Deutsche Telekom Ag · XETR:DTE

Deutsche Telekom — FY2003 Earnings Presentation

36 slides from Deutsche Telekom's earnings presentation, Mar 10, 2004

  1. Slide 1: Analysts Meeting, March 10, 2004

    Analysts Meeting. March 10, 2004 =======!"§

  2. Slide 2: Full year 2003 Results

    Full year 2003. Results. Kai-Uwe Ricke CEO =======!"§

  3. Slide 3: 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 intende

  4. Slide 4: Highlights of 2003. Delivering on our targets

    Highlights of 2003. Delivering on our targets. „ Significant reduction in net debt „ “6 + 6 Program” over-achieved „ Margin improvement across all divisions The Deutsche Telekom „ Return to profitability Story 2003: „ Strong improvement in EBITDA debt reduction and „ Introduction of the 6 initiative

  5. Slide 5: Targets. All year end targets exceeded

    Targets. All year end targets exceeded. December 2003 actual Original target FY 2003 „ Net debt € 46.6 billion € 49.5 – 52.3 billion1 „ Adjusted EBITDA € 18.3 billion € 16.7 – 17.7 billion2 „ Free cash flow3 € 8.3 billion € 5.5 – 6.0 billion „ Cash contribution4 € 12.1 billion € 10.0 billion1 „ Net

  6. Slide 6: Financial Highlights. A year of profitable growth

    Financial Highlights. A year of profitable growth. Revenue (€ billion) Adj. EBITDA (€ billion) +4.0% +12.1% 18.3 55.8 53.7 16.3 2002 2003 2002 2003 =======!"§ FY 2003 Analyst Meeting Investor Relations 10/03/2004, Page 6

  7. Slide 7: Margin improvements

    Margin improvements. Significant efficiency improvements in all divisions. Adj. EBITDA margins (%) 35.5 32.8 33.6 30.4 29.3 25.5 16.7 13.3 11.0 4.8 FY 2002 Group T-Com T-M obile T-Systems T-Online FY 2003 =======!"§ FY 2003 Analyst Meeting Investor Relations 10/03/2004, Page 7

  8. Slide 8: T-Com. Secure topline through access revenue growth

    T-Com. Secure topline through access revenue growth. Access and call revenues (€ million) Grow access revenues: „ Broadband 2500 Access „ Access price increases Call rev. 2000 „ New optional tariffs 1500 1000 500 0 Q1/03 Q2/03 Q3/03 Q4/03 =======!"§ FY 2003 Analyst Meeting Investor Relations 10/03/2

  9. Slide 9: T-Mobile Europe. Strong revenue and EBITDA growth

    T-Mobile Europe. Strong revenue and EBITDA growth. „ Net revenue increased by 13.0% to € 15.4 billion „ EBITDA increased by 14.1% to € 5.1 billion „ Contract net adds increased to 2.0 million (from 1.5 million in 2002) Net revenue Europe (€ million) EBITDA Europe (€ million) 16,000 6,000 14,000 5,00

  10. Slide 10: T-Mobile USA. High-quality subscriber growth

    T-Mobile USA. High-quality subscriber growth. „ No. 2 in net adds in 2003 „ Highest ARPU increase among the “Big 6” Net adds (million) in 2003* Year-on-year change in ARPU ($)* 6 3,50 3,00 5 2,50 4 2,00 1,50 3 1,00 0,50 2 0,00 -0,50 1 -1,00 0 -1,50 Cingular Cingular NXTL TM US AWE Sprint VZW NXTL Sp

  11. Slide 11: T-Systems. Focus & execution

    T-Systems. Focus & execution. „ Customer campaign “Managed business flexibility” started „ “Focused Solution Portfolio” established „ Large order book of €12.6 billion strong basis for future growth „ General administration and overhead streamlined „ Sales and distribution reorganized „ Internationa

  12. Slide 12: T-Online. Focus on broadband

    T-Online. Focus on broadband. „ Over 13.1 million subscribers: T-Online subscribers (million)1 over 27% in broadband 14 13.13 „ Revenues2 increased by 12.24 12 16.9% to € 1.9 billion 10 „ Adj. EBITDA2 more than 9.56 tripled to € 310 million 8 9.45 „ Adj. EBITDA margin2 6 increased to 16.7% from 4 4.

  13. Slide 13: Deutsche Telekom. The T stands for Innovation, Quality and Efficiency

    Deutsche Telekom. The “T” stands – Three principal growth drivers: – Broadband for Innovation, – Mobile Quality and Efficiency – Business customers – Integrated telecommunications operator across Germany and Central & Eastern Europe – Become leading connectivity provider of fixed and mobile broadban

  14. Slide 14: Agenda 2004. The 6 initiatives

    Agenda 2004. The 6 initiatives. Broadband Business customers Innovation 6 cross-divisional initiatives Quality Personnel Efficiency =======!"§ FY 2003 Analyst Meeting Investor Relations 10/03/2004, Page 14

  15. Slide 15: Broadband initiative

    Broadband initiative. Accelerating the broadband adoption in Germany. Domestic DSL lines1 (million) Accelerating broadband adoption „ Market leader in Europe ~10 2) „ 91% market share in broadband in Germany3 7.5 „ New pricing and broadband >5.0 strategy “1-2-3” 4.0 „ Wholesale DSL access from 2.8 m

  16. Slide 16: Personnel initiative

    Personnel initiative. Target to reduce relative personnel costs. „ Propose reduction in working hours and pay per year: discussions with DT AG unions ongoing „ Negotiate appropriate annual pay rise: discussions with unions ongoing „ Implemented voluntary redundancy scheme: 1,700 contracts signed per

  17. Slide 17: Vivento (PSA). Transfer program on track

    Vivento (PSA). Transfer program on track. Transfers into Vivento Progress Vivento as of Dec. 31, 2003 Left Vivento1 3,690 19,238 11,528 4,020 11,750 8,221 5,133 Remaining Temp Vivento workers employees 31/03/03 30/06/03 30/09/03 31/12/03 1 Of which approx. 2,150 employees left the Deutsche Telekom g

  18. Slide 18: Efficiency initiative

    Efficiency initiative. 7 point program for further efficiency gains. „ Continuous improvement in working capital optimization „ Re-sale of used equipment „ Continue selective asset sales „ Leveraging purchasing power „ Reduce IT support costs through standardizing IT infrastructure „ Increased integ

  19. Slide 19: Financials 2003

    2003. Financials. Dr. Karl-Gerhard Eick CFO =======!"§

  20. Slide 20: Revenue and adjusted EBITDA. Growth continues

    Revenue and adjusted EBITDA. Growth continues. Organic growth with constant exchange rates1 Revenue (€ billion) Adj. EBITDA (€ billion) 58.0 19.0 + 8.0% + 16.2% 53.7 16.3 FY/02 FY/03 FY/02 FY/03 Reported growth Revenue (€ billion) Adj. EBITDA (€ billion) + 4.0% 55.8 + 12.1% 18.3 53.7 16.3 FY/02 FY/0

  21. Slide 21: Capex. Full-year capex at € 6.2 billion

    Capex. Full-year capex at € 6.2 billion. € billion1 2003 2002 T-Com 2.1 3.2 T-Mobile 3.0 3.5 T-Systems 0.7 0.8 T-Online/GHS (incl. recon.) 0.4 0.5 Total 6.2 7.9 1 Figures rounded to the nearest € 100 million figure. =======!"§ FY 2003 Analyst Meeting Investor Relations 10/03/2004, Page 21

  22. Slide 22: Cash contribution up 44%

    Cash contribution1 up 44%. Strong improvement in all divisions. € billion2 2003 2002 T-Com 8.2 7.1 T-Mobile 3.7 1.6 T-Systems 0.8 0.3 T-Online 0.2 0.0 GHS (incl. recon.) - 0.8 - 0.6 Total 12.1 8.4 1 Adj. EBITDA minus capex (excl. goodwill). 2 Figures rounded to the nearest € 100 million figure. ====

  23. Slide 23: Free cash flow. Highest operating cash flow

    Free cash flow. Highest operating cash flow. € billion1 Q4/03 Q4/02 FY 2003 FY 2002 Cash generated from 4.4 3.6 18.1 16.7 operations Net interest payment - 1.1 -1.3 - 3.8 - 4.2 Net cash provided by 3.3 2.3 14.3 12.5 operating activities Cash outflows from - 2.0 - 1.9 - 5.2 - 6.8 investments in prope

  24. Slide 24: Debt reduction program. Targets overachieved

    Debt reduction program. Targets overachieved. Net debt (€ billion) 64.3 61.1 53.0 -17.7 billio 49.2 n 46.6 Strategic FY 2002 H1 2003 Q3 2003 Q4 2003 Review Q3 2002 =======!"§ FY 2003 Analyst Meeting Investor Relations 10/03/2004, Page 24

  25. Slide 25: T-Com. Strong bottom line performance

    T-Com. Strong bottom line performance. EBITDA adj.2 Adj. EBITDA margin2 „ Adj. EBITDA growth of 3.4% year-on-year + 3.4% „ Strong efficiency 10,356 improvements – 10,011 + 6.3% adj. EBITDA margin reached 35.5 33.4 almost 36% in 2003 „ € 8.2 billion cash contribution FY 2002 Cash contribution1 (€ mil

  26. Slide 26: T-Com. Expenses and capex reduced by € 2.5 billion

    T-Com. Expenses and capex reduced by € 2.5 billion. 25 Expenses2 Capex 20 15 20.3 18.9 10 € 1.4 billion less expenses1,2 5 3.2 2.1 0 € 1.1 billion less capex1 FY02 FY03 1 Calculated and rounded on exact figures. 2 Expenses: revenues minus adj. EBITDA. =======!"§ FY 2003 Analyst Meeting Investor Rela

  27. Slide 27: T-Com. Q4 revenues strong

    T-Com. Q4 revenues strong. T-Com revenues (€ million) „ Gross revenue growth between Q3 and Q4 at 8000 5.0%. Net rev. 7500 Gross rev. „ Net revenue growth between Q3 and Q4 at 4.0%. 7000 6500 6000 5500 5000 Q1/03 1 Q2/03 Q3/03 Q4/03 1 Q1 excluding cable revenues. =======!"§ FY 2003 Analyst Meeting I

  28. Slide 28: Fixed line. Total revenue development

    Fixed line. Total revenue development. 564 Cable1 T-Com Eastern Europe +2.4% T-Com on a comparable basis2 International 3,877 -0.6% 3,855 T-Com T-Com domestic: - 2.9% Domestic: – Core „ Successful rebalancing 14,698 +1.7% 14,955 strategy continues fixed-line business – Data commu- „ Other revenues:

  29. Slide 29: T-Mobile. Sustainable revenue and profitability growth

    T-Mobile. Sustainable revenue and profitability growth in 2003. „ More than 5.1 million new contract subscribers „ 5.5 million unique active non-voice users (without SMS) + 13.2% FY 2002 61,062 + 15.4%2 FY 2003 53,920 22.78 + 32.4%2 19.74 1 + 14.9% 6.67 29.3 5.04 1 25.5 1 Subscribers (‘000) Revenues

  30. Slide 30: T-Systems. Revenue growth despite difficult market

    T-Systems. Revenue growth despite difficult market environment. „ Revenue growth (excl. deconsolidations) at 4.4% Revenues +1.2% „ TC revenues up 5.3% due (€ million) 10,489 10,614 to successful sales efforts FY02 FY03 and attained network outsourcing deals -2.3% „ IT revenues down 2.3% IT due to we

  31. Slide 31: T-Systems. Strong EBITDA & margin improvement

    T-Systems. Strong EBITDA & margin improvement. Adj. EBITDA Cost savings YE/03 - (in € million) YE/02 in € million +22.9% − Travel expenses 17 1,415 − Maintenance 77 1,151 − Marketing expenses 21 FY/02 FY/03 − Rental and leasing expenses 81 − Legal and consulting fees 44 Adj. EBITDA-margin − Losses o

  32. Slide 32: T-Online. Strong operational performance

    T-Online. Strong operational performance. Revenue1 Adj. EBITDA1 in € million +16.9% in € million +307.9% 310 1,851 1,584 76 FY/02 FY/03 FY/02 FY/03 1 German GAAP results of T-Online division. =======!"§ FY 2003 Analyst Meeting Investor Relations 10/03/2004, Page 32

  33. Slide 33: FY 2003 – Net income. Positive

    FY 2003 – Net income. Positive. € billion1 FY 2003 Q4/03 FY 2002 EBITDA 18.5 4.2 16.1 Depreciation and - 12.9 - 3.2 - 36.9 amortization Net financial expense - 4.0 - 1.3 - 6.0 Taxes (incl. other taxes) + 0.1 +0.1 + 2.5 Minorities - 0.4 - 0.1 - 0.3 Net income 1.3 - 0.4 - 24.6 1 Calculated and rounded

  34. Slide 34: FY 2003 – Balance sheet. Strong improvement in key credit metrics

    FY 2003 – Balance sheet. Strong improvement in key credit metrics. € billion FY 2003 FY 2002 Assets 116.1 125.8 Equity 33.8 35.4 Net debt 46.6 61.1 Net debt/adj. EBITDA 2.5x 3.7x Gearing1 1.4x 1.7x Equity ratio2 29.1% 28.1% 1 Net debt divided by shareholders’ equity. 2 Shareholders’ equity divided b

  35. Slide 35: FY 2004 – financial strategy

    FY 2004 – financial strategy. Strategic financial targets. Return on capital, EVA Profitability Financial flexibility Growth Net debt/EBITDA, Gearing Revenue growth Equity ratio =======!"§ FY 2003 Analyst Meeting Investor Relations 10/03/2004, Page 35

  36. Slide 36: Deutsche Telekom. Outlook 2004

    Deutsche Telekom. Outlook 2004. „ Focus on profitable growth „ Use of free cash flow in 2004 „ Debt reduction „ Incremental capex „ Acquisitions „ Dividend for 2004 - paid in 2005 „ Target adj. EBITDA of at least €19.2 billion =======!"§ FY 2003 Analyst Meeting Investor Relations 10/03/2004, Page 36

Deutsche Telekom — FY2003 Earnings Presentation on 6ix