Tele Columbus AG (TC1) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the Tele Columbus AG Q1 2024 Results Conference Call. I'm Moritz, the Chorus Call operator. [Operator Instructions] The conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Carmen Becker. Please go ahead.

Thank you, Moritz, for the introduction. Good morning, ladies and gentlemen. This is Carmen Becker speaking, and it's my pleasure to welcome you in the name of Tele Columbus management team to today's conference call following the release of our first quarter results for fiscal year 2024, which ended on the 31st of March. I'm here today with Markus Oswald, Chief Executive Officer; and Nicolai Oswald, External Interim Chief Financial Officer. Now I would like to remind you that if any lenders or rating agencies on the call right now that this is a public conference call in which only publicly available information will be discussed. I would therefore ask you to refrain from questions containing information not belonging to the public domain. This conference call is intended for capital market participants only and not for press representatives. If any journalists are on the line right now, we would highly appreciate if you were leaving the conference call now. Press representatives are welcome to call my colleague, Sebastian Artymiak, to discuss any outstanding questions. Having said that, it's my pleasure to hand over to you, Markus. The floor is yours.

Thank you, Carmen. Good morning, everybody, on the line. Yes, happy to go to the next page. I think the table of content seem like the quarters before. Some messages in front coming to the operational update and KPIs. Then Nico will lead through the financial performance. Some closing comments from my side and then open up for question and answers. And let us see how long this call will take place. A lot of answers -- questions and answers are given last week on our Capital Markets Day, but looking forward to lead you through in more details through our Q1 results '24. Coming to more detail on the operational side. Yes, like I said last week also, consumer focus very important for us to folder bulk migration but also growth on IP. And it's good to announce again and again that we are the fastest-growing IP operator right now in Germany with 9.3% year-on-year growth and a 27% year-on-year growth on IP net adds. So besides that, that we are on a good way on bringing our IP numbers up and up. We also have an accelerated shift towards higher bandwidths withstand then, of course, also for support on the ARPU side. So more than 45% of our gross adds are right now opting 400, 500 and more megabits in Q1 '24. I come also later on to the bundled share, which is also above 45%, which is accelerating TV sales as well. So we addressed the Q4 churn of bulk contracts. We compensated this churn on the RGU basis in Q1, and we have here a stable base. And I will also lead you through our waterfall on bulk migration, which shows that now we are in the middle of Q1, the acceleration of our bulk migration efforts Q2 as well, but it will lead to the whole of the year. When we are speaking about TV, premium TV RGUs are also increasing. So it's 12,000 quarter-on-quarter and 18,000 year-on-year. On the financial side, we have a slightly increased of service revenue year-on-year, but excluding construction work, which was a one-off effect, it is minus 0.6%. Adjusted EBIT -- normalized EBITDA in Q1 '24 increased by 4.2% year-on-year to EUR 47.9 million. Reported EBITDA is mainly influenced by our non-recurring Amend & Extend transaction costs and likely this are introduced last week as well, our transformation costs. So we call it Project Transformer, which stands for our thoughts about potential ServCo and NetCo split. CapEx in Q1 increased, of course, by 16.4%, and this is mainly driven by our excellent performance on the consumer side, which led to because we also are capitalizing our commissions, CPEs as well as also our fiber strategy is going on and on. Cash position. So coming to liquidity, cash position is EUR 102 million as of March 31st in '24. And this also leads to the inflow of the first inflow of cash by the shareholder contribution out of the A&E transaction about EUR 180 million. When we are now looking a little bit more deeper into the numbers, coming to Page 7. Here, we see the acceleration. So normal is that a Q1, of course, in many times has a dip to Q4 because the Christmas period and so on, there's always a rally in the IP market. The good thing is that we also can bring our numbers up coming from 9% growth year-on-year in Q4. We are now by 9.3%. And having in mind that on a higher customer base, this is what our revenue is bringing up. All other competitors are Telefonica, Deutsche as well in a good shape and all other -- and United and Vodafone are losing customers. United are but getting pace on their growth path as well. So IP, here, we are which is supported is our bandwidth and price leadership. But coming later on, I think it's on the next page. Yes, let's go to the next page. Here, we also see the acceleration in Q4. So at the end, I think last time, it was more a focus on the consumer sales. Now for the group of Tele Columbus, we added nearly 15,000 net adds to our customer base, which is gross to 27% on a high number compared to where we come from when you -- 2 years back, it was [ 4,400. Yes, 4,400 ]. Now we are on to 15,000. And to whom I didn't -- to whom -- who didn't participate in the Capital Markets Day, this 15,000 is the gross adds, the good thing -- the net adds. The good thing is that we have pending gross adds in our system. So actually, they are linked to the TV bulk migration, and we also have pending TV contracts in our system because we are in the pre-marketing phase of the bulk migration. And here, you can see that in June and July and also even in August and a lot of our sales activities coming out of Q1 will be added as a gross adds in the upcoming months. Continuous growth on the Internet revenue side, you see on the right-hand side of this graph. And when you look at the mixture, and this is also the basis for the growth of Internet revenue on Page 9. This is where I refer. I make my notes earlier on, quarterly gross adds column above the red one coming from a level Q1, 26%, 1 year earlier. We are now at 45% of take-up rates higher than 500 megabits and a lot of them are taking 1 gig product. And this is only on a net add basis --sales basis. The graph beyond shows that we have nearly doubled our bundled share, triple-play share where TV is incorporated in an IP sales in Q1 '24. So this brings the per RGU basis in a higher ARPU profile, and this is exactly the path which we want to follow. When we are looking at this growth coming on Page 10, so we are bringing our numbers up and up. So between 671,000 in Q1 '23 to 733,000 right now in Q1 '24, this gap or this increase of 60,000 customers when you calculate it by [ 25 ] ARPU and calculate it by 12 months, it's near an uplift of [ 18 million ]. And this brings our service revenue up over time. It brings our EBITDA up over time, and this is exactly what we also have interlinked in our business case. Telephony goes hand-in-hand with our subscriber base on the Internet side. And I think on the comments here, it is also linked that, yes, we will add further more gross adds in the coming months coming out of Q1. Also good numbers on upgrading our FTTH homes, so coming from 100,000, which I reported in Q4 or for Q4, we are now at 134,000. We added as well another 5,000 to that because of, yes, also pre-marketing phases in this footprint. And I will also show you the difference later on in our waterfall on the housing side signed contracts. We also made a big progress again in Q1 '24. On the TV side, these numbers are, like I said before, a little bit inflated by the bulk migration. So we could add TV subscribers. You saw the big loss or the bigger loss in Q4. These are the customers. Right now, our systems are calculating bulk migration will take place. So a customer ending in Q4, so we have that minus of 81. And we nearly compensated this downside, and we are now with [ 1,788 ] RGUs on the TV side, which is a fantastic job that a lot of customers are taking in. Premium TV I mentioned before as well, good numbers on that side. And here, again, the page and for explanation who can't join our Capital Markets Day. What you can see here is a snapshot of our work in progress on working on the bulk migration. So we did 60,000 migrations in the past year '23. We did 110,000 in Q1. We will do 160,000 in Q2; and coming up Q3, 665,000. We did in the past go into these objects with our -- with all of our point of sales, sending letters with housing associations together, joint mails, Internet pages are linked. So if a customer goes into the Internet page or to the Internet page of a housing association, there's information, on our page is the information. And in German press, the information is really getting up, getting up, getting up. We are, and sometimes also a little bit piggybacking on these marketing activities, which is good for us because other competitors have really billboards out in the market to discuss TV. So we reached on this basis right now 48% on the customer base migrated in '23. In the base of Q1 '24, we already reached above, I think, the last number was 42%. For Q2, we are higher than 30%. And even in the upcoming quarters, for Q3, we already reached something around 20%. And this number is on a daily basis evolving. Good thing is, just to give you an example, we have 25 employees out on the weekend. So we started an active also marketing campaign in-house. So everybody hands on board. So some of our employees go -- went door-to-door on Saturday. And these 25 are nearly subscribing for 100 RGUs on the TV basis, which is per person a fantastic number. And they are coming from controlling internal audit accounting or whatever. So this is -- yes, we are now collecting TV contracts and thanks to all of these employees and fantastic staff right now doing that tremendous job. Coming to our housing association waterfall, same to that. Fantastic jobs are made here. Contracts won and open to build third column from the left side, I reported in Q4 a number near to 230,000. Now I'm glad to report 347,000. So only in Q1, more than 100,000 households more are signed for FTTH contracts. So only the biggest 5 are counting something around about 60,000. And the number of left to address, and this is also what we are pulling into the pipeline goes down by 50,000. So this needs, to be honest, a little bit to accelerate, but this is what the troops are working on, and bulk migration has a big impact on that as well. So these are, I would say, yes, the performance KPIs. And now I hand over to Nico for the financial KPIs.

Thank you, Markus. If we look on the revenue side, Markus already mentioned it on the comments that we're coming from around about EUR 111 million in Q1 '23, with a slight growth of 1.3% to EUR 112.3 million on Q1 2024. We compare quarter-over-quarter, we've seen that we had this onetime impact from Q4 last time. So that is not really reasonable. But let's look at the prior year, and I think that's a stable growth by more than 1%. Interesting on the revenue composition, we first -- for the first time, reached the 40% on the Internet and Telephony. So this segment is continuously growing, outgrowing now being bigger than the TV segment, which is only left 39%, and the other 2 components are pretty much stable on the 10%, 11% bucket. That is the stable continuation of the growth that we see and this trend is expected to be continued. Looking at the normalized EBITDA on Page 16, which basically goes hand in hand with the higher sales and the lower cost base. So we came from an adjusted normalized EBITDA of around about EUR 46 million, ending at around about EUR 48 million. And mainly, we see the increasing operating revenues driven by IP. We have a split later in the next section. We could continuously cover the cost on the TV signal, so year-on-year decreased also on the back of the lower TV sales that goes in line. We have the other direct costs, which basically same story as last year, we have the higher maintenance and energy costs, which, however, are offset by lower signal TV costs and also for the Internet and phone and B2B business. On the personnel side, still an increase due to more FTEs on the payroll and the corresponding salary increases that we see, partly offsetting with marketing reductions due to channel mix and also efficiencies in the measures that we do. Coming to the normalized EBITDA, which I just mentioned, the EUR 48 million. You see a strong dip into the reported EBITDA. Still not surprising. We've mentioned this pretty often also in the Capital Markets Day and in the Q4 results, we were expecting still costs in relation to the A&E transaction as well as the transformation activities that we've also started. So this is a very major dip down to EUR 32.1 million for Q1. On the CapEx side, Page 17, we've seen a year-on-year increase. The normal pattern you see in the cable industry and fiber industry is that Q1 tends to be below the annual average, also due to seasonality in Q4. We do exactly see the same pattern. However, we are on a slightly higher level compared to last year with EUR 53 million, 47% of revenues compared to last year, EUR 45 million, 41% of revenues. So that is the normal growth level that we see interestingly is on the fiber network infrastructure. We are more or less in line with last year. Same again, there's a lot of impact in Q4, and then it starts slowing down in Q1 until it ramps up again throughout the year. But the increase mainly is driven by our CPEs and commissions, so the end customer related CapEx that has been increasing from EUR 9 million to EUR 16 million. So that is driven also by our gross sales performance. On the network infrastructure, as I mentioned, this will be continuously being pushed throughout the year, and we expect to be on those higher levels that we've also mentioned last week in the Capital Markets Day on the CapEx intensity this will remain. We've seen a slightly slower start in -- on the IT segment. However, this is also due to phasing and will catch up throughout the year. A slightly deeper look into the revenue bridge that you've previously seen as well. I think the most important is besides the slight increase we see that our Internet and Telephony bucket is increasing faster than we have the losses on the TV side, so not only from the subscription revenues only where we lose EUR 4 million on the TV side, we already compensate with EUR 4.2 million on the IP side. If we add hardware-related costs, which are still allocated to the other segment, but if we allocate it here just for illustrative purposes, we're already at above EUR 5 million on a quarter-by-quarter view. So basically, stable picture, losses in TV, increases on the IP side and the rest is rather stable, slight increases on the wholesale side as well, offsetting the B2B, which had a rather slower start into the first quarter, which we are expecting due to phasing to catch up and go back into growth. Overall, solid performance in Q1. If we look at the main drivers, we've seen the revenues we've just discussed. EBITDA normalized, we also discussed growing by 4% to the EUR 48 million on a normalized basis. And then the reported we mentioned already the dip, which is related to the A&E transaction, which has been completed, and we are now hopefully, going forward, just seeing the transformation costs in the non-recurring, which still be -- which will still be ongoing. And the CapEx increase, we just spoke about going back to above EUR 50 million on the first quarter. Yes, I'll hand back to Markus because that's basically the summary of the financials.

Yes. With the last page, let me give you a sum up of our opportunities for the future and also comment on some of the other slides as well. So for us, it's really important in what markets surrounding we are in right now in Germany. And the good thing is what we also really see in the reflecting of our numbers, growing demand for higher speed is there. Of course, we are also supporting this high demand with our product and price strategy. But this -- the good thing on that is that our strategy is completely fits to the market, fits to the demand in the market and plays into our ARPU perspective for the future, higher demand for higher speeds will support our ARPUs. Land grabbing coming from low beyond 30% penetration on IP. On our network, we really can grow here like we assumed for the future. This is supported by our relationship with the housing association. This is exactly what we are seeing right now also in our discussions with the bulk migration, the support is there. Letters are sent by the housing association, introductions are made, and this relationship will last. So we are now working on the second part planning for '25 with these housing associations, how they can support us as a sales channel, I would say, or a supportive adviser for the tenants, how to accelerate IP growth again and even also work again on the TV growth in these customer bases with bundled products, for example. The in-footprint market structure as the third point here on that page is what I've shown a lot of times is that we are competing against a VDSL structure in the footprint and the footprint with the tenant in the house. And here, the customer can choose between our DOCSIS or FTTH products, high bandwidths versus a 250 limited line. The structural speed and price advantages, I mentioned our product strategy is adapted right now, and this has also changed from the past on a monthly basis where we can react very fast and first on the online channel, which is good on the [ CPO ] side, but then also on all other channels, which are really ramping up. So just to give you a flavor, I think -- I thought, last year, I also mentioned that we are building up the door-to-door sales agent side compared to last year, and this is what we are doing on the bulk migration. We doubled the number of sales agents. And to be honest, we are ready to double it again. So this is what we are planning for the future on that side. We will see in the future a little bit going down our sales CapEx, for example, because now also a lot of TV contracts are changed. And this cost commission and this brings CapEx up, that will dim a little bit down. This is good for our CapEx profile for the future. Nevertheless, IP growth could be higher, should be higher, and this is what we also planned on the CapEx and CPO profile. Efficient upgrade plan on the FTTH side, we can -- we are able to deliver. We changed in first quarter 30,000 -- more than 30,000, I think, was a number which we are building out. This is exactly the pace which we have planned, and we want to get pace, and this is great that also on the [ CPO ] side, technical department, great jobs are done, processes are streamlined, that capacity can deliver what housing is selling to the market. This and CapEx, good word is linked to shareholders. This is supported by our shareholders, our investment strategy, our liquidity forecast. And it's not only the management team, which now fits to our strategy, our employees are doing a great job to deliver what we planned as well our partners from the external side, sales or also from the technical side. Good. That's an overview about our first quarter and thanks for listening. And now we would open up the line for your questions.

[Operator Instructions] And the first question comes from James Ratzer from New Street Research.

Yes, Markus, Nicolai, so I have 2 questions, please, at this stage. I mean one follows up from the CMD when I asked about the guidance you gave of EUR 220 million for the EBITDA guidance for this year. And I think you've mentioned then you could come back to talk about it during this call now the Q1 results are out. So I was wondering if we could just dig into that a bit further because it would seem to imply the EBITDA growth for the remaining 3 quarters of the year should jump to about 16% year-on-year to achieve that. And yet we are supposed going to see some TV losses coming. So I just like to understand the drivers of that acceleration and how confident you are in that? And the second question I had was regarding the EUR 180 million injection of capital you've had because it looks in the reports if that's been structured as a shareholder loan, which is paying 17% interest and might be converted to equity. So if you could give us your views on actually the timing on when that will be converted to equity, please? And also, if you could tell us the share price at which will be converted as well?

Thank you, James. I'll take that question. With regards to the guidance on the EUR 220 million EBITDA, we would probably guide you towards a EUR 210 million-ish number, so slightly lower than the EUR 220 million. You said that there is a stronger growth expected to for Q2 to Q4, which hopefully will take place, yes. And there is some uncertainty about the TV side. We see that we have to work on hard on the migration as expected. So yes, that would be our guidance to slightly be a bit less aggressive on the EUR 220 million. In terms of the EUR 180 million, you're correct. It is a shareholder loan with the mentioned interest rate that you've mentioned. We can agree on that. The timing on conversion is not yet fully finally decided. It is still the plan to convert the EUR 180 million. We might do it in one step, whenever the EUR 120 million are coming to follow, so that it will be in one go. I am not in a position yet to say anything about the share price. This is not yet fully decided and agreed.

And the next question comes from Tomas Moreno de Guerra from Bain Capital Credit.

The first one I had is of the non-recurring spend that you had this quarter, just wanted to know how much was related to the A&E fees? And then how much in A&E fees remain to be paid in the rest of the year?

The very biggest portion was related to the A&E fee. And back to my knowledge, all fees are basically paid in Q1 and booked in Q1. So we are not expecting any substantial outstanding issues in relation to the A&E transaction. So this should all be done in the books. We had the first -- I would say, roughly out of my head, around about EUR 1 million that we've booked for the transformation project. The rest is -- there's also some costs related to the bulk migration. So it's a bit more tricky. It's not all A&E transaction. And I can -- yes, I was asked about this, and I think we promised to show a bridge. I still need to do this and give some more details from the call we had on the Q4 call, right? I think that's still open.

Okay. So the A&E fees are north of EUR 10 million. Is that correct?

I would suppose, so yes.

Yes. Okay. The second one I had is I just wanted to see if you could comment on the run rate in terms of Internet net adds you're currently seeing during Q2. I mean do you feel comfortable that you can land in that 20,000 to 25,000 range for the quarter?

It depends how we see again that bundle with TV. And if we have a higher bundle of -- again, bundled together with TV and then they are linked to July, August, and this brings us to Q3. And in some occasions, we see that again, and this is also coming to the forecast or to the ideas on our guidance on the EUR 220 million, James question is, for that, we lower a little bit this guidance because at the end of the year, I'm assuming that we are near to our -- so which is good for '25 for our -- for the starting point for next year. But during the course of the year, I would expect through the migration that IP net adds linked to the TV migration comes a little bit later than expected.

Okay. So you feel comfortable that together with the July and August activation, what you're winning in Q2 should land you at 20,000 to 25,000. Is that a fair assessment?

So at the end, we are targeting more than 90,000 net adds at the end of the year. I would say that is our target. And throughout this impact of bulk migration, the phasing of these net adds is a little bit tricky to estimate right now.

Okay. Okay. And then the last one I had is on your sort of FTTH pipeline. So the contracts which are won and open to build, that increase from Q3 to at the end of Q4 to 347 in Q1. I just wanted to know if that is sort of actual contracts that you won? Or is there any restatement impact in that? And if you could break down what's the restatement impact or the correction impact? And what's the actual sort of new contracts that have been won?

No, it's actually new won contracts. So we won a big contract 19,000, for example, in Nuremberg; 17,000 in Halle; 10.000 in Berlin; 7,000 in Heidelberg; 7,000 in Solingen. So all contracts are on FTTH, and we have an exact bridge of really linked housing associations to these numbers.

Got it.

Tomas, maybe to add on that because there is a slight restatement for Q4 last year that we've had in the toolbox -- in the tool kit, sorry, but the Q1 numbers are as they are. So there is no restatement in Q1. That's the numbers that we see, but you see a slightly different number for Q4 in the past because there was a misunderstanding in the number collection. So -- but this year, that is the snapshot that we currently see.

Got it. And just a final one. Should we expect to see this pace of contract wins through the quarter this year? Or how should we think about your -- the run rate at which you're sort of adding to this FTTH pipeline over the quarter?

A little bit is depending right now on the pace of the housing association. What we already always stated is that our FTTH grows is, first of all, linked to our customer base and first of all, linked to the wishes of the housing industry. And for that is exactly -- I think the acceleration, which takes place in the past was also linked to the bulk migration because -- and this is good for us. We are in front of the customer asking what is your future thoughts about bulk migration. This is exactly linked with what is your future thoughts about our contract, our network strategy, and this leads automatically to the fiber strategy. I think that was an acceleration. What we are now accelerating is, don't forget the pace to our key account managers and go out and subscribe for these contracts. And this is linked to the left to address column on that slide that we need to push that down. But now on a quarterly basis, we are with 100,000 and so on, I would say it's dimming down. And now we are in the talks to the housing associations. And that can take right now a little bit more time than in the past.

And the next question comes from Ethan Garber from Imperial Capital.

Yes. I think you partly addressed it just now in your strategies for internalizing the fiber conversions of existing cable MDUs. But I'm curious, what are your preferred strategies? I think you had mentioned that you have 25 dedicated salespeople. Was that something that I heard correctly? And what is your preferred approach to try to stabilize and have the highest conversion ratio in the face of competition?

25 is not the right number. I think we are between 50 or 60 key account managers on that housing side. To add that, we also have an external sales force for the smaller housing association footprint. So the total number, how we address the market is higher or something around, I would say, above 100 point of sale in that case of addressing the housing associations. And this is a twofold answer. First of all, we are concentrating on our footprint. And I -- the thinking about the NetCo/ServCo split leads to a CapEx facility, which maybe brings us more capability also to address neighborhood housing associations, which are currently not in our footprint. So first of all, target is housing associations, follow the wish of the housing association and follow our ramp-up strategy. So we are in talks with housing associations to their current contracts. They come up with wishes. We are asking to be honest, just for example, in this year, upgrading another 100,000. We are full -- our books are full, completely full, housing associations understanding that. So we are talking about [ '25, '26, even '27 ]. And these are right now the talks which we are doing. We are not going out into the market. And to be honest, in selling FTTH like hell. Everybody who wants it will get it in the next 2 years, it is demand driven by the housing associations. And for that, we fill up our pipeline.

And the next question comes from Jonathan Waite from Ares Management.

Just a quick one for me. Just on the blended TV ARPU, it looked like it declined quite significantly this quarter to EUR 7.4 versus EUR 8.3. So is there something going on there that you could elaborate on, please?

Nothing specific going on. I mean, we've seen 2 things in the market, and there's always 2 impacts on the ARPU. One is any promotional activities and the second one is bundling and IFRS split between the product lines. Did you say specific on the IP on the total ARPU? What were your question on referring to?

On the blended TV ARPU, I can see it at EUR 7.4 this quarter versus EUR 8.3 last quarter. So it's -- was declined, yes.

What we've actually have seen in the past also in the bulk migration is that we've seen a higher outflow ARPU and then having an impact on the migration impact if we switch those customers to the individual side as we only connect 50% plus to individual contracts, somehow this is an impact on the bulk TV part, which influences total blended ARPU. We're constantly assessing. There is no specific action. We've seen a lot of pressure from the market on the TV side. Also other players are playing tough promotion activities at the time. And yes, so that is probably what we see. We have to follow closely.

Okay. So going forward, would you expect the ARPU to stay at that low EUR 7 area? Or do you see scope for that to change as you move more to individual contracts?

Let me comment on that. Like Nico mentioned it before, what we are seeing is right now also a promo effect. What we are seeing in the German market right now because also competitors want to catch this opportunity of the bulk migration, a lot of promo actions in the market right now. I would expect these promo actions to be honest, will last also during the course of the year, maybe to the Q3 quarter. And then I would say it will normalize, but then we have to find out what is the impact of the migration and yes. But right now, I would say for coming quarter, I would also expect something on [ EUR 7.6 ] concerning the ARPU.

And we have a follow-up question from James Ratzer from New Street Research.

So my question actually direct follow-on from Jonathan's just now. On that ARPU drop because it does look like it's about an 11% drop in your overall TV ARPU base across the whole base in just one quarter. So of the customers that have recontracted on the individual RGUs during this quarter. Could you just give us an idea of what ARPU those customers are contracting at, which maybe seem to be driving the ARPU number this quarter? And the other follow-up, add on TV, and this is maybe I'm just being very slow here. But in your presentation, you show on Slide 12 that in the first quarter of this year, you had 110,000 bulk to individual migration, and that was a 40% migration ratio secured. So that would imply to me that the 60% you weren't secured could be 165,000 loss, but yet you put up a very strong KPI on TV of only 2,000 decline and seem to be suggesting a positive trend for the second quarter as well. So I was just couldn't quite work out how to read those TV KPIs, please?

So on the KPI side from net adds on the TV side, I think the problem we see is that we have the losses and then over time, we have the net adds on the individual side. So there is a slightly delay in time shift in when do we lose the customer and when do we put it back into the system. Also, when do we show churn and when do we show net adds. So that is a bit. It was offsetting in Q4 as we had, for the first time, those bulk migrations on a bigger scale at the end of December, basically, having a switch on the, let's say, reporting date on 31st of December, which is now a bit different because we had losses in Q1, but we also had the adds in Q1, which are then offsetting the numbers basically implying a stable TV base. I think depending on going project by project going forward, depending on the size and the magnitude, we might, again, see delays and shifts because in Q1, as I said, we had losses and adds at the same time, while in Q4, we basically had more losses than adds. Does it make any sense? Can you follow me?

On the one hand side, James, it is also -- and this is good because now the whole company has this TV focus, again, IP focus and the TV focus. You remember that 58% of our other base is already on individual contracts. And we also achieved to rise penetration. So it is not -- so when we are looking at our RGU performance on TV, it's a mixture out of RGUs losses from bulk migration. RGUs gains out of bulk migrations on the individual side, but they are also RGU gains on the individual basis, which are already since decades in our systems as individual customers. And this then is a mixture but the overall RGU number is a mixture out of these 3 impacts then, which is good because we also can compensate out of other RGUs coming from, but this is only RGU picture. Page 12 is really linked what we gained in the other customer bases, but in the bulk migrations, the others also are adding up to our RGU base, because in that basis, we're selling IP and IP linked to bundled shares, brings also TV numbers up. And the ARPU drop is a mixture, again, out of what customers are then subscribing for. It could be the next-gen TV basis. And here, we also have promo activities like Nico mentioned before. It could be signed new housing contracts, which are also linked to lower ARPUs for the future on the TV side. And this is also a mixture out of the drop on the TV ARPU.

And the next question comes from Peter Jurik from Tresidor.

I just wanted to follow on, on the questions about TV. The first question is, could you just give us, at a high level, the ARPU for basic TV contract that you would have on the bulk housing association contract versus when that person moves on an individual base contract? Just to understand what the same RGU would look like on an ARPU basis before and after, so that we can more contextualize the move in ARPU that you have reported.

The problem is that all these bulk migrations, we have bulk migrations with an ARPU -- bulk contract with an ARPU of EUR 5. We have bulk contracts with an ARPU of EUR 12, depending on the size of the company or the bulk contract, which we subscribed decades ago. And this is a problem I can't say you right now exactly and we have to go into the numbers. What of these are we migrating right now? The ARPU could be the same on the TV side. It could be a little bit higher on the TV individual side. So this also depends on the negotiation again with the housing association. So a housing association coming from EUR 5 migrates into individual subscribing for the future on FTTH could link these subscription with, let's stay with EUR 5 for individual contracts or we are signing up an uplift on EUR 5.60 or EUR 6. And this is a mixture out of that. So I can't say you exactly what is the price here and there.

Okay. Fair enough. But could you at least provide us the revenue that you earn on a basic individual contract if you move them on?

The basic individual contract is then, again, based on concession agreements, as Markus just described, even going forward on the individual base unless the person subscribed to an upgraded product, but the basic TV is somewhere could be between, let's say, 7% and 12% for an individual contract depending on the concession agreement reached, depending on the size, the amount of homes connected. And then normally, on the bulk side, it is a notch lower, obviously, where we see the ARPU around -- let's say, an average between EUR 6 and EUR 8.

But we can provide and let's discuss it and take -- later take offline and come to the -- send a mail to Sebastian on the Investor Relations side, and we can provide you. We have a basic TV price list, and we have individual prices then negotiated again with housing association, and we can give a little bit more flavor on that.

Okay. But I guess what's interesting to me, and I hadn't realized this, so perhaps that's my mistake. But when you're moving bulk customers on to individual customers, the price is still negotiated by the housing association. As in the customer moving from bulk to individual might achieve a different price based on what was negotiated than what they would do if they would go online on the website.

Exactly. With housing associations also, we are signing contracts on an individual basis for individual contracts for their tenants. What we then can achieve throughout our point of sale are upsell contracts. So the argumentation on a sales basis is you want to have a basic TV package or you want to have a nice and beautiful and colorful one with HD with premium TV with foreign languages with recording options like on the next-gen TV side, and that helps us to lift up the ARPU on that.

And maybe one -- well, and maybe one more clarification point on when you negotiate with the housing associations for these concessions for TV, is it like how does the penetration work? Is it that you -- so let's say, I have a housing association with 100 households, I negotiated a concession with that housing association. Does that count as 100% penetration, you have guaranteed revenue from the housing association? Or is it just a -- is it a revenue share, where if somebody comes in at a discounted rate, the housing association make money as well? It's just how does it work? Because I don't know how to translate it into penetration going forward.

Yes. So in former times, it was exactly what you were saying. It was 100 households. And with a bulk contract, you got the guarantee of 100 households are paid by the housing association on an individual basis as well, that could be. So I negotiated with you an ARPU about EUR 5.60 on the higher side and on -- when you only have 100, for example, with 80 or 90 or whatever. This is the system change throughout the individual contracts. So -- but nevertheless, housing associations, together with us or our competitors are negotiating by the framework agreement, what an individual contract, which we have to subscribe with the tenant could cost for the basic or will cost for the basic product. And then we are in our upsell models. But these are then not guaranteed contracts. These are individual contracts, which we have to subscribe with a tenant or sign a contract with the tent.

And how does the housing association benefit? Because I know previously there was a little bit of a revenue sharing effectively. So in this case, it's just the housing association telling its tenants that, hey, I negotiated a really good contract for you, and that's the end of the story? Or is this some kind of profit share or something else on the side?

No. in some other calls, we mentioned that the profit sharing or revenue sharing model are taking place by the big animals in the zoo of housing associations, most of that. And here, we have a right of something about 15% to 20% who are asking for that and have the power to ask for that. And I would say it's something around 80%, which these revenue share models are not in our systems. So it is just exactly what you are saying. I subscribe with Tele Columbus, a cool deal. You will get fiber, you will get best pricing on IP. Look at the Internet page, look at my page and subscribe for a tenant for a new contract. This is the normal, hopefully, then also blended mails coming from the housing association when we upgraded to FTTH. And this is a TV product and also with the IP product. For both, we need a single contract with a tenant after the possibility by TV or via auxiliary costs will go down. So we are now focusing on individual contracts, TV, upsell on TV IP.

Okay. That makes sense. And then a separate question on TV. Is there any way that you can help us understand the cost base for content in this business? Are the content costs fixed or variable? And the reason why I wanted to ask is, obviously, there's a certain level of uncertainty as to what level of migration you will have. I know that you have your own internal expectations. But I'm wondering if you achieve less or more versus what you expect, will the content cost stay the same? Or are they variable to an extent? And maybe a way to represent this as well as what kind of TV subscriber base do you need to break even on the content cost, if that is even a thing?

We adapted with our assumptions on the migration also in our business plan, our content costs, which are on the normal basis, but also, in some cases, with minimum guarantees. But in our assumptions, we are far above these minimum guarantees to be dropped out and have a negative impact on our business plan for the future. But also we can give additional flavor by a separate session to that.

Ladies and gentlemen, this was the last question. I would now like to turn the conference back over to Markus Oswald for any closing remarks.

Okay. Thank you. Yes, thanks for your questions, and we will follow-up. So this was fast. So we had some more time, but I think throughout the Capital Markets Day, a lot of questions are asked. Thanks again. And we will update you on the Q2 results coming up, I would say, in August. And hopefully, right now, everything works with uploading the presentation, everybody finds the presentation. And I think we are doing better on that job. Thanks to the team. Thanks to you for listening, and have a nice day. Thank you, and bye.

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