Freenet Ag Unsp/Adr

Good morning, everybody. Thanks for joining today's call. You have all most likely read our announcement, and as always, we will now go through some of the details and are happy to answer your questions. When I prepared myself this morning, I made a note and said it's no real news, but it's good news. I think that is really the message from this quarter. You have read and heard a couple of weeks ago that we have concluded with all three networks operators long-term agreements. We are finally expanding the 5G mobile tariff portfolio across all the three networks for our customers, which will enable a couple of new campaigns in Q3 and 4, which I will give a bit more detail in a second. We've been very successful with our IPTV development in terms of net ads and also in terms of new agreements and we have also no real surprise and no real news but confirmation of the fact that we have shut down Gravis. It is not included anymore in all the numbers. Let me also say that the related the related cash flow and the related costs are that we have expected are all in plan even a bit better because we will have we have sold out almost the entire stock which brought a significant pile of cash we are currently working on the re-rents of our in total 38 locations 10 are already Signed and there's 10 more to be to come, which will also then go against the negative, even though this is all financial resides. I just wanted to clarify that there were no negative surprises or big efforts that keep us busy. The team did a wonderful job. They're going to straight to the mobile development. I think no big surprise. We have grown a little bit with the plus 26. in the first half of the year. I think across all the operators and service providers in Germany, you can see that there is low uptake. I would consider this as a matter of fact that prepaid migration that has feeded the postpaid numbers over the last five, six years is coming to kind of an end. We are comfortable with the current growth, but we are also realistic that we stick to about 100 net ads for the full year. But even though a lot of things change, at least from the headlines, we do not expect a big shift. We have learned, as you have learned from United Internet, that they seem to lose a couple of customers. And then the question was, Are they all coming to us or where are they going? Well, first of all, even if you terminate the contract, you're not out the next day. We would assume that a certain proportion of that is still bound for 12 months or for 24 months. So the negative reaction is certainly an issue and a challenge for 1&1, but they will also now start to try to retain those customers that are not gone yet. So we could not perceive kind of a big wave as a result of the network downtime. What are the things that we are aiming for or working on in the second half of the year? And I will on the next page go on the Telefonica thing explicitly. There's a couple of things worth mentioning. We are right now Launching similar plans to the family or next plans for Deutsche Telekom across the board specifically with the Telefonica enabled new tariff plans that we have launched actually a couple of days ago. We are starting from 1st of September a sponsoring of the so-called Icon League, which is an indoor soccer league that was created and founded by Toni Kroos, the famous German player. We expect there to work with a lot of young influencers as well as sportsmen and are hoping to address a target group, young male professionals that we haven't met before. And once again, the Telefonica portfolio is helping us there because this is people that go for SIM only attractive full data plans. A word to the ARPU, we expect this to be, the ARPU to be stable for the full year of 2024. Coming on the next page, talk a little bit about the agreements. I think we have been talking before, but here's a summary again. We have concluded a deal with Deutsche Telekom, including the year 2028, another one with Vodafone 29, and the one with Telefonica, which is a 5 plus 5, so up until 2034. It's worth mentioning that The fundaments of the business model and the fundaments of also our financial mechanics has not changed. So we are not expecting a big drop or big increase of sex or any other spendings, but also not on the revenue side because the fundamental mechanics stayed the same. But still, the key changes that reside from Telefonica is, first of all, we have full access to their cloud portfolio, which we did not before. Second is, we have full access for all of our customers. We can convert that to 5G. And I have also heard from Tim and the colleagues from ER that people were asking or you were asking about commitments. I mean, any contract always includes vice versa commitments. On the one hand side, the support and the agreement on terms, and vice versa, the network operator asks us to commit to quality, to volume, to mix, to a whole set of activities, and I think it is easy to understand that, first of all, there is an agreement on non-disclosure, and we stick to that confidentiality. For me, personally, and I'd like to add that the most important thing on the Telefonica contract, and that is really the difference from the two that, additional to the two points that I've made, is that we have an agreement on the long-term revenue share. There will not be a volatile thing depending on a new tariff plan, but it's an agreement that gives us really a possibility to long-term customer lifetime value planning. That is a fundamental difference. If you can assume that a renewal is supposed to be done under the same terms and conditions, then the acquisition This is helpful because it changes from a short term, short sighted, quarter to quarter kind of planning to a long term planning. And I think both companies feel very comfortable with it. So what are we doing with this new situation? One thing is, and he has just mentioned one brand, we will launch a number of new discount brands. just as HappySim, DrSim and others. I think you all know that Drillisch or 1&1 are working with up to 15 brands. We are not doing that in the past due to the limitations of SIM-only tariff plans applicable to those brands. Now we are enabled and you've got to see white label brands in the near future and a whole number of them because we see that this is a good way to be more prominent on the Google search, but also on the things like Verivox or Check24. We are providing currently plans starting with 5G till 25G, similar to the Blau portfolio. So if you check out the Blau website and then compare that with the FreenetMobil from Google, you will find that they are very similar. but we are still providing the bigger ones up to the unlimited, and the unlimited plans were very successful. We see also that we can charge more than we did before. Right now, well, we concluded the deal in June. We have done technical preparations and selections of customer segments during the month of July, and we have in the second half of July started to do a couple of tests. Let me maybe illustrate that there's one campaign, for example, where we call the unlimited and big data tariff plan owners and tell them that they can upgrade now to 5G, and we offer them either a price upgrade if they are on a monthly contract and want to remain on a monthly contract, or no price up if they change to a 24-month contract. And conversion is super attractive and the reaction of the customers is really positive. We are doing this now also in campaigns on the lower end, and we do a general campaign across any of the churners where we offer bigger GB packages. And given the fact that we have these offerings right now, We are fully compatible to the other brands. You might have heard that Magenta has doubled all their data packages in the first week of August. We have also provided this to our telecom network customers. This is just a mentioning of two or three campaigns, but there is many more in preparation. I think it's way too early to say what the straight impact is, but I think there is a side comment made also in our announcement that we think that there is an upside potential, which is not only giving us the confidence to make the 100k net, but we can also imagine, depending on the results of the test, that we go beyond the 100,000. now equipped with the Telefonica deal. Moving on to IPTV. Next page, you can see that I think very, very strong Q2. I've seen the numbers from Deutsche Telekom this morning had a plus 114. Very happy to see that we've done 191. net at in Q2 total for the first half was 330. I think the 2 million customers that we have maybe not guided, but called an ambition or a personal ambition are very likely to be reached. We are also seeing in July, not the fatigue that we have seen in the past years in the Q3. I mean, it's still a Q3, but We're doing quite well in the first four weeks. So it's not the drop down after the European Championship or in summer or something. But the thing that made me really proud during the European Football Championship, our team was 724 up, double checking our service level and we could maintain 100%, even 100%, not even 99, 99, but 100% full service level we have provided. our peak was five terabits per second sent to the different connecting points and all the traffic was well handed over. We did not do campaigns like allowing people basically taking a single day and taking a ticket. So these 191,000 are real customers with a strong commitment. More than half of it has taken a 12 month package, including a stick and a remote control. And we see that the remote control customers, if I may call them like that, those are the ones that are very sticky and show high loyalty to the product as soon as they have installed it. We will now in August start a campaign with Deutsche Bundesliga. We have agreed with Sky Germany to offer a package with the full WOW and WOW Sports package. Part of the channels will be also included in a kind of a live EPG a feeling so that people can easily access it and don't need to start with the app of sky or wow but can start right within our waipu epg this is a great test we are very grateful that sky also has accepted us to do that in order to understand how much of our customer base will be attracted by that So it's mainly a campaign where we expect the customer base to upgrade. And then we want to measure what the churn impact is. It's not so much a new customer acquisition tool, but a loyalty driver. And I'm sure we will give some indication more details with the Q3 numbers and an outlook for the next year. Media broadcast. I mean, customer base still going down, but it was in the first year less than 40,000. So we are less than 10% still losing. But I think we're getting closer to kind of a long tail kind of feeling. The good thing is that price up is still a valuable tool. And sooner or later, we will do another price up in order to stabilize the ABDA. There is 5G broadcasting tested with Xiaomi and two public channels in Germany. And there is talks to many other B2B customers. We have also won the first service contract for car loading stations because our field service can provide countrywide technical services in a high quality. So coming to WIPO in a bit more detail as the last topic from my side, while we've been successful with the TV campaigns with Dieter Bohlen, modern talking guy, we started with Dieter for Mieter, so Dieter for lease contract owners, patching a little bit the cable and telling the customers that cable is an old-fashioned access tool and ours is much better. We switched on, we then flipped or switched the campaign to Dieter on the football championship. If you want to see the goal faster than elsewhere, then you're right with Waipu TV. This message was also heavily picked up by the press and also by sponsored ads. I think that all added up to the 191 1000 net ads this year. What are we preparing right now? I said one thing is Bundesliga and also mentioned on the marketing side the sponsoring of ICANN League. Here we see the first time a really interesting synergy between the core mobile business and the TV business. We are sponsors for the ICANN League for Freenet Mobile but WIPO will also broadcast that I can leak on a specific channel and add it to their service. I think these are the kind of corporations that we're going to see even more in the future. On the right-hand side, one is the graph of brand recognition index. So the Dieter Bohlen campaigns still are super attractive and drive recognition. And on the right-hand side, it's a repetition of what I said, 191 net ads. And we are expecting for the full year, for the second half of the year, more than 300,000. My guesswork would be Q3 around 100,000 and Q4 plus 200,000. So in total, we will cross the 2 million subscriber number by the end of the year. We are also starting to test a couple of advertising replacements also with the key channels. such as from the Proceeding Group. So also on the advertising side, we are gaining pace and we are winning the confidence also and the trust also from the channel operators. They stepwise understand that this is also beneficial for them and will create additional margin. Once again, I think in November we will be We will give more details there, because then we are going through the test. But there is a whole number of activities that give us the great confidence that we will go beyond the 2 million subscribers. Having said all this, the numbers are mirroring what I said, and I hand over to Ingo to give you a deeper view on the financials.

Thank you, Christoph. Good morning, everybody. I start with a view on the group financials. Again, we see a slight increase of the revenues by something like 3% in the quarter and also for the first half. So I think we are totally on track here. And I think the good news is that the revenue increase is based on service revenues, which are high valuable. On the gross profit, therefore, we see an increase in the quarter by 6.7%. It is based on the valuable revenue what we are generating and therefore all in we could increase the gross margin further. The EBITDR level, what we see here basically is that we have the cost under control. We see again some increased personal cost, which is no surprise. And we see the marketing expenses, the higher marketing expenses based on Baipu. But I think... No surprises here or what we expected because this is something where we already guided at the beginning of the year. We guided a stable year, a transition year 2024. And this is exactly what we see here if we look into the EBITDA after six months. Moving to mobile. Here you see explicitly the increase in the service revenues here. You do also see an increase in the other business, which is partly generated from digital lifestyle business. So we still do not have a focus on low margin hardware sales, but it is an intrinsic part of the business that we do hardware sales and we need to have hardware sales. But it is definitely not our focus. Moving to the gross profit here. Yeah, maybe this is a positive surprise because the gross profit is increasing even stronger than in the first quarter. This is based on the digital lifestyle business, on the service revenues, and it is also based on the contract, what we could conclude with all of the network operators where we have, in part, favorable conditions here. Moving to the EBITDA. I think maybe this was, if there were some critics in the first quarter, there were the critics that the cost increase was slightly high and therefore the EBTA effect was not that strong. I think here it normalized in the second quarter. So most of the gross profit is also arriving on the EBTA side. So I think I already mentioned, yeah, personal costs, are higher during the whole year. But what we already saw last year was an increase in the second half. And therefore, what we do expect in the second half of 24 is a phasing out of the personal cost effect. Moving to some KPIs of the move by business. I think Christoph already mentioned the stable RPU, the growth in mobile subs in this challenging environment of the second quarter. And what we also see on this stage are the digital lifestyle revenues. And yeah, I think we left out the low margin hardware revenues at the beginning of the year. This is something what we already explained to you and it is even the message is even better now because the the increase of 3.6 percent is from valuable business moving to TV and media What we do see here, we see the strong increase of the revenues, which is based on the number of subscriptions and on the growing customer base. What we do have on the gross profit side, all this revenue increase is arriving. So we do also see here a gross profit increase. um and not only for the quarter but also for the first half but as marketing expenses even in the connection of gross ads is not part of our gross profit yeah definitely the negative effect in the epda i think could not surprise us us and would also not do also not surprise you I think in the second quarter, the negative in the effect in the EBITDA was even a little bit higher on an EBITDA level than in the first quarter. But yeah, we have invested in marketing. We told you that the additional invest for the whole year would be 20 million. This is what we already planned at the beginning of the year. I would confirm that this today because in the first half, the additional investment was 12 million, and for the second half, we do expect another 8 million. But, and I think this is clear, and I think the proof of concept then will be shown in 2025, but I think it is clear that the high customer intake, what we show, that this justifies the higher investments moving to the free cash flow bridge think no no big surprises change in working capital largely stable compared to last year. Texas, yeah, Texas up to now a little bit lower because there were some refunds, one-off refunds, what we received in H1-23. So therefore, in comparison, the Texas looks slightly higher, but I would say this is a normal level, what we see in 2024. On the capex side, the figure definitely looks relatively low, especially in the area of digital radio. We have some phasing effects here, so we will see some of the investments in the second half. But I think there's a good guess that we do not need the whole capex budget, what we planned or forecasted at the beginning of the year. Lease payments, it's relatively stable to last year. Some structural effect last year, but all in, no surprise. Interest payments in line with what we planned for the whole year. So, I think we already got some of these questions with the 151.2 for the first half. Wouldn't it be reasonable to increase the free cash flow guidance? We have to decide it for now to stay with the guidance where it is, because we have to wait and have to see if there will be a catch up in the capex in the second half. So I think we are not that confident today that the figure is really lower, but yeah, I think there are, It is likely that something could be possible here to increase slightly this guidance during the rest of the year. The guidance page is therefore confirmed from today's point of view. And as this is my last slide here, I would hand it over to the operator to start the Q&A session, please.

One moment for the first question, please. And the first question comes from Paulo Tang of UBS.