freenet AG ($FNTN)

Good morning, ladies and gentlemen, and welcome to the freenet AG conference call on the Q1 2026 results. [Operator Instructions] I will now hand over the call to Robin Harries, CEO of freenet AG.

Good morning, everyone, and welcome to our Q1 earnings call 2026. I'm Robin Harries, the CEO of freenet. We are very happy about the start into the year. We could see strong revenue growth and strong growth in terms of free cash flow. And yes, we had a solid and sustained customer growth across mobile and IPTV, and we had some nice operational highlights. And for example, the relaunch of our domain, freenet.de, and we started our -- or we started further AI initiatives. So we brought AI bots live, and we are -- keep integrating mobilezone Germany, the company that we acquired last year. We confirm our guidance for the full year '26. And yes, as I said, we are happy about the start into the new year. Next slide, please. On the following slides, I will focus on our 2 core segments, which are mobile and IPTV. I'm going to start with an update about developments in the mobile segment. One good thing is that the market is shifting to value over volume. As you know, we saw or we had very strong competition since '24, which had a very negative impact on pricing. It started in '24. And then we saw further negative developments over the course or in the beginning of '25. But the good thing is that in the end of '25, during the Cyber Week, we could observe that it was the first time for years where prices didn't go down further. Normally, during the Cyber Week, prices go down further. But last year, this didn't happen. And in the end of the year, we could even increase prices. And this is what we keep doing. So in the beginning of this year, we increased our front book pricing. And this is also something that we observed in the market. For example, our competitors, they increased the lower prices, for example, from EUR 4.99 to EUR 6.99. You could see this when you look at 1&1 or if you look at Blau.de. And also other competitors, they started to increase prices. We did the same. And yes, I mean, front book prices went up 1% to 2% at freenet, which is good. And we believe that there is a shift, and this is, I think, good for the entire industry. Another good thing is that we are in constructive discussions with the one network provider. We mentioned this last time that we have an unfavorable contract, and this is also -- this was the reason why we had an outlook for this year, which was between EUR 500 million and EUR 530 million adjusted EBITDA because there might be a negative impact of EUR 50 million, which is already included in our outlook. But we are talking to the to the partner. We have C-level discussions every week, and we see good progress, constructive progress. Outcome is still not predictable yet. But so far, we are also happy about the progress there. Next slide, please. One important thing when we talk about mobile is the development of our premium brand, freenet, freenet is the most important brand in our company and our premium brand. And we switched or we had a relaunch in the past, domain for our mobile offerings and was under the domain, freenet-mobilfunk.de. We switched it, we moved it to freenet.de. So now you have our best offers under freenet. And this was the start for our brand marketing investments. Since the beginning of the year, since the move of the domain, we already had 4 TV campaigns, for example, and the TV spots are clearly focused on brand messaging. So we created spots where you can see the brand a lot, where you can feel the brand and they connected to strong mobile offerings where we sell mobile phones so that our customers connect the brand freenet to mobile phones. And that's very important because if you look at unaided brand awareness, that's a big chance, a big opportunity for freenet because the people in Germany, they know the brand, freenet. But if you ask about where they want to buy or where they could buy their next mobile phone. And if you look at unaided brand awareness, our numbers are just around 10%, and this is a low number. If you compare it to our competitors like 1&1, they are over 40%, the others are even higher. So that's a big opportunity for us to increase our brand awareness. And we are doing this through performance-based brand marketing investments that increase the traffic on our website, which also increase the sales for the brand, freenet. And this will help us to further drive more direct traffic to our websites. And so far, we are really happy about the developments. We could see a significant uplift in terms of visits, conversion rates are getting better because when you get branded traffic, this is always the most -- this traffic has the highest quality. We will keep doing this over the course, I guess, next month and also years to increase the performance-based brand marketing investments. And we will also further improve our website. So far, there's still room for improvement in terms of user experience on the website. So we will further increase the conversion rate, and we will also further increase our offerings. When you look at, for example, we will include -- or also offer further bundles. Next slide, please. And here, we have some nice numbers. As you can see, last quarter, we grew 29,000 net adds in the mobile business. And this, even though we increased the prices, as I said, we started to increase prices at the beginning of the year, but we could see a solid growth. And especially when you look at our competitors, I think that's a really strong number. And we're happy about it. And besides the growth in terms of postpaid net adds and we could also increase our postpaid service revenues, and that's always, I think, both is good development. And on the right side, you can see postpaid reselling. And this is new. We included this, this time for the first time. These are reselling that we generate through our mobilezone business. So I think overall, we see easing competition, which is good. We are happy about the development in terms of postpaid. So we have strong reselling business. And the combination of our service provider business and our reselling business is actually very interesting and gives us new opportunities. Of course, our objective is to get our own users and to focus on the server provider business, but it can also make sense to increase or to become more active in the reselling business. We look at actually the outcome and look at where we can earn most money. So therefore, this gives us more flexibility, more possibilities, and we are really happy about the new part of the business that we acquired last year. Next slide. Now turning to our second core segment, the IPTV business. And there, we saw a nice development as well, 42,000 net adds in the IPTV business, which is strong. And besides this, we could also generate a nice adjusted EBITDA. Since the beginning of last year, we see very good developments in terms of profitability. We are proving that money can really contribute significantly to our bottom line. And I mean, the product is really fantastic. If we look at ratings, if we look at tests, so we see that it's not also -- our view that our customers that they also like the product a lot. And for example, waipu was the winner of the connect test, which is a very important one. And also on the SATVISION test. And I mean, that's a stable subscriber business, which is growing, adding more customers contributing to the bottom line. And it's not only that we earn money through subscribers. It's also that we earn money through targeted advertising. And that's actually very interesting because here we have, for example, the dynamic ad substitution. This is, for example, when you watch ProSieben and you watch it through or another channel and you watch it through waipu.tv, you see different advertising, advertising, which is really targeted on the audience. And that's, I think, really powerful. And besides this, we also have FAST channels in waipu.tv, and there we have a dynamic ad injection that means that we have -- that we include our ads and the advertising into those FAST channels. And I mean, the targeted advertising is getting more and more important. Here, we already have significant impressions. And I think it's also a very good sign that big German broadcasters are working with us. On the next slide, please. So for us, mobile business is important. The IPTV business is important. But it's also very important for us to see progress in terms of AI. And I mentioned during the last earnings call that we want to be the AI first telco company in Germany. I think we have a good advantage because we have flat hierarchies. We have a relatively small organization compared to our big competitors, and we are fast. So we want to be the speedboat, the attacker in the market, and actually, that's what we're doing. So when you look at the speed, how we implement AI. I'm really impressed by this. I'm impressed by the team and also the capabilities to change. If you look at our teams, they're really hungry. They want this implemented. And they are doing this in a very good way. And for example, we started our first test with our AI voice bots. If you call our service lines today, so there's already a small part, which is operated by AI voice agents. And here, we are still in the testing stage, but we are scaling this. And this is already an interesting part. And we are keen to further scale this through the course of the year. So this will improve our customer service a lot, yes. So this will help us to become more efficient. That's really good. So then we also started our new AI buddy in telesales. This is an AI tool for our call center agents. For example, when they do outbound calls, now they got much better information. They have a tool that shows them what to offer to the customer. This tool reacts to the reaction of the customers and suggest new offers and so on. So this is, I think, also a big opportunity. And then we further develop our AI Smart Pricing. If you consider that we have over 8 million customers, and that's actually that's actually a lot of data, and you need to know what to offer to the customer at what point in time, and you need to know what offer you should offer as a customer. And there, we see a big advantage by using AI, and this is our Smart Pricing. So we have now just rolled out our Smart Pricing 2.0, which is a further development of our initial activities. And this is just the start, yes. So we focus on our customer segment at the moment. But besides this, we are also looking into, for example, new customer acquisition into things how we can further optimize the creation of our commercials. And we also hired one expert. This is also a nice story. He was already with mobilezone. So now he's reporting directly to me. He's responsible for our AI activities within the company. And so there's a lot of focus. It's progressing. We are very happy about it, and I'm relatively sure that we will see further nice development and progress over the course of this year. With that, I would hand over to Ingo.

Yes. Good morning, everybody, from my side. I start with the group overview. I think you will see that the structure of the pages, we changed it a little bit. We got some hints from your side. I think the Investor Relations department was very creative. And I hope that the new structure will give you more transparency than before. So on this first page here, you see the group figures. Yes, revenue, a strong increase based on first time of mobilezone consolidation. Gross profit with an increase of 2.2% to EUR 242 million. In the adjusted EBITDA, we see a decrease. But I think Robin already mentioned it, we have this network operator contract, which we are in negotiation about at the moment. And the effect from this is minus EUR 12.5 million versus last year. So without this effect, it would be an increase of 6%. So I think we are happy with the basic business. And definitely happy with the adjusted free cash flow, which is EUR 85.7 million in the first quarter of '26. And I think I'll come -- I'll discuss it later on, but it's a good development in net working capital because of bonus payments from the networks. Moving to the revenues. What we see here, definitely, and I already mentioned is the first consolidation of mobilezone and the strong growth. We see an increase in hardware sales. I think from the past, you know that we were not that interested in increasing hardware revenues. But here, the situation is different because, as you know, they, mobilezone, they have a contract with Apple. So we -- first time we get the iPhone directly from this contract. There is the possibility to get more iPhones, which was a problem in the past. So I think here, in this case, I'm not that unhappy about the increasing hardware revenues, therefore. And what you see in the other business here, which is increasing, this is based on the 182,000 reselling customers, which were gained in the first quarter because in resale, you get provisions and you do see these provisions here on the other. And this is the reason for the increase. Moving to the IPTV business. Yes, I think it is all as expected. We see an increase in revenues definitely, mainly driven by subscription revenues, where we saw an increase of EUR 4.5 million, which is more than 10%. And I think I mentioned that during '25 several times that from the -- that we were unhappy to lose the contract with Telefonica. But on a profit and revenue base, this was not that big problem for us. And therefore, here also the headwind is not that big. Advertising is also increasing. Robin already referred to it. Other holding, now here in the new segment structure, much bigger because in the other holding segment, we show media broadcast now, the antenna broadcasting business, which is relatively stable. But the B2C customers are still shrinking here. Moving to the gross profit. I think it's a very good picture because we see the increase by EUR 2.5 million here in mobile in the first quarter. If you put into consideration that we have the negative effect of EUR 12.5 million from the Telefonica or from the Telefonica agreement, which is under negotiation now. On the other hand, you see that we gain gross profit from mobilezone of EUR 17 million in the first quarter. And in addition, you see that we lost or that we sold the cloud, our WiFi business mid of last year. But in the first quarter, it was still part of the figures. So we lost EUR 3.5 million from this business here. All in, the margin decreased to 26.7%. This is mainly linked to the higher hardware sales, what we did in the quarter. IPTV, stable, strong development. I think you see, based on the revenue increase, you see the gross profit increase, subscription is gaining traction. So we increased it, and we also increased advertising gross profit. So from both sides, this is very successful. Other holding, we see the slight increase based of the shrinking B2C, antenna business here, but it's also relatively stable, what we see. All these effects, you can find in the EBITDA on the next page. Mobile, yes, it looks bad. But if you know the effect, if you normalize the Q1 of '25 by reduction of the EBITDA from the cloud, the base is something like EUR 101.9 million. And if you also normalize Q1 '26 by the negative effect from this MNO contract, then you would see that there is an increase in the -- and it shows that the underlying business is very solid, it's stable. And so we are fine with the mobile results, what we see. IPTV, an increase by EUR 3 million. Yes, in terms -- in relative terms, it's impressive, nearly 50%. And I think on the one hand, you saw on the gross profit level, it increased by EUR 2.2 million. And this was even possible with the reduction of cost. So we spent less for marketing in this first quarter. And therefore, we see the increase of EUR 3 million and margin step-up here to 17.1%. In the other/holding segment here on the right-hand side, yes, we see an increase in results. This is not based on the antenna business. It is based on the reduction on the Board level here. And therefore, I think this was something what will be seen during the year. Moving to the free cash flow, to the free cash flow bridge. Here also, a slight change in the structure, how we show it. I think what you can see is that in net working capital, we are much more successful than last year. So on the one hand, we get more bonus payments from the networks. On the other hand, we had to increase our inventories because we do not know if hardware will be available during the year. Therefore, we increased our inventories to more than EUR 100 million. This, I have not seen before as a CFO, and all this hardware -- most of the hardware is already paid. So I think it's even more impressive, this net working capital development in the first quarter. Taxes, no big changes on the same level as last year. CapEx, slightly higher investments based on the digital radio side mainly. But again, all in a very low CapEx level. We are still CapEx light, no changes here. Lease payments on a comparable level. Interest payments a little bit higher because we had this bridge financing for the acquisition of mobilezone, which we could repay in April with the new promissory note. But yes, interest had to be paid. And therefore, the higher interest payments here. So all in, I think we are happy with the EUR 86 million -- nearly EUR 86 million of free cash flow in the first quarter. And I think with this last very good figure and with the hint to the very, very healthy balance sheet, what we do have. I hand over to the operator again and ask you to start the Q&A, please.

[Operator Instructions] The first one is from Sofija Rakicevic, Goldman Sachs.

Two questions from me this morning. The first one on TefD. When should we expect an update on a potential agreement or a renegotiation? Would this be communicated by a stock market announcement or as a part of 2Q results? Could you just give us some color on this, please, given that you're meeting with their management often. The second one is how are you thinking about postpaid net adds for full year, both in total and also split between the core. Well, business ex mobilezone and mobilezone.

Sofija, thanks a lot for your questions. I'll take the first one. I would have the hope from today's point of view that we get a good agreement, a good new agreement with Telefonica. This would lead to a -- yes, I would expect a change in the guidance, and therefore, the stock market announcement would be necessary. So it is our hope that on the base of an agreement, the stock market announcement would be necessary. And I think, therefore, yes, definitely, yes. And the postpaid question, I think, Robin?

Yes. Regarding postpaid, we gave the guidance that we expect moderate growth here. We showed last year, especially in the second half of the year, our muscles and the ability to grow, to show strong growth. So we are happy about the start into the quarter with almost 30,000. So we have opportunities for the next quarter. This also depends on our competitors. So at the moment, I think it looks quite good. But as you know, the price is always a lever, it's a driver. So I think we have -- or we are able to steer the customer growth. And so therefore, I mean, we keep our guidance with moderate growth.

The next question comes from Polo Tang, UBS.

I have three. The first one is just about your MNO agreements. So you mentioned that you're in constructive negotiations with Telefonica Deutschland about a new agreement. But if you do get a new deal, will the step-up in EBITDA be EUR 50 million? Or is that number up for negotiation? And just related to your M&A agreements, can you confirm if your other MNOs have approached you about renegotiating their existing agreements? And can you remind us if these M&A deals require you to deliver a minimum level of volume in order to maximize the bonus payments? Second question is really just about waipu.tv. So revenue trends and subscriber trends were perhaps lighter than consensus expected. So how confident are you that subscriber net adds at waipu.tv can accelerate to the 300,000 to 400,000 per annum that you are basically -- that you need to achieve to get to your 2.7 million to 3 million subscriber target by 2028? And given that Deutsche Telekom has exclusive rights to the FIFA World Cup, do you see a risk that Deutsche Telekom's MagentaTV will take share in Q2, Q3? My final question is really just about mobile consolidation. We've obviously had a lot of headlines about potential mobile consolidation in the German market. If this does happen, how should we expect the potential impact on freenet?

Regarding the -- yes, thanks for your question. Regarding the Telefonica contract, yes, I mean we are -- so I mean, it depends, yes. So we are in negotiations there. So far, there's nothing to disclose. It's still unpredictable. We see good progress, as Ingo just mentioned. It's also important for a new contract or if we want to have a fruitful and healthy long-lasting partnership, it's important that we create win-win situations. And I think that's important, yes, if you think about the following years. And I think this is also something that the new management understands. And so therefore, we are, I think, quite positive, yes. And so the -- regarding the other network providers. No, they haven't approached us regarding renegotiations. I mean we are in discussions, and we have good relationships with them. So we are in close touch. So that's normal business. So I think there's nothing special. In terms of subscriber trends with waipu.tv, I think the quarter is quite strong. If you look at the last quarters, I mean, we grew with over 40,000, that's strong, that really helps us. It's a good start. And when you think about the rest of the year, I mean, the fourth quarter is always strong. So we believe they will further increase. And then if you think about the soccer championship, this is also good. If you look at our competitors, our competitor, one competitor, so they have a massive marketing campaign. And this is always good for the IPTV market, yes. So the more people learn the product, yes, so the more people that switch from traditional cable to IPTV and know and experience the benefits, that's good for the market, that's good for us. And besides this, I mean, we have our own marketing campaigns. We prepared things. We are at waipu, we are very fast in creating new campaigns and creating new business relationships and then to come out. So there, we are quite confident that we will see further positive development here. Your last question was related to the mobile -- to the possible mobile consolidation. So for us, that's actually -- that's not important if there are 3 or 4 mobile network providers. I mean I was also a Board member of 1&1 for 6 years. And there, we had only one relationship with Telefonica. This work also quite well. I mean in the end, it's important that you have at least one partner. So we are now at the moment in a very good situation. So where we have contracts with all 4 network providers, also with 1&1 besides this. So with 1&1, for example, we started to integrate them into our shops, yes, into our -- and there, we already have over 30 shops where we also already started to sell 1&1 contracts. So at the moment, we have contracts with all 4 of them. And if there's only 3 instead of 4, I don't think that this will have a negative impact on us. Yes, I hope this answered your question.

The next question is from Stéphane Beyazian with ODDO BHF.

I was just curious starting with mobile. If you could help us, which competitors are playing the front book and which are not actually playing the front book and still potentially dragging the industry? And my second question still regarding mobile is, can you help us understand how significant is the gap between the front book and the back book pricing to try to understand how long it could take for mobile ARPU to stabilize and bounce back? And finally, if that's possible, I was just curious to know when do you think the O2 waipu contract would be at 0?

Stéphane, I'll take the last one. It is already at 0. So I think there were some customers in the -- still some customers in the first quarter. I think we still have 1,000 or 2,000 customers. But this, I would call 0.

Okay. I'll take the other questions regarding the front book pricing. Yes, I mean, at the moment, if you look at the -- at our competitors, Telekom increased prices. Then you have Vodafone, they increased prices. You have a Telefonica, especially with Blau, they increased prices. They were very aggressive in the past, and they increased it, and we did the same. We did this especially in our channels where we have price-sensitive customers that we increased a lot. And so overall, I think everybody does smart things at the moment. It's like not last year, it was something -- sometimes it was unhealthy. So there you could see offers that actually did not create value. So they were too cheap. So this has changed. And when you look at the overall ARPU, I mean front price booking went up. If you look at the overall ARPU, it's still going down. So this is something that you can also see with our competitors. So that's the same with freenet. And this will take time a little bit because I mean, yes, you have churn. So you have old customers with higher ARPUs that was the normal churn, so that leave us. So then you have new customers from '24-'25 that were cheaper. So overall, the impact of the overall ARPU is still decreasing. But I mean, if you do the right things today, so this year, so this will be also play out positively in the near future. And yes, that's it.

Next question is from Karsten Oblinger, DZ Bank.

The first question is about the just the difference of the adjusted EBITDA and the reported EBITDA. Could you remind us of the EUR 2 million? And the second one is about the possible IPO of waipu. Is there any new idea about timing or the IPO in general?

Karsten, thanks for your questions. The adjusted EBITDA is the -- most of the EUR 2 million is linked to an old Board -- to a contract of a Board member who resigned. But there was still a payment, which was necessary. And so this could be concluded in the first quarter and therefore, it's mainly driven by HR. On the waipu IPO side, what I know is that, yes, we did the soft announcement. I think you know our position. We have to support this IPO because the minority shareholders have the right to start it. It has started. We support it. And as I know, there will also be a road show from the Board members here from EXARING. Yes, so this is all what I can say. I think our position has not changed. We are happy with the 75%, what we do have. We would not need an IPO. But yes, I think we have contracts and we -- and I think this is how you know us. If we have a contract, then we act corresponding to what we signed some years ago. But yes, I think we have to wait and see what happens. You are nearer to the investors. At the end of the day, the investors will decide. And I think we support it, but we do not need it.

The next question is from Florian Treisch.

One question left on my list. I think in a recent newspaper article, you mentioned that you're thinking about extending into new verticals. I think you also touched on that in the recent conference call. I think you mentioned that fiber might be an interesting idea to enter. I mean we have seen decent positive feedback from 1&1 in the call some days ago. Can you give us an update here what to expect from your end?

Yes. Thanks for the question. Good one. Yes, this is, I think, a very nice opportunity for us, and we are on it. So I mean, especially when you talk about fiber. So it's difficult to do marketing. So it's important that you talk to your customers. It's like not easy to sell it because you cannot just do display advertising or so, it's a complicated product that you need to explain to people because you have to go into their house and that stuff and so on. So therefore, it's helpful if you have shops, yes. And we have around 500 shops and where we have good locations. And then we also have good partnerships, for example, with MediaMarktSaturn. And so we have a very good footprint in Germany. And we have a huge customer base of around over 10 million customers. So therefore, I think it makes a lot of sense to also start to do marketing and to create a nice broadband product. And we are in discussions with partners. So we are proceeding here. It's something that will take some months, but we will do something here, and this will be a further nice opportunity for us.

The next question is from Shekhan Ali, Berenberg.

The first one is on the M&A headwind. So in Q4, it was positioned that the worst case would be for about EUR 50 million in the year. And in Q1, you sort of did EUR 12.5 million. Has anything changed with how we should think about the worst case and best case with this? And then second question on mobile net adds, how much of these are coming from the mobilezone sales channel versus own freenet?

I do not understand. I'm not sure if I understood the first question correctly. So we said there could be a headwind of something like EUR 50 million. Yes, in the first quarter, it was EUR 12.5 million. So on a -- if you do the math and if we already had EUR 13 million last year in the fourth quarter, yes, you are correct. I think the effect from the MNO contract in the full year will be EUR 50 million. So it will be something like EUR 37 million higher than last year. So if I got the question correct. But I think with the EUR 12.5 million in the first quarter, we are -- and I'm not happy about it, but we are on track to reach the EUR 50 million for the year if it works linear. Then the second one.

Sure. So this is -- as you can see, we now report postpaid customers, so there we grew around 30,000, which is mainly from freenet. And then we also show our reselling contracts, which are around 180,000 and this is then the mobilezone business. And there are some -- there are also some customers included in the -- from mobilezone through the brand high in the postpaid customers, but this is a rather small number.

Dear ladies and gentlemen, as there are no more questions in the queue, I am closing the Q&A session and handing the floor back over to the hosts.

Yes. Thanks a lot. Yes, we want to thank all our employees for their fantastic job. We know that we are demanding, and there's a lot on their plate at the moment. But together, we are sure we will move forward step-by-step. And we have many opportunities about us, and that is really great and besides there's also a lot of fun. So thanks to all of us, and thanks for joining this call. Bye-bye. We wish you a nice day.

Bye-bye.