Q2 financial results down y-on-y; on track to realize outlook

Progress made with strategic initiatives to strengthen the business in The Netherlands

High underlying growth in Germany at strong margin

First phase of restructuring plan is being implemented to optimize cost structure

Outlook confirmed

Message from the CEO, Eelco Blok:
“The market and regulatory headwinds that we have been experiencing in Q1 continued to affect our financialperformance in the second quarter, notably in our domestic business. Since Q1 and the announcement of our‘Strengthen, Simplify and Grow’ strategy, we made progress with our actions to strengthen the business in TheNetherlands. We have announced new mobile propositions and multi-room IPTV and have accelerated therestructuring plan. In Mobile International we achieved high underlying service revenue growth in all regions withparticularly strong margin performance in Germany. We remain on track strategically, are soundly financed andconfirm our outlook for the year.”

Impact from regulation leading to lower revenues for the Group, good performance Mobile International
KPN Group revenues were 1.9% or EUR 64m lower y-on-y in Q2 2011 with difficult market conditions in TheNetherlands offset to some extent by a good Mobile International performance. Group revenues were y-on-ysignificantly affected by a regulatory impact of EUR 136m, net positive incidentals of EUR 19m and results fromacquisitions of EUR 4m. Dutch Telco showed a revenue decline mainly due to continuing trends which werehighlighted in Q1 such as regulation and difficult market conditions. Consumer wireless is dealing with an ongoingchange in customer behavior and competition in the ‘value for money’ segment. In Consumer wireline the broadbandbase remained stable, with net line loss at manageable levels and PSTN / ISDN losses offset by TV additions. TheBusiness Segment has maintained stable market shares despite continued price pressure. A continued difficultmarket for Getronics resulted in a y-on-y revenue decline. At Mobile International, underlying revenues increased9.6% y-on-y in Q2 with Germany, Belgium and Rest of World all contributing. Both iBasis and Ortel Mobile showed agood performance in Q2.

KPN Group profitability impacted by regulation, strong underlying EBITDA growth at Mobile International
KPN Group EBITDA decreased by EUR 78m (5.6%) y-on-y, whereby the underlying EBITDA decline was 1.0%. TheEBITDA was negatively impacted by regulation of EUR 56m and net incidentals of EUR 10m. EBITDA in Dutch Telcodeclined in Q2 y-on-y as fixed cost reductions were not sufficient to mitigate the impact from regulation, changingcustomer behavior, higher SAC and price pressure in the Business Segment. On the other hand, the business inGermany showed a strong EBITDA margin of 41.8% in Q2 leading to 6.0% underlying EBITDA growth y-on-y. Therestructuring plan in The Netherlands is being executed at Getronics to further optimize the cost structure.EBIT decreased EUR 95m (11%) y-on-y, as a result of lower EBITDA (EUR 78m) and higher amortizationpredominantly of licenses and software compared to last year (EUR 16m).

Progress in strengthening Dutch Telco
The trends in Dutch Telco highlighted at the Q1 results continued in Q2. Within Consumer wireless the change incustomer behavior, leading to the substitution of voice and SMS by data, and the competition in the ‘value for money’segment remained visible in Q2. In the Business Segment price pressure and rationalization by customers continued.Short term measures and strategic initiatives to counter these trends have made progress. In Consumer wireless,actively upselling high ‘out of bundle’ customers is proving successful and new mobile propositions for the KPN andHi brands will be introduced in Q3. In the ‘value for money’ segment, the focus is on customer retention managementand brand improvement at Telfort. The Business Segment has successfully implemented new customer retentionmanagement to actively address the price pressure and rationalization.The first results of our quality program are becoming visible with decreasing call ratios across the board andshortened delivery times within Consumer wireline (e.g. fiber) and Business.

KPN Telecom NV (NYSE: KPN)