Deutsche Telekom AG · XETR:DTE

Deutsche Telekom — Investor Day (March 2010)

35 slides from Deutsche Telekom's investor day presentation, Mar 18, 2010

  1. Slide 1: T-Mobile USA: Regaining U.S. Market Position

    Deutsche Telekom Investor Day. T-Mobile USA: Regaining U.S. Market Position. March 18, 2010 Robert Dotson, CEO and President – Brian Kirkpatrick, CFO

  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. They include, among others, statements as to market potential and financial guidance statements, as well as our dividend outlook. They are ge

  3. Slide 3: Outline

    Outline. 1. Industry position 2. Regaining momentum 3. Q&A 3

  4. Slide 4: US wireless market will continue to grow driven by data growth

    US wireless market will continue to grow driven by data growth. Forecasted Industry Revenues1 ($B) (CAGR%) 3.5% Total Revenue 176 158 Data Revenue 41 63 CAGR: 15.7% Voice Revenue 117 113 CAGR: -1.4% 2009 2012 United States 1) Revenues represent service revenues only. Data includes messaging. Source:

  5. Slide 5: Healthy US business economics

    Healthy US business economics. Consumer Attributes USA Western Europe Higher ARPU  $50 = Wireless ARPU  $35 Greater propensity to spend  $240 = Monthly comms & entertainment  $130 in category1 spend per household High and growing consumer  850 MOU = Voice usage per month  300 MOU usage  300MB

  6. Slide 6: Headwinds impacted 2009 performance

    Headwinds impacted 2009 performance. Economic downturn US Unemployment Rate – Consumers still struggling  High impact on T-Mobile customer dominated portfolio % 12 10 Customer behavior 8  ARPU erosion, less roaming, downsized tariffs 6 4 3G Offerings 2  24 months late 0 2007 2008 2009 2010 iPhone

  7. Slide 7: Competing against bigger players nothing new for T-Mobile USA

    Competing against bigger players nothing new for T-Mobile USA. Industry Share Competitor Positioning Other 9% 4%  Largest network – acquisition of 15M Alltel customers 10%  New attack on low end – StraightTalk TMUS 12% 20% Sprint 18%  iPhone ≈ 60% of new adds AT&T 29% 31%  Attacking low end with

  8. Slide 8: Historically strong customer trends slowed in 2009

    Historically strong customer trends slowed in 2009. T-Mobile USA Customers (CAGR in %) millions +3% Historical Subscriber growth +15% 32.8 33.8  Strong growth in consumer segments 28.7 25.0  Focus on rate plan innovation, i.e. myFaves, FlexPay 21.7  Voice and messaging value centric 2005 2006 200

  9. Slide 9: Historic revenue growth fueled by customer adds

    Historic revenue growth fueled by customer adds – faster growth than industry. T-Mobile USA Service Revenue (CAGR in %) in bn. USD -2%  Pressure on ARPU resulted in 2009 Revenue decline +16% 16.9 19.2 18.9 12.3 14.5 2005 2006 2007 2008 2009 Industry Revenue1 (CAGR in %) in bn. USD +10% +5%  Indust

  10. Slide 10: Data growth not sufficient to offset voice declines in 2009

    Data growth not sufficient to offset voice declines in 2009. Blended ARPU 2008 vs. 2009 Data ARPU ($) – Sprint post pay only 16.75 $1.5 16.04 $51 15.56 ($1) 10.20 ($2.0) $47 ($2.5) 2007 2008 2009 3G Covered POPs (M)1 2008 Core Roaming Voice Customer 2009 Data ARPU pricing Mix 300 200  Roaming down

  11. Slide 11: Cost actions held margins in 2009

    Cost actions held margins in 2009. T-Mobile USA OIBDA (CAGR in %)  Generated profitable growth in past while driving -3% strong customer additions in bn. USD +14% 6.1 5.9  2009 margin nearly flat despite revenue decline 4.7 5.4 4.2  Evolved cost structure  Roaming overbuild Service 2005 2006 200

  12. Slide 12: Top line stability with lowest CPGA among national carriers

    Top line stability with lowest CPGA among national carriers. Retail Gross Adds1 (‘000s) Cost per Gross Add2 6.000 $700 5.000 $600 $500 4.000 $400 3.000 $300 2.000 $200 1.000 $100 0 $- 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1) CSFB Q4 09 Wireless Trend Review.

  13. Slide 13: Stable Operating FCF despite aggressive 3G buildout

    Stable Operating FCF despite aggressive 3G buildout. T-Mobile USA Cash CAPEX (PP&E) in bn. USD 3.6 3.7  Deployed ≈ 70% of 2008-09 CAPEX against critical 2.6 2.7 growth drivers 2.3  3G buildout  Coverage enhancements 2005 2006 2007 2008 2009  Distribution expansion T-Mobile USA Operating Free Cas

  14. Slide 14: Outline

    Outline. 1. Industry position 2. Regaining momentum 3. Q&A 14

  15. Slide 15: Focused plan of attack to regain market position

    Focused plan of attack to regain market position. Stabilize fundamentals today and position for 2010-2011 growth 1. Attack top 6 churn reduction opportunities 2. Leverage expanded 3G network 3. Leverage Android OS and device portfolio 4. Aggressive value pricing for voice and data services 5. Drivin

  16. Slide 16: Churn opportunity is single biggest economic driver

    Churn opportunity is single biggest economic driver. T-Mobile USA Contract Churn Other 2.5% Network 2.3% 2.4% 2.2% Involuntary (non-payment) Price/Plan Q1/09 Q2/09 Q3/09 Q4/09 Handset Upgrade Credit Handset  Activities aligned against top ≈ 65% of reinvention 12% Mgmnt 9% insurance 14% near term ch

  17. Slide 17: Brand anchored in the consumer space

    Brand anchored in the consumer space. Primary Target: Value Conscious Families Win Segment: Hispanics 120M consumers Win Segment: Young and Social 50M consumers 40M consumers 50% of 10yr US pop growth Rapid uptake of new mobile services TMUS index 183% TMUS index 125% Drafting Segments Wholesale opp

  18. Slide 18: US data market remains most attractive globally

    US data market remains most attractive globally. 2009 Wireless Data Revenue T-Mobile USA Share of ‘Big 4’ Data Revenue YoY Growth (%) 13.5% 26% US $41B 11.7% 11.8% 13% Japan $32B 9.8% 9.5% 21% China $24B 7% UK $9B 11% Italy $8B 6% Germany $7B 18% $6B 2005 2006 2007 2008 2009 France 23% India $4B Hug

  19. Slide 19: Data demand exploding

    Data demand exploding. Data consumption by device type – TMUS 4Q2009 U.S. Data Usage in TB/Day (MB/month) 398 60,000 364 Data Excludes 50,000 Voice 40,000 Fixed 30,000 134 20,000 ≈ 8 years TMUS Estimate 21 10,000 Mobile 0 All 2G Devices All 3G Devices 3G Android 2000 2002 2004 2006 2008 2010 2012 20

  20. Slide 20: Network buildout

    Network buildout.  Focusing on national scale 3G Covered POPs  Decreasing dependencies on roaming partners 280 M  Overbuilt 13% of roaming footprint by end of 2009 230 M  Continuing to develop partnerships to deploy fiber for 205 M optimized backhaul capacity and cost 167 M  Launched HSPA+ (21

  21. Slide 21: Using alternate backhaul providers to reduce costs

    Using alternate backhaul providers to reduce costs. Sites with alternate backhaul providers Alternate backhaul cost impact % of 3G Cell Sites $ per MB Original trajectory – 75% T1 based capacity 40% 20% Alternate backhaul providers reduce long-run backhaul costs by ≈ 90% 0% Q2 ‘09 Q3 ‘09 Q4 ‘09 Toda

  22. Slide 22: HSPA+ Yields Most Capable 3G+ National Network in 2010-2011

    HSPA+ Yields Most Capable 3G+ National Network in 2010-2011. EOY 2010 Covered POPs Real world throughput1 (>5 Mbps nominal average throughput) (Mbps) 5+5 MHz 6 Peak User Experience 185 HSPA 7.2 3.5 Average Throughput 120 WiMax 10 100 5 HSPA+ (21 Mbps) 12 0 6.5 LTE 30 T-Mobile Clear WiMax Verizon LTE

  23. Slide 23: Viable spectrum position – Pursuing options for the future

    Viable spectrum position – Pursuing options for the future. Average Spectrum Depth Spectrum Freeboard: Most capacity in the industry (MHz, top 100 market) LTE options include (Site*Hz per Subscriber)  700 D Block 54  AWS III 73  2ndary Market  Refarm 58 28  National BB Plan 67 700 MHz & AWS 46

  24. Slide 24: Innovation leadership

    Innovation leadership. GSM/EDGE 3G – New Era 1st 1st 1st 1st 1st 1st ‘02 Sidekick ‘03 Video ‘03 Multiplayer ‘08 G1: Android Phone ‘01 AOL IM Messaging Gaming ‘06 Even Landlines 1st 1st 1st 1st ‘02 Blackberry Wireless email ‘02 National Wi-Fi ’07 Wi-Fi Calling ‘08 Hotspot @Home II Landline Replacemen

  25. Slide 25: 400% increase in 3G converged devices on air during 2009

    400% increase in 3G converged devices on air during 2009. T-Mobile USA Converged 3G devices on air (millions) Converged 3G Advanced & Affordable ≈8 3.9 2.8 HSPA+ Data Sticks 2.1 Full 21Mbps capable 1.5 0.8 Q4/08 Q1/09 Q2/09 Q3/09 Q4/09 YE2010 Netbooks Retail Fastest connectivity on the go 2 3 4 7 11

  26. Slide 26: Product strategy focused to meet the needs of target segments

    Product strategy focused to meet the needs of target segments.  Drive higher volumes with a smaller set of strategic vendors  Narrow OS footprint to reduce support costs  Challenge iPhone with iconic devices like myTouch  Leverage Android for a consistent experience across the device lineup Cate

  27. Slide 27: US consumer driven by value in wake of recession

    US consumer driven by value in wake of recession. Temporarily changed spending until economy improves 25% Permanently changed spending philosophy 52% 23% Did not change spending Source: McKinsey Wireless Panel 2009. 27

  28. Slide 28: Unmatched track record of value leadership

    Unmatched track record of value leadership. 1st 1st 1st 1st 1st ‘05 Prepaid text & ‘09 $49 Unl ‘04 Ringback tones data ‘06 Even Landlines loyalty offer ‘09 Equipment Installment Plan 1st 1st SmartAccess 1st 1st 1st ‘02 Subprime ‘08 $49 Unl ‘07 Postpaid plans add-a-line ‘09 Parental control on GetMor

  29. Slide 29: “Even More” is value delivery vehicle

    “Even More” is value delivery vehicle. Strategic Elements T-Mobile USA Savings vs. AT&T and Verizon Impacts Driving consumers to Talk, Text, & Web $2+ Unlimited Talk, Post launch activation Text, & Web Family of 5 46% ARPU lift Unbundling tariff and Couple 33% device subsidy > 50% Activations on Unl

  30. Slide 30: America’s leading service provider

    America’s leading service provider. T-Mobile USA Rank among US Wireless Carriers Ranked 1st in 8 of last 10 Customer Care biannual surveys Retail Sales Ranked 1st in 7 of last 10 Satisfaction biannual surveys  Frontline employees and corporate culture are basis of strength 30

  31. Slide 31: Aggressively addressing branded distribution gap

    Aggressively addressing branded distribution gap. Competitive Branded T-Mobile USA Branded Distribution Distribution – 2009 5,723 3,376 5,173 4,918 2,631 Exclusive Dealers & 1,290 580 Others 3,408 1,852 3,149 1,501 3,638 1,752 2,051 2,086 Retail 1,501 2,315 2,024 2007 2008 2009 2010E 1,280 Share of

  32. Slide 32: Major retailer distribution on par with competition

    Major retailer distribution on par with competition. Competitive National Retail T-Mobile USA National Retail Distribution – 2009 7,522 >8,000 9,200 3,082 3,566 6,500 5,500 2007 2008 2009 2010E Share of T-Mobile 8% 7% 9%1 Gross Adds (postpaid) Source: Company reports and TMUS estimates. 1) Radio Sha

  33. Slide 33: Laser-focused on measures of success

    Laser-focused on measures of success. Drivers Key measures 2008 2009 2012 ambition level Expansion of branded and national distribution Quality subscriber Contract Net 1 1,818K (42K) Bolster value proposition for primary targets growth Adds Share of contract gross adds > 20% Smartphone penetration >

  34. Slide 34: Summary

    Summary.  Continued strong US wireless industry  Better positioned in Q1/10 than in Q1/09  Fundamental building blocks in place to stabilize 2010  Action plan pivots off huge potential for mobile Internet w/leading position  Strategy: network, devices, service & distribution, wrapped in leading

  35. Slide 35: Outline

    Outline. 1. Industry position 2. Regaining momentum 3. Q&A 35

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