Deutsche Telekom Ag · XETR:DTE
Deutsche Telekom — Q3 1999 Earnings Presentation
45 slides from Deutsche Telekom's earnings presentation, Nov 30, 1999
Slide 1: Conference call: strategic overview
Deutsche Telekom Conference call: strategic overview November 30, 1999 Dr. Ron Sommer, CEO ===!"§ Deutsche Telekom Conference call, November 30, 1999 Page 1
Slide 2: Growth drivers
Growth drivers Deutsche Telekom has been able to accelerate subscriber growth in all key areas million 9/30/98 9/30/99 Growth* Telephone lines (incl. ISDN channels) 46.1 47.4 3% of which: ISDN channels 9.3 12.4 33% n residential customers 3.5 5.4 56% n business customers 5.8 7.0 20% T-Online account
Slide 3: Strategy
Strategy Deutsche Telekom's strategy is based on four pillars Mobile Consumer Data Access Internet IP ===!"§ Deutsche Telekom Conference call, November 30, 1999 Page 3
Slide 4: Mobile
Mobile Expanding Pan-European mobile coverage is key priority T-Mobil (GER) 100.0% One 2 One (UK) 100.0% max.mobil (A) 91.0% Westel (HUN)* 64.2% MTS (Russia) 46.0% PTC GSM (PL)* 45.0% Radiomobil (CZ) 41.4% Croatia Telecom 35.0% Wind (I) 24.5% UMC (Ukraine) 16.0% RTDC (Russsia)* 67.8% * Subject to va
Slide 5: Establishing Deutsche Telekom as one of Europe's leading mobile carriers
Mobile Establishing Deutsche Telekom as one of Europe's leading mobile carriers 20.4 17.0 Subscribers (million) 13.2 12.7 12.2 7.8 6.0 3.1 Mannesmann TIM DT Vodafone FT Telefonica BT KPN (incl. Orange) AirTouch (incl. E-Plus) n Calculated on basis of majority-controlled subscribers in Europe. n Subs
Slide 6: T-Mobil
T-Mobil Accelerating subscriber growth with an average of 300,000 per month in Q3 Additions per quarter ('000) Average monthly 1,200 churn (%) n 7.7 million T-D1 subscribers per 1,000 2.0 September 30, 1999 (+ 62% since 9/98) 800 n Low churn rate of 1.5 1.1% per month on 600 average in 1999 due to s
Slide 7: Mobile/Online Convergence
Mobile/Online Convergence Strong push in wireless data n Currently 150 million SMS per month n T-D1@T-Online: mobile Internet access at no charge for T-D1 customers n T-D1 lowers its call rates for T-Online by approx. 42% n Mobile banking via T-Online in 85 countries around the world n T-D1 WAP (Wir
Slide 8: One 2 One -- 22% of net additions
One 2 One -- 22% of net additions Steadily improving its share of the UK wireless market Quarterly net additions (%) 31.0 26.0 Vodafone 35.3 36.7 37.3 26.0 34.0 Cellnet 26.9 25.9 25.5 20.1 19.7 22.0 19.0 Orange 23.5 14.4 17.3 17.5 21.0 22.0 One 2 One Q3 '98 Q4 '98 Q1 '99 Q2 '99 Q3 '99 Source: Compan
Slide 9: T-Online
T-Online Accelerated growth of subscribers, increasing number of log-ins n Subscribers September 99: T-Online subscribers and log-ins 3.6 million (+ 46% since Subscribers (million) Log-ins per quarter (million) 9/98) 400 n Log-ins : full year 98: ca. 840 million 4 350 Q1-Q3 99: ca. 1,040 million 300
Slide 10: T-Online
T-Online Strategy: Expand reach of t-online.de portal through additional content German-language search engine e-commerce n Infoseek search technology n More than 6.6 million online n www.infoseek.de banking accounts; 1,500 participating financial institutions n Axel Springer/Holtzbrinck n Shopping
Slide 11: Data IP
Data IP Strong commitment to providing global connectivity n Currently 36 Metropolitan Area Networks (MANs) in Germany n High-performance network in Germany: 12,000 kilometers of fiber-optic cables with 2.5 gigabit transmission connecting the major economic centers n Contract with iaxis provides Deu
Slide 12: Access - broadband cable
Access - broadband cable Deutsche Telekom is taking decisive steps to unlock value in its broadband cable network n Largest broadband cable network in Europe: 18 million homes connected, 25 million homes passed n Broadband cable has been loss-making due to under-utilization n Deutsche Telekom has in
Slide 13: Summary: key messages
Summary: key messages n Good progress in achieving the goals we have set ourselves, especially in expanding pan-European mobile footprint n Exceptionally well positioned to benefit from the boom in Internet and e-commerce in Europe n The acquisition of Siris proves our strong commitment to providing
Slide 14: Conference call: financials
Deutsche Telekom Conference call: financials November 30, 1999 Dr. Joachim Kröske, CFO ===!"§ Deutsche Telekom Conference call, November 30, 1999 Page 14
Slide 15: Deutsche Telekom call minutes
Deutsche Telekom call minutes* Strong growth of fixed-to-mobile call minutes and other services offsets decrease of long-distance and international call minutes Minutes (billion) 0.9% 150 137.4 138.6 Q1-Q3/98 135 Q1-Q3/99 120 105 -0.8% 90 87.6 86.9 75 60 --18.6% 45 * In the PSTN= 34.9 Public Switche
Slide 16: Deutsche Telekom call prices
Deutsche Telekom call prices* Transport prices decreased by 27% on average Euro/100 minutes 60 Q1-Q3/98 -14.5% Q1-Q3/99 50 43.9 -6.7% 37.6 40 35.7 33.4 -25.2% 30 26.4 18.7 * In the PSTN= 20 -42.8% Public Switched 13.9 -27.1 Telephone Network 7.9 -35.3% ** Directory assistance, 10 -4.8% 8.0 service n
Slide 17: Deutsche Telekom call revenues
Deutsche Telekom call revenues* Long-distance price cuts result in 25% decrease of PSTN revenues Euro (billion) -24.5% Q1-Q3/98 13.5 11.9 Q1-Q3/99 12.0 10.5 9.0 9.0 7.5 -53.4% 6.0 -5.5% 4.8 4.5 * In the PSTN= 3.2 3.0 -30.3% Public Switched 3.0 2.3 22.7% 7.0% Telephone Network 1.6 1.2 1.3 ** Director
Slide 18: Revenue breakdown
Revenue breakdown Decreasing importance of long-distance and international call charges % of total Euro (million) Q1-Q3/98 Q1- Q3/99 Q1- Q3/98 Q1-Q3/99 Call charges (total) 10,882 7,805 42% 31% long-distance and international 6,415 3,353 25% 13% Access charges 4,571 4,717 17% 18% Telephone network c
Slide 19: Income by segments before taxes
Income by segments before taxes Decreased revenues and return on sales of telephone network communications cannot be offset by other segments Income before taxes Return on sales Euro (million) 1998 Q1-Q3/99 1998 Q1-Q3/99 Telephone network communications 4,796 2,014 23.4% 16.1% Mobile communications
Slide 20: Margin development
Margin development Cost reductions could not compensate for revenue decrease in 1999 EBIT EBITDA 1998 Q1-Q3/99 1998 Q1-Q3/99 Telephone network communications 31.4% 22.6% 56.3% 47.6% Mobile communications 23.9% 30.9% 42.9% 42.0% Broadband cable/broadcasting 1.7% 12.6% 55.8% 60.8% Terminal equipment -
Slide 21: Costs
Costs Continued focus on key drivers Euro (billion) n Lengthening of certain depreciation periods 15 leads to lower depreciation 12 6.6 n Small reduction in (-8.8%) 6.0 personnel costs 9 n Reduction in debt and interest expenses 6 6.9 (0.1%) 6.9 Depreciation 3 Personnel costs 2.3 (18.1%) 1.9 0 Inter
Slide 22: Financials: outlook
Financials: outlook n First-time consolidation of One 2 One in the fourth quarter will have a significant effect on Group revenues and earnings n Deteriorating margins from telephone network communications - partially offset by new applications and access n Mobile voice will follow fixed telephony w
Slide 23: Appendix
Appendix ===!"§ Deutsche Telekom Conference call, November 30, 1999 Page 23
Slide 24: T-Mobil
T-Mobil Prepay is driving acceleration in subscriber growth Net new subscribers per month in 1,000 350 300 250 200 Contract 150 Prepay 100 50 0 Oct-98 Jul-98 Dec-98 Jun-99 Sep-98 May-99 Nov-98 Aug-98 Jan-99 Mar-99 Jul-99 Apr-99 Sep-99 Aug-99 Feb-99 ===!"§ Deutsche Telekom Conference call, November 3
Slide 25: T-Mobil
T-Mobil Attractive subscriber base n Increase in average ARPU* and usage (T-D1) usage Monthly usage per subscriber ARPU* Euro/ n Stable ARPU despite (minutes) month/subscriber) 127 mass-consumer market 140 125 122 126 128 75 characteristics 116 118 120 n ARPU still higher than 100 European average 5
Slide 26: T-Mobil
T-Mobil T-Mobil defends GSM market share against growing E-networks Market share as of September 30, 1999 n E2 2% n E-Plus 16% n Mannesmann D2 42% n T-D1 40% Source: Telecom Handel per 9/30/99 ===!"§ Deutsche Telekom Conference call, November 30, 1999 Page 26
Slide 27: One 2 One -- market share growth
One 2 One -- market share growth Improvement of 10 percentage points over last two years 3.25 million customers per September 1999 Over 4 million customers by year-end 1999 Cellnet Vodafone 30% Cellnet 35% Vodafone 40% 43% Orange One 2 One Orange One 2 One 18% 7% 10% 17% September 1996 September 199
Slide 28: One 2 One
One 2 One Revenues on par or better than competitors Monthly contract ARPU Monthly prepay ARPU Euro Euro 80 30 63 63 65 72 25 24 23 70 25 60 18 20 50 40 15 30 10 20 5 10 0 0 One 2 One Orange Cellnet Vodafone One 2 One Orange Cellnet Vodafone Source: Company data ===!"§ Deutsche Telekom Conference ca
Slide 29: One 2 One vs. Orange network traffic
One 2 One vs. Orange network traffic Traffic profiles (minutes) - June 1999 One 2 One’s total capacity advantage: 4:1 Daytime spare capacity 8:1 One 2 One carries 50% more minutes than Orange! Orange One 2 One 03:00 09:00 11:00 01:00 05:00 07:00 13:00 15:00 17:00 19:00 21:00 23:00 ===!"§ Deutsche Te
Slide 30: One 2 One business economics
One 2 One business economics Healthy trends year-to-date Sept. 98 - Sept. 99 n Acquisition cost per customer -40% n Support costs per customer -27% n Incremental capex per new customer -41% n Cash costs per customer -20% n Churn -21% n Customers per employee +57% ===!"§ Deutsche Telekom Conference c
Slide 31: Pan-European mobile
Pan-European mobile Unparalleled position in Central and Eastern Europe Austria Hungary Poland Czech Republic Company max.mobil Westel* PTC* RadioMobil Deutsche Telekom share (%) 91.0 64.2 45.0 41.4 Subscribers in 000 1,290 836 1,500 619 GSM Market share in % 39% 59% 42% 43% Moscow/Russia Croatia Ru
Slide 32: T-Online
T-Online T-Online dominates both the access and portal market in Germany n Access strategy - Europe’s leading ISP, second largest in the world - Almost 60% of the dial-up market in Germany - International access (roaming) in 150 countries - Establishing a leading position in wireless access - Settin
Slide 33: T-Online
T-Online Increasing traffic through aggressive pricing n T-Online eco*: DM 0.02/min Average usage per subscriber for Internet usage, monthly payment: DM 8.00 incl. 2 free Minutes/ month/ hours at no charge 317 subscriber n T-Online by Call*: DM 290 0.03/min for Internet usage, no monthly fee n T-Onl
Slide 34: Access - ISDN
Access - ISDN Higher revenue from access charges through increased ISDN penetration Channels in millions 14 26.2% penetration 12 10 8 Residential 6 Business Total 4 2 Mar -96 Sep-96 Mar -97 Sep-97 Mar-98 Sep-98 Mar-99 Sep-99 ===!"§ Deutsche Telekom Conference call, November 30, 1999 Page 34
Slide 35: Access - T-DSL
Access - T-DSL Build on success of ISDN access with aggressive rollout of T-DSL n 60,000 pre-registrations prove strong market interest n 54 cities by 1999, 200 cities by 2000, n Hamburg national coverage by 2003 n Berlin n Suppliers: Orckit, Fujitsu Residential customers (768 kbit/s downstream) n D
Slide 36: Revenue by segments
Revenue by segments Strong growth in mobile communications, international, and other services Euro (million) Q1-Q3/98 Q1-Q3/99 % 1998 Telephone network communications 15,453 12,522 -19.0 20,531 - of which access charges 4,571 4,717 3,2 6,141 Interconnection services 970 1,972 103.3 1,611 Data commun
Slide 37: Consolidated statement of income
Consolidated statement of income* Euro (billion) Q1-Q3/98 Q1-Q3/99 Euro % 1998 Net revenue 25.992 25.576 -0.416 -1.6 35.197 Changes in inventories and other own capitalized costs 0.733 0.658 -0.075 -10.2 990 Total operating performance 26.725 26,234 -0.491 -1.8 36.187 Other operating income 1.459 1.
Slide 38: Development of depreciation and investments
Development of depreciation and investments The lengthening of the depreciation periods on copper cable and conduits results in lower depreciation Euro Billions Q1-Q3/98 Q1-Q3/99 1998 Depreciation and amortization 6.5 6.0 -0.5 9.0 Investments Intangible assets and property, plant 3.0 3.4 0.4 4.8 and
Slide 39: Group debt
Group debt* Debt reduction ahead of schedule Euro (billion) 70 64.2 Incl. MATAV, max.mobil (gross) 60 56.4 55.1 Incl. MATAV, max.mobil (net) 51.3 51.8 50 Excl. MATAV, max.mobil 42.6 45.6 39.0 40.5 39.1 40 34.1 37.7 30 24.7 23.5 20 10 * Incl. promissory 0 notes 01.01.95 31.12.95 31.12.96 31.12.97 31.
Slide 40: Personnel restructuring
Personnel restructuring* Personnel reduction faster than planned. Restructuring will be continued. Employees in 1,000 250 230 214 201 191 200 179 175 170 150 100 50 * Based on old compo- sition of Group (without 0 MATAV and max.mobil) 01.01.95 31.12.95 31.12.96 31.12.97 31.12.98 30.09.99 2000 e ===!
Slide 41: Cash flow according to IAS
Cash flow according to IAS Revenue decrease and the resulting decrease in earnings have negative effect on cash flow in % of in % of Euro (billion) Q1-Q3/98 revenue Q1-Q3/99 revenue Net cash provided by operating activities 10.3 40% 7.1 27% -3.2 Net cash used for investments in property, plant and e
Slide 42: Losses related to subsidiaries and related companies
Losses related to subsidiaries and related companies* Euro (million) Q1-Q3/98 Q1-Q3/99 1998 Southeast Asia -109 -42 -118 Atlas/Global One -166 -167 -221 Others -46 -54 31 Total -321 -263 -308 * Deviates from figures pursuant to German GAAP, since income and expenditures resulting from the setting up
Slide 43: U.S. GAAP reconciliation
U.S. GAAP reconciliation Euro (million) Q1-Q3/98 Q1-Q3/99 1998 Net income in accordance with German GAAP 1,554 1,252 2.243 Provisions for personnel restructuring -233 -89 -286 Income tax effects 138 -485 203 Other differences 74 323 65 Costs related to the capital increase 0 237 0 Net income in acco
Slide 44: Net income according to DVFA/SG
Net income according to DVFA/SG* Euro (million) Q1-Q3/98 Q1-Q3/99 1998 Net income in accordance with German GAAP 1,554 1,252 2,243 Deferred taxes on losses carried forward -26 -9 -82 Retrospective adjustment of depreciation periods 321 0 383 Cost of capital increase after taxes 0 134 0 Net income in
Slide 45: Disclaimer
Disclaimer This presentation contains or may contain forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. It is important to note that the company´s actual results could differ materially from the results anticipated or projected in any such for