Deutsche Telekom Ag S/Adr

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

Good afternoon, everyone, and welcome to our live Q4 2020 webcast and conference call. As you can see with me today are our CEO, Tim Hortges, our CFO, Christian Illig, and our head of Germany, Srini Gopalan. Tim will first go through a few highlights, as always, and provide our guidance for 2021. Srini will then update you on our German Fiber to the Home plans, and he will also talk about the German segment Q4 performance. Christian will talk about all the other segments and our group financials. After this, we will have time for Q&A. Before I hand over to Tim, please pay attention to our usual disclaimer, which you will find in the presentation. And now it's my pleasure to hand over to Tim.

Welcome, everybody. I hope you're in good mood despite the COVID-19 crisis, which is still ongoing. But I hope that we can share at least some of the optimism and the transactional dynamic which Deutsche Telekom is carrying forward. I'm glad that I found a place on the table. I'm sitting at the end of the table, so I'm glad that I'm here. The center of this company is anyhow here in the middle, which is Christian, the CFO, and the finance community, and Srini Gopalan. You know, this is, let's say, the master of disaster. So, therefore, I'm very happy that he's with us today introducing him. This is this totally underdressed gentleman there, you know. By the way, Srini, this is the way how you should look as a CEO, yeah? Not the way like you're going. I really appreciate your presentation. Next time it will be the other way around, guys. So I'm very happy, by the way, talking about yesterday's supervisory board meeting and the way going forward. We have extended the contract of Thorsten Langheim for another five years, and you know how important Thorsten is for us on the group development side for going forward, and as well from Birgit Bohle, our HR director in this community. So therefore you see that our team is stable. and aligned to bring things forward. And I can tell you one thing. If I look hindsight, you know, we had a lot to do, but looking foresight, I have all hands on deck. There's so many things to do. And one of the topics we're discussing today is the fiber rollout in Germany, which is very important. I want to share some highlights about, you know, our 2020 results, which you see on the first slide. And I will give you even the update about the group financial outlook for 2021, including our guidance. Srini will then go into the fiber to the home deployments and into the performance of Germany. Despite this acceleration, we will still grow our ex-U.S. free cash flow in the coming years. I think this is the most important message which we are bringing forward today. 2020 was a fantastic year for Deutsche Telekom on both sides of the Atlantic, a year in which we delivered on our promises, even over-delivered on them, where we laid the foundation for the long-term value creation of our group. Just a few highlights. We are 5G leader in all our major markets where we have already the spectrum available. TMUS is delivering the synergies ahead of plan. The group still beat its initial free cash flow guidance as well as the increased targets. Our adjusted earnings per share was positive. All this despite the dilution from the merger and despite the corona pandemic. Our customer growth was as strong as ever, especially in the fixed line market. And organically, group revenue grew by 3%. EBITDA grew by 8%. And in Germany, we had the highest broadband net-ed share since a decade. And we strengthened the German fiber business case through wholesale agreements. with all major resellers, which is, by the way, very important, you know, to get co-funding for our fiber rollout going forward. And we'll talk about that later. And on top of that, there's a gift for all of you guys. We confirm a stable $0.60 dividend as promised. We go to the next page, and we see all segments on the left side. All segments had a good, strong EBITDA growth, except for two systems. And you see as well that the European segment has grown now its EBITDA at 12 consecutive quarters in a row. Germany, by the way, now growing EBITDA since 17 quarters in a row. And free cash flow at 6.3 billion beats our mid-year post-merger guidance of 5.5 and our raised target of at least 6 billion. So, guys, I just wanted to mention that. Because I have done so many transactions, so many mergers in the past, and we always had this discussion about first we have the deep dive in a merger, and then we create the value. By the way, this is the normal story. We were able, despite the fact of $1.5 billion of cost for synergies in the first nine months, despite that, to significantly over-deliver on our free cash flow numbers. Despite the $5.5 billion, we made $6.3 billion. Adjusted earnings per share grows by 15% to 1.2 euros. This increase is due to the TMUS option, which we agreed with SoftBank. And by the way, Christian will talk about that a little bit later on as well. But even without this, our earnings would have been stable despite the merger dilution due to our strong ABTR growth along the major businesses. 2020, another very busy year. We got the approval and delivered the Sprint merger. Okay, that's history. TMUS funded itself. We renegotiated the terms with SoftBank pre-close. And in May, we gained ownership of valuable call options. TMES is executing on the synergies. You have seen the numbers better than anyone could have wished for. And churn has remained low, which is, I think, in this corona pandemic situation, you know, it is really outstanding how T-Mobile is performing, that the lowest industry churn in the U.S. markets. And the benefits of our 5G leadership are yet to come. On the European side, we agreed to exit our Romanian fixed line business. And we entered various agreements with Celnex related to our Dutch towers. And we have another very, very creative instrument to fund outside our balance sheet infrastructure, which is called DIF. And I think in our Q&A later on, you will definitely ask questions around this as well. Going to the most important thing and the one which I care most about, that is customers. And by the way, that's not just, you know, a lip commitment. It's just my personal desire here. And I can tell you we are not slowing down. We have gained 7 million new postpaid subscribers, customers in 2020. So we say subscriptions. We don't say customers because, you know, these are SIMs. But, you know, it's a huge growth which we have seen there. We have gained 700,000 new broadband customers in Europe, of which almost 400,000 in Germany. Think about 400,000. This is a market share which is beyond our ambition level of 40% in the German market. And on top of that, we have gained 400,000 new TV customers. And you know that this TV customer business is now a very profitable business for us as well. On page seven, you see our commitment towards society and environment and the progress we made here. our customer satisfaction increased in 2020, and so did our employee satisfaction. By the way, I just want to mention that if you see an increase of almost 10% points, this is not usual. Normally, 1% point is already a huge improvement. We really used COVID for convincing customers about our service social responsiveness about our sustainability efforts and the stability of our infrastructure and the connectivity which we are providing. And we get a fantastic feedback for our customers. Never in the history, never in the history of companies we had as close, you know, as high customer satisfaction numbers or employee satisfaction as we have seen in 2020. I'm very happy about this. Very happy. Digital inclusion matters to us a lot. And by the way, we were ahead of that wave. Just think about how this is now politically discussed, but especially when it comes to politics. Hate speech. We had a big campaign. And please have a look to our YouTube clips on this one. Very, very emotional spots around that, including Billie Eilish and other content here. So it's very good. Our fiber and our 5G networks are built for the many, not the few. That is the proposition. We are not exclusive. We are always inclusive. This is what the T brand stands for. Across our footprint, we engaged massively to help people to deal with the consequences of the pandemic. I do not want to go into all the offers which we have made, much more than our competition. So we are really in the heart embedded as part of our society. And a particular focus for us was connectivity. for elderly people, for schools, and even for students. By the way, on both sides of the Atlantic, and just mentioned the U.S. at that point, you know, the 10 million campaign, which Mike Siebert started, was very well regarded in the market. We stepped in and delivered where we were asked to help. And Deutschland has the most regarded and, by the way, the biggest Corona Warn app now downloaded 26 million times, working totally smoothly. Now, you can argue about the efficiency of a decentralized app, but it's definitely a part of the fight forward. against corona we made progress with diversity by the way i got the gender personality of the year yeah Great stuff. But independent from that one, I think, you know, you see even here, look at these guys, the three gentlemen. If this is not diversity, then I do not know what diversity really is. So in Germany, we, as example, delivered, you know, 100% carbon-free electricity. We call it green magenta. By the way, done. We reduced our energy consumption in absolute terms for the second year in a row. By the way, keep in mind that we are running the biggest cloud infrastructures, you know, as a telco. So we have an additional business with the systems which other telcos don't have. Despite that outsourcing of energy, we were able to reduce energy in absolute terms. And with Dominic and with Birgit and with Claudia, we have three women in our board of management. And we are in Germany now, the most diverse board from a gender perspective. But I think it's only one piece of diversity. It has to do with internationality. It has to do with the backgrounds of people we're coming from. And it has to do with gender as well. So I think we are on good track and we have success. already a lot of execution around diversity. Networks. I mentioned that earlier that our networks are built for the many, not for the few. And that's how we are leading 5G. I do not want to celebrate it again. And you know I love that story because, you know, nobody of my competition was expecting that we are deploying 2.1 on 5G. We used all our antennas. And today we have two-thirds of the country covered by 5G services. And all the competition is looking, what the heck happened? You know, nobody in Germany, and you can see our press clippings, nobody doubts how far ahead Deutsche Telekom is at that point in time with regards to 5G. And this is just the beginning. By the way, same happened in the U.S. Interesting, on this page you see the tower. By the way, it's the 5G tower. This is the tower in the center of Düsseldorf. And guess which company sits in Düsseldorf? I hope you know it. On page 8, you can see what we mean by FTTA acceleration. And I think even here, we are on a good track. So, therefore, this is page – yeah. We started to accelerate our fiber build in 2020 with 600,000 new homes passed in Germany and 1.6 million passed in Europe. Guys, again – One million additional lines only in Europe, which we have built last year. So don't always look on to our German footprint. Even look to the European businesses. We are making big steps there as well in our fixed mobile convergence based on the best technologies. We thought you would know, like to hear what we are doing in 2021 and beyond. You know, whenever we talk about share price, I always hear something about FTTH. So it's very important for us to give clearance and details around that. That is, by the way, why Srini is with us today. And he will give you a very detailed update about how we are now, you know, scaling up our position on FTTH. On top of that, you know, we have the Capital Markets Day in May where we give you more thoughts, more decisions around the acceleration plan as well. So that's it from my side. And, therefore, I'd like to hand it over to Srini. So, Srini, the master.