Deutsche Telekom Ag · XETR:DTE
Deutsche Telekom — H1 2003 Earnings Presentation
38 slides from Deutsche Telekom's earnings presentation, Aug 14, 2003
Slide 1: Deutsche Telekom Analysts Meeting August 14, 2003
Deutsche Telekom Analysts Meeting August 14, 2003 ===!"§ 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: H1 2003 Results
H1 2003. Results. Kai-Uwe Ricke CEO ===!"§ Deutsche Telekom
Slide 4: H1 2003 highlights
H1 2003 highlights. Strong revenue and adj. EBITDA1 growth. Organic growth with constant exchange rates Revenue1 (€ million) Adjusted EBITDA1 + 9.1% 27,839 + 22.1% 9,315 7,632 25,512 H1/02 H1/03 H1/02 H1/03 Reported growth Revenue (€ million) Adjusted EBITDA1 27,211 + 17.0% 9,074 25,754 + 5.7% 7,757
Slide 5: Net income
Net income Full-year net profit targeted. € million 1,109 275 H1/02 H1/03 -3,142 -3,891 Net incom e Adj. net incom e 1 1 To interpret this non-GAAP measure, please refer to the “Reconciliation to pro forma figures” in the H1/03 interim report or the Reconciliation to pro forma figures” posted on Deu
Slide 6: Quarter-by-quarter development
Quarter-by-quarter development. Sequential earnings improvements2. Adj. net income1 (€ million) – Efficiency improvements working – Revenue stable despite + 43.4% 162 – Deconsolidation (cable, SIRIS etc.) 113 (€ -0.2 billion) – Adverse foreign exchange impact (€ -0.2 billion) – Weak economy (T-Com,
Slide 7: Margin improvements
Margin improvements. More than 10% efficiency improvements. Adj. EBITDA margins1 (%) Efficiency improvements of € 0.8 billion in H1/03: 35.7 − T-Com cost savings € 0.3 billion 33.3 33.6 30.1 – T-Systems cost savings € 0.1 billion 28.030.0 – T-Mobile economies of scale: € 0.2 billion 16.9 – T-Online
Slide 8: Cash contribution
Cash contribution1. 64% increase at group level. Adj. EBITDA2 - Capex3 – Capex3 reduced to € 2.1 billion from € 3.5 billion in H1 2002 7.0 – Capex3 full-year guidance unchanged € 6.7 - 7.7 billion 4.3 4.5 3.3 2.3 1.3 0.4 H1 2002 0.1 0.0 0.1 H1 2003 Group T-Com T-Mobile T-Systems T-Online 1 Adj. EBIT
Slide 9: Fixed line: total revenue development
Fixed line. Total revenue development. 218 Cable1 – Growth in T-Com Eastern Europe T-Com 1,882 +1.3% 1,906 despite negative forex influence International T-Com – T-Com domestic Domestic: – Core fixed-line revenues grew by – Core +2.6% 7,279 +2.6% 7,468 fixed-line – Data communication, business value
Slide 10: T-Com Domestic: T-DSL
T-Com Domestic. T-DSL – No. 1 in Europe. Revenues (€ billion) T-DSL subscribers (million) 3.7 T-DSL retail 3.4 access revenues 3.1 +190 % 0.3 2.7 2.5 2.3 0.1 +40% 0.4 DSL wholesale 0.3 traffic revenues H1/02 H1/03 Q1/02 Q2/02 Q3/02 Q4/02 Q1/03 Q2/03 ===!"§ Deutsche Telekom Page 10 Unaudited figures
Slide 11: T-Com: Strong efficiency improvements
T-Com. Strong efficiency improvements. Adj. EBITDA-margin1 (%) Efficiency improvements H1/03 - (€ million) H1/02 +6.3% 35.7 33.6 − Travel expenses 32 − Maintenance 67 − Marketing expenses 45 − Rental and leasing expenses 45 H1/02 H1/03 − Legal and consulting fees 27 − Losses on accounts receivable 1
Slide 12: T-Com Domestic: Measures for future revenue development
T-Com Domestic. Measures for future revenue development. Innovation leadership T-DSL growth pushed: New product features Defend market share and aggressive marketing campaigns Target 2003: >4 million subs New attractive options Secure revenue growth plans requested: in core business – AktivPlus Call
Slide 13: Personnel Service Agency (PSA)
Personnel Service Agency (PSA). Transfer program well under way. Total number of employees in temp Total number of employees in PSA worker positions or permanently placed 7,379 228 4,899 2,046 842 120 234 1,605 5,105 1,400 1,116 3,174 31.03.03 30.06.03 31.03.03 30.06.03 T-Systems, T-Mobile, T-Online
Slide 14: T-Mobile USA: More than 10 million contract subscribers
T-Mobile USA. More than 11 million subscribers. – More than 10 million contract Net adds (thousands) subscribers 1,556 – 1.6 million contract net adds in H1/03, clear No. 2 with 0.5 million more net 1,248 adds than the nearest competitor – 606,000 net adds in Q2/03 – 652,000 contract net adds in Q2/
Slide 15: T-Mobile USA: Strong ARPU increase
T-Mobile USA. Strong ARPU1 increase – Blended ARPU1 increased by $4 year-on- Blended ARPU1 (US $) year to US $53 – Sequential improvement of US $3 53 compared to Q1/03 + 8% – Increase due to half usage and half 49 features and data – Contract ARPU1 slightly increased year- on-year from US $52 to US
Slide 16: T-Mobile USA: Sustainable cost advantage and scale effects
T-Mobile USA. Sustainable cost advantage and scale effects. – Cash cost per user (CCPU1,2) decreased CCPU1,2 (US $) to US $23 in Q2/03 from $25 in Q2/02 - 8% – Blended ARPU1 - CCPU1,2 on par or 25 ahead of most national competitors, 23 despite relatively smaller size – Additional scale effects to be
Slide 17: T-Mobile USA: Record EBITDA margin
T-Mobile USA. Record EBITDA1,2 margin. – EBITDA1,2 margin as % of net revenues EBITDA1,2 margin (% of net revenues) more than doubled to 25% in Q2/03 – H1/03 EBITDA1,2 of US $849 million provides TM US with ample flexibility to 25.1 address H2/03 growth opportunities + 106% – Full-year targets: – EB
Slide 18: T-Mobile: The growth engine
T-Mobile. The growth engine. Organic growth with constant exchange rates – Organic revenue growth with constant Revenue (€ million) exchange rates was 26% in H1/03 vs. 11,491 H1/02 + 26% 9,140 – Reported group revenue increase of 19% to € 10.9 billion in H1/03 vs. H1/02 (organic 15%) – Revenue incre
Slide 19: T-Mobile: Sustainable growth in Europe
T-Mobile. Sustainable growth in Europe. – Revenue increase of 17% in Europe Revenue Europe (€ million) (organic 11%) – Revenue increase driven by subscriber and + 17% 7,418 ARPU2 growth 6,344 – European subsidiaries gained 805,000 contract net adds in H1/03 – Significant increase of ARPUs2 in local
Slide 20: T-Mobile: Record adjusted EBITDA
T-Mobile. Record adjusted EBITDA1,2 of € 3.3 billion (reported). Organic growth with constant exchange rates Adj. EBITDA1,2 (€ million) – Organic adj. EBITDA1,2 growth with constant exchange rates was 36% in H1/03 +36% vs. H1/02 3,486 2,559 – Adj. EBITDA1,2 increase of € 0.7 billion to € 3.3 billion
Slide 21: T-Systems: Strong growth in telecoms
T-Systems. Strong growth in telecoms1. – TC revenues up 5.7% due to shakeout in Revenues1 (€ million) competitive landscape, end of price erosion and increased network outsourcing 0.9% deals 5,079 5,127 – IT revenues down 3.2% due to weakness esp. in international and desktop services – YTD record o
Slide 22: T-Systems: Strong efficiency improvements
T-Systems. Strong efficiency improvements. Adj. EBITDA1 (€ million) Cost savings H1/03 - (€ million) H1/02 +22.4% 623 509 − Travel expenses 10 − Maintenance 35 − Marketing expenses 7 − Rental and leasing expenses 49 H1/02 H1/03 − Legal and consulting fees 16 − Losses on accounts receivable 20 Adj. E
Slide 23: T-Online: Focus on profitability
T-Online. Focus on Profitability. – Adj. EBITDA increased by € 74 million Adj. EBITDA1 (€ million) on a year-on-year comparison – Gross margin stabilized over 50% 75 76 in 2003 53 – 25% of T-Online customers 35 are using T-DSL 2 Q2/02 Q3/02 Q4/02 Q1/03 Q2/03 Gross Margin (%) – Approx. € 170 million
Slide 24: Financials
Financials. Dr. Karl-Gerhard Eick, CFO ===!"§ Deutsche Telekom
Slide 25: Debt reduction program almost achieved
Debt reduction program. 6 + 6 almost achieved. Net debt1 (€ billion) 64.3 61.1 YE 2003 target -11.3 billio 53.0 n 49.5 - 52.3 (3 x net debt /adj. EBITDA) Strategic Review FY 2002 H1 2003 FY 2003e Q3 2002 1 To interpret this non-GAAP measure, please refer to the “Reconciliation to pro forma figures”
Slide 26: Free cash flow
Free cash flow1. € 4.0 billion free cash flow in H1/03. € billion2 Q2/03 Q1/03 H1/03 2002 Cash generated from operations 4.6 3.4 8.0 16.7 Net interest payment -1.5 -0.3 - 1.8 -4.2 Net cash provided by operating activities 3.1 3.1 6.3 12.5 Cash outflows from investments in – property, plant and equip
Slide 27: Capex status
Capex1 status. Strong increase in cash contribution. € billion Q2/03 Q2/02 T-Com 0.5 0.9 T-Mobile 0.6 0.7 T-Systems 0.1 0.1 € billion Q2/03 Q2/02 T-Online and Others 0.1 0.1 Adj. EBITDA2 4.6 4.0 Total capex 1.2 1.9 Capex1 1.2 1.9 1 Property, plant and equipment and intangible assets (excl. goodwill)
Slide 28: Debt reduction going forward
Q2 2003 – Debt reduction going forward. Focus on free cash flow. € billion Target Q3/02 Achieved To go Free cash flow1 5.5 - 6.0 4.2 1.3 - 1.8 Asset sales2 6.2 - 8.5 5.3 0.9 - 3.2 1 To interpret this non-GAAP measure, please refer to the “Reconciliation to pro forma figures” in the H1/03 interim rep
Slide 29: Successful bond offering 2003
Successful bond offering 2003. Final step towards being fully financed. – Due to ongoing deleveraging success the only benchmark transaction in 2003 – Great market acceptance: US $ 2 billion size limit five times subscribed – Very tight pricing: bonds came below initial secondary market levels – Fir
Slide 30: Q2 2003 Liquidity reserves
Q2 2003 Liquidity reserves. Liquidity reserves as of June 30, 2003. € billion Liquidity reserves (€ billion) 28.3 90 – Unused credit lines 80 – Syndicated loan DTAG 11.9 70 28.3 – Syndicated loan T-Mobile UK 2.3 60 – Bilateral credit lines 50 DTAG 4.7 81.3 – Bilateral credit lines 40 subsidiaries 0.
Slide 31: Q2 2003 Maturity profiles
Q2 2003 Maturity profiles. Fully financed. in € billion 16 14.6 14 12.6 12 10 8.4 8 5.8 6 5.0 4.1 3.7 3.8 4 3.0 3.3 3.1 3.1 2.8 2.1 2 0.8 0 2003 2004 2005 2006 2007 2008 2009 2010 >2010 3.Q 03 4.Q 03 1.Q 04 2.Q 04 3.Q 04 4.Q 04 ===!"§ Deutsche Telekom Page 31 Unaudited figures
Slide 32: Group headquarters & shared services
Group headquarters & shared services. Adj. EBITDA improved by 151 million €. – Rebranding expenses reduced by Adj. EBITDA (€ million) approximately € 100 million – Start-up costs associated with the ABS transaction of approximately H1/02 H1/03 € 100 million saved in H1/03 - 20 -171 ===!"§ Deutsche T
Slide 33: H1/03 Net income
H1/03 – Net income. € 1.1 billion. € million H1/03 H1/02 ∆ Adj. EBITDA1 9.1 7.8 1.3 Depreciation and amortization - 6.5 - 7.9 1.4 Net financial expense - 1.9 - 2.3 0.4 Taxes (incl. other taxes) - 0.2 - 0.6 0.4 Minorities - 0.2 - 0.2 0 Adj. Net income1 0.3 - 3.1 3.4 Special factors1 0.8 - 0.8 1.6 Net
Slide 34: Net income: positive sequential
Net income. Positive sequential net income. € million Q2/03 Q1/03 ∆ Adj. EBITDA1 4,598 4,476 122 Depreciation and amortization - 3,212 - 3,269 57 Net financial expense - 853 - 1,092 239 Taxes (incl. other taxes) - 295 99 - 394 Minorities - 76 - 101 25 Adj. Net income1 162 113 49 Special factors1 94
Slide 35: Balance sheet structure
Balance sheet structure. Shareholders Shareholders equity and equity and Assets liabilities Assets liabilities 13.5 19.8 35.4 Shareholders 35.0 equity and Assets liabilities Non current Shareholders assets equity 101.2 111.5 73.6 Current Liabilities 71,9 assets Deferred Accruals expenses 1.3 14.7 0.
Slide 36: H1 2003 Conclusion
H1 2003. Conclusion. Kai-Uwe Ricke CEO ===!"§ Deutsche Telekom
Slide 37: Summary: Excellent performance to date
Summary. Excellent performance to date. – YE 2003 net debt target almost achieved (€ 11.3 billion out of 12 already delivered) – € 4.2 billion of free cash flow since November 2002 – € 5.3 billion in asset sales since November 2002 – Fully financed – 9% revenue growth1 – Positive net income – Target
Slide 38: Outlook: Principles
Outlook. Principles. – Debt reduction – Continue to ensure undisputed access to the capital markets – Continue to improve quality of balance sheet – Dividend – Target to pay a dividend for 2004 (payable in 2005) – Meaningful payout ratio – Profitable growth – Based on clear financial criteria ===!"§