1&1 AG (1U1) Earnings Call Transcript & Summary

[Interpreted] Good afternoon. A very warm welcome to our yearly analyst and investors conference of 1&1 AG in Frankfurt. It's my pleasure to welcome you here today. And making a long story short, Mr. Dommermuth, CEO of 1&1 AG; and Sascha D'Avis, CFO of 1&1 AG will guide you through our business year 2024 and the outlook 2025. And afterwards, we'll have time for questions and answers. Thank you very much, Mr. Dommermuth. You have the floor.

[Interpreted] Thank you very much, Mr. Keil. Ladies and gentlemen, as it was said, I have the pleasure to present to you the financial year of 2024 and the current situation of our network. And then Mr. D'Avis will talk about the outlook. You are familiar with our business, broadband business and mobile telecommunications, 3.95 million broadband connections. VDSL and FTTH complete packages, including voice and IPTV. We purchased via 1&1 Versatel, our sister company with an federal network and transfer points to carriers and municipal networks for the last mile, not via Versatel, but via Deutsche Telekom and city carriers. For mobile telecommunications, 12.44 million mobile contracts in the past year. We are first open RAN in Europe, fully virtualized. We have a broad market coverage with our main brand 1&1. And then we have our co-brands, GMX and WEB.DE and the discount brands that you can see here at yourfone and others. Our customer contracts of the past year, 130,000 more to 16.39 million, 12.4 million coming from mobile internet, 3.95 million broadband lines. For mobile Internet, we would have liked to see more growth at the beginning of the year, we were at 250,000 new contracts. However, last year, with the migration of our customers to new network. We saw some changes. We had some significant outages and so that cost us performance. For our development as in the previous years, a slight decrease, and we would have liked to have a difference situation. However, the earnings are on the right track, as you will see later, and so that is why we decided not to be too aggressive and rather making sure that the business works well. Our revenue of this past year, slightly down EUR 4.06 billion. Our high-margin service revenue of plus 1.8% to EUR 3.303 billion, and our low margin other revenue with smartphones, notebooks, tablets, also a decrease. Now hardware business is a low-margin business for us. We calculate the price with the contract term. So if the hardware cost is maybe EUR 1,200 then the monthly payment has a plus of EUR 50 for 24 months, we get the money back. The revenue always depends on how attractive a device is or what kind of incentives we offer and the better the deal, the more hardware we sell, of course. Our operative performance for the segment, Access, as I said, it's working well. So we have an EBITDA of EUR 856.1 million. And this is our traditional business. We have sales, we have customer service, operations and so on. And then we have our upfront costs, and we purchased the services the same way we would in case we were to get them at Telefonica or others. And our second segment is the 1&1 Mobile Network with EUR 265.3 million EBITDA increased start-up costs. You will see that it's going to be similar for this year. But then in the following years, you will see that the losses are not as high. And the goal, of course, is to, in the future, be able to produce at a lower price than having to purchase at a higher price for each gigabyte and to then make sure that this segment can also contribute to our profit, but this will take some time. Our CapEx, we have EUR 290.6 million in this past year. EUR 21.7 million for this segment Access, EUR 268.9 million in the segment for the 1&1 Mobile Network, hardware and software. Here you have an overview of the numbers, 16.3 million (sic) [ 16.39 million ] new contracts. We have service revenue of EUR 3.2 billion (sic) [ EUR 3.3 billion ], then the EBITDA of the Access segment, EUR 786.2 million (sic) [ EUR 856.1 million ], 1&1 Mobile Network minus EUR 132.4 million (sic) [ EUR 265.3 million ]. And the EBIT, EUR 455.8 million (sic) [ EUR 309.4 million ]. You can see here the effects of depreciation of investment in hardware and software, which then will change over time. EUR 0.05 per share the minimum dividend. Now let's quickly talk about the current situation of our mobile network and our telecommunications architecture. We have a completely virtual network that we are building. Today, we have 4 core data centers, they are redundant. We have 24 edge data centers around the core data centers. And then around those, we have the far edge data centers. The far edge data centers, the antennas, they have -- the antennas don't have their own intelligence, so there is no storage in some basement. The far edge data centers produce the IP traffic, transform it to radio signal and then from there, it continues. More than 1,000 active masts are connected to the far edge data centers. So we have more than 1,000 active hubs and more than 5,000 more are in development. Now what does that mean? We have contract for the use of a specific location and at this location right now, the antenna is being built or the mast is being reinforced or we have an in-house cabling process going on at the moment. Or if we don't have a location provided by tower crew, then we may use rooftops and look into statics first, of course. And then we will then build the masts. We will build the antennas and include the cabling fiber optic and so on, 5,000 locations, as I said, right now are in development. Now we are seeing progress here with the goal of the 1,000 active masts. That was our goal for 2022. It took a bit longer. However, from quarter-to-quarter, we are having better numbers. And now we have a critical mast compared to Telefonica and others in monthly development. And so you can say that the business is running, so to speak, and we are finding our place, it's easier to plan. And so the next 5,000 are in development right now. As I said before we are building the first open RAN in Europe. What is the main difference. We have open interfaces with that we are independent, we can decide ourselves what partners should provide us with hardware or software. We have our network that's built in a way that we always have fiber optical antennas, and we are prepared for real-time applications because we have the necessary capacities in the data centers so that we can have a quick and smooth transfer. We have a low electricity consumption compared to traditional networks. 3,200 employees at the different sites. And we have a very broad ecosystem with more than 100 partners who help us build and operate the network, 50% coming from Germany, 40% coming from the rest of Europe and 10% from the rest of the world with the exception of China, we don't have partners coming from China. So far so good. And so that's 2024 from the first perspective, and I'll hand over to my colleague, Mr. D'Avis.

[Interpreted] Thank you very much, Mr. Dommermuth. I would like to wish you a good afternoon as well. And I would now like to proceed to sharing the financials with you for the current financial year, which is 2024 and also give you an outlook to our expectations for 2025. Let me start with earnings. Revenue in 2024 was EUR 4.0643 billion, compared with EUR 4.0967 billion in 2023. Therefore, the high-margin service sales dropped to EUR 3.303 billion in 2024, while low-margin hardware revenue, particularly from smartphones, fell by minus 10.8% to EUR 0.76 billion. The cost of sales rose from EUR 2.938 billion in 2023 to EUR 3.022 billion. 2024. The gross profit fell accordingly from EUR 1.159 billion in '23 to EUR 1.042 billion in 2024 which is a decrease of 10.1%. The gross profit in the Access operating segment increased from EUR 1.326 billion in '23 to EUR 1.401 billion in 2024, which corresponds to a strong increase of 5.7%. Net gross profit in the 1&1 Mobile Network segment, 1&1, amounted to minus EUR 359 million in '24 compared to minus EUR 166.8 million in '23. This included some depreciation and rising expenses for the construction operation and the 5G frequencies in the year 2024, amounting to EUR 129.1 million with after EUR 47.3 million in 2023. The distribution costs rose from EUR 513.2 million in '23 million to EUR 535.7 million in 2024. So this corresponds with an increase of 4.4%. And this is mainly due to higher commission costs in previous years, which are deferred over several years. Administrative costs totaled at EUR 112.2 million in '24, we're slightly below the previous year's figures of EUR 115.6 million. Other operating income and expenses was at EUR 37.0 million, and the balance was above the '23 level of EUR 31 million. The change is due in particularly to improved income from the recovery and collection processes. Impairment losses on receivables and contract assets increased from minus EUR 105.4 million in '23 to minus EUR 121.9 million in 2024, mainly due to higher payment defaults. We will recover part of this through the higher income, as I said, from the recovery and collection process. EBIT was at EUR 309.4 million in 2024, which was below 2023 result of EUR 455.8 million, which is attributable to the higher expenses for the 1&1 Mobile Network. At minus EUR 4.2 million, the financial result in 2024 was below the previous year's figures of plus EUR 9.1 million. The increase in financing expenses was primarily due to the interest expense from the recognition of leases in connection with our network expansion. The decrease in interest income was mainly due to a lower average cash investment at United Internet. Earnings before taxes, thus amounted to EUR 305.2 million in 2024 compared to EUR 464.9 million in 2023. As a result, tax expenses fell to EUR 92.4 million in 2024. In 2023, tax expenses still amounted to EUR 149.9 million. We will therefore, achieve a consolidated group result of EUR 212.8 million in 2024 compared to EUR 315 million in the previous year. I would like to move on to the balance sheet. Balance sheet total rose from EUR 7.74 billion at the end of '23 to EUR 8.13 billion at the end of 2024. This increase of EUR 389.3 million is mainly due to the following effects: Current assets amounted to EUR 1.844 billion and were, therefore, EUR 83.7 million lower than the previous year's figures, which was totaling at EUR 1.928 billion. On the one hand, this is due to the EUR 107 million decrease in receivables from affiliated companies. The decrease is primarily due to the reduction in cash investments at United Internet by EUR 91 million versus 2023. On the other hand, inventories fell from EUR 176 million in the previous year to EUR 119.6 million in 2024 at the reporting date as a result of the scheduled reduction in inventories. In contrast, deferred taxes increased by EUR 69.5 million, which is primarily due to the advanced payments to Deutsche Telekom as part of the contingent contract. The noncurrent assets increased by EUR 473 million from EUR 5.13 billion (sic) [ EUR 5.8125 billion ] in 2023 to EUR 6.286 billion in 2024. This is mainly due to the increase in property, plant and equipment as a result of investments in the 1&1 Mobile Network. Current liabilities rose from EUR 716.6 million in 2023 to EUR 730.6 million in 2024. This is due to an increase in trade payables as a result of delayed invoices from upstream service providers in the network expansion. Noncurrent liabilities also increased from EUR 1.137 billion to EUR 1.306 billion in 2024. This increase is due to higher lease liabilities of EUR 222.2 million as a result of the growing number of antenna sites in the 1&1 Mobile Network segment. This was offset by the annual repayment of the liability from the frequency increase. Equity rose from EUR 5.887 billion to EUR 6.094 billion due to the positive group result we have shown. Moving swiftly on to cash flow. Net cash flows from operating activities amounted to EUR 311.4 million in 2024, compared with EUR 225.6 million in the previous year. These were made up of plus EUR 494.3 million cash flow from operating activities, increased tax payments of minus EUR 99.9 million which mainly relate to back payments of income taxes for previous years in excess of prepayments for the current income taxes in 2024. These excessively high advanced payments will be refunded as part of the general assessment and result in cash inflows. Reduction in inventories of EUR 58.4 million, the change in contract assets of minus EUR 64.7 million as a result of the reduction in hardware sales and from the change in deferred expenses in the amount of minus EUR 223.5 million due to the advanced payments under the quota agreement with Deutsche Telekom. And last but not least, obviously, from the change in working capital amounting to EUR 17.4 million-plus. Cash flow from investment activities amounted to minus EUR 180.8 million in 2024 compared to minus EUR 125.2 million in 2023. This can be broken down as follows: Cash CapEx in 2024, amounting to minus EUR 290.6 million mainly from investments in the 1&1 Mobile Network, EUR 91 million from the investment of free cash and cash equivalents at United Internet and plus EUR 19.1 million in interest payments received from the investment with United Internet. Cash flow from financing activities amounted to minus EUR 129.7 million in 2024 compared with EUR 101.8 million in the previous year. This is broken down as follows: EUR 14.1 million is repayment of lease liabilities as part of the accounting of the rental agreements for our antenna sites, minus EUR 8.8 million from dividend payments, minus EUR 61.3 million repayment of liabilities for the 5G radio spectrum, minus EUR 31.3 million other payments with the interest character. As in previous years, these relate to payments in connection with the white spots project and minus EUR 14.1 million interest payments from leases. As a result, in 2024, we achieved a free cash flow of plus EUR 20.8 million, a significant increase compared to the minus EUR 70.1 million in 2023. I would now like to discuss the bridge from EBITDA to free cash flow. We come from an EBITDA in the amount of EUR 590.8 million, trade receivables in the amount of minus EUR 6.8 million, inventories amounting to EUR 64.6 million. Contract assets amounting to EUR 64.7 million, deferred expenses of minus EUR 223.5 million, trade payables in the amount of EUR 9.7 million, other working capital to the tune of EUR 11.7 million (sic) [ EUR 11.2 million ]. Tax expenses in the amount of minus EUR 199.3 million and then the cash CapEx amounting to total of EUR 290.6 million, which brings us to a free cash flow value of EUR 20.8 million. So let us turn to the lookout for 2025. The service revenue in 2025 is expected to be at the previous year's level of around EUR 3.3 billion. Regarding the EBITDA, we are expecting it to fall by about 3.4% to roughly EUR 571 million after EUR 590.8 million in 2024. For the operational segment Access, we expect it to fall to around EUR 836 million compared with EUR 856.1 million in 2023. The decline in EBITDA is due to the expiry of the national roaming agreement with Telefonica, which provides for one-off payments every 5 years that are capitalized and then amortized. The national roaming agreement with Vodafone, which is commercial equivalent for 1&1 does not provide for such one-off payments. The use of the Vodafone network is recognized as EBITDA in the wholesale costs. In this respect, there is no change in EBIT due to the switch to Vodafone. The burden on the EBITDA is offset by the relief in depreciation and amortization in the same amount. The EBITDA in the 1&1 Mobile Network segment is expected to remain unchanged year-on-year at around minus EUR 265 million. This includes roughly minus EUR 100 million in expenses for customer migration and for network upstream services which will no longer apply after the complete migration of all customers in 2026. The investment volume, cash CapEx is expected to amount to EUR 450 million. It was EUR 290.6 million in 2024 for the previous year, mainly driven by the network expansion. So thank you very much for your attention. And we will now move on to answering your questions. Thank you very much indeed.

[Interpreted] Thank you very much. Indeed, I have a first question, that first row on my -- from my point of view, to left-hand side, Mr. Polo Tang from UBS, and then we go to the right-hand side to Siyi He from Citi.

Polo Tang from UBS. I've got three questions. First one is in terms of guidance, you're expecting stable subscribers over 2025 and stable service revenues, but can you talk through what you're already seeing in Q1? And is there any reason why Q1 trends would be different from the full year trends? Second question is just on the CapEx guidance of EUR 450 million in 2025. Can you maybe break down some of the key elements in terms of what is in this EUR 450 million? So specifically, how much is a spillover from the CapEx that you did not spend last year in 2024? Also, how should we think about the RAN CapEx and how many cell sites or antennas are you expecting to activate this year in 2025? And can you maybe also talk about data center CapEx? And my final question is really just about the network build. Can you clarify if you intend to build to 25% population coverage or 50% coverage? And separately, would you consider RAN sharing or some form of network sharing as an alternative to doing everything by yourself?

[Interpreted] Let me begin with the subscribers. This year, we are involved in a huge customer migration project. At the moment, we are actually migrating 50,000 customers per day from the Telefonica network that we have used on a wholesale basis, and we're now pulling these customers into our own network. And in the framework of this migration, we are actually losing more customers than would otherwise be the case. And there are obviously various reasons for that. It begins with us writing to customers who have an inactive contract or always thought about canceling and they have forgotten. And we're now actually reminding them that they still have this contract and that we want to change it over and they now take that as a trigger point to cancel their subscription with us. And it's also got something to do with the fact that the process is cumbersome. About 96% of our customers migrated more or less automatically where we basically have a profile SIM card, and we basically take a second profile, and we can do that over the air, basically. And with the change of the telephone number, we activate the second profile, but not every customer has a dual profile SIM card and only 4% people have a dual SIM card, but the process still doesn't work because they have a special type of mobile phone that they're using, and we're supporting thousands of mobile phones, but not the finite last model that they might have bought from Lord knows where or they have various special combinations. They have several dual SIM cards that they use combined and what have you. These processes are laborious and we actually do lose customers via that. If we have to send a new SIM card and the customer calls the call center and possibly has to wait and then there can be frictional energy losses. And that is why we think that this year, we are not going to show any growth. So I think we would -- that the normal growth that we would normally be making cannot be the same as before because we are migrating many more customers than last year. So at the moment, 50,000 a day. That is a gigantic migration project. And that is why we are working towards keeping our customers stable as much as we can. Now in the first quarter, I see a slight lapse with mobile phone contracts, possibly 10,000 to 20,000 customers less, particularly as we are migrating so strongly and so many. And those migration efforts are going to be huge in the first and second quarter. In the third quarter, it will tail off. And in the fourth quarter, there will be nothing that's more remainder left then. So towards the end of the year, you should be able to see more marked and more healthy growth again, at least that is the plan in our perspective. So my colleague, Mr. D'Avis is going to say something on the EUR 450 million CapEx.

[Interpreted] Yes, we do plan to reach 25% of our customers and 50% of our customers. Nothing has changed these targets, and we're building our network. And if there is an opportunity of usefully and intelligently doing RAN sharing than we would do that as well. So far, we don't use any RAN sharing, and we don't have any offers on the table that would suggest RAN sharing to us where we would say that this is stable enough that we could or should be doing this in the next few months. But why not? I mean this exists in other countries. And we basically have it in Germany, where you have antenna used by several providers. And if there were to be the opportunity, we'd obviously use this, obviously, the conditions would have to be right. In regards to your CapEx question, as you know, our CapEx in 2024 was significantly below our guidings due to phasing effects. And so for our plan 2025, we see the phasing effect of 2024 significantly. That's getting to this year and also investments for our capacity expansion until the end of the year. Then we have the network expansion that also has an impact in our CapEx and our CapEx budget includes also investments for our buildup of new sites.

How many sites you plan to deploy or how many antennas you plan to deploy in 2025?

[Interpreted] Well, I cannot publish the number now because if I then cannot fulfill this target, then we'll read that in the newspapers. We have now fulfilled our goal of 1,000 that we wanted to conclude in 2022. And we have been criticized for that. And we've had negative coverage due to that. Now as I said, we are improving quarter-to-quarter. But I don't want to say an exact number because then I'll be compared to that number always. We are on the right track, and we think that we can meet our goals. .

The second question Siyi He of Citi.

Siyi He from Citigroup. And I have one question and one clarification, please. And my question is your guidance on Access EBITDA, you expect Access EBITDA to be flat year-on-year. But in theory, you should have benefits coming from voice over LTE and also international roaming. I'm just wondering when you're thinking on the EBITDA development, what other costs you factored in your guidance for '25? And the clarification question is on the migration. You talk about that your migration to your platform is in full speed. Is that the same case when it comes to Vodafone's national roaming and whether you still think that the migration to Vodafone national roaming can also be completed by end of '25?

[Interpreted]. The Access business, this year is flat because we are not expecting any customer growth, no sales growth or revenue growth. But you're right, there are savings in the upfront input because of voice over IP, because of national roaming, but that is coming from mobile communications. If you look at the Access business, well, you can see what we usually would have to buy. And then in the mobile telecommunications business, we have our own production with voice over IP and then similar to the MVNO contract. You have the effects due to lower purchasing costs. And that compared to the costs we have in the mobile telecommunications business. Vodafone national roaming, we are migrating customers from our wholesale networks to the 1&1 network. They use Telefonica roaming and then later, we'll switch the roaming. So the customers won't even notice. They don't need a new SIM card or a new profile, nothing like that. They are in the 1&1 network and how we configure the network, our customers won't even notice. And so we are migrating about 50,000 customers for Vodafone national roaming, now going up to 80,000 because we have many customers with Telefonica roaming already. But in parallel to the migration, we are also switching the national roaming and want to conclude that process by the end of the year. And so this is within our time line so far.

Adam Fox from HSBC.

I've got 3 questions, please. The first one is on towers. In the past, you had spoken about potentially spending EUR 100 million to EUR 150 million of incremental CapEx on your own towers. There was a bit of a mention of that in the presentation. I wondered if you could just tell us where we are on that? Is there a moment during the year where we'll get an update on that? And what do we -- what, if anything, are you waiting for there? The second question is on the spectrum. The regulator has taken an important step in recent days, but the way that I look at it, at least, it could be quite a long time before you would actually get access to the sub-gigahertz spectrum. Obviously, you've got negotiations with the other operators to go. So I wondered if you could talk a little bit about your perspective on that process, whether or not it changes anything in the way you're thinking about the build this year. I don't think it sounds like it does. And do you have enough visibility at this stage to begin to think about the Capital Markets Day that you might want to talk about? And then my final question, which I appreciate is a sensitive one, so I'll leave it to you as to how you want to handle it, but I'd love to hear how you characterize your operating relationships with Vantage and Rakuten at the minute? I'll leave it there.

[Interpreted] Now could you please repeat the question about the Capital Market. My colleagues and I didn't quite get it. Please repeat that one, then I have all the answers to your questions.

I suppose I was saying we've been waiting for a Capital Markets Day for many factors. Spectrum, I think, was one of the last ones that we were waiting for. There is some clarity from the regulator now, not perhaps perfect clarity. Do you think we're at the point where you're willing to host a Capital Markets Day for the market?

[Interpreted] Now EUR 100 million to EUR 150 million for own towers you mentioned. And I can't remember to have said something like that during the presentation. Now what we are spending per year will be much higher. So about EUR 500 million, I'd say, in total for our own towers that we are going to build. And the question is whether we will keep them or sell them to a tower group. We have not decided on that yet. In regards to the spectrum, the regulator has decided that the frequencies for Telefonica, Vodafone and Telekom will be prolonged for another 5 years. And -- so 2028 may will then maybe bring another option with more diversity of what we have today. For us, this is very positive. So we have a large spectrum that's being offered and that is best better than having an option with a smaller volume. Of course, if I only need 1/10, then, of course, the impact is different from if I needed 1/3, let's say, if I need only 30%, then I don't have to pay as much. So obviously, if you calculate that, it's always impacting on how difficult it is for us as a market participant. Now we would have liked to see a spectrum auction to then know what volume we can use. We will only see that in a few years. For now, we have a lease for the Telefonica spectrum times 2 megahertz is the current spectrum that we are leasing from Telefonica is part of a remedy that was part of the merger release. And this lease ends this year, and the regulator has said that this spectrum will be continued to be at least for another 5 years. And so since we have the current lease agreement, we only need to prolong it. So this should be a fast process. Now the national roaming negotiations were supposed to go quickly as well and then it took 2.5 years, so you never know. But in general, I'm optimistic that this will be quite fast. The low band frequencies 700, 800, 900 megahertz. This will be more tricky because regulators said that they will need to negotiate with us again, and we contacted Vodafone and Telefonica and asked for their offer so that we can use their frequencies in a cooperative manner where we have active mast. Now it could be that in 2 weeks' time, we get a good offer from them, and that's it. However, my experience tells me that this is not what is going to happen. I'm already in touch with our lawyers. I told them to buy a new cabinet for all the files we'll need as you can imagine, that's 3 gigantic machines. There will be a lot of experts statements coming for the coming months. And I hope that the regulator will keep a close look at it, and we'll make sure that it's a fair process. The cost for the frequencies are clear and that's what we pay in order to prolong the agreement with the application we have. Let's say, we need 20% of the surface, then the frequency make us EUR 10 million per year, just to say a number, then we should pay EUR 2 million, that would be fair. But who knows what the process is going to be like. We have competitors who will come up with thousand reasons why this is not possible. Maybe there is a hospital right where these frequencies are or a senior citizens home and the senior citizens will need the frequencies. And if they can provide them to them, then they'll have a problem with the network and so on. In some negotiations in the past, they said, we only have 500,000 capacities left for our own customers. So there's nothing to share with you. And so we will continue to build our network. And as I said before 5,000 locations right now. We are in development and the low band frequencies are part of that. Of course, it's not just mid-band and high band, we also have a lot of locations, not 100% of the locations, but many locations where we are developing and expanding right now, and that is what we are going to keep doing. And then we will also be able to use low band, the earlier, the better, but I can't make any promises, but it will not hold us back. And then about our Capital Market Day, and I apologize once more for not having understood that. I mean you're absolutely right. We do not have any real clarity about what the frequencies will look like. But besides that, the image is, in fact, getting clearer. We know what the speed of expansion is. We see what the customer development looks like. We do know the cost factors incurred, the image is getting ever clearer, and we know where we're going. So I think that frequency topic is one that we're keeping an eye on because that could obviously make a difference depending upon from when we can use these frequencies and what the conditions will look like most precisely but then we will be in a position to make a proper statement and make a forecast that we will actually match in the years to come because, otherwise, it doesn't make sense because if you have so many unknowns still in an image, then it's not worth anything. So I think this is something that we should be able to do very soon. Now on that operating relationship with Vantage, I mean, we actually have good relations on the working level. Also with Rakuten, we've got the same. But with Vantage, we've got the antitrust proceedings. Well, I don't know if I'm allowed to call antitrust proceedings but the antitrust authorities are looking into that. So I don't know what the right technical term is for that, but we've been dealing with that for 2 years, and I'd very much hope that this will come to an end. So that either the antitrust authorities say they find that there has been an infringement or not because I have no influence on that, but the operational relationship is working fine. That's okay.

If I could just clarify the towers question because it may be my misunderstanding, your CapEx budget is EUR 450 million this year. I thought we would -- I thought there was a chance that because of some of the challenges you are facing in acquiring sites that you might, on top of that build out some own sites with a view to a sale and leaseback subsequently. Is that the right understanding? Or not? Is there an envelope of CapEx that you might end up spend or money for cell sites that you might end up spending during the course of the year if you have to do more build yourself. Have I misunderstood?

[Interpreted] As I said, in 2025, CapEx includes investment in passive infrastructure and for our own construction. I mean if we could speed that up, we would obviously do so. And then obviously, yes, there would be a higher CapEx need. But at the moment, we feel quite happy with the approach that we're pursuing there and with the numbers that we've mentioned. So I think this is sufficient. There is enough room in this coffer of EUR 450 million for our own construction too.

[Interpreted] The next question, Mr. Wolf Martin from Shareholder Value, and then we go to the third row on the left-hand side.

[Interpreted] Hello, Wolf Martin from Shareholder Value. Could you give us update on your negotiations with Rakuten. And then I have another question. You have adjusted your dividend for United Internet, but the savings that you've made with the frequencies goes to 1&1 so why haven't you adjusted the 1&1 dividend as well?

[Interpreted] Well, I don't know what you mean about an update of the negotiations on Rakuten. And we obviously negotiate with them basically daily about change orders about new things, whatever there is. I don't know what you're trying to get me to.

[Interpreted] Well my question is that you say in the guidance for 2025, there aren't any payments for delays in your dealings with Rakuten because weren't you going to negotiate that with them again?

[Interpreted] Well, take out Rakuten, it is absolutely right, we're negotiating with the partner about compensation and damages. But as we have liabilities of not telling about -- I mean keeping these things secret, but this is not included in any guidance if there were to be a payment. Now after the dividends you were talking about, in United Internet, we have a clear dividend policy. And dividend policy has been undercut repeatedly in the past few years. I mean we basically had very small amounts. And we didn't do that because United Internet wasn't earning enough to pay the dividends, but we actually didn't know how much money, 1&1 would have needed if there had been the opportunity of buying additional frequencies. And until this weekend, I mean, that could have still happened. So we've said if there were to be an auction for a frequency, then obviously, we want to have our coffers appropriately full and then have the cash pool with the United Internet. By now, we have used the cash pool that we still have with United Internet because we have a huge CapEx for the next few years and our share isn't trading particularly high at the moment. So if there were to be an opportunity and new money was needed, then we would have called upon United Internet to take out a loan for us, some financing vehicle for us, and that is why we have kept some powder dry, so we could have helped if the opportunity had arisen. This has now not happened and the opportunity is postponed, and we assume that in a few years to come, where the wide range on offer is going to be much broader. And then hopefully, the auction and the tender with the bids is going to be hopefully cheaper because there'll be more available so that we can basically pay for this auction and to any auction that might come for a new frequency. Well, we obviously could pay a dividend now, and then we have to increase our capital in 3 years' time. And that actually I think, doesn't make much sense. And therefore, we said let's stay prudent and straightforward, let's keep our hands on this money at the moment. 1&1 is debt free, but we have to continue building the network. We've also -- we've seen last year the risks in the network. I mean we had an outage for 3 days last year, which was huge. So all of that is not without risk. I mean building the network isn't risk-free. We don't know what the frequencies are going to cost. Will we be able to maintain, keep our towers, will we have to do a sale and leaseback, how expensive will the next auction be? And I mean, we really have to make sure that to be able to pay this money we would have to take out a loan, we as 1&1, to then pay a dividend and build the network and finance the next bid for frequencies, and we thought that, that wasn't the right way to be going.

[Interpreted] Now let's move over to the left-hand side, Frank Rothauge from AHP Capital.

[Interpreted] I have a CFO question, if I may. In the last meeting last year when we talked about that you had a decline in the gross profits with stable income at the time could you possibly show the effects again that led to this gross profit decline. I would actually like to understand whether there are effects included as a consequence of building the network.

[Interpreted] Yes, the decline, the gross profit is completely owed to the network building activities. Because in the operational segment of Access, we have done really well. The gross margin was increased very noticeably last year. It was a strong year, and I think the burden more or less exclusively comes for financial effort for the 1&1 Mobile Network.

[Interpreted] If you were to roughly quantify that, I mean, those effects, network against improvements in the Access segment.

[Interpreted] If my memory serves me right, I think we have an increase in the Access segment of 5.7%. And correspondingly a decline in the 1&1 Mobile Network.

[Interpreted] Then up here, Camilio Azzouz from Amber Capital in the first row, please.

Congratulations for the publication. Three questions on my end. Last year, you were communicating on churn from migration to be around 250,000 net adds. There would be largely low-value net adds for the reasons described by Mr. Dommermuth. So if we take that into account and the guidance of stable net adds, should we assume that your commercial addition should be around 250,000 for the year, including mobile and fixed and keeping in mind that fixed could be slightly negative, so mobile could be closer to 300,000 highlighting a strong pickup in commercial momentum. This is my first question. My second question is on the 5G costs. So I see that in 2026, you're going to start reducing that number for EUR 100 million, which is better than expectations. Can you help us understand by when the 5G segment will turn into a positive contribution into your numbers? And my third question is around the optionality around RAN sharing. So I welcome the comments made by Mr. Dommermuth that you would explore potential optionality around RAN sharing. How should we think of the CapEx profile of the company if you were to use RAN sharing as a tool to get from 25% to 50%. I imagine this would be a lot more asset light and therefore improve the cash flow generation.

[Interpreted] Thank you very much for that question. On that first question, you're absolutely right. It's true that in 2025, if we weren't doing this huge migration, we'd be talking about 200,000 to 300,000 of net growth. I think that is still the right figure to bear in mind, and that's also what we're expecting duly. I think by 2026, obviously, it depends upon the competition a bit, but that is an absolutely correct assumption. That is the order of magnitude that we're expecting. And we think in 2025 with this huge migration process. And it is true that we are expecting a slight -- very slight decline in the fixed alliance and a slightly higher growth in the field of mobile telephony. . On the mobile phone network for next year, we just said this year, we have about EUR 100 million to spend this year that will not have to be spent next year. We basically have to pay compensation for taking over and transferring mobile numbers from other providers. We have higher call center costs because customers are asking lots of questions. There is uncertainty, not all customers are on the new networks, and we cannot lift all savings potentials like with international roaming and others. Therefore, we assume that next year, things will look EUR 100 million better. But we're then still not in the black with our network. But I can't tell you how long precisely because you'd obviously have to know what the frequency costs will end up being, which we don't know and cannot know. But I can tell you what I really think of course, we all want to have our network up and running in a profitable way. I mean, no doubt about this, but I'm now sitting here in my 38th year and whether we are getting it to be profitable in year 40 or 41 is not going to make a big difference for the company in the long run. We're obviously trying to do it as quickly as possible, but it all has to be a good quality. We have to understand what we're doing at every point. And I've just shown you our map, and we basically are tying each antenna in with a fiber cable. I mean we have kilometers of fiber optics connections that we're putting into the ground. I mean that -- I mean this is just going to make us very stable, but it's not cheap. Others do it much more cheaply. I mean all of these data centers that we're building I think most of that could be very slightly cheaper, but we have decided to build something that is future orientated and does leave room for further development and this is the most modern infrastructure that you can find anywhere. I think what we're doing is the most modern structure and infrastructure in existence. And that is what we are guided by we want to do this state-of-the-art, and we want to do it best possible. And while the RAN sharing question is a good question. I mean, what would happen if we had between 25% and 50% of RAN sharing, I think those are dimensions in RAN sharing that I don't think about, I have to say. I think about the odd location that we could cover by RAN sharing. But I'm not imagining that we are no longer building any locations or any towers or whatever? Because we have a RAN sharing partner and use their sites. But yes, it might be, but it might also snow in December. I don't actually see any reason to believe that right now.

[Interpreted] Mr. [indiscernible] here at the first row, and then we'll move into the third row again.

[Interpreted] Mr. Dommermuth you said 5,000 towers in development and per quarter, you can be compared to the other 3 large stakeholders. Now maybe you would want to tell us a range of their numbers. So we have an indication of where you're going. And then a more general question, we'll have a new government in Germany, a new federal government. We already know that. We still don't know what government is going to look like exactly, but it seems to be a mixture of -- coalition of the red and the black part, the SPD and CDU. So that means investments in defense, in infrastructure without precedence. And so is there a business for you in that plan of the current government that is being formed?

[Interpreted] Well, in regards to the towers. We have about 200 to 300 locations per quarter, and we want to see -- per day, and we want to see an upward tendency there. Now in regards to the new federal government in Germany, so far, I don't see any business we could get from that investment plan. Now in regards to landlines and mobile telecommunications. For mobile telecommunications, it would be easier if we had a license for new masts and that would definitely help. There have been talks about that, but it's not really a new business model. It will just alleviate the current business and for fiber optics, I heard that they are counting market born solutions. And so that is about what we have at the moment, whether this is going to be increased or not? And if you can get subsidies or not? I cannot tell you today as 1&1 we are using the optical fiber of 1&1 Versatel. And so I don't see how this could be a great new business for us compatible with our broadband business.

[Interpreted] Simon Stippig, Warburg Research. I would like to ask the following question. In regards to CapEx, if I look at the delta of your guidance, November 2024 to the numbers published this week, then there is a gap, EUR 130 million phasing effects, EUR 140 million, something like that. Is that correct? And the CapEx expectations, would you say that in 2025, we'll have a peak CapEx from what we've seen. And in regards to the EBITDA 1&1 Mobile Network, you said EUR 100 million additional expenditures. Could you give us the split between the migration and the upfront costs for the network? And in regards to the quarterly EBITDA trends, you had a slide with the trend of the EBITDA over the different quarters, it's a negative trend. So is it fair to say that this trend will be turned around the next year. You said Q4 will be much stronger than Q1. And the last question is this, what would be the worst case in regards to the point in time to then have a profitable business?

[Interpreted] Thank you very much. In regards to your first question regarding CapEx, yes, that's correct. There is or there was quite a large gap. There was one gap between booked CapEx and cash CapEx. So there is a phasing effect where you can really say that the payouts in 2025 will come. And on the other hand, there will be effects from 2025 going to 2026. And so you can't really say that you have the full EUR 130 million as phasing effect for 2025 because some of that will be moved to 2026. And so the peak CapEx at the moment, I think we can say that's 100% because we still have those phasing effects. There are delays. And with the dimension we are working with, this could easily be between December, January, February, there could be a shift but we have -- we are at a high level already. And so I think the numbers will improve with the CDCs and final capacities being concluded. And once we can focus on the rollout, the CapEx will go down. The EBITDA for mobile telecommunications, you asked about the EUR 100 million and what they consist of. And I can't give you the details here. However, we have mentioned the main effects, the migration and the larger effect is that in the EUR 100 million. Now in 2026, we won't have that anymore. And then additional savings due to national roaming and others that will then have a positive effect on the EBITDA next year. Your assumption is correct that the EBITDA in 2025 of mobile telecommunications, of course, from quarter-to-quarter will improve Mr. Dommermuth talked about the migration process and the huge number planned for 2025. And most of the migrations will take place in the second quarter. We've already had lot of migrations in the first quarter, there's going to be a peak in the second quarter. And then in Q3, we'll see a slowdown towards end of the year, we'll then have migrated all our customers to our network. And then we'll start seeing more and more savings and fewer expenses for the migration towards the end of the year. And then you asked the question of all questions. Is the network profitable? Well, so that -- the own production costs less than what we have to buy and now I have this answer that may not be satisfactory to you. It's a fixed infrastructure. And the earlier we use it at full capacity, the earlier, it's going to be profitable. So it's a question of the costs and sales and volumes if we're quicker than it's going to be better for us, but I cannot give you an exact day. You ask us each quarter, and that's okay. But what I really want to focus on more is cash more than on EBIT or EBITDA. And the cash flow now, I think the expenses will soon go down. So we will not have to put much more cash in there then we have savings. We have the core data centers. We have the -- once we have the far-edge data centers as well, then we'll only invest in the rollout of the antenna locations. The more we can lease the better, the fewer CapEx we need, the more on production we can have and in a few years, we'll be able to see that on the cash side, it's really working out. The EBITDA will see some more delay, EBIT as well. But for cash in a few years, this should be done. And what we should also look at is the numbers. We know that these are very large dimensions and 30% is paid by the government because we don't have to pay taxes on that part. And of course, the other 70% also heard, but it's only 70% that we cannot pay out as a dividend, not 100%, at least.

[Interpreted] Yes, go ahead.

[Interpreted] [indiscernible] I have a question about the real-time applications. You are building a state-of-the-art network with a very large investments. Very positive, I must say. Now what is your feeling or your experience when customers ask you about this and you. Maybe you can give us 2 or 3 examples?

[Interpreted] Now I would love to give you many very good examples. We have tested it with a game server. And we had low latencies below 3 milliseconds and so 5G is 2.5 milliseconds, I think, the signal. And we were able to do that in 0.5 millisecond to go to the data center and back. So that's quite fast. In principle, it's working, it's physics, if you have fiber optic, then of course, it's faster if it's a shorter distance. However, today, I cannot give you an application, a real-life application where people are willing pay for that right now. But we know or we think that this is going to come, and we want to be prepared. But we have do it once there are applications that can actually bring us revenue. And so people need to be willing to pay for that. And for now, we have to be honest and say this is nothing we are going to do in the next few months.

[Interpreted] I think we're coming towards the end because our parent company, United will also have their press conference in a moment. So maybe 2 or 3 more questions. If there are no more questions, then we would like to thank you. Investor Relations and our CFO, will still be here for you, probably not today because now it's our colleagues turn, but in the coming days. We look forward to your reaching out to us. Thank you very much for your attendance and for your questions. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]