Freenet Ag Unsp/Adr

Good morning, ladies and gentlemen, and welcome to the Freenet AG conference call on the Q1 2026 results. At this time, all participants have been placed in a listen-only mode. There will be an opportunity to ask questions following the presentation. I will now hand over the call to Robin Harris, CEO of Freenet AG.

Good morning, everyone, and welcome to our Q1 earnings call 2026. I'm Robin Harris, the CEO of Freenet. We are very happy about the start into the year. We could see strong revenue growth and strong growth in terms of free cash flow. And, yeah, we had a solid and sustained customer growth across mobile and IT TV. And we had some nice operational highlights. And for example, the relaunch of our domain freenet.de. And we started our, or we started further AI initiatives. So we brought AI bots live. And we are keep integrating Mobile Zone Germany, the company that we acquired last year. We confirm our guidance for the full year, M26. And yeah, as I said, we are happy about the start into the new year. Next slide, please. On the following slides, I will focus on our two core segments, which are mobile and ITTV. I'm going to start with an update about development in the mobile segment. One good thing is that the market is shifting to value over volume. As you know, we saw or we had very strong competition since 24, which had a very negative impact on pricing. It started in 24, and then we saw further negative developments over the course or in the beginning of 25. But the good thing is that in the end of 25, during the cyber week, we could observe that it was the first time for years where prices didn't go down further. Normally, during the cyber week, prices go down further. But last year, this didn't happen. And in the end of the year, we could even increase prices. And this is what we keep doing. So in the beginning of this year, we increased our prices. Front book pricing, and this is also something that we observe in the market. For example, our competitors, they increase the lower price, the lower prices, for example, from €4.99 to €6.99. You could see this when you look at 1&1 or if you look at Blaudi. And also, other competitors, they started to increase prices. We did the same, and... Yeah, I mean, front book prices went up 1% to 2% at Freenet, which is good. And we believe that there is a shift. And this is, I think, good for the entire industry. Another good thing is that we are in constructive discussions with the one network provider. We mentioned this last time that we have an unfavorable contract. And this is also, this was the reason why we had an outlook for this year, which was between 500 and 530 million adjusted EBITDA, because there might be a negative impact of 50 million, which is already included in our outlook. But we are talking to the to the partner. We have C-level discussions every week, and we see good progress, constructive progress. Outcome is still not predictable yet, but so far, we are also happy about the progress there. Next slide, please. One important thing when we talk about mobile is the development of our premium brand and pre-net. Pre-net is the most important brand in our and company and our premium brand. And we switched or we had a relaunch in the past. The domain for our mobile offerings was under the domain freenet-mobilfunk.de. And we switched it. We moved it to freenet.de. So now you have our MS offers under freenet.de. And this was the start for our brand marketing investments. Since the beginning of the year, since the move of the domain, we already had four TV campaigns, for example, and the TV spots are clearly focused on brand messaging. So we created spots where you can see the brand a lot, where you can feel the brand, and they're connected to strong mobile offerings where we sell mobile phones so that our customers and connect the brand Freenet to mobile phones. And that's very important because if you look at unaided brand awareness, that's a big chance, a big opportunity for Freenet because the people in Germany, they know the brand Freenet, but if you ask about where they want to buy or where they could buy the next mobile phone, and if you look at unaided brand awareness, our numbers are just around 10%, and this is a low number. If you compare it to our competitors, like 1&1, they are over 40%. The others are even higher. So that's a big opportunity for us to increase our brand awareness, and we are doing this through performance-based brand marketing investments that increase the traffic on our website, which also increase the sales for the grant-free net. And this will help us to further drive more direct traffic to our website. And so far, we are really happy about the developments. We could see significant uplifts in terms of visits. The conversion rates are getting better because when you get branded traffic, this is always the most – this traffic has the highest quality. We will keep doing this over the course, I guess, next month and also years to increase the performance base. brand marketing investments, and we will also further improve our website. So far, there's still room for improvement in terms of user experience on the website, so we will further increase the conversion rates, and we will also further increase our offerings. When you look at the, for example, we will include or also offer further bundles. Next slide, please. And here we have some numbers. As you can see, last quarter, we grew 29,000 net ads in the mobile business. And even though we increased the prices, as I said, we started to increase prices beginning of the year, but we could see a solid growth. And especially when you look at our competitors, I think that's a really strong number. And we're happy about it. And besides the growth in terms of postpaid net ads, we could also increase our postpaid service revenues. And that's always, I think, both is good development. And on the right side, you can see postpaid reselling. And this is new. We included this this time for the first time. These are reselling ads. that we generate through our mobile zone business. So I think overall we see ease in competition, which is good. We are happy about the development in terms of postpaid. So we have strong reselling business. And the combination of our service provider business and our reselling business is actually very interesting and gives us new opportunities. Of course, our objective is to get our own users and to focus on the server provider business, but it can also make sense to increase or to become more active in the reselling business. We look at actually the outcome and look at where we can earn most money. So therefore, this gives us more flexibility, more possibilities, and we are really happy about the new part of the business that we acquired last year. Next slide. Now I'm turning to our second core segment, the IPTV business, and there we saw a nice development as well, 42,000 net ads in the IPTV business, which is strong. And besides this, we could also generate a nice adjusted EVTA. And since the beginning of last year, we see very good developments in terms of profitability. We are proving that this money can really contribute significantly to our bottom line. And, I mean, the product is really fantastic. If we look at ratings, if we look at So, we see that it's not also our view, but that our customers, that they also like the product a lot. For example, Vaik was the winner of the Connect test, which is a very important one, and also won the SET Vision test. I mean, it's a stable subscriber business, which is growing, adding more customers, contributing to the bottom line. And it's not only that we earn money through subscribers. It's also that we earn money through targeted advertising. And that's actually very interesting, yeah, because here we have, for example, the dynamic ad substitution. This is, for example, when you watch ProSieben and you watch it through – or another channel, and you watch it through Weibo TV, you see different advertising. You have the advertising, which is really targeted on the audience, and that's, I think, really powerful. And besides this, we also have fast channels in Weibo TV, and there we have a dynamic ad injection that means that we include our ads and the advertising into those fast channels. And, I mean, the This is the targeted advertising is getting more and more important. We already have significant impressions. And I think it's also a very good sign that big German broadcasters are working with us. On the next slide, please. So for us, mobile business is important. The IPTV business is important. but it's also very important for us to see progress in terms of AI. And I mentioned during the last earnings call that we want to be the AI first telco company in Germany. I think we have a good advantage because we have flat hierarchies. We have a relatively small organization compared to our big competitors, and we are fast. So we want to be the speedboat, the attacker in the market, and actually that's what we're doing. So when you and look at the speed how we implement AI. I'm really impressed by this. I'm impressed by the team and also the capabilities to change. If you look at our teams, they're really hungry. They want this. They implement this, and they are doing this in a very good way. For example, we started our first test with our AI voicebots. If you call our service lines today, So there's already a small part which is operated by AI voice agents. And here we are still in the testing stage, but we are scaling this. And this is already an interesting part. And we are keen to further scale this through the course of the year. And so this will improve our customer service a lot here. So this will help us to become more efficient. That's really good. So then we also started our new AI body. IntelliSense, this is an AI tool for our call center agents. For example, when they do outbound calls, now they got much better information. They have a tool that shows them what to offer to the customer. this tool reacts to the reaction of the customers and suggests new offers and so on. So this is, I think, also a big opportunity. And then we further develop our AI smart pricing. If you consider that we have over 8 million customers, that's actually a lot of data. And you need to know what to offer to the customer at what point in time, and you need to know what offer you should offer. the customer. And there we see a big advantage by and this is our smart pricing. So we have now just rolled out our smart pricing 2.0, which is a further development of our initial activities. And this is just the start. So we focus on our customer segment at the moment. But besides this, we are also looking into, for example, new customer acquisition into and things how we can further optimize the creation of our commercials. And we also hired one expert. This is also a nice story. He was already with MobileZone, so now he's reporting directly to me. He's responsible for our AI activities within the company. So there's a lot of focus. It's progressing. We are very happy about it, and I'm relatively sure that we will see further nice development and progress over the course of this year. With that, I would hand over to Ingo.

Good morning, everybody from my side. I start with the group overview. I think you will see that the structure of the pages, we changed it a little bit. We got some hints from your side. I think investor relations department was here very creative, and I hope that the new structure will give you more transparency than before. So on this first page here, you see the group figures. Yeah, revenue, a strong increase based on first time of mobile zone consolidation. Gross profit with an increase of 2.2% to $242 million. In the adjusted EBITDA, we see a decrease, but I think Robin already mentioned it. We have this network operator contract, which we are in negotiation about at the moment. And the effect from this is minus $12.5 million versus last year. So without this effect, it would be an increase of 6%. So I think we are happy with the basic business and definitely happy with the adjusted free cash flow. which is 85 million.7 in the first quarter of 26. And I think I come, I discuss it later on, but it's a good development in networking capital because of bonus payments from the networks. Moving to the revenues. What we see here, Definitely, and I already mentioned this, the first consolidation of mobile zone and the strong growth. We see an increase in hardware sales. I think from the past you know that we were not that interested in increasing hardware revenues, but here the situation is different because, as you know, they mobile zone, they have a contract with Apple. So we first time we get the iPhone directly from this contract. There is the possibility to get more iPhones, which was a problem in the past. So I think here in this case, I'm not that unhappy about the increasing hardware revenues therefore. And what you see in the other business here, which is increasing, this is based on the 182,000 reselling customers, which were gained in the first quarter. Because in resale, you get provisions, and you do see these provisions here on the other. And this is the reason for the increase. Moving to the IPTV business. Yeah, I think it is all as expected. We see an increase in revenues, definitely mainly driven by subscription revenues, where we saw an increase of 4.5 million, which is more than 10%. And I think I mentioned it during 25 several times, that from the... We were unhappy to lose the contract with Telefonica, but on a profit and revenue base, this was not that big problem for us, and therefore here also the headwind is not that big. Advertising is also increasing, Robin already referred to it. Other holding, now here in the new segment structure, much bigger because in the other holding segment, we show media broadcast now, the antenna broadcasting business, which is relatively stable, but the B2C customers are still shrinking here. Moving to the gross profit, I think it's a very good picture. because we see the increase by 2.5 million here in mobile in the first quarter. If you put into consideration that we have the negative effect of 12.5 million from the Telefonica agreement, which is under negotiation now, On the other hand, you see that we gained gross profit from mobile zone of $17 million in the first quarter. And in addition, you see that we lost or that we saw the clouds, our Wi-Fi business mid of last year. But in the first quarter, it was still low. part of the figures, so we lost 3.5 million from this business here. All in, the margin decreased to 26.7%. This is mainly linked to the higher hardware sales, what we did in the quarter. IPTV stable, strong development. I think you see, based on the revenue increase, you see the gross profit increase. Subscription is gaining traction, so we increased it, and we also increased advertising gross profit. So from both sides, this is very successful. Other holding... We see the slight increase based off the shrinking B2C antenna business here, but it's also relatively stable what we see. All these effects you can find in the EBITDA on the next page. Mobile, yeah, it looks bad, but if you know the effects, If you normalize the Q1 of 25 by reduction of the EBITDA from the cloud, the base is something like 101.9 million. And if you also normalize Q1 26 by the negative effect from this M&O contract, then you would see that there is an increase. And it shows that the underlying business is very solid. It's stable. And so we are fine with the mobile results, what we see. IPTV, an increase by $3 million. In terms, in relative terms, it's impressive, nearly 50%. I think on the one hand, you saw on the gross profit level an increase by 2.2 million. And this was even possible with a reduction of cost. So we spent less for marketing in this first quarter. And therefore we see the increase of 3 million and margin step up here to 17.1%. In the other holding segment here on the right hand side, yeah, we see an increase in results. This is not based on the antenna business. It is based on the reduction on the board level here. And therefore, I think this was something what will be seen during the year. Moving to the free cash flow, to the free cash flow bridge, here also a slight change in the structure, how we show it. I think what you can see is that in net working capital, we are much more successful than last year. So on the one hand, we get more bonus payments from the networks. On the other hand, we had to increase our inventories because we do not know if hardware will be available during the year. Therefore, we increased our inventories to more than 100 million euros. This is, I have not seen before as a CFO and all this hardware, most of the hardware is already paid. So it's, I think it's even more impressive this networking capital development in the first quarter. Taxes, no big changes on the same level as last year. CapEx, slightly higher investments. based on the digital radio side mainly, but again, all in a very low CapEx level. We are still CapEx light, no changes here. These payments on a comparable level, interest payment a little bit higher because we had this bridge financing for the acquisition of mobile zone, which we could repay in April with a new promissory note. But yeah, interest had to be paid and therefore the higher interest payments here. So all in, I think we are happy with the 86, nearly 86 million of free cash flow in the first quarter. And I think with this last very good figure and with a hint to the very, very healthy balance sheet, what we do have, I hand over to the operator again and ask you to start the Q&A, please.

Thank you very much. Dear ladies and gentlemen, if you are dialed in the conference call, please dial star 9 and the pound key to raise a question. I repeat, the combination is star 9 pound key. You can also Raise your question via the web interface if you click on the dial-in button, and then raise your hand. We have a couple questions already incoming. The first one is from Sofia Rakicevic, Goldman Sachs. Hi.

Hi. Good morning, everyone. Two questions for me this morning. The first one on TEF-B. When should we expect an update on a potential agreement or renegotiation? Would this be communicated via a stock market announcement or as a part of two-tier results? Could you just give us some color on this, please, given that you're meeting with their management often? The second one is how are you thinking about post-paid net ads for full year, both in total and also split between the core areas? well, the Business X mobile zone and mobile zone. Thank you.

Sofia, thanks a lot for your questions. I take the first one. I would have the hope, from today's point of view, that we get a good agreement, a good new agreement with Telefonica. This would lead to a Yeah, I would expect a change in the guidance and therefore a stock market announcement would be necessary. So it is our hope that on the base of an agreement, a stock market announcement would be necessary. And I think therefore, yes, definitely yes. And the post-paid question, I think, Robin.

You know, regarding post bed, we gave the guidance that we expect moderate growth here. We showed last year, especially in the second half of the year, our muscles and the ability to grow, to show strong growth. And so we are happy about the start into the quarter with almost 30,000. So we have opportunities. The next quarter, this also depends on our competitors. So at the moment, I think it looks quite good. But as you know, the price is always a driver. So I think we have a problem. We are able to steer the customer growth, yeah, and so therefore, I mean, we keep our guidance with moderate growth.

Okay. Thank you.

The next question comes from Polo Tang, UBS.

Good morning. Thank you for taking the questions. I have three. The first one is just about your M&O agreements. So you mentioned that you're in constructive negotiations with Telefonica Deutschland about a new agreement. But if you do get a new deal, will the step up in EBITDA be 50 million euros, or is that number up for negotiation? And just related to your M&O agreements, can you confirm if your other M&Os have approached you about renegotiating their existing agreements? And can you remind us if these MNO deals require you to deliver a minimum level of volume in order to maximize the bonus payments? Second question is really just about Waipu TV. So revenue trends and subscriber trends were perhaps lighter than consensus expected. So how confident are you that subscriber net ads at Waipu TV can accelerate to the 300,000 to 400,000 per annum that you were basically that you need to achieve to get to your 2.7 to 3 million subscriber target by 2028? And given that Deutsche Telekom has exclusive rights to the FIFA World Cup, do you see a risk that Deutsche Telekom's Magenta TV will take share in Q2, Q3? My final question is really just about mobile consolidation. We've also had a lot of headlines about potential mobile consolidation in the German market. If this does happen, how should we expect the potential impact on Freenet? Thank you.

So regarding the – yeah, thanks for your question regarding the Telefonica contract. Yeah, I mean, we are – so, I mean, it depends. So we have negotiations there so far. There's nothing to disclose. It's still unpredictable. We see good progress, as Ingo just mentioned. It's also important for – a new contract, or if we want to have a fruitful and healthy, long-lasting partnership, it's important that we create win-win situations. I think that's important, yeah, if you think about the following years. And I think this is also something that the new management understands, and so therefore we are, I think, quite positive, yeah. And so the... Regarding the other network providers, no, they haven't approached us regarding renegotiations. I mean, we are in discussions, and we have good relationships with them. So we are in close touch. So that's normal business. So I think that's nothing special. In terms of subscriber trends with YCUTV, I think the quarter is quite strong. If you look at the last quarter, I mean, we grew with over 40,000. That's strong. That's really healthy. It's a good start. And when you think about the rest of the year, I mean, the fourth quarter is always strong. So we believe they will further increase. And then if you think about the soccer championships, This is also good if you look at our competitors or competitor, one competitor. So they have a massive marketing campaign. And this is always good for the IPTV market. So the more people learn the product, so the more people that switch from traditional cable to IPTV and experience the benefits, that's good for the market. That's good for us. And besides this, I mean, we have our own marketing campaigns. We prepare things. We are very fast in creating new campaigns, in creating new business relationships, and then to come out. So we are quite confident that we will see further positive development here. And your last question. was related to a possible mobile consolidation. So for us, that's actually not important if there are three or four mobile network providers. I mean, I was also a board member of 1&1 for six years, and there we had only one relationship with Telefonica. This worked also quite well. I mean, in the end, it's important that you have at least one partner. So we are now at the moment in a very good situation. So where we have contracts with all four network providers, also with one-on-one besides this. So with one-on-one, for example, we started to integrate them into our shops, into our And then we already have over 30 shops where we also already started to sell one-on-one contracts. So at the moment, we have contracts with all four of them. If there's only three instead of four, I don't think that this will have a negative impact on us. Yeah. I hope these answers your question. Clear. Thank you.

Fair questions. The next question is from Stéphane de Yazian, Vodidio VHF. Please, start with you.

Yes, thank you. Good morning, everyone. I was just curious, starting with mobile, if you could help us, you know, which competitors are playing the phone book. and which are not actually playing the front book and still potentially dragging the industry. And my second question still regarding mobile is, can you help us understand how significant is the gap between the front book and the back book pricing to try to understand how long it could take for mobile output to stabilize and bounce back? And finally, if that's possible, I was just curious to know, when do you think the O2 Waipu contract would be at zero? Thank you.

Good morning, Stefan. I take the last one. It is already at zero, so I think there were some customers in the – still some customers in the in the first quarter, I think we still have 1,000 or 2,000 customers, but this I would call zero.

Okay, I take the other questions regarding the front book pricing. Yeah, I mean, at the moment, if you look at our competitors, Telecom increased prices, then you have Vodafone, they increased prices. You have Telefonica, especially with Blau, they increased prices. They were very aggressive in the past, but they increased it. And we did the same. We did this especially in our channels where we have price-sensitive customers that we increased a lot. And so, overall, I think everybody does smart things at the moment. It's like last year, this was something – sometimes it was unhealthy so that you could see offers that actually – and did not create value. So they were too cheap. So this has changed. And when you look at the overall ARP view, I mean, front price booking went up. If you look at the overall ARP view, it's still going down. So this is something that you can also see with our competitors. So that's the same with Freenet. And this will take time a little bit because, I mean, yes, you have churn. So you have old customers with higher ARP views. that was a normal churn. So then you have new customers from 24, 25 that were cheaper. So overall, the impact of the overall ARPU is still decreasing. But, I mean, if you do the right things today, so this year, so this will be also play out positively in the near future. And, yeah, that's it. All right, thank you. You're welcome.

Thank you very much. Next question is from Carson . Please, serve it to you.

Yeah, good morning, everyone. The first question is about the adjusted, the difference of the adjusted EVTA and the reported EVTA. Could you remind us of the 2 million? And the second one is about the, possible IPO of the WIPO. Is there any new idea about timing or the IPO in general?

Good morning, Carsten. Thanks for your questions. The adjustment EBITDA is the most of the 2 million is linked to an old board contract. to a contract of an board member who resigned, but there was still a payment which was necessary, and so this could be concluded in the first quarter, and therefore it's mainly driven by HR. On the WIPO IPO side, all what I know is that, yeah, we did the soft announcements, I think you know our position. We have to support this IPO because the minority shareholders have the right to start it. It is started. We support it. And as I know, there will also be a roadshow from the board members here from Exaring. Yeah. So this is all what I can say. I think our position has not changed. We are happy with the 75% what we do have. We would not need an IPO, but yeah, I think we have contracts and I think this is how you know us. If we have a contract, then we act corresponding to what we signed some years ago But, yeah, I think we have to wait and see what happens. You are nearer to the investors. At the end of the day, the investors will decide. And I think we support it, but we do not need it.

Okay, thank you.

The next question is from Florian Kretsch.

Good morning, everybody. One question left on my list. I think in a recent newspaper article you mentioned that you're thinking about extending it to new verticals. I think you also touched on that in a recent conference call. I think you mentioned that fiber might be an interesting idea to enter. I mean, we have seen decent positive feedback from one-on-one in the call some days ago. Can you give us an update here what to expect from you? And thank you.

Thanks for the question. Good one. And, yes, this is, I think, a very nice opportunity for us, and we are on it. And so, I mean, especially when you talk about fiber, so it's difficult to do marketing. It's important that you talk to your customers. It's, like, not easy to sell it because you cannot just do display advertising or so. It's a complicated product that you need to explain to people because, yeah, you have to go into their house and that stuff. So therefore, it's helpful if you have shops. And we have around 500 shops in very good locations. And then we also have good partnerships, for example, with MediaMarkt.org. So we have a very good footprint. in Germany, and we have a huge customer base of over 10 million customers. So, therefore, I think it makes a lot of sense to also start doing marketing and to create a nice broadband product. And we are in discussions with partners, so we are proceeding here. It's something that will take some months, but we will do something here, and this will be a further nice opportunity for us.

Thank you.

Welcome.

Thank you very much. The next question is from Shek Ali Berenberg. Please, over to you.

Hi. Thank you for the question. The first one is on the M&O headwind. So in Q4, it was positioned that the worst case would be for about 50 million in the year. And in Q1, you sort of did 12.5 million. Has anything changed with how we should think about the worst case and best case with this? And then second question on mobile net ads, how much of these are coming from the mobile zones, sort of sales channel versus own free net? Thank you.

Good morning. I do not understand. I'm not sure if I understood the first question correctly. So we said there could be a headwind of something like $50 million Yeah, in the first quarter, it was $12.5 million. So if you do the math and if we already had $13 million last year in the fourth quarter, yeah, you are correct. I think the effect from the M&O contract in the full year will be $50 million. So it will be something like $37 million higher than last year. So if I got the question correct, but I think with the $12.5 million in the first quarter, we are – I'm not happy about it, but we are on track to reach the $50 million for the year if it works linear. Then the second one –

This is, as you can see, we now report postpaid customers, so that we grew around 30,000, which is mainly from Freenet, and then we also show our reselling contracts, which are around 180,000, and this is then the mobile zone business. And there are some, there are also some customers included in the from mobile zone and through the brand high in the post-paid customers, but this is a rather small number.

Okay, yeah, that's great. Thank you.

Okay.

Thank you very much. Dear ladies and gentlemen, as there are no more questions in the queue, I'm closing the Q&A session and handing the floor back over to the host.

Yeah, thanks a lot. Yeah, we want to thank all our employees for this fantastic job. We know that we are demanding and there's a lot on that plate at the moment. But together, we are sure we will move forward step by step, and we have many opportunities about us, and that is really great, and besides, it's also a lot of fun. So thanks to all of us, and thanks for joining this call. Bye-bye. We wish you a nice day.

Bye-bye.