T-Mobile US Analyst Day

T-Mobile US Analyst Day

• FCC auction 107 (C-band: 3.7-4.2 GHz)
• Round 1: 201208 - 210115
• Round 2 (assignment): 210127 - 210217
• Winners announcement 210224
• T-Mobile US
• Spent $9.3b
• Average 40 MHz in top markets (225m pops)
• Best suited for dense urban
• Total midband spectrum 292 MHz (AT&T 172, Verizon 244)
• Key Themes
1. Maintain 5G Leadership
• Ultra Capacity 5G (midband (2.5 & C-band) & mmWave), build best network, current coverage 125m pops, target 200m YE 2021, completion end 2023 (90% pops coverage)
• Extended Range 5G (low-band: 600 MHz) coverage 300m pops YE 2021, 97% YE 2022
• current 5G coverage 287m pops & 1.6m miles^2 (AT&T 0.7m, Verizon 0.4m)
• currently 85k macro sites, to add thousands + 50k small cells
2. Expand addressable markets
• expand market share in smaller/rural markets (50m HH) from 10 to 20% in 5 yr, with hundreds of new stores o/w 200 in 2021)
• improve service support, improve self-service
• to increase B2B market (50m lines) share from 10 to 20% in 5 yr
• to launch in-home Home Broadband plan March 2021, target 7-8m Home Broadband subs in 5 yr
3. Unlock merger synergies
• $1.3b in 2020, target $2.7-3.0b in 2021, to grow to $7.5b per yr (originally $6b) from decomissioning macro sites (35k YE 2022 for $3b synergies) + avoiding cost synergies ($2b) + SGA savings ($2.5b)
• synergies to NPV $70b (up from 43)
4. Better financial results
• SR 2023 $61-62b (up from 60), $70b by 2026
• core adj EBITDA 2023 $28-29b (up from 26), $36b by 2026
• capex 2023 $9-10b, 2026 $9.5b
• FCF 2023 $13-14b (up from 10-11), $18b by 2026 (down from 9-12)
• shareholder returns 2023-26 cumulative up to $60b
• Other
• current consumer market (310m subs) share 30%
• currently 7500 T-Mobile branded stores (postpaid) + 500 Metro branded stores (prepaid), plans store-in-store at Best Buy (1000) & Walmart (2200)
• current B2B market ($27b in 2020, CAGR 8% to $40b in 2025; 50m lines in 2020, CAGR 4% to 60m in 2025)
• current home BB market $90b

Deutsche Telekom Capital Markets Days 2018 - Highlights

Deutsche Telekom Group

• Guidance 2017-21: uninterrupted growth for revenues (1-2%), adj. EBITDA (2-4%), FCF (10%), capex (excl US) flat (EUR 12.1b), all units contribute from 2019; dividend 2018 to track FCF (70 c/share over 2017), dividend to track adj. EPS from 2019 (EPS from EUR 1.00 in 2018 to 1.20 in 2021), minimum dividend 50c
• Not on track 2014-18: capex 2014-18 CAGR 1-2% (CAGR 2014-17 6%), opex 2014-18 down (2014-17: EUR 700m indirect costs down vs. target 1.8b)
• Plans indirect cost cutting (excl. US) from automation & digitalisation, EUR 1.5b by 2021 o/w half non-staff (real estate, legacy IT)
• o/w 750m Telekom DE, 400m Europe, 100m T-Systems, 200m GHS
• All-IP complete in Germany by 2019 (consumer) & 2020 (business), Greece 2019, etc.
• Staff reduction already implemented (incl. phased retirement)
• Focus
• Digitalisation: app (Mein Magenta)
• Portfolio simplification
• Automation (1500 bots)
• Data (analytics, AI)
• IT transformation (harmonised API layer)
• Real-time operations (IP/BNG, Access 4.0)

Telekom DE

• Behind on cash contribution target 2014-17 (2% vs 2.7%)
• Guidance: revenue growth >1% (MSR 2%, BB 3-4%), adj. EBITDA growth 2.0-2.5%, cash contribution growth 4-5%, capex flat (EUR 4.2b)
• Target SME revenues EUR 6.5b by 2021E (2017: 6.0)
• Indirect cost cutting: EUR 300m from automation, 250m from operational excellence, 200m from platform retirement.
• Drivers
• Convergence: MagentaEins (HH penetration Europe from 21% (2017) to 40% (2021))
• Multi-brand mobile: focus on premium brands; IoT, 5G
• Leverage fiber & TV investments: TV share 50% YE 2021; wholesale revenue CAGR 2017-21 2%, wholesale end-users CAGR 2017-21 1% to 12.3m, wholesale ARPA CAGR 2017-21 2% to EUR 13.5)
• Customer service: 24 hr problem solving from 66% (2017) to 80% (2021); TRI*M score to 64 by 2021E (2017: 59)
• Broadband 
• >50 Mb/s coverage 62% YE 2018E, 95% YE 2019
• High-speed (50-250 Mb/s) coverage 80% (95% incl. wholesale) YE 2019 (70% access to 100 Mb/s based on vectoring; super-vectoring from 18H2 for 105-250 Mb/s for 15m HH YE 2018, 28M HP by YE 2019)
• To launch FTTH 2018, ramp up to 2m HH/annum from 2021 (given the right regulatory conditions), possibly in co-investment)
• IRR target FTTH/B 7.5%
• Target market share 30% by 2021E
• Mobile: 27k sites (to add 2k/annum), 80% FTTS; mobile base stations to grow from 27k (2017) to 36k (2021) incl. small cells in urban areas, LTE population coverage from 94% (2017) to 98% (2019), 99% (2020)

Systems Solutions

• Outlook 2017-21: rev CAGR 1%, adj. EBITDA CAGR 5%, margin 8-10%, capex stable (EUR 400m)
• T-Systems to return to growth (based on IoT, cloud computing, security solutions), cash contribution break-even by 202E
• Cost savings >EUR 300m
• Transformation 2018-21
• Portfolio focus: 3 clusters
• Core: fixed & mobile
• Growth: ICT, IoT, security, road charging, digital solutions, public cloud managed services, SAP
• Classic IT: managed infra services & private cloud, SI
• Sales revitalisation
• Delivery integration
• Overhead reduction (8 to 5 management layers)

T-Mobile US

• Outlook 2018: postpaid net adds 2.6-3.3m, adj. EBITDA $11.4-11.8b, capex $4.9-5.3b 
• Focus
• Un-carrier
• Beyond smartphone: Music Freedom, BingeOn, Netflix On US, layer3 TV, 5G, IoT
• Simplicity & digitalisation 
• Cost savings >$1b over 3 yr 

Europe (GR, HU, HR, SK, MK, ME, PL, CZ, AT, RO, AL)

• Outlook 2017-21: revenue CAGR >1%, adj. EBITDA CAGR 1-2%, cash contribution CAGR 2-4%, capex stable (EUR 1.8b).
• Indirect cost reduction EUR 400m by 2021 (120m from operational efficiency, 50m from simplification, 90m from digital customer interaction, 100m from leaner structure (incl cross-border synergies)).
• FMC: HH penetration from 26% (2017) to >50% (2021), revenue CAGR 2017-21 25% to EUR 1.7b
• FMCC (cloud): penetration VSE/SMB 31% (2017) to >50% (2021), revenue CAGR 2017-21 10%
• FTTH/B 
• Coverage 17% (2017) to 30% (2021)
• FTTH/B capex
• FTTH/B capex EUR 100m (2017) to 300m (2021)
• HP additions 250k (2017) ramp up to 750k per annum (2021)
• BB revenues EUR 3.6b by 2021E (2017: 3.2b)
• Mobile base stations European subsidiaries from 41k (2017) to 47k (2021) incl. small cells (macro cells adds 1k/annum), LTE coverage 99% by 2021

Group Development (part of GHS)

• Outlook 2017-21: revenue CAGR 3%, adj. EBITDA CAGR 3-4%, cash contribution CAGR 3% (-4% incl. site-roll-out at Deutsche Funkturm), capex flat at EUR 300m (+17% incl. site-roll-out) 
• T-Mobile US: un-carrier 
• T-Mobile NL 
• "Still a long way to go" (SR & EBITDA)
• Unlimited mobile de-risked, based on capacity expansion
• Unique incentive scheme
• Cost cutting 30% of overhead FTE (non-customer-facing) (from early 2017)
• Initiated towers carve-out (stay at DT)
• "Dutch market needs LT-viable maverick"
• Deutsche Funkturm: creating European TowerCo by insourcing tower assets NL, AT, etc.
• DTCP (Venture Capital)
• BT stake

Technology & Innovation: 5G

• Mobile capacity/speed upgrade (i.e. a better 4G). Economic rationale: efficiency gain (opex).
• FWA to complement FTTH/FTTB in (sub)urban areas. Economic rationale: more cost-efficient & faster time-to-market than FTTH/FTTB (capex). Note: capex 30-50% lower, but FTTH/FTTB TCO better after 20 years (FWA higher opex).
• Selected new products/solutions (massive IoT or services based on extremely low latency). Economic rationale: new revenue streams (e.g. campus networks).