Deutsche Telekom Ag · XETR:DTE
Deutsche Telekom — FY2002 Earnings Presentation
33 slides from Deutsche Telekom's earnings presentation, Mar 10, 2003
Slide 1: Deutsche Telekom Conference call March 10, 2003
Deutsche Telekom Conference call March 10, 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: Strategy and implementation
Strategy and implementation. Kai-Uwe Ricke CEO ===!"§ Deutsche Telekom
Slide 4: 2002 – Group financial highlights
2002 – Group financial highlights. Continued strong operational performance. – Group revenue up 11.1% to € 53.7 billion – Adjusted EBITDA1 growth of 7.8% to € 16.3 billion – Investments2 reduced by almost 30% to € 7.9 billion – Free cash-flow before dividends increased to approx. € 4.8 billion3 from
Slide 5: 2003 objectives
2003 objectives. Debt reduction, cash generation and profitable growth. 6+6 deleveraging program – progressing well – Asset sales € 4.4 billion out of targeted € 6.2 - 8.5 billion achieved or sale agreed – Free cash-flow objective clearly achievable Free cash-flow in 2002 amounted to € 4.8 billion D
Slide 6: Implementation: Efficiency for the group
Implementation Efficiency for the group. – Lean strategic management holding: – Efficiency improvements – Headquarters 900 employees – € 0.3 billion marketing – 3,000 employees transferred to – € 0.3 billion reduced losses divisions from accounts receivable – 1,500 job cuts – € 0.1 billion savings i
Slide 7: T-Com: Position strengthened
T-Com. Position strengthened. – Strong operating results contribute to the revenue T-Com Germany growth € billion – 3.3 million T-DSL 2000 contracts sold as of Feb. 28, 2003 1950 – 22.4 million ISDN 1900 channels as of Dec. 31, 2002 1850 – Domestic revenues with 1800 decrease of 1.3% almost stabiliz
Slide 8: T-Com Mission
T-Com Mission. Statement and program to deliver. Become one of the internationally recognized leaders in fixed-line communications – Become one of the most efficient fixed-line operators worldwide – Be recognized by customers for the highest quality of service – Maintain worldwide leadership in inno
Slide 9: T-Mobile USA
T-Mobile USA. Net adds1 in ‘02: Fastest growing U.S. wireless carrier. in (‘000) – Took No. 1 U.S. position in acquiring net adds in 2002 1,017 – ARPU levels held, contract churn and bad debt now under 872 control – Contribution to group revenue increased from € 2.8 billion1 to € 6.1 billion 509 526
Slide 10: T-Mobile Europe - Cash-flow generation matters
T-Mobile Europe - Cash-flow generation matters – European revenue up 15% to € 13.6 billion, EBITDA up 33% EBITDA to € 4.5 billion and investments in € billion down 26% to € 1.6 billion 3.4 4.5 – European EBITDA margin improved to 33% from 29% 2001 2002 – Western European ARPUs improved during FY 200
Slide 11: T-Mobile Mission
T-Mobile Mission. Statement and program to deliver. We will deliver the best customer experience in mobile communications - the true freedom to move - on a global scale Extracts from implementation plan 2003 Goals Example Measured by One Company – Process & system harmonization Realize scale effects
Slide 12: T-Systems: Strong adjusted EBITDA performance
T-Systems. Strong adjusted EBITDA1 performance. Adj. EBITDA1 in € million – 2002 revenues at € 11.3 billion decreased by 4.9% 350 324 318 – Adj. EBITDA1 grew by 30% to 300 € 1.15 bíllion 258 266 263 251 250 – Focused ‘Go-to-Market 210 Model’ to increase sales 200 effectiveness (order entry) 147 and
Slide 13: T-Systems Mission
T-Systems Mission. Statement and program to deliver. Establish T-Systems as a leading provider of IT and network solutions for major companies and key customers of Deutsche Telekom Extracts from implementation plan 2003 Goals Example Measured by Focus on top accounts Exploit expansion and cross-sell
Slide 14: T-Online: Focus on profitability pays off
T-Online.1 Focus on profitability pays off. – 26% revenue increase at the T-Online division Revenues (incl. DeTeMedien) on in € million year-on- year comparison to € 1.8 billion 1,830 – EBITDA of € 207 million, 1,449 from € –78 million in 2001 – Approx. 1.5 million new 2001 2002 subscribers in 2002
Slide 15: T-Online Mission
T-Online Mission. Statement and program to deliver. Become a leading Internet media house to deliver the best online experience – Lead through new innovations and formats/platforms – Monetizing the direct subscriber relationship Extracts from implementation plan 2003 Goals Example Measured by Streng
Slide 16: Summary
Summary. Debt reduction, cash generation and profitable growth. – Debt reduction program under way – Asset sales with € 4.4 billion achieved or sale agreed – Q4 results provide basis for cash-flow growth in 2003 – Structural changes in place – Decentralized structure now in place (incl. structure of
Slide 17: Financials
Financials. Dr. Karl-Gerhard Eick CFO ===!"§ Deutsche Telekom
Slide 18: Q4 – Group financial highlights
Q4 – Group financial highlights. Excellent quarter. – Group revenue up 9.0% from Q4/01 to € 14.5 billion – Adjusted EBITDA1 growth to € 4.4 billion or +14.6%, compared to Q4/01 – Investments2 of € 2.5 billion – Free cash-flow of € 0.2 billion despite high investments in Q4 compared to previous quart
Slide 19: Deutsche Telekom Group 2002
Deutsche Telekom Group 2002. Continuous improvement in revenue and adj. EBITDA1. € billion Growth in 2002: 16 – Revenue of € 53.7 billion vs. 14.5 14 13.0 13.4 € 48.3 billion in 2001 - 12.8 11.1% growth year-on-year 12 – Adjusted EBITDA1 of 10 € 16.3 billion 8 vs. € 15.1 billion in 2001 - 6 7.8% gro
Slide 20: Revenue and adj. EBITDA development
Revenue and adj. EBITDA1 development. T-Com stable – strong growth at T-Mobile and T-Online. Total revenue (€ billion) 2002 2001 ∆€ ∆% T-Com 30.2 29.4 0.8 3% T-Mobile 19.7 14.6 5.1 35% T-Systems 11.3 11.9 - 0.6 - 5% T-Online 1.8 1.4 0.4 29% Other 4.3 5.1 - 0.8 - 14% Adj. EBITDA1 (€ billion) 2002 200
Slide 21: Capex status
Capex status. Significant reductions achieved in 2002. € billion 2002 2001 T-Com 2.8 4.7 T-Mobile 3.1 3.2 T-Systems 0.7 1.3 T-Online and Others 0.5 0.7 Total capex1 7.1 9.9 Inv. in intangible assets2 0.8 1.3 Investments3 7.9 11.2 1 Additions to property, plant and equipment. 2 Excluding goodwill. 3
Slide 22: Deleveraging contribution
Deleveraging contribution. Positive contribution from each division. Adjusted Invest- Net interest € billion EBITDA1 ments2 expense Sum3 T-Com 10.2 - 3.2 - 0.6 6.4 T-Mobile 5.0 - 3.5 - 1.0 0.5 T-Systems 1.2 - 0.8 - 0.1 0.3 T-Online 0.2 - 0.1 0.1 0.2 Other4 - 0.3 - 0.3 - 2.4 - 3.0 Group 16.3 - 7.9 -
Slide 23: Free cash-flow
Free cash-flow. Further increase despite high investments in Q4. € billion1 Q4/02 2002 2001 %2 Cash generated from operations 3.6 16.7 16.3 2.4% Net interest payment - 1.3 - 4.2 - 4.4 3.1% Net cash provided by operating activities 2.3 12.5 11.9 4.4% Cash outflows from investments in – property, plan
Slide 24: Development of net debt
Development of net debt. Reduction by € 2.9 billion in Q4/02. Net debt as of September 30, 2002 (old definition) 64.0 Sale of T-Online shares - 0.7 Real estate - 1.1 T-Systems ABS and Sale and leaseback - 0.3 Free cash-flow - 0.2 Others (e.g. foreign exchange effects) - 1.0 Net debt as of Dec. 31, 2
Slide 25: Net debt development in 2002
Net debt development in 2002. Reduction despite € 8.3 billion one-time cash-outs. € billion Asset disposals incl. real estate Free Dividend cash-flow 2.8 and others 1 BEN 1.6 Debis 2.0 6.9 4.7 61.12 62.1 Net debt Reclassification 0.4 52.4 Dec. 31, 2001 Dec. 31, 2002 1 Free cash-flow (€ 4.8 billion)
Slide 26: Development of net debt since June 2001
Development of net debt since June 2001. € 10 billion reduction despite € 8.3 billion cash-outs. € billion 80 70 60 50 71.0 67.3 65.2 62.1 64.2 64.0 61.11 40 30 30/06/01 30/09/01 31/12/01 31/03/02 30/06/02 30/09/02 31/12/02 1 Under new definition. See backup for detailed explanation. ===!"§ Deutsche
Slide 27: Debt reduction track record
Debt reduction track record. Sales of more than € 4 billion since November 2002. November/ December 2002 Status asset Sale of UMC/Eutelsat S.A. € 0.2 billion disposals: Sale of 120 million T-Online shares3 € 0.7 billion 50% to 2/3 ABS transaction of T-Systems3 € 0.2 billion of target1 already achiev
Slide 28: Key financial ratios
Key financial ratios. Improvement of net debt/adj. EBITDA1 ratio. 2002 2001 2000 Net debt/adj. EBITDA1 3.72 4.1 4.4 Adj. EBITDA1/net interest exp. 4.0 3.7 4.2 Net debt/shareholders‘ equity 1.7 0.9 1.3 1 To interpret the adjusted EBITDA, please refer to the important information contained in the back
Slide 29: Shareholders' equity
Shareholders’ equity. € billion 66.3 42.7 35.7 35.4 23.8 24.6 25.1 12.7 1995 1996 1997 1998 1999 2000 2001 2002 ===!"§ Deutsche Telekom Page 29 Preliminary unaudited figures
Slide 30: Mandatory convertible
Mandatory convertible. Successful issue strengthens investment grade position. Rationale: To strengthen the balance sheet and therefore Deutsche Telekom’s investment grade position, as instrument is expected to receive significant equity credit from rating agencies Size: Up to 178 million shares (+1
Slide 31: Maturity profile
Maturity profile. Financed through to Q2/05. Bonds and Medium Term Notes (MTN) maturities as of March 2003 € billion 14 12 10 8 6 4 2 year 03 04 05 06 07 08 09 10 11 12 >12 ===!"§ Deutsche Telekom Page 31 Preliminary unaudited figures
Slide 32: Debt reduction: current status
Debt reduction: current status. Substantial progress already achieved. € billion Scenario Measures Measures Measures Q3/02 in Q4/02 announced still needed to reach target Net debt 64.0 61.1 58.8 Free cash-flow 5.5 – 6.0 0.2 5.3 – 5.8 Real estate 2-4 1.1 0.35 0.6 – 2.6 Cable 2.0 – 2.3 1.7 n/a Asset s
Slide 33: 2003 Outlook
2003 Outlook. Targets reconfirmed. – Adjusted EBITDA growth to € 16.7 - 17.7 billion – Investments1 of € 6.7 - 7.7 billion – Free cash-flow of € 5.3 - 5.8 billion – Remaining asset sales of € 1.8 – 4.1 billion2 – Decrease net debt to approx. 3 x adj. EBITDA by year-end 2003 1 Investments in property