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.

Good afternoon, everyone, and welcome to our third quarter 2020 conference call. With me today are our CEO, Tim Hutkes, and our CFO, Christian Illig. Tim, as usual, will first go through a few highlights here to date, including our raised guidance. And this will be followed by Christian, who will talk about the quarter's financials in more detail. And then we have time for Q&A. And as usual, before I hand over to Tim, please pay attention to our disclaimer, which you'll find in the presentation. And now it's my great pleasure to hand over to Tim.

Yeah, high five, guys. So welcome from my side here for a great quarter of Deutsche Telekom. Another, you know... Very good outlook for the remainder of the year and the future we're having. I want to share some of the highlights with you today and our strong results, which we have presented earlier this morning. As usual, my overview will be followed then by Christian, and then we go deeper into the questionnaires. This was a good quarter, as I mentioned, on both sides of the Atlantic. Strong commercials, a lot of progress with the merger and underlying strong financials. most important thing for me we are growing and this despite covet i think this tanker is on its way through a storm in in a very very clear way and i'm very happy about commitment of our people to this we are investing at the same time um with 17 billion record high levels and this uh at despite uh covet so um um we are not you know negatively tangled by that. In the US, we made great progress with the Sprint integration. You saw the numbers already. And with the rollout of our 5G services, we are well ahead of AT&T and Verizon. We raised our full year guidance. On this side of the Atlantic, we continue to deliver commercial and financial growth. And here, too, we raise our full year guidance as well. So that makes it a good story for whole Deutsche Telekom. Germany has grown 16 quarters EBITDA in a row now, and the euro segment grows 11 quarters in a row. So I think that shows you the good performance. Our commercials remain strong. We added 97%. broadband customers in Germany on the broadband side. Our line losses are down by two-thirds, 45,000, you know. So this is almost nothing this quarter compared to the history. And we have achieved a grand slam of German service awards. Look, I would say every company, every tagger would name them. We have so many awards. that I cannot, you know, list them here, but I will definitely do that in the capital markets day. So that I show you at least, you know, how we are outperforming our competition. And just today we got another award. There was a big network drive test made in seven categories. Deutsche Telekom won six out of them. So from a network perspective, there's no one else even close to our performance these days. We entered a benchmark wholesale agreement with Telefonica Deutschland, which is helping us to improve our commercials around the FTTH rollout going forward and is even helping us big time in our credibility towards regulators. Our headline debt is up due to T-Mobile's long-term American Tower Agreement, but our financial leverage dropped to 2.5 times this quarter, which is a good note as well. I'm also happy to confirm our clear intention to pay a 60 cent dividend for 2020 next year, which is subjected to the board approvals. Let's go to our presentation and looking at page four, where you see that we are growing despite COVID. Headline financials are up a lot, boosted by the consolidation of Sprint, but also by our consistent strong organic growth. Organic revenues are up 1.2% year-to-date. Organic EBITDA grew by 7.5% and all segments contributed here, including to systems. Free cash flow was up by 1.8% despite COVID-19 and more than 1 billion euros year-to-date US merger integration costs supporting the financial numbers. Let's move to the U.S. merger on page five. And I think it's obvious to see that we made great progress with the merger. since our closing in April. On the commercial side, we implemented the rebranding in August, and yet we had a record quarter for our net debt numbers. By the way, we looked it up. This is the second most successful quarter in the history of T-Mobile US. Our postal churn remained low at 0.9%, well below historical pro forma levels. And that's despite the fact that we are integrating the Sprint customer base in the T-Mobile one. As for the network, the team will cover 100 million pops with 5G in 2.5 gigahertz by year end. And then they will double this again next year, at least. 15% of the Sprint traffic is already on our T-Mobile infrastructure. This will jump to well over 50% in 2021. We are very confident about our synergy targets. We will realize 1.2 billion of synergies and I'm talking now annual savings already this year and we will double this then in 2021. T-Mobile also significantly improved its financial position in a series of refinancing transactions. Last week, T-Mobile raised their EBITDA and free cash flow guidance, as you know. Clearly, the team is very well on track to deliver the promised goods for customers and shareholders. And by the way, only looking at the track record since the announcement of the deal, the company has more than doubled its valuations. And you know who is T-Mobile US biggest shareholder, don't you? So moving to page six and the investments. We show that our key investments outside of the US are moving on as expected. We keep our flying wheel going. In Germany, we now cover 35.7 million lines with fiber, of which 1.9 million are with gigabit connectivities. In the EU, we passed 7.6 million with gigabit cable lines. This brings our total gigabit footprint, including Germany, to almost 10 million now. So across Europe, we added 1.3 million giga lines in the last 12 months. We agreed a benchmark fiber wholesale deal with Telefonica Deutschland, and we think this is a very important win-win situation for our partners in Munich. The agreement extends our proven contingent model approach for the next 10 years and from VDSL to FIBA to the home. As part of the deal, both parties have entered commitments. We have agreed certain minimum build and Telefonica has committed minimum volumes. The German regulator has a stated preference for light touch fiber regulation based on voluntary commercial agreements. They immediately welcomed this deal. Moving on to customer service and we further improved our service KPIs. Fault repairs are down by another fifth. Our first contact resolution rate is up by a quarter and complaints are down by over a third. We keep winning most service awards. Our chatbot came first in the recent computer build. We achieved a grand slam, as we call it, in the recent chip service hotline. We came first for mobile and for fixed and for TV and for hosting services. And we won most other awards as well. I mentioned that already at the beginning. And I'm very happy with these wins. We won't stop until everyone is connected. That is our purpose, and I think that the company is really aiming for leading. On page seven, let's talk about the investments into 5G. In Germany, we are well on track for our plan to cover two-thirds of POPs with mid-band 5G by year end. This is far ahead. of our competition. And I can tell you one thing, I'm here since 20 years. I was witnessing the 3G, the 4G launch, but we never in our history in Germany had a bigger advantage compared to our competition than we have it today. We now offer 27 5G capable devices, including the iPhone 12, but also more affordable models like the ones from OPPO. Moving on, the iPhone arrived. The share of 5G-capable devices has more than doubled to almost half of all new devices. So step-by-step 5G is becoming increasingly relevant for our customers, both on the B2C and on the B2B side. We already mentioned the great progress T-Mobile is making in the U.S. with their 5G build. We are covering over 270 million pops with 5G service already, way ahead of the competition. By the way, for the first time in history, T-Mobile U.S. is ahead of competition with regard to a network technology. And their 5G error cover is twice that of AT&T and three and a half times of Verizon. 5G in 2.5 gigahertz is already available to over 30 million people, and it will be available to 100 million by the end of this year. And by the way, we are doubling up. On 2021, we will cover 200 million. In the Netherlands, we already have 90% of the population covered with 5G services, and other markets like Poland and Hungary are doing well as well. We are also off to a good start elsewhere. It depends a bit on where Spectrum has been awarded and where not. Moving on to our customers. And here again, we keep growing in our European footprint. We added 1.2 million converged customers in the last 12 months. In Germany, 15.5 million customers are on our fiber products and 600,000 on super vectoring. And we saw very good mobile customer growth, not just in the US. With that, let me go to the guidance. Today, we raise our EBITDA guidance for the group, not only in the US, but also in Europe. We also raise our free cash flow guidance. But first, let me look into the ex-US EBITDA guidance. Here we raise our 2020 target from 13.9 to 14 billion, and you might know that last quarter we already improved it. And we do this despite some headwinds in our operations from the COVID-19 crisis. Our group EBITDA guidance is based on our increased ex-US guidance plus the 15.5 billion from T-Mobile's year-to-date. Then we add the midpoint of T-Mobile's implied Q4 guidance, and that's 5.9 billion. And finally, we deduct the expected fourth quarter gap IFRS bridge of 0.2 billion. And so we get to at least 35 billion for the group this year. I know, guys, you know it, but, you know, it's so impressive to just, you know, reflect that again. Think about that one. Last year, Deutsche Telekom was 10 billion euros, if it are smaller than, you know, what we are showing this year. And we have increased our guidance by almost 1 billion, 1 billion. Remember, before COVID, we said we are going to achieve a result of around $34 billion. Using the same approach based on T-Mobile's guidance increase, we also raised our group free cash flow guidance to at least $6 billion. This was at least $5.5 billion in August. Our full year group capex guidance remains around 17 billion and our dividend remains at 60 cent for 2020 as well. We confirm this today. And now let me hand it over to Christian for giving you all the details around that.