Deutsche Telekom Ag S/Adr

Telecom's Q1 2024 conference call. As you can see with me today are our CEO, Tim Hodges, and our CFO, Christian Illig. As usual, Tim will go through a few highlights, followed by Christian, who will talk through the quarter in more detail. After this, we have time for Q&A. Before I hand over to Tim, please pay attention to our usual disclaimer, which you'll find in the presentation. And please also note that this conference call will be recorded and uploaded to the Internet. And now it's my pleasure to hand over to Tim.

Thank you, Hannes, and welcome everybody to the first quarter 2024. And if you have seen it, it was a very good start into the year. Very predictable and reliable numbers from all the businesses we are having. We are very happy on the track of our stated targets. Our first quarter financial results are very consistent with the multi-year trends that we showed. And that was, well, the 4%, you know, service revenue growth, a 7% organic EBITDA growth, and a 15% growth in adjusted earnings per share. So I really like that. T-Mobile was able to raise its full-year guidance, and we are reflecting this in our group guidance today. T-Mobile announced the creation of a fiber joint venture with EQT, which targets 3.5 million households in the U.S. by 2028. And T-Mobile received the necessary approvals for the Mint transaction and finally received the 2.5 GHz spectrum from the Auction 108. The German regulator made a proposal on the spectrum extension, which is now being consulted upon. So I think everything is working in the direction which we were foreseen, and we are coming along very happily with these topics. Let's take a closer look at our financials on page 5. First, old segments contributing to our growth. Second, organic growth. Service revenues grew up by 4.1% in the first quarter, which is even a bit faster than last year's growth of 3.6%. Organic ex-US service revenues grew by 3.6% in Q1, again marking acceleration. And as mentioned, organic group growth, EBITDA, increased by 6.9% in Q1, which is the same as it was one year ago. The foundation of our growth is our network leadership. In the last quarter, we passed another 500 million additional European homes with FTTH and now reach 17.5 million. This is up 3.6 billion year over year. 3.6 million, sorry. And in Germany, we now pass 8.2 million homes with fiber. In Europe, 9.3 million. In the U.S., our 5G leadership is confirmed by all tests. And in Europe, our 5G coverage stands at 68%. And in German mobile, our network leadership remains beyond any doubt. Our strong customer growth continues both in the U.S. and in Europe. T-Mobile added nearly as many postpaid customers as last year. Over in Europe, we managed an acceleration in mobile net ads, and TV net ads also accelerated, but the broadband net ads were slower than last year. Christian will talk about that one later on in a bit more detail. Moving on to ESG, despite strong growth in data usage, we further reduced our energy consumption for the group. We recently became the first telco in the world to use large-scale battery storage systems for renewable energies. And our latest campaigns against hate speech received further acclaim. At the Capital Markets Day, we will provide you with a more detailed update on our sustainability ambitions. With this, let me move to our guidance update. With the Q1 results, T-Mobile had narrowed its guidance range, accounting a mid-point $50 million increase for EBITDA and free cash flow. Today, we are reflecting this in our group guidance. We remain comfortable with our ex-US guidance for EBITDA and free cash flow, which remains unchanged. Our overall group guidance for 2024 also remains unchanged. And with that, I hand it over to Christian for a deeper dive into the quarter.

Thanks, Tim, and hello from my side. As usual, I'm going to start with T-Mobile U.S., and let me start with service revenues, which were growing at 3.5 percent, which is very similar to the last two quarters. The core EBITDA growth remained very strong at 8 percent, but actually now forced ranking came in second after our European segment, which grew at 1 percent, which you're going to see later on. Total revenues are still impacted by lower equipment revenues, so this is going to be a pattern which we also expect for the future. Tumuba's customer growth is super strong. The postpaid phone growth was basically on the level of last year and is absolutely industry-leading. The high-speed internet customers came down by more than 100K, but that was guided because we have ended our promotional activities on HSI. With its Q1 results, T-Mobile also raised its customer guidance by $150K to $5.2 to $5.6 million. Moving on to Germany, organic revenue growth was plus 2.6%. Organic EBITDA growth was at a stable 3%, very consistent with the previous quarters. So we are all well on track in the German segment with regard to what we want to achieve for the full year guidance this year. Total service revenues were consistent with last year's performance. In the mix, mobile was very strong with 3.4% year-over-year, and that was driven by customer growth as well as by upselling. The fixed service revenue grew by 1.2% year-over-year, which was at the lower end of the range, and it's very much due to phasing in public sector projects. So we expect a stronger performance for the remainder of the year. As you can see on page number 15, broadband revenue growth remains strong at 4.2%, and that is driven by both upper growth as well as volume growth. Wholesale excess revenues growth is slightly weaker sequentially, but it remained in a positive territory. We also expect positive wholesale excess revenue growth for the remainder of the year. Page 16, our broadband customer performance was lower this quarter. To be honest, nobody is happy about this. It is not surprising because we said it also in the last quarter. There was a very weak competitive performance, and we're seeing that competitors are moving in a better territory. You've seen that with one-on-one. You also see it with Vodafone. And if you basically add all numbers up, we're still above the long-term target of 40%, but it's below what we have achieved in the previous quarters, and we're working to reverse that trend. We're also seeing an impact on the increased focus on FTTH because you know that there's a lagging effect between signing to a contract and getting the access line on FTTH. As mentioned, On FTTH, we have an increase of 93,000 customers, and we expect this acceleration to continue. So if you compare 23 versus 24 and 23, we have 300,000 FTTH customers signing up to that service. We expect 450,000 in the vicinity, 450,000 in 24. Also on the TV net ads, we improved. We have 73K new IPTV customers. And on top of that, we have 53 over-the-top TV customers. So in total, it's 126. We have now 4.4 million IPTV customers and 350 on top, 350 OTT customers on TV. We're also pleased to announce a partnership with the Association of German Real Estate Managers, which help us to support our services in promoting their services. And that is a very nice complement to the partnership which we crafted last year with the Housing Association Organization, JDW. Our mobile commercials remain strong, as you can see. We had 280,000 net ads. This is very much consistent with last year. And I think if you add all the numbers up, it's more than 50% of the total market net ads in the first quarter. With that, I move to our European segment, which is actually the star in Q1. The organic revenue growth reached 5.7% on a year-on-year basis, and it was very much supported by service revenue growth. In Greece, we had a benefit from a contract which was related to the European recovery program. The organic EBITDA growth was 8.1%, as I said earlier on, slightly higher than the U.S. But note that the EBITDA growth is very much driven by net margin growth, but also we had a tailwind from lower energy costs, which actually led to that result. And I wouldn't extrapolate this into the outer quarters, because we're not sure whether this basically maintains on this level. And you know that in 23, the performance of the European segments when it comes to EBITDA growth was continuously growing, as you can see on the chart. Our customer growth in the European segment remains strong, very strong, 80% growth in mobile. Solid numbers on broadband, TV net ads were about the same. And we had a reduction on the converged customers, but it's very much related to a change in Slovakia on how to count those customers. And they're now being treated as mobile-only customers, and therefore we had to deduct our installed base per 100K. Moving over to T-Systems, what you see here, we had a pretty good start in the year. We're growing revenues on a reported level by almost 5%. You see there's a slight increase in order entry, but to be clear, order entry is going to be the main challenge also for the remainder of the year. And we have... an okay EBITDA growth on a year-on-year basis, on an organic basis, 1.5%. So that basically concludes my operational review, and let's look at the group financials. What I said earlier on, our reported financials were impacted by, obviously, the tower transaction, which we conducted, and by FX. The headline revenue growth was negatively impacted by handset revenues, which came in lower relative to last year and was very much driven by the U.S., On the organic service revenue, actually, our growth is higher than what's been reported. It's 4.1 versus 2.9. And the reported net profit was growing by around 15%. This is a rounding issue. The precise number is following on the next page. Taking a look at the free cash flow, on the next page you see that the free cash flow was growing by a good 100 million or 3.6% year-over-year. That was driven by an increase in cash flow from operations, a reduction of CapEx, very much driven by the U.S. The U.S. came down year-over-year by 400 million, whereas the ex-U.S. business, predominantly Germany, was higher relatively to 23 by 300 million. But this will basically phase adequately into our guidance over the course of the year. Our adjusted net profit was up by 14% on an annual basis, on a year-on-year basis. And the good thing is it was very much driven by adjusted EBITDA. So everything is pretty much coming from the operational business. Moving to our leverage, despite some headwinds, which you can see on that chart, that's the net debt X lease chart of $2 billion coming from the U.S. dollar. You see only an increase of $0.7 billion on a quarterly basis, end of Q4. up until end of Q1. And that leads very much to a very stable leverage of 2.3 X leases or 2.81 including leases. So therefore, I'm going to complete my review and hand it over to Tim.