Deutsche Telekom Ag S/Adr

As you can see with me today is our CEO, Tim Hurtges, and our CFO, Christian Illich. As usual, Tim will first go through his highlights of the year, followed by Christian, who will talk more about the quarterly performance and the group financials. After this, we have time for Q&A. Before I hand over to Tim, please pay attention to our usual disclaimer, which you find in the presentation. And please also note that this conference will be recorded and uploaded to the Internet. And with that, it's my pleasure to hand over to Tim.

Thank you, Hannes, and welcome to the fourth quarter and full year 2024 results call. Look, we can deeply go into the numbers, but let me say we are celebrating our 30th birthday at Deutsche Telekom. I know you're not very romantic, but for us it's quite a journey of 30 years Deutsche Telekom. And we had intense discussion this morning with the press around that one, and we're going to celebrate that throughout the year. And the good thing is that we are going to start, let's say, with a record year into this anniversary here. And in sum, you have seen the numbers. It was a very good overall track record throughout the businesses. It is the highest EBITDA, the highest free cash flow, and the highest adjusted earnings in our company's history, which we are able to present today. We made great progress along the priorities we outlined at our October Capital Markets Day, be it on fiber, being it on the mobile technology leadership, being it on customer service and customer experience, and being it on artificial intelligence. But I can tell you one thing. You know, these are just in its infancies. You know, we are just beginning here. And I'm already pushing a lot so that we should accelerate on these topics. Our financial performance also in the fourth quarter was on track for the targets we outlined at the Capital Markets Day. And on 29th of January, T-Mobile reported already their strong results and provided a very positive outlook for 2025. We are completing this picture today with our XUS and our group results, and we provide you with our guidance of the group as a whole. Again, in 2024, our group developed quite nicely, 3.7% organic service revenue growth. We had 6% organic EBITDA growth, 19% growth on free cash flow, and 19% growth in adjusted earnings per share. So I think this is remarkable. And I know that if you compare us with the European industry, it's anyhow leading. During the year, we announced more than $10 billion of M&A investments in the U.S., be it wireless, in advertising, or in fiber. It shows the attractiveness of the U.S. market at that point in time and even our willingness to grow beyond connectivity businesses here. And we are very happy where we are here. One month ago, our stake in T-Mobile US was back to 51.5%. Also, good news for you. We took decisions to evolve our leadership team at the same time, and you have seen the notes, while providing stability in our organization in this kind of uncertain times here. I'm happy to tell you that I extended my contract until 2028. I hope you're happy about it. And Srini will now join T-Mobile US as the chief operating officer. He will bring a lot of expertise in fiber, a lot of expertise in electronics. in, you know, the relations between the motherhoods. And he will as well help us by realizing synergies within, you know, the group in an easier way. And as his successor, we have nominated Rodrigo Diel as the new head of Germany. He's a quite international manager. He was born in Argentina. He grew up with McKinsey and with Millicom. He was head of Panama. He was in our organization, in the European organization, heading the B2C marketing segment. And he was in Austria running the business over the last year. So quite experienced guy who is now joining us here in the German environment. Overall, our total share to return, and you know that was 38% last year, and our shares recently reached a new 24-year high of 35 euros yesterday. These are good news. I understand today, you know, we had some dropbacks on this one, and let's understand what the reasons for that were. But in principle, we are very optimistic with regard to 2025 and with regard to the guidance and with regard to our capital markets day commitment. So I'm not looking on a day. I'm looking on a long-term trajectory, and this trajectory is on the share price very, very good. So, again, this was another good year for Deutsche Telekom and its shareholders. And there's much more to come. And I will talk about my priorities in a second. As usual, let's take a closer look first on the organic figures on page five. And what you can see here are the elements of the segments. And obvious to see, all segments are growing. The organic group revenue grew by 3.7%. Excluding the U.S., the growth would have been 2.9%. Our core EBITDA grew by 6.5%. And excluding the U.S., it's a remarkable growth of 6%, which we were able to show here as well. T-Mobile grew its adjusted core EBITDA by 8.3%. Europe grew by 8.1%. Germany by 2.6%. And just, you know, our fastest growing segment. And you know that for me there's always a ranking of everything I'm doing. The best in class from a percentage perspective was T-Systems with a growth of 12.3%. Now, we know that this is on a small basis, but nevertheless, it's another turnaround story within Deutsche Telekom. And I'm very happy what this team has achieved. So well done to the systems. Distributions may not be so important from the value contribution, but for us they are very relevant when it comes to being a differentiated telco in the B2B space. Because we are running cloud, which is getting more and more relevant today and in the future, and we are running digital service or developing applications for our customers, Both are things other Stelcos don't have. So this is getting more and more relevant. And in both areas, we're applying a lot of AI and we have a lot of AI expertise, which we can then as well use for the group. So the contribution of the system is getting more and more important over the next years. Moving on to our networks. And, you know, this is my favorite topic. In the last 12 months, we've passed 3.3 million additional European homes with Fiber to the Home. And now we reach over 20 million homes in our European footprint here. In Germany, we have achieved our targets of the 10 million households. including the joint ventures and our corporations. And this despite all the headwinds the German fiber market was facing. So we keep on track. Our mobile networks as well remains leading across the footprint. Existing German network modernization program is well underway. You saw that from Srini and Abdul, the presentation about our leadership in the way we are using internet. Spectrum, Project Nemo. In the U.S., our network leadership remains uncontested, and we are further extending our technology leadership here as well with the public beta launch of direct-to-sale satellite communications. Now, you would immediately ask, why don't you have a Starlink deal for Europe yet? Look, the answer is very simple, because if you have a 98 coverage of 5G services in Germany, you don't have so much uncovered areas. We are going – this area is more for FMS solutions. If needed, while using satellites, but in the US, 400,000 square kilometers uncovered areas as a whole. And therefore, the satellite connectivity makes a lot of sense as an adjacent technology network of networks. Remember, that was the term which I used, you know, a couple of years ago is is coming live. Our customer growth continues, both in the U.S. and both in our European entities, all of them. You can see in page 34, by the way, the consistency of our customer growth over many, many years. So there's no reason that, you know, we see a slowdown or whatever. You know, you have always some seasonal effects or some competitive effects. But overall, our growth rate is quite intact. Our subscriber growth on postpaid is strong, 6 million postpaid net ads in the U.S. and 2 million in Europe. So another 8 million, you know, postpaid customers gained in 2024. The fourth quarter saw year-on-year improvements in churn. That is remarkable that we are even further reducing our churn both in Germany and in the U.S. to, I think, an all-time low in this area. In Germany, we consistently delivered near 300,000 new mobile net ads in the quarter, benefiting from our successful segmentation and our clear leadership. By the way, it's standing on three pillars. There's a B2B area. There is definitely... our direct business, which we have, and then there's Kongsta as well. So we have different, you know, segments here, which we are working on. And this is always good, you know, that you have different legs. In the U.S., we issued the highest initial post-pandemic net ads guidance ever for this year. We benefited from our leadership, both in value and in quality. And we keep on running and continue this development. TV net ads were as well in 24 stronger than the year before. That was mainly driven by the German business. And here that was the European Championship, which helped us. But please be aware in this 437,000 net ads, there are 300,000 not included. This is over-the-top services that 300,000 customers downloaded our app and using our app on the different TV screens. Even this one is not included in the numbers which you see here. Broadband net ads were slower than last year. And I think this is a little bit, let's say, the black spot on our white shirt, as we say in German, where I would say this could have been better. This is mainly driven by Germany. Fiber net ads, not shown here, they accelerated. That's a good message. And, by the way, almost doubled compared to the previous year. But the broadband net ads were slower, and we have to discuss that later on, because this is definitely an area where we want to improve our delivery. Moving on to ESG for a sec. Look, despite strong growth in data usage and the demand in our services increased, we were able to reduce our energy consumption for the group by 2%. So assume that we have 30% more data usage in our networks. And at the same time, we are able to reduce the consumption of energy by 2%. That shows the efficiency ambitions or the activities which we are driving here. We reduced our CO emissions by a similar percentage. This is good. And if some of you might question what the heck is Tim talking about, nobody cares about ESG anymore. I can tell you we won't stop on this topic here because for us, it is more than just, you know, a kind of hygiene factor. For this is a commercial element because the moment where we can reduce our energy costs, The moment we are able, you know, to reduce or increase the efficiency of our architecture here, the moment this has a hard commercial impact and therefore there are more elements than being altruistic, this is really a big commitment towards the future and to our P&L at the same time. Our community contribution, by the way, amounted to $1.1 billion last year, and there were 34 million beneficiaries, including 6.3 million students, which we connected as part of T-Mobile's education initiative program. Another great program, the brand has to be an inclusive brand. And this means we are covering from the super rich to the ones who cannot afford our service, everybody. We embrace people into our brand, but we can declare that that's nice. And maybe people are believing us, but we have to live it. And you have to be committed to this is that why these instruments are so important. Coming to the guidance, our 2025 guidance, the bottom line is that we delivered our EBITDA guidance and we outperformed our guidance for free cash flow and earnings per share in all categories for 2024. Note that our adjusted EPS of €1.90 included 7 cents of non-recurring earnings. The largest single item here was a 4-cent benefit reduction from an improved tax outlook for our GD Tower joint venture. So this is included in the 190, but even the 183, by the way, friends, the 183 is highly above our original guidance for 24, which was 175. So, you know, outperforming on most of the KPIs, which we guided last year. So we had this fantastic Capital Markets Day in October last year and got great feedback from you guys. Thank you for that. It's a big commitment for me and for all of us, you know, going forward. I just wanted to share what we are doing right now and what are we working on in 2025, what is most important. By the way, there are a lot of other activities. We are driving around our flywheel here, but just let me stress a few of them. So starting with fiber, look, our ambition is we will keep the pace of the fiber built out in Germany and in Europe, 2.5 million alone in Germany. And we want to even, you know, include our FIBA joint ventures in the U.S. Hopefully, we're expecting, you know, that in the second quarter this year, we get the consolidation of our FIBA investments after, you know, the approval of them. And then we have even, you know, commercial benefits from these activities as well. And then we will see what's happening here on the FIBA and the Convergence side. But this is a big commitment going forward. And for us, it's very important that we are stepping up on monetization. And we make good progress on this one. You saw that in the fourth quarter. The fiber take-up is severe, and Christian will talk about that in a second. But more to come. In Germany, you know, we want to go beyond 20% this year on the utilization of our infrastructure, the extended infrastructure. And in Europe, we are beyond 30%, by the way, 34%. So, therefore, you know, there's more to come that we monetize fiber. Second topic, on the mobile side, our network's clearly leading on both sides of the Atlantic, but we won't rest on our laurels here. We want to extend our lead. In the U.S., with our customer-driven coverage build, interesting proposition. I love that. And by the way, we will steal with pride all the ideas from the U.S. into our entities here as well. and develop them further. In Germany, we are improving our network leadership with our radical network modernization program, NEMO. So two really big initiatives. I'm not worried at all that we will not have another year, but we will all, by the way, all network tests. We are expanding our technology leadership with 5G standalone in Germany and other markets in satellite connectivity in the U.S. and in open RAN technologies. So these are just three examples of what we are trying to do. And at the same time, we are driving everything that we gain more ARPA growth out of this infrastructure. Because, you know, if you have a market-leading infrastructure, you know, you should be able to monetize that even beyond your competition. Then another third element, which is very important for us and should discuss that, is the momentum in our B2B area. We presented, you know, the different entities, Europe, Germany, anti-systems, and we have spoken about the ambitions here. We have laid the foundation on product side last year, and we see a positive momentum. By the way, mobile is super strong everywhere. On the fixed time, we are making progress. Cyber security demand is high, double-digit growth. So there are a lot of, let's say, good developments which we see, but we stay hungry here. So let's see where we make progress this year. AI, very important for us. This is a centerpiece of our strategies, a centerpiece of my belief. To be honest, you know, we had a much better start than most of the telcos. I know that because a lot of telcos are, you know, visiting us and want to understand, you know, how we are driving the 500 projects within our entity. I see unbelievable efficiency gains in the workflow optimization. I see them on the individual services. We see that already in the U.S. with the digital use from our customer side and the way how we are serving them in a better way. I see them in the network autonomy. I see them as a cyber element. There is so much, you know, which we can improve faster and more efficient with AI. This is just the beginning. I think we have to double down. I will push this organization this year much harder on AI and implementation. By the way, I'm flying out from here to Barcelona. Next week we will talk about, on the MoVA World Congress, we will mostly talk about, let's say, our AI initiatives and how we are improving and how we are using AI services, including our partners. Scale advantages is another big thing. Our leading size and portfolio gives us a unique opportunity among other players in these industries. You know, I always hear that from my competition. Yeah, Tim, the only reason why are you good is because you have the U.S. I said, okay, you could have done the same, but you don't have a U.S. But the U.S. and our European entity gives us a super advantage to scale our businesses. And we have to prove that. And I want to show that to you. How we can do that, operating models in IT, in NT, in sourcing. So the element of transatlantic collaborations should be, do we want to bring to a next level? And by the way, that Sweeney is going there, that will help a lot. So the next topic is the leadership team and how we evolve this team. And as I said, you know, my contract extension hopefully provides stability in this world. It's good to have that in the new European Commission. It's good to have that with the new government in Germany coming in. I think it's even good, you know, to have that in the U.S., Because there are a lot of, let's say, uncertainties now in this environment. And it's as well, I think, good for the team here because the stable management is even, you know, stability in our strategy going forward with a clear focus. With Rodrigo, we found an excellent successor for Srini, for Germany. We will bring him to you when he has to say something. And Srini is brilliant, highly appreciated in the U.S. team. They know what they get, and this will help us as well. So this is just the beginning. To be honest, I'm working on a lot of, let's say, ideas around our leadership team on the second level about how we can re-innovate, how we can upskill these people, how we can get even more international in this regard. So more to come throughout the year 2025. Our guidance for 25, and I'm going to be quick, it's based on last year's average foreign exchange, which is, by the way, 108. That is our foreign exchange rate, which we take into consideration. And it is the same. It's the sum of the guidance of DT, XUS, and for T-Mobile US. Adjusted. by U.S. GAAP IFRS bridge. And I heard that this morning was intensive discussion about this bridge, this IFRS bridge, and this billion which is in between that. T-Mobile issued its guidance on 29th of January, and we are using the midpoint, the midpoint of their guidance. This guidance is based on an IFRS bridge of $1 billion in 2025. and at a dollar exchange rate of 108. For the DTX U.S. business, we are guiding for 2025 an EBITDA of $15 billion, and we are guiding for 2025 a free cash flow of $3.6 billion, by the way, slightly increasing over the years. For the group, we are guiding around $44.9 billion, EBITDA and 19.9 billion free cash flow. And for the earnings per share from one euro 90 coming to around two dollars, sorry, euros for the adjusted earnings per share. So another increase of nine percent for 2025. Note, please, that we are no longer guiding the core adjusted EBITDA because the handset lease revenues in the U.S. have become immaterial. So that makes our KPIs more easier to understand. And with this, I hand it over to Christian, who would give you even more details on the 24 numbers.

Thanks, Tim, and hello from my side. So as usual, as you know, we're going to start with T-Mobile US. We're staying on US GAAP. What you see is that the service revenue has increased year over year to 5.5% growth and is very much driven by the post-batch service revenue growth, which you can see on the call-out. That is obviously the foundation for a stunning 10.1% core EBITDA growth in the fourth quarter, so a very, very strong financial performance. I'm taking a look at the commercial figures. You see that the postpaid net additions in the fourth quarter was one point nine million. And if you add everything together over the course of the year, 24 was more than six million of net ads, of which 50 percent, roughly 50 percent is post is phone net ads. And that momentum obviously led to a guidance of 5.5 to 6 million post-pandemic NAT additions in 2025, which is the highest ever guidance the U.S. team has given to the market. What you can also see is that we have a very steady performance on high-speed Internet with roughly 400,000 plus NAT additions. So we have now a base of 6.4 million customers, and I think we're tracking well against the 7 to 8 million high-speed Internet customers by the end of 2025. Moving to Germany, 33 quarters of consecutive EBITDA growth. Despite the fact that we have seen the wage increase beginning of the quarter, the Q4 EBITDA was growing by roughly 2.8%. And that gets us to a full year 2.6% growth. You remember we had in Q1 only 1% EBITDA growth. Our guidance for 2025 is 10.8 billion EBITDA growth. which is pretty much at the same growth rate as we have seen it in the fourth quarter. So we're pretty much in line with what we articulated in the October meeting here in Bonn at the CMD. Moving to what you see on the chart on revenues, obviously, is that organic revenues slightly decreased over the quarter. This is very much driven by lower handset revenues. The... Service revenue was slightly positive, as we can see on the next page, but it was still sequentially lower than we have seen this in the previous quarters. And the reason being for this is that we actually had a higher expectation of IT revenues in the public sector in the fourth quarter, which didn't turn into business, which sequentially will move largely into the upcoming quarters, especially in Q1. Mobile service revenue, you see that we're growing pretty much at 2%, which is stable relative to the previous quarter. And despite the fact that the mobile market is quite aggressive, price aggressive for quite some time, I think our performance has been very steady, and we remain absolutely confident that we're going to meet our 2 to 2.5 growth expectation on the long run. So let's move to the fixed line trends on the following pages. So what you can see on page number 17 is that both broadband and wholesale access revenues grew in line with the previous quarter. The steady growth in broadband revenues, our retail fixed revenues, was obviously smaller in this given quarter. And I explained this by the dip in the IT revenue, especially in the public sector. So we expect a better performance in the upcoming quarter. And we expect that part of this business will eventually turn into business in this given quarter. So if we basically exclude the dip in the IT revenues, I think then the growth rate would have been comparable to the previous quarters. So, again, expect an improvement in Q1. We move into the next page. You see some fixed line revenues. Our broadband and TV customer growth has slowed, especially broadband moved down to 16. Let's be clear. We're below our fair share, which is above 40%. And you know that our clear ambition is always to trend above our fair share of 40%. The sequential decline is obviously due to two impacts, which we're seeing right now. The market growth is not at the same level as it used to be a year ago, and we see that the voter phone performance has actually increased, and you've seen that in their numbers, which they have reported out to you a couple of weeks ago, where their line losses reduced from negative 33 to negative 7. So overall, we will obviously work on this performance to improve it again and especially to be at least on fair share in the upcoming quarters. What we also see is that the nets on TV have come down because the rental prices privilege impact is kind of fading out but overall and and tim said it before beforehand uh we actually achieved 600 000 customers roughly 50 50 one is exit access bound and the other one is obviously ott led so we will we will obviously try to maintain momentum here but don't expect that 24 will replicate and 25. So on the broadband market, let's again step on this one. As we've seen that the market is obviously performing, is growing at a slower rate. The importance of having richer mixes in our base is obviously an important thing. I think what you see on the retail customers on the upper right-hand side is that we have increased our customer base significantly. which is enjoying access lines of at least 100 megabit per second by 700K over the course of the year. It's now representing half of the base. in our broadband customer base. So now moving to fiber, what you can see is we have a very strong performance on fiber. So first of all, we have achieved 2.5 million homes passed in 2024. Secondly, what you see is that the customer growth all up increased from 300K in 2023 to 470K in and twenty four which is an increase of fifty percent and uh... the last quarter we achieved uh... another hundred or we gained another hundred thirty four a thousand customers uh... uh... in the given quarter and you know that obviously fiber is ultimately important for us because the higher our fiber coverages the higher our fiber uh... customer base will be the better our broadband performance will be so uh... Let's move over to the mobile commercials. And what you see on the mobile commercials, we achieved 260,000 branded net ads. And Tim basically explains coming from three sources, B2C, B2B, and Kongster. This is slightly lower, obviously, relative to the previous quarter, comparable slightly below the previous year. That slowdown is actually explainable by B2B. But it's nice to see that despite the very promotional market in Germany, our churn has come down from 0.9% to 0.8% on a monthly basis here in Germany. So, obviously, we're still benefiting from our strong brand, our network leadership, our effective segmentations, which we're applying, and obviously very much based on our attractive family plans. Moving over to Europe. I think another excellent quarter wrapping up an excellent year. Our organic revenue was plus 4.3%. Organic EBITDA in the fourth quarter was 7.3%. Totally in the year, 8.1%. Stunning figures. And these figures are obviously based on On the next page, on a very solid customer growth across all the different categories, being it mobile, broadband, FMC, and TV. And the good thing in Europe is it's based on a balance of volume growth and value growth. T-Systems on the next page, very solid quarter. I think you see a positive momentum on the order entry with close to 11% growth. Revenues were only up by 1%, but we had a very good performance on EBITDA, which was 29%. But you see it's very cyclical how the business develops. So I think the 12% growth rate, which Tim alluded to, is a better performance. comparable to see that we're basically out of the negative territory in T systems and that we're moving in stable waters. So that's pretty much with my operational review. Let's move to the group financials. And you see some good growth across the P&L, but also across the cash flow statement. Adjusted EPS is up 30 percent this quarter or 19 percent over the course of the year. And Tim explained in the adjusted EPS, there are seven cents of tailwind. Four cents are coming from a tax benefit, which we have in our tower business, which is a one-off. Two cents are coming from the pension fund benefit. gain due to interest rate changes, and the last cent is coming from derivatives. The free cash flow is down over the quarter, but it's 19% up over the year. So what you see on a Q4 versus Q4 comparison, that Q4 is not very representative for the year. Net debt increased on a yearly basis by $5 billion, of which $6.2 billion is purely driven by ethics. So next chart are basically the bridges, Q4 over Q4. As I mentioned, on free cash flow, this is not representing the full year. It's very much driven by a very low capex spend, which we had in the previous year in the U.S., and that drove down the higher spend on a year-on-year basis. Same holds true on the net profit development. That was very much supported. by one-offs, whether it's been the civil servant health insurance or the tax benefit which we achieved on our tower business, which is not recurring. But overall, I think a very good growth of 19% over the course of the year. Moving to page 25, you see that our net debt has increased by $6.8 billion, of which $4.7 billion is driven by Forex. The 8 cent increase on the dollar obviously hit us in the fourth quarter. The average dollar was only 108. So that is actually having a negative impact on the leverage all up. And you see that the leverage X leases basically remained at the same level, which is 231. We have a slight increase. improvement relative to 23 to 278. But let's be fair. We intend to be at a maximum of 275. So we have to work against this. I think that completes my review. And I hand it over to, I guess, Hannes, right? Or Tim?