Deutsche Telekom Ag · XETR:DTE
Deutsche Telekom — Q3 2002 Earnings Presentation
40 slides from Deutsche Telekom's earnings presentation, Nov 14, 2002
Slide 1: Deutsche Telekom Analysts Meeting November 14, 2002
Deutsche Telekom Analysts Meeting November 14, 2002 ===!"§ Deutsche Telekom
Slide 2: Disclaimer
Disclaimer This presentation contains forward-looking statements that reflect the current views of Deutsche Telekom management with respect to future events. The words “anticipate”, “believe”, “estimate”, “expect”, “intend”, “may”, “plan”, “project” and “should ” and similar expressions are intended
Slide 3: Strategic Review and Q3 Results
Strategic Review and Q3 Results Overview Prof. Dr. Helmut Sihler Financial results Dr. Karl-Gerhard Eick Strategic Review Kai-Uwe Ricke ===!"§ Deutsche Telekom
Slide 4: Strategic review: Financial objectives
Strategic review. Financial objectives. – Net debt reduction to 3x adjusted EBITDA by year-end 2003 – Sustainable improvement in our operational results – Strengthen our strategic market positions ===!"§ Deutsche Telekom Page 4 Preliminary figures
Slide 5: Unscheduled charges
Unscheduled charges. Necessary adjustments. € billion Total extraordinary writedowns and restructuring charges (before taxes) 22.4 – T-Mobile USA 18.0 – Other T-Mobile 3.3 – Other extraordinary writedowns and charges 1.1 Tax effect of extraordinary writedowns - 3.1 Total unscheduled charges (after t
Slide 6: Net debt targets
Net debt targets. Target of 3 x adj. EBITDA by year-end 2003. – Q3 2002 net debt: € 64.0 billion – Q4 2002 & 2003 free cash-flow: € 5.5 – 6.0 billion – Asset sales € 6.2 – 8.5 billion – 2003 year-end net debt target € 49.5 – 52.3 billion – Expected full-year 2003 adj. EBITDA € 16.7 –17.7 billion – 2
Slide 7: T-Mobile USA
T-Mobile USA. Any deal will be assessed on its own merits. – Strong performance: – Subscribers : 1 + 11% – Revenue : 1 + 16 % – Options are kept open – Stand-alone – Merger – Potential merger not needed for debt reduction or for securing future cash-flows 1 Q3/02 versus Q2/02 ===!"§ Deutsche Telekom
Slide 8: Targeted efficiency improvements
Targeted efficiency improvements. Sustainable improvements through cost control. 0.2 0.1 0.2 Targeted total 0.3 annual efficiency 0.1 improve- 0.2 ments by 0.4 year-end 2003: € 1.5 bn PSA Losses in Travel Personnel Billing group Marketing accounts expenses/ Consulting Total T-Systems services effect
Slide 9: Targeted personnel changes
Targeted personnel changes. Transfers and redundancies (1/1/02 to 31/12/05) Reduction Reduction Transfer and Total net as National International increases of Dec. ‘05 T-Com - T-Com Telekom AG 29,500 5,400 - Cable assets Germany 3,000 1 - T-Com Eastern Europe 10,700 T-Mobile 1,100 300 4,600 2 T-Syste
Slide 10: Dividend
Dividend. Supervisory Board and Management Board recommendation to the next AGM: no dividend payment in 2003 Cash savings of €1.6 billion compared to 2002 Decision on future dividend payments to be made by the Supervisory Board and the Management Board at the appropriate time ===!"§ Deutsche Telekom
Slide 11: Summary
Summary. Securing future cash flow growth. – Net debt target of 3 x adjusted EBITDA by year-end 2003 – Free cash-flow target: € 5 - 6 billion annually from 2003 onwards – Targeted efficiency improvements of €1.5 billion by year-end 2003 – Expected reduction in interest payments € 600 million by 2004
Slide 12: Operational Review
Operational Review. Dr. Karl-Gerhard Eick ===!"§ Deutsche Telekom
Slide 13: Q1-Q3/02 Group financial highlights
Q1-Q3/02 - Group financial highlights. Continued strong operational performance. – Group revenue up 12.0 % to € 39.2 billion – Adjusted EBITDA growth to € 12.0 billion or +5.6 % – Capex1 reduced to € 4.8 billion or –24.0 % – Free cash-flow (before dividends) increased to approx. € 4.7 billion2 compa
Slide 14: Strategic Review: unscheduled charges
Strategic Review: unscheduled charges.1 Values adjusted due to environmental changes. € billion Unscheduled charges T-Mobile USA licenses 9.6 T-Mobile USA goodwill 8.4 T-Mobile UK UMTS license 2.2 BEN (goodwill and UMTS license) 1.1 Others (incl. Comdirect, T-Systems/SIRIS) 0.7 Total extraordinary w
Slide 15: Revenue and adj. EBITDA development
Revenue and adj. EBITDA development. T-Com stable – strong growth at T-Mobile and T-Online. Revenue (€ million) Q1-Q3/2002 Q1-Q3/2001 ∆€ ∆% T-Com 22,254 22,060 194 0.9 T-Mobile 14,245 10,166 4,079 40.1 T-Systems 8,291 8,585 - 294 - 3.4 T-Online 1,296 1,042 254 24.4 Other 3,173 3,570 - 397 - 11.1 Adj
Slide 16: T-Com: Successful rebalancing continues
T-Com. Successful rebalancing continues. € million – Access revenues increase 2000 from Q1-Q3/01 to Q1-Q3/02 by more than 11% 1950 1900 – Ca. 3% quarter-by-quarter access revenue growth 1850 during 2002 due to price 1800 increases and successful T-DSL sales 1750 – T-DSL: 500,000 new 1700 contracts s
Slide 17: T-Mobile highlights: Accelerating subscriber growth
T-Mobile highlights. Accelerating subscriber growth. Net adds (thousands) 16 – 2.2 million net adds in Q3/02 135 exceed the cumulative net adds in Q1/02 (858k) and Q2/02 (1,226k) 659 – More than 68% of the new subscribers of the T-Mobile Group are contract customers 10 – Customer mix improvement in
Slide 18: T-Mobile highlights: EBITDA
T-Mobile highlights. EBITDA – Impact of U.S. growth. – European operations continue to improve EBITDA 176 106 – Q3 U.S.: Approx. €150 106 75 95 million additional subscriber 93 51 acquisition costs compared 77 77 227 to Q2 due to strong growth 237 199 – Capex under control with € 700 million in Q3/0
Slide 19: T-Mobile USA (US GAAP)
T-Mobile USA (US GAAP). “Get more” strong performance.1 Q3/02 Q2/02 ∆ % Covered POPs (million) 211 162 49 30.2 Subscribers (000) 8,896 8,027 869 10.8 Thereof contract (000) 7,480 6,421 1,059 16.5 ARPU blended (US$) 51 49 2 4.1 ARPU contract (US$) 53 52 1 1.9 Total revenue (US$ million) 1,513 1,309 2
Slide 20: T-Systems: Double-digit EBITDA margin
T-Systems. Double-digit EBITDA margin in Q3/02. % – Continuous improvement of 16 EBITDA margin quarter-by- 14 quarter in 2002 vs. 2001 11.6 – Headcount reduction in 12 9.7 8.9 9.2 international network services 10 business 8 7.3 – Improvement in efficiency 5.2 and productivity in managed 6 networks.
Slide 21: T-Online International AG: EBITDA
T-Online International AG. EBITDA – Consistent improvement. – Total subscribers: up 1.1 million to 11.8 million in 2002 – Broadband subs: up 1.1 million to 2.5 million in 2002 28.8* € million 35.6 27.31 1.5 -14.0 -31.2 -34.8 -56.9 Total -66.4 Q1 2001 Q2 2001 Q3 2001 Q4 2001 Q1 2002 Q2 2002 Q3 2002 1
Slide 22: Cash-flow
Cash-flow.1 Strong track record continues. (€ billion) Q3/02 Q1-Q3/02 Q1-Q3/01 %2 Cash generated from operations 4.7 13.1 10.4 25.8 Net interest payments - 1.2 - 2.9 -3.2 9.3 Net cash from operating activities 3.5 10.1 7.2 41.6 Cash outflows from investments in – property, plant and equipment - 1.5
Slide 23: Capex status
Capex status. Further capex reductions achievable. (€ billion) H1/02 Q1-Q3/02 Target 2002 2001 T-Com 1.6 2.2 3.3 5.0 T-Mobile 1.1 1.8 3.9 3.2 T-Systems 0.3 0.5 0.9 0.9 T-Online and Others 0.1 0.3 0.4 0.8 Total capex1 3.1 4.8 8.5 9.9 1 Tangible assets only. ===!"§ Deutsche Telekom Page 23 Preliminary
Slide 24: Net debt
Net debt. Cash outs partially offset by funds from operations. € billion Dividend Asset Funds from BEN 1.6 disposals operations 1 0.8 and others 2.0 Debis 5.6 4.7 64.0 62.1 55.7 Jan. 1, 2002 Sept. 30, 2002 1 Including tax refund (€ 0.8 billion) and foreign exchange effects (€ 1.5 billion) in Q2/02.
Slide 25: Free cash flow development
Free cash flow development. € 4.7 billion of free cash-flow in Q1-Q3/02. € billion2 0.91 1.8 1.6 0.3 Q1/02 Q2/02 Q3/02 1 Includes Tax refund (€ 0.8 billion) in Q2/02 and miscellaneous (€ 0.1 billion) in Q1/02. 2 Rounded figures. ===!"§ Deutsche Telekom Page 25 Preliminary figures
Slide 26: Net debt: Debt level reduced in Q3
Net debt. Debt level reduced in Q3 despite BEN. – Net debt as of June 30 64.2 (€ billion) – Purchase price BEN + 1.7 – Full consolidation of BEN’s debt + 0.3 – Q3/02 free cash-flow - 1.8 – Joint venture with Cingular - 0.2 – Other1 - 0.2 – Net debt as of September 30 64.0 1 Other includes real estat
Slide 27: Business improvement
Business improvement. Continuous improvement in revenue and adj. EBITDA. Revenue – Revenue and adjusted EBITDA have continously improved 13,423 over the last quarters 12,770 12,984 – Adjusted EBITDA margin improved continuously: Q1/02: 29.6% Q1/2002 Q2/2002 Q3/2002 Q2/02: 30.6% Adjusted EBITDA (€ mi
Slide 28: Debt reduction targets: revised scenario
Debt reduction targets: revised scenario. 3 x net debt to adj. EBITDA by year-end 2003. € billion Scenario H2/02 Scenario Q3/02 Current net debt 64.2 64.0 Free cash-flow Q4/02 and ‘03 4–5 5.5 – 6.0 Real estate 2–4 2–4 Cable 2.5 – 3.5 2.0 – 2.3 Disposal of other assets 2.0 2.2 Acquisition BEN - 2.1 n
Slide 29: Investments: targets in 2003
Investments1: targets in 2003 Allowance for investments1 dependent on meeting adj. EBITDA goals. 2003 (€ billion) Adj. EBITDA goal 17.7 16.7 Investments* 7.7 6.7 - T-Mobile USA 2.0 2.0 - UMTS 0.8 0.8 - Other 4.9 3.9 Adj. EBITDA minus investments* 10.0 10.0 1 Investments in property, plant and equipm
Slide 30: Cable and real estate sales
Cable and real estate sales. Advancing. – Cable TV in negotiations – Anticipated proceeds somewhat below than previous guidance – Closing anticipated for Q1/03 – Real estate sales well advanced – € 850 million sales already agreed in 2002 – Approx. € 800 million total prepared for sale as packages f
Slide 31: Other asset sales
Other asset sales. Range of options increased. – Strategic review identified further potential candidates for sale – Proportionate EBITDA of these assets amounts to € 400-600 million – Value for ALL assets would be approx. € 2.4 – 3.6 billion (based on appropriate EBITDA multiples) – Target proceeds
Slide 32: Liquidity reserves as of September 30, 2002
Liquidity reserves as of September 30, 2002. Fully financed until mid 2004. € billion Liquidity reserves (€ billion) 19.4 90 – Unused credit lines 80 – Syndicated loan 19.4 DTAG 10.0 70 – Syndicated loan 60 T-Mobile UK 2.1 – Bilateral credit lines 50 DTAG 4.5 40 83.4 – Bilateral credit lines subsidi
Slide 33: Strategic Review
Strategic Review. Kai-Uwe Ricke ===!"§ Deutsche Telekom
Slide 34: Strategic review: Reshaping the group
Strategic review. Reshaping the group. – Clear objectives: significant debt reduction and organic growth – Five key points: – a properly managed Deutsche Telekom is a cash machine – the 4-division structure is still the right basis for future growth and needs focused management – devolution of more
Slide 35: T-Com: maximize the cash-flow
Strategic review. T-Com – maximize the cash-flow. Revenue (% of group total) – Continuation of rebalancing 53.4% 48.2% strategy to secure EBITDA – Consistent marketing of the broadband offers to all customer segments – Capex and opex discipline while Q1-Q3/01 Q1-Q3/02 improving service quality – Imp
Slide 36: T-Systems: focus and partnering
Strategic review. T-Systems – focus and partnering. Revenue (% of group total) – Rely on partners for the further 17.2% international development of the IT 14.7% services – Focus on the 4 business lines of telecommunications, public sector, manufacturing, and financial services Q1-Q3/01 Q1-Q3/02 – F
Slide 37: T-Online: monetising the customer base
Strategic review. T-Online – monetising the customer base. Revenue (% of group total) – Proven and robust business model 3.0% 2.8% – Consistently exploit the growth potential of broadband access and non-access services from our position as market leader – Further internationalization will depend Q1-
Slide 38: T-Mobile: cash-optimized growth in Europe
Strategic review. T-Mobile – cash-optimized growth in Europe. Revenue (% of group total) – Focus on free cash-flow Europe – Europe: further increase efficiency 21.4% 22.2% through clearly structured program – Emphasize mobile data as a source of growth, thereby increasing ARPU Q1-Q3/01 Q1-Q3/02 Adj.
Slide 39: T-Mobile: cash-optimized growth in U.S.
Strategic review. T-Mobile – cash-optimized growth in U.S. Revenue (% of group total) – U.S.: continue successful growth U.S. strategy on our own for the time being – U.S.: consider future business 11.1% combination opportunities not as debt 4.3% reduction measure but as an opportunity to maximize t
Slide 40: Deutsche Telekom Analysts Meeting November 14, 2002
Deutsche Telekom Analysts Meeting November 14, 2002 ===!"§ Deutsche Telekom