Koninklijke KPN NV

F:KPN

Earnings Call Transcript 2021-Q1

[Operator]

Good day, ladies and gentlemen. Welcome to KPN's First Quarter 2021 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, Reinout van Ierschot, Head of Investor Relations. You may begin.

[Reinout van Ierschot, Head of Investor Relations]

Thank you, and good afternoon, ladies and gentlemen. Thanks for joining us today. Welcome to KPN's First Quarter 2021 Results Conference Call. With me on the call today are Joost Farwerck, our CEO; and Chris Figee, our CFO. As usual, before turning to our presentation, I'd like to remind you of the safe harbor on Page 2 of the slides that also applies to any statements made during today's presentation. In particular, it may include forward-looking statements, including KPN's expectations with respect to its outlook and ambitions, which were also included in the press release published this morning. All such statements are subject to the safe harbor. I would now like to hand over to KPN's CEO, Joost Farwerck.

[Joost F. E. Farwerck, Chairman of Management Board & CEO]

Thank you, Reinout, and good afternoon, everyone. Today's results mark the first quarter of our accelerated growth strategy that we presented to you back in November last year. And I'm pleased to report solid progress on all strategic pillars, which strengthens our confidence to deliver on our outlook and on our ambitions. The accelerated fiber rollout is well on track as we added over 100,000 households to our footprint in the first quarter. And last month, we announced a joint venture together with APG to accelerate further and create additional value for all our stakeholders. We've also successfully phased out copper in the first 6 pilot areas, which is an important milestone in our program to decommission copper on a large-scale as of 2023. In the first quarter, the mass market service revenue trends continued to develop in the right direction. Mobile service revenues in B2C are already approaching a year-on-year growth trajectory. The broadband base and fixed stabilized further, and Wholesale continued to show solid growth. And this all adds to the confidence in our ability to grow our mass market service revenue by the end of the year. All in all, the encouraging revenue developments and strong free cash flow generating and balance sheet enable us to reiterate our 2021 outlook and our ambitions for 2023. So as a reminder, our accelerated growth strategy is supported by these 3 pillars: one, leverage and expand our superior networks; two, grow and strengthen the customer base; and three, continue to simplify and streamline our operating model supporting the next wave of cost savings. We will touch upon our progress on all of these pillars in today's presentation. In the first quarter, we expanded our fiber footprint by 106,000 homes passed. The run rate was impacted by a 2-week frost period, during which we were unable to dig and without this we would have exceeded our fourth quarter results. In early April, we successfully shut down our copper network of nearly 40,000 households addresses in 6 pilot areas, and this allowed us to test and evaluate the operational and financial impact of shutting down copper. And when we start to do this on a large-scale from 2023, this will result in significant savings related to the closure of technical buildings, reduced service tickets, lower maintenance costs and lower energy consumption, et cetera. Last month, we announced the fiber joint venture with APG, which further accelerates the rollout of fiber in the Netherlands. And this deal is important for us as it strengthens our strategy to be the leading fiber operator in the Netherlands. The joint venture will bring forward the fiber rollout in areas which we were not part of our existing plans for the coming 5 years, so we further accelerate on that. And the attractive valuation by a strong partner clearly underlines the value of our state-of-the-art Fiber to the Home network. Together, KPN and the joint venture will roll out more than 650,000 lines per year, reaching maximum rollout speed, and we have already secured the majority of the construction capacity needed to meet these targets. And considering that the total fiber rollout in the Netherlands across all participants was just over 500,000 households in 2020, this is an important step for KPN and for the Netherlands. We now expect to reach 80% of households with fiber in 2026, up from 65% by 2025 in our original plans. And this is important for 2 main reasons: it will speed up the copper decommissioning, leading to earlier cost savings; and this allows us to significantly bring down our CapEx levels sooner now already after 2026. This means we can settle at a much lower, longer-term sustainable CapEx level in the years thereafter. Now let's move to the Consumer segment. In the first quarter, the Consumer service revenue trend was impacted by an EUR 8 million one-off correction. And excluding this, the underlying service revenue trend improved. Mobile service revenues declined only 0.7%, fully driven by prepaid as postpaid service revenues were already flat year-on-year, and fixed service revenues declined 1.8%. Looking at our new households focus disclosure, revenue growth in our Fixed-Mobile portfolio was offset by lower revenues from legacy services. We've been able to stop the NPS decline and we're seeing encouraging underlying developments. Customer satisfaction remains one of our top priorities. We see that our investments in increased capacities are starting to pay off, and we should be able to gradually bring these down again in the coming periods. Now let's take a deeper look at our Consumer KPIs. At our Capital Markets Day, we indicated that growth in Consumer will come from 2 areas: Fixed-Mobile and fiber. And although revenues in Consumer were still lower year-on-year, we see encouraging KPI developments, which show that we are working according to the line of our strategy. In Q1, Fixed-Mobile households net adds were again positive and Fixed-Mobile ARPA improved, resulting in higher revenues from these services. In our other area of growth, fiber, we also see a very positive trend in net adds. Our focused commercial strategy and upgrade for copper are resulting in better sales numbers on fiber. We're confident that this solid KPI development will fuel the growth of our Consumer service revenues this year. Let's now move to the business segments. Although still declining, the overall revenue trend in Business is starting to move in the right direction. Q1 service revenues were down below 4% year-on-year, better than the previous quarters. COVID-19 and customer migrations continue to impact our B2B performance. Last year, the lockdown only came into effect in the final 2 weeks of March. So in Q1, we saw lower roaming revenues due to travel restrictions and delayed IT projects. Business Net Promoter Score improved to plus 2%, mainly driven by customer migrations to our future-proof target portfolios and much better customer satisfaction levels. In SME, we have come a long way with our customer migrations. Almost 90% of customers have been migrated away from traditional voice and legacy broadband services. KPN ONE platform is well positioned to provide additional services to customers. A quarter of the base takes 3 services, so there's enough room to grow this going forward. We also see a strong take-up of unlimited among our SME customer base. In the first quarter, almost half of the EUR 8 million year-on-year revenue decline was due to loss of roaming revenues. So without this, the effect on SME revenues would be less, and SME would have performed better. We see a clearly stabilizing trend on the SME service revenue level, which makes us confident in our ability to stabilize service revenues in SME by the end of the year, driven by the solid base developments both in broadband and mobile. In Wholesale, service revenues continued to grow in the first quarter, mostly driven by broadband, which in turn is a result of expanding our fiber footprint. We added 22,000 broadband lines and 30,000 postpaid SIMs in the quarter. As we've always said, we continue our open network policy, built on reasonable and nondiscriminatory terms. And therefore, we offer a viable alternative for our current and future Wholesale partners. This month, we announced a new long-term sustainability goal. KPN is already on track to reduce emissions in the chain by 50% in 2040, and this ambition is now being scaled up to achieving zero net emissions in the chain by the same year. This relates, for example, to improving the energy settings of TV receivers, more sustainable transport of products and equipment by our suppliers and using less materials in the production of equipment for our customers. Now for the financial results, let me hand over to Chris.

[Hans Christian Figee, CFO & Member of Management Board]

Thank you, Joost. Let me now take you through our financial performance. Our financial performance was impacted by an EUR 8 million one-off noncash correction in B2C fixed service revenues, which was related to the timing of revenue recognition in 2020. We exclude this one-off in the trend of a number of metrics illustrated to and fair underlying performance. Therefore, let me highlight a few key figures for Q1. Our revenues declined by 1.2% year-on-year, corrected for this one-off event and the sale of KPN Consulting in Q1 last year. Growth in Wholesale and Consumer Fixed-Mobile was offset by lower revenues from Business and Consumer legacy services. We see the underlying trend in service revenues developing in the way we envisaged, and we're on track to meet our inflection target for the year. EBITDA effectively was flat year-on-year, corrected for the impact of the one-off. Lower revenues and temporarily elevated costs related to customer support were offset by continued progress on cost savings. In the year-on-year comparables, we absorbed a roaming delta versus Q1 last year and the temporary cost spike in B2C. Our free cash flows increased by 53% year-on-year to EUR 122 million. Our liquidity position, including undrawn RCF, remained very strong at almost EUR 1.9 billion. Joost already indicated that the underlying KPIs are showing promising trends for growth in mass market service revenue soon. Wholesale growth remained strong and B2C mobile revenues showed a step-change improvement in the right direction, with postpaid already flat year-on-year. Net adds in B2C fixed are stabilizing and nearing positive territory, while ARPA is already growing. Already, in SME, we see ample opportunity to improve the revenue trend, which makes me very confident we'll deliver against our objective for the remainder of the year. Please note that SME revenues effectively have been stable for the last 3 quarters already. As I said, the one-off correction makes the trend somewhat hard to read. However, the year-on-year growth rates at the right-hand side of the slide show that we're getting close to growth in mass market service revenues. And by the way, in the Business segment, we observed favorable service revenue developments in LCE and Tailored Solutions. But of course, our focus is on SME stabilization first. We are continuously digitalizing and simplifying the company in order to deliver a combination of improved services, better customer experience, more efficient operations and thereby creating long-term value for all stakeholders. In the first quarter of the new cost savings program, we delivered EUR 21 million of savings, which is in line with the required run rate to reach the more than EUR 250 million of savings by 2023. As said, this cost number includes some temporary cost spikes. For the year, we see KPN still on track to move towards disparate cost savings, with the lion's share of the savings tilted towards the second half of the year. In Q2, in terms of cost and cost-only, we'll face a tough comparison base as last year's number benefited from COVID-weighted savings, which were lapped this year, and several digitization efforts that save costs and will kick in only the latter part of the year. So we'll continue to move towards our cost objective, which will be the biggest FX backloaded in the second half of the year. At our Q4 results, we explained that we improved our working capital management last year, and we have continued to do so in 2021. In Q1, we were already able to reap some of the benefits, with part of the improvement also due to intra-year phasing. Normally, we have higher investment in working capital in Q1. And although still negative, that is we still invest in working capital, the investments in working capital were significantly lower compared to previous years. During 2021, the rest of the year, we'll explore further options to keep improving our working capital within the normal course of business. This will help us not only today but also in future years to keep a healthy baseline of working capital. We started the year well in terms of cash generation. In Q1, we've seen a solid increase in free cash flow despite higher CapEx as a result of the accelerated fiber rollout. Free cash flow of EUR 122 million was a good 50% higher than last year and the margin moved to 9.5% of revenues. This increase in cash was mainly a result of, first, the different phasing of working capital; importantly, lower cash interest, lower cash restructuring, partially offset by higher cash taxes. A few points are worth mentioning. First, our nonfiber CapEx was fully according to plan. The higher CapEx of last year was the result of accelerated fiber investments, while [ other ] CapEx spend was in line with expectations. It declined a bit and absorbed an increase in Consumer CapEx. This provides a proof, an early proof, that we can manage our nonfiber CapEx levels, which will enable us to sustainably lower our CapEx levels once the fiber rollout is completed. Secondly, our free cash flow grew significantly in Q1. We're confident in our ability to reach our FCF target this year. But mathematically speaking, it's clear that we will not see a 50% growth rate every single quarter, so please expect some fluctuation of this number during the quarters. But at the same time, we remain confident with regards to our free cash flow target for the year. And we ended the quarter with a very strong cash position despite redeeming a EUR 361 million senior bond that had a 3.25% coupon in February, giving room for further interest cost reductions this year and the next. We continue to have a strong and resilient balance sheet at the end of March. As a result of the bond redemption and other corporate actions we took last year, the average cost of senior debt improved by more than 30 basis points year-on-year. In Q1, net debt declined EUR 111 million, mainly driven by the free cash flow generation during the quarter. We maintained the leverage ratio just short of 2.3x, comfortably below our ceiling of 2.5x, and we further enhanced our interest cover. Total liquidity remained very robust at the end of the quarter. It consists of EUR 614 million in cash and short-term investments and the undrawn revolving credit facility. The sum of this covers our debt maturity safely for the next 3 years. Today, as we are reassured by our performance, we confidently reiterate our 2021 outlook. As a reminder, we expect adjusted EBITDA after lease to come in at EUR 2.345 billion, broadly a 1% improvement versus last year. We'll ensure CapEx does not exceed EUR 1.2 billion. We expect a free cash flow of EUR 765 million, in line with last year despite higher CapEx level. And we expect to pay a regular dividend of 13.6% per share -- EUR 0.136 per share over 2021. And of course, the road to our objectives is never straight line and quarterly results will surely fluctuate, but we feel confident to deliver on the objectives for the year. In addition, we also reiterate ambitions for 2023, as provided at the strategy update last November. Having said that, we believe KPN is reaching a unique position. We're investing heavily by accelerating the fiber rollout to a maximum operating capacity, driving additional future cash flows and balance sheet flexibility. KPN is becoming a pristine and clean fiber company. We're at the point of returning to mass market service revenue growth, and we are aiming to accelerate organic cash generation in the next few years, giving rise to progressive dividends and, at the same time, deleveraging. We have a prudent financial policy, but don't intend to run an inefficient balance sheet. So it's a combination of a fiber plan, CapEx rollout, mass market service revenue growth and sufficient cash to grow our dividend and delever at the same time, and we are very much aware of the efficiency needs of our balance sheet. Our plan is only 1 quarter underway, but progress has been good, which makes me confident for successfully continue to execute. So to summarize, KPN had a solid financial quarter, displaying its cash generating ability. We see encouraging signs in base and service revenues that will drive the mass market service revenue growth. This is driven by positive signs in Consumer, with Fixed-Mobile and fiber net adds, and ARPA, all in positive territories. SME is seeing good broadband and mobile inflow, which is helping to stabilize revenues by the end of this year. In Wholesale, we see the ongoing success of our open network policy, leading to continued solid growth. Our fiber rollout run rate has maintained a good pace and has proven an attractive return profile. And we reiterated our outlook for this year, plus the ambitions for 2023 and are strengthening our confidence when it comes to delivering on our strategy. Thanks for listening to our presentation. Now let's turn over to your questions. Back to you, Reinout.

[Reinout van Ierschot, Head of Investor Relations]

Yes. Thanks, Chris. [Operator Instructions]

[Operator]

[Operator Instructions] And the first question is from Mr. Jakob Bluestone, Crédit Suisse.

[Jakob Bluestone, Research Analyst]

I had 2 questions, please. Firstly, can you just share your thoughts around the KKR Deutsche Tel fiber joint venture? How does that sort of impact your thinking around overbuilds? And I guess to what extent is there a land gram on building fiber? And secondly, on the fixed line side, if -- I think you said it was a minus 1.8% underlying decline in fixed service revenues, which I think is a little bit weaker than what you reported last quarter. You mentioned in the release more pressure from legacy. Can you maybe just expand on what's going on within the sort of fixed line services? And why do you think you're seeing an acceleration in legacy pressure?

[Joost F. E. Farwerck, Chairman of Management Board & CEO]

Yes. Thanks, Jakob, for your question. I'll take the first one. Chris, you'll take the second one, okay? Yes, the new fiber initiative in the Netherlands, it's only a plan. So I can't say very much about this. There's a high ambition of, if I'm not mistaken, 1 million households in 5 years. But like I said, it's a plan. We have a plan, but we are also doing it. So we're executing the rollout, last quarter above 100,000, this quarter above 100,000. So we're rolling out on a level we never did before. We have our strategy. We're speeding up. And that is, for us, the most important thing. We anticipate on other initiatives to roll out fiber as well. That's why we say in 2026, we expect KPN to cover 80% of the Netherlands. The rest of the Netherlands will be covered by third-party initiatives. That means that in 2026, we expect all households to be connected to fiber. So -- and I also heard Deutsche Telekom saying -- or T-Mobile that they try to avoid overbuild. That's always good. That is what we try to do as well when we face an initiative somewhere in an area. Most of the times, we can come to an agreement to cooperate. But let's first see if this all really works out. And for us, it's most important to focus on our own plans and execute and speed up what we're currently doing.

[Hans Christian Figee, CFO & Member of Management Board]

Okay. Jakob, on your question on fixed. A couple of things to point out. Our fiber revenues and copper revenues, the combination of the 2 is showing still a healthy combination of growth. I mean fiber added from Q1 last year to Q1 this year about EUR 15 million of service revenues, copper had the same thing if you adjust for the revenue correction. So the fiber growth, even the numbers are lower, is canceling out some of the copper decline. And indeed, legacy products was the main delta. That tends to happen mostly around first of the -- the beginning of the year. So people canceling their old legacy subscriptions at the beginning of the year. And that's an important driver for the delta in Q4 and Q1. But if I look at the underlying fiber developments, the net adds we had there, the copper to fiber upgrades, if I look at the development of our ARPA and ARPU, ARPA on fiber and ARPU and fiber [ tech ] does tend to be quite positive. So we are still pretty confident that we will get to this revenue inflection. But it's a legacy line item that cost change. And that, to me, is something that tends to happen more in Q1 than the other quarters.

[Operator]

The next question is from Ms. Siyi He, Citi.

[Siyi He, Research Analyst]

And I have 2, please. The first one is really a clarification. You said actually you accelerate in fiber net adds, but the corporate decline also accelerated. So I was wondering if you can talk through the reason behind that? Is that just simply because in the pilot areas you phased out copper and you replaced by fiber? Or actually, you see the decline in growth coming from different areas? And my second question is you mentioned about the potential cost savings and the CapEx reductions after you -- phasing out copper and finalizing your fiber. I was wondering if you can give us some indications what kind of ballpark we should expect.

[Hans Christian Figee, CFO & Member of Management Board]

Siyi , let me take the first question on fiber. What we're seeing is a couple of points. On fiber, an increased activation rate. You can see an activation percentage going up. That is due to the fact that we've changed our activation processes somewhat where, operationally speaking, when you draw a fiber line, you don't stop at someone's front door, but you connect to everybody regardless of them being customer or not. But actually, the more efficient process saves cost and time, but also accelerate the take-up. So we see an increase in what we call copper to fiber upgrades, so moving clients from copper to fiber. So the numbers you see, the fiber and copper numbers, there's some transition of copper to fiber clients in there. Net of that, our fiber is still continuing to grow. Still our new net adds in fiber-only is a significant positive. Copper churn, if you strip out that copper to fiber move, we saw copper churn moving up from Q4 to Q1 and has stabilized. So I think in January we moved to a higher level of churn, and then Jan, Feb and March, we're stable. My estimate is still more in the slower -- lower speed copper environments, that's where the copper churn is. But overall, we see numbers improving from a combination of fiber -- clean fiber net adds positive, copper to fiber upgrades also because of the changed connection activation process that we have, which eventually we will lead -- we believe lead to ARPU uplift. And then an increase in churn [ up to gen ] and then staying flat, so no further increase in churn in copper.

[Joost F. E. Farwerck, Chairman of Management Board & CEO]

Yes, Siyi, your second question was about cost savings and CapEx after 2026. So we expect to be ready end of 2026 with the rollout of fiber. That means that after that, we will no longer invest in fixed access network unless it's new build households, so we have to connect. So that's a completely different investment schedule compared to what we do today. That means that we can step down heavily on CapEx after 2026. And that's not -- that's about hundreds of millions. On the cost savings side, decommissioning copper is very important. All incumbents talk about that. And some of them are starting to do it. It will save us on maintenance costs, on the cost of technical buildings. We're going to phase out most technical buildings. This is, by the way, an all dream to come true for KPN. We save on reconstruction costs, on power usage. So that's also very important. And that will start to kick in as from 2023, and it will continue -- we will continue to benefit from that savings program after 2026 as well.

[Operator]

The next question is from Mr. Michael Bishop, Goldman Sachs.

[Michael Bishop, Equity Analyst]

Just 2 questions, please. Firstly, just taking up on the stronger performance in B2C mobile. I know in prior quarters, you've mentioned 3 or 4 factors coming through, such as like better low end pricing, lapping the back book repricing from 2019. But just wondering if you could give us a quick recap on what's happening there sort of within the mix and why you've seen that nice improvement? And then my second question, Chris, you mentioned, I think, a couple of times towards the end of the presentation about not intending to run an inefficient balance sheet. And given you seem to have quite a lot of visibility over the business, particularly around the big-ticket items like fiber CapEx, have you had any more thoughts about sort of what is a medium, long-term efficient balance sheet and what that looks like?

[Joost F. E. Farwerck, Chairman of Management Board & CEO]

Yes, Michael. In consumer markets, we see mobile postpaid moving in the right direction. If I'm not mistaken, we're more or less flat year-on-year. So that is really moving in the right direction. That's mainly because of how we position it. Unlimited in the market, that's doing quite well. We see a strong inflow on the higher ARPU propositions. And indeed, we corrected pricing on the no frills side. Of course, as you know, we eliminated Telfort in the past, but we also repositioned our mobile propositions a bit in the market. So we really try to move our customers to the higher ARPU, more unlimited kind of propositions. And that's on the right track, I would say. We're not there yet, but I expect more to come from this in the coming quarters. So we're pretty satisfied on the mobile performance in consumer markets.

[Hans Christian Figee, CFO & Member of Management Board]

Yes, Michael, allow me to give you a quick marketing scan then. We're investing heavily in fiber, as we said, driving future cash flow with the point of return to mass market service revenues and that we can do a progressive dividend and organic deleveraging. Currently, with 2.3x leverage, that will drop because also next quarter, you see the proceeds from the transaction with [ APG ]. So that means that leverage number will come down. Our ceiling is 2.5%. I think the floor that we announced or the -- yes, it's not a formula, but the effective floor is around 2x. Below that, it becomes inefficient. And within that 2 to 2.5, management has some room to maneuver. I mean our strategy is good. We're only 1 quarter underway now. Let's see if our strategy continues, it will give us more visibility on performance, especially on the returning to mass market revenue growth. On the return -- increased contribution of fiber, very sticky fiber revenues, if that continues and we continue to delever and the cash flow keeps coming in, I think we should be able to return to our shareholders somewhat more than just the annual dividend increase. So that option is definitely there. And in terms of inefficient balance sheet, I think the lower [ bound ] is like 2x. We've set a ceiling of 2.5. But if we get to organic revenue growth, more share of fiber, I think it's not inconceivable that we should aim to be where the upper end of the leverage and the lower end of leverage, because simply our balance sheet could sustain that. So to me, it's a function of getting the business to deliver on revenue growth, fiber client base, sticky fiber revenues. That would give us the anchor at which to move our leverage up a bit towards the upper end of the range and that also gives opportunities for additional shareholder returns.

[Operator]

The next question is from Mr. Matthijs Van Leijenhorst, Kepler Cheuvreux.

[Matthijs Van Leijenhorst, Analyst]

The first question is a follow-up on an earlier question. Could you give us the capital to -- CapEx to sales ratio after 2026, could you give the number? And the second question is on this Chinese vendor, Huawei, because the Dutch regulator is currently investigating access to your network. What is the risk of a full ban? And in case that would happen, if we would see a full ban, well, what could be the cost for you?

[Joost F. E. Farwerck, Chairman of Management Board & CEO]

Okay. Well, Matthijs, your first question is about CapEx after 2026 and sales after 2026, so that's a very difficult one. I'll hand over that one to Chris. But let me first take the Huawei question. Yes, like other telcos in Europe or like most of them, 10, 15 years ago, we decided to select Huawei in certain domains of our network, not only because of the price, but because they were much further than the other 2 main suppliers. But of course, we have a multi-vendor policy. So we use a lot of different vendors for all kind of networks. For instance, on the fixed side, we're fully Nokia. The investigation that this week started is all about an article in the newspaper, which was about a report drafted 11 years ago on behalf of KPN. And KPN in those days was looking at the opportunity to source out the mobile network maintenance to Huawei and to do a risk analysis. And as a result of the report, KPN decided not to source out maintenance of the mobile network to Huawei, so we do that ourselves. And second is that some vulnerabilities were identified and fixed 11 years ago. Every year, we audit our mobile core network. We audit the way we work with vendors, so also with Huawei. And that's also done by external parties. And every now and then, Agentschap Telecom from the ministry comes in to audit as well. So I'm happy with that audit that started this week because then we can talk about facts in the -- that will come up instead of hearsay stories in the newspaper. So we're not naive. We are talking about this topic for a long time already with our government. And we completely follow the guidelines of our government. So as far as I'm concerned, I'm pretty confident that we are fully aligned with our government, and we strictly follow their rulings.

[Hans Christian Figee, CFO & Member of Management Board]

So Matthijs, on your first question on CapEx over sales. And of course, it's a bit like reading tea leaves on what our CapEx over sales ratio in 2026 will be. So let me give you a few components of that. Today, our CapEx is say EUR 1.2 billion, out of that is EUR 450 million in fiber. Well, up to 2026, that will only be new build and maybe some small remaining portions of it to be done and some maintenance. But that will lead to a significant chunk out of that spend will be going off -- going away. Secondly, in the nonfiber. Today, nonfiber CapEx to sales is around 14%. I don't think we'll end at 14% percent but I would be surprised if we're higher than 18%. I mean, I would be prudent. I would say somewhere between 14% and 18%. And depending on how you look at the amount of new build spend on amount, at the amount of new maintenance, some are in there. But I would pick a number in that range. And then you know what I model with, without giving you a hard coded number. Because 2026 is still a couple of years away, but I think it's going to be fully somewhere in that range. And I guess you will have to pick a number in there.

[Matthijs Van Leijenhorst, Analyst]

Yes. Much appreciated. Just as a follow-up on the first question. What if the government decides for a full ban? Could you give any indication what it could cost or...

[Joost F. E. Farwerck, Chairman of Management Board & CEO]

Yes. We -- I mean, currently, we run our radio access network on both Ericsson and Huawei. So we know how to run a network of 2 suppliers. So that's one. Second is that we don't expect a full ban because we are aligning, like I said, with the government. And they know what we do and we know what they want us to do, and that's what we're currently doing. We already announced that we will move non-Western vendors out of all critical systems. That was our own decision before the government started to talk to us, and that's what we are doing. For instance, the mobile core network will be migrated to Ericsson. That's a decision that we took before the summer. It will take some time, but we started it. There are other domains where we will migrate to Western vendors. We're in the same situation as a lot of other telecom operators on this topic. So it would really surprise me certainly that [ then ] will be there, and certainly not within a short notice or a time frame of 1 or 2 years. So if you look at the U.K., for instance, there was a ruling there to migrate non-Western vendors out of critical systems in 7 years. So that kind of ruling I anticipate on, but not anything else.

[Operator]

The next question is from Mr. Keval Khiroya, Deutsche Bank.

[Keval Khiroya, Research Analyst]

2 questions, please. So firstly, you mentioned the impact of COVID on OpEx last year. But how should we think about the benefit to revenues from COVID impacts annualizing in Q2? I guess last year you saw a negative impact from roaming and delayed projects, but also a benefit from higher national traffic as well. And then secondly, last year you were also quite pleasantly surprised about how well the market to fixed line price increased. Could you say your thoughts on how you just think about the scope and maybe size of fixed price moves going forward?

[Hans Christian Figee, CFO & Member of Management Board]

Shall I -- Keval, shall I take COVID question? So what we're seeing in the first quarter on COVID is that we lost about 6 million roaming revenues in the first quarter year-on-year. But last year, of course, the 2 months were still roaming revenues. We lost it in B2B mostly. There was a EUR 2 million in B2C, we estimate, combination of roaming, a little bit lower handset sales and lower unlimited because of shop closure. And shop closure has an impact on handset sales and handset sales has an impact on unlimited bundles. And we saw about EUR 6 million higher interconnect revenues. People calling 0900 COVID numbers. So the net revenue delta was about EUR 2 million, where, of course, interconnect is much lower-margin business than roaming. So I think the net impact on our -- what I'd say, contribution margin was about EUR 4 million in the first quarter and we compensated some of that by cost measures. I think the overall impact on EBITDA has been neutral, possibly slightly negative depending a bit how you look at the cost impact. But again, it was like high-margin revenues replaced by lower-margin revenues, which you counter by cost savings. When it comes to roaming -- when I look at data and voice traffic right now, it has, of course, come off. Last year, it fell completely off a cliff in Q2. That, I think, will not happen. It will continue at a slightly higher pace than last year, although, of course, travel is mostly within Europe, so don't give much roaming benefits. So the real roaming uplift of the roaming potential for the year is in Q4 on a year-on-year comp. Because in Q4 last year, remember we all went back to lockdowns. And if the vaccination programs succeed, the world might be coming back to normalcy in Q4, and then you can see year-on-year roaming benefit. So to me, first quarter, EUR 4 billion hit on contribution margin countered to a large extent by cost savings. Roaming for the rest of the year, I could see a tiny support year-on-year in Q2 and Q3, but mostly in Europe, within Europe travel, and we've got good hopes for Q4. We don't plan for it. It's not an EBITDA outlook number. But if there's any upside, that will be in Q4. And then in Q2 last year, we had a significant also cost savings due to the [ unlike ] COVID shock. So when it comes to Q2 comparison, I think that we have a little bit better outlook into the revenue growth versus last year and slightly more challenged year-on-year comps in cost because last year in the second quarter, our cost really went down massively in the quarter, as you'll remember. That would be the points I'd love to make on COVID. Hope that helps to you.

[Keval Khiroya, Research Analyst]

Yes, that's very clear.

[Joost F. E. Farwerck, Chairman of Management Board & CEO]

And on your question on the fixed line price increase. Yes, usually, we do that yearly around the start of summer, to be announced in May. Last year, we did, if I'm not mistaken, a EUR 50 increase on the broadband pricing. So wouldn't surprise me if we move in the same line this year. But first, we will communicate this to our customers before we disclose it further. But I expect us to announce something in the coming weeks.

[Operator]

The next question is from Mr. Usman Ghazi, Berenberg.

[Usman Ghazi, Analyst]

Just 2 questions, please. Firstly, on the 5G auction, I believe there's some litigation now or some further delays. If you could just provide an update on the 3.5 gigahertz auction, whether you see it still happening next year or whether it would be delayed further? And then the second question was -- this is going back to the balance sheet and looking at it a bit differently. I mean if I look at your capital employed, there is no -- from the outside, there is no way for us to understand how much of the capital employed is actually related to the fixed infrastructure, all in fiber. And you're spending EUR 450 million in CapEx every year on fiber. So it be just helpful to know how much of your cash employed now is either related to your fixed infrastructure or fiber? Any indications or any idea of how to get there would be quite helpful.

[Joost F. E. Farwerck, Chairman of Management Board & CEO]

Yes. So on the auction on 3.5 gigahertz. Yes, the Ministry of Economic Affairs is preparing for an auction in the first quarter of next year. I think it's an ambitious time line, but it's -- they aim for the first or the second quarter coming year. 300 megahertz is becoming available for exclusive national licenses for 5G from end of the year, September 2022. That's the plan. So they moved out the Ministry of Defense using the spectrum in the northern part of the Netherlands, which is helpful. But there's still Inmarsat, another company making use of the spectrum for services at sea. And they are starting a process to delay the auction. I don't think that will happen. I'm not sure how it will be solved. The usage of that Inmarsat is about much less spectrum usage than the Ministry of Defense is doing currently. But I'm not completely sure how they will solve this. But that auction will happen next year. I'm convinced of that, yes.

[Hans Christian Figee, CFO & Member of Management Board]

And to your other question, Usman, let me take it up offline, that -- with -- to see how we can help you improve our disclosure. I don't have the exact number on how much capital employed we have on fiber on top of my head. I do know that the ROCE of the group is continuing to improve. So that to me is an important factor. Exactly what you'll be looking for, why don't we take it offline and see if it helps us -- or we can help you with enhanced disclosure on this part.

[Operator]

The next question is from Mr. Luigi Minerva, HSBC.

[Luigi Minerva, Senior Analyst]

The first question is on the APG JV. I wanted to understand, of the 910,000 lines, what's the extent of the overlap? So currently those lines, are they all on ADSL or some of them are on fiber to the cabinet, for example? And what's also the overlap with the VodafoneZiggo footprint? And secondly, perhaps an update on the regulatory situation for the Wholesale access terms. Can you tell us where the regulator stands and if they plan to make further progress?

[Joost F. E. Farwerck, Chairman of Management Board & CEO]

Well, on the joint venture with APG, listen, we more or less have the same footprint as VodafoneZiggo. We cover 98% of the Netherlands, 95% with a copper network. VodafoneZiggo, a bit less. But you can assume that almost all households in the Netherlands have both a wireline from KPN or a cable moving into that household from Ziggo. The scope of the joint venture is the planning we have as from 2026. So we announced a rollout plan to roll out 500,000 connections per year ourselves, adding up to 2.5 million on top of almost 3 million we already did. And after that, in 2026, we would start in the more smaller villages, semirural areas. And with this joint venture with APG, we'll start with these areas not after 2026, but in the second half of this year. So that means an acceleration after -- especially focused on the long tail of our own planning. Most of our -- it's all about fiberizing our copper network. So there's no fiber networks there yet. It's about copper areas. And most of the areas are all on VDSL. So that means that we already rolled out the backhaul fiber to the cabinet in most of these areas.

[Hans Christian Figee, CFO & Member of Management Board]

With the question on regulation. Look, 2 things at hand, of course there have been a new EECC. I think the ACM is still working through how to apply, how to, in a normative framework, to actually apply that European regulation in the Netherlands. And we've got the request by T-Mobile. Well, these requests [ are ] both premature and inappropriate. Premature because you can only file a request when you have a conflict, which we don't, we're still discussing and negotiating with them. And secondly, if you look at our open wholesale access model, which is continuing to be open, which is continuing to be nondiscriminatory, we -- in our analysis, it's very viable for anyone to have -- even if you are an attacker or someone new to the market, you can run a viable business case in a very capital-light model being on KPN's network. So we're very confident in our position. At the same time, we do not expect any news on this thing before the summer. I think it's quite premature both where we stand in our discussions and when it comes to where the clarity also on the new regulation. I do not expect and we would be surprised if there would be any major news from ACM before the summer.

[Luigi Minerva, Senior Analyst]

Can I have a quick follow-up on the first question? So as you upgrade -- as the JV upgrades, the VDSL lines to fiber, you will obviously lose some VDSL wholesale revenue. Have you -- can you give us an indication of how much of the wholesale revenues will be lost to the JV?

[Joost F. E. Farwerck, Chairman of Management Board & CEO]

Yes. Well, it's our plan to -- usually, when we move from copper to fiber in area, we go to penetration rates of 50% to 60%, so that's both retail and wholesale together. So we improved both on the retail and the wholesale side. We can still sell wholesale also on the network from the JV because we have the wholesale interface with most of the service providers in the Netherlands and we deliver that on the active layer. The JV can do the same because it's an independent company. But I expect because of these are specific areas with us on a lower market penetration rate than in the areas we choose for the first 5 years, I expect, in total, our position to improve there.

[Operator]

The next question is from Mr. Ulrich Rathe, Jefferies.

[Ulrich Rathe, Senior European Telecommunications Analyst]

First of all, I would like to come back to this big jump in the fiber activation, which is very good to see. Could you comment a bit -- you did already comment on some of the drivers? But I was specifically interested, are you giving temporary discounts for people outside of the areas to switch over? And what is the ARPU in the transition from copper to fiber in general, if that's possible to answer? And my second question is some clarification on the one-off. So you're saying the 1Q item is -- it was an overstatement that you're correcting in the quarter. I was wondering, the historical overstatement, where was that? Was it a particular quarter? Or was it a big item? Or was that essentially just something you're correcting that was spread out over the quarters of 2020?

[Joost F. E. Farwerck, Chairman of Management Board & CEO]

Yes. On the fiber activations, I think the most important change we built in our company is that we organized really one organization being fully responsible for fiber and the rollouts, commercial activities, regional approach. So there's far more and far better focus on the activation of fiber in all different -- every area is different, every area has a different strategy. Sometimes, we have to defend our position there. Sometimes we're more a challenger. But that's now done with a far better focus. And the commercial people in the lead -- traditionally, we had operations in the lead. First roll out the network and then try to sell. That's difficult because when we started to roll out fiber, then Ziggo could activate all their customers locking them in for 12 months. But now we first sell and then roll out. What we also do is that we migrate customers more actively from copper to fiber, and after that, sell up. So the churn on fiber is low around 7%, if I'm not mistaken. So it's always good to also migrate customers more to fiber to create stickiness. So it's our commercial performance, the focus on the different areas, the way we first sell fiber before we roll out and the way we migrate customers more actively and in a more sufficient and onetime right way.

[Hans Christian Figee, CFO & Member of Management Board]

Yes. And when it comes to being commercially active, we -- of course, the policy that you are the same speed for copper and fiber at the same price. So if you had 100 megabits on copper and you move to 100 megabit fiber, you get to quote the same price. That helps migrate customers. But then we have a plan of action initiative in place where customers can temporarily experience the higher speed that we have. So the higher speed you can have in that area for the same price for a couple of months and then after that period, like you may go back to the old speed or you may stick to the higher speed. So have customers experience the full fiber benefit that has just started. Let's wait and see how sticky that is. But our plan is when you get fiber, same speed at the same price, but you get the opportunity to experience the highest speed you have around and the real benefits of fiber for a short period of time at no additional cost. And after some point, your clients actually choose do I go back to my old speed or stick with the new speed. On your question with regards to the one-offs, it's somewhat accrued during the year, but the focal point in the second half, the [ mostly ] point, it has to do actually with the Telfort migration that was the driving factor. And it has to do the physical migration of that. So it mostly affected the second half of the year, Q2 -- sorry, Q3 and Q4.

[Ulrich Rathe, Senior European Telecommunications Analyst]

Can I just follow-up, just for clarification. On that changed go-to-market strategy, when would you say -- when did that start really in the market? Was that something that started late last year? Or was it started earlier?

[Joost F. E. Farwerck, Chairman of Management Board & CEO]

Yes. Well, we started that end of last year and we're scaling up now. It's for us very important to change the way KPN is working and to reinvent ourselves. This is one of the very important focus areas we were, after summer last year, really working on, and we're now seeing the first good results. But we're not done yet. That's -- quarter-after-quarter, we will have to improve on our operational execution.

[Operator]

The next question is from Mr. Joshua Mills, Exane.

[Joshua Andrew Mills, Research Analyst]

Just a couple from me. The first was just related to the Consumer Net Promoter Score. And I think at the end of last year, you said you recognize we've had some friction points. We're going to invest and fix it, which has happened and you stabilized. So the question is, can you give us some specific detail on what initiatives you've taken and then maybe an indication as to how much extra investment there was in a quarter to do that? And then the second question is just related to the copper shutdown and trial period. You mentioned as well that a few operators tried to do this and take some time. What kind of issues do you face or have you found when you've started this? And how long do you think it really takes from identifying an area where you've built fiber, you no longer need copper to actually fully removing the legacy equipment, et cetera, realizing the savings?

[Hans Christian Figee, CFO & Member of Management Board]

Yes. Joshua, on the first question on the NPS. The NPS was stable. Actually, we see an underlying improvement. The NPS was stable. Mechanically speaking, we reweigh all these different customer groups every year again. And due to the reweighing, actually the negative impact on the NPS, the underlying improvement is about 2 to 3 points. Officially, what we reported is 11 points. The underlying improvement actually is there. So what did we do? I think we spend a lot of money and time stabilizing our ITV platform. Remember, at the time, our ITV platform was new and clients had to get to know it, and we had to stabilize it. Secondly, we equipped many of our DSLAMs with more batteries to deal with some energy fluctuations, which actually caused, as we understood, more fluctuation in network quality than we have it so far. So it's reequipping our DSLAMs with batteries, stabilizing the proof of our ITV platform. We scaled up our consumer support and mechanics team, and it took time to people to work. I mean before you can have an experienced and well effective support staff employee, it takes a bit of time before people can be fully effective. So that is the combination. We took more money and trained them to be more effective and more efficient, and a few network changes. My estimate is cost is around EUR 5 million to EUR 6 million this quarter, Q4 some similar number. And we now look at the simple drivers of those costs, call volume service tickets. We were flat, it was Q4 in terms of call number service tickets. And at the end of this quarter, early April, we saw the volumes coming down. So bear with us, but it all points towards a normalization and a reduction of spend at the end of Q2, beginning of Q3. The current trend of reducing call volume service tickets actually continue.

[Joost F. E. Farwerck, Chairman of Management Board & CEO]

Yes. So what we did is that we -- it's all about end-to-end steering. So Chris mentioned all kind of components and financial effects, but what we did is end-to-end steering on Wednesday morning. Every now and then, we join those sessions. And it's the network people, the platform people, the customer process people, the salespeople, they fully have to understand what's happening when you change something in the back end of the company, then it's affecting the quality on the front end of the company. And that is now fully under control, and that's how this business should be run in the first place. So that's very important. And we ended up in all these kind of components. Chris mentioned, like TV, but it's really to have good overview of what's happening in the total value chain of our business. On the copper shutdown, people always talk about the consumer market, but that's the easy part, to be honest. So what we see in the 6 areas we just did is it's important to follow the S-curve, the first and the second wave of customers migrating from copper to fiber. And then there's a third wave, and that's what we call the complementary upgrade. Like Chris just mentioned, we migrate the final batch from copper to fiber against the same price on copper broadband connection. So if you are on a 50-megabit on copper, we move you to a 50-megabit on fiber. And after that, we approach these kind of customers to upgrade the service and the ARPU, of course. The more complicated part is ISDN 2 and ISDN 30 for B2B customers, and all kind of exotic individual services via copper done for B2B customers. So for ISDN 2 and ISDN 30, we created a solution. So everything has been migrated. All our SME customers have been migrated away from ISDN. So that's also good to understand because in the first quarter last year, there were still SME customers on ISDN against a higher price. But these kind of services are more complicated. And at the end, what we saw is that the main distribution frame is almost empty, but as always, 1 or 2 working lines. And at the end, you just have to disconnect them, because otherwise, you can't empty the network. But in short, the consumer is more about straight direct migration. And in B2B area, we really had to invest in complementary services to facilitate the migration. And that's all done now. So that's why we're ready.

[Operator]

The next question is from Mr. Konrad Zomer, ABN AMRO.

[Konrad Zomer, Research Analyst]

Two questions, please. The first one on your CapEx guidance. It was up 15% in the first quarter, obviously, because of the fiber acceleration, EUR 43 million. It doesn't look like that acceleration will come down in the next 3 quarters. So is there any chance you will prefer to not meet your 1,200 CapEx guidance for the year, but accelerate fiber even faster? Or do you think you have enough leeway to reduce your nonfiber CapEx in the remaining 3 quarters? Because there is clearly the risk, in my opinion, that your full year CapEx guidance might not be fully met? And my second question is a bit shorter. Can you indicate what proportion of your cost savings target of EUR 250 million is specifically related to the copper decommissioning?

[Hans Christian Figee, CFO & Member of Management Board]

Konrad, on your second question, a very small amount. I think you're looking at EUR 10 million, EUR 20 million, that order of magnitude. I mean the copper decommissioning will really kick off in 2023.

[Konrad Zomer, Research Analyst]

Yes. I thought so.

[Hans Christian Figee, CFO & Member of Management Board]

As of 2023, so that's -- there may be some small savings, but think about a double-digit number, maybe EUR 20 million, EUR 30 million. But the most it really is kicking in after the completion of this cost-saving program.

[Konrad Zomer, Research Analyst]

Okay.

[Reinout van Ierschot, Head of Investor Relations]

And CapEx?

[Hans Christian Figee, CFO & Member of Management Board]

On CapEx, well, I think you're completely right. I mean, look, we stick to our EUR 1.2 billion CapEx guidance, it's very clear. Of course, you have fiber spend that is been significant. Nonfiber spend is coming down a little bit even if you see some increase in Consumer CapEx. It's just a bunch of programs that we were running last year that you gradually have to scale down, you can't just turn off the tap. So we had a plan and have a plan to get nonfiber spend down significantly, and that requires scaling down some of the programs. I mean notably in the first quarter, we did spend some more money on mobile site swaps. I think our mobile site swaps is now well over half of total. If you do a traffic weighted, it even more. So on mobile and some of the other programs, it takes a bit of time to scale them down, but we do stick to the EUR 1.2 billion CapEx guidance.

[Operator]

The next question is from Mr. Stephen Malcolm Burn, Redburn.

[Stephen Paul Malcolm, Research Analyst]

I'll go for the 2 questions, if that's all right. Just coming back to the corporate decommissioning. Can you just outline any regulatory requirements you need to meet? You may have touched it on Joshua's question, if you did, I missed, I apologize. And what protection to your Wholesale customers have here? Can you force them to migrate their existing VDSL customers to fiber? Or does that go through some sort of regulatory arbitration? And then just sort of looking at the sort of 2026 post-fiber CapEx point you've talked about. This being in the telecom sector, we penalize you when you generate too much cash and we worry when you are generating too -- when you generate too little. And then when you start to generate too much, [ we worry they get ] taken away. Have you had any discussions at all with the regulator about what the world looks like in your post-fiber world and be able to sort of get any sense for future regulatory protection to the investments you're making today? And do you think that the presence of APG as a coinvestor could help you on that front?

[Joost F. E. Farwerck, Chairman of Management Board & CEO]

Well, on the decommissioning, one of the reasons we really kick off as from 2023 is because of regulation. So we cover 1/3 of the Netherlands on fiber. And in most of the areas, we announced the decommissioning of the copper network, but we agreed with our regulator on announcement period of 2 or 3 years. So after that, our Wholesale customers have to be migrated to fiber just as we ourselves have had to do that. It works quite well, by the way. Because of the success on fiber, we see other players on our network being super successful on fiber. 22,000 connections added last quarter. So strong growth there. And that's also because they migrate from copper to fiber in these areas, and they know they have to do it. So we follow that, we follow our own migrations and we follow the migrations of our Wholesale partners because they all have to be there at the same time. And that is -- and that's why we announced it a couple of years upfront, we started the real decommissioning.

[Stephen Paul Malcolm, Research Analyst]

And Joost, did you give a number in terms of penetration or reach that you've got to hit to decommission copper, I didn't catch that? Or is there -- is it at your discretion?

[Joost F. E. Farwerck, Chairman of Management Board & CEO]

Well, it's at our discretion, but the most efficient way is, of course, to move to as low as possible penetration grade on copper before we start to decommission. Otherwise, we face a lot of costumers to migrate. And that's why we, currently in that new fiber approach, move our customers faster to fiber for 2 reasons: to sell up in a -- the commercial flow works better, but also to -- in the first 2 waves of the S-curve, as I call it, make sure that most of the customers of KPN are migrated to fiber. And we see Wholesale partners doing the same thing. So we learn a lot on how to manage fiber and how to migrate customers to fiber since 2008. But I think we're doing it in a much smarter and more efficient way today than we did 10 years ago. And the whole regulatory framework is followed by us. So that's why we take 2023 as the real year to really kick it off on a large scale.

[Stephen Paul Malcolm, Research Analyst]

Okay. That's very helpful.

[Hans Christian Figee, CFO & Member of Management Board]

And then your second question on the future regulatory framework in 2026. Well, I mean, your crystal ball is as good as mine.

[Stephen Paul Malcolm, Research Analyst]

I doubt that, Chris.

[Hans Christian Figee, CFO & Member of Management Board]

We're not regulated today, right? And the current regulatory framework, the EC, that's about to be in place that I think has a horizon that's supposed to extend for a few years, explicitly talks about protecting digital infrastructure investments. And secondly, it says if -- you have to provide open wholesale access and have to give someone else a viable economic -- viable business case, viable economic case. We believe we do. And as far as I can see, I don't have a reason why that would not be the case in 2026. And of course, it depends on the number of variables. But there's no deal or agreement at this point on what the world looks like post-fiber rollout. But when I look at the current regulatory framework and the horizon, it's supposed to cover, I don't see an immediate threat on the horizon.

[Joost F. E. Farwerck, Chairman of Management Board & CEO]

And then to add on that, of course, we discuss our fiber strategy with the government frequently because what we are doing is super important for the digitalization of the Netherlands and also very helpful for Dutch economy. So for us, it's very important that we are supported by the government to make this possible and make it happen. And when we discuss this at the ministry, they're very supportive. It's not only important for KPN, but it's important for Dutch economy and the Netherlands as well.

[Operator]

The next question is from Mr. Simon Coles, Barclays.

[Simon Alexander Arulraj Coles, Research Analyst]

Just on mass market service revenue guidance. I mean we have pretty good visibility on Consumer, and Wholesale is going well. So I was just wondering if you'd give a bit more color on SME. Because I think in your comments, Chris, you were saying something around it's been stable for the last 3 quarters on an underlying basis. So could you give us some more color on sort of the moving parts? There's obviously a roaming impact this quarter, but then you're saying broadband looks strong and there are some interesting developments. Any more color around SME would be very useful.

[Hans Christian Figee, CFO & Member of Management Board]

Yes, sure. I mean if you look at the presentation on the Business page, you can see the quarterly SME revenue numbers. And you see last year, around EUR 140 million something revenues in the -- service revenues in Q1, Q2, stepping down to EUR 133 million to (sic) [ from ] EUR 135 million in the subsequent quarters. The step-down was due to the PSDN/ISDN migration shut off. There was a specific self-induced, self-inflicted markdown in service revenues. So with that, you see numbers on SME to be quite stable for the last 3 quarters, Q3, Q4 and Q1, that's one thing. Second element is it's mostly mobile. In our SME business, the mobile revenues weigh relatively heavily compared to large corporate clients. So the share of mobile and SME is relatively significant. So that means that the roaming step-down compared to the first 2 months of last year is particularly visible in SME relatively to LCE simply because the share of revenues. It's over 40% share in revenues in SME and about 20% in LCE. So that's -- you can see that, that roaming thing hits SME mid-corporate more than LCE. So the point I'd want to make is roaming and mobile is going down. Mobile is going down or had some headwinds because of roaming. And also there is price competition. Let's be clear, ARPU is under pressure in mobile. That affects SME. Broadband network service -- IT service is doing quite well in SME. Base, okay. Pricing, good. That altogether leads to a step-down in SME. But again, that really has been almost offsetting in terms of service revenues for the last 3 quarters. So when you look at that, I'll say, Q2 to Q2 will still be challenging, because we're in today at EUR 135 million or it's EUR 133 million service revenues in the quarter. Last year, Q2, you had EUR 140 million, EUR 142 million, EUR 143 million, I believe. But in the second half of the last year, the year-on-year comps will become much more friendly, much more supportive also because of roaming. So it's a comp issue, it's an issue of the shutoff of ISDN and PSTN migration last year and the fact that mobile service revenues and the roaming delta and competition just weigh more heavily on SME than LTE.

[Simon Alexander Arulraj Coles, Research Analyst]

That's very clear. And on the competition, it's still tough in mobile, but you're not seeing any issues in the broadband side, [ as I understand there ]?

[Hans Christian Figee, CFO & Member of Management Board]

Well, I mean, life is not life stuff out there, but we're seeing more fierce price competition in mobile than in broadband at this point. And I think our strategy is just to increase cross-sell. KPN One is now at -- 25% of our customers have triple play services, that will and also needs to increase. So one of the critical factors for us is to increase that -- the cross-sell ratio. A critical factor is to increase the amount of unlimited to counter mobile competition. But as I said, price competition is more heavy, more prevalent in mobile than in broadband at this stage.

[Reinout van Ierschot, Head of Investor Relations]

Okay. Thanks. With that, we will conclude today's webcast. So thanks for your attention. If there's any further questions, as usual, please contact the relations team. Thank you.

[Joost F. E. Farwerck, Chairman of Management Board & CEO]

Thank you.

[Hans Christian Figee, CFO & Member of Management Board]

Thank you.

[Operator]

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