Deutsche Telekom Ag S/Adr

Good afternoon and welcome to Deutsche Telekom's conference call. At our customer's request, this conference will be recorded and uploaded to the Internet. May I now hand you over to Mr. Hannes Wittig.

Yes, thank you. Good afternoon, everyone, and welcome to our first quarter 2020 conference call. With me today are our CEO, Tim Hodges, and our CFO, Christian Illich. Tim will first go through his highlights of this quarter, followed by Christian, who will talk about the quarter's financials and provide a few deep dives. After this, we have time for Q&A. A bit less than usual, if you allow, because we have some urgent appointments afterwards. Before I hand over to Tim, please pay attention to our usual disclaimer, which you'll find in the presentation. And now it's my pleasure to hand over to Tim.

Thank you, Hannes, and welcome everybody from my side. I want to talk about our strong Q1 results. And in addition, I want to give you an update on how COVID-19 has impacted our business and why we remain confident to achieve our stated full year 2020 targets. This will be followed by Christian with a deeper dive into our Q1 results, plus some additional financial disclosures. Let me start with my highlights. We closed the U.S. merger on April 1st from the Home Office. So we gained all remaining approvals. We were able to raise $19 billion shortly after closing, despite peak market turmoil and on better terms than expected in our initial merger case. In brackets, I was a little bit nervous in the meanwhile, but turned to be on much more positive. We confirmed the target synergies and are now working on the rapid implementation, which is going well. In Germany, meanwhile, we revealed our plans to cover over half of the country with 5G, and this already in 2020. The strong commercial and financial momentum we achieved in 2019 continued in the first quarter of 2020. On both sides of the Atlantic, all segments are growing from a profitability basis. Our EBITDA grew double digit in the first quarter. Yes, you heard it rightly. Our EBITDA grew double digit. And this despite, let's say, the impact of the global COVID-19 crisis. It seems to be that our operations are very resilient. We were able to move swiftly with decisive and generous crisis support for our customers. Our networks and service operations held up flawlessly across all geographies and technologies. We remained in our stated leverage comfort zone and we confirmed our dividend. So based on our Q1 performance and based on what we are seeing so far, we see ourselves on track for our stated 2020 guidance. Before we go through the details, let's look at a quick summary of our Q1 financial performance on page four. Let's keep that simple. All segments grew this quarter again. Page 5, we show some of our key investments outside of the U.S. In Germany, we cover over 35 million lines with fiber, of which 1.7 million with gigabit connectivity. In the U, we now pass 3.4 million with full fiber, bringing the total footprint, including Germany, to just over 5 million. This is up 1 million compared to one year ago. We now have 250,000 customers on SuperVectron as demand starts to accelerate. And in Germany, we reduced our IT time to market to five months, less than one-third of what it was in 2017. And the app penetration in our European segment has reached 57%. Our networks stand out and keep winning all awards. By the way, it's the most successful first quarter we ever see in Deutsche Telekom. We won the recent Connect test for the overall best mobile networks, both in Germany, in Europe, and as a multi-country operator for entire Europe. We won all German mobile network tests. We won all German fixed line tests. We won all service tests. And we won the test for the best German IPTV platform with almost full marks. And we were named one of the Germany's top three customer-oriented companies alongside with Amazon and Miele. Our customer service metrics that we showed you mid-February keep improving. Moving on to slide six. Early May, all German operators met with Bundesnetzagentur to declare their 4G coverage. From what we learned, I can tell you we are not just far ahead of Telefonica Deutschland, we are also far ahead of Vodafone. But network leadership is not just about 4G, it will increasingly be about 5G. A couple of weeks ago, and I mentioned that already, we revealed a big plan for 5G in Germany. And let me give you the details. Upon launch, we will refarm some of our 3G spectrum. And as soon as our newly acquired 3G spectrum becomes available, we will have 2 times 15 MHz of 2.1 GHz spectrum on 5G. 2.1 is excellent for 5G because this spectrum range combines speed with good propagation. We will switch on 5G in 2.1 GHz in at least half of Germany already this year. On top of this, we will have the top 20 cities covered with 3.6 GHz. Going forward, we will leverage other spectrum ranges, such as 700 MHz frequencies. So we have a mix of low-band, mid-band, high-band, which is, compared to my competition, significantly better, and we will roll out faster than anybody else. So comparing the commitments of Vodafone with ours, we will have four times more coverage already by the end of the year with regard to 5G. I'm very excited about this acceleration plan, which we laid out during the Corona crisis, and it shows that we are maintaining our clear German mobile market leadership. On page seven, we talk about the customer growth, and it remains strong. We are very grateful for the trust, especially in these difficult times. The incumbents are the winners, and we see it again. In our European footprint, we added 1.4 million converged customers. In Germany, almost 15 million homes are served by our fiber products, and we saw strong and steady mobile customer growth on both sides of the Atlantic. There was a time where people were criticizing our vectoring and super vectoring rollout. We are now able to... serve more than 80% of German households. And we are the guard horse for the digitization in Germany and especially for all the business customers. So all the traffic load in the COVID crisis is managed on our network and we not had a single outage in our networks during the crisis so far. Let me now on page eight talk about the way we have approached the coronavirus. Those who knew me know that I'm reluctant with praise, but I'm really, really proud how our company, our people have responded to the crisis. Early on, well ahead of others, we announced many offers to help those affected by the lockdown. Not just in Germany, but let me focus here on Germany and give a few examples. Immediately after the close down here, we gave 10 gig extra mobile data for free. Millions of customers signed up for this via our app. Residential customers and business customers. To help stranded families, we gave six months of Disney Plus for free. So far, we have more than half a million takers on this new proposition. Exclusive at Deutsche Telekom. We supported German business with multiple free offers and usage went up by many multiples. Here we are talking about Teams and mainly Webex from Cisco. We gave Webex to schools for free and we had 40,000 takers. That enables 1 million pupils since the beginning of the crisis. And on request of the German government, we teamed up with SAP to develop a COVID-19 tracing app so it shows the trust even the government has in us. So on. It's a really long list of things. And I can tell you we have proven that we are taking societal responsibility and we won't stop for the upcoming months. On page nine, we show the impact of COVID-19 crisis on our operations. And again, we use Germany as an example. We kept the networks up and running. There were no disruptions, zero. As we speak, each minute, we enable around 70,000 WebEx or similar conferences on our fixed-line infrastructure. Within one week, we enabled 16,000 service staff to work from home. Our field service had enough protective equipment and remained fully operational. Currently, we have 180,000 people at Deutsche Telekom working remote. All our service KPI were stable and some even better than before the crisis. Complaints, for instance, are down by a quarter. Our employee health ratio improves on a like-for-like basis. This is stunning. Take an example. In Germany, we have 6,000 people in the field operations, and we had a better health ratio than before COVID. And the same is true with the idle time and the handling of our service people who are working from home. The productivity increased by 8% points. When it comes to distribution, as our shops were closed, we saw somewhat lower gross sets, but we also saw significantly lower churn than usual, I should say even lower. In any case, our digital channels and our inbound call centers picked up much of the slack, so in sum overall, commercial performance was not hugely affected. As we speak, most of our shops are open to customers and are operating again. commercial activities slowly beginning to normalize. Looking forward, it will be interesting for us to leverage the lessons learned during the crisis for our efficiency, for the digital customer experience, for our networks. On page 10, the good news is that based on our strong first quarter and what we are seeing so far, we feel able to reiterate our guidance as stated. And by the way, we reiterate our guidance. Most of the telcos are not giving a clear commitment with regard to the guidance for this year. Clearly, COVID-19 brings some short-term and some long-term headwinds to all the business, especially on revenues. And Christian, he will show you the sensitivities of these parameters later on. But positively, at the EBITDA level, there are a lot of mitigating actions we took and we can take going forward. And our stated 2020 guidance had been prudent as well. The bottom line is, our group outlook will change when we fully incorporate Sprint. T-Mobile last week guided for the second quarter and said that They will provide full-year guidance with their second quarter results. And then we will reflect this in the group outlook. That said, our stated guidance is unchanged. We continue to expect 13.9 billion ex-US EBITDA. This is, of course, not affected by the U.S. merger. Without the merger, we would still expect Free cash should grow from 7 billion to 8 billion this year, as stated. And again, we confirm our 60 cent 2019 dividend ahead of our virtual AGM in June. I think this is another very, very strong environment in this difficult COVID times. Let me now hand over to Christian for a number of further deep dives. Christian, over to you.