CEO and Chairman of the Board of Management, Koninklijke KPN
Talking telco strategies: a Fireside chat with KPN COO Joost Farwerck and Manish Vyas
Joost Farwerck and Manish Vyas join Martyn Warwick to explore telco strategies in general and KPN's strategy in particular.
About Joost Farwerck
During the third quarter of 2021, Farwerck stated that KPN's results showed "another important proof point of our strategic progress," with mass market service revenue growth visible in all segments. He noted the company had "nearly completed" a 200 million euro share buyback program, which he described as "the first step to structurally return additional capital to our shareholders in the coming years." Farwerck also said KPN and Glaspoort planned to jointly reach 80 percent of Dutch households by the end of 2026, after which capital expenditure would come down. In a July 2021 interview, Farwerck discussed KPN's security operations, stating that the company faces "five to ten thousand attempts per day to get into our systems." He described KPN as "a very healthy company" investing "a billion euros per year in the Netherlands" and said the company aims to do more than just make money, seeking to give back to society. Earlier, in July 2020, Farwerck reiterated KPN's commitment to its 2020 outlook, stating that the company's dividend of 13 cents per share was "cast in stone" and that it would be "a shame to pause" capital expenditure given the value creation it enables.
Transcript (9 segments)
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Martin Morck0:09
Welcome, I am Martin Morck, I'm the editor-in-chief of Telecom TV and I'm joined by two genuine industry luminaries. On my far right there is Joost Farwerck, who is member of the board of management and the chief operating officer at KPN. Joost, you're very welcome, thanks for coming. Thank you very much. And on my right, Manish Vas, president of communications, media and entertainment business at Tech Mahindra. There seems to be some striking similarities between what we've seen Tech Mahindra present this morning when you did it, Manish, and what you have, Joost, as KPN strategy which is simplify, grow and innovate, and Tech Mahindra's run better, change faster and grow greater. There are striking similarities. Who's been copying whom? Can I go first? I have been copying them, okay. Imitating is a sincerest form of flattery, or have you been learning from them?
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Manish Vas1:03
I think that's the point. I think we, I said it earlier in the morning, our job as a technology and a services and a consulting company at one level becomes very easy because we listen and we follow and comprehend the strategic imperatives of leaders like Joost. And when we observe their strategy and talk to them and keep KPN such an inherent and integral part of who we are, it's been a partnership that we have enjoyed thoroughly every single day. We have asked them often about what exactly their priorities are and it's no, like I said, different words but in a sense achieving the three same objectives which is to help folks like KPN transform their operations, make them more effective, transform and change the technology landscape much faster, and to find new opportunities to grow as we transform the product mix and the services. So that's what has given us the transformation and that's what I meant by us taking inspiration from their strategy all the time.
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Martin Morck2:17
Okay, Joost, elaborate on how KPN is evolving your simplified grow and innovate strategy. What does it mean and how do you implement it?
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Joost Farwerck2:26
Well, in 2030 we started with strengthen, simplify and grow, and now we move up with simplify, grow and innovate. We had to strengthen our company by investing a lot in networks, in capacity, but also in the change of the company, new services for our customers, new platforms, new IT, a lot. And that's how we know Tech Mahindra so well because it's a very important partner in this journey for us. We said we have to simplify our company. We're in the middle of that. We just finalized the program after three years, but we are working for at least another three years on this simplification. It's about the simplification of the products, the services, the customer processes, but also the simplification of networks and IT in our company, and this all in parallel, not one after the other, but in parallel. And of course it's about growth, growth of our customer base, of the net promoter score of our customers, but also growth of our top line and margin. And after three years, we succeeded quite well in consumer segment to realize that. And now for the coming period, we're really focusing on the business segment in the Netherlands to stabilize and grow again.
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Martin Morck3:41
Manish would like to come in on there from the Tech Mahindra point of view and just look at this aspect of simplification. How does it apply to you as well? We're talking about change or transformation or simplification of an established, very successful, large enterprise. What comes along with that territory is legacy, and what comes with legacy is very experienced people who have been successful in doing things in a certain way that has to change, and that's not easy. They say old habits die hard. They also say sometimes, a friend of mine said once that the most difficult thing in creating the new is to fight against the antibodies within, right? And that I think is the mindset question, probably what you're asking. I think it clearly is difficult, and the answer to that is not easy, but there is one thing that can help, which is where I totally agree and take inspiration from the word simplify. You will have to simplify things because there are so many different things. Like earlier today when I spoke, U and Anil pointed out that I missed out the word digital in my speech. I mean, because there are so many things to be discussed today, there is no one thing that defines everything. Our attempt by creating, using the three generic words run, change and grow, is exactly a small attempt towards simplifying our story, and saying it has to be understood by the weakest link in the company and by the strongest technical person in the company as well. So that's our attempt to try and align with the mindset change and the culture change. We've given simplification a fair run for his money. Let's have a look at growth. How are you going to grow?
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Joost Farwerck5:31
Yeah, well, we truly believe in investing in internet of things. We rolled out a separate network. We're not waiting for the 5G wave because that's more or less starting after 2019. So we're doing pilot on 5G but we rolled out an Internet of Things LoRa kind of network, and it's an ecosystem we're building. You can make a business case for ages how it works, but currently we are connecting companies, people, we are even connecting cows to the cloud. And that's because we create, we know it will come, and it will not come in growth from a financial point of view probably in the first six or 12 months, but we know it will be a growth for the longer run for our company, and that's why we really invest in Internet of Things and all services related to that.
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Martin Morck6:27
We're running out of time, so I'm going to ask one more question of you, Joost, if I might. You've been talking about investing pretty heavily within KPN in infrastructure, whether it's 4G or fiber to the home or whatever. Is it easy to justify and get the money you need for those changes and improvements in an era when traditional revenue is flatlining or even falling?
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Joost Farwerck6:54
Well, to be quite honest, if the plan is good, yes. A couple of years ago, we as a management concluded that we had been underinvesting in our company, and when we announced the plan including a step-up in investments, it was received quite positively because that's how our business works. One has to invest before the returns come in. Although having said that, I just mentioned we really invested a lot over the last three years. I think we can do less in the coming years. I know for sure this year we already stepped down like 100 million. So that's the good part. But we always will keep investing in quality and in the long term of our company, in our business.
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Martin Morck7:47
Okay, we're out of time, gentlemen. So thank you both very much. Joost Farwerck and Manish Vas, thank you so much. Thank you.