Deutsche Telekom Ag S/Adr

and welcome to Deutsche Telekom's second quarter 2026 conference call. Joining me today are our CEO Tim Höttges and our CFO Christian Illek. Tim will begin with an overview. Followed by Christian, who will take you through our quarterly performance and group financials in greater detail. After this, we have time for Q&A. Before handing over to Tim, please take note of the usual disclaimer included in our presentation and shown here. 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 Hannes and welcome everybody here today. I'm happy to present another set of strong results and a material step up in our returns to shareholders. But let me quickly start with a snapshot on the results. Our group organic service revenue is growing by 3.9% in the first six months. Organic EBITDA is growing by 7.4%. Adjusted APS is growing by 10.3%. Customer growth remains strong and peer leading in all our markets. So it's a broad development which we have across the group. And we raise our group free cash flow guidance today to reflect T-Mobile's guidance increase you have seen. We have a clear line of sight for our capital markets growth targets and we are all in a very positive mood here. But clearly, while we are delivering, there has been significant volatility for our shares. And I want to address some of this volatility in my prepared remarks today. I will not go through my usual charts today. They should be modestly self-explanatory. Instead, I will go through the four segments before coming to our capital allocation. The common thread for this are three themes. The first, we deliver strong and reliable growth. Second, we invest in our future profitability. And third, we allocate capital to grow our value per share. Let me start with T-Mobile. T-Mobile remains the clear growth leader in the US. Organic EBITDA growth based on IFRS was 9.6% in the first half of this year. T-Mobile added half a million accounts in the first six months, well on track for its full year target. and T-Mobile has established network leadership based on its superior spectrum position. This translates into ARPA opportunities. T-Mobile's ARPA growth is peer leading. At the same time, postpaid phone insurance has come down to 0.85 last quarter. Our focus is on quality, on quality growth, and you can see that in our numbers, our strategy is paying off. Looking forward, T-Mobile's company's privileged growth opportunities are fully intact. This is rural, this is B2B, and this is fixed wireless as the main areas. And T-Mobile is investing. We are investing in digitization to drive efficiencies and customer experience. We are investing into US cellular integration to drive attractive synergies. and we're investing in attractive fiber opportunities and we're investing in wireless technology leadership with evident results. And as my colleague Srini said on the call, we are looking to forthcoming spectrum auctions as an opportunity to further cement our leadership position. Next, let me talk about Germany. In Germany, we are delivering with our 39th quarter of consecutive ABDR growth. We are investing in our future profitability and our networks are market leading. And we keep investing ahead of the competition. We systematically leverage AI to drive additional efficiencies. Our mobile leadership is uncontested and further strengthened by our ongoing network modernization. We are delivering strong and consistent customer and service revenue growth, and by the way, even market check-ins. The broadband market, however, is more challenging, and we lost some subscribers this quarter. A key driver to this to this development is the fiber penetration alongside fiber homes past. We are seeing steady progress here with 161,000 fiber nets as this quarter. But as a priority, we will substantially accelerate this run rate and with it our fiber monetization. Positively, our broadband revenue growth improved this quarter and we are expecting further improvements in the coming quarters. Moving on to Europe. Our European segment delivers like a clockwork. 4% organic service revenue growth driven by consistent customer growth each quarter. 4% organic EBITDA growth this quarter, which is the 34th consecutive quarter of organic growth. We are investing in networks and customer experience. We are also integrating platforms to drive synergies across the footprint and making good progress, thanks to Christian, on network at scale. Our European business demonstrates that the whole can be more than the sum of the parts, as we have promised. And last but not least, T-Systems. T-Systems is delivering strong and steady financial results. It has become a strategic asset for Deutsche Telekom. We are very lucky with all this sovereignty discussion to have the leading IT company here in Europe under our roof. Demand for a sovereign cloud, demand for secure digitization, demand for AI applications and infrastructure is growing and TIS Systems is our lighthouse to take advantage of these opportunities. So in summary, we are delivering. Our EBITDA growth is best in class and our earnings per share, the growth is double digit. Our cash flows are strong and our leverage is prudent. We are investing to maintain and extend our strong growth into the future where we face challenges ahead. We act. This brings me to our capital allocation. Our capital allocation remains disciplined and focused on accretion for our shareholders. Accretion as measured by adjusted earnings per share. And as you know, we are not selling into the T-Mobile share bear back this year. Our T-Mobile stake therefore increased to 54.3% by July, up two percentage points from one year ago. We have been steadily executing our existing 2 billion share-by-back program here on the European side and today we are topping this up. In addition to our ongoing share-by-back, we are today proposing an additional share-by-back facility of up to 3 billion on top in 2026 alone. We have seen exceptional volatility in our shares in recent months. Our shares have traded at the bottom of their long-term valuation ranges and do not seem to reflect the growth opportunities we see. And so we are taking actions now and step up our share-by-back program. Buying back our undervaluated shares is an excellent investment, consistent with the capital allocation framework we outlined in our 24 Capital Markets Day. At our cost of capital, buying back our shares drives attractive accretion to earnings per share. Why this magnitude? Because it can drive meaningful accretion to our adjusted earnings per share. Why not more? Because discipline always goes both ways. We want to take advantage of our any excessive discounts, but we will not put our network leadership, our spectrum flexibility, our A rating or our strategic flexibility at risk. And why up to? Because we buy value. For us the share-buy-back is an investment. It's not volume at any price. The bigger the gap to intrinsic value, the more attractive is the share-buy-back for us. Our dividend remains the reliable foundation of our shareholder remuneration. The buyback is a flexible complement to leverage exceptionally valued discounts in the interest of our shareholders. The additional facility increases our total shareholder remuneration in 26 to almost 10 billion euros if it is fully utilized. And this is, by the way, the highest ever. As Christian will show you later, with our leverage ratio well below our stated 2.75 target, we have the balance sheet headroom for this additional facility. I have not spoken about what we are doing, so finally a few words on what we are not doing. We are not commenting on speculated transactions. This is our well-established principle. We are not doing transactions that do not create a clear and compelling superior return for our shareholders. This is true for M&A, this is true for Spectrum Acquisitions, this is true for Fiber CapEx, and this is true for Shareable Dex as well. I think it is fair to say that this management team has a 15-year track record of disciplined and successful capital allocation. The capital allocation decision we announced today, the additional buyback facility, reflects exactly this discipline. Beyond this announcement today, there is nothing to communicate. As mentioned, I will skip the next pages as most topics have been covered and move straight to our guidance increase on page 10. T-Mobile US raised its 2026 free cash flow guidance by 0.2 billion at the midpoint on 23rd of July. And we are passing on this guidance today. As a result, our group free cash flow guidance increased to around 20 billion. We continue to guide for constant currency group EBITDA growth of around 6% to 47.5 billion in 2026. We reiterate our DTXUS EBTR guidance of 15.4 billion. Our guidance remains based on constant foreign exchange rates. And as usual, we have a page in the pendings in which we compare our guidance with the consensus adjusted for foreign exchange. Based on current exchange ratios, our DTXUS EBITDA guidance would be in line with 15.5 billion consensus. And with this, I hand it over to Christian.

Thanks, Tim, and hello from my side. As usual, let me quickly recap T-Mobile's strong second quarter results. And if we're taking a look at the numbers, according to US GAAP, service revenue grew at close to 9% or 8.9% on a year-on-year basis, despite the fact that we had prices increases that were rolling over. Obviously, the growth is supported by last year's acquisition, especially US Cellular. The core EBITDA grew at 11.7%, and that basically keeps T-Mobile well on track to achieve their ambitious financial targets. Account growth, as you know, grew at 277K, and the ARPA was up 2% on an annual basis, and Tim talked about the lower churn on the postpaid phone. Let's move over to Germany, which I think had a solid quarter. Total revenues grew at 3.7%. Obviously, that sequential acceleration is largely due to the World Cup-related non-service revenues. This quarter's adjusted EBITDA grew at 2.7%, which is very consistent with the previous quarters. For the next quarter, we expect the EBITDA to come a little below, whereas the fourth quarter will be above that 2.5% to 2.7% range. So the full-year guidance of 11 billion EBITDA is fully intact. So mobile service revenues accelerated as well, sequentially to 2.4%, so we're basically trading at the upper end of the guidance cord of 2 to 2.5%. Same is true for fixed line service revenues, they also accelerated. You see, and we'll get into this later on, there's a slight increase in broadband revenue growth, but it was also supported by some, I would call it, lumpy IT project business. As you can see on the next page, broadband revenues is now basically accelerating. We had 1.6% in the first quarter, 1.9% in the second quarter, and we only had a small contribution from the back book price increase in the second quarter, but this effect will increase in the upcoming quarters, and therefore we expect that the broadband revenue growth will further accelerate in the second half of this year. Wholesale service revenues obviously declined because the price increases from the previous years, especially from last year, were rolling over. We don't anticipate any further deterioration. What we expect is that we basically cover volume losses largely through upselling and upper growth, either upselling copper or fiber infrastructure. So taking into account that we had solid growth in wholesale over the past two years, I think we're well on track to meet our guidance which we have given at the CMD which is basically stable revenues. Let's move over to the fixed KPIs and let me start with the broadband customer losses. You see that we basically lost 20,000 customers this quarter. This is very much the same number which we had a year ago and it's largely explainable through price-related churn. So far, and that's the good news about that churn, the churn, the actual churn is much lower than we anticipated in the business case. And we expect this to moderate out in the third quarter and to normalize in the fourth quarter, which will be a big driver also for the accelerated broadband revenue trends in the second half. We have many initiatives to improve our broadband performance. I think the most important one is fiber. And you see that we've seen an 18% increase of fiber net adds on an annual basis and an 11% increase of our fiber penetration. That is obviously not holding us back to continue to push on the renewed strategy, both in SDUs and MDUs. And we're tracking well with an accelerated growth momentum here. Finally, on TV, we're seeing steady growth in triple play and also in contracted OTT. So over the first half, we basically added 200,000 TV customers. And on top, throughout the successful World Cup coverage, we welcomed roughly a million additional non-contracted OTT customers. It's now up to the go-to-market teams to retain as many of those customers as possible. So, next page, 18, we're seeing the mobile KPIs. I think what you see, especially on the growth on volume or on data usage, that very much reflects our unlimited propositions which we introduced a year ago. Moving over to Europe, and Tim called it a clockwork. I would call it a Swiss clockwork. It's really phenomenal what they're providing. The reported revenues grew at 1.5%. The organic service growth was 4.1%. And actually, you saw steady growth across mobile, across fixed, and across IT. The reported revenues were impacted by three factors. Obviously, we had a deconsolidation of Romania this year. We had a planned unwind of wholesale transit revenues, and that was somewhat offset by the very strong Hungarian currency, the foreign. Organic EBITDA growth was accelerating to 4.1%. We're fully on track with our full year guidance. And the difference between organic and reported EBITDA is also related to the strong Forend, which we're happy to see right now in this given year. So on the commercial performance, you see a very steady performance across all four categories. Nothing to basically explain here. T-Systems, I think, They posted a healthy year-on-year growth when it comes to revenue and EBITDA. They're well on track to hitting their CMD targets. The order book was due to phasing a bit slower, but we expect a much stronger second half and therefore also growth over the full year. Tim talked about this. T-Systems was able to secure two really important flagship contracts. One is Volkswagen, where we're going to build and operate Volkswagen's global private cloud network. And in April, we have been awarded together with SAP to develop The Central Citizen App and that shows that we are really well positioned when it comes to digital sovereignty and that T-Systems is at the center of what's currently important on digitalization and sovereignty here. So that concludes my operational review and I move over to the reported financials. So what you see is we had some headwinds coming from the dollar but still you see that in the second quarter EBITDA growth at seven and a half percent Adjusted Earnings almost close to 13% this quarter. On the free cash flow, you see that free cash flow was up Thank you very much. Next page, as always, you see our NetDap development, left-hand side without leases. It increased by roughly 5 billion on a year-on-year basis, on a quarter basis. This is largely driven by the DT and US shareholder remuneration. And you see also on the leverage ratios that including leases, we're tracking well with 268 and without leases on 2.3. And with that expanded share buyback program here on the DT side, we still will meet a leverage target which will be below 275. I think that completes my review and we're opening up for Q&A.