Deutsche Telekom Ag S/Adr

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.

Good afternoon everyone and welcome to our second quarter 2020 conference call. With me today are our CEO Tim Hoedkes and our CFO Christian Illig. To be precise, Tim is actually in a remote location and Tim will first go through a few highlights as always, followed by Christian who will talk about the quarter's financials in more detail. And after this, we have time for Q&A. And please, as always, pay attention to our usual disclaimer that you find in the presentation. And with that, I hand over to Tim for his opening remarks.

Thank you, Hannes, and welcome everybody here from my side. I think it's a big picture day, as Hannes pointed out, you know, in the pre-prep call today, showing that we are well on track both sides on the Atlantic's. giving the highlights of our very strong first half results. As usual, my overview will be followed by Christian, and he's going then into the details. I think this was a very special quarter. We incorporated Sprint's operation, and we created the new T-Mobile. And with the new T-Mobile, we even created the new Telecom. We entered a win-win agreement in this quarter with SoftBank, creating a big option value for Deutsche Telekom's shareholder going forward. and we delivered operationally on a very strong basis despite COVID. And I hope you have compared our numbers with our competitors' numbers. I'm really proud about my organization and how we performed. We delivered headline growth both inorganically anyhow and organically, commercial growth and strong earning growth. and way ahead of, you know, of our large European peers on EBITDA. In the U.S., we overtook 18 teen-branded customers, and outside of the U.S., our organic EBITDA grew by 4%. We maintained our high investments, and we took big steps towards 5G leadership on both sides of the Atlantic. I'd love for you to go into that one later on. Despite COVID-19, we reiterate our full-year guidance for ex-US EBITDR, which we handed out to you before COVID, and with regards to the free cash flow. And we are also able to provide strong full-year guidance for the whole group, including the new T-Mobile. I'm also really happy that we are seeing record employee and customer satisfaction, honestly, in pieces, double-digit growth. And outside of the US, we had the highest employee satisfaction Customer satisfaction is also up to record levels in Germany and elsewhere across our footprint, and even this is a good message. People really appreciate the work we have done so far in this COVID crisis, providing good connectivity, very stable, resilient services. Move on to page four, and the sprint merger, which is putting us into a totally different league. In the U.S., we have now overtaken AT&T in terms of branded wireless customers. Second, we have the best spectrum position. You know that. It is a spectrum deal, and we will build the network on this basis to the best infrastructure in the U.S. And we have confirmed 43 billion of synergies, and hopefully we are trying to beat this estimate. I think it's um even very good to see how this new team around mike siebert is coming together and the great spirit which this team has working remote but you know executing along every kpi which we have laid on pre-merger site slide four shows a few key steps of the new deutsche telecom first measure we are now a hundred billion our turnover company We are providing an annualized EBITDA close to $40 billion. Our balance sheet is now $270 billion big, and we employ 230,000 people across the globe. And we look forward to huge benefits and future returns from this transaction for Deutsche Telekom's shareholders. Let's look at a quick summary of our first half year financial performance on page five. Headline financials are up strongly, boosted by the first time concentration of Sprint. That said, organic revenues were stable year on year, and organic EBITDA was up 8.6% in the first half. I think this is an unbelievable strong number comparing that, you know, most of our competitors are suffering big time with the COVID crisis. The cash flow was up by 19.6 year on year. And all segments contributed to our strong EBITDA growth, with one small exception, our system unit, which was not able to mitigate corona-related headwinds completely. On page six, we show some of our key investments outside of the US. We call it the flying wheel, which is going on. In Germany, we now cover 35.5 million lines with fiber, of which 1.8 million with gigabit connectivity. In the EU, we passed 6.3 million with gigabit capable lines, bringing the total footprint, including Germany, to 8.1 million. And we now have almost half a million lines on super vectoring, up four times in the last 12 months. We added a benchmark agreement with the city of Münster to our FTTH toolbox, and that is the way of partnerships going on. We further improved our service KPIs. Our first contact resolution rate, which is our most important KPI for services, up more than a quarter in the last 12 months. Complaints are down by almost half. T-Mobile won the J.D. Power Customer Care Award again with the highest score ever seen, and we keep investing in mobile network leadership, and we have geared up in 5G. I come to that on the next slide. I always promise, you know, that we are taking over 5G with all our markets. And when we spoke last time, I think we highlighted a bit our plan for Germany. Remember I said, look, let's see what we are announcing throughout the year, but now we can talk about it. We are now covering half of the country with a full three carriers of 2.1 gigahertz spectrum. Very silently we have bought, spectrum from Telefonica, 2.1 gigahertz, deployed that on our infrastructure across the country. And we are now able to provide this coverage all over the places without building new sites. And on top of that, we are building leading 3.6 gigahertz coverage. So we are just, you know, accelerating our build by using 2.1 gigahertz with free spectrum. And in addition, over time, when we get the approval for all the new rooftops and towers, we will increase our 3.6 gigahertz coverage on top of it. And with this, we will more than double provide speed for our German customers already by the end of next year. And as you know, this is the way ahead for our German peers. I'm very happy and very proud about the technical team of Germany who made this silent strategy live and that we have now an advance of four to five times more coverage than Vodafone and even a significant advantage when it comes to speed. Last week you heard T-Mobile US talk about the great progress we are making. T-Mobile US achieved a world first by launching standalone 5G nationwide last week. And TMS already covers over 250 million pops with 5G in 600 megahertz area. 5G in 2.5 gigahertz has been deployed in eight markets. And there we see average speeds of 300 megabits per second. And as you also heard on their call, T-Mobile is upgrading sites to 2.5 gigahertz. at a rate of 700 sites a week. We also invested in 5G elsewhere in Europe. In the Netherlands, we defended our spectrum lead in last month's auction. And we already cover 80% of the Netherlands with 5G and aim for full coverage by year end. And we are also off to a strong start in other European markets, especially Austria and Poland. Looking to page eight, I'd like to draw your attention to our customer growth because this is the basis for what we are. We are not only a yield company, we're even a growth company. And we remain strong during the crisis. Remotely, we were selling more by our service center than ever before. In our European footprint, we added 1.3 million new converged customers. And in Germany, more than 15 million homes are served by our fiber products now. And we saw solid mobile customer growth on both sides of the Atlantic, despite Corona. And Christian will give you all the numbers for each of the markets. On slide nine, let me explain you our guidance for this year. I'm taking this in steps. Our ex-US guidance is very simple. There is no change. This is despite the COVID-19 crisis. We are able to mitigate the headwinds so far, and we believe we can do this for the remainder of the year. Our group guidance is based on our ex-US guidance. For EBITDA, it was $13.9 billion. At the contribution from T-Mobile's year-to-date, for EBITDA based on EFRIS, this was $9.5 billion. At the midpoint of the guidance, you heard from T-Mobile last week, $11.2 billion, including Sprint. And finally, we deduct the U.S. debt IFRS bridge that we expect for the remainder of the year, minus $0.4 billion. For 2020 Group EBITDA, this gives you around $34 billion. For Group 3 cash flow, this adds up to at least $5.5 billion. And this is often expected group cash capex no cuts at all but now 17 billion of volume and this is without spectrum and again this is based on the tm us guidance last week plus an unchanged outlook for europe so very brave very committed and very strong Javier of Deutsche Telekom in this difficult environment, beating our competition. And that's enough for me today, so I hand it over to Christian.