Koninklijke KPN N.V. (KPN) Earnings Call Transcript & Summary

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

Yes. Good afternoon, everyone, and thank you for joining us for KPN's Third Quarter 2026 Results Webcast. With me today are our CEO, Joost Farwerck; our CFO, Chris Figee; and also our incoming CFO, Wouter Stammeijer who will take up the role on the 1st of November. He's listening in. Before we begin, please note the safe harbor statement on Page 2. 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 CEO, Joost Farwerck.

Thank you, Matthijs, and welcome, everyone. Let me start with the highlights of the third quarter. Group service revenues increased by 2.7% with growth across all segments. And within the mix, consumer showed continued growth, mainly driven by Mobile. Business inflected to growth driven by continued strong SME and an improvement in LCE. And Wholesale continued to grow, driven by Mobile, while the decline in Broadband subscribers moderated. The underlying business continues to perform with healthy EBITDA and free cash flow growth year-to-date. And together with Glaspoort, we passed the milestone of 6 million fiber homes, and we remain the clear leader in the Dutch fiber market. And finally, we remain confident to deliver on our full year 2026 outlook and midterm ambition. Chris will take you through the financials later, but 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 to deliver on our Connect, Activate & Grow strategy, which is built on 3 pillars. One, we continue to invest in our leading network. 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% and free cash flow by approximately 7% on average over the strategic period. Let's review our operational performance, starting with fiber. Within our fiber footprint, 80% of the homes passed are already connected. So we have a strong platform to further commercial activation. And we've made significant progress with almost 75% of our retail broadband base now on fiber. Consumer continued to grow, led by Mobile, while Fixed remained resilient in the competitive markets. Customer satisfaction improved further, reflecting what differentiates KPN: secure, high-quality networks, excellent service and a seamless digital experience. And our Fixed, Mobile convergence base continued to grow and now represents 62% of our broadband base and roughly 2/3 of our Mobile base, supporting customer loyalty and value growth. Now let's take a deeper look into our third quarter KPIs. Broadband net losses were 7,000 in the third quarter, and the churn was elevated early in the quarter following the update to our general terms and conditions, which for 1 month allowed customers to cancel without a penalty. After July, trends improved through the quarter. And at the same time, broadband ARPU remained resilient, supporting continued growth in Fixed service revenues. In Mobile, we added 24,000 postpaid subscribers. Blended postpaid ARPU increased by 3.2%, supported by a more favorable customer mix and an increased uptake of value-added services. And combined, these factors drove Mobile service revenue growth, which accelerated to 5.1%. Now let's turn to B2B. Business returned to growth in the third quarter, reflecting continued commercial momentum across all the 3 subsegments, particularly in Mobile. Customer satisfaction remained best-in-class, supported by our strong position as a trusted and secure provider. And beyond connectivity, we continue to broaden our Mobile proposition with the launch of KPN Mobile AI, helping business customers work smarter and create more value from customer interaction. Looking at the underlying business, SME continued to deliver strong growth, slightly above 8% with strong demand across Broadband, Mobile and Cloud & Workspace. And also LCE returned to growth with service revenues increasing 2.5% year-on-year, driven by Mobile, IoT and Security. Security was particularly strong, although a part of that was reflected in project revenues. Tailored Solutions revenues declined by 3.3%, and that's reflecting the carryover effect of the large contract changes in 2025. That headwind gradually eased out through the quarter and had lapsed by the end of Q3, supporting a further improvement in the fourth quarter. And finally, Wholesale. While Broadband remained under pressure from the declining copper, net losses moderated, supported by strong fiber net adds and a smaller remaining copper base. Mobile continued to perform strongly, especially supported by our international roaming service. And other service revenues were broadly stable as growth in visitor roaming was more than offset by lower revenues from legacy products and low-margin interconnect services. Now before we move to the financials, a personal note, as you all know, Chris will leave KPN and hand over to Wouter on the 1st of November. So this is his last chance to take us through every detail behind the numbers. Chris, thank you for the good cooperation and everything you've done for KPN. I wish you lots of success and fun in your future career. And now Chris, over to you.

Thank you, Joost. Let me summarize some of the key figures for the third quarter for you and year-to-date. First of all, the adjusted revenues increased by 2.9% year-on-year in Q3, driven by both higher group service revenues and higher non-service revenues. Second, our adjusted EBITDA after leases was stable compared to last year or increased by 2.4% on a comparable basis, excluding IPR benefits, driven again by higher revenues. Our adjusted EBITDA margin decreased by 140 basis points year-on-year to 44.8% of total adjusted revenues. Third, year-to-date free cash flow generation was stable compared to last year despite the prior year tailwinds from IP sales and IPR benefits. I will give you more details on the underlying cash development later in this presentation. As previously guided, group service revenues accelerated to 2.7% year-on-year with all segments contributing. And within the mix, Consumer service revenues increased by 1.8% year-on-year, primarily driven by Mobile. Business service revenues came in strong and increased by 3.9% year-on-year, driven by continued momentum in SME and a rebound in LCE. Wholesale service revenues delivered 2.1% year-on-year growth in the quarter, driven by international sponsor growth. Our underlying EBITDA, that is excluding IPR benefits, grew by 2.4% year-on-year, supported by revenue growth. The underlying EBITDA margin decreased by 80 basis points to 45.5%, mainly reflecting higher direct costs, including handset and hardware sales and third-party access costs. Adjusted indirect OpEx increased by EUR 7 million, mainly driven by higher personnel expenses due to the annual wage indexation and the one-off CLA payment in July, partly offset by a reduction of over 400 FTEs over the past 12 months. Year-to-date, our indirect OpEx decreased by EUR 12 million, and underlying progress remains in line with plan, and we reiterate our ambition to deliver around EUR 20 million of structural net indirect OpEx savings in '26 and a total of EUR 100 million savings by 2030 comparing to a 2025 baseline. Our year-to-date operational free cash flow increased by 5.5% on a comparable basis, adjusting again for prior IP sales and IPR benefits. And this strong cash conversion reflects the continued strength of our underlying business, primarily driven by EBITDA growth. Our reported free cash flow was stable year-to-date as EBITDA growth was offset by changes in provisions and higher restructuring costs. The delta in provision reflects mostly pension contributions as well as a few other noncash movements. Delta and other free cash flow elements mainly reflect prior year lease adjusted effects from the Althio transaction. Overall, our cash margin remained broadly stable at around 14% of adjusted revenues. Finally, we ended the quarter with a cash position of EUR 414 million after absorbing the impact of the interim dividend over 2026. With that, we continue to have a strong balance sheet. At the end of September, our leverage ratio was 2.5x, stable both sequentially and year-on-year and in line with our self-imposed ceiling. Interest cover remained strong at 9x. During the quarter, we successfully refinanced our EUR 500 million hybrid bond, and this transaction further optimized our capital structure and reduced our financing costs. Our liquidity position of more than EUR 1.5 billion remains very strong and covers debt maturities through the end of '28. And finally, in July, Fitch Ratings upgraded its outlook on KPN from stable to positive while reaffirming its credit rating, reflecting our improving free cash flow profile with a stabilizing market structure and the diminishing impact of legacy revenue decline. Overall, our financing profile remains strong and well positioned going forward. We reiterate the 2026 outlook that we shared with you in July, and we remain confident in delivering our full year financial objectives. In line with our commitment to shareholder returns, we paid an interim dividend of EUR 0.08 per share on the 3rd of August this year, and we completed our EUR 250 million share buyback program. And finally, we reiterate and reconfirm our midterm ambitions as presented at our Capital Markets Day, including our total cumulative shareholder distribution targets. So let me conclude with a few key takeaways. We delivered solid financial results in the third quarter with accelerated group service revenue growth supporting underlying EBITDA and free cash flow growth. From here, we expect service revenue growth of around 2.5% as the Tailored Solutions contract efforts have lapsed and prior year comparisons effects from IPR and IP benefits are now behind us. Growth was broad-based with all segments contributing. Mobile maintained strong commercial momentum, while broadband remained competitive. We remain the leader in Dutch fiber with about 3/4 of our retail broadband base now on fiber and more than 6 million fiber homes passed. And overall, we're on track to deliver our 2026 outlook and reiterate our 3-3-7 midterm ambitions, including our cumulative shareholder distribution targets. Thanks for listening. And with that, happy to take your questions.

Thank you, Chris. Operator, please open the floor for questions. Please limit your questions to 2 please. Thank you.

[Operator Instructions] The first question comes from Keval Khiroya from Deutsche Bank.

I've got 2 and also best of luck in the next role, Chris as well. So the 2 questions. So you highlighted the reasons for the weaker consumer broadband KPIs. Would you expect the broadband base to be at least stable in Q4? Or do you see any risk still to the customer momentum in broadband? And second, you introduced the ad-hoc more for more Mobile increase this year in Mobile, and you've changed the contract terms in Fixed, which means you could presumably be a bit practical there as well. I appreciate you can't tell us your pricing plans, but would you say the focus on value over volume has increased and have managed the volume side of the equation, if so?

Yes. Thank you for the question. Yes, indeed, a weaker quarter on the broadband base with a decline of 7,000. It is -- I mean you all know that the Netherlands is a competitive market, but the reason that we go below 0 is that we saw a temporary churn pressure early in the quarter related to the contract-free period, and that has to do with the change in the general terms and conditions we introduced. It was a call we made, and we anticipated on that. With this, our terms and conditions are up-to-date, clear and aligned with the developments in legislation and case law, and it provides us also with greater flexibility to adjust our subscriptions and propositions in there or in the future. Now on that, as you know, if you look back every year, we have introduced one or more price increases. It's a bit of a sensitive topic in the Dutch markets. So we do not communicate upfront on price increases. But having said that, like I just said, in the way we change our terms and conditions, we see more flexibility to adjust our propositions. We are pretty confident in the developments in Q4 when it comes to the broadband base. So I expect broadband-based consumer in Q4 to move back above the 0, so I expect slight or decent growth in Q4.

The following question comes from Carl Murdock-Smith from Citi.

That's great. And similarly, Chris, best of luck for the future, and congratulations. Two questions from me, please. Firstly, can you talk a bit about the impact of the price of memory and how that's having an impact on the cost of CapEx equipment and handsets, et cetera. Is this manageable within current CapEx envelopes? Or could it potentially put next year's CapEx ambition of less than EUR 1 billion at risk? And then secondly, obviously, lots of focus at the moment on agentic AI and how this might impact potential consumer purchasing behaviors. And I'd just love to hear your thoughts on how this could impact the market and what you're doing to prepare for it. That would be great.

Yes. So -- and Chris will follow up on this. When it comes to our CapEx envelope, we are pretty much focused on the strategy and the financial framework we introduced a long time ago, and we will keep on doing that. Of course, it's a challenge when it comes to impact of memory and prices related to that. So the teams are working on it. We do a lot of hedging in the way we purchase upfront. And of course, we also innovate. So we buy against higher prices, but we're also buying against lower prices due to innovation we do. It's a challenge to run our CapEx. But currently, the teams are very well equipped to run it in the way we plan it. Sometimes it's tough, a challenge for the new CFO, but I'm sure we will manage it in a good way like we did over the last 6, 7 years.

Yes, yes, maybe on that point, Carl, I mean, I have 2 perspectives. My future perspective will love this thing. My current perspective [ says gee, is ] an attention point. Look, as you said, I mean, our CapEx envelope is a CapEx envelope. We'll solve this in the CapEx envelope. It is solvable within the CapEx envelope. It's not easy, but it means an increased focus on reuse, recycle and refurb and revisit on the amount of memory compute that you actually need in your devices where you don't have too much compute. So I think there's optimization going on around the actual spend. And then it becomes a matter of re-prioritizing CapEx. Obviously, this equipment is critical for customer experience, you can't cut it back. It just means that you have to make choices in the allocation. So I think in our view is the envelope is the envelope, and we'll solve it inside that. And when it comes to your question on AI, on one hand, you could see there's a threat, although I think we manage it well, agents such as Meta's Muse may reduce churn and switching costs for customers, making it easier for customers to select another provider and to switch in an easy way. On the other hand, the Netherlands is a super competitive market. We know different sites and apps where customers already are very transparently able to compare all the propositions out in the market, and KPN ranks well when it comes to prices, Youfone as well. And when it comes to quality, we always pop up first. And that is something we closely monitor around these developments. But -- so you could see there is a threat. I think it's a no-brainer it exists and that we have to play a role in that. On the other hand, we're introducing a lot of agentic AI in our operating model. We have transformation programs ongoing to run the OpEx down in the years to come. We introduced a program to -- relate to net savings of EUR 100 million up to 2030. And I am super enthusiastic about the way AI is supporting us there. So it creates a lot of opportunities to improve customer engagement and develop new ways of working and to lower our OpEx.

The following question comes from Joshua Mills from BNP Paribas.

Yes, I'll echo the sentiment as well, Chris. I thought for the last call, I'd give you a geeky niche question on the free cash flow bridge for next year. So hopefully, that keeps you entertained. I guess if I go back to the 3-3-7 guidance and take the starting point, the 7% CAGR gets you to about EUR 1.16 billion of free cash flow for 2027. And then if you add on the EUR 15 million or so from the Althio deal, you get to about EUR 1.175 billion. So first question is, is that the right way of thinking about the math? Is there anything else I'm missing? I understand it's around 7% CAGR number. So just trying to get to the midpoint. And then if we do the bridge from EUR 950 million of free cash flow to next year. If you use 3% EBITDA growth in line with the guidance, that's about EUR 80 million higher in EBITDA. Then if you drop the CapEx to EUR 1 billion, that's EUR 250 million. So adding this all up, you get to about EUR 1.28 billion of free cash flow, which is obviously about EUR 100 million guidance. So could I ask you for the last time to run us through the moving parts in the free cash flow bridge for next year where that EUR 100 million or so of headwinds come from cash taxes, interest costs, any working cap effects, just to help us with our modeling.

I think -- I'm still thinking whether this is a question or a job application. But I think -- let me walk you through some of the elements. Obviously, leave it for Joost or Wouter to give you the full number for next year. I mean we traditionally give full year guidance when we present full year numbers. So the exact number will be, I guess, on the agenda on the Q4 numbers somewhere in February. But in generally, I could say your approach is right, the way we look at it. We've given you a 3-3-7 CAGR, and that's kind of similar frame that we apply by setting our own ambitions and targets for next year. So I think it's the right way to go about it from a mathematical perspective. Then moving parts, the way I think about it, indeed, you have growth in EBITDA. There will be a step down in CapEx to EUR 1 billion. That is more or less in the books in terms of how we plan to manage this. And against that we'll have a step-up in tax. I think as you can see, this year, we're doing better on tax than previously. We've been fairly conservative on estimating our tax spend next year. So it's looking good, but there will be an inevitable tax step-up as we are using our net operating losses. I think there will be restructuring spend, which is a bit higher this year, which will also be a bit higher next year. I think we're accelerating the FTE decline, this year, we're doing about 400. I wouldn't be surprised if next year, we get to about 500 to 600 of FTE decline in terms of overall cost ambition. Interest, flat, slightly up possibly. And then I think there's a significant working capital opportunity again next year, which we're preparing right now, same thing again and that's going to be [indiscernible] equating number that gives you to the number. So basically, moving parts, I think you're right. Tax will be up. But again, tax increases have been less than what we anticipated due to various reasons, better and longer use of net operating losses against that slightly higher reorg spend, again, but that's a positive spend as we're reducing staff, reducing costs. As I said, possibly acceleration of the FTE decline. Today, we're doing about 4% of our staff next year could be as high as about 6%. Interest flattish to maybe slightly up, but that's marginal and the remainder is working capital, and there is still opportunity to improve working capital, and that's also stuff that we are doing today to be prepared for next year. That's kind of how I would qualify or outline the bridge into next year.

So I think you mentioned all the right buckets. One thing I would like to add to Chris' story is that when I -- when we lower the run rate of CapEx with EUR 250 million in a year, the effect is in cash EUR 250 million in the year after. But in the year itself, it's a bit less because some of that CapEx would have been paid in '28. So taking into account, I think it's a healthy financial framework we're running here, especially next year and the year after. But that effect of minus EUR 250 million is a bit lower in the year itself than in the year after.

That's very clear. Maybe if I could squeeze one last one in. On working capital, is the main issue here that delta between the timing of the CapEx on the P&L and the cash flow? And if not, when would we expect working capital to normalize in the future? Is it something that we should be thinking about as a flat working capital item in our modeling from '28 onwards? Or are there other steps...

Well, I think '27 will probably be still a positive number. As Joost said, there's a bit of a working capital drag, but there's working capital opportunities against it. I think the whole thing normalizes when CapEx normalizes. I think probably '28 is a more normal number. But at this point, as Joost said, there's work done to compensate for the working capital. There would be the working capital timing effect of the CapEx delta that you have next year. So I think '28 is probably the first year when you have really stable CapEx numbers and you have more stable working capital.

The following question comes from Mollie Witcombe from Goldman Sachs.

I just have 2, please. Firstly, on Mobile. I understand that the EUR 1 more-for-more security increase was maybe reversed. So just maybe a little bit of color on how should we be thinking about trends in Mobile consumer given that that's the case? And I think you also maybe put through some price increases in October. So just how they've landed more generally, a little bit of color on that would be great. And then my second question, I just wanted to come back to the terms and conditions update. You mentioned some case law. I just wanted to check, this isn't at all connected to the ECJ ruling that we saw with one of your European peers, is it? And also, will this likely affect your competitors as well? Just a little bit more detail on that would be great.

Yes. Thank you. Mobile consumer. yes, I mean, we're following a couple of price increases, like you said, we did a more-for-more adjustment, which worked quite well because it also was related to an improvement of the proposition. So we also introduced a security shield on our proposition, which is called [ Extra Veilig Mobile ] with an additional pricing. We have the usual price increase we did. So that's related to 5% year-on-year revenue growth. Also, we see a strong base growth. Also, we see a good supportive premium mix. Unlimited accounts for 45% of the acquisitions in September to give you an example. So it's not related to one price action we did. It's a whole ecosystem we're running here on Mobile. And yes, Mobile is a good market in the Netherlands, and we're playing our role here, and I think we will continue to do so. And your second question was about...

Mollie, can you repeat your second question, please? We couldn't entirely follow the question.

Yes, of course. So you mentioned earlier that you had updated your terms and conditions on Fixed and unless I kind of misheard some commentary in the background there, some case -- you said something about getting case law up-to-date or something along those lines of being in line with more recent case law. So I just wanted to check that this wasn't at all connected to the recent ECJ ruling. And one of your European peers had kind of some ruling on back book increases. So just wanted to check if that was connected at all and if your competitors will also have to update the terms and conditions and you might benefit on that side.

Well, I don't think it's really related to EU ruling. To be honest, every now and then, we have to adjust our terms of conditions to see where we are, how we are aligned with developments in legislation and some case law. And we also found out that we could use and benefit from more flexibility to adjust subscriptions or propositions over time. Well, so with this, we can run our base in just a little bit better way than we did in the past. We're a base company. It's super important to focus on the value of the base and to run it in an excellent way. And for that, we did this. We anticipated on 1 month, all customers free of contracts. And we also knew that our competition was aware of that because we had to announce it. But it is really on how we run our base. It's not related to EU regulation as far as I know.

The next question comes from Polo Tang from UBS.

I'd like to copy everyone else and just wish Chris the best in his new role. I've got two questions. So firstly, on broadband, consumer broadband. I know that you flagged that losses in Q3 were mainly due to one-off terminations because you changed the terms and conditions, but Q3 also saw Ziggo offer ESPN to all subscribers for EUR 2.50 per month. And you also have Ziggo expanding into the Delta Fiber footprint. So my question really is, how much of an impact do you think Ziggo had in terms of your broadband declines in Q3? And do you see a risk of this continuing in the coming quarters given that Ziggo is not incentivized to remain promotional ahead of their spin-off in mid-2027? My second question is really just around fiber build. So can I clarify if the plan is still to build to 80% to 85% fiber coverage in the Dutch market? So just looking thus far, KPN covers about 70% to 75% of the Netherlands, Delta Fiber, ODF cover the rest, and there's limited fiber overbuild in the market. So I'm just asking in terms of if you build to 85%, will this not increase fiber overbuild and will not induce more broadband competition into the market?

Yes. Polo, on the first one, right? If you look at our broadband developments in the year, I mean, except for like 1.5 months, our churn has been really subdued. We've been investing heavily in churn, loyalty-based programs, ARPU protection measures, et cetera. And churn has been actually lower than previous years consistently. The lower net add growth in the year was because we have a lower share of new sales because I think we also have been very restrained in joining the discount frenzy and we more focused on base optimization and churn reduction. And that has actually worked throughout the year, except for 1.5 months, where, as Joost alluded to, the terms changed led to cancellations in Q2, which showed up in net add losses, churn spike in Q3. After that, the whole thing normalized, if you look at the current order balance on a weekly, monthly basis that we track, it's actually similar to the beginning of the year. Obviously, the Odido running through it, but it's actually a fairly stable order balance that we see on a weekly, monthly basis. We also had a few activations in October that are pushed for technical reasons to the third quarter, the fourth quarter. So all of that means there's a lot of stuff going on. We do recognize that Ziggo is active on Delta. Ziggo has a new ESPN contract. But except for the 2 freaky or 1.5 freaky churn months, the overall order balance has been stable and our churn has been relatively low. So it gives us quite some comfort that in Q4, you'll see a return to some sort of positive net adds.

Yes. And Polo, on fiber, I mean, you're right. We announced a target of up to 85, not 85%, up to 85%. We currently are almost on the level of 75. Having said that, Delta and ODF, they also build a footprint of 1 million. So the Netherlands is above 90% fiber coverage. So now for us, it's very important to understand how we move further and maximize the fiber -- the value of our current fiber infrastructure. We will continue to expand the fiber footprint in a more disciplined value attractive way and also within the financial framework because that's also a target we announced and some targets are more important than other targets, I would say. So we also have a more flexible toolkit how we serve our customers outside our footprint. And we evaluate all the options, how to move above 80%, but also through the lens of customer experience, strategic control, long-term value creation, you name it. So perhaps in the next quarter, we will come back to the target of 85% and how we are going to run it. But the CapEx step down is something we already planned for next year. There's no way to move back from that, and we will execute on that. So I think that's the way we will move further.

The following question comes from Ajay Soni from JPMorgan.

My first is on consumer fixed growth, which has slowed a bit in Q3. I know you have the combi discount headwind throughout this year. And if I look at fiber ARPU growth, it has been quite limited in 2026. Do you think this fiber ARPU growth does step up in? And the second question was just a follow-up on your cash flow bridge, which was around your accelerating FTE reduction next year. So what are you seeing that's going to be driving that much bigger FTE cut in 2027?

So I think I mean to say where fiber ARPU will be next year, if I look at broadband service revenue growth at around 0.2%, 3% per annum. If you look at where we started this year, I would have the consumer service revenue growth at 1.9% is where we expect it to be. It's driven by more mobile and less fixed than what we anticipated in the beginning of the year. So mobile has been better in terms of net add growth and also sticky price increases that actually stuck and filter down to the bottom line. In fixed, we see ARPU is actually kind of in line with what we expected. There's a slight -- the headwinds are small base effects, which are negative. I think less growth than what we anticipated. Obviously, the decline in Q3 is part of that. And also the market requires a little bit more discounts or less revenues from additional set-top boxes or additional streaming services. So I think that drives fixed to be around 2.3%. I would expect that probably in Q4 to be a similar number. At some point in next year, I would hope to accelerate, that's something for next year. But I think compared to where we started, to me, the most important point is group service revenues and consumer service revenues is on plan. And that fixed, our view is more of where we planned it to be and relatively stable. On the FTE reduction, where it's come from various initiatives. We've obviously given you guys a EUR 100 million net cost savings opportunity in target. The adoption of more agentic AI service in call centers. It is the ramp down of our fiber rollout, which require less fiber-related staff and project management staffing, we are obviously scaling down the fiber rollout that organization will be rightsized and normalized. There is other initiatives ongoing, notably in the B2B market. We've seen a few larger customers leave, we'll rightsize and adjust our organization on that. So a range of initiatives across the group that will, as we see, accelerate the reduction in labor potential and staff at KPN. But all these initiatives are say, underway have been launched, have been discussed with works councils and are set in motion.