Koninklijke KPN N.V. ($KPN)

Good day, ladies and gentlemen. Welcome to KPN's First Quarter Earnings Call Webcast and conference call. Please note that this event is being recorded. [Operator Instructions]. I will now turn the call over to your host for today. Matthijs van Leijenhorst, Head of Investor Relations. Please go ahead.

Yes. Thanks, operator. Good afternoon, ladies and gentlemen, and thank you for joining us for KPN's first quarter results webcast. With me today are our CEO, Joost F. Farwerck; and our CFO, Chris Figee. Before we begin, please note the safe harbor statement on Page 2 of the slides. Today's remarks may include forward-looking statements, including KPN's expectations regarding its outlook and ambitions, as also set out in the press release published this morning. All such statements are subject to the safe harbor. With that, let me hand over to our senior, Joost Farwerck.

Yes. Thank you, Matthijs, and welcome, everyone. Let me start with the highlights of this first quarter of the year. Group service revenues increased by 0.6%, with contributions from Consumer, SME and wholesale. Consumer trends were positive with healthy broadband and postpaid inflow, reflecting our continued focus on loyalty, base management and secure propositions. In business, SME remained strong. And as expected, overall growth was impacted by a decline in the low-margin tailored solutions segment and wholesale continued to grow driven by international sponsored [ RoamingMainly ]. We delivered solid EBITDA growth and maintain tight cost discipline with indirect cost down EUR 3 million year-on-year. Year-on-year free cash flow declined as expected due to the phasing of interest payments and working capital. Together with Flusport, our joint venture, we remain the clear leader in the Dutch fiber market. Once again, we received the Umlaut award for having the best mobile network in the Netherlands with the highest score worldwide as well. Overall, we remain on track with the execution of our strategy and therefore reiterate our full year 2026 outlook and midterm ambitions. Chris will take you through the financials later. First, let me briefly revisit our strategy and operational performance. At our strategy update in November last year, we confirmed we are well on track with our Connect activate growth strategy built on 3 pillars: One, we continue to invest in our leading networks; two, we continue to grow and protect our customer base; and three, we further modernize and simplify our operating model. And together, these priorities support our ambition to grow service revenues and EBITDA by approximately 3% on average and free cash flow by approximately 7% over the full strategic periods. Let me now walk you through our operational performance, starting with fiber. In the first quarter, we continued our fiber rollout with an increased focus on connecting and activating homes to support penetration and value creation. This approach is paying off with continued growth in fiber broadband net adds, which now represent 70% of our retail base. Consumer service revenues continue to grow, supported by the consistent fiber and mobile service revenue growth. Customer satisfaction, our Net Promoter Score improved again driven by operational excellence, the success of our CombiVoordel offer our secure propositions and a seamless digital experience. Fixed mobile conversions remains a key strength and now accounts for 61% of the broadband base and roughly 2/3 of the mobile base. Now let's take a closer look at our KPIs for the quarter. In fixed, our focus on loyalty and base management resulted in 9,000 broadband net adds. Fixed ARPU out firm despite continued base investments in a competitive market, supporting service revenue growth of 0.8%. In mobile, the base development remains supportive. We added 90,000 postpaid subscribers. Growth remains healthy in the high end with around half of the inflow fire unlimited, in the no-frills segment, we see promotional activities putting some pressure on ARPU, leading to 2.3% mobile service revenue growth in total. Let's now turn to the B2B segments. As expected, business service revenues declined by 0.6% year-on-year. The strong growth in SME was mainly offset by a decline in Tailored Solutions. At the same time, commercial momentum across both fixed and mobile remained solid. Customer satisfaction improved further, highlighting the quality of our network and services and reinforcing KPN's position as a trusted and secure partner. And against this backdrop, data and operational sovereignty are becoming increasingly important for our customers, and we are well positioned to support them. Within business, growth continues to be driven by SME with strong demand across broadband, mobile and cloud and workspace. LCE growth moderated as continued IoT growth was offset by lower activity in low-margin cloud and Workspace in LCE. Tailored solutions decline is expected reflecting a strong prior year performance and the impact of contracts we decided not to renew. We expect revenue improvement in this segment in the second half of the year despite lower service revenues, the total contribution margin improved year-on-year in B2B, reflecting our focus on value steering. Wholesale continued to grow, mainly driven by mobile. Broadband service revenues decreased due to the ongoing reduction of the copper base, partly offset by ongoing growth in fiber. Mobile remains strong, supported by international sponsor roaming and other service revenues declined due to lower traffic and softer visitor roaming, which we expect to recover from next quarter. Then ESG remains fully embedded in our strategy. Here, we show you our progress across our 3 pillars: responsible inclusive and sustainable on responsibility, we continue to deliver services that are secure and reliable by design. Our data safety reputation remains strong, supported by a growing number of security certified employees and secure by design services, Inclusivity also continues to improve with higher employee engagement in 2025, and diversity remains a clear priority for us. And on sustainability, we again reduced Scope 1 and 2 emissions year-on-year while maintaining high levels of reuse and recycling. In short, we are making steady progress across all ESG areas, reinforcing our long-term value creation. And with that, I'll hand it over to Chris for the financials.

Thank you, Joost. Let me now take you through our financial performance, and let me first summize some key figures for the first quarter. First, our adjusted revenues were up 2.1% year-on-year in the first quarter. driven by service revenue growth and higher nonservice revenues. Second, our adjusted EBITDA after leases grew by 3.1% compared to last year, supported by higher revenues and continued cost discipline. OIBDA margin improved by 40 basis points to 45.1% of total adjusted revenues. Our indirect expenses were 3 million lower despite wage indexation and remain, in fact, to deliver 15 million to 20 million of indirect cost savings this year. Elevated energy prices will have no material impact on our EBITDA this year. As previously highlighted, our full year EBITDA guidance assumes a u-shaped year-on-year growth pattern over the year. we have somewhat lower growth in Q2 and Q3 and a planned pickup in Q4. Third, our net profit increased by 19% year-on-year, mainly driven by a higher operating profit. partly in fact in the absence of prior year one-off costs related to the Alto acquisition. And finally, our free cash flow declined by about 20% compared to last year, fully driven by timing effects that will reverse in Q2, and I will explain this in more detail shortly. In the first quarter, group service revenues grew by 0.6% year-on-year, supported by consumer, SME and wholesale. We expect this lower level of top line growth to continue to but with momentum that picking up again in the second half of the year. And within the mix, consumer service revenues increased by 1.3% year-on-year, and we expect this trend to improve steadily. Business service revenues declined by 0.6% year-on-year, partially driven by tailored solutions and reflecting our focus on margin and contract quality. -- exiting the tail Solutions business, B2B would have grown by about 2.5% year-on-year. For the full year, 26%, we expect B2B to recover with growth weighted towards the second half of the year. Our high-margin SME business will continue to show growth in the 5% region throughout the year. And finally, we also grew by 0.8% year-on-year driven by mobile, while copper decline continues to weigh on broadband. Our operational free cash flow increased by 10% year-on-year. This is driven by EBITDA growth and temporarily lower CapEx related to weather-related delays and fiber rollouts. For full year, our CapEx outlook remains unchanged. And on a like-for-like basis, that means excluding IPR benefits and IP sales, we remain confident in delivering the mid- to high single-digit operational free cash flow growth. In line with our CMD guidance. Let me now focus on the moving parts of free cash flow. Our free cash flow in Q1 came in at over EUR 100 million or around 7% of revenues. Supported by EBITDA growth and lower CapEx, but temporarily impacted by timing effects related to interest payments and working capital movements. Although our free cash flow was lower in the first quarter, we expect to recover in the second quarter as these interest cost effects reverse being the year-on-year growth in cash generation across the first half over the full first 6 months. From then on, cash generation normalizes, and we stay fully on track to meet our full year free cash flow guidance. We ended the quarter as we started with a very strong balance sheet. At the end of March, we had a leverage ratio of 2.4x and comfortably below our sell-in posting of 2.5 and also our interest coverage remained strong. In Q2, our leverage ratio will increase somewhat due to shareholder distributions, and we expect to end the year at or below our 2.5x ceiling. Our exposure to floating rates is limited and the average cost of debt decreased 3.5%. Liquidity remains strong at EUR 1.8 billion. And early Feb, we execute on our refinancing plan for the year. And with that, we extend the average maturity of our debt at a lower average cost. Credit rated agencies acknowledge our strong balance sheet and market position, which is evidenced by solidation stable outlook. We remain on track to deliver our full year 2026 outlook. Our quarterly phasing may fluctuate, our full year expectations and midterm ambitions remain unchanged. So let me conclude with a few takeaways. We delivered solid commercial momentum across consumer and business, which we expect to continue into Q2. Customer satisfaction continued to improve with higher NPS scores in both consumer and business markets, reflecting the quality and reliability of our network and services. We remain the clear leader in the Dutch fiber markets, with an increased focus on connecting and activating homes to drive value creation. Group level service revenue growth moderated as expected but set to recover in the second half of the year. Cost discipline remains strong and cash generation is solid, giving us confidence that our full year free cash flow targets are well within reach. We're also making good progress with our share buyback program for the year. effectively, again, returning all our free cash flow to our shareholders. Overall, we remain on track with the execution of our Connect activate and growth strategy. While the geopolitical and economic factor remains volatile, KPN's financial results have proven to be resilient. We therefore reiterate our full year 2016 outlook and midyear ambitions. Thanks for listening. So with that, we're happy to take your questions. Thank you. Please, operator, please open the floor for questions.

[Operator Instructions]. Our first question comes from Samuel Bruce from Bank of America.

Hello, it's actually David Wright here. I think I may just take [indiscernible] and I apologize for that. Yes, a couple of questions for you, please. The wholesale revenue growth versus maybe some of the softer guidance you gave last year. Chris looks to be a little behind the curve. And I know you have indicated that could recover. So just a little help with the sort of moving parts there in terms of line loss, mobile customers, et cetera. And then it's probably the same question really for B2B. I'm just looking a little behind the curve. Again, any sort of visibility you can give us on the jigsaw pieces on why and how that improves in the second half would be very much appreciated.

Yes. So start with wholesale. So David, on wholesale, the moving parts are a couple of line items. On the broadband side, we saw a decline in copper and some growth in fiber. I think we were affected by the final phasing out of the Tele2 brand is one of our main peers, obviously, what our main competitors and clients up from cyber attacks. I think we also saw some of the outlooks from that, mostly on the copper base. So you can see less copper, more copper outflow, less fiber inflow that we relate to the phasing out of the Tele2 brand, which I think is basically nearly done, but also the market effects of the of the heck that affect that are basically wholesale broadband service revenues. Mobile and sponsored roaming continued strong. The biggest impact is expected in the second half of the year, we have quite a healthy funnel of clients to be on boarded. That's going to happen as of late Q2 and the second half of the year. So then you'll see more mobile-sponsored rolling clients becoming connected on the system. And the third leg is visitor roaming, which is a bit less than we expected. It has to -- I think with less tourist trucking to the Netherlands. It's early days. So if you look at those moving parts compared to expectations at the beginning of the year, I think revenues from our largest customer and visitor roaming were less than we expected that we anticipated. On mobile, it's according to plan, but more tilted towards the second half of the year.

Yes. And David, to get to B2B. The most significant impact on the B2B service revenues was, of course, the minus 40% in tailored solutions. And that has to -- is related to the 2 large contracts. We decided not to prolong or at least to increase tariffs to make sure that the margins would be better than we saw over the last year. So that -- these contracts are stopped. It doesn't have any impact on our margins. And I expect that in the third quarter to move up again because of the year-on-year effect. So without that tailored solutions effect, B2B service revenues would have been 2.5% this year, total KPN, I think Chris mentioned it as well, 1.7%. So -- but this is really a temporary effect. So looking forward, we expect SME to continue to grow at 5%, around 5%. Tailor solutions to move back in the plus in the third quarter. LCE will continue to move around the 0% growth in the coming quarters.

SP1 And just very quickly on the wholesale side. I think, Chris, you may have talked about potential targets, if I remember rightly, around about 3% in wholesale this year. Is that still achievable? Or could we just be a little short of that, do you think?

I think given the effects of our main clients, that's affecting that number. So you see wholesale a bit lower OpEx in Q2, they're picking up in the second half of the year. I would say, probably around 2% for the year. Next year is a different story, but I think for this year, probably more around 2-ish than 3, I think. And I do think that the combination of physical roaming and the effect of the broadband base or mainline are the key explaining factors for that.

The next question comes from Paul Sidney from Berenberg.

I had two, please. Selling sort of high level, but it would be great to get your thoughts. The first one is on mobile upsell. I just wondered, do you see an opportunity to drive additional revenue growth from upselling products to your customers like data security, other services? I know in particular, lease as been very vocal about being able to monetize the upsell of security services. Just wondering if that's becoming more of a theme with it, KPN and the business and maybe it applies to business customers as well? And just secondly, Chris, on capital allocation, we're seeing a bit of a flurry of M&A activity over the last couple of weeks, both in our sector but also across Europe. I was just wondering, is your view of M&A changing in light of this? I know you're giving free cash flow back to shareholders pretty much over at 2026. But looking at valuations in Europe, potentially in-market, bolt-on acquisitions. Just wondering how you're thinking about potential opportunities for M&A if there are any this year and beyond?

Yes. So in general, our strategy is to enrich the mobile proposition for our customers, first of all, by combining it with broadband but also to generate with more services. We've been building a KPN app, which is facilitating our customers in a much easier way so they can upgrade or downgrade them sales. And the example you mentioned is one of the most important things we introduced lately. That is an additional security package mobile customers. We do it on broadband as well. So there's a free package, which is more or less a base security environment, but taking into account how important cybersecurity is and everything that's happening in the market. We also introduced a package customers have to pay for. And so not only making sure 50% of the inflow is unlimited, but also by enriching our unlimited propositions, it is our intention to upsell.

Capital allocation, yes. Look, on M&A, first of all, we have a fair amount of headroom on our balance sheet as we have today. But most importantly, I think on MA, it's important to be very disciplined and look at the value creation. And whatever every file you look at needs to meet a ROCE or ROIC hurdle or a cash generation here, right? Whatever is happening in Europe is not really affecting us. I mean is like you look -- we always look out for interesting additions to our business. But from a very disciplined perspective. So no, we're not especially active rather than last year at this point in time given what's happening in Europe. I think we've got the same level of scrutiny and then the same level of, I would say, thresholds for transactions to occur. They need to make strategic sense, have a clear synthetic value and then need clear ROIC and cash generation or [indiscernible] and then first, we have if they were to occur, we've had significant headroom on our balance sheet. And then , of course, you could always say that's sort of buying back shares by business, but that -- the hurdle for that is quite high. So I would say, in summary, no particular increased interest by KPN as a function of what's going on in the markets. same level of intensity is always the same framework as we always have.

Perfect. So is it fair to assume, Chris if nothing is being your return on capital employed hurdle then all free cash flow pretty much goes by to shareholders.

Yes.

The following question comes from Andrew Lee from Goldman Sachs.

I had two questions. One on consumer price rises and one on cost efficiencies. On the consumer price rises, as your expectation changed at all on your ability to land those price rises typically be more than offsetting cost inflation just in light of the competitive environment across your businesses. And on that subject, I would just note that at one point, it had sounded like you had expected a greater tailwind from a competitor's data issues that doesn't appear to have transpired and wondering whether that's due to greater competition anything changed in the inflationary environment you anticipate? Just a broad question there. And then secondly, on cost efficiencies, a lot of European incumbents are increasingly noting lower CapEx intensity requirements post the fiber build and growing OpEx efficiencies as softwarization accelerates, we've only had a strategic or mini strategic update from you last year. But even in that time, other companies are finding new efficiencies. Are you finding your opportunities here are growing as you continue on that cost efficiency path? Any kind of color there would be helpful.

Okay. Andrew, I will start and then Chris will follow up, I guess. Yes, on price increases, in general, subscription-based business. Every year, we look at price increases. We did one in mobile on the front book. And annually, we take decisions on price increases mainly to at least equalize CPI impact and I don't expect that to change. I think you mentioned the tailwind from things happening in the market on data breaches or am I correct there?

Yes, exactly. Yes. I think at one point a couple of months ago or a month and a bit ago, there was some optimism that, that could present a greater tailwind that seems to have transpired. I appreciate that some of that tailwind may slip into the second quarter. It sounds like it's a big a toll, and...

Yes. So I think it's important to stay focused on our strategy and not to jump on an event. Of course, the data breach in the market is not good, and it's clear how impactful security is and cyber security -- cyber security is for the whole society. This is where we are on full position. This is our strategy. on broadband, on Mamba, but also on B2B, we are the best secured provider for the Netherlands, and that is clearly visible. So not related to pricing, but on the inflow, especially this quarter, it will probably be better, but that's a temporary event. But I think in general, you could say that KPN is the most secured connectivity provider for households, SME B2B customers, the government, Ministry of Defense selected us for a cloud solution. So no matter what will happen in the market with competition. I think it's important for us that we understand the value of our strategy here. And on cost efficiency, yes, we have launched a couple of transformation programs as we call it, we think there's a huge potential in it. That's why we raised the bar for EUR 100 million net OpEx reduction in 5 years. That is not gross, but net because, I mean, the difference should be visible. And that's all related to a couple of big change programs, which is all about the operating model of KPN. It's more digital first and human-assisted instead of the other way around. We launched the first AI agency in the customer interface. And slowly, we see traffic slowing down, traffic from customers coming in. So less tickets, less calls, less conversations. So that's kicking off quite well. We have a program called autonomous operations, which is really changing the way we run our technology in the company, so there's a lot in there. And at the end, it all leads to less FTE and lower indirect OpEx. So EUR 100 million down in 5 years. If we think it could be more, of course, we will grab it and increase the target. But let's first see how far we come here.

Yes. And on your question on the data breach effect, and some of it will show up in Q2, some of the increased new sales and improved order balance. These customers take a bit of time to be activated, right? So my view is that the event led to some churn at the other side in the beginning that showed up on our side on wholesale, but may the lowest crude on our side in retail in the first quarter. I think that effect by and large, has faded. But we look at structurally improved order balances at this point in time. So a greater share of gross sales in the market and lower churn at KPN. And that will probably feed into the second quarter of the year. You can imagine this thing happened at the end of February, March when sign-up customers then are only activated in the second quarter. So some of that effect will show up in the second quarter.

The next question comes from [indiscernible] from Deutsche Bank.

And I have 2 questions, please. So with the full year results, you talked about 1.5% consumer service revenue growth for the full year. Didn't that still valid? Or do you think there could be a bit of a higher number than that 1.5%? And any comment on fixed and mobile within that mix would be helpful. And secondly, you've done a good job at converting the copper base to FTTH. How much of that remaining copper base is currently covered by fiber? Or will it be over the next 3 years, given I guess that's where you have the best scope to convert and protect that remaining copper base?

On the first one, [indiscernible], I think there's upside for consumer to do a bit better than 1.5% year-on-year. Again, that will show up mostly in the second half of the year. It has to do with the effect I just explained to Andrew about some additional inflow from the data breach, but I think also structurally a better order balance that will get -- show up really in the numbers into Q3, right? Then you have a full quarter of all these benefits. And then the price indexation, and also Joe talked about our ability to monetize some of the security features. So I'd say for the consumer side of things, I wouldn't be surprised that the second half of the year shows a run rate of growth higher than 1.5%. So there's a bit of upside in there. On the copper question, at this point, 70% of our base is on fiber, 30% is on copper. So that's actually much reduced from the past, you can see the benefit from that, that turn on broadband is structurally trending down. You can see the smaller copper base, the bigger churn, bigger share of fiber leads to a much improved turpisition. How much of that remaining copper is yet to be converted to fiber, I don't know.

Well, we cover 70% of the Netherlands on fiber and 70% of our broadband base is on fiber, but that's not the same 70%. So within the fiber footprint, we can uplift our base probably around 80%. So I would say that in some areas, copper areas, we see, especially in the larger cities, a market share of 20% in KPN retail. So it's a bit higher. So there's clearly an opportunity of migrating customers in some areas to fiber is also an opportunity to serve our customers better well on copper and in combination with fixed wireless access or so to support the gateway. But there's a lot of potential in the current fiber footprint to move up more customers to fiber.

The following question comes from Polo Tang from UBS.

I have two. The first one is just can you kind of pick a picture question in terms of competitive dynamics. Can you comment on you're seeing in terms of both the consumer market and also the B2B market? And has there been any change going into Q2? And my second question is really just on B2B trends. Are you seeing any change in behavior among SMEs or LCE clients just given the macro environment Alternatively, are there any changes in consumer behavior just because of the current macro environment?

Yes. Paul, yes, you know the Dutch market, and it remains competitive, but that we consider normal course of business. So from the first to the second quarter of this year, not a big change, of course, on the broadband side, Delta and Vodafone being active Odido on our network, but also on the Delta network nowadays. And on mobile, we see increased competition mainly on no-frills. So still, I would say, the unlimited markets, that is a healthy market where we see a strong inflow. And most of the competition is really in the lower-priced ranges, but that's already ongoing for a while. And in B2B, that's a different. We don't phase 1 or 2 big competitors there. That's a fragmented market. In SME, we are super strong. We really worked on not only a very simple digital portfolio but also on our go-to-market strategy. So we are in control of not only our own channels but also third-party channels to reach out to our customers. So in SME, we expect ourselves to keep on growing. We don't see a lot of macro environment impact yet, I should say. So of course, we keep close eye on that. But until now, we also expect Dutch economy to grow a bit but sure 1.5%. So it's super relevant because we're a met economy in the Netherlands, but until now, we're in control. I would say, all on the consumer side, I mean the effect of higher gas prices is really only felt for lower income house malls, right? And that's typically not our customer base. So I would say the majority of the Dutch people may have some impact but relatively limited and certainly not the new customer base, we typically target.

In the corporate segment. I see me growing nicely. I see some upside for me to beat the 5% mark for this year. From what I see is a more determination by our SME customers to digitize their business. So that's an opportunity for us as a response to any economic pressure, is it target by our clients to digitize the business, implement AI tools enhance coactivity, so actually, I think on the SME side, a it's a positive. If anything, you could see a little bit more price orientation on the LCE side, if anything, but it's not there yet. But if I look forward, I would say, on the SME part of the economy, that feels pretty strong and robust. And in SME growth could do better than 5% in this year, if anything. So I would say limited and maybe for ourselves, have answered as I'm still asking the question is very limited, right? We basically hedged our energy exposure for the full year. We're very pleased with the solar PPA we have this year and won the wind one coming on stream next year. It basically means that the energy impact on KPN is negligible and won't affect anything this year and also not next.

[Operator Instructions]. Our following question comes from David Vagman from ING. Please go ahead.

The first one on consumer ARPU side. Can you give us an updated view -- your view on how you expect them to evolve for mobile and fixed for this year? And then the second question, can we get your latest updated view on FTE reduction of this year?

Yes. Should I think on fixed and mobile ARPU, I think we're pretty positive on those. We will push through typical indexations for broadband in early July, mobile until October. Think about 3% range of indexations I mean we have yet to decide and communicate, but that's probably the range that we're thinking of -- and then fix developments have, in any case, been quite positive. In this year better than we planned. So I would say pretty upward potential on fixed ARPU. On mobile, we've seen so far, a good developments on the unlimited side. bit of pressure on the -- in the no-frills segment of the market. So I'd say a moderate improvement in ARPU in mobile driven from indexations, monetizations of security features, an improved mix. And then against that, you'll see some continued pressure in the no-frills part of the market. And net-net, I'd say, really positive outlook for mobile indexations. And on FTE reductions, I think we're now a good 400 below this time last year. I expect us to end the year with certainly 400 million below the year as well. So basically, for the full year, around 400 FTE reductions.

Yes, I would say, at least, I mean, we -- we don't have a plan to suddenly do a big reorg and reduce a couple of thousand FTE, we're step-by-step digitalizing the company in a prudent and healthy way. So currently, good on track it ahead of the plan, like Chris mentioned, minus EUR 400 million. And of course, we want to accelerate there. It's, for us, not the most I mean it's not an FTE target. We have got an indirect OpEx target. And so we have a bit less than 10,000 Fit in the company, but we also hire a lot of people every day. So there's a flexible skill around that. We also keep an eye on that because it's really about controlling indirect OpEx.

The following question comes from Siyi He from Citibank.

I guess I have two follow-up, please. The first one is on the price increases. It's CKI has raised the front book prices this year. And just wondering if you can talk us through how it's landed and also whether you could consider making this also annual exercise as well going forward? And the second question is on your answer on the fixed ARPU. I think a couple of quarters ago, you mentioned that the fixed export was affected by the combo discount. And just wondering if you can give us some data on how far are you with pushing the discount? And when do you think that this drug was that to lift off

Yes, it, on the front pricing they landed really well. I mean, it went through unnoticed. What I think is on the positive side on mobile, we always look at the renewal delta basically is which always tends to go up once you do your price indexation and then you work your way to get it down again. because it's actually much lower than it was same time last year, about 40% reduced compared to last year. That does help any renewal leakage. So I think we're pretty happy with the front book price increase as it landed well and it's reduced that renewal delta significantly. Will we do want to get next year? Well, ask me again next year. That's hard to predict. But so far, so far so good in terms of how this has landed. On the fixed ARPU to CombiVoordel, you're right, that feeds into the service revenues in fixed. So that effect will really wash out next year. We see next year, the combination of the spend on the constructs that we have actually optimized and reduced a bit to optimize the structure and what the giveaways are against the cross-sell and lower churn levels. That is still planned to be positive next year. So that effect will wash out and will have a positive contribution next year. Having said that, I think we reported fixed service revenue growth around 0.8%. That was a bit better than we planned. So I think overall, fixed service revenues will be better -- it will be better than planned in any case. And 0.8% of this quarter will be the lower bound of what we will communicate this year unless something really strange happens. But given the current trend, I would say, first of all, to answer your question precisely, the effect will wash out next year. But most importantly, we see some better fixed service revenue growth numbers than we anticipated.

The last question comes from Ajay Soni from JPMorgan.

Just two questions, please. My first is a follow-up on the fixed service revenue growth. So what was the headwind from the CombiVoordel discount within Q1. And my second one is around the H1 free cash flow, which you mentioned will be higher less than the same period last year. So I think that implies free cash flow in Q2 around well over EUR 200 million. Is this purely just coming from working capital and interest being better versus last year? Or is there anything else that we should be considering?

Well, on the fixed, I would estimate that the CombiVoordel discount [indiscernible] .40 basis points in a quarter roughly. That's kind of what I estimated to be to give you a feel that the underlying fixed revenue growth excluding CombiVoordel is around 1.2-ish. In terms of the H1 free cash flow, the -- in fact, one is, of course, the interest rate payments. We did actually replace a bond with the coupon in April for both the coupon in Feb. So basically going back to last year, the coupon falls in the first and the second quarter. That's about a good EUR 27 million. And there will be working capital delta. It has to do with specific salary and bonus payments has to do with the cycle and the CapEx flow throughout the year, Q4 last year versus Q1 this year. And typically, I would say, we always have particular situations where we pay more cash out in the first half of the year and the first quarter of the year than the second quarter. All in all, I would expect definitely free cash flow in the second quarter to be materially higher than EUR 200 million. So I would say expect the full 6 months of the year to be up towards the full 6 months of last year, and that's interest, which is really in the back, which is going to happen. It is working capital shift that also for sure were going to happen that too. And with that, for full year free cash flow, our guidance was above EUR 950 million. We still feel confident and comfortable with that guidance. So we should definitely make that. Thanks for dialing in. I would like to conclude today's Q&A. As always, in case of any questions, feel free to reach out to the IR too and, yes. See you soon.