Koninklijke KPN NV

F:KPN

Earnings Call Transcript 2020-Q2

[Operator]

Good day, ladies and gentlemen. Welcome to KPN's Second Quarter 2020 Earnings Webcast and Conference Call. [Operator Instructions]Please, note that this event is being recorded. I will now turn the call over to our host for today, Bisera Grubesic, Head of Investor Relations. Go ahead, please.

[Bisera Grubesic, Head of Investor Relations]

Thank you, operator. Good afternoon, ladies and gentlemen, and welcome to KPN's Second Quarter 2020 Results Webcast. With me today are Joost Farwerck, our CEO; and Chris Figee, our CFO. Before turning to the core of the presentation, I would like to draw your attention to the safe harbor statement on Page 2 of the slides that also applies to any statement made during today's presentation. In particular, today may include forward-looking statements, including the company'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 statement. I would now like to hand over to Joost Farwerck

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

Thank you, Bisera, and welcome to our second quarter results presentation. We delivered solid performance in the second quarter with stable adjusted EBITDA after leases and significantly higher free cash flow, excluding divestments. Our balance sheet and liquidity position remains strong, and we are living up to our 2020 dividend commitments. Demand for KPN's essential connectivity services remain high, and our networks have proven to be robust through a period of unprecedented demands. The execution of our strategy is well underway, and we saw positive developments, particularly in the competitive consumer market, where broadband and postpaid net adds showed a clear improvement trends. And we see some first signs of bottoming out there. In B2B, we made again progress with customer migrations, though we recognize several challenges remain in the B2B segment as the economic activity in the Netherlands has decreased. As we continue our open wholesale model, we see further growth in our wholesale broadband portfolio, and we also continue to ramp up our fiber rollout. I would like to highlight a few key figures corrected for divestments, adjusted revenues declined by 3% year-on-year. Growth in professional services in Business and in Wholesale was offset by lower revenues from mobile and a roaming effect and fixed voice services. Adjusted EBITDA after leases was flat as the effect of lower revenues was fully offset by strong cost savings. Free cash flow increased 70% year-on-year to EUR 177 million. And ROCE, which we will now be reporting semiannually, increased 80 basis points year-on-year to 9.8%. Chris will give you more details on our figures later in this presentation. The estimated net effect of COVID-19 on group financial result was a slightly negative in the second quarter. The estimated negative net effect on adjusted gross profit was around EUR 5 million to EUR 7 million, driven by lower revenues from roaming and delayed IT projects. This was partly offset by higher fixed and national mobile traffic. The estimated net impact on adjusted indirect OpEx was approximately EUR 6 million to EUR 11 million positive, driven by, for example, lower cost related to travel, learning and development, facilities, FTE cost, et cetera. Uncertainty continues about the impact of COVID-19 on the Dutch economy, and therefore, on KPN. And with the Netherlands expected to move towards a recession, the ultimate impact remains difficult to predict. While we expect to see a higher negative year-on-year effect of roaming in Q3 due to the summer holiday season, we remain able to adjust our cost base in line with developing economic circumstances. Our revenue risk assessments by type of customers is unchanged compared to the first quarter. Importantly, revenue in customer segments that are most exposed to the negative impact of COVID-19 accounts for approximately 10% of total group revenue. We remain committed to our strategy and to our 2020 outlook as provided in January this year. We delivered in the first half of the year an outlook for adjusted EBITDA after leases, CapEx, dividend per share is reiterated. Combination of COVID-related downward pressure on revenues, offset by strong cost control, enables us to reiterate our 2020 outlook for adjusted EBITDA after leases. We reiterate our CapEx outlook of EUR 1.1 billion, and we also reiterate our dividend per share outlooks of EUR 0.13. An interim dividend of EUR 0.043 will be paid in August. We remain fully committed to grow free cash flow with at least a mid-single-digit percentage. There could be some limited downside risk due to a potentially worsening trend in customer payment behavior as a result of COVID-19 in the second half of this year. However, we are not observing this, and this is not impacting us today. We remain committed to grow free cash flow with at least mid-single-digit percentage. KPN is well positioned to absorb the short-term and medium-term effects of COVID-19. Visibility of impact of the pandemic into 2021 is limited. So we remain fully committed to our 3-year strategy and let me now give you an update on our strategy. In the first 6 months of the year, we have seen solid progress on our strategic pillars, which, as a reminder, are building the best network, focus on profitable growth segments and accelerating simplification and digitalization. We've made good progress in building the best converged smart infrastructure. On fiber, we added 76,000 additional households in Q2, which adds to a total of 250,000 households since we started to roll out last year. We've also significantly improved access speeds for our customers. To date, we upgraded a total of nearly 1,500 mobile sites with the latest equipment, and we only have approximately 80,000 legacy lines left to migrate by the end of 2021. We switched off ISDN 2 technology, and we are currently migrating customers to our new OSS environment, reducing the lead time of new broadband customers from around 2 weeks to 3 days, strongly improving the customer journey. We have one of the largest fiber footprint in Europe with 2.6 million households or 32% of the nation covered by fiber to the home and 55% of households covered by fiber to the cabinet. Our ambition is to cover more than 40% of households with our own fiber network by the end of next year, and we expect to continue the fiber rollout thereafter as we are just getting the machine up and running. We acquired a small local fiber network consisting of 6,000 homes past -- in May, and this was a good opportunity to enlarge our footprint at value-creating terms. This month, we successfully tested our next-gen PON technology and reached up and download speeds of 8.5 gigabit per seconds. And this only shows what our investment in technology will bring to our customers in the future. We will continue to develop this to further shape the digitalization of the Netherlands. As I mentioned, we added 76,000 households to our fiber network in second quarter. We activated 32,000 customers, which means a solid activation rate of 47% over the past 12 months. Currently, we are rolling out an average of 5,400 fiber to the home connections a week. We're active in 83 areas, and we are starting construction in the largest cities of the Netherlands. We are committed to our fiber investments, and we see continued commercial proof points that our fiber strategy is driving value. Fiber is now more than half of our consumer broadband net sales. We see a higher network penetration in fiber areas. Fiber ARPU is 9% higher than copper, driven by higher inflow ARPU and better take-up of value-added services. Convergence penetration on fiber is higher, and NPS is higher, resulting in lower churn. Consumer fiber revenues grew 6.3% year-on-year in the last quarter, driven by growing base and attractive ARPU. Overall, our fiber investment generate returns that exceed the group's cost of capital and have a positive net present value. While the speed of our mobile network modernization was somewhat impacted by COVID-19, KPN upgraded approximately 560 sites with the latest mobile RAN equipment in the second quarter. And this brings the total modernized sites to around 1,500 since we started in September last year. In the latest spectrum auction, we obtained an attractive combination of frequency licenses totaling 75 megahertz for a total of EUR 460 million. We're satisfied with this outcome, and the new licenses allow us to further improve the quality of our mobile services, and we are excited to launch 5G services for our customers tomorrow. KPN initially foresees the most potential of 5G for new business applications, such as innovations in the field of safety, health care, mobility, logistics and the manufacturing industry. The first new serviced enabled by 5G are a first step in 5G development. More new developments will be added in the coming year. And after the auction of the 3.5 gigahertz bands, which we expect in 2022, a greater improvement in speed and capacity will be possible. Let's now move on to our second strategic pillar, focusing on profitable growth. In Consumer, we aim to deliver sustainable value through our continued focus on the high-value KPN brands and by running a targeted household approach. We've reached some important milestones, integrating the Telfort brands and launching KPN Hussel. In B2B, we migrated a significant part of our customers to our target portfolio, and we are regionalizing the IT environment. We're simplifying our product portfolio. However, due to COVID-19 impact, we expect B2B end-to-end adjusted EBITDA after leases to stabilize in 2021 based on current estimates. In Wholesale, we see continued growth of our Wholesale Broadband Access and VULA portfolio. Our third strategic pillar is accelerating simplification and digitalization of our company. KPN made good progress in the digital transformation program by migrating customers to a new operating support system. This reduces the lead time of new broadband customers and strongly improves the customer journey. Also we've shut down 3 data centers and terminated several applications resulting in structural cost savings. The second quarter was the first in which we saw the full effects of COVID-19 measures on the Dutch society. While impacting performance in some areas, this dynamic also underlined the importance of KPN's efforts to improve and enhance the quality of the Netherlands digital infrastructure. This work is essential to the country's economic recovery as well as its ability to address the ecological and social challenges of the post-COVID world sustainably. Throughout the crisis, we have ramped up incident monitoring and waived fees for cybersecurity support for hospitals. We offered free connectivity cards for vulnerable groups to stay connected and be home schooled during the COVID-19 pandemic. And we signed a green recovery statement, calling on the government to start to COVID-19 recovery plan sustainable. Our ESG efforts are recognized by various external benchmarks. We are on the A-list of CDP. We have a AAA status at MIC and we have gold-class distinction at Dow Jones Sustainability Index. Let's move to the performance of the segments. In the second quarter, fixed consumer revenues were slightly up, while mobile service revenues declined 6.5% year-on-year, partly driven by lower roaming revenues. As mentioned before, this trend is expected a bit worse in Q3 due to lower roaming revenues during the holiday season. The market remained highly competitive with 3 players focusing on converged customers, competition from local fiber operators in rural areas and mobile competition now focusing on more on the high ends, unlimited propositions. NPS increased year-on-year to plus 15. We are highly valued for our best-in-class network, converge services and our fiber strategy. Also, we are pleased that our fiber network is recognized as the best fixed broadband network in the Netherlands by the Dutch consumer association. A few words on our consumer KPIs. In the quarter, our converged customer base returned to growth. Converged households grew by 3,000 customers, and we added 30,000 converged postpaid customers. Looking at our broadband base, we added 17,000 fiber customers in the quarter, while the total broadband net adds declined with 3,000. In mobile, our customer base remained broadly flat. So this is, for us, an important trend to focus on. This quarter-on-quarter improvement of consumer net adds was driven by improvements by commercially strategy on fiber. Our focus on the fiber strategy is important, our strong unlimited propositions we introduced, our new marketing campaigns and our Super WiFi proposition in the Netherlands. Also we see that existing customers value the quality and stability of our network, especially in this COVID crisis resulting in lower churn. Our focus on value is demonstrated by fixed ARPU growing 5% year-on-year. In mobile postpaid, ARPU being EUR 17 for the sixth quarter in a row. In B2B, we completed the sale of KPN Consulting on the 1st of April. And as a result, the second quarter results do not include any KPN Consulting revenues. Corrected for divestments, business revenues declined 5.7% year-on-year. And this reflects the strategic actions in the segment, and it is also related to COVID-19 as we saw lower revenues from roaming and IT projects, in particular. We have further simplified our B2B product portfolio, and we removed already 37% of our offerings. We are on schedule to reach the 50% target by the end of next year. NPS in B2B increased to plus 2, driven by improved scores at SME and LCE customers. KPN is mainly valued for quality and for reliability. The operational transformation of our B2B segment is taking shape. We continue to simplify our product offerings, and most of our customers have now switched to a future-proof portfolio such as KPN Kleinzakelijk SoHo, KPN ONE and KPN Smart Combinations. We have now migrated 84% of SME and 72% of LE customers. We completed the phase out of ISDN 2, which is an important milestone, not easy in COVID times since migrations that require physical access to offices. And these were often postponed. Then on our customer segmentation within B2B, in the first half of the year. In the first 6 months of 2020, revenues from SME and LCE were declining, mostly driven by mobile ARPU and the proactive customer migrations. Revenue from our integration customer segment increased as a result of more project-related work. Now let's move to wholesale. Correcting for the sale of NLDC, adjusted revenues in Wholesale increased 1.2% year-on-year, driven by solid performance in our fixed portfolio. Mobile revenues were broadly flat despite lower roaming revenues. Wholesale added 16,000 broadband lines and 7,000 postpaid sims in the quarter. During the quarter, we also renewed a new 5-year MVNO contract base on commercial terms with Ufone. Following the court ruling on Wholesale fixed access regulation in March this year, KPN has reconfirmed its open wholesale policy based on its voluntary offer for ODF Wholesale Broadband Access and VULA and the long-term contracts it has in place with several parties. KPN believes its open wholesale policy is in line with the symmetric [ Axos ] policy outlined in the European Electronic Communications Code. While we have seen a slightly declining broadband base in Consumer, the performance of our Wholesale segment remains solid. This contributes to our strong and stable broadband network share in the Netherlands of around 52%. Then over to network operations and IT. Adjusted operating expenses after leases declined 9.3% year-on-year for the segment, mainly driven by a reduction of personnel, simplification of networks, IT rationalization and contract renegotiations with suppliers. We are working with our main contractors to protect the 3,000 jobs involved in our fiber rollout. And we maintain the expertise around network build-out in the Netherlands. In spite of changed dynamics in the Dutch construction markets, we are securing long-term construction capacity to safeguard our rollout plans. Now this ends my part of the presentation. I would now like to hand over to Chris to talk you through our financials. Thank you.

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

Thank you, Joost. I'm proud to present our KPN results here today. It's only my second quarter as a CFO, and it was an intense quarter for all of us. We navigated through unchartered territory, and I'm proud to say KPN delivered, both operationally and financially. Our network held up very well despite a massive increase in usage, and our base dynamics started to improve, not only quarter-on-quarter, but also during the quarter, and we achieved a few remarkable results. Our EBITDA after leases was flat in the quarter despite the corona headwind. It was up over the first half year. Our net profit was up 18%, and we expanded our margin to over 44%. ROCE, that we disclosed for the first time, was up towards nearly 10%, and we increased our free cash flow by almost 20% year-on-year.Under that, our working capital initiatives are starting to bear fruit. On top of that, we've got a very strong liquidity, over EUR 900 million in cash. Scheduled redemptions and the auction payments are payable out of existing cash. We launched a commercial paper program to increase our financial flexibility and will and be able to pay interim dividends and provide a safe haven to investors. Let me go through some detailed numbers. On Page 25, let me explain the like-for-like performance of our results corrected for the impact of divestments. Our adjusted revenues declined by 2.4% year-over-year. The adjusted EBITDA after leases increased by 1.6%, increase of 1.6% year-on-year. Lower revenues were more than offset by strong cost savings, and our margin improved by 180 basis points. Competition stays intense, but we've been able to expand our margins in this challenging environment. Our operating profit was EUR 39 million higher due to a combination of lower restructuring costs, a book gain on KPN Consulting, partially offset by our depreciations. And the same metrics drove a net profit EUR 38 million higher than last year due to higher operating profit, lower financing costs, partially offset by lower finance income due to the sale of KPN's stake in Telefónica Deutschland. Our cost savings program on Page 26 is well on track. We are ahead of a linear pattern in terms of reducing our cost base, achieving the EUR 350 million target. In the quarter alone, we realized a EUR 33 million net indirect OpEx savings. This brings a total of savings at 60% of the EUR 350 million, or EUR 231 million since the start of the program. These savings are driven by less personnel costs and by less IT and TI expenses. In the light of COVID-19, we decided to postpone new reorganization requests until the first of June 2020. In response to that, we reduced the hiring of new employees to a minimum and also reduced external staff to compensate this effect. We restarted restructuring projects again after 1st of June. In the quarter, we scaled down effectively 178 employees, correcting for the sale of KPN Consulting. On top of that, we also reduced our staff by 35 external staff members. Positively speaking, our running costs were notably lower in the quarter. Our monthly indirect cost base was an average close to EUR 10 million lower in Q2 than Q1. Also we noted that COVID-19 helped us deliver additional cost benefits in the areas of travel costs and housing facilities. We continue to see good cost reduction opportunities. Our self-help optionality will help us going forward, and we're fully confident that we will reach the EUR 350 million cost objective by the end of 2021. Our operational free cash flow was strong. For the first 6 months of the year, ended at EUR 588 million, a little lower than last year, corrected for divestments, fully driven by the temporary or the timing of our CapEx investments. In the first half, we've seen a strong increase in our free cash flow despite higher investments in fiber. Our free cash flow of EUR 257 million was EUR 40 million higher compared to the first half of 2019 and 20% up versus the same quarter in last year. In Q2, we saw EUR 26 million higher free cash flow compared to Q2 last year. This all is a result of a higher adjusted EBITDA after lease in the first half, lower cash restructuring, lower cash interest, lower investments in working capital and lower cash taxes, partially offset by increasing CapEx or at least to increase timing of CapEx investments. We ended the quarter with a strong cash position in total of EUR 907 million, whilst having paid the final dividend for the of 2019 in April this year. Our CapEx increased EUR 42 million year-on-year in the first 6 months. The share of access investments in CapEx has increased towards 50%, mostly in fiber. We are confident and positive about the value case for investing in fiber. Joost already demonstrated the key metrics and key KPIs to demonstrate that fiber actually creates value. The increase in CapEx is mainly driven by the different inter-year phasing of these increased access investments. We invested EUR 54 million less in commercial activities as a result of better inventory management, fewer active mechanics due COVID-19 and the reclassification of IT and TI. Net-net, IT, TI investments decreased EUR 6 million, following significant simplification of the IT and network architecture in prior years. Our investment in working capital were EUR 152 million in the first half year, lower than last year. The main drivers were lower trade receivables following lower sales levels due to COVID-19, lower trade payables, mainly driven by payment of end-of-year peak of incoming invoices, lower accruals driven by bonus payments, and our working capital is also positively infected -- or impacted by a number of specific initiatives on billing, invoicing and payment terms. ROCE, return on capital employed, improved 80 basis points year-on-year to 9.8%. We promised you we'd disclosed this number, and here we are showing our commitments to show our commitment to value creation and to demonstrate that we allocate cash and capital in a value-creating manner. Our ROCE is calculated on a 4-quarter rolling basis, i.e., the 4-quarter rolling average of our net operating profit after tax divided by capital employed. We reported, as you can see, an improving operational efficiency, which was driven by our disciplined cost control, offsetting lower revenues, consistent with our increasing operating margins. Capital efficiency was higher than last year. It was a result of higher depreciation and CapEx and due to accelerated depreciation of our copper and mobile networks. Net-net, an increase of ROCE of about 80 basis points. We have a strong liquidity position. The group's total liquidity stood at EUR 2.2 billion at the end of the second quarter, consisting of EUR 907 million in cash, and EUR 1.25 billion in undrawn revolving credit facility. Our total liquidity covers debt maturities until the end of 2022. In addition, KPN initiated a EUR 1 billion commercial paper program of EUR 105 million outstanding at the end of the quarter. We lowered our effective cost of debt to below 3% in the second quarter of this year. As a result of all of this, our financial position remains solid. Our net debt-to-EBITDA ratio was 2.3x. The interest cover ratio improved to 9.3%. And as I said, the weighted average cost of senior debt was 2.95%, 55 basis points lower than last year at this time. As mentioned during previous quarters, we believe in investing in disclosure to our shareholders. We want to be open, clear and transparent. We committed to you a disclosure agenda. In this quarter, we continue to act on that agenda. And we added ROCE, we added segment adjusted EBITDA after leases, which you can find in the data pack, much more commercial information on our consumer fiber activities, the details behind the value creation that our access investments actually deliver and the revenue breakdown per B2B customer segment. In the future, we'll continue in this agenda and plan to further enhance disclosure as indicated on the slides. We delivered on our disclosure commitments to you, like we deliver on our business commitments. So to summarize, we continue to create value for our shareholders. We have delivered a stable adjusted EBITDA after leases in the second quarter and strongly increased free cash flow in challenging times. KPN's balance sheet and liquidity remains very strong. And in Consumer, we see improvement in base dynamics quarter-on-quarter and during the quarter. In B2B, we were progressing with customer migrations and simplified our product portfolio, although we recognized several challenges remain as the economic activity in the Netherlands has decreased. In Wholesale, we see a growing broadened portfolio, contributing to a group-wide stable broadband market share of 52%. With strong costs, we deliver on our plan and ahead of track, and we are accelerating the rollout of fiber, which delivers a positive net price and value and drives value for KPN. And finally, we remain committed to our strategy and to our 2020 outlook and living up to our dividend commitments. Having said that, thanks for your attention. Let's turn to questions.

[Bisera Grubesic, Head of Investor Relations]

Thank you, Joost and Chris. [Operator Instructions] Operator, please open the Q&A.

[Operator]

[Operator Instructions] The first question is coming from Mr. Keval Khiroya, Deutsche Bank.

[Keval Khiroya, Research Analyst]

Got 2 questions, please. Firstly, you've highlighted that the current backdrop makes it difficult to confirm the midterm guidance out to 2021. I understand there are top line uncertainties, but is there any reason to think at least that the OpEx savings shouldn't continue at least at the current run rate? And if so, should we think about upside to the EUR 350 million savings target? And then secondly on CapEx, you've highlighted that the pace of fiber rollout continues to improve. Are you now at the maximum run rate? Or should we expect further increases there? And is there anything you can say about whether we should still expect EUR 1.1 billion of CapEx for 2021, which is what you had originally penciled in the original guidance? And anything you can say on midterm CapEx generally would be helpful.

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

Let me start, and then Chris will take over. When it comes to 2020 and 2021, we are fully committed to our strategy. And in that strategy, we have a framework of CapEx of EUR 1.1 billion. In that EUR 1.1 billion, we have to operate, and that is what we currently do. So I'm happy with the results of Q2. That's why we can reiterate our 2020 EBITDA, CapEx, dividend guidance, and we're convinced that we remain committed to growth in free cash flow. For 2021, visibility of the impact of -- yes, the COVID-19 crisis is currently limited. So also there, we remain fully committed to our 3-year strategy. We have a cost-saving program. We had one of 3 years. This is the second one. And as you can see today, we are a little bit ahead of the plan. So if everything works out well, I'm convinced we can upgrade that plan in the future. And maybe you can add something on OpEx and CapEx?

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

Yes. On OpEx savings, as I said, in the quarter itself, you look at the monthly indirect spend, it's about EUR 10 million a month less than the last quarter. Obviously, some COVID tailwind in there, but underlying, there's a strong cost savings story. We're ahead of track, as Joost said, at some point, we'll get back to you on our cost. But we're confident that we'll reach our cost target, and the current run rate is actually beyond what you'd expect initial program.When it comes to CapEx and fiber rollout, we're not on our maximum speed yet. We continue to ramp up. We want to achieve 1 million households at the end of next year. With that, we will allocate a bigger chunk of our CapEx towards fiber. Will it fit in the current EUR 1.1 billion envelope? In our current ambitions, yes. We just have to find savings in other CapEx categories. But we want to move to 1 million households, and therefore, we need to speed up the ramp-up of our fiber rollout and continue in the path that we've set in.

[Operator]

The Next question comes from Mr. Joshua Mills, Exane.

[Joshua Andrew Mills, Research Analyst]

Just 2 questions from me. The first is around the tweaks you've made to the free cash flow guidance. And just to fully understand how we should think about fiber-to-the-home M&A going forward. So I think maybe the first question would just be, what percentage of the fiber-to-the-home lines you plan to build this year and next? Do you expect to buy rather than build yourself? And just if you could give us a kind of rough guide about how many millions of euros you'll be spending on that over the course of this year and next, that will be very helpful. And secondly, and related to that point, could you give us an idea of the total scale of opportunity you see to buy these smaller fiber-to-the-home providers? Is it kind of tens of thousands? Is it larger than that across the market? And what parameters do you look at when you decide between building a network yourself or buying in those kind of assets?

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

On the question on our acquisition of fiber lines, first, let me know that the amount of money we spend on it is relatively small compared to the total CapEx budget, right? We have a EUR 1.1 billion CapEx envelope. I think to this point, we spent 1% or less than 1% actually on fiber M&A. So we should not get carried away with the amount of M&A we can do in the space. It's a funny thing because what we buy is actually a network with a very small operation. Mentally, I tend to think of this as M&A, which you fund out of your balance sheet. Unfortunately, IFRS, like, requires to classify this as CapEx. I can't frame it as a business combination, but as a network acquisition. Because we are rolling out fiber ourselves, and we're buying small network without too many activities on the side. So whilst mentally, this is M&A that you fund with your balance sheet, effectively, we have to present it as CapEx. How do we look at it? It's opportunistic. It's on top of. So we have an organic fiber rollout plan where we have a very specific model and approach select regions, select areas, select zip codes where we roll out fiber. But sometimes you bump in opportunities to accelerate and add more fiber to your fiber portfolio. We tend to look at it from a couple of lenses. First of all, buy should be never more expensive than make. So we will ask ourself the question, if you wanted to put out fiber in this area, would it be more expensive or cheaper to buy it? Secondly, is there a real value-creation opportunity because you add a network where penetration is really low, and penetration is what drives ultimately the fiber case. So can we add penetration to the network? That together will drive the case and how we look at it. How much is there to do? Hard to say. This is opportunistic. We don't pursue a truly active M&A strategy, but once you bump into opportunities, you look at it. So it's -- you're looking at probably a couple of percentage points of the total CapEx envelope at max. I can't tell you how much we do when and where because in these transactions, we are in this opportunistically. If we see a good deal and create value, we'll pursue it. If not, we're happy to walk away. So it's all about is this value created to shareholders, but it's a couple of percentage points of our CapEx envelope. That's kind of the maximum of what we could do. And unfortunately, IFRS requires to classify it as CapEx. Although mentally, this is an acquisition you fund with your balance sheet. So you're talking about a couple of thousand -- 10 thousands of lines, not hundred thousands of lines.

[Joshua Andrew Mills, Research Analyst]

Understood. I mean I tried ask the question in a slightly different way. When you initially gave the guidance for 1 million homes fiber-to-the-home households, and this EUR 1.1 million CapEx budget, I think the assumption was that you would meet that 1 million home coverage within that CapEx budget. So if you're pursuing additional add-on M&A on top of what is an unchanged CapEx guidance, should we expect you to perhaps end up at more than 1 million fiber-to-the-home households by the end of next year? Or is this just a shift of cost into different area?

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

We're not going to be cheeky, say, I keep this out of my CapEx budget, but inside the 1 million homes target. It’s either both in, both out. For all intents and purposes, both out. So it's out of the CapEx, it's out of the 1 million homes. We make or we don't make the 1 million homes based on organic rollout. We make or don't make our CapEx budget within the EUR 1.1 billion. So we're going to continue to compare apples and apples for you.

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

But please be aware that there's really a small opportunity for us, 6,500 lines. Maybe there are 2 or 3 more of these kind of networks in the Netherlands. We're not sure if we are going to buy it, like Chris said. It's all about the deal, and we compare this against rolling out ourselves. But this is, to be honest, a limited opportunity, small stuff.

[Operator]

The next question comes from Mr. Frederic Boulan, Bank of America.

[Frederic Emile Alfred Boulan, Senior Analyst]

A quick question on your KPIs, both in mobile and in broadband in the Consumer segment. So we saw a nice improvement. But at the same time, this is in the middle of pandemic, which is pushing churn down everywhere. So looking ahead, when we look at the next couple of quarters, should we expect that return to a more stable picture to remain? Or on the contrary, there is scope for churn, et cetera, to pick up in the back end of the year and into next year?

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

Thank you. Yes. This is for us, super important. I said before, we have to draw a line in the sense when it comes to our broadband and our mobile base in consumer market. After eliminating the Telfort brand, we lost customers quarter-by-quarter over the last 5 quarters. So I'm seeing a positive trend here with minus 3,000. I would say COVID is not against us, but it's really about the way we launched the new propositions. It's about the way we combined operations and commercial people in the regions to sell fiber and to connect people to fiber. It is about how we launch unlimited, our new marketing campaign. So the market didn't stop rotating, by the way. We saw an inflow on the wholesale side of broadband customers of 16,000 this quarter. We stabilized. So for me, these are positive signals, and we will do all we can to improve this quarter, our base in consumer market. On the mobile side, we see the positive effect of our push to unlimited propositions, which is to support our ARPU. Of course, in Q3, we always have the biggest impact of roaming. But in general, this unlimited proposition is really supporting our ARPU, and the base is also developing in the right direction. So this is not a coincidence. It is very important. Every week, we look at this as a Board, and the company is fully focused on improving our base churn.

[Operator]

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

[Michael Bishop, Equity Analyst]

Just 2 questions, please. Firstly, on B2B, you mentioned in the slides that I think you're pushing back the stable EBITDA target until 2021. Could you just talk us through the dynamics behind that shift? And effectively, how much is COVID related? And then secondly, picking up on your slight caution about the remainder of the year on free cash flow and by debt. It doesn't feel like you're seeing too much today, but could you give us any extra color around your updated thoughts on the bad debt in relation to the 10% of revenues from potentially impacted areas that you identified at Q1?

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

Yes. In B2B, the end-to-end stabilization is very important target for us. In general, we're on track. In SME, we migrated 84%. And I think in SME, we will stabilize this year. LCE migrated a lot, above 70%. So it really has to do with the impact of roaming that I think we're not going to make it this year in stabilization. Having said that, when we look at the whole value chain end-to-end, knowing where we are in the migrations, we are convinced that we can make it soon next year. Free cash flow?

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

Yes, Michael, on the free cash flow. Look, this year, we've delivered on our EBITDA and free cash flow objectives, right? We delivered a better cash -- free cash than planned than last year despite an increase in CapEx. As Joost said, we've confirmed our EBITDA guidance, committed to you our free cash flow guidance. We increased our risk around free cash flow bit, not our expectation, but just a risk. And the notion is indeed that there is a risk in the second half of the year when the economy needs to pick up and the government support will gradually wane, we need to see how that affects payment behavior by our customers.At this point -- and as we talk about payment extension of our customers, we don't see massive risk of bad debts increasing. For your background, bad debts are around 6% of trade receivables in business consumer. I think total exposure, about EUR 25 million of bad debt provision. Hasn't changed, haven't really -- hasn't really materialized, materially moved in the first half year. We don't see an increase in bad debts. We don't see an increase in payment terms, so it's 30 to 60 to 90 days, but you have to reckon that, that is a possibility that is happening. So it's not happening today, but it's a possibility. So what we're saying is, look, we're committed to our EBITDA, committed our free cash flow, we expect to deliver our guidance. But when it comes to extension of payment terms, payment duration, that does not affect your EBITDA, but it may temporarily affect your free cash flow in the year because that's what we're seeing. We're not seeing it today. But of course, we're cognizant of what what's happening in the outside world, the uncertainty around COVID, and that could be a factor in the second half.

[Operator]

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

[Luigi Minerva, Senior Analyst]

The first is on the roaming impact in Q3. Maybe can you give us an indication of what you expect? And secondly, I noted your positive comments on Wholesale and that you -- what you're doing complies with the code. Maybe can you give us a wrap-up on where we stand on fixed line regulation in the Netherlands and whether you see a risk of more intervention on KPN?

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

Yes. So compared to other telcos, our roaming impact is limited since we -- as a Dutch incumbents are competing against T-Mobile and Vodafone in the Netherlands, and they have international networks. So they offered better online -- on-net propositions to B2B customers. Having said that, there's always an impact outside of EU. So this is really a limited amount of revenues. But all -- we know it will impact our revenues a bit in Q3 as it did in Q2. On Wholesale, we have been regulated for 20 years. Last quarter, we won a case against -- yes, a regulator and suddenly nowadays we're no longer regulated in fixed access in the Netherlands. We appreciate regulation, and we understand we need a supervisor in the Netherlands. That's very important. We're not against regulation. I think having a regulatory framework is good. That's why we suggested to follow our open access model in the Netherlands, with all the pricing on the services we do on the Wholesale side that used to be regulated. And we follow the same price scheme as before. The only thing we do not like is the idea of getting regulated on tariffs. And that's why we have these discussions with our government. We appreciate regulation. We think it fits in the European regulatory framework. And I think that we can make a good step by using the open access model of KPN as a voluntary model introduced by us, which is from a legal point of view, possible as the new regulatory standards in the Netherlands.

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

Maybe on the roaming, I can add, if you look at roaming traffic levels, I mean, our own data own voice since last year dropped by 50% to 60% of the comparable period. Visitor data dropped by 30% to 40% over the comparable period. We saw some recovery in June. So early traffic data in June recovered a bit. Now the intelligent lockdown has gradually been released. Where do we see impact? I would see on B2B probably similar as in the previous quarter as in Q2. You'll see some additional impact in the consumer business. People don't travel abroad in the quarter. We'd expect to see some compensation in the form of more national calling, out-of-bundle calling. But I can't rule out that in this very quarter for consumer, you may see a temporary dip in ARPU as the roaming and national calling effects kind of tend to have impact. That should be temporary. On an EBITDA level, I think we can still compensate with lower cost. But in terms of impact, continue the same impact on B2B and impact this quarter on consumers because of the holiday season, possibly, hopefully and expectedly compensated by more out-of-bundle calling in home calling and compensated with lower costs. That's kind of the background that I would love to give to you. And some first signs of gradual, very small improvement in June when data traffic levels start to bottom out a bit.

[Operator]

The next question comes from Siyi He, Citi.

[Siyi He, Research Analyst]

I have 2, please. The first one is just go back to your comments on mobile, especially in B2B. In this quarter, we see another deterioration in the trend. So I wonder whether you can comment on how much of that is relating to roaming. And now look at your B2B ARPU is at a similar level to your consumer. I'm just wondering if you can say we should expect some underlying stabilization of the B2B mobile ARPU? And my second question is related to your previous comments on the fiber acquisition. I was wondering if you could give us some more data points in terms of your return on investment you see on it and how long will it take to cover the cost of capital?

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

Yes, your first question was referring to the roaming effect, if I'm not mistaken, and the mobile consumer ARPU. So we see an improving trend on mobile ARPU because, yes, not that long ago, we were facing a decline in ARPU every 2 quarters. And now for the sixth quarter in a row, we are around EUR 17. And we stabilized our base. And that's all related to our commercial approach in the market. So underlying development is good. Like Chris just mentioned, there's a roaming effect in our current revenue trends, and Q3 is always a bit more higher on the roaming than the Q2. Although we have this EU roaming. So in EU countries, it doesn't make any difference if you're in the Netherlands or outside, same tariff accounts there. So it's really outside EU, we're talking about on the roaming. So the effect in Q3 on the roaming will be a bit more than in Q2 but not significantly. And your second question…

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

Was on the ROI of the fiber acquisition. When we look at it, we always do, first of all, an NPV analysis, where we look at bespoke fiber-specific cost of capital, which is higher than KPN's group cost of capital. We've debt. It's NPV positive. For competitive reasons, let me not dive too deeply into the ROIC or IRR. But it's a low double-digit number that we think we can achieve on this transaction. That's all depending on us meeting our penetration goals, but we think we can do it. And you're looking at a low double-digit IRR over time.

[Siyi He, Research Analyst]

And just want to follow up -- the mobile comment -- do you see the underlying trends also improving for your B2B mobile?

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

Well, the base for sure is improving in B2B. We added 61,000 net adds in this quarter, if I'm not mistaken. So I think there's a lot to repair in the Netherlands. When it comes to mobile, we all invested a lot in networks. We have the best networks in Europe in the Netherlands. So it's super important that we all understand that we have create value. This market in the Netherlands is eliminating lower price points and moving more to unlimited, high-priced, for us, above EUR 30, EUR 27, EUR 50 in the package in a converged package. So I'm a bit -- a little bit positive here, but yes, let's wait and see. But today, currently, it's moving a bit in the better direction, to put it that way. Yes.

[Operator]

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

[Simon Alexander Arulraj Coles, Research Analyst]

Just on cost cutting, you said you're running ahead of expectations. And I think before you said there's some uncertainty around FTE reduction, given the macro environment. You said you started off again at the beginning of June. I was just wondering if you can give us some more color on how that's going and does that mean that you could potentially still be on track?

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

Yes, so when corona started, we froze all our reorganizations. And we worked on how we could facilitate our people working from home. But having said that, we still reduced on FTE because we had a couple of reorganizations already ongoing. And end of this quarter, we announced that we restart our reorganizations because we think it's not fair to our people and doesn't make any sense to keep waiting with improving the operating model of KPN and simplifying our organization. And our people agree, as long as we do it according to plans and in a fair way, and that's what we always do. So we restarted our reorganizations, and we will, in the coming 6 months, reduce people but having said that, in the way we always do, in a very decent way. On OpEx reduction, we're running ahead of plan. And like I just said, yes, we are ambitious. So we would like to beat our plan. And not for today, but if continue like this, we will upgrade the program.

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

When it comes to FTEs, I mean, what was did was, at some point, once the lockdown started, we froze our reorganization requests, restructuring requests. But in exchange for that, we instilled in effectively a hiring freeze. So new hires have dried up considerably. And secondly, we reduced external staff significantly. For example, when we used to have our shops around 200 external staff, we closed them and reopened them. Today, we're opening them with about 80 staff. So we saved on 100 external staff numbers from the closing, reopening of our shops. So we compensated the slowdown of the freezing of our restructuring with less external staff and hiring freeze. Now we've started restructuring again and basically a function, if you simplify your business, digitize your business, that makes no sense to have people employed that do not, kind of, any -- make any meaningful contribution anymore, has been aligned to discuss with the unions and the workers' council. So that's kind of kicking off again, and we're starting it again. But it's fair to say the biggest restructuring will probably take place in Q4 of this year. And the coming summer and the coming Q3, we'll focus on keeping a lid on internal inflows, keeping lid on external staff and gradually ramp up where restructuring requests for advice again.

[Simon Alexander Arulraj Coles, Research Analyst]

Very clear. Can I just ask a follow-up linked to the '21 free cash flow guidance then? Because you say you're confident that the B2B EBITDA could stabilize in 2021. Admittedly, that's pushed back from 2020. And the cost-cutting sounds like it's ahead of expectations and the conversations on redundancies are going well. So is it -- should we just take it as it's purely the COVID uncertainty that's causing you to have some apprehension for now and little else is causing that.

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

Yes, it's really all about COVID, we -- we -- it's really about the impact of the pandemic that's uncertain to us. KPN underlying is delivering as planned, probably even better than planned. Sometimes Joost and I look at sort of what if COVID had not happened, what kind of quarter, half year would we've had. So I think KPN underlying is delivering according to plan. It's the uncertainty around COVID. And for example, the payment behavior or the depth of the recession that is hard to gauge. So that's kind of the only risk we're flagging.

[Operator]

The next question comes from Mr. Paul Sidney, Crédit Suisse.

[Paul Sidney, Research Analyst]

Just a couple of questions for me, please. Firstly, the question on fiber. Now that you're back up and running on the FTTP build, and you're seeing the clear benefits to ARPU, churn, NPS, how much fiber do you think it makes sense to build in the long term? Or how much could you economically see KPN building in the long term, given those benefits you're seeing? And then secondly, question on the balance between Wholesale and Consumer, fixed and voice and broadband lines. And the question is, are you less concerned over the retail customer trends now versus a year ago, given that you're getting that offset on Wholesale. And obviously, Wholesale customers come with lower ARPU but also lower costs. So just wondering how you think about the balance there and maybe how your thinking has changed over the last year?

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

Yes. So when we look at the fiber case, we see the proof that it's working. We are doing better than the original fiber case we built 10 years ago. On ARPU on penetration, we're doing good, and we aim to do better in existing fiber areas because having a penetration of 60% still means that 40% is not active yet. So for us, it's important, allowing to focus on new build areas, but also on the existing footprint we built over the years. Currently, we're working on a plan to roll out 1 million until the end of next year. And that is very important. The machinery we're building means that we can build fiber against lower cost per household because the more we build, the lower it gets, the more efficient we will become. We innovated a lot in the rollout of fiber. So we can go faster in areas to connect more houses against a lower price. So that is our focus for now. Doesn't make any sense to stop end of next year. I don't think so. So we will probably keep on building fiber. But of course, it's very important to stick in our CapEx framework as well. So that's where we are on fiber. We're doing good, we're scaling up, and it's against a lower cost per household. The balance between Wholesale and Consumer, I would say, we're playing this game for a long time. I think over the last quarters, we saw outflow on Consumer and a bit higher inflow on Wholesale. So it's our leverage on the Consumer side. Having said that, it's not healthy to lose that much customers in Consumer for a couple of years in a row. So I'm satisfied with the results of this quarter that we more or less stabilize consumer base, a bit of loans, minus 3,000. But again as said, the inflow of 17,000 or 16,000 on the wholesale side means that others are losing customers, and they are moved to our network and that balancing act between Consumer and Wholesale, delivers a lot of value, I think.

[Operator]

The next question comes from Mr. Roman Arbuzov, JPMorgan.

[Roman Arbuzov, Analyst]

I just wanted to go back to local ARPU for a second. So given your comments on roaming and rest of world, I'll just ask directly, do you think it's reasonable to expect you to maintain the EUR 17 mobile ARPU in Telfort consumer going forward? Or do you think we may see some downside risk to that even though that may be temporary? And also, when you talked about positive underlying trends related to consumer mobile, I just wanted to double check whether you meant that on an underlying basis, excluding roaming, consumer ARPU was actually positive in positive growth territory in Q2. And then the second question is just on Telfort broadband customer migration. Could you give us some color about where you stand on that and whether you've managed to migrate more customers in Q2? And how much of that remains to be done, please?

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

Yes. I apologize because the sound is not that good. So difficult to hear you correctly. But if I'm not mistaken, you asked a question around mobile ARPU of and the EUR 17 and on the Telfort customer migrations. Let me start with the Telfort customer migrations. We migrated the full mobile base of Telfort to KPN in a very smooth way. That was done. And all these customers have been migrated to KPN against the former Telfort price point. So that's done. On the broadband side, we are going to migrate the Telfort customers in the second half of this year to KPN. But we -- and we're piloting that now with friendly users, as we call it, but that's also very important that it goes smoothly in a couple of batches and then to the new environment. So that's an important migration, and we will do it in the second half of this year. And once that's done, the base is more stabilizing. So that is important. You're right there. On the mobile ARPU?

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

On the mobile ARPU, a couple of trends at play. The underlying trends supporting mobile ARPU are positive. I mean, if you look at the renewal of older cohorts of clients, the drag -- the ARPU drag from renewals is actually getting smaller and smaller. So there's still a bit of ARPU leakage from repricing older cohorts, but that leak is getting smaller and smaller. Secondly, the inflow, outflow mix is also improving. Behind it is a bigger share of unlimited. So we're upselling our clients toward unlimited propositions. So that, together, should provide some support to our mobile ARPU going forward. As I said in the short term, in the summer, you may have a temporary roaming effect. Roaming for international calling may distort the Q3 numbers. And thirdly, the one thing that we just do not know is whether our clients will look for more no-frill solutions as a response to COVID where they look for lower-cost solutions or not. It's not happening today. We don't see it at all, which we see in increase in the share of unlimited but something we need to be very mindful about. So my summary would be underlying trend from renewals, inflow, outflow, core repricing should be positive towards ARPU, a temporary dip in Q3 and the uncertainty around the COVID outlook. But given the stuff that we can control, especially the increasing share of unlimited, supports our mobile ARPU.

[Operator]

Next question comes from Mr. Usman Ghazi, Berenberg.

[Usman Ghazi, Analyst]

I've got 2.5 questions, please. The first question was just on the capital employed at the group level. I was wondering if you could tell us how much of that is related to FTTH. And just related to the ROIC, which is very impressive, around 10%, I mean logic would dictate, if you're generating a ROIC of 10% versus, let's say, cost of capital, I don't know, 5%, 6%, that you should be increasing CapEx to create more value, provided, obviously, that the income and returns stay this high, and I'm assuming that fiber-to-the-home returns are even higher than the group ROIC of 10%. So how do you manage that almost inconsistency between -- in theory, how to create value versus what the equity markets would like to see, which is CapEx, either flat or even come down. So that was the kind of broad question around ROIC. And then the second question was around B2B. You've disclosed that SME and large corporate are around similar in terms of the size of revenues, EUR 300 million each in H1. I mean, is the -- are the margin dynamics different for these segments in the end-to-end EBITDA? Or is it broadly similar kind of contribution?

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

To start with your B2B question, SME is not the largest segment when it comes to revenues. But from a profitability point of view, it is very important for us. So it's the highest profitable B2B segment for us. And why is that? Because we standardized the portfolio, it's called KPN ONE. We can migrate 82% of the base to KPN ONE, and we can support that full base with less people than we do in LE or corporate. Corporate, we migrated 73%, but against the lower margins, and that's what we are focusing on. Yes, maybe on ROIC?

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

On your question on the share of fiber in total capital employed, let me look it up for you. I think we'll get back to you with that detail. But I do agree that ROIC of around 10% is a nice number. We'd love to grow it, actually grow it further. Wouldn't you want to do more CapEx if you had an ROIC of that? I think it's about the marginal ROIC that counts. So we do monitor that carefully. But to put you at ease, we are comfortable that the ROIC on fiber is actually value creating. Without giving you the details on the numbers, I think the numbers in the sheet Joost present, show you that there is value creation in fiber. Could we do it? Would we want to do more? That's a $64 million question, something we have to think about. One thing we'd note, of course, you may want to do more, but you need to have the construction capacity locked in. So there's no point throwing money at fiber if you can't have the field service workers that dig holes and pull these lines. So step one is looking in the construction capacity. Step 2 is make sure you've got the operational capability if you convert all those homes passed into active clients. So it's logistical and commercial operation that needs to account as well. Because if you look at the fiber case, it's actually the penetration that counts. If you look at the fiber NPV, and sorry to give you a bit of a lecture here, but it's not so much the cost for home passed that makes the difference with the amount of penetration and the ARPU realized that actually drives the NPV. So versus the question, can we get the building capacity if you build these lines and make this money work? And secondly, can we get our operation to actually sell those homes passed, homes activated and get the revenues. If you dare, you're right, theory would predict that more CapEx is actually better. But we're cognizant of the sensitivity of the shareholders of the capital markets over higher CapEx. So it's something as to think about, to chew on and to communicate very carefully about. But I mean, theoretically, you're absolutely right.

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

And adding to that, we report a CapEx of EUR 1.1 billion in the total year, which is a lot in the Netherlands. Considering a rollout of, let's say, 300,000 fiber lines. That is not most of the EUR 1.1 billion. So 300,000 households is representing less than EUR 300 million CapEx. So it is also important for us to really focus on all the CapEx buckets in that EUR 1.1 billion and trying to reallocate CapEx from one bucket to another bucket. And the more we migrate to CapEx, the more profitable it is when it is -- to our concerns. So it's also about reallocating CapEx from one theme to fiber to the home.

[Operator]

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

[Ulrich Rathe, Senior European Telecommunications Analyst]

So for my 2 questions. The first one would be on the -- coming back to this acquired fiber operator. I mean you're framing this as a bit of a build or buy, so as I think. And could you just then in that context, explain where the acquired operators and also the ones you would further look at in this area whether what stand in the priority list for the build? And I mean, I suppose the thesis behind that is that where you're currently buying, it is not where you probably would build neck. So just trying to figure that out or whether there's actually a big overlap that it's really like you would build in that sort of area, or you would buy in that sort of area, but that's actually the question you're currently answering. My question -- the second question is on the payment behavior. Now you're calling this out as a risk and then you insist that you're not in natural behavior. So I'm a bit struggling to understand why you then call it out. Is it prior experience from prior situations? Is it informal conversations that you have with the purchasing managers in these companies? It just feels that you're adding a degree of uncertainty here that some of your peers aren't adding. And there must be a reason. I'm just not entirely sure what that reason is.

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

Yes. So we have fiber initiatives in the Netherlands. And that also had to do with the slow rollout of KPN a couple of years ago, we gave them room to maneuver. There's been fiber rollout in rural areas where we didn't roll out. We prioritized in other areas. And so the business case in the Netherlands, a third-party rolls out fiber and then you sell to KPN, and this is not the way we would like to do business. But it's important that we speed up our rollout to lock in all the capacity to avoid others to do it. Secondly, our message to these initiatives is go to Germany. There's more room there to maneuver. There are more rural areas. Probably better business model as well because we are now in a lead of rolling out fiber. And so it's not that they all can roll out fiber, we buy it. The consolidation we recently did was a very small one, 6,000 lines. For the first time, we had to book it in CapEx because we didn't buy a company, we only bought the access network. So it's really a network we bought. That's it. No people involved or whatsoever.But we know these people from the beginning. So we know where they were rolling out, and we didn't roll out there ourselves. There are also areas in the Netherlands where other start and we go in. Because to protect our customer base and because we have that area on our list as well. Currently, we worked out a plan for all municipalities in the Netherlands. So in 295 municipalities in the Netherlands, KPN has a network plan. And currently, we are working in 85 regions. So that's big operations in the Netherlands, we're a small country. And I think that will delay and decline the introduction of more parties in the Netherlands. And only where we can do a good deal and only when it fits our network, we consider to buy there's no overlaying in the Netherlands. There's no overlap. And it is very important that we make sure that it will not happen in the Netherlands. So that's why it's, again, important that we speed up our rollout as well.

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

Yes. And when it comes to the payment behavior, you're asking a question, is it fair to flag a risk when you don't see it yet? If you look at what happened in the first quarter, the one thing we're really cautious about is payment behavior. So we had a very intense monitoring scheme and a very clear protocol, how to deal with request for payment extensions. We did receive some requests. We granted some. We did not grant others. We had a protocol in place. I think in total, cost us a couple of million of working capital in this quarter. So at this point, very limited. Some of the things, you want to be very mindful and vigilant about. Maybe other telcos don't show it. I don't know. I think we perhaps have a slightly bigger business market because it's a business market thing rather than consumer market things that may be difference between us and them.But again, at this point, it's not there yet. We want to -- at least want to flag it. Is it naive to flag it, if it's not there? Perhaps. If it's honest, yes, for sure. We want to be transparent and clear to you this is a risk and want to be honest with you. But again, we need to see how it evolves.

[Operator]

The last question comes from Mr. Steve Malcolm, Redburn.

[Stephen Paul Malcolm, Research Analyst]

I, for one, kind of express my thanks to your honesty. I think you were just expressing a fairly common sensical honest view with the free cash flow outlook, which I think is very sensible in the circumstances. I had a question related to that, though, I guess, just around financial priority. Clearly, you're flagging the visibility is not great, things remain pretty opaque. There's a lot of economic uncertainty. As you look into the next 12 or 18 months, can you just sort of help us understand your financial priorities? Should we think that the EUR 1.1 billion of CapEx is written in stone that you're going to build that fiber almost come what may? If your EBITDA slipped and working capital slips a bit and cash flow comes under pressure, would you be committed to building that fiber because the returns are so good? And how do you weigh that up against your dividend commitments? Are you confident that under sort of most foreseeable circumstances, the balance sheet could take a bit of strain on the dividend and continue to pay the CapEx. So that would be very helpful. And just coming back to the sort of fiber machine that you said you've got up and running. Clearly, one of the big problems last year was that sort of big shift in working capital that you flagged or your predecessor, Chris, flagged sort of shifting payment terms. Now I guess as one of the most reliable payers of construction crews in Holland at the moment, have you been able to take advantage of COVID to sort of change those payment terms and maybe give yourself a better runway in terms of payment over the next 2 or 3 years to improve the cash outflow on building more fiber, could be interesting to know that.

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

Well, before I hand over to Chris, I must say I'm happy with Chris coming in because we improved the way we run our CapEx, and we improved the way we run our working capital, and there's room to improve there. And that's what we currently see. We always said fiber rollout means that we have to prefinance a lot. But on the other hand, if we are responsible for a fiber chain in the Netherlands with 3,000 to 5,000 people at work and with all the construction ongoing in 85 areas, we can do better in negotiations on payment terms than when we only do 100,000 lines per year. So I would say that we improved there. And that's why the impact is less than we mentioned when we presented our fourth quarter early results.

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

Yes, the point -- on the working capital environment and payment environment, we do see some, of course, underlying pressure on working capital from fiber access investments and working capital stream from that. I think we've been able to counter or get some of it already. We've got -- as Joost said, we've got a working capital program ongoing. That consists of both the ingoing side and the outgoing side to its payments and invoices together that allow us to mitigate it to a significant extent. Possibly not all of it, but at least a significant chunk of it. And to your first question is your EUR 1.1 billion CapEx cast in stone. I tend to think if we've committed EUR 0.13 dividend per share, that is cast in stone. Certainly, you've got a balance sheet where your leverage is less than 2.3x EBITDA. Our dividend is cast in stone, not our CapEx. At the same time, if you look at the value creation that we're able to achieve with our CapEx, it would be a shame to pause it if you got a balance sheet that is able to support and support like this. So our dividend, that is rock solid, that's pretty sacred, certainly the EUR 0.13 that we've committed, also showing the fact that we're paying an interim dividend on the basis of EUR 0.13 per share. So that is cast in stone. CapEx really is a function of can we create value to our shareholders by deploying all this capital? If we can, then I think we should do it as long as we can safeguard dividend.

[Stephen Paul Malcolm, Research Analyst]

Can I just ask one more quick one? Chris, you obviously had -- you had a few weeks of the price rise now, which I guess was not something you anticipated you could do a few months ago. Can you just give us an update on how the price rise has landed and the sort of competitive response to you and VodafoneZiggo raising prices?

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

The competitive response has been very benign. I mean, interestingly, the newspaper wrote that KPN and VodafoneZiggo both had a more moderate price increase than last year, which is factually true. It was a more moderate price response. It was a price response of -- the response that we hoped for. So I think the price increase has landed reasonably well. Of course, most of our customers rather see a price decline than a price increase. But I understand there's a link to, for example, the wage inflation, the wage price -- wage increase that we experienced. So we have not seen any major fallout in terms of volumes from the price increase. I mean the price elasticity has still worked for us.

[Bisera Grubesic, Head of Investor Relations]

Thank you, everybody. This ends today's webcast. If there are any further questions, please let our IR team know. Thank you very much, and operator, you can close the call.

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

Thank you.

[Bisera Grubesic, Head of Investor Relations]

Thank you.

[Operator]

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