Deutsche Telekom Ag S/Adr

Good afternoon, everyone, and welcome to Deutsche Telekom's first quarter 2026 conference call. Joining me today are our CEO, Tim Mertges, and our CFO, Christian Illich. As usual, Tim will begin by sharing the key highlights of the quarter, followed by Christian, who will take you through our quarterly performance in more detail and group financials as well. After this, we have time for Q&A. Before handing over to Tim, please take note of the usual disclaimer included in our presentation. Also, please be aware that this conference will be recorded and uploaded to the Internet. And now it's my pleasure to hand over to Tim.

Thank you, Johannes, and welcome, everybody, to today's call. As you have seen, our numbers, we are off to a good start in 2026. on all areas on both sides of the Atlantic. In this world of uncertainty, Deutsche Telekom is resilient and we are keeping delivering the strong growth as promised. As I called in the press this morning, the headline for this quarter is Deutsche Telekom is robust. Group organic service revenues were up 4.6% year on year. Organic EBITDA accelerated to 7.5% growth. We raise our group guidance today to reflect T-Mobile's guidance increase and we remain on good track with regard to all capital markets targets. This is very, very sufficient. We demonstrate our innovation leadership at the Mobile Work Congress. Some of you have seen that. This included the announcement of the first in-call AI assistant and an industry-leading autonomous network agent Just two examples where we are the trailblazer of our industry. Our T-Mobile stake reached almost 54% at the end of April. This is up 2% points from one year ago. We used the time here for increasing our shareholding at T-Mobile. As you can see on the next page, our growth remains broad-based. Most notable this quarter is the acceleration in T-Mobile's EBITDA growth, stunning 12% on US GAAP and 10% on IFRS basis. And this is, you know, almost doubling with regard to the growth from last year, which was 5.3%. Our ex-US segments all grew in line with our plans. We keep investing in our market network leadership. In the last 12 months, we parked 3.6 million additional European homes with FTTH. We now reach 13 million homes in Germany. Both in Germany and Europe, we see accelerating fiber customer growth. And by the way, we are very close to be market leader number one with regard to our numbers in Germany and in Europe on the fiber side, which is our aspiration. In the US, we agreed to create two additional fiber joint ventures, which are expected to pass 1.8 million homes by end of this year. Our mobile networks remain leading across the footprint and T-Mobile, by the way, just an example, had the highest ever proportion of switchers who cited network quality as the primary reason to join us. As you can see on the next page, our growth remains broad-based. Most notable was the – I'm sorry, that was already the page before. Let's go to the AI and the digital world. On page 7 here. you can see our regular update on AI and on digitization. On October 5th, we will host our promised investor event that is dedicated to AI and will last the whole day. I will invite all, let's say my board colleagues, but more important, you know, we will go through all the cases with the respective leaders of our organization and we'll show the broad variety of AI applications and their implications for our financials in a separate Capital Markets Day event. I don't know whether other companies have done that so far, Even here, I think, you know, we are the first one, at least in our industry, who is going that deep and showing what we are achieving here and what we aspire for. So for today, I cannot go into all the details. I'm spending my number one priority in the company is implementing AI and working in AI. So, that said, I'll give you a few snippets here. At Mobile Work Congress, we made various industry leader announcements. We unveiled the first AI call assistant that is native to our voice network and that provides live translation, call summaries, and contextual assistance in the call. Hello, Magenta, and then the AI agent is supporting the discussion. We will launch this service commercially very soon, and then you can test it out. We also presented Minder. This is a multi-agent network solution that predicts, detects, and resolves network issues before they impact the customers. So anomaly detection and autonomous repair, there's always a human interface still in the place, but prospectively it might be full autonomous. In Germany, our AI-enabled chatbot deflected one million calls in the first quarter, and we plan to double the number of deflected calls in 2026. And AI is heavily used in our German fiber deployment for planning, quantity, control, and documentation. And it's one of the contributors why our built-out cost for fiber came down now quarter over quarter. Coding, another very important example. With AI support, it's three times faster. In some cases, we even are 95% faster than previous ones. And in April, we turned our annual extended leadership team into an AI base camp in Munich. where everyone, the top 250 people of this company, you know, were working, it was like a hackathon, you know, we were all sitting there with our laptops and working on it, learning not only TREP-CPT and prompting, but, you know, we were, for instance, installing our own skills. We were developing our own GPTs and AI agents. We were working on prototyping and MVPs with Lovable. And we were even working on agents with Happy Robots and other partners. So we were deeply in the implementation of AI. We believe that only if the leaders can use the tools personally the rest of the organization will follow. So therefore it is on us leading the pack here and showing our own competence. Let's go to the business. Our customer growth. We had a good market leading customer growth on both sides of the Atlantic. You have seen them T-Mobile US numbers. We delivered a 6% year on year increase in postpaid account net additions. And outside of the U.S., our customers was a bit lower this quarter due to Germany, but nevertheless still a stunning 327,000 mobile net ads which we were able to deliver. In broadband, the growth remains driven by Europe, and in Germany, subscribers were stable for a second quarter. successive quarter, despite recently communicated price increases. I think this is the art of marketing. If you are, on the one side, growing your customer base, growing your net promoter score, and at the same time being able to pass through some of the inflation which we were facing in the past to your customers. Good on its way. Growth in the TV triple play remains healthy. In addition, in Germany, we continue to see strong growth with over-the-top TV subscription. And I can promise you one thing, you will see a significant increase coming now soon for Germany because the World Championship is coming. And as you know, Deutsche Telekom has all the 144 games on their Magenta TV platform. Society and environment. We continue our steady progress towards our societal environmental targets. We further reduce our energy consumption on this side of the Atlantic, and we are successfully leveraging AI to drive these efficiencies. Elsewhere, we have developed an end-to-end scope three solution for the automotive value chain. And by the way, we are working on a target setting for all our leaders, including us here as board members, that is our incentive schemes related not only to one, to scope one and two, but as well to scope three. I think even here we have a kind of unique position. On May 19th, we will publish our corporate responsibility report, which contains various examples how AI applications can contribute positively to society. And you know that we are very proud that we are already carbon neutral with regard to Scope 1 and 2. Let's go to the guidance of 2026. T-Mobile U.S. raised its 2026 guidance for EBITDA and precursor by 50 million at the midpoint on April 28th. And we are passing on this guidance and increase our guidance today. We are well on track for our unchanged DT ex-U.S. guidance. And with that, we will now continue for a constant currency group EBITDA growth of around 6% for this year to $47.5 billion. Our guidance for the free cash flow is now more than $19.8 billion. Our guidance remains based on last year's average dollar exchange of $1.13. As usual, we have a page in the appendix in which we compare our guidance with the consensus using foreign exchange of $1.70. Ladies and gentlemen, those are the key facts, and as I said, of a very robust start into the year with a good prospect going forward. Some of you may expect me to comment on recent press speculations. I'm afraid I will have to disappoint you. As a matter of principle, we do not comment on market rumors or speculations from the press regarding potential transactions. I trust you will understand that, and I hope you will not take it the wrong way if I do not provide for Christian you with further details or comments in response to related questions later on. And with that, over to Christian for his usual deep dive.

Thanks, Tim. And let me first quickly recap T-Mobile's strong first quarter results. And I will basically compare everything based on US GAAP. So you know they've grown service revenue by 11.3%, and that is coming from an acceleration on organic growth. but heavily supported also by the acquisitions from last year, especially driven by youth sellers. Core adjusted EBITDA also accelerated from 6.8% in the fourth quarter to 11.9% in the first quarter. And as Tim said earlier on, also the organic EBITDA growth accelerated. Despite a competitive environment, T-Mobile achieved a higher post-ban account growth than it had last year. It was a 6% increase. And what it looks like, it's the strongest in the industry. At the same time, they were able to increase the ARPA by nearly 4%, well ahead of the industry peers. The broadband subscriptions, which we don't show on the chart here, were over 500K this quarter, with fixed wireless access additions being higher than they were a year ago. Based on all these positive results, T-Mobile raised its customer guidance on account growth, by 50,000 to a midpoint of 1 million or a range of 950K to 1,050,000. Moving on to Germany and I would say Germany actually had a solid quarter. Total revenues grew by 2.1% in the first quarter of this year and the growth was roughly driven 50% coming from service revenue, 50% coming from non-service revenue. This quarter's adjusted EBITDA performance was 2.5%, pretty much the same. It's the same like we had in the previous quarter, and it's actually along our expectations. The mobile service revenue slowed down a little bit sequentially to 2.1%, but it remained in the guidance corridor, and we are absolutely comfortable to achieve our guidance when it comes to mobile service revenue. Big service revenue slowed down sequentially. It was slightly better in the last two quarters, but you know that in Q4 and in Q3, we had strongly, we had phasing impacts, negative phasing impacts from B2B. As you also can see in the next page, the broadband revenue remains subdued. This is mainly an effect of the customer losses we were facing in 2025. The upper still remains strong in the consumer side with a growth of roughly 3%. With our back book prices, we're seeing a slightly elevated churn. It's kicking in starting from February, so we expect that this Impact will last over the course of the second and third quarter with a peak in the second quarter. Wholesale revenue growth remained in positive territory. Upper growth continues to offset the volume losses. But please keep in mind the annual price increases for the lower DSL tariffs, as agreed upon with the commitment contracts back in 2021, will roll over starting from the next quarter. Still we expect that the wholesale access output will continue to grow in the upcoming quarters. So let's look at the broadband base and the subscriber base. What you've seen is we were able to maintain a stable subscriber base in the first quarter and we're also intending to basically stabilize the broadband subscriber base in the second quarter. In any case, given that we have introduced the back book price increases in April, and we're seeing this, that we expect a higher churn in the next upcoming two quarters. So that means if we intend to have a stable broadband base for the remainder of the year and we have the peak churn in the second quarter, the second half should give us better broadband revenue growth figures than we've seen it right now. We launched multiple initiatives on broadband performance, and one of the biggest ones with the biggest impact is obviously the fiber penetration. What you can see on fiber is we have a 16% increase in fiber net additions to 148K, and you see also that despite our continuous rollout of 2.5 million households passed, we've seen an increase in the fiber penetration by 10%. On the TV side, you see steady growth on the triple play. Additionally, we're continuing to add a significant number of OTT contracts. It was 90,000 in the first quarter. So that adds up to close to 120K. And that compares to a complete increase in 2025 for the full year of 344. And we expect, obviously, the OTT performance, but also the triple play performance in front of the World Championship to actually increase. Moving to the German mobile KPIs, customer growth remained solid, but it was a little bit slower than on a quarter-by-quarter basis, especially if you compare it to the previous years. This is partly due to the price increase which we introduced back in February on the multi-cards, on the third and fourth card. But it may also be an effect of the market growth in this given quarter. We have seen Vodafone. We have seen one-on-one. Obviously, Telefonica is coming tomorrow. We will see how this pans out in terms of total growth. The growth in data usage obviously reflects our unlimited propositions, which we feel comfortable with given that we're expanding the capacity of our mobile network. Moving over to Europe. You see another strong quarter, 33 consecutive quarters of organic EBITDA growth. Service revenue grew by 2.1% on an organic basis, very strongly supported by service revenue growth all up. And here we had an extraordinary strong performance of IT service revenue coming from Greece. The organic EBITDA grew by 3.5%, and if you extract EBITDA, the relief of the Hungarian telco tax from last year. That is pretty much the same run rate as we had last year. Underpinning our financial results, you see our European commercial momentum remains very resilient and positive. You can take a look on the chart on page 20. Moving over to T-Systems, also T-Systems remains on a positive track according to all relevant parameters. As we communicated, we will have a slower EBITDA growth than last year. That reflects our investments into future growth opportunities like sovereign cloud and artificial intelligence. But in any case, I think we're feeling really comfortable with their performance. So that is basically my operational review. Let's look at the reported financials. Obviously, what you see is that the reported financials were impacted by a weaker dollar. And that's been highlighted on this chart here. Despite a weaker dollar, you see that our adjusted earnings per share grew at 8%. So we feel comfortable with the guidance of 10% over the course of the full year. Moving over to the free cash flow bridge, we see that the free cash flow was supported by a lower CapEx spend, predominantly driven by Germany. And we had kind of a drag on the cash flow and from operations. And this is due to Forex, a weaker dollar and 300 million of higher restructuring expenses, which are all related to the US. The adjusted net profit is obviously driven by high EBIT. If you combine EBITDA and depreciations, partly offset by the financial results in taxes. Moving over to net debt, what you can see is the net debt has increased by, without leases, by 1.4 billion. The very strong shareholder remuneration of in total 5.1 billion euros basically could be offset by a strong free cash flow momentum. And I think the increase is purely due to the dollar. And if we take a look at our leverage ratios, including leases, we're well below the comfort zone of 275 and 264. And I think this continuous performance on the net leverage also led to the decision of Standard & Poor's to increase our rating after 18 years to A-. That makes me happy, as you can imagine. So that is my review, operationally and financially, and I think you, Tim, are going to summarize the quarter.