Deutsche Telekom AG · XETR:DTE

Deutsche Telekom — Q3 2008 Earnings Presentation

35 slides from Deutsche Telekom's earnings presentation, Nov 6, 2008

  1. Slide 1: Q3/08 Conference call

    Q3/08 Conference call. Deutsche Telekom. November 6, 2008

  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: Agenda

    Agenda. Deutsche Telekom Q3/08 results conference call. ƒ Introduction Stephan Eger Head of Investor Relations ƒ Q3/08 Highlights René Obermann CEO ƒ Q3/08 Financials Dr. Karl-Gerhard Eick CFO and Deputy CEO ƒ Q&A If you like to ask a question, please press ”* 1” on your touchtone telephone 3

  4. Slide 4: Q3/08 Highlights

    Q3/08. Highlights. René Obermann, CEO

  5. Slide 5: Q1-Q3/08 Highlights

    Q1-Q3/08 Highlights. ƒ Revenue flat on an organic basis1 (reported revenue decreased 2.5% from €46.7 billion to €45.6 billion) ƒ Adj. EBITDA up 0.9% on an organic basis1 (reported adj. EBITDA increased 0.5% from €14.7 billion to €14.8 billion) ƒ Free cash flow stable at €5.8 billion ƒ Net income imp

  6. Slide 6: Management update: Focus, fix and grow

    Management update: Focus, fix and grow. Improve com- petitiveness Grow abroad Mobilize the Build network- in Germany with mobile Internet centric ICT and CEE Achievements Q3/08: ƒ BBFN domestic revenue decrease in Q3 of -5.9% in line with guidance of -4 to -6% range ƒ Adj. EBITDA of BBFN domestic in

  7. Slide 7: Improve competitiveness in Germany and CEE: cost and headcount reduction

    Improve competitiveness in Germany and CEE. Ongoing cost and headcount reduction in Germany. BBFN domestic adj. EBITDA and margin ƒ BBFN adj. domestic EBITDA with -5.4% in Q3 (-1.6% in Q1-Q3) well on track to achieve € million better end of FY guidance of -5 to -8% 36.0% 35.0% 33.8% 33.6% 34.5% ƒ Su

  8. Slide 8: Domestic broadband retail net add market share at 49%

    Improve competitiveness in Germany and CEE. Domestic broadband retail net add market share at 49%. Broadband lines in million Development Q3/08: 22.3 ƒ Stabilized retail broadband market share of 21.6 1.6 46% since 5 quarters 20.8 1.4 19.5 1.3 18.3 1.0 ƒ Net add market share of 49% shows full Cable

  9. Slide 9: CEE fixed line – continued high profitability

    Improve competitiveness in Germany and CEE. CEE fixed line – continued high profitability. CEE fixed line adj. EBITDA and margin ƒ Fixed network CEE continues to deliver high profitability. Q3/08 adj. EBITDA margin at 43.2% € million 47.0% ƒ Q3/08 revenue €0.6 billion 42.4% 43.1% 43.2% 38.4% ƒ Q3/08

  10. Slide 10: T-Mobile Germany

    Improve competitiveness in Germany and CEE. T-Mobile Germany. Service revenues ƒ Financial trends: ƒ Service revenues: € billion -2.5% yoy vs. -4.9% yoy in Q3/07 ƒ Adj. EBITDA: 1.85 1.78 1.81 +12.2% yoy vs. -13.0% yoy in Q3/07 1.74 1.71 ƒ Adj. EBITDA margin: 43.6% vs. 37.7% in Q3/07 (adj. EBITDA ben

  11. Slide 11: Management update: Focus, fix and grow

    Management update: Focus, fix and grow. Improve com- petitiveness Grow abroad Mobilize the Build network- in Germany with mobile Internet centric ICT and CEE Achievements Q3/08: ƒ 1.0 million contract customers added internationally. Total international sub base now at 87.9 million ƒ T-Mobile improv

  12. Slide 12: Grow abroad with mobile: T-Mobile USA

    Grow abroad with mobile: T-Mobile USA. Continued double-digit growth in Q3. Service revenues ƒ Total revenues (US$) up 12.5% yoy ƒ Service revenues (US$) up 13.3% yoy US$ million ƒ Adj. EBITDA (US$) up 10.6% yoy 4,735 4,787 ƒ Adj. EBITDA margin: 28.4% in Q3/08, compared 4,225 4,257 4,455 to 28.9% in

  13. Slide 13: Grow abroad with mobile: CEE countries

    Grow abroad with mobile. CEE1 countries – continued double-digit growth. Service revenues ƒ Total revenues up 14.8% in Q3/08 ƒ Service revenues up 15.8% in Q3/08 € million 1,609 ƒ Adj. EBITDA up 18.9% in Q3/08 1,472 1,390 1,364 1,335 ƒ Adj. EBITDA margin in CEE countries up 1.5pp to 43.6% in Q3/08 ƒ

  14. Slide 14: Management update: Focus, fix and grow

    Management update: Focus, fix and grow. Improve com- petitiveness Grow abroad Mobilize the Build network- in Germany with mobile Internet centric ICT and CEE Achievements Q3/08: ƒ Non-voice revenues w/o messaging up 28.3% yoy to €639 million. Europe up 45.3% yoy to €379 million. US up 19.9% yoy in l

  15. Slide 15: Mobilize the Internet: growth driver non-voice

    Mobilize the Internet. Growth driver non-voice excl. messaging. web’n’walk users (Europe1) myFaves users (USA) web’n’walk users (in 000) myFaves users (in mn) 4,717 6.5 7.0 3,239 3,836 4,146 5.5 2,822 5.0 2,105 2,409 3.6 1,890 2.5 880 1.5 0.7 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 06

  16. Slide 16: Mobilize the Internet: dynamic growth in data ARPU

    Mobilize the Internet. Dynamic growth in data ARPU. Data ARPU excl. messaging (Europe1) Data ARPU incl. messaging (USA) (in €) 1.50 1.50 (in US$) 8.60 8.90 8.20 8.50 1.30 1.30 1.30 1.20 7.80 8.10 7.50 1.10 1.10 6.50 0.90 5.90 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 06 06 07 07 07 07 08

  17. Slide 17: Management update: Focus, fix and grow

    Management update: Focus, fix and grow. Improve com- petitiveness Grow abroad Mobilize the Build network- in Germany with mobile Internet centric ICT and CEE Achievements Q3/08: ƒ Joint sales force and production unit with Cognizant established: weighted sales pipeline of €150 mn ƒ International sal

  18. Slide 18: Transfer of 160k SMEs from T-Systems into T-Home

    Transfer of 160k SMEs from T-Systems into T-Home. Focus on underlying value chain. Old Customer split NEW ƒ Affected SMEs request mainly T-Systems standardized products of which Enterprise Services TOP 400 90% are already produced within Top 60 Customized ICT T-Home ƒ T-Systems to focus on TOP 400 L

  19. Slide 19: Targets for 2008 confirmed

    Targets for 2008 confirmed. Targets Adj. Group EBITDA Around €19.3 billion Free cash flow Around €6.6 billion Dividend policy Maintain attractive dividend policy 19

  20. Slide 20: Q3/08 Financials

    Q3/08. Financials. Dr. Karl-Gerhard Eick, CFO and Deputy CEO

  21. Slide 21: Overview Group financials

    Overview Group financials. Revenue (€ billion) Adj. EBITDA (€ billion) 15.7 15.6 5.13 5.25 5.13 5.21 15.5 15.5 1.5% -0.9% 2.4% -1.5% Q3/07 Q3/08 Q3/07 Q3/08 Q3/07 Q3/08 Q3/07 Q3/08 reported reported organic organic reported reported organic organic Net income (€ million) FCF (€ billion) 3.6 1,055 1,

  22. Slide 22: Mobile summary

    Mobile summary. 127 million customers worldwide. Customers (million)1 Total revenue (€ billion) 126.7 8.9 9.0 9.11 117.0 1.7% 8.3% [+2.6%1] Q3/07 Q3/08 Q3/07 Q3/08 Adj. EBITDA (€ billion) International revenue (€ billion) 7.0 7.1 1 3.1 3.01 6.8 2.9 2.91 4.5% +3.1% [+3.6%1] [+4.2%1] Q3/07 Q3/08 Q3/07

  23. Slide 23: BBFN summary

    BBFN summary. Domestic revenue and adj. EBITDA in line with guidance. Total revenue (€ billion) Domestic revenue (€ billion) 5.00 5.001 5.63 5.601 4.71 4.661 5.31 5.231 -5.9% -5.5% [-6.8%1] [-6.6%1] Q3/07 Q3/08 Q3/07 Q3/08 Adj. EBITDA (€ billion) Domestic adj. EBITDA (€ billion) 1.97 1.971 1.86 1.81

  24. Slide 24: Business Customers summary

    Business Customers summary. Almost 10% growth in international revenue. Total revenue (€ billion) Adj. EBITDA (€ million) 2.92 2.741 2.72 2.731 291 2381 -6.9% 213 2141 [-0.4%1] -26.8% [-9.9%1] Q3/07 Q3/08 Q3/07 Q3/08 External revenue (€ billion) International revenue (€ million) 2.18 2.141 2.07 2.09

  25. Slide 25: Save for Service – Gross savings and opex development

    Save for Service – Gross savings and opex development. Cost base development1 ƒ Total run rate of “Save for Service” (S4S) program at €3.5 billion annually 0.6 ƒ Q3/08 contribution of “Save for Service” 0.2 €0.5 billion 10.74 10.76 ƒ €0.6 billion additional market spend – -0.3 -0.5 predominantly in

  26. Slide 26: Group headcount development: Q3 2007 to Q3 2008

    Group headcount development: Q3 2007 to Q3 2008. ƒ Group headcount net reduction 11,500 FTEs (-4.8%) at the end of the period yoy ƒ Employees decrease in Germany: net 16,200 FTEs (-10,7%) ƒ Employees increase International: net 4,700 FTEs (+5.2%) ƒ Increase in headcount at T-Mobile USA ƒ Business Cu

  27. Slide 27: Q3 2008 – Free cash flow

    Q3 2008 – Free cash flow. On track to achieve 2008 full-year guidance. € billion Q3/08 Q3/07 EBITDA (reported) 4.9 4.9 Non cash items and others 0.1 0.0 Change in working capital and accruals 0.0 0.3 Income taxes -0.1 0.4 Cash generated from operations 4.9 5.6 Incl. restructuring payments -0.2 -0.2

  28. Slide 28: Q3 2008 – Reported net income

    Q3 2008 – Reported net income. Year-on-year increase by 250%. € billion Q3/08 Q3/07 EBITDA 4.9 4.9 Depreciation and amortization - 2.6 - 3.0 Net financial expense - 0.7 - 0.7 - of which net interest expense - 0.6 - 0.6 EBT 2.3 1.9 Income taxes - 0.6 - 0.8 Earnings after taxes 1.1 0.4 Minorities - 0.

  29. Slide 29: Q3 2008 – Adjusted net income

    Q3 2008 – Adjusted net income. Adj. net income up 12.0% yoy. € billion Q3/08 Q3/07 adjusted adjusted EBITDA 5.3 5.1 Depreciation and amortization - 2.6 - 2.8 Net financial expense - 0.6 - 0.7 - of which net interest expense - 0.6 - 0.6 EBT 2.0 1.6 Income taxes - 0.7 - 0.4 Earnings after taxes 1.4 1.

  30. Slide 30: Q3 2008 – Balance sheet ratios

    Q3 2008 – Balance sheet ratios. Solid balance sheet. € billion 30/9/2008 30/6/2008 Balance sheet total 123.4 120.1 Shareholders’ equity 44.8 42.1 Net debt 39.4 40.6 Gearing 0.9x 1.0x Equity ratio 36.3% 35.1% Net debt 30/6/2008 (€ billion) 40.6 Free cash flow -2.2 Dividends 0.2 Deconsolidation effect

  31. Slide 31: DT's geographical reach

    DT’s geographical reach. Portfolio proves structural benefit in today's environment. W. Europe (in bn €) Q1-Q3/08¹ ƒ Revenue 27.4 ƒ Adj. EBITDA 8.8 E. Europe (in bn €) Q1-Q3/08¹ ƒ Revenue 6.3 ƒ Cash contribution 5.8 ƒ Adj. EBITDA 2.7 ƒ Adj. EBITDA margin (%) 32.1 ƒ Cash contribution 1.7 ƒ Adj. EBITD

  32. Slide 32: Q1–Q3 2008 – Magyar Telekom

    Q1–Q3 2008 – Magyar Telekom. No impact from economy. ƒ Adjusted EBITDA margin improved from Q1 – Q3/07 42.7% to 44.0% Q1 – Q3/08 ƒ ROCE improved from 11.0% in 503.6 502.8 Q1-Q3/07 to 12.4% in Q1-Q3/08 ƒ Number of employees reduced by 11% from 11,850 as of Q3/07 to 10,560 as of Q3/08 214.9 221.1 ƒ Nu

  33. Slide 33: Q3 2008 – Maturity profile

    Q3 2008 – Maturity profile. €6.2bn funded across various markets with tenors of at least 5 years. € billion ƒ €1.5 bn Eurobond ƒ US$1.5 bn US$ bond 6.4 ƒ €1.3 bn Schuldscheindarlehen 4.7 ƒ €1.3 bn MTNs (retail-targeted) 4.5 4.5 3.9 3.8 ƒ €0.5 bn loans from 2.9 3.4 European Investment Bank 1.8 1.1 ƒ

  34. Slide 34: Liquidity reserves as of September 30, 2008

    Liquidity reserves as of September 30, 2008. € Liquidity reserves (€ billion) 18.7 billion Unused bilateral credit lines 14.2 (average remaining contract duration: 2.4 yrs) 18.7 Assets 4.5 58.1 39.4 Total line availability Liquidity reserves DT Group net debt 34

  35. Slide 35: Thank you for your attention!

    Thank you for your attention!

Deutsche Telekom — Q3 2008 Earnings Presentation on 6ix