Koninklijke KPN NV

F:KPN

Earnings Call Transcript 2021-Q2

[Operator]

Good day, ladies and gentlemen. Welcome to KPN's Second Quarter 2021 Earnings Webcast and Conference Call. Please note the 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]

Good afternoon, ladies and gentlemen. Thanks for joining us. Welcome to KPN's Second Quarter and Half Year 2021 Results Webcast. With me today are Joost F. 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, which also applies to any statements made during this presentation. In particular, today's presentation 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. Let me now hand over to our CEO, Joost Farwerck.

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

Thank you, Reinout, and welcome, everyone. Today's results show an important proof point of the progress on our strategy and execution as we are delivering ahead of schedule. Mass market service revenues grew in the second quarter, the first step towards sustainable top line growth for the whole company. For the first time in 4 years, we saw growth in Consumer Mobile service revenues supported by strong performance of our unlimited proposition, and our broadband base has grown in the second quarter. We also see service revenue trend improving in SME. Total SME service revenues grew compared to last quarter, which keeps us well on track to stabilize before the year ends. We're installing fiber at a record pace. We've passed the milestone of 3 million households and nearly half of Dutch houses now have fiber connection, the vast majority via our network, the network of the Netherlands. The joint venture with APG, which is called Glaspoort, is now up and running and enables us to further accelerate the fiber rollout together. Our efforts in modernizing the mobile network are paying off. Our mobile network has yet again been recognized as the best mobile network with fastest 5G in the Netherlands. And we were able to grow adjusted EBITDA in the second quarter despite the elevated spend to improve our customer support and facing a tougher comparison base in terms of COVID-related savings. I'm glad to see that these investments are paying off and that customer experience and Net Promoter Score are improving again. And with mass market service revenues growing ahead of schedule and our best-in-class network coupled with NPS being back on track, we reiterate our outlook and ambitions. Finally, while we keep investing to drive further growth and maintain room for value-creating growth opportunities, we pay out a progressive dividend that is comfortably covered by free cash flow. The confidence in our strategy and the successful execution of our strategy gives us comfort around our multiyear cash generation perspective, enabling us to structurally return additional capital to our shareholders. And as a first step, we intend to buy back shares worth EUR 200 million this year. Let me briefly touch base on the 2 unrelated unsolicited approaches we rejected in the second quarter. As stated in our press release issued at the beginning of May, the Boards of KPN reviewed both approaches carefully taking into account the interest of all stakeholders. Both approaches were rejected as they failed to provide tangible added value over our strategy. When we updated our strategy last November, we were determined to implement a strategy that focuses on both short- to medium-term business improvements and long-term sustainable value creation. And this was illustrated by the acceleration of our fiber rollout to unprecedented levels in the Dutch markets. That's not only a plan on paper, we're actually executing, which is clearly visible in today's numbers. Revenue growth, cost reductions and lower future capital intensity levels once the fiber rollout is behind us, will fuel growth of free cash flow further and that, in turn, will fuel attractive shareholder returns. We are fully confident that our accelerated growth strategy will create long-term sustainable value for all our stakeholders. Let's now look at the first pillar of our strategy, our best-in-class networks. In the second quarter, we rolled out fiber to 113,000 households. And together with the Glaspoort joint venture, we expect to reach 80% of Dutch households by the end of 2026. After reaching that point, CapEx will come down to a much lower sustainable level. In the meantime, and visible in our homes activated, we continue to successfully add new fiber customers and upgrade existing customers from copper to fiber. And that will deliver higher quality service and better customer experience leading to a growing fiber customer base. And we foresee significant cost savings as we gradually shut down our copper network in the coming years. All in all, fiber is at the heart of our strategy to return to sustainable revenue growth. We are proud that Ookla once again recognized our leading mobile network. And with this recognition, we retain our position as the best mobile network in the Netherlands with the highest up and download speeds, the best coverage and the fastest 5G in the Netherlands. Let's now move to our customers. In the Consumer market, we aim to be the preferred digital partner for households. And to provide the best digital access, KPN continued its Super WiFi campaign and made the 1 gig proposition more accessible by lowering the price point while doubling the upload speeds. Regardless of the subscription, all our fiber customers can upload just as quickly as they can download. And this is a unique advantage of a cable and important when working from home or gaming online. Furthermore, we improved customer interaction in the MyKPN app, and we signed a unique entertainment partnership with Microsoft. And we upgraded the Xbox Game Pass Ultimate into our offering. Our customers can now play more than 100 great games in our interface. We've also managed to turn the tide in mobile service revenues which returned to growth for the first time since the first quarter in 2017. And this was supported by strong commercial performance of especially our unlimited data proposition. Fixed mobile revenues increased more than 3%. Total Consumer service revenues still declined 0.7%, but showed growth compared to the first quarter. Customer satisfaction remains one of our top priorities, and I'm very glad to see that our efforts in this area are paying off. Consumer Net Promoter improved to plus 14% as we successfully invested in increased capacity, improved processes and knowledge training for our customer support. And as a result, the amount of issues that were solved first-time right increased more than 10% since the start of the year. And that's important because especially for these colleagues, it is difficult to perform on the highest level with all COVID-19 rules and restrictions still in place out there. Now let's take a deeper look into our Consumer KPIs. We have again delivered a solid fiber inflow reflected by 47,000 new customers in the quarter, further fueling the stabilization of broadband net adds. Fiber ARPA is significantly higher compared to copper. And that's due to higher speed takeup, more value-added services and more SIMs for households. And importantly, fiber service revenue growth is offsetting the copper declines. And the decline in Consumer fixed service revenues is fully driven by legacy services. As we accelerate our fiber rollout, we are confident fiber is set to make up for legacy declines as well, setting the stage for increasing fixed service revenues. Our postpaid base improved by 16,000 net adds and postpaid ARPU grew by 1.1%. And combined, this led to a return to growth in mobile service revenues. Let's now move to the B2B segment. This year, we started to run the Business segment focusing on 3 distinctive customer segments, SME, LCE and Tailored Solutions. And to remove complexity and to improve efficiency in our SME and LCE segments, we've introduced a simple target portfolio with standardized building blocks. And since more than half of B2B EBITDA comes from SME, we have prioritized transforming that segment. And the decline in business revenues was broadly in line with the first quarter. As roaming impact lapsed, SME service revenues improved to minus 3%. And we expect the SME service revenue trend to improve further in the next quarters. LCE and Tailored Solutions declined mainly because the second quarter last year was quite strong despite COVID. Also, our business NPS improved markedly as customers continue to value KPN for the stability, the reliability and the quality of our network and services. Now the transformation of the SME segment is taking place and is taking shape with 95% of SME customers now migrated to the future-proof portfolio. And the graph you see here on the left illustrates the customer journey of a migrated KPN ONE customer. First, ARPU takes a hit when a customer is migrated to the target portfolio, but after migration, we are well positioned to up- and cross-sell additional products. And the order we've shown here is purely illustrative. But generally, when a customer takes 2 additional products, the ARPU returns to or surpasses pre-migration levels. And in that light, it is positive to see that the number of triple-play customers within the KPN ONE proposition increased by more than 50% compared to last year. Quarter-on-quarter, revenues grew 2.6% and the trend is backed by healthy base developments. And this means we're on track to stabilize service revenues in SME by the end of the year. In wholesale, revenues increased 9% in the second quarter, supported by our attractive open access policy. Year-to-date, we've added 16,000 broadband lines corrected for the migration of 22,000 Oxxio commerce customers coming to our Consumer portfolio. Now with ESG fully embedded in our strategy and operations, we are contributing to making the Netherlands a better place, not only by conducting our own operations fully sustainably, but also by using our technology to make other companies and other activities more sustainable. For instance, in agriculture, logistics, traffic management and health, we contribute with our digital services. And we've again been awarded a AAA ESG rating by MSCI, the highest possible score. So that's all good. And now I would like to turn to Chris to take you through our financials.

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

Thank you, Joost. Let me start by summarizing some key figures for the second quarter. Our adjusted revenues increased by 0.2%, supported by growth in mass market service revenues and some non-service revenues. The adjusted EBITDA after leases increased by 0.6% and our free cash flow in the quarter was more or less flat versus last year. For the full first half year, free cash flow increased by 17% year-on-year despite higher CapEx. Our return on capital employed increased by 50 basis points to 10.3%. The adjusted group revenues increased 0.2% year-on-year. Consumer revenues were flat as growth in mobile service revenues and non-service revenues encountered declining Legacy services. Fiber and copper revenue developments effectively canceled each other out. Business revenues declined nearly 5% and mostly driven by our LCE and Tailored Solutions performance with SME revenue development turning increasingly favorable. Wholesale revenues grew by 9%, mainly driven by broadband and other revenues were partly supported by nonrecurring benefits related to IPR or intellectual property rights. Six months ahead of schedule, we've already managed to grow mass market service revenues. These activities, which together represent about 75% of our revenues and 90% of our EBITDA, are now growing both year-on-year as well as sequentially. And Joost already took you through the main drivers. We see this as an important proof point for the success of our strategy and the first step towards full and complete top line growth for the group. Our EBITDA grew 0.6% compared to last year, despite a tough comparison base in terms of cost savings. The cost savings run rate this quarter was impacted by 2 factors: first, temporarily elevated spend to improve customer support, which has paid off with an improving NPS in Consumer and Business segments, and we expect these additional costs to fade throughout the rest of the year. Secondly, less tailwind from COVID-related savings. Last year, we experienced a strict lockdown in Q2, and shops and offices were mostly closed. And as a result, we've had a difficult comparison base of costs related to travel, housing facilities and marketing. And finally, a few other elements affected our cost performance this quarter, such as rotation to holiday provisions and the fact that we are planning a larger restructuring in the B2B segment, which will help boost our own costs, but this will be executed in the second half of the year. Now let's turn to CapEx. We are accelerating the rollout of fiber to prepare for the years to come, and CapEx related to fiber was EUR 218 million in the first half of the year, driving the entire step up in CapEx spend. In the same period, we stepped down other CapEx by EUR 29 million, mainly driven by rationalization and increased effectiveness of our effective investment programs in copper infrastructure, IT and mobile access. Our non-fiber CapEx to sales ratio was contained to about 16%. For the coming years, we expect fiber CapEx to remain broadly stable between EUR 450 million and EUR 500 million per year. And after 2026, when the fiber rollout is largely complete, we expect to significantly reduce our capital intensity levels. In the first half of the year, we've seen strong underlying cash generation despite higher CapEx and higher taxes. The higher CapEx costs are operational free cash flow to decline, but this was countered by several other line items, more favorable developments in working capital as our continued effort to reduce working capital intensity is paying off, EUR 33 million lower cash interest paid as a result of bond redemption last year and lower cash restructuring. Please note that our reported free cash flow excludes the effects of the JV with APG. Our free cash flow margin improved to 11.7% of revenues. On Slide 24, we report our return on capital employed. Upon request, we've given a little bit more insight into the breakdown of our capital employed, which we hope is helpful. Our ROCE, return on capital employed, is solid, has increased 50 basis points year-on-year to 10.3%, a level consistent with a healthy value creation, and we see room to further optimize ROCE in the years to come, driven by fiber investments, cost savings and an improving top line profile. On 9th of June, KPN and APG announced a closing, an effective launch of the fiber joint venture called Glaspoort. APG has agreed to pay nearly EUR 480 million for a 50% stake in the JV. For this transaction, KPN has recorded a net cash inflow of EUR [ 217 ] million in the first half of this year, which is classified as a cash in and cash flow from investing activities. This transaction has had several implications on our balance sheet and P&L in the second quarter. In the P&L, you can see EUR 840 million incidental book gain in line with revenues, EBITDA, operating profit and profit before tax. This amount equates to the transaction value, minus goodwill and some minor prepayments. P&L taxes related to the transaction are EUR 191 million, and consequently, the net effect of EUR 649 million is visible in profit for the period. On our balance sheet, the following movements are visible. First, a reduction of EUR 64 million goodwill related to the transaction; second, other noncurrent assets, which include the book value of 50% ownership, and the financial asset representing the discounted value of future payments of APG. Thirdly, current assets and specifically cash and cash equivalents include the initial payment by APG and total equity includes a net effect of the aforementioned EUR 649 million in profit for the period. Our balance sheet continues to be resilient, committed liquidity consisting of EUR 795 million of cash and short-term investments and a EUR 1.25 billion undrawn RCF together cover debt maturities through 2023. Versus Q1, our net debt declined by EUR 20 million, mainly driven by the payment we received of Glaspoort and all other corresponding Glaspoort cash flows, by the free cash flow generated during the quarter and some of those was partly offset by the final dividend payment over 2020 in April this year. Our leverage ratio is now at 2.2x, comfortably below our ceiling of 2.5x. So reassured by the growth in mass market service revenues, good and solid strategic progress, we confidently reiterate our 2021 outlook. We expect the adjusted EBITDA after leases to come in at EUR 2,345 million; a CapEx of EUR 1.2 billion, and we expect free cash flow of EUR 765 million in line with last year. Our regular dividend will grow to EUR 0.136 per share over 2021, and we will already reward our shareholders with an interim dividend of EUR 0.045 per share. And finally, we reiterate all our ambitions for 2023 as outlined in the strategy update last November. The strategy -- the execution of our strategy is on track, and we are focused to deliver long-term value to all our stakeholders. KPN remains fully committed to an investment-grade credit profile and aims for a leverage of no more than 2.5x. Our progressive dividend policy targeted growth of 3% to 5% per annum. And our proposed 2021 dividend implies growth of 4.6% and is at the top end of this range. We are confident that this progressive dividend policy can now be complemented with a structural incremental part of capital returns to our shareholders, driven and supported by: one, the continued strong execution of our accelerated growth strategy, which already led to an earlier than planned and sustainable mass-market service revenue inflection; by two, a healthy outlook for our free cash flow generation, taking into account our CapEx commitments; and thirdly, a robust balance sheet and disciplined financial framework with our leverage ratio comfortably below our targeted level. We will continue to run an efficient balance sheet going forward, providing scope for attractive cash returns to our shareholders and will not retain more cash than is absolutely needed. We also, of course, expect to retain ample flexibility to pursue bolt-on growth investments as they may arise, such as the acquisition of Oxxio recently and to acquire further spectrum. So while we invest strongly to deliver on our strategy to drive growth, we see no reason to retain our free cash flow this year. We intend to execute a share buyback program of EUR 200 million this year, effectively returning all 2021 free cash flow to our shareholders. So to summarize, today's results showed an important proof point of the success of our strategy. We returned to mass-market service revenue growth already and earlier than planned, and we will structurally return additional capital to our shareholders, starting with a EUR 200 million share buyback this year. Thank you for listening. Now let's turn to your questions.

[Operator]

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

[Keval Khiroya, Research Analyst]

I've got 2, please. Firstly, you've highlighted some of the items which weighed on Q2 OpEx reduction. But can you elaborate a bit more on how we should think about the level of OpEx reduction in the second half? When you gave the EUR 250 million target, you did update the 2019 to 2021 target, which I think implies about EUR 100 million to EUR 120 million of cost reduction in 2021. Do you still see that as achievable? And secondly, if we add the dividend and the welcome buyback, you're distributing roughly 100% of 2021 free cash flow. As you think about future additional cash returns, would you consider distributing more than 100% as a tool to increase leverage as your EBITDA also grows?

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

Well, first on -- thanks for your question. On the OpEx reduction, this comes in batches. We run a cost efficiency program now for years, and we aim to continue that. And we expect to do more in the second half of the year than we did in the first half of the year. To give you an example, we're working already for 6 months on 2 large reorganizations that will affect in the months to come that will impact our OpEx as well. And also in this quarter, we saw clearly less cost reduction due to holiday provisionings keeping in, et cetera. So we are really confident in our OpEx reduction. If we completely meet the EUR 100 million for this year, I can say, in total, we also add some more cost to drive mass-market revenues up. But in total, I'm happy with the balance of things, and I expect more cost reduction to come in the third and in the fourth quarter.

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

Yes. I think the EUR 250 million definitely stands, so we'll met the EUR 250 million. And as Joost said, we've got some more costs when it comes to the customer support and a number of large reorganizations, which will come in the second half of the year, end of Q3, beginning of Q4. And to your second question, on the free cash flow, indeed, as you correctly point out, Keval, we retained no cash this year. As we said, additional capital returns will be a structural part of our shareholder reward. The exact number next year, we will determine next year, but it's certainly possible that we'll exceed our free cash flow in any given year in terms of what we return. It depends a bit on how the world evolves, depends on additional investment opportunities. It depends a bit on spectrum, but we're not necessarily constrained by our free cash flow in any given year when it comes to capital returns.

[Operator]

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

[Joshua Andrew Mills, Research Analyst]

Two for me. The first is on the Net Promoter Score improvement, which is super healthy across both Consumer and Enterprise. I'd just be particularly interested in exactly what you've done to drive that and probably more on the enterprise side, if you could give some specific examples, that would be helpful. And then second question is around Huawei, a quite familiar topic. But obviously, in Q2, there are these headlines around historic potential security laps in Huawei equipment. I know that it's been kind of a big topic of debate in the Dutch press and I think also in the government. So my questions is, what has the government said to you directly about Huawei within your network. Has the situation changed in the last 6 months? And do you envisage any situation or future costs to take out the existing Huawei equipment from your network, which you may not have been included in your prior guidance?

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

Yes, Joshua, first, your question on the Net Promoter Score improvements. Yes, we really invested in the front line of the company. Like last quarter, we explained all these people are working from home to serve our customers. A couple of them we took back to the office. And we really scaled up on people, on training and on support and which is clearly visible in a reduction of calls and in the speeds they can handle calls. So 10% improvement there already in the first month. So that's very good. So it's an end-to-end quality steering we do, starting at the service centers, completely until the back-end of the company and this cooperation through the company is super important, and that we really improved. But we also invested in that. And that was one of the reasons why we made more cost in that part of the company last quarter. And now we see the costs going down and we see -- yes, the things more under control. In B2B, we stepped up from 2 to 4 which is also all related to improving customer support and helping out our people. So all in all, I could say that COVID is not helpful for this kind of work. And I think we made the right steps to support our colleagues there, and it pays off, that's clearly visible. Yes. On Huawei, that's every now and then popping up in the news and for a long time, we are discussing that topic with our government, like all West Europe -- European telcos. We have Huawei in our network. Already more than a year ago, we announced our strategy that we only will work in the future with Western vendors in our critical domains. And we also announced that the core network, which -- of mobile, which is currently delivered by Huawei will be replaced and we selected Ericsson for that. And we've been discussing the plan with our government in great detail. The government gave us and the other 2 operators a message and instruction based on a legal order. And that was not a surprise for us. So we know the plan. What's in the plan is state secret. But it is, for us, not a surprise. It's completely in the life cycle of things. And so we will not see additional OpEx or CapEx related to that. Because we have our -- time and it fits in our strategy. So that's that. Every now and then, Huawei will pop up again in the newspapers, and we are fully aware of that. But it fits in our plans, what we're currently doing and also in our migration plans, and we have the time to do what we have to do.

[Operator]

The next question is from Mr. Andrew Lee, Goldman Sachs.

[Andrew J. Lee, Equity Analyst]

I have a question on your balance sheet flexibility and coinciding with your use of the word first step with regards to your buyback. So you mentioned earlier on in the presentation that you rejected both private offers given their failure to show value creation above your strategy. I just wondered, has your approach towards target leverage and flexibility changed at all? And maybe specifically, your buybacks takes you to around, let's say, 2.3x net debt to EBITDA right now. That's 0.2x below your ceiling. Is that 0.2x buffer close to the amount of flexibility you need within your strategy for the longer term? Obviously, I'm thinking about the scope for more buybacks this year and going forward, as you deliver. Any kind of help you can give us in how you're thinking the balance sheet and the required level of flexibility would be great.

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

Sure, Andrew. Well calculated. This buyback will take us probably end of the year at 2.3x net debt to EBITDA -- EBITDA kind of where we -- my planning as well. For this year, we intend to do EUR 200 million. So don't expect anything more this year, but 2021 is EUR 200 million to start. Our ceiling is 2.5x. You may want to end -- run a bit below that to have some buffer for, as I said, some M&A or spectrum acquisitions. I don't think we necessarily need to stop at 2.3x. The effective ceiling, including buffers, a bit higher than that. So it gives you some feeling for where we are and what the scope is, but we want to start with not retaining any free cash flow this year. And next year, we have to reset the number again. But to your point, 2.5x is the upper limit. We could get -- run a little below that to keep some flexibility. It depend also, of course, how the speed of our fiber client base develops as more clients become sticky fiber clients, that also gives some room for additional leverage going forward. And it depends on how the Dutch market evolves. If competition is developing healthy, margins stay where they are, they will support things. So they need a couple of things coming together. But at this point, 2.5x is our ceiling and you'd run a little bit below that, but not necessarily 2.3x.

[Operator]

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

[Matthijs Van Leijenhorst, Analyst]

It's regarding the Dutch Competition Authority, ACM. Apparently, they have identified a risk that your access conditions could make it more difficult for competitors to compete. What is your view on this new study? And do you foresee any risk that we could see regulation implemented again?

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

Yes. So for us, it's not a surprise that ACM is working on a new market analysis because that's what they have to do. It's a regulator, and they always work on a new market analysis every 3 years, and they look 5 years ahead, so that's not a surprise. Last time was in 2018, and that one was annulled by the highest court in March, [indiscernible] in 2020. So we all know that. So the interesting unusual situation is that we're not regulated. Now according to ACM, there could be a risk that KPN's access conditions could complicate the possibility of competitors to compete with KPN. We don't see that. We have an open network policy, an open access policy. We didn't change the model after we were no longer regulated. I think one of the most important proof points there is that the strongest growth is in the base of the challengers using KPN's network in the Dutch market. That's where the real growth is, us growing 1,000 organically. Ziggo, I don't know, probably a small decline and then 16,000 growth on our network from these internet service providers. So that shows that there is good room for them to act and they're doing that. And we didn't change conditions. We did lower wholesale tariffs when we lowered the 1 gig pricing retail. So we think there's a fair balance. And of course, the regulators will always try to regulate. So that's not a surprise for us. But from a legal standpoint, we think it's very difficult to declare KPN a dominant player in the Dutch market with a market share of 37.8%, and Vodafone around 43% -- or VodafoneZiggo that is. So we'll see. We expect the market analysis and probably they will really look at how to regulate us. We are not that much against regulation. We are much against interfering in pricing because we think the Dutch market is working quite well. But we'll see how it works and we'll take it step by step, but we are pretty confident that we have a very good standpoint and a solid legal standpoint as well in this whole matter.

[Operator]

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

[Siyi He, Vice President]

I just have one, and it's probably a clarification. My question is on your guidance for your EBITDA. I think during your conference call you said that you comfortably reiterate your guidance. And when we look at the service revenue trajectory and also cost-saving opportunities, it feels like second half will come to become materially easier than the first half. Maybe if you can just walk us through what kind of potential headwinds that we should bear in mind that might mean that the EBITDA growth will be less than the numbers simply imply. And my second question is just a clarification. I think on the presentation, you've said that there is a difference between the IT spending revenues between SME and also the larger enterprise. Just wondering why that's the case and whether that's just simply COVID related that you see more delays in public contracts?

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

On the first question, honestly, we confirm our guidance and reiterate our guidance for the year. Is the second half year facing much headwind? Not necessarily. But you recall last year, Q3 last year was very strong. Q4 last year was a bit weaker in year-on-year comps. So you find that the comps on Q3 will be a bit more difficult, the comps in Q4 will be a little bit more easy. I'd expect the mass-market service and revenue developments to continue. You'd expect as [indiscernible] joined the bandwagon to also move to inflection and possibly even some growth, but let me -- let's inflect first, but there's positive upside there. We'll see, as Joost said, the cost kicking in, the cost reductions kicking in Q3, possibly Q4. With that, we feel confident with the EBITDA outlook, confident with the free cash flow outlook. If anything, I'm a bit more bullish actually on free cash flow, I think we can actually surprise a bit on the upside there. Although, of course, we need to deliver that first and we can confirm it at the end of Q3. So that's how we look at the year. Let's remain prudent and conservative, let's reiterate our outlook, confirm what we -- what we need to confirm and share a view that on free cash flow, a little bit more upside might be possible. Joost, do you want to talk to the SME, and LCE business?

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

Yes. So your question on , if I'm not mistaken, on SME and LCE is. In SME, we said we're almost there, 95% migrated inflection coming up, minus 6% last quarter, minus 3% now. And looking at all the quarters behind us, we think we're moving in the right trend. And that's related to those migrations. On LCE, we do the same but we're later, and that is because it's less profitable. So we decided to prioritize on that whole SME business. 75% has been migrated. In LCE, we also tried to do it a little bit more careful than we did in the past on SME. So let's see. I think if we fix that mass-market revenues like we're currently doing, if we can really show broadband consumer growth, SME growth, then we have to announce the plan on LCE, that's what we're working on, but I'm confident that we can migrate it in the right direction just as we did on SME.

[Operator]

The next question is from Mr. Polo Tang, UBS.

[Polo Tang, MD & Head of Telecom Research]

My first one is just really about COVID impacts from here. So can you maybe just talk about where your mobile roaming revenues are currently compared to 2019 levels? And have you seen much of a bounce back or recovery in Q2. Also, are you seeing any indications of rising bad debt amongst SMEs or business clients? Or alternatively, are there positive benefits from COVID in terms of people trading up to the fastest broadband speeds as they work from home. So really just a kind of question around COVID impacts from here. And the second one is really just coming back to business revenues. You've obviously seen an improvement in terms of SME revenues. But obviously, declines are continuing in terms of the rest of the business unit. So can you maybe just kind of talk about some of the puts and takes in terms of business revenues from here and how -- the major moving parts of how optimistic are you that total business revenues can stabilize as we look at 2022?

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

Yes. Polo, let me answer the question on COVID. If I go back to -- if I just talk about revenues first and cost later. On the revenue side, there's little actually roaming revenues kicking in. If I look at the outlook for the year, perhaps roaming revenues could be a few million more, but you look about EUR 2 million to EUR 3 million more. Where we see the biggest source of roaming revenue to roaming profit is clients traveling across the globe. We see careful travel with -- inside Europe picking up. We've seen some small pickup in visitor traffic into the Netherlands. We've seen good developments in IoT. But again, that's all inside Europe. So on roaming, I'm afraid that the upside for the year is EUR 3 million. That's kind of what it is compared to last year. And that is actually still to happen in Q3 and Q4. So unfortunately, not much there on that. On the good news side, bad debts are not there. We see our clients paying our bills all in time, actually sometimes paying it early in time. Most of our clients still have quite some cash. So into the bad debt, we have not seen an increase in write-offs or even hints that requires us to increase our bad debt provision. So it all feels stable versus last year. On the cost side, we faced a bit of a headwind versus last year, meaning 2020. Of course, we had the strict lockdowns in Q2, at which we had no travel, leisure, entertainment or education costs. Today, we've got some home work allowance. So I think on the cost side, COVID is a bit of a headwind versus last year, simply because we get back to our employees. So all in all, it's flattish with a small potential upside in roaming. And in the year and year comes some adverse development when it comes to costs. But all in all, it's not a massive impact yet on our results.

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

Yes. And on LCE and integration in B2B, I just said that in SME, we are moving in the right direction. So we will follow that trend and we worked for quarters on that. We're doing now the same in LCE. Integration is a bit different. Integration is, yes, projects, we do on large enterprise. And we really are improving there. But it goes a bit up and down. Sometimes we invest in costs related to larger projects. But all in all, we think that we can run that business more in a stable way already soon. And the question is how we strengthen our company by doing that. On LCE, we're doing the same as we did in SME, but it's more complicated. It's larger enterprise customers that have to swap hardware on their side when we start migrating. So we're more prudent in the home migration program than we were on SME. It's mainly about SDH and ISDN services that we really have to migrate because of the life cycle of the networks and the platforms behind those services. But for the rest, we think we can replicate the services. So we're trying to do it a bit smarter and to support our customers, not to change all the hardware on their side. So we will take our time. And after we have done the SME inflection end of this year, we'll work on the LCE. If it's going to happen next year, I can't promise you yet. But we'll give you more update on that end of this year, I guess. But we'll have -- you know us, the migration works, but we try to do it a bit smarter way than we did in the past.

[Operator]

The next question is from Mr. Jakob Bluestone, Crédit Suisse.

[Jakob Bluestone, Research Analyst]

I had a question just on your improvement in your Consumer service revenues. Your fixed and mobile service revenues both saw a roughly 2% improvement in growth. And I was just hoping you could maybe break down what drove that, I guess there was an annualization of comps on the roaming side. But anything else you'd sort of call out? It looks like it's mostly ARPU-driven. So was it price action or a mix change? Just to sort of help us understand what is it that's driving that service improvement in Q2 versus the Q1 run rate? And then just very briefly, can you also just confirm that you haven't had any further approaches since the press release that you sent out a few months ago?

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

Yes. Well, on approaches, I don't have that much to announce, of course, otherwise, we would have done that. And like I said we've carefully considered the 2 approaches, and we rejected both unsolicited offers. We are very focused on the execution of our own strategy. We think that's the best way to create value. And we don't have any new information on the whole topic. And for us, the most important thing is that we will keep on executing on our strategy and show good results there. Now for the question on the service revenue in Consumer. I'll hand over to Chris, who knows all about that.

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

Very good pickup. When it comes to the mobile side, I mean, the main driver of mobile service revenue is net adds. We have seen positive net add growth for a few months now. I think it started in early Feb. So March, April, May, June were all months with positive net adds in postpaid as you also saw in the quarter. With that ARPU in mobile stable, if you dive a bit deeper, noncommitted ARPU, slightly down for last year, committed ARPU up, older ARPU stable. So no roaming impact, there's stable ARPUs and ARPU development, mostly driven by a solid share of unlimited and some gradual uptick in clients moving to higher bundles. But by and large, in Consumer Mobile, it's net adds with stable ARPUs. When you look at -- on the Consumer fixed side, we, of course, have seen some decline in net adds in the first quarter and plus 1% organically in the second quarter and plus 22% from Oxxio, while the Oxxio impact on 1 quarter is relatively small. And then when it comes to the ARPU, we've seen the fixed ARPU, a couple of moving parts, some small pressure on fixed ARPU due to VoIP on the Consumer side due to legacy on the Consumer side and in the first quarter, lower value-added services, which has returned in the second quarter with more value-added services and effectively stable ARPU. So when you look at the broadband side, decline net adds in Q1, return to small, but yes, not impossible, not negligible growth in Q2. And effectively some stable ARPU. So overall, we found that this year, net adds is the main driver of [ what were ] service revenues. And as you know, we've announced a small price increase, inflation, which will kick in, in the summer, that's going to support the Consumer broadband development going forward. And Consumer Mobile side, we continue to see good inflow of net adds.

[Operator]

The next question is from Mr. Steve Malcolm, Redburn.

[Stephen Paul Malcolm, Research Analyst]

I'll go for a couple. Just on the Dutch competitive environment, we've seen a couple of kind of interesting developments as we go into the quarter. I know they launched a broadband only product for the first time and they also lost the Formula One race, which impacts their sports offering. So maybe just any thoughts you've got on [ Eutelsat ] in response to that and following up on Chris' comments. Any update you can give us now on the price rise of land and whether any wrinkles to look for in Q3 as that comes through? And then after just coming back to the point on free cash flow Chris is making, I mean should we assume that this brings back the same in working capital? I know you're 17% ahead in the first half versus last year on working capital. Everything else feels like it's the same -- EBITDA, CapEx, interest. Is that where the impact will be as to whether you update guidance in Q3 or not?

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

Well, on the competitive environment. Yes, well, the Dutch market is a competitive market. On the other hand, we've seen consolidation in the market. We've seen lower price points being taken out. Like Chris just mentioned, we increased our tariffs and another large player followed a month later. So on the mobile side, T-Mobile built up a very important postpaid Consumer back books. They are the largest in the Consumer market in the Netherlands as #2 and Vodafone #3. So they're no longer a challenger. They are more or less protecting their back book. So that ends up in a 3-player market with a lot of challenges around us, mainly on our network, challenges like Lebara, Leica, Ufone, they're all wholesale customers of KPN. So there's enough of lower-priced propositions out in the markets. I think we stand out with the quality play. It's clearly visible that customers in the Netherlands like to pay for quality and for instance, a gig symmetrical up and down is different than what others can supply in the market. So I think that's the game we have to play in this environment. Of course, T-Mobile is up for sale, but we expect the buyer of T-Mobile also to aim for value creation instead of anything else. So it's a busy market. We're a small country with a lot of providers. But what we did last quarters is that we really differentiated in the way we should, and that is by leading the quality game and customers like to pay for that. On free cash flow, Chris?

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

Yes, Steve, on free cash flow, I think you're right, the main change will be on working capital management, which I think is going to support our free cash flow. One little point of note, I mean, last year, Q3 was very strong, as you recall, last year, Q3, we had a big impact on working capital. So the delta free cash flow will show up not in Q3, but likely will show up in Q4, driven by working capital. We tightly manage our inventories, tightly managing our payment terms, relationship with vendors and suppliers, smart working capital solutions with them. So that's kind of the driver of our free cash flow developments. Today, we're EUR 43 million ahead of last year. I don't want to disappoint you, but we're not going to be EUR 43 million over last year for the full year. But the upside will be mostly there in Q4, driven by working capital and cash management areas.

[Operator]

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

[Usman Ghazi, Analyst]

I've got 2 questions, please. the first one is from the report actually, rather than the presentation. In the report, I think for the first time, you specifically outlined that in Consumer, you have an ambition to grow service revenues by the end of 2021. So I mean, could you perhaps highlight the factors that will get you to that growth number? Because if I look at the numbers today, I guess the legacy decline is 20%, they're weighing. So are they expected to moderate or is the MSR growth expected to pick up? So any color there would be helpful. And then just on the shape of the mass-market service revenue trend through the year. So I guess, Q3, we should see an additional kick over to SME, SME kind of stabilizing from where we are today, then in Q4, you're indicating that Consumer should be growing as well. So I mean the -- it seems to me that the mass-market service revenue trend is not only sustainable but that should be getting better through H2. So is that kind of the right way of framing this?

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

Yes. Well, mass-market service revenues were positive. We -- we think that we will improve the whole trend of mass-market service revenues in the second half of this year. So -- and like we said, it's our strategy and it's our plans we announced last year to inflect in the second half of the year. So that's our holy target. Well, we've seen inflection on the total of things in this quarter. And you're right, SME will further improve. It's in the trend. If you look at the quarters behind us -- we'll think year-on-year, we'll show improvement in the quarters to come in SME. And also on the Consumer side, we want to improve further service revenues supported by all commercial actions. Consumer, end of this year?

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

Well, I think on the Consumer side, we see mobile service revenue growth to continue to grow. Considering our broadband, I mean, it's on the brink. I think we make a good chance to get there. So with the price increases coming up, it depends a bit on how the net adds, of course, will evolve. And legacy will continue to decline, although the decline in legacy tends to take place in Q1, that's where you step down typically. So the remainder of this year, you may see some decline, but a little bit less and then it's a seasonal thing. So will Consumer service revenue as the whole grow? I think we're getting close. Ask us again in Q3, we've got more visibility. The total mass-market service revenue will definitely to grow. As SME joins, mobile continues to grow, also continues to grow. And then I see the broadband side of things, which is going to be on the brink of growth with the drag from legacy actually fading away gradually during the year.

[Usman Ghazi, Analyst]

And my second question was on the -- coming back to regulation. I mean, you're absolutely right that you haven't changed any of your wholesale kind of pricing since the court ruling. But I guess what has changed is the nature of the -- or rather the increment of fiber deployment that you announced after the court ruling is a point to multipoint network, which gives an excuse to an alternative operator to say that look, this kind of network discriminates against us if you want in terms of replicating owner economics as with the ODF product that you have out there. So is there any way to reduce the risk from this from this -- the complaint by an alternative operator that the nature of the fiber deployment is discriminatory? Or do you not see it like that at all?

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

Well, I think when it comes to what you said correctly, we have not changed anything actually. We look at what we've offered. We've actually kept the same location with ODF to all our customers. We have CapEx reduced, also prices a tiny bit in line with the pricing that we've reduced in the, for example, 1 gig in the Consumer market. That's all aligned. When it comes to point to multipoint, we have a VULA offer, which is actually a virtual local unbundled solutions. I mean we show it local. VULA stands for virtually unbundled something. So effectively, it is an unbundled offer, which we think is actually quite attractive and it works very well. Chris, do you want to add to that?

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

Well, you mentioned ODF. And of course, that's the passive access on fiber, and that's what we do in most of the fiber areas point to point, but wholesale partners only buy it in the really larger areas, on large points of presence. Otherwise, it doesn't make any sense to roll out your backhaul to these kind of areas. So it's a bit theoretical that we have to offer that kind of service in the smaller regions. Because we have that VULA service to replace that. And on the other hand, you mentioned the idea of having a different position on the network side. This whole regulation, of course, is in the first place on our retail market position. But this is all theory. So let's see what the draft market analysis of our regulator will show. There will be a consultation process, and I can assure you we will join it in great detail. And then we really understand what the plans are. But -- like I said, from a legal standpoint and looking at the way the market has been regulated in the past and also in other countries, we think we have a fair and open network policy that really is serving the whole market.

[Operator]

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

[Ulrich Rathe, Senior European Telecommunications Analyst]

Two questions, please. The first one is on the IPR benefit that you mentioned. Is that -- was that sort of one dispute that -- a big one that sort of came out and you're highlighting it? Or are there further installments of this sort of thing coming potentially, if it goes your way. Could you confirm that the impact is actually larger than the revenue and the EBITDA growth that you had. I think you talked about revenue and EBITDA growth for the group, which was EUR 4 million year-on-year, both for revenues and EBITDA. I think the IPR benefit was larger than that potentially, which would mean that the underlying revenue and EBITDA is still in decline. The second question is on the joint venture with APG. In the big picture, you got the partner in to provide the capital upfront. But of course, you will pay out to them over time a share of the returns when they come. On the other hand, you now return some of that cash that you got from APG as you got them in to shareholders. Could you describe how that creates value for KPN shareholders? Because at times, you could have accelerated the fiber rollout with your own capital rather than returning it to shareholders. Effectively, what you're saying is the returns you could make in fiber are lower than returns you're making by buying back shares. And I was just wondering how you think about that balance?

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

Yes. Ulrich, on the first question on IPR, we do have a regular stream of IPR type of revenues. It's something that generates income -- has generated income before and will generate income in the future. It's a bit lumpy, so you can't have it every quarter, it's lumpy in terms of timing, in terms of size, but it is a fixed -- I would say almost like a product fixed set of revenues. You can say if you strip it out, yes, it would impact our EBITDA. At the same time, it's one of the incidentals that goes to our results. If you look to our results last year and this year, and you strip out all those like one-offs or semi one-offs or lumpy type of revenues. Last year, you have deltas in holiday provisions. You've got deltas in the way we reserve for STIs and LTIs, long-term and short-term incentive programs for our staff. You may have other different one-offs. If you strip out all those one-offs and you can include IPRs there as well, you'd still have EUR 3 million to EUR 4 million EBITDA growth. So as you strip one out, you strip the other one out as well. And the underlying EBITDA growth still is around EUR 3 million to EUR 4 million in this quarter-on-quarter. So Q2 last year to Q2 this year. Third one, when it comes to the joint venture, actually, the share buyback, in my mind, is not the money we receive from APG. I know it feels like it's the same amount of euros, but it's really driven by the organic replicable generation of cash from our group, and that's what we're paying out effectively, not retaining any cash and this effectively paying out our free cash flow. Could we have invested in any fiber? Possibly, we could. But again, we set out the JV for a few reasons. One is the cost of capital from the -- from a partner, from APG, appears to be lower than our own cost of equity. So it's an effective way to fund this business. You might actually argue that return on capital and buying back your own shares is bigger than the cost of capital from the capital APG provides. But more importantly, we felt that this JV gives us much more flexibility to further accelerate our fiber into a scale that we couldn't do ourselves. Or we didn't want to do ourselves without affecting our free cash flow. So the JV with APG is to be separate from the share buyback, it's relatively low cost of equity capital with a deep-pocketed partner that has more -- that allows us to scale up fiber to a level that we wouldn't be able to do ourselves without affecting our free cash flow. And secondly, the ongoing cash generation of the business and the balance sheet that we have, even without the APG joint venture, looks very promising. It means if we hadn't done a JV, we still would have come to the same share buyback conclusion. So to me, those are separate worlds and you can't immediately connect them. We, in our minds don't connect them.

[Operator]

The next question is from David Vagman, ING.

[David Vagman, Research Analyst]

The first one is on the working capital evolution also for the coming years. Could you describe the evolution that you expect and in particular, in relation with the capital investment, the fiber CapEx or is it evolving any positive development there? And then concerning fiber and the take rate, how should we be thinking about evolution, the progress that you could have on the take rate going forward? And any potential swing to expect, let's say, quarter-on-quarter on your business, let's say.

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

Well, to start on fiber what we see is an improvement in the take-up rate, and it's also because of the change in our strategy. So when we enter a new fiber area, we're focused on migrating as much customers as we can to fiber in the first wave. In the past, we did that later in the second wave. And we're in the middle of improving our total performance there. So end-to-end customer service, the salespeople and the rollout, the network organization, hand-in-hand, very important business we are working on to improve on a daily base. So it is very important to improve the take-up. And currently, we're doing well, and we'll keep on focusing on upgrading customers faster and sooner to fiber. And it's also new for us because in the past, we rolled out like 250,000 lines per year. Now we do 500,000 including APG and 1.5 years from now, maybe 700,000, 750,000 per year. So that is a lot. We're working on hundreds of areas at the same time. So we're building and selling and delivering all in the same time in 100 different areas on new fiber, and we also have older areas. So it's really something we are trying to optimize, but this is one of the most important topics. The upgrade to fiber faster than we did in the past. So that's one of our main KPIs. And on working capital?

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

Yes, that's my -- has been my hobby since I joined KPN. When you look at working capital, I mean the fiber rollout or the increased fiber rollout has a negative implication for working capital as fiber is -- paid -- a portion of the cash is paid up front to the construction company. So effectively, it's not even the level of fiber, but the delta in fiber, that's driving the amount of the working capital drag that we have. And this year is the last year where we have a big increase in our fiber rollout. From next year, it will be stable at the level that it will be this year as we committed in our capital markets -- Capital Markets Day. So 2021 is the last and final year of an increase in fiber rollout on our own balance sheet. That drives an investment in working capital. So this year, we'll still commit investments and capital to working capital. I mean there will still be a drag on cash flow, albeit a lot less than last year. All our measures that we're taking today are countering that working capital drag by taking other measures to optimize the other parts of working capital. So that means that this year, we'll still have an investment in working capital. From next year, the investment will be very close to flattish. Unless, of course, our business grows massively, we've got more inventory, but we will sort it out by then. So I would think this year, commitment of cash in working capital, less than last year, countered and mitigated by working capital measures. And next year, the impact -- the investment in working capital will be a lot smaller and very close to 0.

[David Vagman, Research Analyst]

And one very quick follow-up. On the swing in take-up rate, should we expect any particular swing from 1 quarter to the other, given the scope of -- the large scope of the rollout?

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

Well, you saw the swing in this quarter and the more we rollout, the more we will push the upgrades. But this is where we are. And like I said, it's super important for us to further improve there. We're already doing much better than we did in the past. And in the coming quarters, we'll give you more updates on how we do the fiber thing. But that's, of course, one of our challenges looking forward.

[Operator]

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

[Luigi Minerva, Senior Analyst]

The first one is on the pace of the fiber deployment. And clearly, it's gaining speed. And I was wondering if you can share with us your kind of key learning points now what -- how have you improved in your fiber deployment compared to a year or 2 years ago? And whether you see still some room for further improvement, for example, in the way you do the digging or in the way you get the authorizations. And I appreciate also the nature of the market is a bit one where you have also other types of deployments and there's an element of who gets there first in a given area. So probably you also improved on that respect? And my second question is on the relationship, the whole relationship with the JV. So when the JV will start deploying fiber, KPN's retail business will wholesale fiber access from the JV. What are going to be the terms of that wholesale access? And how will that impact your P&L and cash flow?

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

Well, on the speed of rolling out fiber, I can mention 3 important drivers to speed it up for us, at least. The first one is capacity. I think the most important change we did end of last year, maybe yes, last year, that is that we locked in a lot of construction capacity for the years to come. So in the past, we did that more on a quarterly base. When 1 quarter was done, we asked for more capacity 4 quarters in a row. But that does not give enough confirmation to these contractors. They like to have a long-term visibility on the portfolio and for good reason because then they can plan more efficiently in some areas in the Netherlands. So we worked out a plan for the whole Netherlands together with these contractors, and we signed off the construction plans for the years to come. And that is an important partnership we built there. Of course, we know all these contractors, but now it's really about longer-term partnerships we did together. The way we roll out changed. In the innovation part of construction together with contractors, we can speed up the rollout by improving the way we connect households. It's a bit technical. But instead of bringing all the hardware into households, we can preinstall more equipment outside the household, dug underground, perfectly sealed but in a more efficient way than we did in the past to connect all our customers when they order for fiber line. And the third thing is that every municipality has its own plan. We build for every municipality, every village a plan. And you have to go to these civil servants for a permit. It works different in different areas. And we have an organization working on the permits for also the years to come. Because if you try to roll out fiber digging a hole and putting fiber in it, that's the easiest part. That's probably taking 2 weeks. The rest of the 12 months is all about engineering, permits, construction planning with your contractors. So that whole plan that we've improved, and that gives us the opportunity to roll out faster and with far more capacities. These are the most important changes, I would say, in the fiber rollout. And on the JV interface?

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

Let me firstly outline to you how the financial interaction between KPN and JV works -- the JV works. The JV itself provides fiber in wholesale broadband access. To this extent, the JV has a passive fiber product and procures the active layer, the access services from KPN. So KPN provides at cost the active layer to the JV, which we add to the JV's passive lines for wholesale broadband access, which means in practice for KPN as being one of the wholesale clients of the JV, I guess, and we hope and we count on other wholesale clients. But basically, KPN, if we sell fiber on a JV area, the Consumer unit books Consumer revenues. Our TDO or network unit pays wholesale broadband access fees to the JV. And the JV pays back a compensation for the active layer to KPN in the segment Other. That will be how this thing will flow through the KPN P&L. The impact of KPN will be relatively small at the beginning, the JV has got 12,000 homes passed right now. I think we're going to add to 70,000, 80,000 fiber-to-the-home connections in JV for this year. So 2021, impact will be relatively small. I think next year, the JV will ramp up to 150,000 to 200,000 fiber-to-the-homes rollout. So I guess by -- in the course of next year, the second half of next year in 2023, this could become meaningfully large. So as I said, streams through the Consumer revenues in Network and the segment Other, but this thing will really be impacting our P&L at more size in the second half of next year and in 2023. And then will also see in the minority interest line of KPN, a stake that we have in the profit of the JV.

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

Yes. So although, we will see some more OpEx in our company because of this construction, the whole business case is also around consolidation still very interesting for us because with the JV, we focus on areas where we have a lower market share and the business opportunity in total of things is very interesting for us altogether. So the total business case also in the first year, it works quite well.

[Reinout van Ierschot, Head of Investor Relations]

Okay. Thank you, Joost and Chris. That concludes the Q2 call. If there's any further questions, please contact the Investor Relations team. Thank you.