freenet AG (FNTN) Earnings Call Transcript & Summary

Dear ladies and gentlemen, welcome to the Capital Markets Day 2021, including the Q3 2021 results of freenet AG. At our customers' request, this conference will be recorded. [Operator Instructions] I now hand you over to Tim Frederik Oehr, Head of Investor Relations, who will lead you through the agenda. Please go ahead.

Thank you. Good morning, everyone. Also from my side, a warm welcome to our Capital Markets Day 2021. Let me briefly discuss the agenda for the call today. In the first part, Ingo Arnold will present the Q3 results. In the second part, Christoph and Ingo will provide detailed information on market opportunities, key focus areas for the next years and financial trends up to 2025. Both parts will close with a Q&A. The Q&A session for the Q3 results is limited to 20 minutes, and will end at 10:45 CET. Therefore, I ask you to keep your questions short so that everyone has a chance to ask questions. Of course, the IR department will be available for questions afterwards. So with this short note, I now hand over to Ingo for the presentation of the Q3 results.

Okay. Good morning, everybody, from my side. Thank you, Tim. I'll start with the results. What you saw from our publication yesterday evening. I think, again, a very, very successful quarter. So yes, it's an easy job here to present these figures because, I think, in all dimensions, very, very strong. Starting with a group overview here of the financials. On the one hand, the group revenues are stable compared to the first 9 months of 2020 in the third quarter, even higher than last year. So I think it's 100% what we guided, a stable revenue line here. In the gross profit, yes, it's very positive. If you leave out the gross profit from freenet Digital, what we sold at the end of Q3 2020, in each single quarter of 2021, you see an increase of the gross profit during the year. In the third quarter, again, EUR 214.8 million versus EUR 214.1 million in Q3 '20. EBITDA, it's already up in each single quarter again here. Comparable to the gross profit, you see an increase of nearly EUR 5 million. So all in, we see an increase of 4.4% now. So it's still very strong on the one side from the business itself, what you see in the gross profit, but on the other side, also from the cost side, but I would like to pronounce that the cost reductions are not decisive for the good result. What is this decisive here is the good gross profit. And I think this is the base also for the projection, what we will present later on for the next years. Looking into some subscriber figures here in the postpaid business, again, a slight increase in the third quarter, 25,000 customers. Also in the app-based tariffs, FUNK and Flex, there's an increase of 6,500 in the last quarter. And in waipu.tv, it is an increase of 24,000. Definitely not disappointing here because if you compare it with the growth of the third quarter in 2020, where the business grew only by 5,000 new customers, I think this is typical for the summer quarter, and therefore, the 24,000 increase in waipu.tv is, again, a very strong figure. Slightly disappointing for some of you maybe is the decrease of the subscriber base in freenet TV. I think we already announced it during the year. We see it quarter by quarter. But what is very important for us is that even with the decrease of the RGU, the EBITDA is increasing. And, at the end of the day, this is the most important figure for us here. Moving to the mobile business. And here, I think, the headline is hitting the point here. It is rock solid. I think you do not see any weakness in this business especially if you look into the service revenues postpaid, which are the most important ones for us. You see -- in comparison between the third quarters, you see an increase by EUR 11 million to EUR 392.6 million in the third quarter here. And so, I think, also here, the important top line here is growing. And I think what is not that important for us is the line of the hardware business. It is slightly increasing with reopening of shops, but as it is no high margins, it is not really important for us. So it is only a slight increase, but this does not -- is not an important fact here. Moving to the gross profit in the mobile business. What we see here also is an increase in the gross profit quarter-by-quarter to EUR 164.2 million from EUR 162.8 million. It is an increase comparable to something what we already saw in the second quarter. And here, you see how strong the business is. You do not see it 100% in the EBITDA because the cost situation is not as good as in the quarters before. But still, the bad debt level is low, but we still do have all the provisions on the balance sheet what we had built at the end of last year. Moving to some KPIs of the mobile business, very important, the ARPU. It is EUR 18.40 in the third quarter 2021. So it is even higher than in the third quarter '20. So it is an increase, what we have not seen for a very long period. But, at the end of the day, as I did before, when it was slightly down, I would say this is a stable ARPU. And I would not forecast now for the next quarters that the ARPU will increase quarter-by-quarter. It is a stable situation. The ARPU is an important figure for us, but it is not the most important figure for us. And I think we explained it especially during the call at the end of the second quarter. We see that roaming is partly back. This is not important for us in terms of profit, but we see, especially from the private side, that travelers are starting again during the summer. So we see a slight increase in roaming, but we are not back where we were before the crisis. Digital lifetime -- lifestyle revenues also very -- it's a perfect picture of what we see here. Again, an increase up to EUR 52.2 million in the third quarter now. And it was a very strong quarter. And I think what is very important for us is that we have more and more subscription plans, which are part of this digital lifestyle portfolio here. And with these subscription plans, the business is much more sustainable. And I think this is something what you saw during the COVID-19 crisis that normally you would expect that you have a lot of reselling here, which would decrease during shop closure. But what you see is that, quarter by quarter, it could be increased, and this is because we have more and more subscription plans, which are part of the business here. Moving to the TV business, which is the growth part of our business. And I think all what we promised is now a reality. What you can see is that the revenues are increasing, especially because of a growing number of customers in the IPTV waipu.tv business. On the other side, in the gross profit, I think the quarter, what we see here was the best quarter what we ever had here in the TV business with EUR 46.1 million. So it's a very good development what we see. And also in the EBITDA, we see an increase on a 9-month basis to EUR 72.1 million. And I think it's a perfect fit that in all dimensions or in all parts of that segment here we see an increase. freenet TV is -- was growing by EUR 4.2 million, and I think this is a confirmation of what I said today and what we said during all these calls, yes, we see a decreasing number of customers in the freenet TV business, but we see an increasing EBITDA, and therefore, we do not care that much about the decreasing RGU figure. In the B2B business of Media Broadcast, we see first effects from digital radio, therefore, we see the slight increase of EUR 1.9 million. And in the waipu.tv business, as we see the effect from the growing number of customers, and therefore, we see an increase of EUR 7 million in the first 9 months compared to the last year. And definitely, it will be a positive result all in this year. Moving to the free cash flow. Free cash flow is on the -- it's even higher than the upper range of our quarterly guidance what we published because we published a guidance of EUR 50 million to EUR 60 million a quarter. Now we have a result of EUR 60.8 million as free cash flow in the third quarter. So it's -- compared to last year, it is definitely lower. But, as you all know, there were some effects in the -- working capital effects last year, which were based on prepaid invoices from some of our partners, and therefore, it looked better than it really was and -- last year, then the fourth quarter was worse. This year, this will not happen because we have, I would say, a normal free cash flow in the third quarter, and therefore, we will have a normal free cash flow in the fourth quarter, which will be something between EUR 50 million and EUR 60 million again. So moving to the KPIs, financial KPIs, I think still here, again, very strong figures. We see, on the one hand, the equity ratio, which is 41.3%. And this is even that strong as we have the impairment of the fiber network, right use of EXARING, which we did in the second quarter. And so therefore, it's significantly above the lower limit what we said at a level of 25%. So it's a very strong balance sheet on the equity side. On the other side, our net debt, it's 1.9. Definitely, it is influenced by the dividend payment what we did during the year. But with 1.9, it's below the 3.0, what we said as the upper limit here. Putting or leaving the leasing out of the view here and just focus on the bank net debt, we see that the leverage is 1.0, and therefore, it's a very, very healthy balance sheet, what we do have here. Moving to a last page, which is the guidance, what you know, I think we increased the guidance in terms of EBITDA and free cash flow some weeks ago. What we do see now is in the subscriber guidance, I think, yes, all what we guided here will really happen. I can confirm this. On the financial side, yes, the revenue will be stable. The EBITDA and the free cash flow will be at the upper end of the range what we published. So it is something -- it's met what you can do. And I think the risks are relatively slow for the last quarter that something could go wrong here. Maybe one hint to the share buyback program. As you all know, and as you all can see from our publications, we -- during the last quarter, we had an order out, which was to buy shares below the EUR 21 share price. We have not seen it. I think in the last weeks, we were -- we could not change our order because we had a quiet period. I think now we have to rethink the limit what we gave to the market. And I expect starting some -- by next week again. And -- but we have not yet fully decided, but definitely, we are interested to buy further shares during the year. So this is an overview about the financials at the end of the third quarter. So I would -- I think I get back to the operator to start the Q&A now.

[Operator Instructions] We have the first question is from Jonas Blum, Warburg.

Jonas, in case you're talking, we can't hear you.

We have the next question. It's from Ulrich Rathe, Jefferies.

I have 2 questions. First one is the shops were open throughout the period, but the non-service revenue, the non-mobile service revenue in mobile in decline. Now on your presentation, you are talking about the hardware revenue is actually growing. Could you comment on the difference? Is that essentially M&A related or what is going on there? What is declining there? And related to this also, I mean, with the shops open throughout Q3, the postpaid subscriber intake was actually slightly weaker this year than last year. And could you comment on that being a competitive issue or a marketing phasing issue or what that might be? And my second question, you might want to defer it to the second half of the presentation, but there is a comment in the results release about smart pricing having been started in some regions. Could you comment on what exactly that is?

I think I would like to start with the hardware question. So what you can see in the figures is that there is a slight increase compared to last year. I think what is important to remember is that, last year, GRAVIS was very successful in the second and the third quarter. Because a lot of people were working from home, so it was necessary to buy a lot of hardware in the GRAVIS stores. So definitely, the revenue is lower this year. It is on the level of 2019, so it's not bad what we see. But last year, there was an untypical increase of revenues from GRAVIS, and therefore, the increase now looks not that big from the hardware side. In the normal shops, we see the -- definitely, we see an increase.

Yes, if I may add. I mean, for GRAVIS, the fourth quarter is key on revenues. I think the last week, prior to Christmas, by far, the strongest week overall. And last year, for the reasons mentioned by Ingo, we had an untypical seasonality. On the development on retail concerning the gross adds and net adds, I mean, in fact, we see an increase in renewals, and we see a slight decrease or rebalancing on gross adds, which, I think, is overall the sentiment of the market. The number of gross adds, as a general number, is going down for years and years now. So it's just a shift between the types of transactions, which is not fully transparent in our reporting. Overall number of transactions was on the same level as prior to the crisis in our own shops and franchise and in third-party retailers. Also Media Saturn, they were still suffering some -- to a certain extent to some closedowns. We see data -- the footfall, we see that also will -- is consistent with their own reporting. Footfall is a bit down, but the purchase dedication of the people showing up is bigger. So conversion is better than before. So overall, I would not confirm the impression or the observation. I would rebalance it with the types of transaction, as I explained. On the smart pricing, I will refer to that point, and we'll give you way more detail in the next piece or next part of our presentation today.

The next question is by Martin Hammerschmidt, Citi.

Two questions, please, from my side. On shareholder remuneration, I think you've indicated in the -- that you will hit the upper guidance of the cash flow. You have low leverage and see limited M&A opportunities, if that's still valid. So how should we think about shareholder return going into next year given that sort of the free cash flow is ahead of the original target? And beyond the EUR 1.50 dividend, would you prefer a special dividend or do buybacks again? And then my second question is on the postpaid net adds. We've seen, obviously, strong growth from O2 yesterday, and commented they expect to continue growing at a healthy clip] and competition to remain rational. Do you see that as well? And in particular, have you seen Vodafone getting a bit more commercial than with you guys? Any thoughts and view how you see competition unfolding from here would be great.

I start with your questions about remuneration. I think, first of all -- I think we have a guidance out, which says 80% of the free cash flow will be paid to the shareholders. I think -- yes, I think the -- it is positive because when we have a higher free cash flow, then the dividend is higher. And if we have a lower free cash flow, then it is lower. This is the mechanism which is behind it. And I think -- yes. I think it will be what we will do. And it's also part when you -- I think we'll discuss it later on up to 2025. At the moment, we do not see to change anything to this rule here. Then you asked about special dividend or whatever, when the SBB will not be fully used. I think it is too early to say because, today, we do not know if it will not be fully used, it would be possible. If you see the volumes what we did at the beginning of the year, or at the end of Feb, when we started the second SBB. With these volumes, it would still be possible to use the whole amount of EUR 135 million. Is it -- is it so realistic? Maybe not. But I think it is not today, it is not the day to decide what we do with the additional money or the free money. I think we have to discuss, we have to consider but we have not done now.

Yes. I would also confirm what Ingo said, I think we're happy that the development is as it is, and we will see how we treat the SBB. I think that is a decision that also will be discussed, once again, with the advisory team, respectively, with the Supervisory Board. On the net adds, and then you mentioned the strong performance of Telefonica. I mean, if we do our internal breakdown on our net adds, and we do it by network, and then put it into a ratio to the overall volume of -- within the Telefonica network, I think that we follow the track or we are on the same page with their growth. We can see that. I would also -- but I would state that Telefonica, right now, with their portfolio, they're in a very strong position. It's very competitive. I think they have been quite consistent over the past 12 to 18 months. And also, they are hard work on not only the network as such, but also network perception pays back. We see that also reflected in the reactions of our customer base. So I think that is, no doubt, a strong move, and we appreciate it because we also take advantage. The same -- the reference to the Vodafone deal, I think, any of us is doing, within a certain seasonality, some hard push on volume. I have seen the Vodafone offering, which, I think, was 6 months free of charge offering. I personally, seeing tests in our channels, do not like the offer as such because it takes the risk that people take the advantage. But then step out or try to step out and cancel the -- at least the prolongation of the contract as soon as they are stepped up to the regular price. So I tend to dislike these kind of step-up offers. But I would put it into -- on my list, it looks like the typical seasonal show. Vodafone business here is 31st of March. They typically spend more money in third quarter, which is the fourth quarter on the calendar. And then they review their spending and their tactics in January. So they try to take advantage from the year-end rally, where all the others typically look for, like, holding money back and trying to keep things tight. I think that is nothing exceptional. And I would also confirm that, overall, it's a more rational market. We see that -- I think the cheapest United Internet offer on unlimited data is EUR 70, so that the former price breaker, United Internet, is a lot more calm right now. So I think that helps, and that is everybody acts in the same manner.

[Operator Instructions] We have the next question is from Polo Tang, UBS.

It's really just about the outlook for the mobile market. I mean, you're sounding a lot more constructive. Historically, you've always sounded a bit cautious and indicated that mobile was more of a stable business going forward. So can I ask what has changed your view?

Yes. I think -- I'll give you an answer in the presentation of the outlook. So if I may postpone, but I will come back to your questions after that one, if this is okay for you?

Okay.

Next question is by Ulrich Rathe, Jefferies.

I don't want to monopolize earlier. But one more question is on the DTT decline. I mean you're saying it doesn't really matter because the EBITDA is growing on the price rise, and I thought, fair enough. But it is, of course, slightly concerning that this drift in the customer base continues so long after the price rise, which suggests there's something more structured going on. So back to this question, which we raised them, I think, earlier in the year already, at what point do you expect, and at what level do you expect this customer base to stabilize? Yes, that's the question.

Yes, Ulrich, with all the optimism and all the constructive view, I think, that is an unanswered question also from our side. What we do is we do interviews with people that cancel their contract, and it turns out that the vast majority is moving their flat. And if they move elsewhere, they find other infrastructure preinstalled and this is when they're going out. So the ultimate question is, is the long-tail base, the one that -- well, it's less mobile in their lifestyle and saying that -- staying in their current flat and relying to the current infrastructure. So we do a lot of questioning this. We do a lot of research on it. We also tried to better understand where the other 2.3 million or 2.4 million DBV-T active users are that are not taking our service. So I want to be honest here. I am -- it's very hard for me to predict where the real tough and heavy and really stable, sustainable, long tail starts. I think it's anywhere between 700,000 and 800,000, but I cannot really say where it is. We have to track it. Thanks to the price increases and also thanks to the transmission payments that we get on the B2B side of DVB-T2, we foresee midterm stable EBITDA coming out even if there is a further decrease on the customer base, but not yet in a position to state where it's going to be on the RGU side.

The next question is by Jonas Blum, Warburg.

Can you hear me now?

Perfectly well.

Great. All right. Just a quick one on the guidance. I mean, you're looking at the upper end now for '21. Can you just specify if that includes the release of the Q4 '20 debt provision? Or is it without? And secondly, I was just wondering around the 2022 budgets from the network operators. Are you already in discussion? And do you recognize any rethinking of the counterparts in terms of retail, whether they want to increase or decrease their own footprint?

Let me start with the second question. Typically, we don't do budget negotiations with the network operator at this period of the year. We do that during the first quarter and most likely it lasts till in the second quarter. It's mainly a discussion on annual incentives, quarterly incentives and alike. What we -- what the focus currently is -- with them is to find a way how to work on the 5G network activities to make 5G tariff plans available to a wider range of our customers. We are in a position to offer 5G, but not to the full extent that we would have expected. We are not in a hurry, but because of the nonexistent demand in the end consumer base, but that is the focus. On the footprint, I think the -- we still remain with a strong belief of an omnichannel presence. We are currently gaining some traction on the third-party retailers. So we have increased the number of those ones that accept us as one of -- as their preferred provider, which indicates that the network operators, mainly Vodafone and Deutsche Telekom, is still stepping out or more stepping out of the retail than others do. I mean they both come from a number of 1,200 to 1,400 stores. And I think it was down below the -- to the direction of 1,000. And that leaves an open space for us to catch opportunities in the -- specifically in smaller cities where it feels that they have problems to run profitable storefronts. So I hope that gives you a flavor, but I don't see big changes on that front there, I think on the debt provision.

Yes, I think that on the bad debt side, I'm still not sure what the new normal will be, and therefore, it would not make any sense to release the provision at the end of the year, and therefore, if we project now that we will be on the upper end of the guidance, then definitely, the provision will not be released. It will be still there in the books.

The next question is by Adam Fox-Rumley, HSBC.

I wanted to ask a question about waipu.tv, please. You mentioned earlier in the year about sports possibly being a good catalyst for take-up. But I think on reflection in Q2, people enjoyed being outside in the sunshine a little bit more. So I wondered if you could talk a little bit about your performance in Q3, and what was attracting customers you feel in particular? And then looking forward, kind of what is your positioning for Q4? I know you're going to talk about the stick a little bit more in the later presentation, but how you're how positioning the TV proposition would be helpful.

Yes. I mean, as Ingo mentioned, the uptake in waipu.tv in Q3 2021 was way higher than last year. I think, last year, we were missing these specific sports events such as a football championship or Olympic Games. But that inspires people to watch TV to drive their consumption and usage and we, obviously, took benefit. One of the key sources of new customers these days for waipu.tv is really any kind of event on TV. So we do -- on social media, for example, we do ads. We say, tonight, you're going to see this and this on RTL, or tonight this is going to be available on ARD, and this and this is available on ZDF, whatever it is. Mainly it's sports or event type of programming, so not series or movies, but event-based stuff. And this attracts people then basically to click, to activate, to go into the app, to take advantage of recording, et cetera, et cetera. And then the key question is how to convert these people into a regular usage. So if you understand this journey, people get -- during the day, get pushed into some content and then they download the app, they register, sports events, which we are -- which are repetitive, at least for a certain period of time, are more attractive than like one shots where people basically take advantage of watching it on their iPad or on their smartphone and then step out again. So that is kind of the ongoing wheel that we are pushing here. The waipu.tv stick is the clear -- has the clear intention to then bring people into a position where they do cord-cutting, where they replace their current device. And with waipu on the -- and I'll talk about the -- some of the features in more detail in a second. We see even after the first few days of selling the device that their using goes straight to the living room, usage is much more intense. These are the people that are switching off their legacy technology in terms of access. So a proposition will remain on delivering everything that is attractive to a broad audience with additional value from what we call the new TV channels that -- these are the channels that are partly exclusive to us. We see that on our usage share split, the new TV channels, in total, are increasing. Out of the total usage, I think it's -- these days, if we go into a direction of up to 10%, which is enormous because the focus in Germany is still remaining on like top 5 channels. So I think these things work out really well. We also see that, as of 4th of November, we still see a good development also on waipu, I see for the full year, definitely a number beyond the 700. So overall, we see that the dynamics remains consistent, and we still believe that the overall segment of IP/OTT is getting more prominent on a daily basis, and we can take advantage.

That's great. If I could just follow up very briefly on the first part of it. Do you track the -- I mean, I assume you do track the kind of engagement levels that you have on those social media platforms. Can you say whether -- are those trending upward? Are you seeing more engagement with those promotional -- with those promotions and those – the tweets and et cetera?

Yes, we do see a lot more engagement, and we do also see more interaction. Unfortunately, when you drive volume on the engagement side, it does not immediately convert into -- or it kind of dilutes a little bit your conversion rate. I think that is the balance that we have to manage.

There are no further questions, and so I hand back to Christoph Vilanek.

Yes. Thanks a lot. Thanks a lot also for the discipline. It's 10:43, and we're going into the outlook. If I may just add a couple of sentences to the Q&A and also to the Q3. Yes, we are -- today, we are November 4. The fourth quarter is running perfectly well along the lines of our projections. The trajectory and the final results on -- in the early indicators of the results in October also confirm everything that we've said, and you can be assured that we have reviewed these numbers also prior to the last few days prior to today's outlook in order to make sure that you know that we -- for years, we've always been a bit conservative and some of you mentioned it. I'm not saying that what comes now is conservative, but we wouldn't -- we are not changing our overall attitude that it's our key ambition to deliver on promise and a little bit over delivery is part of our sentiment and our feelings. We expect, I think, a regular Christmas business, not impacted too heavily by the hardware shortages that we have seen in a meaningful way in October, but right now, Samsung and Apple are well on track. We're a bit worried about January, February, but that goes for the entire market. So we wouldn't be impacted more than others. And if overall availability is lower, then customers will most likely only delay hardware sales instead of stepping out because there is no real alternative. So having said that, I'd like to go into a longer block of telling you what we're working on and what the company is dedicated to. On our website, you might have seen the vision before. In the overall review process that we have conducted within the last 6 months, we've also reviewed the vision, and we still believe that it is a strong statement. It's still valid. It's well perceived internally, and, in some -- it's a vision that goes in any direction for the shareholders, for the partners, for the consumers and for the individuals that dedicate their personal work time and lifetime into this company. Derived from the vision, our mission needs to adopt in certain aspects to more digitization of our daily life. It is -- it remains to be the growth through products and services out of what we call digital lifestyle. But even more than in the past and based on a lot of deep insight in data, which I will give more flavor to it in a few pages later, we dedicate ourselves to understanding the end consumer and trying to detect the wishes that they might not know themselves. We also believe that digital first is an ultimate prerequisite for whatever we do, both in our transactions with the consumers, but also internally. The level of digital and automized -- and automated and app-based transactions is increasing, and it's working really well. And I'm also very excited that our employees enjoy it and support it. Still 2 levels or 2 elements to our mission are key, and we consider them differentiating us from others. The one is that advice and mutuality in advice, so the substance of being a service provider, not owning an own network is giving us the advantage to react on the demand and on the individual demand depending on location, age, preferences and so on and so forth. And the other aspect is proximity. You may say that online is always available, but I think there is an aspect -- and I keep saying that also internally, there is an aspect of having physical individuals close to your customers, people that can be seen, can be talked to, can be found in the shops. So customer proximity and a clear understanding of the individual demand are building factors of a successful mission. If we go and if we ask ourselves for the -- for freenet 2025, which is the name of the internal program, we were asking ourselves what do we want? Where do we want to go? And the first one is, obviously, we want to grow. We want to grow in any of our KPIs, and we need to grow in order to fulfill customer needs. We need to change, and we want to change because we have understood that a constant transformation is the only way, not to survive, but to stay ahead of the others, to stay in front of the competition. And the competition is not only the 3 network operators or, let's call it, the 4 network operators, including the future one. It also staying ahead of competition that is trying to get into our customer ownership to get a larger share of wallet of our customers. So we need to be up to date. We need to be -- we need to understand trends. We need to be ahead of the others in order to keep our position. If you do so, you need to understand what you do best. And you should focus on what you do best. I think we have a clear understanding in what we do best. We remain a telco. We remain a customer-centric organization, providing interaction and transaction that also excludes automatically some areas where we would not go into broader content productions, we would not go into product development to a large extent. We will focus on the assets that we have. Still, we believe that we need to get faster, and we will be faster than we did -- than we were in the past as a result of the previous 4 points. And last but not least, we should stay with our proposition. The proposition is to remain an independent supplier of our services, and we should be reliable and sustainable. And we believe in omnichannel, and we express this belief in this long sustainable position with our retail chain and with our partners in -- on the storefront, expressing it, not only towards the customers, but also towards our partnership. The overall statement is -- or the summary of everything we do remains digital lifestyle. It is -- I think, we have started to use this terminology back in 2012. I think back then, we needed to explain what it is. Today, I see copy cats that use the same expression and terminology all over the place. We have understood that this is the core of our business, but it's also in the middle of our society. And there's slight and small changes on the right-hand side. We say that the growth is going over the entire customer life cycle, and I will explain to you what the difference is to what we had before on this page. If I review the last 10 years, and I do the outlook for the upcoming 5 years, then we see a clear transformation in 3 dimensions. I think the first 10 -- the first years when I was in charge and Ingo was supporting me back then still as the Head of our Controlling and Finance Department, the driving KPI was subscriber acquisition costs and subscriber retention cost. We were driving these numbers down. Maybe we are hoping that by doing so, we would improve our KPIs in terms of EBITDA, EBIT and EBT. The last 5 years, we focused on product life cycle. So we've changed our mind on -- from pure acquisition costs to the equation of what is the monthly margin over a 12- or 24 months contract and compare this to the SACs and the SRCs. So it was a wider view, but we've also learned through the much broader portfolio with digital lifestyle services, TV and media services that this is a too small, a too limited view on our performance. And we have implemented and it is mainly an implementation on the data warehouse side, on the technology side, on the process side and also on the finance side to -- with measuring data and measuring KPIs. So that, for the next 5 years, we put customer lifetime value in our focus. So the difference is that we are not looking anymore to optimize a single product on a single contract life, but we include in the view that -- and I'm trying to make up figures now in order to not disclose details that are relevant also for competition. We know that customers that we have acquired in our own shops have a lower churn and a higher probability to renew the contract. This is something which we knew in the past but we did not include it in our financial modeling, and we did not include it into the decision-making of which channels should have which share on the acquisition side. That is, but it is obviously has a strong impact on what's going on. The same goes for retail customers, where cross-selling is much easier, not only life in the shops, but also during the period of their lifetime, it turns out that they are more likely to accept additional offers than pure online buyers. And you might say that this is mundane. Yes, it is mundane, but you -- even if you realize it, it's a big and heavy duty to put it in your modeling. So that is the ultimate difference between the past 5 years and what we have entered in 2021, we prepared it and tested it in '19 and '20, and we are now live and working on this. As a consequence of what I've said, the proposition is different. We've been a company considering itself a sales machine, and we consider out us today as a team to manage a customer base. And manage a customer base obviously includes the fact that there might be people churning and you might refill the base. And if you have the ambition to grow overall, the refilling is not good enough, but we should add new customers to the customer base, and we have ambition to do have net adds. But it is a different proposition from the past, and we consider ourselves to work on the development and the management of the customer base. And as a consequence of those 2, we also reviewed our organizational design principles. In the years of 2010, we came out of a merger. We were dedicated to systems and processes. And we have changed this also having 2 more members in the Executive Board. But the way we have organized ourselves were based on competencies and also on legacy, which was right for the past 5 years. But for the coming years, we will change to a functional organization. And in order to do so, we also have communicated internally that a mind shift is necessary in all functions. Putting the active customer base management into the middle of any of our action also means that we need to put it in our KPIs, in our goal setting and in the incentive systems. And this is instead of the pure sales machine, which we have considered ourselves to be for the last almost 30 years. The second one is a data-driven and, at the same time, creative approach towards our customers and towards transactions. Data-driven must not mean to have a super brain power sitting elsewhere in the highest floor, it means that everybody, down to the last single individual, needs to understand that any transaction and any interaction should be reflected or should be prepared by using data. And last, but not least, the awareness of corporate responsibility is something that we see as a need, not only from society and regulation, but also as a demand, especially from young people within our corporate structure. On the following pages, I will illustrate a couple of those aspects a bit deeper. The first one is a picture here, I think, which speaks for itself, the difference from product life cycle to customer lifetime value. The major difference is that we do not see a single product range or segment separated from each other. We do not limit it to the contract lifetime of whatever it is, 12 or 24 months. But we look at an individual, and we optimize the compound margin across all products, across all touch points, and not only for 12 to 24 months, but for the full lifetime of an individual. We've mentioned a so-called smart pricing model, and on the next, I think it's going to be 3 pages, I'll give you more detail on this. What it says at the end of the day is on the right-hand side, whatever we do is an individual combination of the offer that an individual that a customer gets such as promotions, hardware prices, tariff plans and the like, which channel we do the offer and whether we do the offers across channel fully consistent or maybe differ -- let them differ by channel. It's a question of timing, but obviously, it's a difference whether you get a newsletter early in the morning or late in the evening, but it also is a difference what your own attitude is and so on and so forth. So what are the drivers or what are the – determines that we can put into our machines to do real-time modeling? It's data on what is the tenure or total lifetime of a customer, of a contract or of a product. What is the behavior of our customers? Do they contact the service call? Do they use the app? Which touch points are their preferences? Can we detect whether touch points they use are in a certain sequence? Is these people that they do calls and afterwards check online, or the other way around? Are these are people that face us -- our sales reps in the shop? Are they using the other channels at the same time? Or can't we track them across the touch points? What is the usage? What is the transaction preferences? And what are the channels that they use most and what differentiates channels for them? And last, but not least, what are a couple of personal admitted data that might have a strong impact on their -- at the end of the day on their buying behavior? The challenge is that you cannot -- either you don't have all the data fully integral for every customer. And it's hard to detect what is the -- what might be the one single data point that is most important for one customer that might also be different for another one. But the team won from Antonio's format. They have worked hard. It's a team of almost 3 dozens of data scientists, did a lot of testing. And we've moved with the results from one-size-fits-all to, today, a 1-to-1 communication and to 1-to-1 offer. We are illustrating it here. When a consumer is -- get into the renewal phase, in the very past, we did one-size-fits-all we sent 1 offer, and we were hoping to be successful. Then we were obviously splitting it into segments. The differentiation was by offer, by hardware, et cetera, et cetera. And nowadays, we are on a real one-to-one in all dimensions. So whenever people get a letter or gets an e-mail already go and lock in on the website, we include, in real time, all the data we have. And we changed the offer or be adaptive to the individual needs of person. And we don't do that because we find it funny or interesting, but we do it because it adds value. And these are indexed impact of test groups. We haven't rolled it out to the full extent into the entire base. This is what we are starting right now on retention and prevention and stepwise also on the new customer acquisition. So we illustrate here that on retention, this is when a customer has terminated its contract, and we try to bring them back. What do we typically do we review -- in the past, we've reviewed the very plan. We reviewed the offer they received, and then we've put another offer out. Today, we include how is this the first time they renew, is this the second time? What -- how did you have last time? What was the triggering event last time that they finally came back? Do we know anything about their complaints, et cetera, which might have changed from the previous period to this period. And as a result, we can do a much more dedicated offer, but not only the offer, but also the way we approach the consumer. We might start the conversation or the interaction with the consumer by mentioning the mistakes that we've made, that we would never have done that before. So what is the drivers of the additional value, the life cycle value then? Well, it might be the tariff plan. It might be the initial down payment for the hardware. It might be that we shift from a pure SIM to a combination of SIM-only plus a price plan, or hardware, or we do financing of hardware and installment payments. All these -- all these small elements, at the end of the day, add to the fact that in the test groups, we could improve retention life cycle contribution by almost 25 percentage points on prevention, which is, prior to a cancellation, the active -- should show up with the end consumer is a plus 10% result. And even on the gross add side, and that obviously goes mainly for online, we see a first impact of 5%. I mean these are the things and great drivers of a positive development. Even though there are other elements within the organization that we have changed and that also contribute to an improved performance of the entire company. One is obviously digitization. And we digitized almost any internal processes. We, today, do almost everything by app, internal HR processes and any processes in terms of signing off procurement, et cetera, et cetera. More importantly, we have seen that, for example, our sales reps are working with Teams and Zoom instead of doing physical meetings the number of meetings has come down, and we will now, not only take the advantage of this, but also change the organization accordingly and take the advantage of savings on that end. Second element is that we have -- for 8 months, the Executive Board has had a review of any of the IT projects and IT demand letters that were created within the company. The 5 of us wanted to deeply understand how do we do things, what are the drivers at the end of the day of bottlenecks in our technology development and how could we improve? We have defined individuals across the entire organization only lately as gatekeepers for our key topics and focus areas that create maybe not the value, but that create a huge effort on the IT side, on the finance side, et cetera, et cetera. To give you a simple example, number portability is still a tricky piece of our business. And when I have asked who is the person in charge of number portability, turned out that we have almost 6 people being in charge because they do it differently when we do the new FUNK and Flex products, we do it differently for retail, we do it differently for online. In the past, this seemed to be our strength to be very fragmented, to be very precise on individual need. But we have understood that this we need to go back to standards in order to accelerate development and our ability to adapt to changes in the market or in the demand of our individual customers. And the third element in our guidelines. If you try to simplify and standardize, you also need to make the entire team understanding where you want to head to. What is our strategic elements in terms of improving processes and the like. we do not want to demotivate the innovation power of our individuals through standardization. And the way we do it is that these guidelines -- more guidelines than we did in the past. But so we limit misinterpretations and miss developments all over the place. And this also is reflected in our new target operating model. And if you -- as an external may look at this, you might say, well, this is quite obvious an obvious solution, but we did not work like that. And we did not work at that for very good reasons. But we think that we need to change and the people we have implemented this as of 1st of November, and people seem to like it a lot because it's a much more transparent logic. So on the left-hand side, you see what you call the product house. This is the [indiscernible]. He's in charge of sourcing the product, creating the products and putting them basically into the internal shelf or you might say, in the internal warehouse. In the middle, management control of steering the business. It's Antonio [indiscernible]. He is heading the entire BI and data team they develop and they put together the offers for the individual customers. They are our brain machine in order to put all the products into the -- not only on the shelf or in front of the consumer, but do it in the right order with the right individual offer, try to optimize the next best offer, the channels, et cetera, et cetera. So this is really a highly data-driven, super sophisticated team that deploys all latest technologies such as machine learning and AI. On the right-hand side, we have customer interaction, and I'm in charge of this. These are the units that really speak or communicate to the end consumer. So that is marketing, that is online, and this is our stationary sales, also customer care. So this is really where the customer interaction goes on. And logically, the KPIs of the 3 of us are complementary. The product house is basically going for the gross margin. The customer interaction is in charge of delivering the number of transactions at best cost, and the management control team is in charge of creating an EBITDA prior to SG&A. Ingo and his team in the Finance Department are not only monitoring it, but giving their constructive input and putting the finger into the wound of further optimization playground. And the same goes on the lower end of the picture that we have renamed the so-called IT Department by the terminology of Technology and Processes, and they are also in charge of the continuous improvement. We think that these steps will contribute very well to our future ambition between 2025. I have mentioned the topic of ESG and CSR, and I won't go into all details here. We have started a lot of initiatives including our green line. Accessory brand networks is our own internal brand. For this, we have -- we will define, before the start of the next reporting season in 2022, our time line for all key parameters such as carbon dioxide footprint, et cetera, et cetera. And let me give you an example on how we bring this also to all the shops, but mainly steer it should the entire company. In 2016, we started to work with Fairphone as the first player. In Germany, we became the largest distributor in 2018. We have launched their 5G phone only this summer. And now we have -- we are about to launch [indiscernible] and [indiscernible] will be the first 1 in Germany where the back of the device and all the materials that are -- that can be done out of recycled material are recycled. The battery -- or the battery can be replaced. And there is no blister, no foils. It's so-called grass paper covers, et cetera, et cetera, and boxes, and we even charge the individual hardware deposit, which allows the user to bring back the device within the next 5 years. And if they bring it back to us, we will pay back the hardware deposit. So I think such a product, which is then available to all our employees as well, all the shop representatives got an individual pack with all the details on it, I think it helps and this will show -- create also a deep understanding of the importance, not only on the top line of annual report, but also in the individual lines of our employees. Let me now step a bit into some details of -- on the product and on the marketing side. We have only -- 6 weeks ago, we have started our big TV social media online and below-the-line campaign. We see [indiscernible]. Everybody who's German might not that these guys, I think, more well known that even the future translate that might change if he becomes the chancellor. But so far, [indiscernible] has a higher recognition in public. And he is our new hero to bring all our brands under the roof and umbrella brands of TriNet, which we will also starting to review our retail footprint, and we are intending to replace Mobilcom-Debitel as a main brand and also as the shield on top of the shops. And we have established freenet-digital.de as our core hub online for any of our brands. So under freenet-digital, you will realize which brands are under the roof and under the umbrella of freenet. And they are all available there. So freenet becomes the home of digital lifestyle as it was in our internal terminology, but it was not shown to the end consumer. Managing the brand is one dimension, managing the customer journey is the other one. We are reporting to you that we have the ambition to do more and more captive channels, which it's also reflected in the numbers on the -- I'm not seeing the chart anymore. I hope that you will -- you are still seeing the chart. You will see on the left-hand side that captive channels are still growing. But one dimension is the captive channels. The other one is owning the customer journey. So determining what the consumer sees and this is going beyond the captives also in third-party free dealers, business distributors and the like. We have done the exercise of reviewing our portfolio also in terms of brands. And we've listed the brands that we are using from now on for mobile -- for mobile products is freenet mobile as a pure SIM only and online distribution only [indiscernible], app distribution only freenet FLEX as the combination. Glamobile as a strong brand focusing on SIM only with omnichannel, and we will replace Mobilcom-Debitel by our new mega tariff plans across the board. These are the products, including a hardware subsidy and will yes, I said it replace what we called in the past, Mobilcom-Debitel. If we look now and thanks for, I think, the comment, I think it was Ulrich. But it was said we sound more optimistic on the mobile side. Well, let me first line out what we think as macroeconomic factors that challenging our business, our mobile business here. There are obviously -- there's obviously price erosion. It may have slowed down, but the trend to SIM only has an impact on overall pricing. So we still believe that there is pressure. Obviously, there's saturation. Obviously, there's regulation such as on roaming and so on and so forth. And we have a lot of impact from compliance cost minimum wages. And last but not least, a declining society in our home country, Germany, in our home market. So these are downward trends that we need to balance and ideally overcompensate to our internal activities. And we have introduced those measures to you in the last 10, 15 minutes. It is the one driver against it is the customer lifetime value concept. It's the smart pricing. It's the expansion of our captive channels. It's internally in the digitization and the cost efficiency and introducing an umbrella brand and focusing marketing and expenses. It's a strong simplification, not only in the internal organization, but also in media planning and in handling the customers. So we were trying to illustrate on that page that with all these measures, we are absolutely convinced that we'll be able to overcompensate the downward trends or the downward pressure from the other levers. And therefore, we will also be capable and able to improve and to increase EBITDA contribution, gross margin contribution from mobile. The same obviously goes for digital lifestyle. There the strategy remains the one that we have started with a long time ago. We have, over the years, expanded the portfolio from the pure security and insurance stuff like Kaspersky and Norton or about guarantee, which is maturing for the hardware to all kind of other services and these go into various directions and will remain a differentiator. With freenet you're introduced a portfolio, and you have a curated app portfolio which we offer to you when we give you, in some cases, price advantages, which you can be charged through our mobile service invoice on a monthly basis. We have seen a tremendous success of this segment within our activities. I think first year, we've reported it was even 2013. We saw a 12% CAGR in the last 5 years. We -- looking at the Q3 numbers will go beyond the EUR 190 million hurdle this year, and we see the ups and upside of another 10%, 15% or 10% even 20% over the upcoming 5 years. This is going to be a contributor on the revenue side of more than 220 million within the next 3, 4 years. And the EBITDA margin, as you know, is very attractive. The one piece that was missing over the last almost 10 years was a focus on Internet access. When we start -- we restarted the Internet access with fixed mobile installation and unlimited data cards. They are now available for a year. We are successfully selling it typically with [indiscernible]. Six weeks ago, we started a pilot on DSL, fixed network, Internet access intellect jobs. We replaced the commission-based business, which we did in these shops and tried to better understand what are the preferences of the consumer. We are planning a full rollout of VDSL free Internet fixed line offer in 2022, and we will give access to other technologies such as cable and FTTH starting at the end of 2022 and kick-starting and launching all of them in 2023. One of the key differences we will remain with our core promise no CapEx, asset-light, so wholesale service provider type of business approach, we will not go into voice. Our customers do have a handset, they do have a flat rate. So we do Internet access only. It's a simplification, and it's also for internal processes big ease coming from being agnostic towards number portability, et cetera, et cetera, and fixed line. And we are technology agnostic in terms of access. At the end of the day, our consumers who just have Internet access, and we're going to decide for them which technology is underlaying. The first indication and the first projection says that out of this business, we will have an EBITDA contribution of EUR 15 million to EUR 25 million within the next 5 years. But it's also the fundament for the concept of converged offers. I'm not changing my mind that converged offers are something which is not -- is maybe valid for 25% -- 25% to 35% of the German consumers but we do not neglect it. And we are with the new Internet access product in a much better position also to drive value from convergent products. And we did not express an extra value or EBITDA contribution out of converged products, but we think conversions as we laid out here, is an additional source of customer lifetime value. Obviously, we -- adding to what we have today, we want to add the force network. We will have access to cable via Vodafone, we will have access to fibre satellite and obviously, 5G as a mean and on TV entertainment we have only recently have started to do the first 5G broadcasting test in Hamburg with a couple of channels also moving there into new directions and into new dimensions. This is a good starting point to go into our TV media segment. You know that these are -- we had from our internal way to looking -- looking at it -- It's 4 pillars. It's the [ right ] for OTT TV platform. It's the freenet TVBP, including the B2B part of it. It's the media broadcast as our infrastructure company there in antenna Deutschland representing the digital audio broadcasting. If we look at the development of the TV market. Here are the numbers from the German market, the development on subscribers on cable, access points and cable satellite, DBV-T, IP and OTT TV. You can see that the heavy growing one is the -- what it's called today the OTT and out of it, we are holding a significant market share. Everybody, including ourselves, is convinced that cable satellite and DBV-T too still go down further. IP, the pure IP and the OTT will basically mix up. There is an underlying technology shift from broadcast towards unicast. And it was much easier to illustrate this trend by just showing which VOD products are out there in the German market with a significant market share. The [ media tricks ] is obviously Netflix. It's the new Sky Q offers. It is same as the [ zone ]. And if I may say we put it into the middle for good reasons. It's right for TV. If we take the projections that are available in the market, you can take a linear approach on IPTV, OTT households and then you would end up with more than 11 million subscribers of this technology by 2023. But there's also other projections and trajectories that suggest that sooner or later, there will be exponential growth to more than [ 30 million ]. We will not discuss in detail what the projections might mean to waipu.tv in the 2 scenarios in our 2025 ambition, we have only included the linear scenario. And we have anticipated that we will lose market share, not because our product is not strong enough. But because we respect that Vodafone and Deutsche Telekom and some other players will also take their share. So even going down in the linear scenario to only 20% market share. Our subscriber base will cross the definitely cross -- beyond [ 1 million ] by 2025 and more than [ 2 million ] 2023. I personally consider this as a conservative outlook. We have -- we can support this significant change with the launch of our waipu.tv stick. It's the first 4K TV stick out of our house. It was silently launched. So it was made available to the press and made available on the waipu homepage only 2 weeks ago. As you can see, it is -- it looks like a regular remote control. This is what our research showed. People are missing the 1 button for day for the German public TV and 2 for TPF and so on and so forth. We want to have straight access to YouTube and Netflix, and this is included on our remote control. But it also includes the access to our own VOD service [indiscernible] , and it has all the features of linear TV and [ SEPI ], but it replaces the old outdated and old-fashioned remote control on cable or satellite, and it includes all the perfect features and benefits from a virtual PVR from access through all your devices in parallel and so on to ports. We have not done a loud launch with it because we were limited in the shipments. That is the sole product where we also are facing semiconductor shortage. Within the first 5 days, we've sold more than 2,000 units without doing -- spending a single pending on marketing. As I said before, screener TV will remain a heavy contributor in terms of EBITDA as a combination of the B2B business, the B2C element and the opportunities to increase prices. So even though the subscriber base and the RGUs might go down, the overall EBITDA will remain on a stable level. for the next 4, 5 years according to our projection. And this certainly has in its modeling a projection on the RGUs. But as I stated in my answer earlier during the call, we will not -- we are not ready in a position, not already in a position to disclose or fix the number. But the one thing we are sure about is this picture that the EBITDA contribution will remain stable. Media Broadcast is the largest service provider in media industry for economic DVD, et cetera, et cetera. We're working for Bundesliga for Deutsche Telekom pomagenda, et cetera, et cetera. The service levels and the technology that we deploy is state-of-the-art. This is a small contributor to the business, but a big contributor to the relationship with the public channels and to other TV producers. On the 5G side, we have set up our campus network in our own location. We are testing a lot of stuff there with the first -- the first B2B customers. And we are convinced that on the 5G side, we will be shortly in a position to show our competence. There are some contract negotiations which are not yet to be disclosed. But I think you will understand much better as soon as we can disclose it. And I also mentioned that we are currently testing 5G broadcasting for the first time as a potential internal replacement for DVB-T2. The same goes for the DAB market, Media Broadcast is doing the business piece of it. So it's the pure service business, we have one, the DAB platform rights for Northern West failure, we have done the same thing for Hamburg. So there's a lot of regional hotspots that we are still able to cover and to acquire with long-lasting contracts. So this entire business model on DAB taking advantage from existing infrastructure, existing antennas is gaining pace and will remain to gain pace and replace the former FM business. In parallel to that, we run with our partner, Miller Median and [ 10 ] Deutschland, it's 50-50 between Media Broadcast and the Absolute Radio group. Under this umbrella, we are running on the left-hand side at our own expense and our own effort. These days, 5 channels under the Absolute brand on DAB +, one which is absolutely elected to run on the first multiplex and we have also pure streaming offers. As of 3rd of October with our partner, either the cruise company, we have launched AIDAradio, and there is one more channel left which we want to run under our own list, and we are in constant negotiations with potential media partners on the content delivery side to help us to make -- to fill the last gap not in -- not on the multiplex but on -- in the radio media landscape in Germany. And next to that, we have third-party providers such as antenna [indiscernible], which are the biggest private channel in Germany, they are paying transmission fees to antenna Deutschland and at the end of the day to Media Broadcast to -- for the service. And in parallel, we do the ad marketing or the ad sales for not only our own channels but also for some of these third-party programs that are on the platform. The vision here is today, radio media is split in a duopoly. RMS is the nationwide service for private channels and ASL for public channels. We have found it at audio in a joint venture with Ströer. Ströer is well-known is the third biggest media supplier in Germany, national -- on a national level next to the one of RTL and [indiscernible] they are coming from digital and out of home, but they are entering with us into the radio arena. And on the right-hand side, you can see that this is a [ EUR 800 million ] national market. It's still a growing market on the audio side. And our vision for ad audio is to become the one single point of contact for any national radio on the digital -- digital audio broadcasting. Obviously, only 50% of the outcome will go into our pockets, but we see huge potential there. So to sum up for the Media Broadcast piece, and I think it's answering 1 or 2 questions that as before, we think that the pure TV, terrestrial TV, B2B, B2C has a current EBITDA contribution of 65%. We consider it to be a stable business. Radio is currently 25%. This is definitely a growing business which will have a significant impact on the P&L from 2023 and there's event and network business, which remains as it is. So having said that, thanks for listening to this longer presentation. I'm sure there's a lot of questions behind it. But before we go into questions, I would like Ingo to sum it up and to show you what this will end up in our numbers, in our P&L over the past -- over the upcoming 4 years.

Yes. Thank you, Christoph, for the interested outlook, I think what we see here, and we were sometimes criticized in the past that we do not have a growing business. I think what we see here is that some of the ideas, what we started during the last years that we will see the fruits out of it in the upcoming years. And therefore, what we did from these operational outlook, we transmitted it into a financial outlook. And I think the most -- the 2 most important figures from my point of view are that on this space, we see -- definitely see an organic EBITDA growth in the next years. And we definitely think that more than EUR 520 million of [ PBCA ] will be possible in 2025. And this would mean that there will be a CAGR of something like or more than 4% during the next 5 years. Now looking in detail into the figures, I think the starting point here for the EBITDA of 2020, where we saw an EBITDA of EUR 426 million. How do we see the split? We think from the initiatives in the mobile communications business, we see something like EUR 30 million to EUR 60 million from the TV and media, something like EUR 35 million to EUR 65 million. And from the cost efficiency, something like EUR 5 million to EUR 15 million. I think we have not discussed this part of the optimization, the cost efficiency measures. But I think we have a successful history here since we were part of a private equity business, Christoph and myself at retail. I think we learned a lot of lessons there. And therefore, that from my point of view, it is fine to write down EUR 5 million to EUR 15 million. I think this definitely is a conservative figure what we see. Looking into more detail into these figures or into these potentials from my point of view, the mobile core business, I think we already saw these optimizations during 2021. And I think with the CLTV concept and with the smart pricing concept what Christoph explained earlier, I think something like EUR 5 million to EUR 15 million, yes, this should be possible even with the headwinds when we put into consideration here. From the digital lifestyle business, I already discussed it during the Q3 of the results. I think we already see that the revenues are already increasing during '21. We will reach something like a revenue of up to EUR 200 million during this year. And so the revenue increase, what was shown on Christoph's slides will definitely -- could be transferred into an EBITDA increase of EUR 10 million to EUR 20 million. In the freenet Internet business, I think it is a new offering, I think it was one of Christoph's comment that convergence is not part of this EUR 15 million to EUR 25 million. But I think this is also another change which could bring us here to the higher and definitely bring us to the higher end of the range. So EUR 15 million to EUR 25 million seems to be possible here. Moving to the TV and Media segment. Yes, definitely, the biggest growth part is waipu.tv and is the OTT business. And it is a conservative view after market development, what we use here to calculate an EBITDA increase of EUR 25 million to EUR 35 million. The freenet TV business, I think here it is compared to the 2020 [ GreneTV ] EBITDA. So what we already saw and what I presented is that in '21 will it be an increase of something like EUR 5 million already. And so the 0 to EUR 10 million here looks not too difficult to reach. On the digital radio side, I think one of the last topics which Christoph explained, EUR 10 million to EUR 20 million looks reasonable. We calculated it, we were not too aggressive about the advertising business, but even without it and with the transmitting fees, what we get EUR 10 million to EUR 20 million seems to be possible. So all in, from my point of view, a very sustainable projection, what we have here, I would like to emphasize that this is not a new guidance. There will be a 2022 guidance at the end of Feb as usual. But I think it is an ambition what we have, and it is a realistic outlook from my point of view. Moving to the last page of the presentation here. The EBITDA increase will definitely lead to a free cash flow increase. What we did here is we used the relation between free cash flow and EBITDA, how it is today and copied it in the future. So without Sunrise in 2020, we had a free cash flow of EUR 203 million. And now we forecast something like more than EUR 260 million. So it is an increase of EUR 60 million. And on the EBITDA side, it is an increase of EUR 95 million. So what we forecast at the moment here is that the free cash flow will even increase slightly higher. The increase will be slightly higher than in the -- on the EBITDA side. Shareholder remuneration was already a topic earlier in the call. Yes we stay to the 80% distribution figure, what is part of our financial policy. So also in the next years, we plan to pay out 80% of our free cash flow. And with this increasing free cash flow, what we forecasted this will be even higher than today. I think we are not 100% clear at the end of the day, if all of it will be dividend or if we will do some further share buybacks I think this has to be decided in the future. But -- and I think this is very important. The business growth combined with a higher shareholder return is what we've promised further for the future. And I think as we are really optimistic to deliver it. And also from my point of view, from a financial point of view, I'm very optimistic that it will be possible to realize what we promised here or what we forecast here. So therefore, I would ask -- I would hand -- I would give back to the operator to start the Q&A on this edition.

[Operator Instructions] We have the first question is from Ulrich Rathe, Jefferies.

I'd like to start with 3 questions on the operational [ model modern day ] financial. The first one is freenet is a very commercial organization, arguably the single-minded focus on closing the sale drives the success. But a shift towards compound margin per customer also means spending more time on low-margin products to keep high-value customers happy. How does this work in practice with salespeople who are quite incentivized to close the deal when they suddenly have to sort of deal with low-margin stuff just because a high-value customer walked into the store? Second question is smart pricing. I mean there's a fundamental issue here that it starts a bit of a cat and mouse game. The customers, once they become aware that there are different prices available to different customers. They will [ cotton on to ] the idea and then try to sort of act theater for you to sort of get the lower prices, of course. How do you view that? And my last question is the Internet business that you want to start. Is that simply a reseller model in the mold of the current service provider model in mobile. So customer ownership, resale margin but no technical infrastructure? Or is there anything else envisaged there?

Okay. Simple answer on the Internet is, it's our own cost and our own expenses. So it's typically a wholesale model. So we have full customer ownership. On the second question, I do not see -- fact is that this -- the part of -- or the key parts of the offer are not transparent to the individual. When we do -- when we do include purchase power of a certain location or of a certain individual in an offering, then it's basically an offer that we give you individually on the touch points that we control. And that is embedded into a full set of elements. So it might be hardware activation fee, tariff change fitment of your other contracts, et cetera, et cetera. So it's not like these offers, you're paying $10, but new customers pay $5. This is not transparent and part of the smart pricing is to keep it intransparent to the individual. The first one, I'm not sure I got -- honestly, I got your concept or your concern. If -- if I include customer lifetime value in my judgment, for example, I mean, day-to-day life now November, December. We have certain flexibility on where and how to generate the necessary gross adds and renewals for the last 8 weeks of this year. So the team needs to take a decision whether we're going to push online or off-line, whether we push internal channels versus externals. Do we want to have -- take advantage of the heavy seasonality in MST, yes or no? Do we include iPhone 13 into the offering or we leave it or we limit it only to real demand versus we put it at the front door as one of our core offers. So if I put these -- these things need to be reflected in customer lifetime optimization. So it's not about mixing low margin and high margin. It's about a deeper understanding on long-term contribution of an individual and treating it accordingly. If I understand that I can -- I acquire a customer, and I can predict that this customer might will most likely never ever, accept a cross-sell offer. But if this is the case, then I cannot spend the same amount on a customer, whereas on a customer that is highly likely to do to take TV on top to take Internet on top to purchase accessories with our shops. So I think that is understanding the consumer, and this is a database marketing at its best. So not losing margin, but increasing the share of wallet, increasing the overall margin on the individual without sacrificing the short-term and periodic gains.

The next question is by Joshua Mills, Exane BNP Paribas.

I'd like start just by talking about the main business, the telecommunications aspect and then pass it as time later go on to the TV. But on the mobile communications ambitions, my first question is, can you give us, if possible, more detail on your current reseller contract? So would really love to know as far the Capital Markets Day, the kind of average duration, the visibility you have on commission terms and volume commitments from your 3 main mobile providers. And just to clarify, is the guidance you're giving on the mobile core business for modest growth based on contracts you have visibility out to on 2025? Or are assuming that terms both with DT [indiscernible] and Telefonica plus economy will stay the same. And so that's a kind of long-winded first question on, can you give a single detail around mobile? And the second question on broadband. The EUR 15 million to EUR 25 million EBITDA target, it would be great to get an understanding of what kind of market share ambition and EBITDA margin pricing, et cetera, lies behind that calculation. I'm sure you've we've done the math. And then finally, I think earlier in the deck, there's a slide that talks about [ one and one ] as an untapped potential in mobile reseller. Have you had active discussions with them? Are you in active discussions with them about becoming a reseller? Or is this simply highlighted there's a potential opportunity which may or may not materialize?

Yes. Thank you for the question. Last one, yes, we are in conversation with United Internet [ Ernst and I ] on the topic. We do not have a contract yet, but we have expression from both sides that both interested in getting into an agreement. So since their own network will only be available whatever, 12 or 14 months from now. And it will take a little time to give us -- give enough uptake. I'm very sure that we will sign an agreement to work together in a typical service provider model. On the network operator contracts. I mean, we cannot disclose the details of these contracts for obvious reasons. In our 5-year outlook, we have taken all the knowledge and all the experience from the past 28 years. In general, we have anticipated that the overall setup will remain the same, which means very much of a typical MVNO model with Telefonica, more a service provider model remaining on Vodafone and DT. We have certainly done our projections and trajectories on overall revenue per network, gross net adds and customer base per net add, and we have deployed historic numbers in terms of margins, et cetera, et cetera. So we do not anticipate and we have no reason to anticipate material changes to the current contracts and to the current agreements. We have deployed necessary conservatism on the numbers because we also -- we know that things could change, but we feel super comfortable with the setup and the 5-year plan includes scenario planning for either of the 3. On the -- on the freenet Internet side, at the EUR 15 million to EUR 25 million, there is a full set of numbers per access technology behind it. There's also an assumption on ARPUs behind it. And there is also a detailed setup of terms that we will offer to the end consumer, and it might be -- I wouldn't call it disruptive, but might be different from what is currently available. But I have to ask for your patience because we do not want to disclose the USP and the pricing at this stage, neither to you or to the market in order to protect our opportunity there.

The next question is by Martin Hammerschmidt, Citi.

On the agreement with [ Deter Boyland ] , I mean what is the -- just to get a better understanding, what is the ultimate goal here? Is it trying to get postpaid net adds up -- is it trying to unify the whole sort of product under -- in the [indiscernible] ecosystem? Is it focusing on accelerating waipu.tv? I'm just trying to understand what he brings to the table and what your expectations are for the partnership. And then on the waipu.tv, and previously, you have mentioned that you're still waiting sort of for this hockey stick growth to come through. Is that hockey stick growth backed into your ambition? Or is that ambition based on more of a linear growth profile?

Yes. The later questions are always the easier ones to answer. No, the projection is based on the linear model, which we have shown on the page for the simple reason that we are more believing in the hockey stick or in the exponential growth, but the question is when is the starting point. So projection numbers are based on the linear scenario. The proposition with the [ Boyland ] campaign is that all the research shows that -- the legacy of our so and so many brands, the legacy of the merger back then between Debitel and Mobilcom, has created a lot of friction in our brand communication. And for years and years, I was thinking about how to -- how can we establish a knowledge that these brands all belong to one group, how can we put freenet as the core sending brand into the middle and the [ Deter Boyland ] engagement and the [ Deter Boyland ] campaign is exactly made to deliver on that goal. We have seen over the first 6 weeks, we have seen that unprompted awareness of the brand prompted recognition of the brand already is increasing the understanding that freenet is providing mobile services, Internet services, MTV entertainment, has won extremely in its perception and knowledge. So these things work really well together. And at the end of the day, we hope that people understand that whenever they go into freenet, be it the physical shop or be it the online presence. This is the home of waipu. This is the home of freenet TV. This is the home of the former [ who will contribute ] now mega tariffs, and this is the home of Glamobile. The entire campaign is set up to deliver that. And as I said, the first 6 weeks in the very, very first measurement shows that it works perfectly well for that. We have a running contract with [ Deter Boyland ] to create new advertising up until the end of August next year and that we can use -- produce advertising longer than to the end of 2022. And there's also an option to prolong a contract, but it's way too early to say. The next detailed measurement on the performance qualitative as well as quantitative. It's going to happen in January. And then we will do a first review and the first retesting of the campaign.

The next question is by Usman Ghazi, Berenberg.

I just wanted to make sure if you can hear me first?

Yes.

Great. If you can bear with me, I've got 4 or 5 questions here. So just -- so I wanted to start first with mobile. In your projections of the EBITDA increase, could you indicate what kind of customer growth and/or captive channel penetration is assumed in order for you to be able to deliver growth in the core mobile business. And that was the first question. The second question was on the freenet kind of TV business or your business excluding [ VIPO ]. I mean in that business, if I look at the financials today, you've got roughly EUR 90 million of EBITDA, you've got EUR 60 million of leases. So the net contribution to pretax is around EUR 30 million from that business. But you know that the subscriber base of freenet TV is going to be coming down. So you've mentioned that you will be looking to migrate those on to either 5G broadcast or IPTV. So I just wanted to understand what the outlook for leases, the lease payments of roughly EUR 60 million is going to be -- I mean can you assume that those come down? Because your dependency on the infrastructure comes down over time? Or will it take until the last customer has been migrated for those lease payments to be out of the equation? So that was the second question. The third question is going to the fixed Internet EBITDA contribution that you have. You mentioned that you will launch in 2022 -- sorry, launch in 2023, infrastructure will be in place backend in '22. But are these contracts signed already? Or do you expect the contracts to be signed next year? And is there any risk to do that? And that then brings me to my final question. I apologize for the list. In your overall group guidance for the cash entry related to the EBITDA increase, I mean, obviously, it's a strong projection that you're putting out, but I'm just surprised that it's not a bit stronger because obviously, the EBITDA increase is coming through roughly EUR 90 million plus. I guess the tax payments are going to be slightly lower in this period given you have the tax asset. Interest payments are going to be stable to down given the leverage is lower and your interest costs are lower and there's a bit of deleveraging happening as well. So [indiscernible] unless CapEx is going up, did you have to deliver some of this growth? I guess the [indiscernible] could -- I would have expected it to be higher on free cash flow from the EBITDA increase. So any kind of color on that would be great.

Okay. Usman, thank you for your questions. I think I'll start with your first one about the customer growth in mobile. All in, what we forecast here is the development comparable to what we saw in the last quarters. It's a slight increase per quarter. I think we see the saturated market, but we still think that an increase of up to 100,000 per year. Here on the net add side is possible. But definitely, it will be mixed between SIM-only, bundled contracts and also app-based tariffs, what we sell. So the profitability, I think we have -- in the bundled business, we have different profitabilities of tariffs. And in all other ways we do also have different profitabilities. So we mixed it all in. But at the end of the day, I would say it does not make a big difference even at the end of the day, I have 20% from no frills or if I have 40% because the profitability in the average is not that different. So we did deep and concrete calculation on this. But I think at the end of the day, it does not make a real difference in terms of EBITDA if I do more SIM-only or if I do more bundled business. On the TV side, I think the lease payments, it is -- you are correct, it's something around EUR 60 million at the moment. I do not think that there will -- that we will see any changes in the following years here. So our calculation is based on stable pricing. We have long-term contracts here with telecom. And so I do not expect and we do not expect in our projection, any changes here. On the fixed Internet side, yes, we already -- or we are just starting with some LTE 4G offers here in this arena. And we did some resetting during the former years already. And therefore, we also have a good base of calculating the business and calculating volume. I think as Christoph described, the method to get the customers will be different and the structure of the tariffs will be different. And this may help to get even more customers further on. But I think what we did here is that we started already or we are just starting, but it is on a very, very low level. What we see is a lot of reselling in this area. And therefore, and this is what we do for years now. But I think the big improvement is that we switch from reselling to customer ownership, and I think this is very important. Then you asked about the cash flow in the long-term forecast, if I understood it correct. And yes, you are correct. I do not see in, for example, an increase in interest yes, there will be an increase in taxes because we will create more profit and then the tax rate -- the tax will be higher, not the tax rate, only the tax payment will be higher. On the working capital side, I think we will need more money. It's a question of how many routers we need, for example, for the Internet business, then it's a question how the hardware business or anyway we'll develop what we need for a digital lifestyle in working capital inventories. So what we calculated is that there will be definitely an increase in the following year. And I think this is typical if you increase your business, you increase your working capital needs. And on the CapEx side, I think, yes, it will. We will stay on an asset-light basis. but there will be additional CapEx payments for all segments. And for example, for the digital radio, we already did some investments, but there are ongoing CapEx. And for example, for the IPTV business, we have -- it's a flexible figure. What we do have in CapEx, but the more customers we have, the higher the CapEx is. It is not no big amount, but there will be an increase. All in, I would say -- and this is what I tried to say when I discussed the cash flow outlook. From my point of view, it is conservative as we took the -- what we see in reality we forecasted for the future. So what we said is, at the moment, the EBITDA is doubling the free cash flow. And therefore, we said the same measure would work for the future. It is conservative. There are some chances that it would -- will get even better. But for now, as we have some uncertainties here, we just did it this way.

Can I just ask a follow-up on the fixed Internet side of things. So I just wanted to ask have the contracts with Deutsche or Vodafone -- are they in place or not?

Yes, there is for the regular DSN, there is a contract in place. There is a kind of like a precontract conversation on cable. And there is ongoing talks on FTTH, satellite, et cetera. But for the launch of -- for the launch in 2022, the contract has signed.

Next question is by Ulrich Rathe, Jefferies.

Just if you look at -- at your differentiation, your point of differentiation versus the rest of the market, I have 2 questions. The first one would be, why do you think in your mobile core business, the network operators couldn't follow suit or even outpace you? Is it that they -- on the retail basis, I'm not talking about the wholesale relationships that were asked about earlier. So the retail basis, is it because they don't understand it. They cannot execute it or because they have fundamentally conflicting goals? If you can comment on that. The second question is you highlighted it on one of your first slides that the key differentiation that you seek to provide this is being impartial and independent. But there is, of course, the slightly cynical view on what freenet is that it's just the sales organization following incentives set by the mobile network operators. And sorry if that sort of sounds a bit blunt here, but it is sometimes what how freenet is discussed. So how would you address that apparent conflict between appearing to customers impartial and independent and operating everything. But in reality, you're just going after the money as it's being offered by the MNOs at any point in time.

I mean on the first one, I think the network operators have boundaries such as huge organizations in their own shop chains. They have compared to us, most likely a much higher personnel cost, SG&A costs, et cetera, et cetera. And I'm not talking about the network as such, I'm talking and spectrum costing. They are bigger operations with all the difficulties of bigger operations, long-term obligations, workers' council, et cetera, et cetera. I think we are just smaller, leaner and therefore faster. We are more flexible with third-party retailers, and we are faster in adapting whatever it's technology, it's offerings and so on and so forth. Whereas on the other hand, if the big companies -- I mean, if they decided for a direction, you can't stop them. So I think it's the old game of being David against Goliath, smart, small, lean, mean, clean versus big, heavy, but very sustainable. So I think just there's room for both in the market. And the second one, yes, I think that is valid, but that is valid in a period of growth. because in a period of more growth in the market, fewer sales, fewer gross intake is the driving force. Nowadays, it's about share of wallet. It's about understanding the customer. It's about giving them the right choice. It's about intelligent pricing per segment. No doubt Deutsche Telekom has a heavy and very loyal footprint in premium customers and customers that are happy and ready to pay a lot more than ours are. But I will compare it with any other business. Mercedes Benz cannot only sell the S class. And there is room for the [indiscernible] [ Golf ] as well as for the [ Dutch Logan]. And I think we've just found our place in the mass market spectrum. This must not be and disclosed for any other industry as well. This must not be in terms of profitability and margin must not be weaker. It's just a different segment. Deutsche Telekom is going for their convergent product. They have still a huge fixed network footprint. We have subscribers that are constantly paying EUR 20 for fixed network, even not using it. They have a huge base in SMEs and companies, large companies, they have a widespread offering and a widespread focus, and we have a -- be taking just a small piece out but we are addressing 10% of the market, and we're very happy with not addressing the other 90%.

And if I can add one, Tim stop me if this -- if too many people else on the call.

No, that's fine.

A lot of the -- I mean a lot of the earlier questions, so quite a few of the earlier questions sort of have an underlying question that hasn't been explicitly asked yet, which is ultimately, U.S. freenet management don't know how the mobile network operators will approach the wholesale business. So how can you talk about an EBITDA in 2025? [ Do you think ] Vodafone might just turn around and decide that it's not worth to deal with freenet? I think that's sort of the underlying current there. Could you summarize the factors that give you confidence that the fundamental business model will continue to work? And in particular, can you comment on any specific statements of regulatory support in this respect?

Yes. Well, thanks for speaking up and giving us the chance to lay it out. I mean, we have seen an option on the 5G frequencies. And in that option, they have the obligation to work with us and the obligation to give us access on any level of the technology is written in the preconditions, and it is an obligation. The thing that's not written down is what this obligation means in terms of amounts in terms of margins. But we also have a long-lasting relationship, giving us a certain level of margins. And so there is a legal framework based on contracts, based on repetitive attitude that gives us the freedom to anticipate and to project a similar level for the future. There are obviously also [ legal ] disputes with the network operators every now and then. And there is also hearings with the regulator. And from some of the rulings of the regulator or some courts as same as from the day-to-day life and work with the network operators, we considered this relationship at the end of the day as a beneficial one for both ends. And honestly, I have -- I know that there is always this doubt and this questioning of it, but I'm not spending more than a day a year in thinking about that topic. It's -- if this was a super unprofitable relationship for the operators, they wouldn't do it. I think if we go bottom line, it is a quite beneficial and quite profitable relationship. And we also are kind of the existing challenger for their internal organizations. If I -- I've said that before, if I was the CEO or whatever of any of the other, I would love to have a constant best practice to compare with. So there's not much more to the answer, but the regulation seems fair to us. The rules are set and -- are in favor of this kind of competition in the German market. And there is ruling some of them are public, some are not public, even in 2021, where courts have decided to give access to ourselves and to others into the networks of the operators. So by definition, if I was an operator, I would not admit it and I would not state it the way I state it. But in fact, I don't see an ongoing conflict. It's the opposite. I see a constructive common work on the market.

The next question is by Joshua Mills, Exane BNP Paribas.

I may just pick up on that last question again then. So I guess over the last few years, your EBITDA margin on service revenues hovered around low 20% or so. And when you're describing the points just now, you made clear that you've got legal rulings, legal disputes in the past that you've won about access. But my question is, have you ever -- or recently had a legal dispute about margins? And if this were to go to court and let's say that the -- the MNOs want to cut you out completely, which I agree is unlikely, but let's say that did happen. What margin do you think the regulator would allow you to deliver? And how would that compare to 22%? And so that's the first question. And then the second is just on waipu. Just love a little bit more detail on a couple of points. So firstly, what's the absolute level of EBITDA today? Just so we can calculate what the growth you're targeting implies? And then perhaps if you could give us a split of the fixed and variable costs because I think the economics of waipu and how the revenue drops through to EBITDA has been difficult to work out in the past given the start-up costs. So I'd just love to kind of understand what the longer-term EBITDA margin on this business would be when we put it through our model.

Okay. On the first one, we haven't had a legal dispute on conditions. So far, whenever we got close to it, we found a way to do it on a contractual level. So we think this is a fair response. On waipu, ARPU was around EUR 7. There is a variable cost, they consist of technically transmission cost plus content cost plus other servicing costs, customer care, billing, et cetera, et cetera. I think this would be Ingo 40%, close to 50% of the current ARPU level. And there is about there is a fixed cost related of around 60 FTEs. We do not believe that the 60 FTEs that would dramatically change if this was double the size because it's technology, it's IT, it's customer -- the little customer care is product management. So whether they are 1 million, 2 million or 500,000 customers is making no big difference. So out of that, you can model it. We are currently very disciplined in marketing. We spend -- we have a spending limit on the individual customer and once again, I will not disclose it, but we make sure that any of the customers is profitable within its lifetime. And we expect this business to scale up because of the low fixed cost going against the -- the revenue. And the -- all other costs are variable, and there are some of them such as technical cost, transmission costs are also decreasing with volume. The thing that is 1:1 variable is the content cost.

I think whenever Josh, whenever you start to model it, I think you could also ask Tim and he can give you some additional wins to make it easier for you. And you asked about the EBITDA, which is the base. This year, it will be something like EUR 5 million.

Great. That's really helpful. So just to follow up on that first comment. So you've got close to having these discussions or legal disputes on margins. I'm aware that there were some discussions and disputes which nearly went to court in the late 2000s. But have they been more recent events than that? And have there been any legal disputes say in the last couple of years on the margin contribution between you and the M&As?

Yes, there have been court rulings also within the last 18 months and the majority, not to say 100% were in our favor.

The next question is by Usman Ghazi, Berenberg.

Just 2 additional ones, please. And first on waipu. You've seen Netflix starting to get into video games now. I mean, do you see an opportunity to broaden the offering beyond just content and into -- beyond TV content and into games as an upselling opportunity or has that been factored in at all in your current projections? And then the second question is just on the on the realignment of sales and the organization towards smart pricing and looking at customer lifetime value. I mean has the kind of change on incentives and organizational structure. Has this been done already? Or is this to be implemented over the coming quarters?

Yes. Thanks, Usman. The first one, no, we are not intending to expand the waipu offering beyond moving images or moving pictures. Games and the like, we do not see a proper scalable business model as of today. I'm not saying we won't find it. But we are not preparing it and we don't think that this is relative to other opportunities would be the right area to invest capacity and competence. What was the second question again?

Organization.

Organization. Yes. The organization physically and from reporting lines and also has now been implemented, it took us unfortunately, a bit longer to find an agreement with all the relevant internal authorities than we thought, but it's now in place from October. It were up and running now from 1st of November. The entire incentives team and the KPIs cannot be changed during this year because people have contracts and we need to follow the existing agreements. But we are working on setting it up so that from the 1st of January, like all setting and incentive schemes will be according to the new system.

There are no further questions for the moment. And so I hand back to Christoph Vilanek.

Well, thanks a lot, gentlemen, for being patient and staying with us for 2.5 hours. As Ingo said, I'm sure that aside from giving you a lot of details and information we have also created a lot of new questions. So please feel free to get in touch with our team in order to facilitate a proper conversation and more detailed insight and understanding of our projections. I think it was -- we've decided to go into that detail and into that midterm '25 perspective, I think 2 or 3 months ago. I can assure you that we have anticipated a lot of what you've questioned today and you're about to question in the next couple of weeks. So we're happy to take the opportunity and the challenge to discuss that with you. Once again, thanks for joining and thanks for your time. Goodbye.

Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect.