we adjust for the IPR benefits, the Althio contribution and the holiday provisioning effects. Direct costs remained broadly in line with last year, reflecting shifts in the revenue mix, particularly within Tailored Solutions, where our continued focus on value and margin steering is shaping direct cost dynamics. On a comparable basis, our indirect cost base decreased by EUR 5 million, driven by lower energy and billing costs. We further scaled down our workforce, resulting in a reduction of over 300 FTEs compared to previous year.

Our year-to-date operational free cash flow increased by 12% compared to last year or 8.6% excluding the IPR benefit and Althio, driven therefore by EBITDA growth. As expected and communicated to you, free cash flow generation rebounded in the third quarter, mainly due to improved working capital and lower interest payments. Year-to-date, our free cash flow is up 12% compared to the first 9 months of last year, again, supported by EBITDA growth and partly offset by higher interest payments and cash taxes paid this year. Finally, we ended the quarter with a cash position of EUR 373 million, absorbing the impact of the interim dividend over '25 and share buyback payments.

We continue to run with a strong balance sheet. At the end of Q3, we had a leverage ratio of 2.5x, in line with our self-imposed ceiling and remained stable compared to the previous quarter. We expect our leverage ratio to return to 2.4x by the end of the year, supported by increased free cash flow generation. Our interest coverage ratio was sequentially a bit lower at 9.5x, and our cost of senior debt decreased slightly, mainly driven by lower floating interest rates. Our exposure to floating rates, by the way, remains limited at only 16%. Our liquidity position of around EUR 1.4 billion remains strong covering debt maturities until the end of '28.

We are on track to deliver the 2025 outlook we shared with you in July. And on 25th of July, we completed our EUR 250 million share buyback program for the year. The cancellation of about 60 million treasury shares will be finalized in Q4. And August 1, we paid out an interim dividend of EUR 0.073 per share in respect of 2025. And finally, we reiterate our midterm, also known as our 337 targets as presented at our previous Capital Markets Day. As outlined back then, both service revenues and EBITDA are expected to grow 3% per year on average over the plan period and our free cash flow by 7% per annum on average with growth in cash back-end loaded due to our CapEx plans. Until 2026, our free cash flow growth is expected to grow at a low single-digit rate per year since we face increasing cash taxes year-on-year.

Now let me briefly wrap up with the key takeaways. We continue to see service revenue growth across all segments. While revenue growth moderated somewhat in Q3, we anticipate a recovery in the fourth quarter. Our commercial momentum remains solid, and we continue to lead the Dutch fiber market. Our net add developments in both fixed and mobile and both in consumer and business was quite satisfactory in Q3. As expected and planned for, EBITDA growth was relatively soft in Q3, but is set to recover in Q4. Cash flow generation was strong, up more than 10% year-to-date. Overall, we're on track this year and continue to make good progress towards our annual and midterm targets, and we reiterate our guidance for the year.

Finally, as we approach the halfway point of our strategy, we can't wait and look forward to providing you with an update of our strategy next week, on November 5. Thanks for listening and turn to your questions.

Yes. Thanks, Chris. Operator, please open the line for the Q&A. Please limit your questions to 2 please.

[Operator Instructions] Our first question is from Polo Tang of UBS.

I have 2. The first one is, is there any update in terms of the Glaspoort acquisition of part of the DELTA Fiber footprint? And my second question is, we have a general election in the Netherlands this week, but is this having any impact on public sector spending in terms of your B2B segment?

Yes, Polo, thanks for the questions. The Glaspoort acquisition, it takes our regulator a very long time to come to a final opinion. So as you know, Glaspoort intends to acquire a rural fiber footprint of approximately 200,000 house passed from DELTA Fiber, and it's still under ACM review. We expect, well, something within 1, 2 months because it takes really too long. We think it's still no reason to refuse it. This could reduce overbuild risks for both parties and supports healthy market development. Then elections coming up in the Netherlands, that's tomorrow, by the way. We -- on the midterm, we see limited impact on KPN. Major topics in the elections are immigration, health care, housing markets. Well, the government wants to build more houses, and we think that's a good one because then we can take them into the house pass footprint.

Topics that could affect KPN on the longer term are about investments in defense, and we're in good position on that. We are selected as the main digital provider for the Ministry of Defense and discussions around fiscal affairs, for instance, the innovation box facility and the share buyback taxation, but that's a vacant faraway remark somewhere from one of the left wing parties. So all in all, I don't expect that much impact for KPN.

Just on public sector, can I just clarify if there's any freezing of public sector spend into an election or out of an election because we see that sometimes in other markets?

No, not really. We have some kind of a framework. So when elections are coming up and when a Cabinet falls in the Netherlands, then they select a couple of topics that they have to continue to run. And we are all convinced in the Netherlands that we should keep on investing in the themes I just mentioned. And also when it comes to cybersecurity and digital, there's no slowing down there from the government, and we are heavily involved in there.

And our next question comes from Mollie Witcombe of Goldman Sachs.

My first question is on B2B. You have said that you've seen some price pressure in mobile and B2B. Could you give us a little bit more color on this? Are you seeing this dynamic both in LCE and in SMEs? And to what extent should we consider this when we're looking at longer-term trends going into 2026? And my second question is just on the B2C competitive environment. What are you seeing in terms of competition? And have there been any incremental differences versus last quarter?

On your question on mobile price pressure, mostly in LCE and larger corporate tickets, there is some price pressure going on. I think that I would say from our point of view, there's still some of the decline, but the decline is declining. So you can say the second derivative is positive, but that's a bit of a nerdy view. But I would say expected LCE, some repricing of our base into next year, but then probably we have good hope it's going to be bottoming out, at least. So there is some price decline, but it's getting a bit better. We saw something similar in SME, but SME, we especially be able to counter that with value-added services by selling more security solutions to customers. So keeping our ARPU up.

So there is some price pressure, most notable in LCE, but gradually abating. So we'll go into next year, but I think somewhere during the course of this year, that effect we hopefully [ achieve that ]. And SME, it's much less prevalent. And there, we see and have experienced good opportunities to counter that with additional value-added services like additional bundlings, but mostly security services around SME to keep your ARPU stable there.

Yes. And on the competitive environment, well, like in Q2, the market remains competitive in consumer markets, so Odido and VodafoneZiggo, especially. VodafoneZiggo launched a new proposition, broadband fixed on their cable network, a 2-gig proposition recently announced. So interesting to see how they will do there. But impact on KPN expected to be limited because our first proposition is 1 gig, and we also offer 4 gig. So most of the new customers land in 1 or 4 gig via our fiber network. And for us, it's very important to play our own game. So we focus on base management, for instance, on convergence households via CombiVoordeel, resulting in lower copper and fiber churn and 11,000 net adds.

We also are very happy with the acquisition of Youfone because on the lower end of the market, you call it that way, there's true competition going on. So Youfone covers that. And currently, more than already 2/3 of our broadband base is on fiber, and that's leading to lower churn and higher NPS. So that's how we position ourselves in this competitive environment.

And our next question comes from Paul Sidney of Berenberg.

[Technical Difficulty] revenue growth, it did slow into Q3 at the group level. There's obviously lots of moving parts...

Paul, paul.

Can you hear me?

We couldn't hear the first part. Could you start over again? Thanks.

Sure. Can you hear me now okay?

Perfect, perfect.

Okay. Great. Yes, just a first question on service revenue growth. We did see it slow into the quarter at the group level. There's lots of moving parts, and you've given some great granularity in terms of the drivers of that. But as we head into Q4, how confident are you that we can see an acceleration in that service revenue growth trend? And then secondly, just looking a bit bigger picture, you report very comprehensive KPIs, very detailed guidance, net add, service revenue growth, NPS scores, free cash flow and returns guidance.

I was just wondering, if we take a step back, which of those is most important to KPN as a business in terms of what really is sort of driving the business? And maybe we get more detail on next week, but just really interested to hear your views on that.

Yes. Paul, let me give you some more granularity on how we see service revenue growth developing. I'm going to just walk you through the business. I think the second question is a typical CEO question.

Yes, for sure.

I'll leave that to you. Look, on consumer, fixed is showing 1% service revenue growth. We've had tailwinds from a price increase, some headwinds from migration from front to back book discounts, et cetera. I think overall, the good news is that churn is actually reducing. The churn is doing better than ever. It's one of the best churn quarters in fixed in some time to come.

Also please note, we have a CombiVoordeel product, which we give customers with multiple products, additional discounts leading to lower churn. That additional discount feeds through the top line. So that affects top line and fixed service revenue growth by almost 0.5% this quarter and even more in next quarter. So for Q4, we expect fixed service revenues to come in at a 0.4%, 0.5%, but that's really the accounting and the upfront payment on these additional discounts that lead to churn. So the discount, especially to multi-converged customers, and we're seeing benefits of churn on that. We'll give you more intel next week because that feeds into [ '26 ].

In mobile, you see a price increase coming in has already come in, has landed pretty well. So I would expect mobile consumer to be around 1.5% in the fourth quarter, fixed below 1% and mobile well above 1% then go to B2B. I see SME recover. I mean there was some technicality in the SME numbers, but it's also, I think, good base and ARPU development, especially in the third quarter. And a little bit easier comps, I would say SME should be 4% to 5% again in the fourth quarter and also in that into the next year. LCE hovering around 0. And on the Tailored Solutions business, there's always some volatility in this business that has to do with the timing of projects.

For example, if you go back to last year, we saw growth -- service revenue growth in Q3, from 5% to 2% back to 5%. There's always a bit of volatility in this business due to the nature of these activities. In the third quarter, we saw the effects of KPN condition more steering on margins. So we lost some business. Some of it we didn't actually mind because there was actually 0 margin revenues and underlying this growth in defense spending. So I'd expect the Tailored Solutions business to be back around 2% to 3% in the fourth quarter, which should bring B2B to around 3%. Wholesale, I would say, probably around 4% to 5-ish in the fourth quarter.

So that means overall service revenues in Q4, I would say, around 2%, probably 2% or a bit up. But that's the moving parts. Some of it has to do with technicalities. For example, as I said, in fixed service revenues, the accounting for the [indiscernible] cost shows up to revenues. It is showing up to churn, so it leads to real value, but short-term service revenues are a bit affected. Mobile should recover, SME should recover and the rest, I think I explained to you for probably around 2%-ish service revenue growth in Q4.

Yes, Paul. And then your question on all the KPIs and the main target. I mean, yes, we try to keep things simple in our strategy. We're a single country operator. We're healthy, and we build a plan for all stakeholders. So we invest in the Netherlands, we invest in customers, we invest in our own people, and we want to reward our shareholders in a decent way. And for that reason, you're right, we give a lot of KPIs, which is about broadband base growth or base growth in broadband, mobile, SME, CAGRs on revenue, net Promoter Score, you name it all.

At the end, we simplified everything by saying it's a 337 CAGR. So that's a top line EBITDA and cash. And if I have to make a choice, I say the 7, the cash is the most important one of those 3. And the rest is all leading. So sometimes you're a bit behind on the subsegment. Sometimes you're a bit speeding up somewhere, sometimes NPS is lower or higher. But at the end, it's very important that we get to that financial promise, and we're on track. So -- but it depends a bit on the stakeholder, I -- when it comes to the KPIs we focus on.

And the next question comes from David Wright of Bank of America.

Just on VodafoneZiggo, they obviously announced their strategic shift earlier this year, pushing a little more into Q2. I'm sure we'll get a similar message on Q3. Are you observing -- how are you observing the sort of retail pushback now? They've obviously branded the 2 gigabit product. We've got a slightly keener pricing. Do you observe anything else? Is there a lot more marketing spend? Is the marketing different than it was before? Just any casual observations you might have on how they've changed [ TAC ].

Well, the change we saw was the announcement on Superfast Internet. I think for the market, that's not that bad. I mean, on mobile, we all 3 move to unlimited, which is a good development for the total market. And if the total market moves to higher speed broadband, wouldn't be that bad, I guess. But we play our own game. So like I mentioned, customers come in on 1 or 4 gig, and that's difficult to copy. So, so far, it's more an announcement then I see real movements in the market. Chris, anything to add on?

Yes. I mean when I look at, for example, our broadband net adds and fiber net adds, fiber net adds have been steady, net adds. But if you exclude all the copper migrations, fiber real new clients come in around 60,000 to 70,000 for quite some time now. So it's pretty steady. We've seen churn coming down. So we've seen churn coming down in both fiber and copper. That churn reduction started in Q2 and continued in Q3. So that's actually positive. And we don't want to steer just by the month, but when I look at just the simple October numbers, the order balances and the early indication of the month of October are fine.

So at this point, it feels that we are obviously cognizant that it's a serious competitor out there. But in terms of underlying performance, no change in recent trends from where we are right now. In fact, churn has come down and things have not fallen off a cliff in the month of October.

And our next question comes from Joshua Mills of BNP Paribas.

A couple of questions from my side. Firstly, it's been about a year since Odido launched FWA services across the Netherlands. I wondered if you could give an update on how you think that's impacted the competitive landscape and whether it is impacting on your wholesale line losses as well or whether that's due to other factors? And then secondly, if I just build on that wholesale line loss question, trends look to be similar to the last couple of quarters. How would you expect that to develop over the next couple of years? And do some of the more aggressive promotions we're seeing from your ISP partners go anyway to help with that trend going forward, even if it's painful on the retail side?

Yes, fixed wireless access from Odido, we see activations on fixed wireless access, but it's also a different market than the broadband market in general in the Netherlands. So it's also a bit of a niche market for people camping, people on holiday, people in boats. So therefore, it's useful. It's also used as another option than whole buy on our network or on DELTA's network. So for Odido, they are asset-light on fixed and they are asset-heavy on mobile. So they try to clearly sell more customers, fixed wireless access to leverage the asset and to avoid the wholesale payments.

But it's not really impactful when it comes to total broadband market share. So we use it as well, by the way, in super rural areas, but we always use it in combination with the fixed line. So for us, convergence is, as you know, the strategy. So in copper areas, the speed of the Internet connection can be supported by bonding via fixed wireless access. And probably, we're going to use that more frequently in the rural areas.

Yes. And Joost, on the wholesale side, if you look at the line losses in wholesale, that's really only copper. So wholesale fiber is growing from our main customer and wholesale copper is declining. As we understand, that decline is mostly related to the switching of the Tele2 brand, so the switching of a brand and the switching of the brand leads to customer migration. That's the main driver for losses in copper and wholesale. I expect that to continue in Q4 and possibly in Q1, but that's probably -- then the light at the end of the tunnel. I think that's the end in sight on that development.

And then, for example, broadband service revenues, I think we're up about 2% this year. I think broadband service revenues in mobile will be plus 2% this year. Next year, around flattish is a combination of fiber growth indexation and the decline in that copper part. So I think when I look at it, it's mostly the line loss in copper related to the switching off of a brand, and that is a project that will come to an end, I would say, next -- somewhere mid- to early Q1, I would expect that impact to really to fade away.

And our next question comes from Keval Khiroya of Deutsche Bank.

I've got 2 questions, please. So you've done quite well on consumer broadband despite the competitive backdrop. But how do you think about the gap between front and back book pricing in broadband? Do you get many requests from customers to move to the current cheaper promos in the market? And secondly, helpfully, you commented on wholesale broadband. But how do we think about the level of mobile wholesale growth next year? Obviously, sponsored roaming has been quite helpful. And does that continue? Any insights on the level of growth next year would be helpful.

Yes. So we shifted a bit on strategy as we announced last year, and that is invest more in existing customers instead of playing the acquisition game. We think it's very important to make a difference against the more challengers in the market. And investing in the customer base also leads to back book front book migrations. So that's how revenues in broadband are impacted, and that's why you only see 1 point something on service revenue growth while we do a price increase of 3.

Having said that, that's part of our plan. And so when we move customers into what we call combination -- CombiVoordeel, then they have to sign up for 2 years, and that's leading to a back book front book migration. But -- so we made it part of our strategy.

Yes. And Keval, on the wholesale side, yes, indeed, we've been quite successful in mobile service revenue growth in wholesale. I expect that to continue. I don't plan on this level of growth going forward. But we have a decent funnel of potential new counterparties signing up in these type of businesses. And then we have a number of these clients that we help to win new business. So we work them for them to win new businesses. So I expect continued growth in this business going forward, perhaps not at the same pace. I think wholesale should be able to grow around 4% or so top line growth next year, all in with flattish broadband service revenue growth and the remainder is mobile. So continued growth, but let me be a bit conservative and not project the same level of growth, but wholesale around 4% service revenue growth next year is definitely feasible with all of this.

And our next question comes from Ajay Soni of JPMorgan.

Mine is just around the FTE reduction. So I think you're 300 lower year-over-year, which seems to be around 3% of your employee base. So my first question is just around why is this not being reflected maybe more obviously within your EBITDA bridge? Are there any other headwinds which are -- which means it isn't reflected? And I think looking further ahead, can you accelerate this FTE reductions over the next year, so they are more meaningful in 2026?

Yes. Thanks for the question. And next week, we will update you on what we are doing on transformation programs and how we look at the company in a couple of years from now and what kind of operating model we're building. And as a result of that, yes, we expect more FTE reduction. So why don't you see the minus 300 already impacting our EBITDA. First of all, we have a CLA increase. We -- other increased pension costs. So we have to cover up for, I don't know, 6% something of increasing wage costs.

And secondly, it's also about the timing in the year. So the 300 will kick in on a higher scale next year than this quarter. But moving the company to a lower FTE base as a result of quality improvements and digitalization is very important also to cover costs and to make a step down.

And our next question comes from Siyi He of Citi.

I have 2, please. The first one is really on the comments of the Q4 service revenue growth of 2%. Just trying to think about the trend for next year. I think you mentioned that the B2B and wholesale trend probably is going to be similar level to Q4. And I'm just wondering if you can comment what kind of tailwinds that you would expect to basically help the service revenue growth to accelerate from the 2% to the midterm guidance of 3% and my second question is basically on fiber rollout. I'm sure that you will cover it next week. But just wondering if you can give us some color of how should we think about the fiber CapEx considering that there seems going to be a decent acceleration needs to be done to meet the above 80% coverage target.

Well, on the fiber CapEx, we clearly guided to the market that we will make a step down in 2027, and we still plan for that. So we expect a step down of at least EUR 250 million. That's in our guidance, and we stick to the guidance. Chris?

Yes. I mean on the service revenue growth, we'll give you a lot more details -- next week on our capital strategy update -- on the full capital market strategy update, we'll give you more details. But think of consumer to be growing around 1.5%, I think B2B north of 3%, B2B around 4%, and that should make for top line growth, but more in details next week. B2B 3, wholesale 4, yes.

And the next question comes from David Vagman of ING.

The first one, coming back on the competitive environment in broadband. If you can comment on your view on your expectation rather on the potential ARPU evolution, in mind speed tiering, but also competition, the announcement of VodafoneZiggo and the tweaking of offers by Odido yesterday. And then second question on the broadband wholesale market in the Netherlands, also your expectation on the ARPU side for KPN?

Yes. So on the -- I mean, the market is competitive. It will stay competitive, and I don't expect that to change. The difference between the Netherlands and most other markets is that we have a fully fiberized country already almost. So we're -- 90% of the households already are covered by fiber networks. All households are connected to at least 2 networks fixed. So what I want to say, our digital infrastructure fixed is of a super high level compared to other countries.

So there is a competition between the fixed players, but I don't expect much competition coming in from fixed wireless access or satellite or other things you see in countries covering more rural areas as well, like -- and then -- so the competition will be firm, but we positioned ourselves, and I'm glad we did, by the way, we built a fiber footprint of almost 70%, more or less clean. And there's not that much appetite to overbuild us there. It will be more competitive in the new areas for us. So there, we can say to overbuild. We're waiting for our regulator to see what they do with that Glaspoort deal. But compared to other countries, I would say, yes, it is competitive. It is challenging, but we build a strong fiber footprint in the core of our strategy.

Yes. And to your point on wholesale ARPUs in broadband, a couple of things at play. Of course, every year, we have indexation. There's a schedule approved and agreed with the regulator, effectively around 2% indexation every year. Our ARPU is supported by the mix shift from copper to fiber. So we see a decline in copper and increase in fiber, that is supportive. And then any ARPU actions that we do to support our broadband -- for broadband partners tend to be linked to retention, tend to be for specific higher speeds or tend to be around linked to volume commitments. So basically, I would say ARPUs in wholesale broadband are pretty much the same and often linked to a combination of mix, price increases and/or specific agreements on retention and volume.

And the final question is from Ottavio Adorisio of Bernstein.

A couple of follow-up questions. On Slide 8, you effectively stated that you expect bottoming up on the mobile. And during the call, effectively, you highlighted the price increases. But when someone look at the chart, you can see that, that revenue trends bottom up already in Q4 and deteriorated afterwards. So my question is that what makes you confident that the price increase will stick this time around, we don't go to promotion later on and the revenue trends deteriorate again?

The second one is on the broadband. The churn for copper for your copper customers is stable, you stated that one. But looking at the numbers, you look at the migration from copper to fiber to be the lowest this quarter over the past 2 years. So my question is that there is any plan to encourage migration by reducing the price gap between copper and fiber?

Yes. On the first question, what happened -- what will happen from Q3 to Q4, what happened last year? Well, Q4 last year was a very particular quarter where a few things happened. We saw a temporary drop, actually, an accounting drop with roaming that actually reversed in the first quarter. You can see in the first quarter, sales revenue growth in mobile going up had to do with the accounting and booking of some roaming revenues. Second, we had an iPhone credit. If you recall well last year, we had some iPhone disturbances for which we gave some of our customer specific credits to compensate for that. I mean the iPhone disturbances are on hold for the end customers. And thirdly, we had a special offer in the market in that very fourth quarter.

So a couple of particular trends that took down growth in the fourth quarter to a low level after which it rebounded in Q1 last year. So those were particular impacts on that third quarter, fourth quarter, and I don't expect them to repeat. So that gives me some comfort that, that blip that you saw last year will not come again this year. And the second question on copper upgrades to fiber. We really try to upgrade customers to fiber. It's a function of network rollout. It's a function of planning. It's a function of access to customers that fluctuates a bit over time.

There's no strategic or technical retweet in this part, if you see what I mean. It has to do with timely and operational execution. We will continue to migrate customers from copper to fiber. We might actually, at the point in the midterm, try to accelerate that to enable the switch off of our copper network to accelerate. Joost, do you want to add?

Well, the unique thing of our fiber footprint is that we're building a fiber footprint with 80% of the households homes connected. And that's first of all to migrate all existing customers of KPN to the fiber network. That's the copper churn or the urban copper migration. Then we want to connect a lot of new customers, and then we want to connect as well a lot of wholesale connections. So there's more room on the network of households already prepared for an activation from a distance. So the copper migration is something that's really in our system to finalize to switch off the copper network as well.

Okay. One final question.

And our final question comes from Joshua Mills from BNP Paribas.

Possibly a pedantic one here. But if I look at Slide #6 in the presentation where you have homes passed as a percentage of Dutch households, you have the target of 80%. And I don't see a year associated with that. I think in previous presentations, you were highlighting that you'd reach 80% homes passed coverage by the end of 2026. Can you just confirm that that's still the guidance and there's no change there, just so I'm clear.

Well, so yes, we are expanding our fiber footprint this year, next year and the years after, 74,000 homes passed, 82,000 homes connected this quarter. We stick to 66,000 because if you read it as well as you did. And last quarter, we also reported 66,000, but that's because of annual addition of households by CBS, the Central Bureau of Statistics in the Netherlands. And we stick to our ambition of 80% of Dutch households on fiber.

But next week, during our strategy update, we'll share how we will get there within our financial framework. So we aim for 80%, and we confirm our midterm ambition of 3 targets, including the CapEx step down of to EUR 1 billion in 2027.

Okay. And just -- so to be clear, the explicit target previously of reaching 80% by the end of 2026 is...

I've said earlier in previous calls as well that there's a lot of KPIs like we just discussed out there. And sometimes we meet -- we're getting faster, sometimes we're slowing down. The 80% is also a target, which is a very important one for us, and we will meet it for sure. But on the timing part, we will get back to you next week. And at the end, it's for us very important that the overall total strategy works, and that's working.

Okay. That concludes today's session. Obviously, we will see -- we'll meet online next week during our strategy -- next Wednesday on the 5th of November. See you then. Cheers.

Thank you. Ladies and gentlemen, this concludes today's presentation. Thank you for participating. You may now disconnect your line. Have a nice day.

Good day, ladies and gentlemen, and welcome to KPN's Second Quarter Earnings Webcast and Conference Call. Please note that this event is being recorded. [Operator Instructions]

I will now turn the call over to your host for today, Matthijs Van Leijenhorst, Head of Investor Relations. You may begin, sir.

Thank you. Good afternoon, ladies and gentlemen. Thank you for joining us today. Welcome to KPN's Q2 and Half Year 2025 Results Webcast. With me today are Joost Farwerck, our CEO; and Chris Figee, our CFO.

As usual, before we begin our presentation, I would like to remind you of the safe harbor on Page 2 of the slide, which applies to any statements made during this presentation. In particular, today's presentation may include forward-looking statements, including KPN's expectations regarding its outlook and ambitions, which were also included in the press release published this morning. All such statements are subject to the safe harbor.

Now let me hand over to our CEO, Joost Farwerck.

Yes. Thank you, Matthijs, and welcome, everyone. Let's start with the highlights of the second quarter. We delivered a strong quarter. Our group service revenues increased by 3.7% with growth visible across all segments. And within the mix, consumers saw a quarter of good commercial momentum, both in fixed and mobile. Business continued to perform strongly driven by all business divisions and wholesale further accelerated. As a result, we delivered strong EBITDA growth. And alongside our operational performance, our EBITDA benefited from a favorable legal settlement related to intellectual property rights.

KPN has a large portfolio of IPRs with over 300 patents, which demonstrates our commitment to innovation, and our extensive portfolio and successful defense of our IPR allows us to license our technologies to major telecom vendors, providing regular income streams and occasional settlements.

As expected, our free cash flow declined year-on-year, mainly due to working capital phasing, higher interest FX payments, but we'll recover in the second half of the year. We further expanded our fiber footprint together with our Glaspoort joint venture. We now cover 2/3 of the Netherlands with fiber. And we raised our full-year 2025 outlook for EBITDA and free cash flow.

And the upgrade reflects the benefit from 2 IPR cases settled in June and July, combined with the solid business and financial progress we've made so far. We launched our Connect, Activate and Grow strategy in November 2023 and are now halfway through -- now almost halfway through the execution of this ambitious plan with significant progress achieved. So we're well on track.

Our strategy is built on 3 key pillars: one, we continue to invest in the leading networks; two, we continue to grow and protect our customer base; and three, we further modernize and simplify our operating model. And together, these strategic priorities support our ambition to grow our service revenues and adjusted EBITDA by approximately 3% and our free cash flow by approximately 7% per annum on average in the coming years or simply put 337 CAGR framework. And given that we're now nearly halfway through our strategic periods, we look forward to providing you with the strategy update on November 5.

Let me now walk you through some business details. We continue to lead the Dutch fiber market. In the second quarter, we expanded our fiber's footprint by adding 160,000 homes together with transport, now jointly covering 2/3 of Dutch households. Our efforts in connecting homes and activate customers have paid off, reaching nearly 80% of total homes connected to the fiber footprint, while more than 2/3 of our retail base now enjoys the benefits of fiber.

Let's have a look at the Consumer segment. Consumer service revenues continue to grow, driven by consistent fiber and mobile service revenue growth. Customer satisfaction remains stable and has our full attention.

Let's take a deeper look into our second quarter KPIs. Our focus on loyalty and base management is paying off, as we recorded a healthy inflow of 13,000 broadband net adds. Fixed ARPU grew by 1.2%. Our postpaid base increased by 37,000, which is a good improvement compared to the previous quarter. Our postpaid revenue declined, primarily due to increased promotional activity in the no-frill segment. And as a result, mobile service revenues grew by 1.3%. However, we expect this to improve in the coming quarters.

Let's now move to the B2B segment. B2B delivered another strong quarter, achieving 5.7% year-on-year growth with good performance across all divisions. Commercial momentum in Mobile remained solid, adding 22,000 new customers. In today's complex world, we help such businesses become digitally resilient with security delivering encouraging growth across both SME and LCE, underscoring its strategic importance. Net promoter score is stable, which reflects the continued trust from our B2B customers for the stability, reliability and quality of our networks and services.

SME remains strong, driven by cloud and workspace, broadband and ongoing momentum in Mobile. LCE increased by 1.7% year-on-year, driven by ongoing growth in IoT, broadband, clouds and workspace, partly offset by continued price pressure in mobile. And Tailored Solutions delivered another strong quarter as planned with growth driven by higher project revenues. And as you know, this business remains subject to project timing and seasonality.

Then wholesale service revenues further improved in Q2, mainly driven by the strong performance in Mobile. Broadband service revenues increased as well despite a declining base driven by fiber. Mobile service revenues remain strong, mainly driven by continued growth of our Travel SIM business. And other service revenues saw a slight increase, mainly due to an uptick in visitor roaming.

Now turning to ESG. This remains a core element of our strategy with a clear focus on 3 key areas: responsible, inclusive and sustainable. And the core of our ESG strategy is to make our networks even more reliable and secure by design. Expanding our fiber network is a key enabler for this goal, helping us to connect everyone in the Netherlands to a sustainable future. And at the same time, we continue to build a better Internet, one that offers seamless access to a responsible, inclusive, safer and greener Internet followed by fiber and 5G. So our commitment to sustainability is evidenced by several top ratings at important independent ESG benchmarks.

Our next slide shows our progress on carbon reduction, circularity and diversity. We continue to reduce our current footprint across the value chain. Earlier this year, we began sourcing solar energy from a solar farm in partnership with Eneco, advancing our green electricity goals.

Scope 2 emissions decreased by 13% year-on-year, while Scope 3 emissions slightly increased due to an expanded scope. And next to this, we made further improvements on our diversity target, reaching 32% of women in our senior management.

Now, let me hand this over to Chris to give you more details, not specifically on diversity, but on our financials.

Thank you very much, Joost. Now, let me take you through our financial performance. Our financial performance benefited from a favorable settlement in June related to 2 intellectual property rights. While these IPR revenue and related costs are normal courses of business for KPN, due to the specific nature of these settlements this year, we exclude this one-off benefit and a few metrics to illustrate our underlying business performance.

To that point, let me start by highlighting some key figures for the second quarter and also for the first half of the year. First, adjusted revenues grew by 5.8% year-on-year in Q2, driven by continued service revenue growth across all segments and higher non-service revenues, including Althio and the IPR benefits. Second, our adjusted EBITDA grew by 6.4% compared to last year, driven by higher revenues, the IPR settlement, and of course, contributions from newly acquired set of Althio. Note that we sold the same amount of value of IP addresses as we did in Q2 last year.

Third, our net profit declined by 8% despite strong EBITDA growth due to one-off costs related to hedge accounting. And finally, as anticipated, our free cash flow declined by 15% or just over EUR 50 million compared to the first half of last year, mainly due to working capital fee. I will share more detail on the underlying cash development later in the presentation, and obviously, in your Q&A.

In the second quarter, our underlying revenues, excluding one-off items in Althio, showed healthy growth, increasing 3.4% year-on-year, fully driven by growth in service revenues. Group service revenues grew by 3.7%, supported by all segments. And in the mix, we saw consumer service revenues increased by 1.3% year-on-year, driven by both fixed and mobile, with solid commercial momentum in both postpaid and broadband net adds.

Recent service revenue growth continued to perform well growing by 5.7% year-on-year with all divisions contributing. And finally, wholesale service revenues grew by more than 8% year-on-year, mainly by the ongoing success of our profitable and good margin international sponsored roaming business.

On a like-for-like basis, the adjusted EBITDA of KPN grew by 4% year-on-year, well above the 3% CMD hurdle. Our underlying EBITDA margin was 30 basis points higher compared to last year at 45.5%. The increase in our direct cost or cost of goods sold was mainly driven by service revenue mix in B2B and higher third-party access costs such as transport. Our indirect cost base was broadly stable. The savings from digitization and less staff were offset by inflationary effects, such as wage indexation.

In the quarter, we further scaled down our workforce to about 70 FTEs. And over the last 12 months, we reduced our total workforce by almost 300 FTEs. In the first half of the year, our operational free cash flow increased by 18% on an underlying basis, driven by both EBITDA growth and lower CapEx. CapEx was EUR 50 million lower compared to previous year, but mostly related to timing of fiber payments. For the remainder of the year, CapEx is expected to step up, fully in line and staying in line with our full-year guidance of EUR 1.25 billion. For the full year 2025, and excluding IPR benefits, we expect high single-digit growth rate in the operational free cash flow.

Now let's focus on the moving parts of our full free cash flow. We generated EUR 309 million in free cash flow so far this year, representing a cash margin of about 11% of revenues. The anticipated year-on-year decline in the first half free cash flow was mainly caused by a temporary negative impact from changes in working capital related to timing, such as the timing of bill runs, the actual cash settlement of the IPR benefits, lower CapEx, which translated into a temporary drag on working capital, timing of inventory buildup and some other small effects, such as pension contributions. We expect these negative effects to reverse fully in the second half of the year.

In addition to working capital, we also faced higher interest payments and increased cash taxes as per the plan. Consistent with our guidance, our free cash flow generation will be stronger in the second half of this year. The improvement is supported by: one, continued operating cash generation; second, the normalization of tax interest payments throughout the year; and three, the unwinding of the drag on working capital. Finally, we ended the quarter with a cash position of EUR 331 million, absorbing the impact of the final dividend payment over '24, share buyback payments and our bond redemption in April.

Let's discuss return on capital. KPN remains focused on creating long-term value, which is evidenced by a strong return on capital employed. Our ROCE improved by 20 basis points year-on-year to 14.6% due to operational efficiency improvements and including Althio as well on a fully consolidated basis. Excluding the IPR effect, our ROCE return on capital is 14.5%. For the coming years, we see scope to further enhance ROCE, reaching our 2027 financial ambition of 15%, consistent with continuous creation of shareholder and stakeholder value.

We continue to have a strong balance sheet. At the end of June, we had a leverage ratio of 2.5x. Our ratio slightly increased during the quarter, mainly driven by dividend and share buyback payments, partly offset by our free cash flow generation and higher EBITDA. Similar to 2024, we expect the leverage to return to 2.4x by the end of the year, supported by increased free cash generation in the second half of the year. Our interest coverage ratio remained sequentially stable at 9.6x. And as a result of the bond redemptions in April, we increased the average maturity and lowered the average cost of our outstanding debt, which is now reduced by 11 basis points sequentially to 3.6%.

In addition to the bond redemption, we also benefited from lower interest rates and from a swap restructuring that was executed in Q2. Our exposure to floating rates remains limited at 14%, and our total liquidity of around EUR 1.4 billion remains strong, covering debt maturities until the end of 2028.

Now let's turn to our outlook for 2025, midterm ambitions. Given the reported results in the first half of the year, we feel confident in raising our full-year guidance for EBITDA and cash flow. We now expect an adjusted EBITDA after leases of more than EUR 2.630 billion and a free cash flow of more than EUR 940 million. The EUR 30 million increase in EBITDA and EUR 20 million increase in free cash flow guidance are primarily due to the 2 IPR cases that we settled in June and early July. The total full-year contributions from these 2 settlements is estimated around EUR 25 million EBITDA pretax with EUR 9 million already recognized in Q2 and the remainder in Q3.

In addition to the IPR-related uplift, we also see some upside in the underlying business performance. It is clear that excluding these IPR settlements, we would have confidently reiterated our financial guidance for the year. And the difference between the increase in adjusted EBITDA and free cash flow upgrades is mainly due to taxes on settlements and some small working capital effects. Other outlook items have been reiterated. Group service revenue growth set at about 3%, driven by growth across all segments. And CapEx will remain stable at the peak level, around EUR 1.25 billion. And as of the 23rd of July of this year, KPN has bought back 58 million shares of about EUR 233 million and completed 93% of our EUR 250 million share buyback program. And finally, we reiterate our midterm or 337 ambitions as provided at the Capital Markets Day.

Let me briefly wrap up with the key takeaways. We simply delivered a strong quarter with good business results, augmented by one-off IPR benefits. Group service revenues continue to grow across all segments, leading to healthy underlying EBITDA growth, fully consistent with our 337 ambition. In fact, for the second quarter in a row, underlying service revenue and EBITDA growth came in above 3% hurdle. We continue to lead the Dutch fiber market, now covering 2/3 of the Netherlands, while steadily progressing with connecting homes.

Currently, more than 2/3 of our retail base are on fiber, which bodes well for the future. We see healthy customer inflow across both consumer and business despite a competitive market. As planned, our free cash flow generation will be back-end loaded and will come out as planned for the full year. Overall, we are well on track this year and continue to make good progress towards our annual and midterm targets.

Obviously, our financial performance this year benefited from the IPR settlements, but also the underlying EBITDA growth supports the update of the guidance, and we feel confident in the cash generation for the remainder of the year. And of course, next year, we will again distribute all of our free cash to shareholders. And it's important again to highlight that if we had not achieved the IPR settlements, we would have fully happily and cheerfully reiterated our outlook. Finally, as we approach the halfway point of our strategy, we look forward to providing you with an update of our strategy on November 5.

Thanks for listening. Let's turn to your questions.

Yes. Thank you, Chris. And as always, before we start the Q&A session, I kindly request that you limit your questions to 2, please. Operator, please proceed with the Q&A.

[Operator Instructions] The first question comes from the line of Polo Tang, calling from UBS.

I have 2. First one is just on consumer broadband net adds. Can you comment on what has driven the step-up in broadband net adds in Q2? And has the broadband market become more promotional in Q3?

Second question is, when can we expect an update on the ACM review of the Glaspoort-DELTA Fiber deal? And can you comment on how you think about use of cash and whether you would look to buy fiber assets rather than build fiber?

Well, Polo, thanks for your questions. Consumer broadband net adds in Q2 were much better than in Q1. Promotional activities in the Dutch market are pretty well intensive, I should say. So I think that our main competitor moved a bit to a more reasonable environment recently. So that would be good. But we especially see us benefiting from our own CombiVoordeel and our fiber footprint supporting this inflow.

On the promotional activities for the near future, I don't think much will change. However, I think it's important that we all realize that we want to create value on broadband, and that is the most important thing for us and I think for our competitors as well.

On ACM, yes, that's a good question, we're waiting. And in the process, I think after summer, they will give their vision on the situation, and then we can react. So we're in the middle of a process around this deal between Glaspoort and DELTA. And let's see what will come out of it. We think we have a strong position. And for us, it's always buy or build. I mean, per area, we can decide to buy or to build an asset if the opportunity is there. And in this case, it's for us best to buy. But if it's not doable, then we have to find an alternative.

The next question comes from the line of Maurice Patrick calling from Barclays.

If I could just ask a little bit more about the broadband competition, just keen to understand if you are seeing a change in competitive intensity after VodafoneZiggo has changed its pricing? They obviously made a material adjustment to their EBITDA guidance for the year, I think signaled a desire to stabilize that base.

And just linked to that, there's been some noise around the fixed wireless access propositions, some of your competition and how that might stimulate their growth. I'm just curious to understand if you've seen any impact from that on the total broadband market, and in fact, your net adds?

Yes, Maurice, let me take some of those questions. On broadband, on the main competitive price actions, they've changed the line pricing, but it is still very close to KPN. I think if you look at details, maybe EUR 1 or EUR 2 cheaper on 100 megabit and a few euros more expensive on 1 gig, so it's very much -- still very close. What I think what we've seen notably in broadband in the last quarter is improvement in churn and company migrations.

If you look at Page 8 in our document, the graph on the top left-hand side, you can infer that actually churn has gotten down, both on copper and on fiber. We've seen less migrations front book to back book. So that's actually supported. So we've seen stable growth in gross adds. Fiber continues to do well, but have some notable reduction in churn. I relate that to our loyalty programs that we've installed a higher proportion of clients in contract that supports a lot. I think the copper to fiber mix is gradually improving in KPN, obviously.

And the fourth one is possibly there might be some fatigue in the market with regards to these commercial activities, but that's more speculation. Actually, we see the loan program, the in-contract base, the copper to fiber mix also supporting churn. So I think that's good. Also reasonable into Q3 as well. I mean, obviously, we're only in July, but so far so good in terms of broadband commercial intensity as such. I would say it's relatively stable, has not deteriorated further.

And on fixed wireless, we don't see a lot of outflow to fixed wireless customers. When we check, there are some, but not a whole lot. I feel that fixed wireless is really addressing a different market segment, but not a real combination of fiber, but other customers that, otherwise, would have gone for a different solution.

It's a bit of a niche segment, we think, first of all, because of all households in the Netherlands are connected to a fixed network or 2 net fixed networks. And we also use fixed wireless access, but that's always in combination with a copper line in super rural areas. So that's what we do already for a very long time. So for us, fixed wireless network is always in convergence with a fixed connection as a total service in super rural areas. But so far, not really a change in the market.

The next question comes from the line of Keval Khiroya, calling from Deutsche Bank.

I've got 2 questions. So firstly, you saw strong revenue trends in wholesale. Can you comment on how we should think about the revenue growth going forward? And to what degree you expect sponsored roaming revenues to fall off in H2?

And secondly, you're now getting close to the end point on the fiber rollout and less than the EUR 1 billion of CapEx. I appreciate you have the November strategy update. But at this stage, would you be able to share any broad thoughts on whether you think structurally there's room for CapEx to continue to fall beyond '27? Some of your peers have obviously targeted lower post-fiber CapEx.

Yes, Keval, on your first question on wholesale, I mean, wholesale probably is doing really well. That will continue to grow. Whether we keep this pace, I don't know, but I think it's going to be north of 5%. I feel reasonably comfortable. And there's a fair pipeline of new customers waiting to be signed up for these type of solutions. So this, I see growth in the second half of the year, possibly be spilling over also into next year on those specific points.

There is some whisper that there's concern about margins on this product. We're not concerned on margins on this. I mean, this is a -- we don't really detail these margins out, but it's not far off from what KPN's EBITDA margins are as a whole. So it actually is a profitable business certainly on the marginal return on capital. It's a very profitable business. And as I said, maybe not full 8% that we saw in the first half of the year, but this is a significant -- it's a growth option for H2 and possibly into next year as well.

Yes. And on your fiber rollout question, I mean, we've built a bold plan to move up to 80% fiber footprint in the Netherlands somewhere end of '26. And so often, we get the question, do we get to 80%? Or what after the 80%? Are you going to roll out to 100%? I think 80% is a good target since it is a lot. I don't -- I'm not familiar with many incumbents trying to cover really that much of the country as we do, taking into account that 80% of that is homes connected as well.

So on that Capital Markets Day, we don't want to, of course, spoil the day itself by telling you what we're all working on. But, of course, we will give insights on the step down in CapEx now to get there, the full fiber footprint and how to move further to 2030. And these are all relevant questions. If it's going to be 75% or 85%, I think, for us, it's also important to really, at the end of that building program, make a step down in CapEx, and of course, give you also an idea how we will run the free cash flow after '27.

The next question comes from the line of Andrew Lee, calling from Goldman Sachs.

I just had one question, which is around wholesale, and I guess, follows on from the questions on competition earlier. Your wholesale broadband net adds stepped down more than they have in quite some time, down, I think, 21,000 in the quarter. Could you just talk through what's driving that? Just give us a bit more color around the competitive intensity you're facing. And how you see that playing out over the coming quarters and if there's anything you can do to alleviate that pressure?

Sure. So wholesale -- I mean, first and foremost, wholesale top line continues to grow and EBITDA continues to grow. We expect the wholesale business to be a growth business well into next year. The mix of growth appears to be shifting away from broadband towards alternative mobile type solutions with sufficiently healthy margin. On this particular point, I think what we're seeing is there's growth on fiber. We see a little bit more wholesale competition for fiber growth. There's growth on fiber, and there's some then churn on copper. We think it's churn towards competing networks and overbuild areas.

So it is actually churn on lower ARPU copper lines that are one of our main broadband clients. I think it is shifting them to the overbuild situations in alternative networks, which has accelerated. I don't think it will stop at the end. But in the end, there is a limit because some point, there's only so much overbuild we have. So I would expect this to continue into Q3, possibly into Q4. But then at some point, the overbuild is actually gone on copper. So it's copper lines in overbuild areas where I think they will shift to other areas. That is a bit of a drag on earnings.

At the same time, this is lower-margin business, lower ARPU business, and there's a price increase that we generally put through on fiber on broadband, and there's still growth on high-margin fiber. So revenue-wise, the impact is manageable. Base-wise, you can see it. And I think that will continue for some time until the overbuild situation -- until the copper lines and overbuild situation have been reduced to a smaller amount. I think that's what's happening. But then again, also, we've been fairly agile in our strategy trying to find new revenue sources, which is then mobile related.

The next question comes from the line of [ Max Findlay ], calling from Rothschild & Co Redburn.

It's actually Steve here. I'll go for 3, but the 2 are very, very short, hopefully. First of all, sorry, just on minority dividends, you had a EUR 28 million minority dividend come through in the second quarter. Is that related to the Althio deal? And just remind us how we should think about that kind of going forward and whether we should be including that in free cash flow?

Secondly, just coming back to Glaspoort, can you -- the associate losses kind of picked up a little bit in the quarter. I mean, they're small numbers. I would have expected it to be kind of moving into profit at this stage as your network loading improves. Can you just sort of maybe cast a little bit of a light on that and maybe remind us how they kind of put in co-works with ABP? Because I think it needs to be profitable or free cash flow positive before they could put the stakes. I can't remember, maybe you could just help us on that.

And finally, just on the IPR settlement, what are the costs associated with that? And should we expect any more IPR settlements or things of that ilk going forward to help EBITDA and cash flow?

Yes. Steve, on the Althio question on the momentum, it's a one-off dividend from Althio. It's a one-off. So I wouldn't plan on EUR 28 million of dividends from Althio going forward. I mean, at the end, it is a good deal because the -- if you look through the numbers, you can see the cash payment -- utilization payment that we did, but then we also received a dividend as part of the potential restructuring of that business. So the net cash out for keeping was actually relatively small, around EUR 70 million, which also explains -- I would say I think it's -- without pumping our chest, it's a better deal than people expected or envisaged.

It also explains why our return on capital employed to KPN is up, including the consolidation of this business. So it's a one-off. There will be dividends to KPN going forward, but not of this magnitude. This was a one-off like restructuring of the balance sheet. But again, it means the cash out for this deal was probably around -- net-net about EUR 70-odd-so million. So it underlines the high return on capital of this transaction.

On Glaspoort, well, Glaspoort is actually EBITDA and EBIT positive at this point in time. There's this interest cost and some financial derivative accounting issues moving from EBIT and full net profit. Also, it has to do that Glaspoort went through a refinancing as well. So I think those 2 elements feed in. Actually, as I said, Glaspoort is performing above plan financially. It's just the interest charges and hedge accounting that affect the bridge from EBIT to net profit, but EBIT and EBITDA are positive.

In terms of consolidation, basically, the only 2 formal conditions are it happens between '26 and 2030, and the number of HPs, homes passed, delivered should reach a certain threshold. I think we're nearly at that threshold. So the consolidation trigger is almost at our discretion. And, of course, it's important [indiscernible] once the tool is free cash flow positive, that should be '28, '29. I keep hoping for '28, might be '29 around that date, and then, we'll consolidate. But there's no further limitations as part. There's no requirement to be free cash flow positive. It just makes sense to do it. But my core summary is financially, Glaspoort is performing actually better than planned at EBIT positive. It's just the interest cost that they need to make.

Joost, on the IPR settlements.

Steve, on the IPR settlements, yes, so it's not that we have these settlements every quarter, right? IPR revenues are normal course of business. We have a large portfolio of IPR with over 300 million patents, and that demonstrates a bit the innovation power of KPN and usually providing financial benefits between EUR 8 million to EUR 10 million per year. Every now and then, we have a discussion with a large worldwide telecom vendor. And sometimes that leads to a real lawsuit. But this time, we were able to come to reasonable settlements.

Indeed, the costs related to that are relatively high, but that's also because this is a very specific job done by 6 people in our own organization. And for this, we hire international lawyers, and we pay them a fee for the outcome of the settlement. So it could be that we have another settlement perhaps somewhere next year. But usually, what I like more is that they just pay for what we ask them and that we have a continuous flow of income. And that these settlements are not only good for a onetime effect, but also means that in the future, they will pay for the IPR they use.

But, Steve, the IPR cash settlement and the cash flow increase is net of any cost of any lawyer fees associated. So this is a net benefit to KPN.

Sure. Sure. Once again, the lawyers have done fairly well.

Yes. It's a good business.

The next question comes from the line of David Vagman, calling from ING.

The first on LCE growth, which was very good, actually better than what you had guided for. So you got back to growth faster than expected. So could you comment on what has been driving this? And what you would expect going forward? So I think you mentioned IoT, broadband, also CPaaS.

And then secondly, on consumer, so you delivered quite a nice performance on net adds indeed, especially in fixed. But then the sales growth was a bit lower and a little bit lower than what you guided for mobile. So could you comment on what we should expect for the coming quarters, especially in the brand mix, let's say, and also your strategy? I've read recently that your phone would stop essentially for instance, if this is correct or not?

Yes. So to start on your LCE question, I mean, B2B is doing great. It's growing above 5%, which is compared to other telcos, I think, outstanding job. Having said that, LCE is our focus item to get it up above the current growth rate. It goes a bit up and down. And that is because there this large enterprise segment, we were finalizing the movement from old to new portfolio. So still, we had to migrate some legacy portfolio to the new environment.

Having said that, I'm okay with the current results. We always focused on real inflection to happen in the second quarter. In reality, we report growth now for a couple of quarters in a row. But it's the parts of B2B that we are really focused on to get it faster growing.

On mobile, we see a strong inflow of net adds, but there's pressure on pricing, of course, that's a competitive market. And on connectivity, we are doing better and better. We're also rolling out fiber in business areas. So when we report homes passed, it's not about the business areas in the Netherlands, but we also have a program to roll out fiber there, and that's really speeding up and improving. So yes, all in all, that's one of our intention points to get LCE to the average of B2B growth in our domain.

And consumer, yes, mobile service revenue is a bit weak, you could say, in total. I'm positive on the KPN development. I mean, we report blended service revenues and ARPUs, but KPN brand is really doing good with high ARPUs on unlimited. Of course, we added Youfone in the game, and that's a big base. So it's difficult to compare KPN with KPN and Youfone compared to 2 years ago, for instance, and in the no-frills segment, that's where the competition is heating up, I would say. So there, we have to be careful. I mean, we show strong growth of net adds. But for us, it's all about the balance between net add growth and value creation.

And on, yes, the quarter-by-quarter development, I would say, usually, we expect a better quarter in Q3 because of development seasonality. We're going to increase the prices. So looking at the current situation, I would say that we largely improved Q3 and Q4 compared to Q2.

Chris?

Yes, I agree. I think, David, when you look back at Q1, and this date is a bit lagging that we did increase service revenue market share in the Netherlands. We're gaining a bit of share across all the group. As Joost said, activity is most pronounced in the no-frill segment, but not spilling over into the premium segment. So I think at KPN level, we're gaining net adds, especially in unlimited. We're introducing a bunch of new unlimited proposition as well over the summer, including growing roaming bundles. I think it's doing well. And that competitive intensity is at this point, quite contained, but contained to the no-frills areas.

And as Joost said, for the second half of the year, I expect gradual bottoming out with a higher number in Q4 when the price increase is being pushed through. So I would say without looking for too much on a quarter-to-quarter-to-quarter basis because this is a long-term business, but I would expect over the second half of the year, H2 as a whole, in consumer to be around 2% service revenue growth on an average basis. That should be feasible, but more towards the end. But then again, does not fall through the step of managing this thing on a quarterly basis. We're in the long-term path, and I think the second half will look better than the first half.

The next question comes from the line of Joshua Mills, calling from BNPP Exane.

I have 2, please. The first one is just around the comments you made there about the no-frills mix versus KPN. Could you give us a bit more color, both on where the sub-brand penetration is today on your postpaid mobile and your broadband base? And then maybe just an example in the last quarter of the 37,000 postpaid net adds you added, what was the split there between KPN and Youfone? Because it looks like there is some ARPU dilution from the mix shift as well, trying to get a feel there.

And the second question was around the recent deal signed between VodafoneZiggo and DELTA Fiber, where VodafoneZiggo is going to be wholesaling from DELTA in about 600,000 new homes from next year. How do you think that will impact your retail broadband net adds, your wholesale broadband net adds? And perhaps if you could give us an idea of what your market share -- your retail market share in those 600,000 homes is today? That would be very helpful.

Yes, Joshua, in your second -- to start on your second question, we don't believe that the VodafoneZiggo wholesale deal on DELTA is a structural change in the strategy more than, yes, opportunistic move. They clearly have a -- at least that's what we read because it's not really clear, but they stick to a network strategy, of course. That's their business model. I think they can do with DOCSIS upgrade in main parts of the Netherlands. And this deal is really centered around the areas where they don't have a network in the first place because that's a DELTA network and that's in limited households, and our market share is lower than compared to the average of the Netherlands. So not that really impactful on KPN developments, I would say. We follow our strategy, and we do not think this is a big paradigm shift in the part of our own strategy.

And your question on no-frills, yes, I think the main part of the base is KPN, right? So that's roughly 75%. And so the rest of that is essentially on Youfone. So -- yes, so that's why it's so important for us to really focus on the KPN strategy, the unlimited part and keep it separated from that no-frill game.

Let me on the first -- on the DELTA assuming there's 600,000 HP. I don't know how much connect they have, but as Joost said confirm the market share of KPN in broadband is less than average. A chunk of that is in fiber. So I would not be too worried about that discussion already on fiber. There is some copper base, but these are copper clients that have been already exposed to competing fiber for some time. So I don't expect an immediate shift also because if -- obviously, we're not privy to the details of the transaction. But our understanding of the typical DELTA wholesale agreement is very much in line with our ACM commitment. So I don't think this may lead to a price fight or so. So if you look at all that, there will be impact, but it's probably going to be manageable and not really affecting the total result of KPN.

And as -- on the question on no-frills, and KPN is probably about 3/4 of mobile business, KPN, and 1/4 is [indiscernible]. So that affects the reported ARPU.

Yes, on the fixed side, almost everything is KPN, right? So there's only a limited part, probably around 5% is no-frills.

Maybe just one follow-up on that commentary around your market share in the areas where there's no cable being lower than nationally. It seems quite surprising given VodafoneZiggo's national market share is around 40%. So in those areas today, is it the case that DELTA Fiber already has quite a lot of market share on the retail side or that your ISP partners over-indexed to those rural areas rather than KPN? It just seems like usually you would expect in the non-cable area you'd be higher.

I would think in those areas, it was DELTA's relatively high market share already. So -- I mean, we -- let's see what the outcome is, but I wouldn't rule out that some of the real gains would come at the expense of DELTA, yes, because I mean that's where they have a relatively large share.

And then we -- I mean, we give you averages of market shares. You mentioned 40% is lower nowadays. Ours is a bit stronger than -- but all in all, it's different per region, right? So the original DELTA region is where DELTA is super strong, but it's limited to 1 million households or less. The largest cities, as before, signal is strong. And us, we are strong in more or less the rest of the country. So it depends a bit on the area what our market position is, and that's how we also took the decisions on fiber rollout.

The next question comes from the line of Siyi He, calling from Citi.

I have 2, please. The first question is really on the consumer service revenue growth. Chris, I think you mentioned at Q1 result call, you're talking about you don't expect consumer to be the main contributor to your service revenue this year. But now you're looking -- now you're having accelerated fiber penetration in the consumer broadband base, and you expect mobile service revenue to improve as well. And just looking out for the next coming quarters or maybe 1 or 2 years, do you see there could be a possibility that consumer service revenue growth could be more in line with the group service revenue trend, which is around 3% going forward?

And my second question is on the indirect cost. I think also you talked about some potential reductions in your indirect costs, but still this quarter, we haven't seen too much move going forward. I'm just wondering if you can help us understand how to think about those lines going forward.

Yes. I think the consumer service revenue growth in all, I don't think, will be 3% level for this year, probably also not for next. Obviously, in the long run, I see that opportunity with fiber coming in and copper churn becoming less simply because we have less copper customers. It's going to take some time to get there. I think also because we have a CombiVoordeel products, which Joost explained, one of the payment discount products, where some of the charges of that are added and booked in the fixed ARPU. So there's a reporting element to this as well. So I would say the growth of KPN in the coming years will be driven by business and wholesale and consumer in the top line lagging somewhat. I think bottom line it could be better. This is a high-margin business, but top line growth in consumable will probably be not the leading part of business, and wholesale will continue to drive this growth going forward. That is a fair outlook.

On indirect costs, I think the cost base KPN, we stayed effectively flat over the quarter in the first half year. And if you strip out all one-offs' incidentals, I think also underlying, effectively we had a flat cost base with, I would say, about 300 FTEs decline, that's actually going quite well. That supports EBITDA growth going forward. And in this business, you have positive service revenue growth, positive gross profit growth with a flat cost base that it trickles down to your bottom line.

So on the cost side, I would say, flattish for the year. FTE declined by 300 in the last 12 months, and we aim to certainly continue at this pace of reducing FTEs and reducing labor costs going forward. So that should help us in the mid- to long-term. I hope it gives you some color how we look at the business in the mid- to long-term.

The next question comes from the line of Ajay Soni, calling from JPMorgan.

My first is actually just on the FTE reductions, which you referenced there. So it feels like you're reducing around 70 FTEs per quarter. Just want to know where these reductions are coming from and you're expecting these for the rest of '25 and into '26.

And then my second question is just around the EBITDA growth. I think previously, you highlighted Q3 will be slightly softer on an underlying basis and then stepping up again in Q4, if I could just confirm that, please.

Yes. So on the FTE reduction, there's -- well, we have a workforce of around 10,000, 1/3 roughly is working in the customer interface. There's technical people in there, and there's a lot of people working in support. And we have programs in place to make the company more digital and to make the end-to-end processes far more first time right, especially focused on customer quality, but also relate to simplification, and yes, at the end, FTE reduction. So it's not an FTE reduction program, but it's leading to FTE reduction.

I think in the future, we will benefit from this more than we do today, but still, we see a step down in FTE already in a run rate, and that is good because the benefits really kick in next year. So for us, this will be an important focus point. And I think there's lots of opportunities here. I mean, KPN has done a lot in optimizing the operating model. But since there's a lot of opportunities on these big transformation programs, supported by AI platforms, we think we can go further. So that's for us an important focus point. And like Chris described, the first steps down in FTE are in the run rate.

Yes. And the second question on Q3, look, obviously, I'm most to blame because I tend to guide feeling for how the quarterly distribution looks like. But in the end, it's all about the long-term view, right? It is about getting us towards 2027 and the anticipated and promised CapEx step down. We should try to look through quarterly fluctuations. But then again, as you're asking, Q3 will be a bit softer. But obviously, I'd like to tell you we can see what roughly the pattern is so that you can place and position and know the context in which these things happen.

The Q3 will be a bit softer. I think actually mostly due to accounting for holiday provisions. Now, let's not dwell on this too long. Feeling is Q3 will indeed be a bit softer than Q2, although I felt that the initial hint that we give is probably the floor, it could be a bit better than what we initially guided for in terms of Q3. Without going overboard on the quarterly guidance, there is a pattern in the year, which is affected by these holiday provision schemes. But I think Q3 will look a bit better than what we initially guided for if I look at it, also including but also excluding the IPR benefit that will land in Q3. I would like EBITDA-wise it will be fine.

So with that in mind, in the end, we'll pursue EUR 20.63 million this year -- [ EUR 2.603 ] billion for the year. That's the plan for the year, and there will be some distribution. But I think in light of that, I would say, financially trading-wise, Q3 looks -- it's going to be less in Q2, obviously, but it's going to be a bit better what we initially pointed at. But then again, that's only 1 quarter. It's about the long-term story.

And the final question is for Paul Sidney from Berenberg.

I also had 2 questions, please. Firstly, a question for Chris. You've upgraded free cash flow guidance twice this year already. Most of that is mechanical, but there's some organic upgrades in there. You're clearly guiding for falling CapEx in 2027. I'm not wanting to preempt any message at the strategic update in November, but are your thoughts around capital allocation changing? Will excess free cash flow continue to be used for shareholder remuneration? Are there any caps on the level of buybacks you can do fiber rollout more than 80%, potentially any acquisitions you could do that perhaps weren't possible a few years ago?

And secondly, you've clearly articulated the 7% free cash flow CAGR out to 2027. But how do you expect return on capital to evolve over the next few years? Could this get close to 20% over time in your opinion?

Well, first of all, thanks for noting that we increased our free cash flow price in the year. I wouldn't expect the flowers and cheers in this call, but I'll get them from Joost.

For sure. For sure.

I think that we're on track to meet our free cash flow guidance, right? And the increase, number one, was due to the acquisitions. We want to be fair that what we buy, we add to our free cash flow guidance. And the second increase was, yes, it's an IPR benefit. It's a one-off, but we want to make sure that we do not use the one-offs to meet the underlying business. The one-offs are really on top of, and as we share our free cash flow to shareholders, basically, they're yours. And that's the result of this, so we distribute them to shareholders.

Plan A is still to distribute all our free cash flow to shareholders. I mean that's what we typically do. We can do that with investing EUR 1.2 billion -- EUR 1.25 billion in CapEx. And if you make a step down to EUR 1 billion, we'll still be investing about 70% of revenue. So we'll then stay fully invested and investing fully and able to distribute all our free cash to shareholders. That is the plan that's what we stick to.

I would say, over time, you'll see the portion of dividends going up. I think in the long run, it would be fair to almost like an 80% payout ratio of free cash flow and the remainder in buybacks. I mean, let's not cast in stone, but I think that's probably a good long-term anchor point for your dividend. So basically, it means that whilst our free cash flow is ratcheting up, our dividends will be going in line with, and I think in the end it was something like order of magnitude 80% of free cash flow in dividends and the remainder in buybacks. The specific distribution, we'll decide on that when we get to '27. Perhaps you can say a little bit more in the Capital Markets update in the second half of the year. But I think that's the end game for us.

Your question on return on capital employed, we're moving towards 15%. Could we go to 20%? I'd love to have that problem. First, I think 15% is a good level. I think that's consistent with a significant amount of value creation. I think if we run this business at 15%, we'll be doing very well. And I mean that's the point, if you run your business at 15%, I think the marginal investment is probably better to allocate towards growth than more return, if you're running at 15%, right? So I'd love to get to 20%. We'll do everything we can to get to up, of course, our return on capital employed to a higher level. But I think at this point, it's fair to assume that 15% is what we're going to and that's fully consistent with shareholder value creation and a fairly decent spread over our cost of capital.

And I think with that, we probably also stand out in Europe. And we won't hesitate to do more. But at some point, investing in growth at this level of profitability might create more value for you guys. And obviously, in line of staying disciplined to make sure we generate sufficient cash in anything that we do.

Okay. Thank you all for your attention and questions. That wraps up the webcast. In case you have any further questions, please feel free to reach out to the IR team. If you go on holiday, please enjoy the holidays. Goodbye.

Bye.

Goodbye.

Ladies and gentlemen, this concludes today's conference. Thank you for attending, and have a nice day.