Deutsche Telekom Ag · XETR:DTE

Deutsche Telekom — Investor Day (December 2012)

45 slides from Deutsche Telekom's investor day presentation, December 2012

  1. Slide 1: Deutsche Telekom Capital Markets Day 2012 Germany

    DEUTSCHE TELEKOM CAPITAL MARKETS DAY 2012 GERMANY NIEK JAN VAN DAMME

  2. Slide 2: Disclaimer

    DISCLAIMER. This presentation contains forward-looking statements that reflect the current views of Deutsche Telekom management with respect to future events. These forward-looking statements include statements with regard to the expected development of revenue, earnings, profits from operations, de

  3. Slide 3: Summary

    SUMMARY. 1 We believe highspeed network quality will be key differentiator 2 We will invest significantly in LTE, Fiber and Vectoring 3 We secure broadband market leadership in fixed and mobile 4 We stabilize revenue in Germany in 2014 3

  4. Slide 4: Review 2010 – 2012

    REVIEW 2010 – 2012

  5. Slide 5: 2010 – 2012: Solid performance in a competitive market

    2010 – 2012: SOLID PERFORMANCE IN A COMPETITIVE MARKET. AMBITION LEVEL 2012 ACHIEVEMENTS 2012  Stable market share broadband  44.9% (-1.7PP)  Stable market share service revenues (mobile)  34.2% (-0.7PP)  2.5 – 3mn Entertain customers  1.9 mn  ≈ €1.5 bn data revenues (mobile)  €1.8 bn (LTM)

  6. Slide 6: Review 2010 – 2012: Clear #1 in broadband

    REVIEW 2010 – 2012: CLEAR #1 IN BROADBAND. GERMAN BROADBAND MARKET Q3/2012 PEERS DOMESTIC BROADBAND MARKET SHARE Q3/2012 VS. FY 20091 in k BB NET ADDS pp 2.3 2010 – Q3/2012 12,424 +947 3,280 -127 -1.7 3,360 +50 -2.9 2,430 +50 -4.4 -4.1 2,111 +1.029 -7.0 1,657 +751 1 Source: Bank of America Merrill L

  7. Slide 7: Review 2010 – 2012: Holding up well in a very competitive German mobile market

    REVIEW 2010 – 2012: HOLDING UP WELL IN A VERY COMPETITIVE GERMAN MOBILE MARKET. GERMAN MOBILE MARKET1 PEER DOMESTIC SERVICE REV. MARKET SHARE Q3/2012 VS. FY 20092 € mn pp SERVICE REVENUE +4.1% MARKET SHARE LTM 2012 VS. 2009 19,974 19,192 O2 2,861 3,124 +0.7 PP -0.7 -0.6 E-Plus 3,021 3,157 +0.1 PP 6,

  8. Slide 8: Review 2010 – 2012: One Company successfully started, more to come

    REVIEW 2010 – 2012: “ONE COMPANY” SUCCESSFULLY STARTED, MORE TO COME. CROSS- AND UPSELLING REVENUE TELEKOM DEUTSCHLAND OC DRIVEN OPEX REDUCTION € mn € mn > 950 ONE BRAND cum. 2010 – YTD 2012 ONE SALES & SERVICE ONE ORGANIZATION INTEGRATED PROCESSES & STEERING INTEGRATED NETWORKS ≈ -250 cum. 2010 – Y

  9. Slide 9: Review 2010 – 2012: Significant churn reduction

    REVIEW 2010 – 2012: SIGNIFICANT CHURN REDUCTION BASED ON SUPERIOR NETWORK QUALITY AND CUSTOMER SERVICE. OUR CUSTOMER SERVICE TODAY… … LEADS TO LOWER CHURN. % YTD/2012 Mean Time between Customer Churn Fixed Churn Mobile assistance for DSL lines complaints Double Play Double Play -41% +52% -59% 15.4 -

  10. Slide 10: Review 2010 – 2012: Outperforming in profitability terms

    REVIEW 2010 – 2012: OUTPERFORMING IN PROFITABILITY TERMS. OUTPERFORMING INTEGRATED DOMESTIC BUSINESS OF OUR PEERS... ... AND NATIONAL TELCO COMPETITORS. Ebitda margin %1 FY 2009 YTD 2012 +3.6PP -1.4PP -4.4PP +4.0PP -3.1PP -2.4PP 49.5 50.0 49.6 48.2 -3.8PP 45.1 46.4 39.2 36.8 41.7 +0.9PP 41.9 38.8 45

  11. Slide 11: Market Trends

    MARKET TRENDS

  12. Slide 12: Mobile data becomes mass market

    MOBILE DATA BECOMES MASS MARKET... WESTERN EUROPE TABLET SALES1 EVERY IPHONE GENERATION DRIVES DATA APETITE mn MB usage per month in October 2012 ≈ +800% ≈ +750% 43 732 21 461 5 86 2010 2012 2015 2G 4S 5 WESTERN EUROPE SMARTPHONE SALES2 MOBILE DATA MARKET GROWTH3 mn Mobile data users in ≈ +130% Germ

  13. Slide 13: Customer use cases drive highspeed and upload demand

    … WHILE CUSTOMER USE CASES DRIVE HIGHSPEED AND ESPECIALLY UPLOAD DEMAND. 3 RELEVANT CUSTOMER USE CASES… … WITH CLOUD BOOSTING UPLOAD ... … ARE THE MAIN TRAFFIC DRIVERS.1 PB ≈ +370% 23.5 Download 2.1 1 Video/TV 3.8 2.6 2 Cloud ! 5.0 15.0 3 Browsing 0.7 1.0 0.9 2.5 Upload 2011 2015 TV/Video Browsing C

  14. Slide 14: Major trends in core market

    MAJOR TRENDS IN CORE MARKET. FIXED COMMUNICATIONS MOBILE COMMUNICATIONS Cable competition Price competition speed & TV via discount brands Fixed mobile substitution via LTE Full flat penetration Network quality perception as differentiator Change in wholesale business 14

  15. Slide 15: Core markets under continued regulatory pressure

    CORE MARKETS UNDER CONTINUED REGULATORY PRESSURE. MOBILE TERMINATION RATES CUT1 POSITIVE SIGNALS HAVE TO MATERIALIZE -80% since 2007 “I intend to produce durable regulatory guidance, to apply at least until 2020.”3 INTERCONNECTION CUT2 -21% Encouraging comments have to materialize since 2007 and are

  16. Slide 16: Strategy 2013 – 2015: Stabilize revenues in 2014 and market leadership

    STRATEGY 2013 – 2015 STABILIZE REVENUES IN 2014 AND MARKET LEADERSHIP

  17. Slide 17: Our priorities in Germany underline the group strategy

    OUR PRIORITIES IN GERMANY UNDERLINE THE GROUP STRATEGY. Seamless Best-in-class connectivity More innovation Secure cloud customer for the by cooperation solutions experience Gigabit Society INNOVATE Cloud & more TRANSFORM Integrated network strategy (INS) COMPETE Leading in mobile and fixed based on

  18. Slide 18: Our priorities in Germany underline the group strategy

    OUR PRIORITIES IN GERMANY UNDERLINE THE GROUP STRATEGY. Seamless Best-in-class connectivity More innovation Secure cloud customer for the by cooperation solutions experience Gigabit Society INNOVATE Cloud & more TRANSFORM Integrated network strategy (INS) COMPETE Leading in mobile and fixed based on

  19. Slide 19: Network quality becomes crucial

    NETWORK QUALITY BECOMES CRUCIAL. TRANSFORM BANDWIDTH DEMANDING USE CASES… …EVERYWHERE & SIMULTANEOUS… … MAKE NETWORK QUALITY CRUCIAL. Speed 1 Video/TV 2 Cloud + Coverage 3 Browsing Capacity 19

  20. Slide 20: INS: Massive rollouts of LTE and fiber with vectoring

    INS: MASSIVE ROLLOUTS OF LTE AND FIBER WITH VECTORING COMBINED WITH REVOLUTIONARY ACCESS APPROACH. TRANSFORM 1 LTE rollout + 2 Fiber rollout + Bes t br oadban d 3 Vectoring + Hybrid Devices LTE DSL 4 Hybrid access 20

  21. Slide 21: INS: Capex efficient and rapid rollout of LTE network

    1 INS: CAPEX EFFICIENT AND RAPID ROLLOUT OF BEST-IN-CLASS LTE NETWORK. TRANSFORM LTE LTE ROLLOUT PLAN PEAK PERFORMANCE HIGHER CAPEX EFFICIENCY Outdoor pop coverage Mbit/s ≈ +260% Capex per Mbit/s % ≈ 100 150 ≈ -70% 88 ≈ 85 75 38 42 Q3/2012 2016 long term 3G LTE800 LTE1800 3G (HSPA LTE 800 LTE 1800 (

  22. Slide 22: INS: Fiber upgrade of fixed network is a smart no regret move

    2 + 33 INS: FIBER UPGRADE OF FIXED NETWORK IN COVERAGE & SPEED IS A SMART “NO REGRET MOVE” TO FTTH. TRANSFORM Fiber FIBER ROLLOUT PLAN VECTORING PERFORMANCE UPGRADE1 HIGHER COVERAGE WITH LOWER CAPEX Coverage Mbit/s Capex per connected home % ≈ -70% +100% >80 100 ≈ 65 +300% 36 50 40 10 Q3/2012 2016 f

  23. Slide 23: INS: Hybrid revolution through combination of fixed and mobile

    4 INS: HYBRID REVOLUTION THROUGH COMBINATION OF FIXED AND MOBILE FOR SUPERIOR SPEED EXPERIENCE. TRANSFORM Hybrid SUPERIOR OFFERING FOR CUSTOMERS... CABLE FOOTPRINT (24MN HH) COPPER ONLY (16MN HH) Mbit/s1 Mbit/s1 Speed up your access @ home ≈200 150+ MAX. DOWNLOAD 100 ≈116 50 ≈50 100 16 100 16 FTTC H

  24. Slide 24: INS: Vectoring and hybrid prolongate copper lifecycle

    4 INS: VECTORING AND HYBRID PROLONGATE THE COPPER LIFECYCLE UP TO 10 YEARS. TRANSFORM INS FULLY COVERS CUSTOMER USE CASES FOR THE NEXT DECADE. Customer use cases covered % 100 3 ADSL 80 ADSL-Hybrid FTTC Vectoring 2 60 FTTC Vectoring-Hybrid 40 20 1 0 2010 2015 2020 2025 24

  25. Slide 25: Our priorities in Germany underline the group strategy

    OUR PRIORITIES IN GERMANY UNDERLINE THE GROUP STRATEGY. Seamless Best-in-class connectivity More innovation Secure cloud customer for the by cooperation solutions experience Gigabit Society INNOVATE Cloud & more TRANSFORM Integrated network strategy (INS) COMPETE Leading in mobile and fixed based on

  26. Slide 26: Key differentiators across entire value chain secure market leadership

    KEY DIFFERENTIATORS ACROSS ENTIRE VALUE CHAIN SECURE MARKET LEADERSHIP. Compete Mobile Broadband 1 Superior Competitive Innovative Highest speed Best-in-class Successful Up- & market Network tospeed [upProducts & 100 Mbit/s Quality on LTE [up 1800Mhz] toTariffs 100 Mbit/s] Sales & Service Cross-Sell

  27. Slide 27: Unrivaled customer experience in all use cases – everywhere

    UNRIVALED CUSTOMER EXPERIENCE IN ALL USE CASES – EVERYWHERE! Compete HIGHSPEED BROWSING TV ON ALL SCREENS CLOUD 100 Mbit/s TelekomCloud 100 Mbit/s Same speed everywhere Entertain everywhere Safe & trusted cloud services 27

  28. Slide 28: Best-in-class sales and service

    BEST-IN-CLASS SALES AND SERVICE. Compete DISTRIBUTION CUSTOMER SERVICE TECHNICAL SERVICE > 750 Telekom shops > 10,000 agents > 10,000 experts K1 unde zuerst ≈ 1,000 Distribution partners Improve process quality Innovative service products Best shopping experience Increase customer satisfaction Best

  29. Slide 29: Mobile strategy: market leader ensures fair shares throughout all segments

    MOBILE STRATEGY: THE MARKET LEADER HAS TO ENSURE FAIR SHARES THROUGHOUT ALL SEGMENTS. Compete PREMIUM T BRAND COMPLEMENTED BY CONGSTAR1 BEST IN CLASS OFFERS FOR ALL SEGMENTS 1  Unmatchable LTE speeds & coverage 11 + Service  Excellent spectrum (800 & 1800MHz)  World-class device portfolio bundled

  30. Slide 30: Mobile strategy: grow gross adds and ARPU despite price pressure

    MOBILE STRATEGY: DESPITE TOUGH PRICE PRESSURE, WE SUCCESSFULLY GROW GROSS ADDS ARPU. Compete MARKETING FOCUS T-BRANDED CONSUMER CONTRACT T-BRANDED CONSUMER CONTRACT CUSTOMER MIX ARPU € Single Play Double Play +4.2 27% 18% 37.0 Gross adds Value based 32.8 customer acquisition 73% 82% 2011 2012 2011 2

  31. Slide 31: Mobile strategy: service revenue returns to growth

    MOBILE STRATEGY: SERVICE REVENUE RETURNS TO GROWTH AS A RESULT OF AN EXPANDING & HIGHER-VALUE BASE. Compete SHARE OF LTE SMARTPHONES STRONG DOUBLE PLAY UPTAKE SERVICE REVENUE GROWTH % based on TDG smartphone sales Contract customers Service revenue mn € bn +47% + 2-3% +63PP 10.0 ≈7 6.8 4 6.8 + 67 96

  32. Slide 32: Fixed strategy: compete with cable via new markets and wholesale partnerships

    FIXED STRATEGY: WE COMPETE WITH CABLE BY ADDRESSING NEW MARKETS AND REINFORCED WHOLESALE PARTNERSHIPS. Compete INTEGRATED NETWORK STRATEGY TV STRATEGY WHOLESALE STRATEGY German TV market 1 LTE rollout 2 + Fiber rollout TV & more Attractive Pricing Competitive Products Sat, DVB-T 3 + Vectoring SAT, H

  33. Slide 33: Fixed strategy: Kontingentmodell strengthens wholesale partners

    FIXED STRATEGY: “KONTINGENTMODELL" STRENGTHENS WHOLESALE PARTNERS TO SECURE NETWORK UTILIZATION. Compete MECHANICS OF „KONTINGENTMODELL“ ARPA UPLIFT  Logic supports nationwide and regional players + ≈90%  upfront investment ≈ 20  risk sharing  Long-term contract (up to 10 years) with commitment

  34. Slide 34: Fixed strategy: compensate line losses by upselling to fiber and Entertain

    FIXED STRATEGY: COMPENSATE LINE LOSSES BY UPSELLING RETAIL BASE TO FIBER AND ENTERTAIN. Compete FIBER CUSTOMERS ENTERTAIN CUSTOMERS CONNECTED HOME GROWTH Fiber retail customers mn Entertain customers € bn +2% >12.4mn mn 5.4 5.3 broadband customers > +60% ≈ +240% ≈3.0 2.7 + 1.9 0.8 Q3/2012 2015 Q3/20

  35. Slide 35: Our priorities in Germany underline the group strategy

    OUR PRIORITIES IN GERMANY UNDERLINE THE GROUP STRATEGY. Seamless Best-in-class connectivity More innovation Secure cloud customer for the by cooperation solutions experience Gigabit Society INNOVATE Cloud & more TRANSFORM Integrated network strategy (INS) COMPETE Leading in mobile and fixed based on

  36. Slide 36: Growth initiatives with innovations from own developments, partnering and ventures

    GROWTH INITIATIVES WITH INNOVATIONS FROM OWN DEVELOPMENTS, PARTNERING AND VENTURES. Innovate GROWING BUSINESS (OPERATING SEGMENT GERMANY) € bn +1.7 9.2 0.7 7.5 0.7 0.2 3.0 2.0 5.3 5.4 2015 TelekomCloud 23% 2012 2015 Cloud1 Intelligent networks1 Growth Initiatives Mobile Data Connected Home De-Mail M

  37. Slide 37: Financial Outlook

    FINANCIAL OUTLOOK

  38. Slide 38: Revenue stabilization in 2014 due to market leadership and innovation

    REVENUE STABILIZATION IN 2014 DUE TO MARKET LEADERSHIP AND INNOVATION. REVENUE STABILIZATION € bn 2014 Stable revenues 22.7 22.2 Revenue split 7.5 9.2 2015  Basic revenue < 60%  Growth revenue > 40% 15.2 13.0 2012/15 Growth business ≈ +25% 2012 2013 2015 Growth business Basic revenue 38

  39. Slide 39: FTTC/Vectoring capex of around €6 bn until 2020

    AS ALREADY INDICATED FTTC/VECTORING CAPEX OF AROUND €6 BN UNTIL 2020. CAPEX € bn 2013 – 2020 4.1 4.3 3.6 3.4 FTTC/Vectoring Capex ≈ €+6 bn cum. Basic Capex ≈ €-4.4 bn cum. 2012 2013 2014 2015 2016 2017 2018 2019 2020 FTTC Basic Capex 39

  40. Slide 40: FTTC/Vectoring funded partly by reduction of basic capex

    FTTC/VECTORING WILL BE FUNDED PARTLY BY REDUCTION OF BASIC CAPEX. CAPEX € bn 2013 – 2015 4.1 4.3 3.6 3.4 1.1 FTTC/Vectoring Capex ≈ €+2.4 bn cum. Basic Capex ≈ €-1.3 bn cum. 3.2 Total Capex ≈ €11.8 bn cum. (≈ €+1.1 bn above 2010 – 2012 cum.) 2012 2013 2014 2015 FTTC Basic Capex 40

  41. Slide 41: Invest in market leadership overcompensated by indirect opex reduction

    INVEST IN MARKET LEADERSHIP OVERCOMPENSATED BY INDIRECT OPEX REDUCTION. DIRECT COST INDIRECT COST1 € bn € bn -0.4 +0.3 Invest in revenue 9.1 5.1 4.8 8.7 Increasing customer service efficiency 2013 – 2015 Lean IT and NT ≈ €1.0 bn cum. Overhead reduction 2012 2015 2012 2015 1 Indirect cost w/o capital

  42. Slide 42: Increasing return on capital due to opex savings

    INCREASING RETURN ON CAPITAL DUE TO OPEX SAVINGS AND LESS RESTRUCTURING PARTIALLY OFFSET BY INCREASING CAPEX. REVENUE CAPEX € bn € bn 22.7 22.2 4.3 2013 3.6 OPERATING ROCE +1.2PP 2012 2015 2012 2015 OPEX SPECIAL FACTORS € bn € bn 13.9 13.8 0.4 2013 2012 2015 0.1 2012 2015 2012 2015 42

  43. Slide 43: Ambition Level 2015

    AMBITION LEVEL 2015

  44. Slide 44: Our ambition: secure sustainable broadband market leadership in Germany

    OUR AMBITION: SECURE SUSTAINABLE BROADBAND MARKET LEADERSHIP IN GERMANY. MID-TERM AMBITION LEVEL  #1 in mobile service revenue market share ≈ 35% 2015 MARKET  #1 broadband market share ≈ 43% 2015  #1 in TV growth 2012 - 2015 QUALITY  Customer loyalty index ≈ +10% 2015 vs. 2012  Stable total rev

  45. Slide 45: Your key takeaways

    YOUR KEY TAKEAWAYS. 1 The best network: LTE + Fiber + Vectoring + Hybrid Access 2 Strong differentiators: best broadband coverage + largest distribution + best service 3 Revenue stabilization: monetization of mobile, fixed and integrated offerings 4 Solid financial performance: continued high margin

Deutsche Telekom — Investor Day (December 2012) on 6ix