Deutsche Telekom AG (ETR:DTEGn) (DTEGY) kicked off the first quarter of 2024 with robust results, including a 4% increase in service revenue and a 7% organic growth in EBITDA. Adjusted earnings per share saw a significant rise of 15%. The company's optimism was reflected in the raised full-year guidance and the announcement of a fiber joint venture with EQT (ST:EQTAB), aiming to reach 3.5 million households in the US by 2028.
Concerns were raised about the German regulator's proposed spectrum extension, which includes a stringent area coverage requirement. Other focal points included the company's network leadership, customer growth, and environmental, social, and governance (ESG) initiatives. CFO Christian Illek delved into the financials, noting strong customer and revenue growth, as well as stable leverage ratios.
Key Takeaways
- Service revenue increased by 4%, organic EBITDA grew by 7%, and adjusted earnings per share rose by 15%.
- Full-year guidance has been raised due to strong Q1 performance.
- A fiber joint venture with EQT is set to target 3.5 million US households by 2028.
- Deutsche Telekom (OTC:DTEGY) expressed concerns about the German regulator's proposed spectrum extension.
- The company reported stable leverage, strong customer growth, and increased free cash flow.
Company Outlook
- Raised full-year guidance following a strong start in Q1.
- Expects continued strong performance in the European segment, driven by volume growth and price increases.
- Plans to address capital allocation and future strategies at the upcoming Capital Markets Day.
Bearish Highlights
- Concerns about the German regulator's proposed spectrum extension and area coverage requirements.
- Challenges in accessing multi-dwelling units (MDUs) for fiber rollouts in Germany.
- Competitive pressures and operational issues impacting German broadband performance.
Bullish Highlights
- Network leadership and family plans helping to protect against churn in the competitive German market.
- Confidence in upselling opportunities and targeting the prepaid market.
- Positive outlook on US fiber investments and revenue potential.
Misses
- Despite the overall positive outlook, Deutsche Telekom acknowledged the impact of inflation on capital expenditure and buildout plans.
- The company has yet to reverse the downward trend in German broadband performance.
Q&A Highlights
- The company plans to exercise 7 million fixed price options in T-Mobile but is undecided on 28 million floating options.
- A $2 billion venture capital fund is in the works, focusing on network security, IoT, Gen AI, and core business growth.
- Deutsche Telekom is aiming for a larger stake in T-Mobile US (NASDAQ:TMUS) by the end of the year.
Deutsche Telekom's first quarter of 2024 showcased a company in a strong position, with strategic plans to bolster its market presence in both the US and Europe. The company's financial health and proactive approach to investments and partnerships signal a commitment to long-term growth and shareholder value. As the company navigates regulatory challenges and competitive markets, it remains focused on delivering quality service and leveraging its network leadership to maintain and expand its customer base.
InvestingPro Insights
Deutsche Telekom AG (DTEGY) has demonstrated a strong start in the first quarter of 2024, with an impressive uptick in key financial metrics. To further understand the company's financial health and investment potential, let's delve into some real-time data and InvestingPro Tips that shed light on its current market standing and future prospects.
InvestingPro Data highlights include a robust Market Cap of $117.76 billion and a low P/E Ratio of 6.11, indicating that the company may be undervalued compared to its earnings. The PEG Ratio, which stands at 0.22, suggests that Deutsche Telekom's earnings growth is potentially not fully reflected in its current share price. Additionally, the company boasts a strong Gross Profit Margin of 43.38%, underscoring its ability to effectively manage costs and maintain profitability.
In terms of InvestingPro Tips, Deutsche Telekom has achieved a perfect Piotroski Score of 9, which is a testament to its solid financial condition and operational efficiency. Furthermore, the company has a history of rewarding shareholders, as evidenced by its high shareholder yield and consistent dividend growth, having raised its dividend for 3 consecutive years. This commitment to shareholder returns is also underlined by the company's maintenance of dividend payments for 20 consecutive years.
For investors looking for stability, Deutsche Telekom's stock generally trades with low price volatility, making it a potentially attractive option for those seeking a more predictable investment in the Diversified Telecommunication Services industry. Additionally, the company's valuation implies a strong free cash flow yield, which could signal further upside potential for the stock.
For readers interested in gaining deeper insights and more comprehensive investment tips, there are 10 additional InvestingPro Tips available for Deutsche Telekom. These tips can provide a clearer picture of the company's financial outlook and help investors make more informed decisions. To access these tips and enhance your investment strategy, consider using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro.
Full transcript - Deutsche Telekom AG PK (DTEGY) Q1 2024:
Hannes Wittig: Good afternoon and welcome to Deutsche Telekom’s Q1 quarter 2024 conference call. As you can see, with me today are our CEO, Tim Höttges, and our CFO, Christian Illek. As usual, Tim will first go through a few highlights, followed by Christian, who will talk through the quarter in more detail. After this, we have time for Q&A. Before I hand over to Tim, please pay attention to our usual disclaimer, which you’ll find in the presentation. And please also note that this conference will be recorded and uploaded to the internet. And now it's my pleasure to hand over to Tim.
Tim Höttges: Yes, thank you, Hannes, and welcome everybody to the first quarter 2024. And if you have seen it, it was a very good start into the year, very predictable and reliable numbers from all the businesses we are having. We are very happy on the track of our stated targets. Our first quarter financial results are very consistent with the multi-year trends that we showed. And there was what, a 4% service revenue growth, a 7% organic EBITDA growth, and a 15% growth in adjusted earnings per share. So, I really like that. T-Mobile was able to raise its full-year guidance, and we are reflecting this in our group guidance today. T-Mobile announced the creation of a fiber joint venture with EQT, which targets 3.5 million households in the US by 2028. And T-Mobile received the necessary approvals for the min transaction, and finally received the 2.5 gigahertz spectrum from the auction 108. The German regulator made a proposal on the spectrum extension, which is now being consulted upon. So, I think everything is working in direction which we were foreseeing, and we are coming along very happily with these topics. Let's take a closer look at our financials on Page 5. First, all segments are contributing to our growth. Second, organic growth, service revenues grew up by 4.1% in the first quarter, which is even a bit faster than last year's growth of 3.6%. Organic ex-US service revenues grew by 3.6% in Q1, again marking the acceleration. And as mentioned, organic group growth EBITDA increased by 6.9% in Q1, which is the same as it was one year ago. The foundation of our growth is our network leadership. In the last quarter, we passed another 500 million additional European homes with FTTH and now reach 17.5 million. This is up 3.6 million year-over-year. And in Germany, we now pass 8.2 million homes with fiber, and Europe 9.3 million. In the US, our 5G leadership is confirmed by all tests. And in Europe, our 5G cover stands at 68%. And in German mobile, our network leadership remains beyond any doubt. Our strong customer growth continues both in the US and in Europe. T-Mobile added nearly as many postpaid customers as last year. Over in Europe, we managed an acceleration in mobile net adds and TV net adds also accelerated, but the broadband net adds were slower than last year. Christian then we will talk about that one later on in a bit more detail. Moving on to ESG, despite strong growth in data usage, we further reduced our energy consumption for the group. We recently became the first telco in the world to use large scale battery storage systems for renewable energies. And our latest campaigns against hate speech received further acclaim. At the Capital Markets Day, we will provide you with a more detailed update on our sustainability ambitions. With this, let me move to our guidance update. With the Q1 results, T-Mobile had narrowed its guidance range, accounting midpoint $50 million increase for EBITDA and free cashflow. Today, we are reflecting this in our group guidance. We remain comfortable with our ex-US guidance for EBITDA and free cashflow, which remains unchanged. Our overall group guidance for 2024 also remains unchanged. And with that, I hand it over to Christian for a deeper dive into the quarter.
Christian Illek: Thanks, Tim. And hello from my side. As usual, I'm going to start with T-Mobile US. And let me start with service revenues, which are growing at 3.5%, which is very similar to the last two quarters. The core EBITDA growth remained very strong at 8%, but actually in our fourth ranking, came in second after our European segment, which grew at 1%, which you're going to see later on. Total revenues are still impacted by lower equipment revenues. So, this is going to be a pattern which we also expect for the future. T-Mobile's customer growth is super strong. The postpaid phone growth was basically on the level of last year and is absolutely industry-leading. The highspeed internet customers came down by more than 100,000, but that was guided because we have ended our promotional activities on HIS. With its Q1 results, T-Mobile also raised its customer guidance by 150,000 to $5.2 million to $5.6 million. Moving on to Germany, organic revenue growth was plus 2.6%. Organic EBITDA growth was at a stable 3%, very consistent with the previous quarters. So, we are all well on track in the German segment with regard to what we want to achieve for the full year guidance this year. Total service revenues were consistent with last year's performance and the mix mobile was very strong with 3.4% year-over-year, and that was driven by customer growth, as well as by upselling. The fixed service revenue grew by 1.2% year-over-year, which was at the lower end of the range, and it's very much due to phasing in public sector projects. So, we expect a stronger performance for the remainder of the year. As you can see on Page 15, broadband revenue growth remains strong at 4.2%, and that is driven by both ARPA growth, as well as volume growth. Wholesale access revenues growth is slightly weaker sequentially, but remained in a positive territory. We also expect positive wholesale access revenue growth for the remainder of the year. Page 16, our broadband customer performance was lower this quarter. To be honest, nobody's happy about this. It is not surprising because we said it also in the last quarter, there was a very weak competitive performance, and we're seeing that competitors are moving in a better territory. You've seen that with 1&1. You also see it with Vodafone (NASDAQ:VOD). And if you basically add all numbers up, we're still above the long-term target of 40%, but it's below what we have achieved in the previous quarters, and we're working to reverse that trend. We're also seeing an impact on the increased focus on FTTH because you know that there's a lagging effect between signing to a contract and getting the excess line on FTTH. As mentioned, on FTTH, we have an increase of 93,000 customers, and we expect this acceleration to continue. So, if you compare 2023 versus 2024, in 2023 we had 300,000 FTTH customers signing up to that service. We expect 450,000 in 2024. Also, on the TV net adds, we improved. We have 73,000 new IPTV customers, and on top of that, we have 53 over-the-top TV customers. So, in total, it's 126,000. We have now 4.4 million IPTV customers and 350 on top, 350 OTT customers on TV. We're also pleased to announce a partnership with the Association of German Real Estate Managers, which help us to support our services in promoting their services, and that is a very nice compliment to the partnership, which we crafted last year with the housing association organization, JDW. Our mobile commercials remain strong. As you can see, we had 280,000 net adds. This is very much consistent with last year, and I think if you add all the numbers up, it's more than 50% of the total market net adds in the first quarter. With that, I move to our European segment, which is actually the star in Q1. The organic revenue growth reached 5.7% on a year-on-year basis, and was very much supported by service revenue growth. in Greece, we had a benefit from a contract which was related to the European Recovery Program. The organic EBITDA growth was 8.1%, as I said earlier on, slightly higher than the US, but know that the EBITDA growth is very much driven by net margin growth. But also, we had a tailwind from lower energy costs, which actually led to that result. And I wouldn't extrapolate this into the outer quarters because we're not sure whether this basically maintains on this level. And you know that in 2023, the performance of the European segments when it comes to EBITDA growth, was continuously growing, as you can see on the chart. Our customer growth in the European segment remains strong, very strong. 80% growth in mobile, solid numbers on broadband. TV net adds were about the same, and we had a reduction on the converged customers, but it's very much related to a change in Slovakia on how to account those customers, and they're now being treated as mobile-only customers, and therefore, we had to deduct our installed base by 100,000. Moving over to T Systems, what you see here, we had a pretty good start in the year. We're growing revenues on a reported level by almost 5%. You see there's a slight increase in order entry, but to be clear, order entry is going to be the main challenge also for the remainder of the year. And we have an okay EBITDA growth on a year-on-year basis, on an organic basis, 1.5%. So, that basically concludes my operational review, and let's look at the group financials. What I said earlier on, our reported financials were impacted by obviously the Tower transaction, which we conducted, and by FX. The headline revenue growth was negatively impacted by handset revenues, which came in lower relative to last year, and was very much driven by the US. On the organic service revenue, actually our growth is higher than what's been reported. It's 4.1% versus 2.9%, and the reported net profit was growing by around 15%. This is a rounding issue, the precise numbers following on the next page. Taking a look at the free cashflow, on the next page, you see that the free cashflow was growing by a good $100 million or 3.6% year-over-year. That was driven by an increase in cashflow from operations, reduction of CapEx, very much driven by the US. The US came down year-over-year by $400 million, whereas the ex-US business, predominantly Germany, was higher relatively to 2023 by $300 million, but this will basically phase adequately into our guidance over the course of the year. Our adjusted net profit was up by 14% on an annual basis - on year-on-year basis. And the good thing is, was very much driven by adjusted EBITDA. So, everything is pretty much coming from the operational business. Moving to our leverage, despite some headwinds, which you can see on that chart, that's the net debt ex-lease chart of $2 billion coming from the US dollar. You see only an increase of $0.7 billion on a quarterly basis, end of Q4, up until end of Q1. And that leads very much to a very stable leverage of 2.3 ex-leases, or 2.81, including leases. So, therefore, I'm going to complete my review and hand it over to Tim.
Tim Höttges: Thank you. Let's go to the Q&A.
Hannes Wittig:
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Adam Fox-Rumley: Thank you very much, Hannes. I hope you can hear me. I'd like to ask you, please, for your thoughts on BnetzA’s recent consultation document on spectrum. Can you explain what you think is required of you when it comes to making an offer, if at all, to 1&1’s? And can you also put your mobile network coverage plans into context of what the regulator's asking for by 2030?
Tim Höttges: Okay, thank you. First, we welcome the proposal for the spectrum extension, even if it's only for five years at this stage. However, the inclusion of an area coverage of 99.5 with 50 megabit per second appears misguided. This is, I think - we don't know which kind of numbers the Bundesnetzagentur is referring to. The initial aim should be to achieve as much coverage as possible for German consumers. And you know that 30% of Germany is forest and 6.5% are natural reserves, and it's already very hard for us to get access or to get sites in this. And we do not have an understanding yet how this should be implemented. Independent from the additional money which is required, it is as well very difficult to get approval for these areas. So, I think, with regard to spectrum handed over to (1&1), I do not see why this is happening. I do not see that he needs that spectrum. The company has so far only connected 227 sites instead of 1,000 sites that were required by end of 2022. And there is no reason to reward this misconduct at the expense of others that have invested in coverage and have invested to the benefit of our consumers here in Germany. So, therefore, we will do everything here on our side to defend our position on this low-band spectrum. It's very clear because our customers are using it and our leadership, both on capacity and speed is as well based on this low-band spectrum, which is part of the whole story which we are making. So, I would say in sum, first, positive note, extension is coming, second, I think the area coverage is something we have now to use the next weeks where we have this consultation phase to understand better what they mean and how this can be achieved because the Bundesnetzagentur made that statement that we are already almost there. I don't get that. For us, we see ourselves at 91% area coverage and not 99.5%, and that is additional money needed if we would've to fulfill this targets. But let's go into this consultation phase, which is six weeks from now. I think, again, asymmetric benefit to 1&1, I do not see any kind of reason nor I understand the background of this. So, let's see whether it's coming from, and we will do everything to defend our position.
Adam Fox-Rumley: All right, thank you.
Hannes Wittig: Thank you, Adam, and thank you, Tim. Next, we have a question from Georgios Ierodiaconou at Citi, please.
Georgios Ierodiaconou: Yes. Good afternoon. Thank you for taking my questions. And Hannes, thank you for the pronunciation. It was spot on. So, my first question is around the KPIs in Germany, and for broadband, I think, Christian, you made a comment that you're not happy with the performance and that's going to improve in the coming quarters. Is it an operational issue? Is there a fiber backlog or something that you're fixing, or is it an a commercial issue? Like you need to be a bit more active in the market? And on the commercial side, if you can also update us around the TV side. I guess the next six to eight weeks could be quite critical on the KPIs there. And then my second question is, again, on the next six to eight weeks, hopefully, and it's around the union negotiation. As you know, it's been a major issue since the start of the year. We read a lot of different things from our side, and it will be great to get your perspective as to whether you think you are closing in on an agreement with the unions. Thank you.
Christian Illek: Let me start with the commercial performance. I think it's a mixture of three things. First, competitors are performing better, and we said in Q4 it was a particularly weak quarter, especially from Vodafone, and you see that their losses have been reduced. And also 1&1 has improved its game coming from negative net adds to basically zero net adds. So, we're seeing some competitive movement and also the alt nets are grabbing some of those broadband customers. The second one is we're seeing that the market is maturing to a certain degree, and we have to figure out whether there's a sustainable, slower market growth in the market. We don't have the final answer right now, but we're seeing that the market is maturing. And the third one is, there are some operational issues which we did in Q1, which we have to basically - which we figured and which we will reverse in Q2. So, I'm hopeful that whether that's going to be Q2 or the near-term future after Q2, that we are going to reverse those strengths. But bear in mind, our net add market share is still around 50%. On TV, look, first of all, we're happy with the 126,000 TV customers, if you combine IPTV and OTT. But if you add up all those numbers, also, if you add up the free net numbers, obviously that doesn't explain the TV losses, which you've seen on the cable operator side. So, what we're not clear about yet is how much cable cord-cutting is happening in the German market. This is the one piece which is unknown to us. And the second piece is to what degree Vodafone is actually converting TV-only customers into triple play customers. So, they basically combine this in their broadband numbers. I think these are the two unknowns for us, but at least strong hypothesis that both of those effects happened and impact the market.
Tim Höttges: So, with regard to the negotiations with the unions, look, we have now three rounds. We are in the fourth round with our partners here in Germany. This is a tough environment. And we had some agreements in other industries which were very high. We always have to reflect - our industry, we always have to reflect the current structure of our salaries already, and we have to consider as well the competitiveness of our market. The negotiations started in March. We had until now nine days of strike within the company. It had an impact less on the service side, more on the delivery side when it comes to FTTH connectivity and outdoor services. So, in principle, under control. We made an offer, which was a €2,000 one-off payment and an average increase in the base salary of 7.1% through mid 2027. This consists of a 4.2% increase from January 2025, plus an additional €150 euros from October 2025. So, it's quite a complex offer, which we made, and it's over 27 months. Now, we now increased this a little bit from 4.2% to 5.2% in principle. The unions again rejected this offer, and the negotiations will continue. So, that's where we currently stand. While we are sitting here, the parties are discussing it. Look, we remain comfortable that we find a solution with them in a fair basis. To my expectation, it should be soon because every argument was now exchanged from the two sides. And we remain comfortable as well that the final agreement will fit into the financial guidance which we reiterated today.
Hannes Wittig: Thank you, Tim. With that, we are moving to Josh Mills at Exane Paribas, please.
Josh Mills: Thank you, everyone, and two questions from my side. The first was just going to be on the mobile trends in Germany. And if I look at your numbers, it doesn't look like you've seen any real pressure from the family plan push by Telefónica Deutschland and Vodafone, but keen to hear your thoughts on how you think that may be impacting the markets and whether you are considering a tariff refresh or any moves on your side to further strengthen your position. And then the second question was just on the broader European business ex-Germany. Maybe a simplistic way of looking at this, but when I bring up charts 18 and 19, net adds are slightly lighter, but we're still seeing an acceleration in organic revenue and EBITDA growth. So, are you putting through price increases in some of these markets? And maybe if you could give a bit of color around how those are landing and how you are actually communicating it to customers would be helpful. Thanks.
Tim Höttges: I’ll start with the first one. Look, German market has been intensively promotional in the recent months. And I think this was catalyzed by some really aggressive moves from Telefónica Deutschland since mid-January. You know the campaign, which I do, the one for two or whatever the name of the campaign is. Telefónica Deutschland essentially reversed its early 2023 price increases on a promotional basis, and they have extended this promotion under the beginning of July. And there have been some promotional responses in the market as well. That said, as you can see again in our Q1 results, our commercial and financial programs remains consistently strong, both in absolute and in relative terms, and you mentioned that. And look, why is that? The answer is, first, the market is quite segmented, and these conflicts are taking place outside of, let's say, our sweet spot of the market. Second, this undisputed network leadership which we have achieved here in the German environment, is the best protection against churn. And on top of that, the family plans are highly appreciated from the customer base. So, this is supporting our growth as well. So, to be honest, I think if we would only differentiate by price, it would be more difficult. But with our brand, with our positioning on the network side and with the innovative offers which we currently have in the market, it looks quite encouraging how we are succeeding in this market. I still think that there's a lot of upselling opportunity in this market. There's a big market for no frills, which our offer is looking for. There's a lot of, let's say, prepaid market, which we want to bring into the Magenta brand. And therefore, I'm not so irritated by the battle, which is between 1&1, Vodafone and Telefónica going on these days. They should do their shit.
Christian Illek: So, let me answer the question on the European segment. I think it's - let me flesh out the three most important items. First, there is still solid volume growth, despite the fact that broadband that has come down, we saw a significant impact and growth in mobile. The second one, obviously price increases, which have been conducted in many markets in the European segment, are coming through and obviously leading to an increased net margin. And the third one is, we have slightly better energy costs relative to last year, and that helps us. That's accounting for about two points of the EBITDA growth. Obviously, it's hard to predict how it's playing out, but again, as I said earlier on, don't replicate this or continue this in the next three quarters. There's a baseline effect coming from 2023, and we don't know to what extent this will carry through, but it will be a very good result on EBITDA, what we're seeing right now internally.
Hannes Wittig: And it's also a portfolio performance. So, it's many countries contributing. It's quite spread. One country is pacing a little bit faster. Others are maybe pacing a bit slower at any given point in time. But broadly, if you add it all up, it's a very solid performance. We very much expect it to continue very strongly as well. So, with that, we move on to the next question, and that's from Polo Tang at UBS.
Polo Tang: Yes, hi, thanks for taking the questions. I have two. So, the first one is just a follow-up on competitive dynamics in Germany. So, have you seen any changes in terms of how Vodafone is behaving post the change of management of Vodafone Germany? My second question is just on your German fiber rollout, how easy is it for Deutsche Telekom to access MDUs and housing associations in order to upgrade your existing network to FTTH?
Tim Höttges: Polo, I think, I answered the first question on the competitive dynamics in Germany with regard to the mobile space. I think, Telefónica was quite aggressive or is quite aggressive with their promotions these days. Very visible on this one. Vodafone, to be honest, the normal reactions, but …
Christian Illek: No, I think, Polo, what you highlighted in your research, which is increased upfront discount, I would consider this a normal promotional measure. And also, I think - I know that it’s common practice in price comparisons to focus on the first 24 months, but I think that is a bit misleading because you have to look at the rate plan overall. And most broadband customers don't leave after two years, right? So, it's - these are promotional structures that change and vary. But we don't see a fundamental directional change from anyone in the German broadband market. And in mobile, I think it's not Vodafone that is driving it right now.
Tim Höttges: We have seen from Vodafone 200 gigabyte on top of the Giga Mobile M&L. We have seen family cards with a discount. We have seen 200 gig for additional young segment. And we have seen the Unlimited for all, which is two family cards, unlimited data on all cards of the whole duration of the contract, which was there, but they were limited to a period of time to attract the market, was not something which was new. So, that is what we say it's promotional. But from a Vodafone angle, I would say they are positioning themselves with the new management now, and Telefónica, I read the way that they're doing everything to take customers away from 1&1 to keep them in their grid. So, that is how we read it here. But as you can see, both on the service revenue side, we were growing by 3.4%, and as well from the customer net add number, we were quite strong and additional wise, Consta was very strong as well. So, it is not that - it looks like this whole movements were taking place in another market, but we are well positioned
Christian Illek: On the fiber rollout question, Polo, two answers. Let me start with the privately owned MDUs. Obviously, that's the process bottleneck to get the owners’ approval to actually connect to the house. And that is an industry challenge. That's not a telecom challenge. Everyone is facing the same challenge. On the housing association, I think what we have now basically done is we have entered agreements with 4.6 million German homes. And the retirement of the rental privilege will also allow us to get access to the in-house cabling in whatever direction, whether it's being built by the owner or whether it's being built by us. So, therefore, I think it's super important that we agreed on this GDW frame contract because it helps, especially the more smaller housing associations, to craft a contract with us because they're not as well equipped as Vonovia or something like this. So, this is - you know that we're basically addressing all market segments. So, the GDW contract will help us. The retirement of the rental privilege will help us. And again, we are covering already 4.6 million German homes with agreements to get access for fiber.
Hannes Wittig: So, we are working on it. And as mentioned before, connecting fiber takes longer, has longer lead times, and that also impacts to some extent the broadband performance on the margin. So, Robert Grindle is next at Deutsche Bank. Thanks, Polo. Robert, you can ask your questions. I think you are on the audio link. Robert, can you hear us? Have you unmuted yourself?
Tim Höttges: It's the bad coverage from BT on the world course.
Hannes Wittig: It's more the basement, Robert. So, maybe we take Andrei Dragolici at Kepler instead, also on audio.
AndreiDragolici: Hi, thank you for the opportunity to ask a question. On Germany and CapEx, you had a higher CapEx in Q1. I was wondering, is it purely phasing or is it more expensive to build? Do you see some headwinds from pricing there? You mentioned slight increasing CapEx in 2024. How should we estimate the following quarters during the year? And also in the US, since you're moving a bit into fiber, do you see the market going more towards convergence in the midterm? And are you trying to position yourself on that segment? Thank you.
Tim Höttges: I'm starting with the US and with the convergence question here. And look, if you look to Europe, if you look to the world, every market is different when it comes to catching up on the convergence game here. And therefore, the quote for the US market, for this big market is out. So, it's too early to say either or. We believe there is an upside for us, a revenue upside for us, and a profitability upside for us because we have seen that with our distribution, with our brand, we can attract the customer segments in the broadband market. And we are doing this already in the high-speed internet, and we do that already with some of the partners here. And therefore, we are now testing whether we can do this as well with fiber from Lumos over the next years. And looking to the business case, the market buildout costs, they're almost the same like in Germany, but the apple is significantly higher. And therefore, the profitability of this whole thing looks quite attractive using our infrastructure and using, let's say the distribution network and other things, which we have already. Now, is this now getting a full-fledged fixed mobile converged market? I don't know. To be honest, let's see. Let's test it out where we are going. Lumos is attracting or aiming for 3.5 million houses prospectively. Yes. Your next questions might be, is that the first of a few transactions? If the business and the deal is good, yes, I would be open to consider, but it's too early to say when and who might be the next target. There are a lot of opportunities in this environment, which we are looking into this one. So, therefore this is a growth optionality for us. And I said earlier already, it is not must have that we own the infrastructure because we have no infrastructure yet. And we are looking to a partner who is co-investing with us in the infrastructure, and we are then the preferred or partially exclusive distribution network for this product. It helps us to keep our growth engine running.
Christian Illek: So, on the question on CapEx, let me - first of all, and you see it on Page 29, where you have the comparison on ex-US free cashflow, where we have an increase of CapEx by $200 million. This is very much due to front-loading and phasing, and it will wash out over the course of the year. By the way, same holds true for the capital figure. So, we're sticking to our $3.5 billion guidance. But I think what we have to acknowledge is there is inflation impact, and I think the biggest impact will come in the future on contracts, which we have concluded on at the peak of the inflation and where the buildout is happening in the future. So, I think there's something which we have to do on our side to increase the efficiency, to basically increase the shallow digging share, to have a process improvement within our buildout to create competition among the different buildout areas to counteract this inflation effects. But the outlook for the following quarter is that the peak of the inflation impact hasn't hit us yet. It’s yet to come.
Hannes Wittig: That said, our guidance for the German CapEx and the guidance for the German CapEx is a slight increase this year, and that is unchanged. So, we have - so the first quarter number should surely not be multiplied by four. It is a phasing effect relative to the full year expectation. So, the next question is from Steve Malcolm at Redburn. Steve.
Steve Malcolm: Yes, thanks. Thanks, Hannes, Good afternoon, all. And Tim, I enjoyed your views on what Vodafone and Telefónica Deutschland should do. A couple of questions on Germany. I want to come back to Adam's question on the sort of the BNA proposals. Would you rather have an auction than comply with the proposals that BNA has come out with so far and kind of force 1&1 to put its hand in pocket and invest in spectrum go against you? And then secondly, just coming back to the comments that Christian made on sort of broadband net adds, I'm a little bit confused. I mean, you're doing 50% share of net adds. Do you think you can do better than that? And what are the moving parts to taking that number up? Because I presume the competitors are going to remain maybe operating better than they were last year. What are the operational improvements you can make? And if growth is just lower, why do you think growth's going to improve from this point? We've seen BT talking about a shrinking broadband market today in the UK. So, just sort of extra color on where you can kind of get back to from the number you printed on Q1 would be great. Thanks all.
Tim Höttges: Okay, let me start with the broadband question. First of all, historically we had a higher net add share than 50%, and we said it very clearly also on the Q4 figures, and we're trying to basically improve our performance. And I'm not saying we're getting to the same levels as in the previous quarters, but I think we want to improve our net add share. What we can influence, and what I mentioned is obviously the natural growth in the broadband market. And I think we have to figure out whether we see a kind of a slower growth in the overall market, which will also impact our net adds on an absolute basis. But there were also some operational issues, which I will not basically be transparent about in Q1, which we can revert, and therefore we're hopeful that we are basically improving our performance on broadband.
Christian Illek: Yes, just maybe to add, just before you start, Tim, we said 50% share of net adds, so at 39,000. We think the market is about 80,000 this quarter, is not very different from the run rate last year, right? So, it's - we’re just saying the market is fairly mature. We are not talking about the declining broadband market or anything like that in Germany.
Tim Höttges: I think the one who is building the network will gain the customers as well and defining the share of net adds. So, we are building quite consistently and moving on. So, I see opportunities for us here. Now, going to your second part of the question, look, the discussion about going into an auction at that point in time, I think it is now less of the way of it. I think it is more the way forward now to make a proper consultation of that paper and find a pragmatic approach towards the aim of the political leadership behind this plan. I would expect that they amend some of the targets. I expect that we find a solution in this discussion about how the 2.5 megahertz of low band spectrum is going to be handled. And I expect the buildout of the area coverage is something which should be realistically adjusted here. And then not expecting an auction, that is my expectation or my forecast going forward. That said, we always have to look whether the price we are paying for the extension is still appropriate compared to an auction. And as I mentioned, it looks like quite expensive now, rights which we have to pay over this time plus the buildout obligations, plus somebody has to give up spectrum, plus, plus, that doesn't look that fair at that point in time, but it's too early to call it a deal. Let's negotiate that within the next weeks until I think end of June or …
Christian Illek: Mid of July.
Tim Höttges: Mid of July, and then we can give you a clearer perspective. Look, on the area coverage, the 99.5%, which we are clearly saying that number is insane. Look, we have 35,000 towers. Vodafone has 25,000 towers, so how can they comply with this? So, I would encourage you to ask the same question also to Telefónica and Vodafone, and put in some, I would say, realism into that ask. And hopefully, we will be successful until the end of the consultation. And by the way, I was very outspoken this morning as well on the press call because somebody who has built 227 towers - by the way, we even don't know how many of them are active. Somebody who had to invest up to 1,000 towers by end of 2022, and now is staying at 227, somebody who has not being proven at all, that he's interested to build out a network, who is deeply sitting on a national roaming deal with one or two parties, why should he get, on top of this non-existing network, low band spectrum? I don't get it. My customers are using the spectrum every minute while we are sitting here. And I can tell you, it is our duty to defend, let's say the quality, and it's our duty to defend, let's say, the service obligation, which we have towards our customers. And that's let’s say, going to be a very tough discussion which is coming over the next weeks.
Hannes Wittig: Okay. With start, thanks, Tim, we move on to David Wright at Bank of America on audio.
David Wright: Okay guys, I hope you can hear me. A couple of questions. The first is on US fiber, and Tim, you gave a lot of granularity that was appreciated, but just maybe a little more on just how these deals basically come around? As in, how are you identifying the areas where you might want to build fiber? How are you identifying partners? Are you literally opening to tender and infrastructure investors, or invited? I'm just interested in the process here and how we can think about that. Actually, it may be for yourself as well, Christian. And then I guess my second question is just on the back to the wage negotiations, what is your bargaining power in this? For instance, if the unions want a higher wage, a higher wage, it seems like you might be going back with higher offers, higher offers, but I'm wondering, what can you offer the unions beyond pure financial gain that they could that they could settle upon? Thank you.
Tim Höttges: Good questions. By the way, David, I start with the wage negotiations. To be honest, look, that is our operational role, which we have to solve. Unfortunately, I'm not sharing how we are going to settle that. The only thing is, so far we have been good partners with the other side and let's give us a little more days on trying to find a solution here which makes sense from both angles. Everybody knows that to keep our competitiveness in the market, we cannot digest significantly higher costs here. So, if we would have to make a deal here, which is unfavorable from our competitive positioning, we have to go into the costs And that is, let's say, then the mitigation plan, which we have to do. Therefore, we are working on different plans here. Give us a few more days and then you will get the clarity on this one. With regard to US fiber and how we are coming around with the deals, look, this is an exercise which we are doing already for, I would say, one and a half or two years. So, it's nothing where we are just jumping into cold water here. We have in-depth discussion. We have looked to a lot of, let's say, players in this market. What we like is market where the eligibility for high speed is very high due to the poor fixed line infrastructure. Second, what we like are companies which are not coming with high legacy or with, let's say, big, old legacy systems. So, clean entrepreneurial business, which are fitting to our un-carrier DNA. The third one is, it's better to pay a little bit more for a business which has really outstanding performance and a clear plan, than going to companies where you have to do, in addition to the new market restructuring. So, therefore we were very much focusing on this kind of smaller business in the US and then we focus always about, let's say, the market potential in the light of how strong is T-Mobile is there as well, a kind of combination with our mobile services and as well with the high speed internet possible. So, it is coming a little bit, let's say, as well from an approach of good substitution here. So, and Lumos is very much fitting to this focus here. And we have other companies already identified. Please always keep in mind we are not making bad deals. So, we are not in a hurry. We don't in a strategic threat or whatsoever. This is an a nice, growing business. I think it's a great opportunity for us, but it is not that we are committing suicide because of a strategic threat or something like this.
David Wright: Thank you, guys.
Hannes Wittig: Okay. And I think with that, we move on to James Ratzer at New Street, please.
James Ratzer: Yes, thank you, Hannes. Good afternoon, Tim, and Christian. So, I had two questions, please, both on capital allocation. So, the first one, Tim, I think at the last conference call, you talked about setting up a €2 billion venture capital fund within Deutsche Telekom. So, if possible, it would be great just to get an update on further developments there. Have you made any investments so far? What type of investments are you now more focused on looking at? And then the second question is regarding SoftBank (TYO:9984), because I think the kind of next time you speak to the market, we will have gone through 30th of June when all those options expire. So, just love to get your thoughts if you can share them on any intentions there. The fact you haven't issued or exercised the floating option yet, does that mean you plan really to increase your stake in T-Mobile through lower than pro-rata participation in the buyback? Or could we expect to see you exercise those options over the next six weeks? Thank you.
Christian Illek: Okay, let me start with the we were just chitchatting who's starting. So, let me go on SoftBank first. You know we have 7 million fixed price options, which we will for sure exercise. I think there's a $60 value, $65 value, intrinsic value in that option. And we have another 28 million floating options, which I would say we haven't taken a decision, is unlikely that we're going to execute them because we don't need them, right? We're above 50%, obviously. If we are adding another 7 million fixed price option to this, we're well above the 54%. And I think the easier way would be stopping - selling into the share buyback rather than to float the market with T-Mobile shares, and then basically let the market absorb that because we have executed on the 28 million floating shares. Haven't taken a decision on the board, but I think that's the indication how we're thinking about this right now.
James Ratzer: Can I ask to follow-up on that, Christian, though? Do you then expect SoftBank to sell those shares into the market if you don't exercise the option?
Christian Illek: Look, I don't - I will not comment on anything which SoftBank is doing. We’ve never done that. We didn't do this also after the drop. So, therefore, I can't give you an answer on that one.
Hannes Wittig: But I think it's fair to say that, James, SoftBank has not sold T-Mobile shares that they have received, right? So, and they could have sold some of those shares. So, of course, we can't comment on their behavior, but that's to be kept in mind. Also, maybe just to make clear the background to Christian's answer is that we are likely to want to have a bit more of T-Mobile than just over 50% by the end of this year. So, just we are clear, we will not participate fully in the T-Mobile share buyback until the end of the year this year, right? We will want to be more above 50% than we currently are.
Tim Höttges: I think we have a great partnership with SoftBank and their guys, and we’ll find the best solution for all of us. So, once we got to your question on the 2 billion venture capital fund, and it's not that we are not that quick that we can already call the internal rate of return or the - but we have made good progress of setting it up. The idea of this growth fund is, we want to have first significant influence on the participants and the participation. And in even some cases, we might even consider to acquire the majority and consolidate the assets which we are acquiring. But that depends on the business itself. It depends on how much independency does the business need to develop. I want to keep it as entrepreneurial as possible, but benefit in our core business as much as possible. So, this is the art, and I have seen so many corporates killing new ideas, venture businesses, by putting them into the core, and then suddenly never see something out. It's like a black hole, the business disappear. And therefore, we want to keep them aside. We want - we need kind of mentor from the operational business who is bringing their services into the core. But we want to let this business independent as well. It should be really tailored to our businesses and really tailored to more entrepreneurial culture. The areas where we want to invest into is network security, IoT, Gen AI, and some opportunities for beyond growth activities in the core business. The business fund will be managed by group development, which is in board membership, Thorsten Langheim. He has a fantastic leader. He's supporting André Almeida. He was former the consumer head in Germany. And he will run it and operationally will be managed by the DT Capital Partners team. You know that is an independent team, which has a big track record. We have with these guys up to 5 billion under fire already in this areas, great talents in this organization, and they will do the operational selection of the partners. The growth fund currently is set up, but we haven't made investment at this stage, but it'll happen soon.
James Ratzer: Got it. Thank you.
Hannes Wittig: Very good. And with that, we have another attempt with Robert. I think you had some technical issue with unmuting before. So, apologies for that on our side. And Robert, can we have your question, please?
Robert Grindle: Indeed. Hope you can hear me now. Sorry for that. I do have fiber to the basement, by the way. I could hear what you were saying. My question is, at the full year results stage, you were cautious around commercial real estate within GHS, and that was reflected in the guidance, and I think it was due to the economy. So, my question is, are you seeing any further worsening of any parts of your German business due to the late cycle impact of the economy on either B2B or B2C? Or conversely, are you seeing an economic pickup in any form? Thank you.
Christian Illek: Okay. So, first of all, on the real estate side, Robert, we don't see any kind of change of what we indicated in the in the past quarterly call. It's a difficult market right now to get a fair value, and we don't sell underprice when it's coming to selling real estate. The second one is on B2B and on B2C, we don't see a lot of changes right now. We see a very slight increase on bad debt, but not to a degree that I would say it's concerning. So, therefore, we're seeing a pretty robust demand, and you can also see it in the T Systems numbers that their order entry has come up again. So, I would say, I expect that this continues also for the remainder of the year. I don't see kind of an increase. I don't see a decrease. I think I see a continuation of what we're seeing today.
Tim Höttges: I would use the word robust.
Christian Illek: Robust.
Tim Höttges: Robust.
Hannes Wittig: It's also true for the European business, by the way. Robert, is that good? So, then we move on to Usman Ghazi at Berenberg, please.
Usman Ghazi: Hello. Thank you, Hannes. I just had a question with regards to the collaboration with SoftBank that you had hoped for when - I remember when SoftBank kind of acquired some of these DT shares in that swap, there was a hope that Deutsche Telekom would collaborate a bit more with the SoftBank kind of owned companies to kind of develop a differentiation on the services side. Not much seems to have happened. Now, obviously, SoftBank is devoting a lot of its capital to AI and things, and I was just wondering if there's a way to kind of refresh that partnership or position DT to take advantage of some of these investments that SoftBank is making through your collaboration. And then kind of, somewhat in the same line of kind of question was that, I mean, if we look out now beyond this year, obviously capital allocation kind of becomes the biggest decision for you as management, given the amount of cashflow that's going to be coming out. So, I mean, how are you thinking potentially about maybe the increasing the size of DT Capital Partners, given obviously there's so much opportunity here in terms of data center investments or AI or what have you? So, any views on that would be interesting. Thank you.
Tim Höttges: Okay. Look, Usman, collaboration with SoftBank, very honest. We have some partnerships with these guys on our Magento moments. I remember that we have even then small investments in some of the growth funds of DT Capital partners from their side. I have a personal strong exchange with Masa Son, and his team about technologies and where the way they're aiming for on AI and other things. Have we monetized that? Have we really made some big strategic moves in this regard? The answer is no. And that is a little bit less than I was expecting. Now, it's not hurting us commercially, but nevertheless, I would say it could have been more going forward. We have a strong partnership, but we haven't really found the right angle where we can collaborate and how to work together. I think on the venture capital side, Vicente Vento and his team, they are in deep exchange on this kind of things, and therefore that is more fitting to the business need. Softbank (OTC:SFTBY) has a little bit, let's say, changed their shape and their focus out of the telco sector, and they're on much other topics now on chipsets with ARM and other things. So, I would always say, we are preferred and I have immediate access, but it's not yet changing the way how our business is developing.
Christian Illek: Look, on the capital allocation, especially when it comes to a stronger engagement with DT Capital Partners, I think partly those questions will be answered with the tech fund. This is the one piece. And the second piece, I think we are well advised if we're staying close to our core business, because if just taking a look, how many announcement we have seen over the past weeks on data center buildouts, like Microsoft (NASDAQ:MSFT), more than $3 billion in Germany and France, Amazon (NASDAQ:AMZN) investing multi-billion here in Germany on data centers, I think they will out-invests us on this category. And I think we need the money for our infrastructure because we want to have undisputed leadership, both on mobile as well as on broadband. But can it be a financial investment in the tech fund? Absolutely, yes.
Tim Höttges: It is.
Christian Illek: It is. They have (money cubes).
Tim Höttges: I know that they have already six data centers and they're considering even extending that, and there was as well a discussion, but that is just maybe food for thought that they are considering a fund, which is specializing on sovereign cloud infrastructure and data center infrastructure in Europe, but it's more kind of planning.
Hannes Wittig: Excellent. With that, we move on to Andrew Lee at Goldman Sachs. Andrew, can we have your question, please?
Andrew Lee: Yes, sure. Good afternoon, everyone. Just had - I just wanted to come back to the Lumos questions that you've already answered. Can you just come back to one of your answers, which was that you don't think it's a must have that you own infrastructure in the US. Is that not a key returns generator in terms of the fiber opportunity? And could you just talk - it's a follow-up from David's question, why you are happy for TMOS to have financing partners for fiber, apart from the ability to do off balance sheets. So, not that the companies are buying themselves, just the finance partners. Is it because they bring local engineering expertise or anything strategic like that? Any kind of more color on your thinking, that would be really helpful. And then just quick last question on Germany. There's been lots of questions already on this call around German competitive dynamics, but just high level, you will see in German broadband benefited from having a donor in terms of volumes over the last year or so. Do you now see a bit of a rebalance in terms of how you grow German fixed line from volume to more pricing efforts? Thank you.
Tim Höttges: Look, let me share from a CEO perspective, the view on the fixed mobile and on the fiber market in the US and where we are standing. In Europe, we have, in all the markets, almost every market, we have a very strong copper infrastructure, coming with customers, coming with revenues and coming with EBITDA. Now, this infrastructure gets substituted by a fiber infrastructure prospectively. Now, if we are not investing into fiber, and by the way, into the full value chain of fiber, we would lose revenues. We would lose, let's say the profitability out of the profit pool. That is why we always say the amount which we invest or which we own in the copper infrastructure is the amount of what we need in the fiber infrastructure as well to protect our revenue and our profitability going forward. That's the little bit, let's say the thumb rule which we have. So, if you have 50% of copper infrastructure, it's good to have 50%. You can always have more, but at least this is protecting you, that you don't have a shrinking business for a long period of time, both on revenues and even profitability. Now, in the US, the situation is different. We don't have any kind of fixed line infrastructure of copper-based or whatsoever. So, everything what we do is an opportunity to grow our business in this environment. So, first thing, it should be profitable. The second thing, there’s no proof of concept that this market is going full convergence at one point in time. So, going now all in on the fiber investments for this market, this is quite a risk and quite an exposure for our company. So, let's learn how we do that. The third one is, we have to build capabilities and skill to run a fixed line company. So, doing this with professional guys, and I can tell you, I'm convinced that having partners, professional infrastructure partners, our PE companies who built that company, the processes, the mindset of this organization is very business-oriented. So, doing this with them is a guarantee that we are not wasting time and wasting money in our developing an own business model. Can we own or is there prospectively a possibility to own infrastructure? Yes, for sure. It's not that I'm excluding this, but to have this symbiosis now in this early phase where we are growing up our skills in this end stage with a partner is good. And on top of that, if you look to the deals, to be honest, the returns which we get on selling and distributing the fiber services is more attractive from a commercial perspective than owning the whole thing and having a classical, I call it, let's say, infrastructure economics. So, that is why we're doing it, and I think we should move on like this, scale it, learn it, and then at one point in time, after this phase one, we then make another attempt to this market and say, okay, now we might go all in or bigger into this equation, but this is for all of us too early to do it right now.
Christian Illek: Andrew, on the broadband market, I would say we're sticking to our beyond 4% growth ambition, and you've seen also quarters where we had a 4% broadband growth with having significant higher net adds on an absolute basis. I think what we're doing here for many years is always a combination of more for more and volume growth. And I think we're adding roughly one Euro ARPA every year to the broadband customer base because of our ARPA-focused strategy. And therefore, I think we're still in line with our assumptions, which we have given, despite the fact that we had a weaker quarter than expected, but it will be a combination of volume growth and ARPA growth. And you see the ARPA growth happening on Page 16 with that increase of customers beyond 100 megabit. So, that's almost a straight line, which you see in there, the 800,000 increase.
Hannes Wittig: Great. With that, we come to the last questions today. And it's from Ottavio Adorisio at Bernstein, I guess, right?
Ottavio Adorisio: Bernstein. Thank you. Thanks for taking the questions. And I have one follow-up and a couple of questions where we brought the follow up is basically on the coverage. You effectively said that 99% is insane. If I catch the right number, you have around 91%, 92% in your plans. Could you just tell us what in terms of CapEx would require to go from your current plans to the 99%, to get a bit of a flavor of how much the (indiscernible) is asking from you? Then I'll go to the broad questions. You talked a lot about FTTH in the US and it's relatively rational. They say, look, it's an option. This is not a must. And we invest in Lumos because we want to know a bit of the economics. The problem about fiber is that it's five, six years buyback. It's pretty unlikely you will know about the profitability and economics probably one or two years or more down the line. Now you’ve got a CMD coming up in the next six months, whereby potentially you're going to give us a bit more flavor about how the allocation of capital within the group. So, therefore, my question is, in the past, it was pretty clear the pecking order. You always saw that the best returns was to invest in TMOS, and you want to keep control. Then the gearing was another key important priority, and the rest, of course, keeping the fiber in Germany and then making the shareholder happy by dividends and so on so forth. Now, how this changed, I don't think that FTTH - my question is, will be FFTH part - in US part of the questions, or you reckon the next three years you'll still be just assessing if you want to dip the toe a bit deeper or not? And what about all the other, let's say, potential use of your capital. We're talking about T-Mobile networks in Germany, FTTH in Germany, more share in DT and more share in TIMOs, because especially the next six months will be quite important for us to hear what next will be on Deutsche. And I guess aside from FTTH in Germany, you know pretty well the economics for all the other projects.
Christian Illek: Ottavio, we try to be fast, but we're not as fast as you're asking us to be. So, I think objective number one is to get rid of this 99.5%, because I think this is an industry challenge, which we don't see how this can ever happen, especially also, you don't have coverage. If you don't get approvals, if there's no technology, you will not get to 99%. You're talking about area coverage, and we have kind of areas which are protected, which is 6% of the German space here, where you hardly get into. So, I'm not sure whether this is actually theoretically achievable. So, therefore, I think the teams will work on the consultation feedback up until July 8 and explain where this number is simply too high. So, let's work on that one first before we're talking about the CapEx implications. And on the second one, I think you basically described the portfolio of questions which we're going to answer in October, but not today.
Tim Höttges: But, Christian, let me - I think the - look, the question is, how are we allocating money in the group? Yes, yes. And there is no simple yes or no, or black and white, US or Europe or Germany. We are looking on it - by the way, we're not making bad deals. It sounds clear, but we are looking very much on the profitability of every kind of things. In Europe, we come to the conclusion that investment into fiber is one of the most important things which we have to do with regard to the long-term NPV development of our group. And that is why we are committed to this. Are we considering at that point in time, M&A or whatever consideration or whatever? No. we don't have big M&A or any kind of M&A happening in Europe. In the US, we have now made the Lumos transaction. I can tell you the deal flow is quite active in the US. There is the discussion about 800 megahertz spectrum. There is a discussion about other things. We have seen Mint getting approved that 1st of May. So, we are doing kind of intra-market consultation in some areas. So, the portfolio allocation is happening between all these. This is our job to sit there and to consider how we best allocate the money, and this all in a framework that our leverage, that our financial framework is operating in a proper way, and which we are doing, and you have seen us de-leveraging the business on and on and and staying to the capital markets targets, which we have. Now, your question should be better answered in a few months from now. We are working on a clear perspective and a fair point, how much fiber do we want to have in the US? How big should that business get? How much money is requested? Is this an opportunity? Is that it? But this is our, let's say, duty to find an answer on that one. We are working on this one, and the Capital Markets Day of T-Mobile and our Capital Markets Day as well, should give answers exactly on this capital allocations for the upcoming four years.
Hannes Wittig: Thank you, Tim. I mean, I'm sure that given our track record and also the pieces of the puzzle you've already seen, there's a lot to go with. And I think that now brings us to the end of our Q&A. Sorry. Thank you, Ottavio, but I think, Tim, you wanted to wrap it up?
Tim Höttges: Look, thank you for all the questions. Look, I think we are leaving the call off in this quarter very optimistic in all markets where we are operating, including, by the way, T Systems, which have shown very good order entry, double-digit, and as well as some good growth. I think very good commercial momentum in all of the markets. Our best business was, by the way, Europe this time, and based on a lot of countries who are performing very well. We have a lot of investments going on in the group. So, we continue at high pace here to protect and expand our leadership in all the markets. And in the US, I think we have set up a vehicle to tap into a new growth environment with the fiber opportunity. We are now preparing Capital Markets Day for October, and this will be preceded by a team US Analyst Day soon before that. The main topic, how we deliver on long-term sustainable growth, I think that's one. What is the customer growth? How is the revenue growth? And one of our thesis might be around B2B and the way how we are improving the growth rate there. It's positive, but I think we can do more. It's about growth and return on capital employed and growth in adjusted earnings, which is the precondition for sustainable long-term dividend growth, what we are aiming for. And then the question about allocation of capital, we discussed that already, should be a core focus of what we are doing. Best network, best customer experience, and as well the best brand. This is definitely a prerequisite, and it'll not change in our perspective going forward. That's part of our DNA, but we have invested into our balance sheet with more than $300 billion of deployed assets. And the monetization of this infrastructure is definitely at our focus. And on top of that, the discussion is going to be very much about, okay, what's the benefit of serving 300 million customers in the European footprint? So, the question about the transatlantic scale and the synergies within this group, this should be another topic of focus. So, a good agenda to work on, a very intensive discussion already taking place over the weekend with the board here. Looking forward to that one, and I'm looking forward to exchange all of this with you, I hope, during the European championships and the Deutsche mix-it as well. At least we are the main sponsor, and you can watch all our games at UHD quality at Magenta tv. Please join us. All the best and goodbye.
Hannes Wittig: Okay, ladies and gentlemen, dear analysts, and investors, conferences about to end. We'd like to thank you for participating, and should you have further questions, please contact the Investor Relations department at Deutsche Telekom, and speak soon. Goodbye.
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