Deutsche Telekom AG · XETR:DTE
Deutsche Telekom — Investor Day (2018)
35 slides from Deutsche Telekom's investor day presentation, 2018
Slide 1: Deutsche Telekom Capital Markets Day 2018
DEUTSCHE TELEKOM CAPITAL MARKETS DAY 2018
Slide 2: Europe
EUROPE SRINIVASAN GOPALAN “a
Slide 3: Key Messages
Key Messages 01 Strong assets portfolio DT EU Majority of assets already converged, with a powerful brand across footprint & relevance in economies 05 Best customer experience Strong & convincing brand promise, digital customer interaction, automated technical service, and a customer centric culture
Slide 4: Review 2014 – 2018
Review 2014 – 2018 GROUP STRATEGY Germany Systems Solutions Technology & Innovation T-Mobile US Europe Group Development Finance
Slide 5: Review
Review Ambition level 2018 Achievements 2017 Delivered/on track TECHNOLOGY All-IP transformation: All integrated NatCos 100% IP-based in 2018 Ca. 70% in 2017 LEADERSHIP Next generation accesses: 75–95% LTE pop coverage in 2018 94% in 2017 FTTx for ≈ 50% of households (in integrated footpri
Slide 6: DT Europe is a structurally attractive converged asset
DT Europe is a structurally attractive converged asset DT Europe NatCo-by-NatCo EBITDA adj. FY 2017, € bn GR 1.14 HU 0.55 Converged HR 0.39 Revenue €11.6 bn leaders 70% from SK 0.32 converged Adj. EBITDA €3.7 bn MK 0.07 leaders Cash CAPEX €1.8 bn ME 0.03 Personnel 47,420 FTE Population 115 mn people
Slide 7: DT is the largest international player in our footprint with significant GDP impact
DT is the largest international player in our footprint with significant gdp impact We have scale in our markets… … and we have economic impact Integrated revenues DT EU footprint1 DT local revenues, as share of GDP Greece Croatia 1.6% 2.0% DT’s position in ICT Vodafone Liberty Orange Telekom AT rev
Slide 8: We have been poorly valued because of past performance
We have been poorly valued because of past performance Reflecting historical declines… …DT Europe has been valued poorly DT EU revenue organic, EBITDA multiple DT Europe € bn 15 CAGR -1.9% 0 2012 2013 2014 2015 2016 2017 ≈4.9x1 DT EU EBITDA adj. organic, € bn 5 CAGR -3.0% EBITDA multiple western Eur
Slide 9: 2017 has seen the beginning of the turnaround
2017 has seen the beginning of the turnaround Back to growth again Revenue growth, organic, EBITDA turnaround visible, adj. organic, € bn € bn 12 -0.1% +0.5% 4 -2.2% -1.0% 10 3 8 6 2 4 1 2 +0.2% +1.6% 0 0 2015 2016 2017 Q1/18 2015 2016 2017 Q1/18 Note: Organic development adjusted for regulation and
Slide 10: Mobile markets back to growth, DT back to fair share
Mobile markets back to growth, DT back to fair share Improving market environment leads to growth… …while DT has begun to leverage its quality leadership Mobile service revenue development1, Mobile contract net adds back on fair share level, year-over-year, per half year Mob. contract net adds marke
Slide 11: Substantial progress on convergence and troubled assets
substantial progress on convergence and troubled assets Commercial strength in FMC Assets strengthened Growth in B2C, 2017 vs. 2016 T-Mobile Austria developed towards convergence Proposed acquisition of UPC FMC HH +420 k +43% FMC revenue +€300 mn +81% Growth in B2B, 2017 vs. 2016 FMCC accounts +60
Slide 12: Reaccelerated cost savings and major organizational changes in 2017
Reaccelerated cost savings and major organizational changes in 2017 Reduction in indirect costs People & structural issues improved Indirect cost, C-levels1 reviewed in NatCos organic Changes in last 12 months ≈50% -0.8% EU HQ made leaner & more agile -2.1% Smaller organization -30% International ex
Slide 13: Strategy 2018 – 2021
Strategy 2018 – 2021 GROUP STRATEGY Germany Systems Solutions Technology & Innovation T-Mobile US Europe Group Development Finance
Slide 14: Europe is positioned to create value by leading in convergence, technology, digitalization, and B2B
Europe is positioned to create value by leading in convergence, technology, digitalization, and B2B Our strategy Ambition Europe 1 Lead in Customer Experience/Lead in Technology Grow Magenta1: Drive convergence to enable value creating market structure Lead In Customer Lead in Lead in Business ex
Slide 15: Convergence: Commercial KPIs evidence benefits
1 convergence: Commercial KPIs evidence benefits FMC reduces churn FMC increases incremental ARPHH1 FMC improves TRI*M Example Greece, Q4/17 December 2017 Greece, Croatia, Hungary, Slovakia, Q4/17 -35% Average FMC Croatia +€15 +11pts. -33% Greece +€14 Slovakia +€12 Mobile Fixed Hungary +€9 Non FMC F
Slide 16: Convergence: reduces exposure to market volatility
1 convergence: reduces exposure to market volatility Focus on commercial execution in FMC: Drive volume and scale up fast – example Slovakia FMC gross add share, FMC mobile contract share, % of total mobile B2C contract sales % of total mobile B2C contract base Mobile only FMC 21% 48% 2% 16% 2015 20
Slide 17: Convergence: targeting > 50% household penetration
1 convergence: targeting > 50% household penetration Focus on commercial execution in FMC: Drive volume and scale up fast FMC household penetration FMC revenues, Simple and flexible FMC offers for all HH, (FMC HHs/fixed broadband base) € bn e.g. Launch of new Magenta1 portfolio with strong more-fo
Slide 18: Networks: converged leader markets will lead transition towards gigabit societies
1 networks: “converged leader” markets will lead transition towards gigabit societies FTTH/B HH coverage1,2 1 Compelling economics & track record 30% 2 Societal benefits 17% 2017 2021e 3 Unique leverage Reinforce leading fixed broadband position and/or address strong competition 1 Including cable ED
Slide 19: Networks: compelling fiber economics in footprint
1 networks: compelling fiber economics in footprint, with track record to monetize 1 Compelling economics and track record DT EU fiber economics Fiber utilization on profitable level and improving, example Slovakia, k < €300 per home passed for 25–50% of footprint FTTH ARPU ranges from €20 to €2
Slide 20: Networks: partnering with local governments
1 networks: partnering with local governments 2 Societal benefits 3 Unique leverage Connecting Europe broadband Fund Strong synergies with mobile EU has invested €2.5 bn for broadband rollout and connectivity Improved economics with FMC: +€9–15 ARPHH increase until 2017 through structural funds fr
Slide 21: Networks: tailored strategies for converged challenger markets
1 networks: tailored strategies for our “converged challenger” markets Strategies for converged challengers Austria Czech Poland Proposed opportunistic opportunistic M&A UPC deal Cetin Orange WHOLEBUY letter of intent OWN BUILD FWA/FMS1 (fixed) 1 Fixed wireless access/fixed mobile substitution GROUP
Slide 22: Networks: Smart funding to triple fiber run-rate within stable capex envelope
1 networks: Smart funding to triple fiber run-rate within stable capex envelope Fundable opportunities Organic FTTH/B investments1 Organic incremental households passed1 run-rate in € bn p.a. run-rate in mn p.a. 0.75 Reprioritization within fixed On-top 0.3 potential Mobile Capex optimization fr
Slide 23: Service: reinventing operations with simplified & agile IT
1 service: reinventing operations with simplified & agile IT Moving to harmonized API1 layer across NatCos New way of working Applications Platforms Growing off-shore development capability Agile, simplified, open source development reutilizing the FMC One App Payments Loyalty harmonized API lay
Slide 24: Service: convergence through seamless connectivity
1 service: convergence through seamless connectivity Digital at the center Connected everywhere App as focal point for customer interaction Easy to use services, in lean & fast production Seamless connectivity app: > 20% of FMC customer base by 2021 New homegateway with better Wifi and SmartHome
Slide 25: Service: Targeting number 1 or 2 in TRI*M in all our markets
1 service: Targeting number 1 or 2 in tri*m in all our markets – Greece is leading the way Cosmote Greece succeeds in stable #1 position in customer satisfaction TRI*M index Key customer satisfaction drivers being addressed COSMOTE is an active part of Greek society and takes on a bigger role toward
Slide 26: B2B: convergence and cloud drive growth
2 b2b: convergence and cloud drive growth B2B: Growth via push of cloud and aggressive increase of 2 & 3 leg penetration Sales push in VSE and SMB FMCC penetration1 FMCC revenues1, Leverage cloud business (as share of VSE & SMB accounts) € bn Big Data campaigning & horizontal bundling CAGR to dr
Slide 27: B2B: leveraging ICT strength for smart city / IoT
2 b2b: leveraging ICT strength for smart city / IOT Leverage position in ICT & further grow cloud Push of Smart Cities/IoT portfolio Hybrid cloud: Expansion of “IT as a Service” with Azure services Focus on key city verticals such as Smart Lighting, Smart Parking, Win with strategic partners a
Slide 28: Value transformation: €0.4 bn lower indirect costs 2021
3 value transformation: €0.4 bn lower indirect costs 2021 Short-term value transformation mainly from efficiency in current operating model, digitalization impact in 2019+ Indirect cost, Operational efficiency, e.g. organic -2% Consolidation and retirement NT & IT Back-office elimination ≈ €120
Slide 29: A Radical simplification is a key enabler
A Radical simplification is a key enabler Commercial propositions Processes IT/platforms Address tariffs, security vulnerability Digital first De-customize applications assessment and business rules Unify delivery model across channels and Simplify user interface Delineate segment overla
Slide 30: B Scaling up customer facing digital touchpoints
B Scaling up customer facing digital Touchpoints B2C: Digital customer self-service B2B: Digitalization partner for SMBs Digitalization of customer interface One digital cockpit “FMCC* Portal” Smartphone service app as direct link to customers Easy-to-use customer touchpoint for all Telco and IC
Slide 31: C Opportunity for cross border synergies
C opportunity for cross border synergies Establish an organization with the right structure, people & skills Future-proof organization Learn from CZ and SK merger Target operating model Ind. cost savings 2021 vs. 2017 ≈ €50 mn and organization Technology transformation element is €30–35 mn Structure
Slide 32: Financial Outlook
Financial Outlook GROUP STRATEGY Germany Systems Solutions Technology & Innovation T-Mobile US Europe Group Development Finance
Slide 33: Financial outlook
Financial outlook Revenue growth1 Cash Contribution2 Cash Capex € bn € bn € bn CAGR > 1% stable 11.6 1.8 CAGR +2–4% 1.8 2017 2021e 2017 2021e Adj. EBITDA Special factors (Cash) € bn € bn CAGR +1–2% 2017 2021e 0.2 3.7 2017 2021e 2017 2021e 1 Without EU roaming impact 2 Cash Contribution = Adj. EBITDA
Slide 34: Mid term Ambition Level
Mid term Ambition Level GROUP STRATEGY Germany Systems Solutions Technology & Innovation T-Mobile US Europe Group Development Finance
Slide 35: Mid term Ambition level
Mid term Ambition level Mid term ambition level Year B2C growth +25% CAGR FMC revenue (€1.7 bn 2021) 2017–2021e drivers > 50% One-App-penetration, 30% pure online sales share 2021e Lead in TRI*M: #1/#2 in all markets 2021e B2B growth +10% CAGR FMCC revenue (€0.5 bn 2021) 2017–2021e drivers