koninklijke kpn n.v. vp-sr credit officer rating... · 4.99% stake in telefónica deutschland,...

CORPORATES

CREDIT OPINION28 December 2018

Update

RATINGS

Koninklijke KPN N.V.Domicile Netherlands

Long Term Rating Baa3

Type Senior Unsecured - FgnCurr

Outlook Stable

Please see the ratings section at the end of this reportfor more information. The ratings and outlook shownreflect information as of the publication date.

Contacts

Laura Perez, CFA +34.91.768.8216VP-Sr Credit [email protected]

Ivan Palacios +34.91.768.8229Associate Managing [email protected]

Pilar Anduiza +34.91.768.8220Associate [email protected]

Koninklijke KPN N.V.Update to credit analysis

SummaryKoninklijke KPN N.V.'s (KPN) Baa3 senior unsecured rating is supported principally by thecompany's (1) leading position in the Dutch market; (2) integrated business model, with astrong quality network; (3) good free cash flow generation driven by its high margins andits significant past investment effort; (4) strong commitment to an investment-grade ratingand its recently announced target net leverage below 2.5x; (5) solid liquidity profile; and (6)4.99% stake in Telefónica Deutschland, which enhances its financial flexibility.

These considerations are balanced by (1) fierce competition in the Dutch telecom market,(2) our expectations of continuing revenue declines mainly driven by structural pressuresin its business segment and intensified competition in consumer mobile; (3) the company'slack of international diversification; and (4) its high dividend payout ratio, which weakens itsretained cash flow (RCF)/net debt to a relatively weak 20%.

Exhibit 1

We expect KPN's net debt/EBITDA to remain well positioned for the Baa3 rating categoryMoody's-adjusted net debt/EBITDA

2.0x

2.2x

2.4x

2.6x

2.8x

3.0x

3.2x

3.4x

2015 2016 2017 2018E 2019E 2020E

Net Debt / EBITDA Trigger Up Trigger Down

Source: Moody's Financial Metrics™, Moody's Investors Service estimates

http://www.surveygizmo.com/s3/1133212/Rate-this-research?pubid=PBC_1152211

https://www.moodys.com/credit-ratings/Koninklijke-KPN-NV-credit-rating-514700

MOODY'S INVESTORS SERVICE CORPORATES

Credit strengths

» Leading positions in the fixed and mobile markets in the Netherlands

» Strong network quality

» Strong commitment to an investment-grade rating with a recent public target net leverage of less than 2.5x in the medium term

» Good free cash flow generation stemming from its high margins and past investment effort

» Financial flexibility, which is provided by the potential for the monetization of its 4.99% stake in Telefónica Deutschland

» Solid liquidity profile

Credit challenges

» Exposure to a very competitive mobile market in the Netherlands

» Lack of geographic diversification

» Sustained declines on revenues mainly driven by structural pressures in its business segment

» High dividend payout ratio, which weighs on its RCF metrics

OutlookThe stable rating outlook reflects our expectation that management actions will protect the company's operating performance in achallenging operating environment. The outlook also factors in our expectation that KPN's management will preserve the company'sfinancial profile to reach its target net leverage below 2.5x in the medium term, which is equivalent to a Moody's adjusted net ratio ofaproximately 2.8x-2.9x (based on historical adjustments).

Factors that could lead to an upgradeWe would consider a rating upgrade if KPN's debt protection ratios were to strengthen significantly as a result of improvements inits operational cash flow and a reduction in debt. The rating could come under positive pressure if the company achieves sustainableimprovements in its debt protection ratios, such as adjusted RCF/net debt of at least 25% and adjusted net debt/EBITDA comfortablybelow 2.5x while experiencing a significant improvement in the business environment.

Factors that could lead to a downgradeCredit metrics that could lead to downward pressure on the rating include RCF/net adjusted debt falling below 20% or adjusted netdebt/EBITDA exceeding 3.2x on an ongoing basis. In addition, a significant use of proceeds from disposals for shareholder remunerationcould lead to downward rating pressure, given the sustained decline in top-line revenue and structural pressures in the businesssegment, which can challenge the sustainability of the company's EBITDA over the medium term.

This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page onwww.moodys.com for the most updated credit rating action information and rating history.

2 28 December 2018 Koninklijke KPN N.V.: Update to credit analysis


Key indicators

Exhibit 2

Koninklijke KPN N.V. [1]

Koninklijke KPN N.V.

US Millions Dec-13 Dec-14 Dec-15 Dec-16 Dec-17

LTM

(Jun-18) 2018-proj 2019-proj 2020-proj

Revenue $11.21 $9.74 $7.78 $7.53 $7.34 $7.66 $6.90 $6.80 $6.80

Debt / EBITDA 5.2x 4.3x 3.9x 3.6x 3.4x 3.4x 3.4x 3.3x 3.3x

RCF / Debt 19.8% 16.8% 18.8% 16.1% 19.6% 19.1% 18.1% 18.4% 18.4%

(EBITDA - CAPEX) / Interest Expe 1.4x 1.8x 2.1x 2.8x 3.2x 3.3x 3.4x 3.6x 3.9x

Net Debt / EBITDA 3.9x 3.5x 3.2x 3.1x 2.9x 2.9x 3.0x 3.0x 2.9x

RCF / Net Debt 26.0% 20.6% 23.2% 18.6% 22.7% 22.7% 20.5% 20.4% 20.8%

[1] Projections exclude iBasisAll ratios are based on 'Adjusted' financial data and incorporate Moody's Global Standard Adjustments for Non-Financial Corporations.Source: Moody's Financial Metrics™

ProfileKPN is the leading integrated provider of telecom services in the Netherlands. The company offers fixed and mobile services, and fixedand mobile broadband internet and TV to retail consumers. The company also supplies mobile, wireline network and ICT services tobusiness customers in the Netherlands. KPN sold its global wholesale services business, iBasis, on March 7, 2018. Therefore, KPN hasaccounted for iBasis as discontinued operation since Q1 2018.

KPN also own a 4.99% stake in Telefónica Deutschland as of November 2018. In the 12 months ended September 2018, KPNgenerated adjusted revenue from continuing operations of €5.7 billion and adjusted EBITDA of €2.3 billion. The company's ordinaryshares are listed on Euronext Amsterdam, with a market cap of €11 billion as of December 2018.

Exhibit 3

KPN's has a good diversification by revenue in its domestic market12 months ended September 2018 revenue breakdown by segment

Consumer 47%

Business34%

Wholesale10%

iBasis (discontinued operations)9%

13%

12%

12%

13%

50%

12%

13%

12%

13%

50%

13%

12%

12%

13%

50%

11%

12%

17%

10%

50%

1 2 3 4 5 6

Consumer 52%

Business37%

Wholesale11%

Continuing operations before other & eliminationsSource: Company reports

Detailed credit considerationsLeading converged operator in the NetherlandsKPN operates an integrated business model and remains the leader in the domestic wireless segment, with a 43% market share interms of service revenue as of December 2017. In retail broadband, KPN is the second-largest company after VodafoneZiggo, holding a41% market share by revenue as of June 2018. KPN's residential TV business has grown solidly, achieving a 32% market share as of June2018, although it remains behind VodafoneZiggo.



KPN distributes content through over-the-top media services (OTTs) and partnerships, including Netflix, which is a fundamental part ofits upselling strategy in the consumer segment.

The company also benefits from its strong network quality, thanks to its past investment effort. KPN expects to increase its FTTHcoverage by an additional 1 million homes by 2021, which would represent a coverage greater than 40%, up from 30% as ofSeptember 2018. Furthermore, it will continue to invest in fibre to the cabinet to upgrade its capacity and broadband speeds.The company aims to deliver broadband speeds in excess of 1 Gbps and 200 Mbps to 45% and 70% of the households by 2021,respectively, compared to 30% and 50% at Q3 2018.

We see the company's investment effort as a positive to enable it to differentiate its product offering, which we think would contributeto improve its revenue trends over the medium term. KPN said that it expects a stronger monetisation of the additional FTTH roll outthanks to lower costs from technology advances that will halve the payback from more than 10 years.

Exhibit 4

KPN is the leading mobile company in the Netherlands with a market share of 43%Mobile market share by telecom operator

KPN43%

VodafoneZiggo30%

T-mobile20%

Tele27%

Total Dutch (Consumer and Business) mobile service revenue market share (Q4 2017)Source: Company reports

Fierce competition likely to constrain KPN's top line; cable regulation a negative in the long-termThe Netherlands has been one of the most competitive markets in Europe for telecom operators. This is because of the significantpresence of a nationwide cable operator in fixed broadband and a more fragmented market structure in mobile, including a handful ofmobile virtual network operators for a relatively modest population of 17 million.

The competitive environment in the mobile market has remained disruptive, with aggressive prices by Tele2 and T-Mobile. InNovember, the European Commission (EC) approved the merger between Tele2 and T-Mobile Netherlands without conditions, incontrast to previous proposed mobile transactions. The EC considered that the merger would not significantly change the prices orquality of mobile services. As a result of the merger, T-Mobile will have a combined mobile service revenue market share of 27%, upfrom 20%.

While we believe Netherlands will remain a competitive market, we believe the merger is a positive for Dutch telecoms over themedium term and it could lead to a slowdown in price pressure given the merged entity's greater scale and its resulting synergies.

Nevertheless, we see the Dutch regulator's recent decision to open-up VodafoneZiggo's cable network as a negative for KPN and forthe Dutch market. We believe this decision could enable mobile companies, such as T-Mobile, to compete in the convergent fixed-mobile market, which has been traditionally dominated by integrated companies. VodafoneZiggo has challenged the regulator'sdecision in court.

In addition, we believe KPN's high-margin wholesale revenues could decline in the long-term given the alternative cable infrastructure.However, cable regulation would probably not affect its wholesale business for many years given the company's secured long-termcontracts (7 years) with T-Mobile and Tele2 and the switching costs resulting from accessing a copper to a cable network.



Exhibit 5

KPN's revenues have remained under pressure given fierce competition in mobile segmentsReported revenue evolution of the main Dutch telecom operators

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

1Q 2016 2Q 2016 3Q 2016 4Q 2016 1Q 2017 2Q 2017 3Q 2017 4Q 2017 1Q 2018 2Q 2018 3Q 2018

T-Mobile Tele2 Voda-Ziggo JV KPN

Source: Company reports

Third wave of cost savings to support organic EBITDA growthWe expect adjusted EBITDA (as reported by the company) growth to improve to around 1%-1.5% in the next two years, mainly drivenby cost savings, offsetting fading declines in revenue. We expect KPN's adjusted EBITDA as of year-end 2018 to be stable, in line withthe company's guidance.

We recognise that the company has made significant progress in mitigating the pressures on top-line revenues over recent years givenfierce competition. However, we believe it is critical that the company will continue to demonstrate its progress to stabilise revenues inorder to deliver sustainable EBITDA growth.

KPN intends to deliver an additional €350 million in net operating savings by 2021, which we think have low execution risk giventhe company's strong track record in cutting costs. The savings will be primarily realized through the additional simplification andautomation of IT platforms and systems. The company aims to shift to an all-Internet Platform (IP) infrastructure by 2021.

KPN has a strong track record in cost cutting because of its IT transformation and network upgrades, including more efficient fibertechnologies. The first wave of the program was finalized in Q4 2016, realizing operating spending and capital spending run-ratesavings of around €460 million, well ahead of the original target of €300 million. The second wave started in early 2017 and yielded€190 million in annual gross run-rate savings (including opex and capex) in Q3 2018.

Revenues expected to decline due to intensified competition in consumer and structural pressures in businessWe expect KPN's revenues to continue to decline by 1%-1.5% over the next 24 months driven by intensified competition in consumermobile and continuing structural pressures on business, offsetting the company's growing convergent revenues.

While KPN was able to mitigate the mobile price pressure in the consumer segment by accelerating convergence over recent years,intensified competitive pressure in mobile and adverse regulation has weakened top-line trends. We expect competitive pressure inmobile to remain fierce, which would probably weaken consumer revenues over the next two years.

In consumer, KPN intends to grow its fixed-mobile convergent base by 300 thousands of households to 70% of its mobile postpaidbase from 55% in Q3 2018 supported by its strong network quality, additional fibre deployment and its strong market share. Webelieve convergence will enable KPN to partially mitigate competitive pressures by raising prices and improving churn.

We expect revenues in the company's business segment to decline at a slower rate for the next two years driven by acceleratingconvergence and its stronger network quality. KPN intends to bring more than 100 Mpbs to 70% of business parks by 2019, up from52% currently.

KPN intends to stabilise B2B EBITDA by mid-2020 by delivering additional cost savings related to the migration of all customers tothe KPN EEN platform and focusing on value over volume in large contracts. We believe there still remains significant execution risks



to stabilise revenues given fierce competition in mobile and structural shift from traditional voice to lower-margin ICT packages,notwithstanding the company's improving trends.

KPN's total revenue declined by an estimated -0.7% excluding the impact of regulation in the first nine months of 2018 (-2.2%including the impact of regulation) driven by intensified competition in consumer mobile and continuing structural pressures on thebusiness segment.

Exhibit 6

Revenue growth in negative territory due to structural declines in business, intensified competition in consumer and regulationTotal adjusted revenue evolution [1]

-1.4%

-2.6% -2.5%

-0.5%

-1.4%-2.4%

0.4%

-3.0%

Q4 17 Q1 18 Q2 18 Q3 18

-1.5%

-2.1%-1.9%

-0.7%

-1.3%

0.5%

-1.3%-1.5%

-2.1%

-3.7%

-2.5%

-3.4%

-1.5%

-1.6%

-4.0%

-3.5%

-3.0%

-2.5%

-2.0%

-1.5%

-1.0%

-0.5%

0.0%

0.5%

1.0%

Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18

Total adjusted revenue ex. regulation Total adjusted revenue

[1] Total adjusted revenue excluding iBasisSource: Company reports

As of year-to-date September 2018, consumer adjusted revenue consistently declined by 1.9%, driven by the impact of regulation, andintensified mobile competition, which offset growth in consumer residential ( +1.3% YTD September 2018). Excluding regulation, theconsumer segment declined by an estimated 0.6%, in contrast to the positive trend in recent years. The company's business segmentdeclined by a slower 1.7%, partially helped by small acquisitions and lower-margin hardware sales. On a like for like basis, organicrevenues declined by 4.4%, compared with a decline of 6% at YE2017.

Exhibit 7

Intensified mobile competition and regulation affected consumer revenues; business continued to decline at a slower rateQuarterly evolution of consumer and business revenue [1]

2.1% 2.1%

-1.5%

-1.4%

-2.6% -2.5%

-0.5%

-6.9%

-5.9%

-4.9%

-1.4%-2.4%

0.4%

-3.0%

-8%

-6%

-4%

-2%

0%

2%

4%

Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18

Consumer yoy growth Business yoy growth

[1] Business revenue growth includes impact of M&ASource: Company reports

Strong commitment to maintain an investment grade rating; equity stake in TEFD enhances the company's financialflexibilityWe believe KPN is strongly committed to maintain an investment grade rating as evidenced by the use of proceeds from disposals fordebt deleveraging purposes (for example, E-Plus and, to a lesser degree, BASE and TEFD).



KPN has recently announced a target net leverage of less than 2.5x in the medium term, which is equivalent to approximately Moody'sadjusted net leverage of 2.8x-2.9x, based on historical adjustments. The company intends to achieve its target organically supported byits cash flow generation. At September 2018, the company's net leverage stood at 2.7x.

We expect KPN’s adjusted net debt/EBITDA (on an IFRS15 impact) to remain largely stable at around 3.0x in the next 12-18 months(2017: 2.9x on a IAS18 basis). We note that the impact of IFRS15 adds 0.1x to the company's leverage.

The company expects 5G spectrum auctions in 2020 for the 700 Mhz and 3.5 Ghz around 2022, which is later than in Europe but itwould also provide KPN with more time to assess the business cases of the various 5G applications.

KPN also benefits from the financial flexibility provided by its existing 4.99% stake in Telefonica Deutschland, which is valued at €507million as of December 21, 2018 (around 8% of the company’s net debt as of September 2018).

KPN has gradually reduced its stake in the company, distributing part of the proceeds to its shareholders (for example, a €200 millionshare buyback completed in Q3 of 2017) and undertaking small acquisitions to strengthen its IT capabilities, while the remainder hasbeen used to strengthen the balance sheet.

Organic FCF growth will drive progressive dividends while capital spending will remain stableWe expect KPN's FCF to grow in the next 12-18 months, mainly driven by modest EBITDA growth and lower cash interest as a result ofthe €1.1 billion perpetual hybrid bond redemption.

We expect KPN's free cash flow generation/net debt to remain strong at 4%-5% in the next 24 months. The company aims forsustainable Free Cash Flow growth (excluding Telefónica Deutschland dividend), driving a progressive regular dividend per share anddeleveraging. In 2018, we expect the company to distribute ~65% of its reported FCF (defined as reported cash flow from operations -capital spending), excluding the pass through dividend from Telefónica Deutschland.

However, high dividend payments will weigh on RCF metrics. We expect RCF/net debt to slightly improve to 20% in the next 18months, which is still somewhat weak for the rating level. This is offset by healthier free cash flow generation.

KPN intends to have a stable capex envelope at around €1.1 billion for the next three years, despite its continuing network investment.The company plans to accelerate its FTTH roll out to an additional 1 million homes by the end of 2021, modernize its mobile networkto be ready for 5G after 2020 and moving to an all IP infrastructure.

This investment within the capex envelope is mainly supported by the technology advances that have lowered the cost of rolling outfibre and the changes in capex mix with greater focus on access networks, rather than IT thanks to the past investment efforts. KPN willalso switch off copper in the areas where it has rolled out fibre that will free up capital spending.

Liquidity analysisKPN’s liquidity profile is excellent and benefits from (1) cash and cash equivalents excluding short-term investments of €354 millionas of September 2018; (2) full availability under its €1.25 billion credit facility maturing in 2023, with no financial covenants as ofDecember 2017; and (3) internally generated cash flow (defined as EBITDA net of cash interest, tax obligations and dividends received)of around €2 billion per year.

These internal sources compare favorably with cash requirements consisting of (1) annual capital spending of around €1.1 billion peryear; (2) cash dividends of around €0.5 billion-€0.6 billion per year (including the pass-through of the dividend that KPN receives fromTelefónica Deutschland); and (3) €1.5 billion in debt maturing over the next two years, including the £400 million perpetual hybridbond, with a call date in March 2020.



Exhibit 8

KPN's debt maturity profile over the next 12-18 months is well covered with existing liquidity sourcesDebt maturity profile as of September 2018 (Euro billion)

0

1

2

3

4

2019 2020 2021 2022 2023 2024 & onwards

EU

R B

illio

n

Senior Bonds Hybrid Bonds

Source: Company reports

Rating methodology and scorecard factorsThe principal methodology used in rating KPN is our Telecommunications Service Providers rating methodology, published in January2017. The methodology grid outcome for our 12-18 month forward view is Ba1, which is one notch below the Baa3 rating assigned. Thegap is explained by the value of the company's stake in Telefónica Deutschland, which provides some buffer for underperformance, aswell as KPN's adequate FCF/debt, which is not included in the scorecard metrics. We expect KPN's FCF/net debt (after dividends, inaccordance with our definition) to improve to a healthy 4%-5% in the next 12-18 months.

Exhibit 9

Koninklijke KPN N.V.

Methodology: Telecommunications Service Providers [1][2][3]

Factor 1: SCALE (12%) Measure Score Measure Score

a) Revenue (USD Billion) $7.7 Ba $6.9-$6.8 Ba

Factor 2: BUSINESS PROFILE (28%)

a) Business Model, Competitive Environment and Technical Positioning Baa Baa Baa Baa

b) Regulatory Environment Ba Ba Ba Ba

c) Market Share Baa Baa Baa Baa

Factor 3: PROFITABILITY AND EFFICIENCY (10%)

a) Revenue Trend and Margin Sustainability Ba Ba Ba Ba

Factor 4: LEVERAGE AND COVERAGE (35%)

a) Debt / EBITDA 3.4x Ba 3.4x-3.3x Ba

b) RCF / Debt 19.1% B 20% Ba

c) (EBITDA - CAPEX) / Interest Expense 3.3x Ba 3.4x-3.6x Ba

Factor 5: FINANCIAL POLICY (15%)

a) Financial Policy Baa Baa Baa Baa

Rating Outcome:

a) Indicated Rating from Grid Ba1 Ba1

b) Actual Rating Assigned Baa3

Current

LTM (Jun-18)

Moody's Forward View

Next 12-18 months (as of Dec-

18)

[1] All ratios are based on 'Adjusted' financial data and incorporate Moody's Global Standard Adjustments for Non-Financial Corporations.[2] As of 12/13/2018.[3] This represents Moody's forward view; not the view of the issuer; and unless noted in the text, does not incorporate significant acquisitions and divestitures.Source: Moody’s Financial Metrics™



APPENDIX

Exhibit 10

Peer snapshot

(in USD millions)

FYE

Dec-16

FYE

Dec-17

LTM

Jun-18

FYE

Dec-16

FYE

Dec-17

LTM

Sep-18

FYE

Dec-16

FYE

Dec-17

LTM

Sep-18

FYE

Dec-16

FYE

Dec-17

LTM

Sep-18

Revenues $7,525 $7,341 $7,658 $21,050 $22,403 $22,917 $4,564 $4,836 $5,133 $1,810 $2,020 $2,182

EBITDA $2,977 $2,877 $3,030 $10,842 $11,103 $10,225 $1,683 $1,748 $1,825 $688 $749 $763

Total Debt $10,213 $10,386 $10,132 $40,571 $45,519 $44,157 $4,058 $4,145 $4,004 $1,458 $1,581 $1,589

Cash & Cash Equivalents $1,391 $1,423 $1,612 $5,783 $5,485 $4,185 $490 $243 $58 $47 $53 $60

EBITDA Margin 39.6% 39.2% 39.6% 51.5% 49.6% 44.6% 36.9% 36.1% 35.5% 38.0% 37.1% 35.0%

(EBITDA-CAPEX) / Interest Expense 2.8x 3.2x 3.3x 2.5x 2.6x 4.7x 3.2x 5.6x 6.1x 12.4x 12.7x 11.8x

Debt / EBITDA 3.6x 3.4x 3.4x 3.9x 3.9x 4.4x 2.5x 2.2x 2.2x 2.2x 2.0x 2.1x

FCF / Debt 1.8% 3.0% 3.7% 2.2% -0.5% 4.0% 3.8% 5.9% 5.6% 4.0% 0.5% 0.4%

RCF / Debt 16.1% 19.6% 19.1% 18.0% 18.1% 17.2% 30.9% 32.3% 32.1% 22.3% 25.2% 19.4%

Baa3 Stable Ba1 Stable Baa1 Stable Baa2 Stable

Koninklijke KPN N.V. Telecom Italia S.p.A. Telekom Austria AG Elisa Corporation

Source: Moody’s Financial Metrics™

Exhibit 11

Operating leases represented around 8% of KPN's Moody's-adjusted EBITDA as of fiscal 2017KPN's Moody's-adjusted EBITDA breakdown (Euro millions)

(in EUR Millions)

FYE

Dec-13

FYE

Dec-14

FYE

Dec-15

FYE

Dec-16

FYE

Dec-17

As Reported EBITDA 2,879.0 2,842.0 2,739.0 2,662.0 2,420.0

Pensions -17.0 -467.0 1.0 -11.0 4.0

Operating Leases 354.0 235.0 176.0 191.0 192.0

Unusual -29.0 44.0 -272.0 -152.0 -69.0

Non-Standard Adjustments 7.0 6.0 -2.0 1.0 -1.0

Moody's-Adjusted EBITDA 3,194.0 2,660.0 2,642.0 2,691.0 2,546.0


Exhibit 12

Operating leases represented around 8% of KPN's Moody's-adjusted debt as of fiscal 2017KPN's Moody's-adjusted debt breakdown (Euro millions)

(in EUR Millions)

FYE

Dec-13

FYE

Dec-14

FYE

Dec-15

FYE

Dec-16

FYE

Dec-17

As Reported Debt 13,663.0 10,441.0 9,700.0 8,632.0 7,596.0

Pensions 1,018.0 316.0 259.0 262.0 218.0

Operating Leases 1,062.0 705.0 601.0 673.8 658.4

Hybrid Securities 92.0 44.5 0.5 29.5 71.5

Non-Standard Adjustments 628.0 63.0 -178.0 86.0 105.0

Moody's-Adjusted Debt 16,463.0 11,569.5 10,382.5 9,683.3 8,648.9




Ratings

Exhibit 13Category Moody's RatingKONINKLIJKE KPN N.V.

Outlook StableSenior Unsecured Baa3Subordinate MTN (P)Ba1ST Issuer Rating -Dom Curr P-3

Source: Moody's Investors Service



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All information contained herein is obtained by MOODY’S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as wellas other factors, however, all information contained herein is provided “AS IS” without warranty of any kind. MOODY'S adopts all necessary measures so that the information ituses in assigning a credit rating is of sufficient quality and from sources MOODY'S considers to be reliable including, when appropriate, independent third-party sources. However,MOODY’S is not an auditor and cannot in every instance independently verify or validate information received in the rating process or in preparing the Moody’s publications.

To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability to any person or entity for anyindirect, special, consequential, or incidental losses or damages whatsoever arising from or in connection with the information contained herein or the use of or inability to use anysuch information, even if MOODY’S or any of its directors, officers, employees, agents, representatives, licensors or suppliers is advised in advance of the possibility of such losses ordamages, including but not limited to: (a) any loss of present or prospective profits or (b) any loss or damage arising where the relevant financial instrument is not the subject of aparticular credit rating assigned by MOODY’S.

To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability for any direct or compensatorylosses or damages caused to any person or entity, including but not limited to by any negligence (but excluding fraud, willful misconduct or any other type of liability that, for theavoidance of doubt, by law cannot be excluded) on the part of, or any contingency within or beyond the control of, MOODY’S or any of its directors, officers, employees, agents,representatives, licensors or suppliers, arising from or in connection with the information contained herein or the use of or inability to use any such information.

NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY SUCHRATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY’S IN ANY FORM OR MANNER WHATSOEVER.

Moody’s Investors Service, Inc., a wholly-owned credit rating agency subsidiary of Moody’s Corporation (“MCO”), hereby discloses that most issuers of debt securities (includingcorporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by Moody’s Investors Service, Inc. have, prior to assignment of any rating,agreed to pay to Moody’s Investors Service, Inc. for appraisal and rating services rendered by it fees ranging from $1,500 to approximately $2,500,000. MCO and MIS also maintainpolicies and procedures to address the independence of MIS’s ratings and rating processes. Information regarding certain affiliations that may exist between directors of MCO andrated entities, and between entities who hold ratings from MIS and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually atwww.moodys.com under the heading “Investor Relations — Corporate Governance — Director and Shareholder Affiliation Policy.”

Additional terms for Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY’S affiliate, Moody’s InvestorsService Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody’s Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intendedto be provided only to “wholesale clients” within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, yourepresent to MOODY’S that you are, or are accessing the document as a representative of, a “wholesale client” and that neither you nor the entity you represent will directly orindirectly disseminate this document or its contents to “retail clients” within the meaning of section 761G of the Corporations Act 2001. MOODY’S credit rating is an opinion asto the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail investors. It would be recklessand inappropriate for retail investors to use MOODY’S credit ratings or publications when making an investment decision. If in doubt you should contact your financial or otherprofessional adviser.

Additional terms for Japan only: Moody's Japan K.K. (“MJKK”) is a wholly-owned credit rating agency subsidiary of Moody's Group Japan G.K., which is wholly-owned by Moody’sOverseas Holdings Inc., a wholly-owned subsidiary of MCO. Moody’s SF Japan K.K. (“MSFJ”) is a wholly-owned credit rating agency subsidiary of MJKK. MSFJ is not a NationallyRecognized Statistical Rating Organization (“NRSRO”). Therefore, credit ratings assigned by MSFJ are Non-NRSRO Credit Ratings. Non-NRSRO Credit Ratings are assigned by anentity that is not a NRSRO and, consequently, the rated obligation will not qualify for certain types of treatment under U.S. laws. MJKK and MSFJ are credit rating agencies registeredwith the Japan Financial Services Agency and their registration numbers are FSA Commissioner (Ratings) No. 2 and 3 respectively.

MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferredstock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any rating, agreed to pay to MJKK or MSFJ (as applicable) for appraisal and rating services rendered by it feesranging from JPY200,000 to approximately JPY350,000,000.

MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.

REPORT NUMBER 1152211


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