Tele Columbus AG (TC1) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. Welcome to the Tele Columbus AG Q2 2024 Results Webinar. My name is Franzi, the Chorus Call operator. [Operator Instructions]. At this time, it is my pleasure to hand over to Sebastian Artymiak. Please go ahead, sir.

Thank you, Franzi, for the introduction. Good morning, ladies and gentlemen. This is Sebastian Artymiak 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 second quarter results for fiscal year 2024, which ended this June. This call is limited to 120 minutes. In case of any follow-up questions, please let me know. These persons are with me here today, 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, this is a public conference call, which only publicly available information will be discussed. And therefore, I ask you to refrain from questions containing information not belonging to the public domain. This conference call is intended for capital markets participants only and not for press representatives. If any journalists are on the line right now, we would highly appreciate that you were leaving the conference call right now. Press representatives are welcome to call me to discuss any outstanding questions. Having that said, it's my pleasure to hand over to you, Markus. The floor is yours.

Sebastian, thank you. And good morning from my side. When we are coming to Page 3 of our presentation. This is a table of contents. We come up with some key messages, following the operational update on KPIs, Nico will take over on the financial performance and then both of us are available for your questions. So looking at half year 1, '24 results and operational performance. Yes, it is -- it was a great half year for Tele Columbus. So outstanding IP sales. We are, again, the fastest-growing IP operator in Germany. Within Q2 net adds increase of 54% and a 13.2% revenue growth year-on-year. It is great to see the shift towards higher bandwidth with 50% we achieved of gross adds opting for 500 megabits and more. We also continued our higher bundled shares, which also is linked to the next point. So the TV access RGU base is, of course, like planned affected on the regulatory losses from the bulk migration. So we are in continuing marketing and sales efforts also for the second half year of '24. On the financial side, beside the TV access losses. We have stable revenues of [ EUR 222.6 million ] to year-on-year and the one-off regulatory TV losses are compensated by our increasing IP revenues. The reported EBITDA is down to EUR 67.1 million, which is strongly impacted by nonrecurring activities like the completion of the A&E transaction, of course, the TV bulk migration and the well-in-shape and perfectly progressed NetCo/ServCo transformation. I will come later on to that. The normalized EBITDA slightly increased by 0.2% year-on-year to EUR 93 million. CapEx increased by 15% year-on-year, mainly driven by investments into both the growth of our consumer business, so like the CPEs and commissions. CapEx on the site for network upgrades will follow up and Nico will also follow up on that point. Liquidity cash position of EUR 66 million as of June 30, '24, and the second tranche of the remaining EUR 120 million of the committed EUR 300 million shareholder contribution out of the A&E transaction is not yet included in this number. Liquidity position is better than originally planned, primarily due to optimization of capital allocation investments and net working capital. So main message is and what I want to start with, we really have achieved a lot of in the first half of '24 looking with great progress in the second half of this year. And this is our aim of the whole management team, we are setting the course for a successful 2025 business already with our strong IP performance, which continues, we have successfully managed the one-off regulatory bulk migration so far and results looking promising that we are in our guidance and the expectations here. We have some slides prepared for our FTTH upgrades with a really very attractive return on invested capital. And a big portion for the preparation for the future is also our NetCo/ServCo separation, which is in full swing and key reorganization steps have already been initiated. So looking at the next page, which, of course, I love really on that presentation, when you look at our performance, we are the green line as Tele Columbus. We are really proud to say, 11.7% of growth in the market. Our expectation was to be honest, a little bit higher than that. But nevertheless, 11.7% is outstanding. The good thing is when we look for the future, it is promising that we will continue on that growth path because we are able to grow. We have the channels in line and we have the potential on our network. And this is great news for upcoming growth of the company. So the potential of this growth or what is the result of this growth. And this is really the change in our consumer sales, and that was for us important to illustrate it again and again, because in the past, we also get these questions, what is the difference now from the company? And the difference is to be honest, you have to stand in front of the customer to sell products. And this is what Jochen and his team did. So Jochen Busch, our CSO, joined us in summer last year. We as a management team already prepared the channels that he is now been shaping them up. So from the left to the right side, sales department, door-to-door, we hired a new director of August last year, more than 16 years of fixed-line experience; shops and retail, new director on Board, March last year, 19 years of experience; online already joined the team in November '22, 22 years of experience; Tele sales summer last year, 23 years of experience; and base management, the same years of experience, joined us in October last year. So the team is shaping up, and this is only the experience of the heads and guess what, they are also hiring new people. So it is a mixture of both worlds. So we have experienced Tele Columbus members in the team, but also joined by former KDG or Vodafone or 1&1, or Telefónica and from the whole market, these departments are now ramping up. And in the middle, the IP net sales are shown how they're ramping up. And like I said before, the operational achievements, I love this number, for example, as we started last year, we are coming from 100 active sales agents, something around that, and they are now moving from 200 to above of 350 per month active sales agents. And we also set up new sales areas. And to be honest, with the 350 active sales agents, we want to move above 400 and still ramping up. Same on the retail structure optimization -- cost optimization and process optimizations. We are restructuring the shop operators active outlets, not only having outlets in our booking system, we want to see active outlets ramping up from 200 to about 300. Also the productivity per outlet is rising, online visits are rising on the online channel A/B testing and a new partner network onboarded in the past. Tele sales more than doubled-customer inbound calls, increased IP inbound call conversion by 50% and now started -- we are starting to focus on outbound calls. The hidden champion behind all that is also our base management. So we have a new win-back process that we also managed our churn rates. So we are now at 13%, and it's possible to go even lower, new prevention churn models and a closer alignment between Tele sales and base management. So we have people on board, they knew their job, and they are now executing. And the good thing is with the push we did, and I will come later on to the TV performance as well here from the sales channels, and we did it all over all products. And the other good thing is channels are still growing. So growing on channel means growing on gross ads means growing on net adds, and volume of customer base. With the support of a really aligned perfect product. And when you look at this product portfolio, it is really our -- we are the value and price leader with perfect services combined. This is the beauty of our growth story. When I look also Michael, our CTO, just mentioned the cluster size, we are serving IP in these clusters, which are also a benchmark in the market. So we have on the churn side, but also on the customer satisfaction side. And when you look at the top tier, we are now comparing our 100-megabit product on the right side of that column. But in our building, our customers only get 1 gig from us, from Tele Columbus, from few other competitors are only offering 250-megabit product. So we can really mean like it is, we are cheaper and 4x faster. When you look at this price comparison, take the price comparison with the entry-tier products. To be honest, we are on the same price with EUR 39.99, but 20x faster. And this is wonderful also for the sales channels and customer satisfaction, and we are planning to set this pace on our prices for the future. So coming again to the numbers, like I mentioned before, Q2 near to 19,000 net adds, 54% of growth. Continuous growth on the Internet side, on the revenue side, Q2, 13.2%, which is good and which of course, was needed to compensate for TV losses on the bulk migration. Coming to the next page, here, again, and our growth path. What you have to have in mind, just to -- when you look at the total numbers of the graph above, this graph showing a slight decrease in the numbers. But for us, it's important to look at the individual dark blue colored columns because on the lighter blue, it comes with nearly no revenue, which we lost and they are linked to a special product, which was offered to housing associations years and years ago, but still in our systems. And by the bulk migration, we are now losing these contracts with the bulk contract as well, but it doesn't harm our IP growth because the revenue [ and the fun fact ] that in the dark blue colors. So what you are seeing here, it's a 12% year-on-year growth and 16% on the Telephony side. Here, we also take portfolio adjustment, and it's now also building with a fixed net flat rate. Next page, also great news also linked to the bulk migration of course, because in the first half year, Q1, Q2, you'll see this increase of gross adds or the increase on the shares. But nevertheless, this is more linked -- sorry that was a mistake. This is more linked to the product portfolio above. It is shown our -- the bandwidth 500 and more. So on the gross add side, is now more than 50% are taking 500 and, of course, 1-gig product. And what I introduced this slide is the bundle mix with TV, as 3-play product, we are now also here on 50% share with our bundled product, which is really deeply linked with the TV approach because what you see in the first half year, and it will continue for the second half year of this year. First of all, our main topic was continued growth on the IP side, but handle the bulk migration, which comes by law. And of course, here, the approach of our customers in many cases is, first, let's talk about TV, and then second, let's talk about IP, and this is combined and shown in these graphs. Exactly on the next page, the topic, again, TV bulk migration. So have in mind again, our base is 42% bulk, which we have to migrate, but it is 58% where nothing happens where we are since decades on single contracts. We have to perform on that side as well, and we did. And by growing our sales -- point of sales and our -- yes, service points, we are addressing the TV customers as well. So right now, we are in the middle of working on these 590,000 customers, who are in Q3 in the migration phase, which also takes to Q4 and, of course, also to Q1 next year, already signed. This is just a snapshot. This is very important. This is not the percentage number we are targeting for this is a snapshot we just already achieved. And here, we already achieved above 25%. And our aim is getting yield to higher than 50% overall penetration rate of individual contracts in already than bulk-migrated customers, and we are expecting that something around 200,000 customers will remain in bulk. And what we are seeing because the number, the shift number was exactly on the -- they come -- they got down. The numbers are getting down end of June and then ramping up in July. And what we see is that they are still remaining in this amount of 200,000 and more. This is exactly what we are also getting from our billing systems right now, in July and August to have just a glimpse on that. Next page here, you see exactly that drop, but don't be afraid. This drop is just because our systems are putting the numbers of the bulk down 30th of June. And now beginning with first of July, the individual contracts in dark blue ones will grow up again to our expectations of more than 50%, adding then the [ 200,000, ] which still remain in bulk. We are trending in managing the bulk migration around this [ 55% ] to 60%, which is completely in line with our expectation. So this on the bulk side and very important for why we the -- this chart is the same on the left side because the team has experienced like before. But here is also what the team managed and that was impossible or this was important for us why we are so focused on changing the consumer channel in the last year, and we are still doing because we had to prepare for the bulk migration. And when you look at what they did before. So years before, there was an increase of 1,000 sales. Now, it is has increased of 40,000, of 20,000, 67,000. So these channels are not only selling IP like hell, they are now selling TV as well. And the good thing is the numbers of agents, the number of operators of retail stores, of Tele sales agents, of online optimization will stay. So we are increasing our sales numbers again and again, and now they are not only focusing on IP, but also for the future on TV. So looking at our TV products, next-gen TV and IPTV product as well, which is then capable on our FTTH network, the preparation for the future, I mentioned before for '25 is done by these sales team here because now growth bulk will be managed in '25. The bulk impact is compensated by the IP growth impact in '24. And then we are looking for the growth which comes by IP and hopefully also on the TV side, we can use a lot of these point of sales to grow on TV than from '25 onwards as well. And this is what we are aiming for. At the same time, by that transformation of the company, the next transformation took place, and we are in focusing on our FTTH upgrade. You know that, of course. And we also prepared a little insight here on the FTTH network, what are the rationale behind that. And Nico will lead you to the 3 pages, which now follow. Thank you.

Thank you, Markus. As Markus mentioned, besides the 2 strong commercial side, IP growth and managing the TV migration. The third key message we wanted to place was the rationale because -- of why do we go into the fiber road and the investment of the FTTH upgrades? And if we look on the key 4 items that we say we truly believe that we have a very attractive return on invested capital. And in a minute, I will walk you through an illustrative calculation of how do we look at these returns and you will also find in the appendix a more detailed table stating the way we look at it, but we'll speak about that in a minute. And the key to remember is that we are not doing this proactively in the upgrade. We are always working with the housing association, and we purely follow the demand driven given to us by the housing association. Whenever they request fiber build-outs in order to prolong our contract relationship, we are happy to be the first provider to really deliver also to that demand. And whenever they see -- or seek it reasonable to upgrade their renovation cycles and improve from coax to fiber, we are more than happy to put this on our project list and going forward. The third key item is that we truly believe that the FTTH upgrade will lead to lower operating and maintenance costs compared to the HFC network. This is basically technology driven. We are talking a lot of passive components in the network compared to cohorts and operation will become easier. And therefore, this is a truly a high lever also on energy costs. And especially, as we said, the maintenance part will come down, and this helps to pay off just by itself. And then the last one is, we're currently pushing our IT sales on the DOCSIS 3.1. This is a very competitive network. We've seen the product proposition, and we will continue to do so. And once we go into fiber, we will then be able to migrate those customers from DOCSIS 3.1 to fiber, and even then get an additional boost to sales because we are even better in the product-pricing proposition on the market, which will lead to continuous growth going forward. If we have a clear -- a clear walk through those return on invested capital, it might be a bit confusing at the beginning, but let me help you with that. The top branch of this tree basically gives you the cash-in position where we come from customers with a certain mix between retail and wholesale, they have different ARPUs and don't take these, especially the wholesale ARPU forgiven. It's just a current assumption, the way we look at it. But if you take the penetration with product price mix, as you come to a blended ARPU, which is second box in the middle that comes up with roughly EUR 35 per month, gives you an annual recurring revenue for our customer, and we would then assume a high gross profit margin and then deduct some maintenance CapEx, which is needed at roughly, let's say, 80% in total, we would come up to a cash flow generation per subscriber of around EUR 330 per year. The bottom branch basically gives you the investment that is needed. That is one, the first box in the middle, which is pure fiber CapEx connection, which we have for build-out, which is the often stated EUR 650 per homes connected. We have -- however, then look at only the incremental penetration. I mean we would love to get 100% penetration, but this is not the case. So we say if we look at CapEx per our customer, this goes up and moves into the area of EUR 1,600. And then again, in order to acquire the customer, we have sales commissions, CPE, so the retail-driven CapEx per subscriber and the respective share, which will add up an additional EUR 300 per customer per subscriber on the CapEx side. This leads them to a total of roughly EUR 1,900 CapEx. And if we then look at the unlevered free cash flow per sub from the top, divided by the CapEx that we have to spend, will come up even after tax of something around 12% of revenue return on invested capital. And the good thing to that is we're not doing it on a 100% flat base just over the whole network. We have a discretionary investment decision for each and every project. So whenever we are approached by housing association, we look at the details. We look at the commercials, we look at the build-out cost per project, and we have a chance to say yes or no. In terms of requests, in terms of tenders, where we have to have certain build-out standards. And sometimes we decide against it if it's not commercially viable. So that gives us a clear advantage that we do want to roll out. We do it on a project-by-project basis, and we do it demand-driven. Just to give you some flavor of what's the magnitude of a typical project, it is around EUR 1 million, EUR 1.5 million on the fiber rollout, and we usually spend it let's say, we're estimating 2 to 4 years would be like a roughly average project period to really do the upgrade on a project-by-project side. The key driver, and I mentioned it, is the EUR 650. And that is definitely one where we are a lot less than every other operator in Germany. That is the key driver we have. And the 3 key points to that is we are in a very high-density multi-dwelling unit footprint, 97% is in that dense area which gives us, obviously, the availability of a high duct share, where we also have cables in the ground and we just have to bring in the fiber into the [ duct ]. And obviously then in order to connect the buildings, we have very low meters where we have digging requirements on public grounds and that is the key drivers that help us. If we look at the level 2 -- network level 2 and 3, which is basically from the headend to the buildings, and I spare you the details, but you know the complexity that is what we say on the network over 2, 3, we are around about EUR 320. And then if we look at the building, and we go into not only to the building, but also into each and every individual apartment. This will then be an additional EUR 330 roundabout. So in average, if we say the EUR 650, that's split in network level 2, 3 and network level 4 and we are talking about connecting the individual apartments. And we're not talking about homes passed costs, which a lot of the other operators in Germany are also doing. So we're really talking homes connected and the success factors, as I mentioned, high-density MDU footprint, the duct availability, and low digging requirements.

Okay. I take over again, Nico. Thanks for that. And when you look what we did in the -- since the new management team and the colleagues from Tele Columbus, what we did here in the last 18, 19 months. So operational performance is on a standardized level now. It is still growing consumer sales are setting the ground for future growth by setting up. On the technical side, like Nico mentioned before, we did all that -- we have a wonderful network. The segmentation is fine and we have also the lowest cost of upgrading, thanks to our duct structure and we are still optimizing, and choosing where we want to build out and where we don't want to build out. And coming now to the next point, and this is very important for us. It is, of course, operational, getting better and better and better. And now we are looking also on our capital structure, getting better, better and better. So doing the A&E was one step stone for us, but it was only the first step stone. And we are now really getting the split of Tele Columbus into a NetCo and ServCo done, and we are really very advanced in that process. And that was really important for us to show it also to you because for us, with this split, we have more than one top topic to handle. It brings us in the company, transparency; it brings us in the company, simplification; and it brings us in the company, efficiency. And all these 3 items lead also to a better cost management and in the future to lower costs, but it also brings us, yes, the gain or the flexibility to be prepared to look at a new capital structure in the future. So what we did, simplification. Out of 35 subsidiaries, we reduce them to 15, excluding minorities. So 20 subsidiary companies are dissolved completion date. I think it's Saturday or -- Saturday this week, 31st of August, ticking the box. Separation, spin-off the ServCo-relevant TC parts into distinct ServCo entities, completion date 31st of August, already achieved. Migration, with migration of 2.9 million customers B2B, B2C, into the respective NetCo and ServCo entities, already done 55%, and completion date will be end of September. Intercompany agreements, update and adjustment of all relevant operational agreements between NetCo and ServCo, 100% already up and running. And the master service agreement as anybody knows of that, are really keen to work on that, but commercial agreement is done and 100% pre-MSA is already signed. We will finish this week as well. So the side that operational work shown before, the transformation of the company, the preparation for future is in a good shape. So going forward, NetCo/ServCo will be attractive investment vehicles. Tax and corporation law on the one-hand side, established NetCo/ServCo structure as of 1st of September. Finalizing the customer migration as of end of September. Organizational lift and shifts of really the people who are working on that company and making all that growth happening. We are preparing that and aiming for Q4 '24. And FiberCo very important for us, formation of a FiberCo as NetCo subsidiary, and FTTH assets in one subsidiary as of Q1 '24. So this is our planning, we prepared for the future. Fixed the basics, we already done, set up the company for growth, we did it. Now setting up for the future and future possibilities of refinancing, again, we are in a good shape and far more on the road than expected, I would say. And this was important for us to show you. Coming now to the financial performance before coming to the Q&A session. Nico take over again please.

Thank you. Let's have a look at the financial performance. As always, you will find the tool kit uploaded on the Investor Relations website as well as the PowerPoint and the quarterly reports where you can relate to the numbers, and you'll find even more details in those. Most of it has already been briefly touched by Markus. Nevertheless, I wanted to elaborate on a few points in the next few pages. If we look at the revenue development, we're seeing basically stable year-on-year revenue developments besides the bulk migration where for the quarter, we've seen the EUR 110 million, again, similar to this quarter last year. Important to note is on the revenue composition, we've now included the IP hardware and wholesale revenue into the Internet & Telephony revenue just to have a better like-for-like comparison. We also adjusted this backwards, but you do see the trend coming up that we are improving from 39% to 40%, 41%, 43% and now even 46% of our revenue is now basically related to Internet & Telephony, including the wholesale part that does Internet and phone, and the hardware revenues connected to it. So I think this is a very strong development and we will see this going forward, especially after the drop in Q3 then for the TV revenues, we will see a stronger increase on the Internet and phone side again. On the reported EBITDA, we've mentioned it, it has been impacted in the half year by a lot of nonrecurring expenses. Most of them have already been in Q1, basically related to the A&E transaction, but also the TV bulk migration has been on the plate for the whole 6 months, and we started with transformation activities that also went into the nonrecurring expenses. The normalized EBITDA is slightly down versus the adjusted normalized EBITDA. So -- and it was basically affected by the higher personnel costs that we still see Markus mentioned it, we will talk about lift and shift, but we will also talk about a restructuring in terms of the complete separation and reorganization. So we do believe that there will be effects going forward. But for the first 6 months, we've seen marketing and personnel driving the costs up, which has been offset partly offset by the direct costs, which helped from the signal fees, which is something we've shown previously. But in the end, we do see and EUR 93 million for the half year on normalized EBITDA. On the CapEx levels, not much surprising Q2 was a 14% increase to almost EUR 64 million, which is higher compared to last year as expected. We've seen a strong growth on the end customer-related CapEx, basically commissions and CPEs. The network CapEx is more or less in line with the previous year, we do expect a stronger due to seasonality, stronger network and deployment CapEx in Q3 and Q4. You've seen the similar pattern last year Q4 is always strong when projects are being finalized or companies are sending in invoices and having half year, half projects are partly invoice of those transactions and the progress of the project. So that's the normal items to see. Therefore, we do expect this to go up as expected in line with our project and project performance going forward. On the revenue side, just a bit more detail we've mentioned it previously already, the TV products go down by EUR 10 million, but we are more than offsetting it with a EUR 13 million increase on the Internet and phone, including the hardware and wholesale revenues. So this is the clear and strong message that we can offset the bulk migration that is hitting us at the moment. We've seen a slight decrease in the B2B segment where we still have work to do, and there are some project delays. So we do hope to catch up. And the other revenues is basically just impacted by a specific agreement with Vodafone to terminate one specific Marienfeld contract. I think we've mentioned this previously, we've lost, I think, 100,000 homes that had barely no EBITDA. So it was just revenues and costs, but washing off. So we've agreed to terminate this contract, and that is obviously then seen in the revenue numbers as well. Summarizing the H1 performance, which obviously is in the light of the bulk migration and the transformation. As mentioned, the revenue is slightly up. Normalized EBITDA flattish if we go on the adjusted normalized, then we are slightly down. Reported EBITDA strongly impacted, and CapEx up strongly and just in line with our expectations. This basically concludes the presentation part, and we would now open up the floor for questions. And I would hand over to Franzi.

[Operator Instructions] Our first question today comes from Tomas Moreno de Guerra from Bain Capital Credit.

So I had a couple. The first one is, do you still expect full year '24 revenues to grow low single digit and for reported to be around EUR 50 million higher than last year as you previously guided. And if not, what has changed versus your previous guide? And then what would be the new guidance for full year '24?

Tomas, thank you. As you may not have seen yet in the documents published, we did adjust our -- or we do adjust our prognosis for forward-looking guidance. And we said that we are expecting a very low single-digit decrease in the revenues. And that is basically due to the bulk migration issues that come in overtime and differently than previously expected, and also that we had some stricter measures in working on the sales channels with regards to capital. So we do see a bit of a delay in the net adds coming on board on the Internet segment. So we still expect a very good outcome on Internet, in order to jump off the IP base into 2025, but it is coming slightly later than previously expected. So we are adjusting the guidance down a bit.

And how about reported EBITDA?

Our same reported EBITDA is that we expect a slight increase compared to last year.

And is the change in the reported EBITDA guidance only due to this Internet net adds coming later than expected? Or has anything else changed on the OpEx and/or in other revenue drivers?

It's basically 2 things. It's one on the revenue side, obviously, that hits us. And then the second one is the nonrecurring transformation costs that will be strongly impacted also in the expected second half of the year.

Okay. Next one I had is on the NetCo/ServCo split. Do you intend to sell ServCo once the separation is complete?

So first of all, we are preparing the split. And of course, for us, it is, like I mentioned before, efficiency drivers in for us by its own, and then looking for a new capital structure in the future. That might lead in some years, but not directly my assumption to also a partial or the possible complete selling of one of the others. But to be honest, I would say that this also in the future, but not immediately.

And in terms of the separate capital structures, by what date do you expect to be in a position to sort of look for separate financing for the 2 vehicles?

So our aim is to be prepared coming up now in autumn and December 1, Q1 '25. So Q4, Q1.

And given how advanced you are in the separation, as you mentioned, would you be able to sort of give an EBITDA range for the NetCo in the first year of operation?

Not at the moment, but I would say, being more in that Q4 [ mode ] we will do. Yes.

Okay. And sorry, last one from my side. If you could talk a bit more about this increase in personnel costs. I mean you seem to imply that it may be temporary due to the TV migration and due to the temporary separation costs. So is the increase in personnel we've seen this quarter? Is it a permanent increase? Or should we expect personnel costs to come down in '25 or in the coming quarters?

We expect to that HR costs are coming down because we are now with transformation of both companies are also bringing us into the shape for the future. So we are in negotiations with the workers' council and looking for new numbers for '25 and '26.

The next question comes from James Ratzer from New Street Research.

I have two, please. So the first question, just following up from Tomas' one, but is on the EBITDA guidance. I think at the last call, specifically on the normalized EBITDA you'd given a number of EUR 210 million for 2024 on the last earnings call. I was wondering if you could then give a specific update on that number, please, for this year? And secondly, just interested in talking a bit more about your wholesale business going forward. Could you just give us kind of update on where you stand with bringing wholesale Internet customers onto your network? Do you have kind of expectations for any to be on by the end of this year? And will wholesale in future just be limited to where you've deployed FTTH? Or are you planning to sell wholesale across the HFC network as well?

Okay. James, first question to the normalized EBITDA, we are aiming with the [ 2 ] in front of the number. This is what we are aiming for. Second to the wholesale business is wholesale partners, giving us right now the feedback beside Telefónica, there is one other partner who are now in talks with us also bringing them to our DOCSIS 3.1 network, but most of the wholesale partners, they will signing up contracts. Hopefully, we will see contracts already starting in this year, but then performance was come later on because we then have to bring the interfaces to our IT systems on both sides. But most of the wholesale partners are looking for the FTTH networks. So numbers are still in lower numbers because we only are about 100,000 or 145,000 is exact the FTTH number right now. So expecting the wholesale business kicking off when also fiberization of our network is kicking off on a more scalable basis.

Got it. That makes sense. So Markus, can I just come back on the guidance for normalized EBITDA because I think to get above EUR 200 million for the full year, that will now imply doing around 7% growth in the second half of the year. So that's a very material improvement from what we saw in Q2 when I think it was minus 7%. So what would be the specific drivers to cause a 14% swing in the second half, please?

So main driver is exactly what we are now seeing also on numbers for Q3 on the IP sales. Of course, we already have some insights on the July and also August. So we know what we are looking here. So I feel we'll jump in a higher momentum. We have it in our own hands on the EBITDA side on the cost base, which we are working on, which comes with our cash flow management and so on and so on. And so these are the main drivers we are looking for.

The next question comes from Vivek Khanna from Deutsche Bank.

Just another quick question, if I may. A lot of my questions have been asked and answered already. Just wanted to touch base a little bit on the fiber rollout in the quarter itself. I mean clearly, the rollout was a little bit slower than what we've seen in the previous quarter. It's not always a straight line. If you could maybe give us a sense as to how you think the base will develop over the course of the year, you're at 145 for the second quarter? And I guess another question related to that is you provide us the pipeline of contracted FTTH rollout, and I'm just trying to understand the drivers of how that number has gone from 347 in the first quarter of '24 down to 319, especially tying that in with the fact that FTTH lines have only increased by 11,000 quarter-on-quarter?

Okay. Coming from the outlook for the households, we will end up by roughly 120,000 fiber households new build -- sorry, new build or changing from DOCSIS to fiber. This is the number what we are now right seeing. And of course, because...

Sorry, could you repeat that number, please?

We will add 120. So the fiber households in '24, 120,000. Not the production in the -- the increase is 120,000 for '24, yes?

Understood. Yes.

And what we are seeing, of course, they are most like Level 4 here as well. And of course, it is always will rise in Q3 and Q4. You will see it in the same in the next year and in the next year and -- so this is a normal pattern. Numbers are changing in the toolkit, I think you are referring to because also customers come to us and say, "Oh, we want to pull back a deal, not the full deal, but we want not the renovation of fiber this year, let's put it into '26 or '27" Because we will put it aligned with our renovation and we postpone it because also of some financial reasons from our side. So we stick to the contract but will postpone the fiber rollout on a customer by customer base. This is important for us. We also have to stick to our financial analysts. So we then say, okay, then the contract also needs to be prolonged by 2 years or whatever because our financial analysis is then also how long we are able to monetize our networks and so on. So these numbers are already are going up a little bit, going down a little bit and not -- when you put a number, it is then the next time the rise in number it also can fluctuate like you saw in the reporting.

Okay. But generally, we would expect that number to go up over time, correct?

Correct. Yes.

The next question comes from Savraj Sethi from HPS.

A lot of mine have been answered already as well, but just a couple left for me. So if I look at Page 15 with the TV RGUs, with the bulk TV RGUs coming down in Q2. You mentioned sort of ending at around 200,000, is that the target for full year '24? Or is that -- will that be a longer-term trajectory to get down to 200,000 on the bulk RGUs?

Right now, it's our estimation for the '24 numbers. We have to see how this develops and how customers will react in their interaction with their tenants. Right now, we are planning for '24. I would say this is nearly the same number right now for '25 because this is what we have but we will adjust maybe the number when we get new feedback from the housing associations on that topic. Right now, we take that number.

Maybe to add, I mean, this is -- we are now approaching the long tail of the bulk customers, which becomes smaller and smaller. The big housing associations, they have been tackled. We have clear contracts, we have clear visibility what's happening there. But in the second half of the year, normally, the tenants come up for the Annual General Meeting, I call it, where they decide on contracts, on topics, and this is happening usually in the second half. And there is a bit of uncertainty in the long-tail smaller multi-dwelling units where you only talk about 5, 10, 15, 20 apartments and tenants. So this is the best estimate we currently see and the number has been quite stable over the last couple of weeks. And yes, so that's the best estimate 200,000 at the moment.

Okay. That's helpful. And my second final question was the remaining equity tranche of EUR 120 million, do you expect that to come in this calendar year? Or will that be in 2025?

No, we expect it to come in this year, which is not an equity trench yet. It's still as a shareholder loan, and we talk about the conversion of debt into equity probably in the next couple of months, but it is assumed this year.

The next question comes from Jean-Yves Guibert from BlueBay.

So some follow-up to -- further clarification on previous question. So based on your expansion of 200 -- of remaining 200,000 bulk TV contract by year-end, it means that you only expect a further around 170,000 further migration by the second half of this year, correct, from the 373 remaining as of June. If you can confirm?

Not 100% sure I understood your question. We're tackling 590,000 for the bulk migration.

I'm talking about Slide 15 and Slide 14 to 15. On Slide 14, you said expecting 200,000 to remain on bulk TV. And Markus mentioned it was -- he was talking about 200 customers on bulk TV. And on the following slide, you have 373,000 remaining TV at the bulk as of June. So does it mean that you only expect roughly 170 -- a further 170 migration by end of this year from around 200 remaining.

That would be correct.

Okay. Then can you explain the slight different and the slight reduction as of on Slide 14, you indicate, and that's my understanding, that's cumulative Q3 '24, 590. The 590 is lower than that the figure you presented at the previous earnings call, which was 665, if I'm not mistaken the bulk base to individual for Q3 '24. You have a similar chart, which was showing actually a higher migration, it was Slide #12 in the Q1 presentation of 665, and now it's being shown as 590. Does that mean that you have fine-tuned your expectation for Q3 '24?

Yes. Some of it is shifted. I'm just checking my notes on that. Some have been shifted from -- we do see some of those numbers also Q2 shifted slightly 160 to 150. So it is mix going both on the contracts once they are progressed and when they are being in the project phase. So there is a bit of a shift. And then we do see some shifts most likely from Q4, even into Q1, '25, and this basically relates to what I said that a lot of these decisions might be taken very late in the year once those tenants meet and take decisions. And so I assume that's the result that has been moved forward.

Okay. And just to confirm those numbers. So currently, the 590, it's cumulative numbers, i.e., I should not add up 60 plus 110 plus 150 plus 590, 590 is cumulative numbers?

No, no. It's a cohort view. So it's -- so we have to talk about roughly 900,000 that we had to manage in the whole migration. We were coming from round about 1 million, take out the 200 that remain, it splits into those cohorts.

Okay. Okay. I understand now. Okay. Perfect. And then coming back again to your normalized EBITDA guidance. And I just wanted to confirm the 2023 base to compare it with what you will achieve for 2024, as you indicated that you expect a slight increase in EBITDA. And because you reported Q1 and Q2, '23 has been adjusted for the OpEx to CapEx shift. And I just wanted to confirm with you whether the full year EUR 193 million of normalized CapEx -- normalized EBITDA in 2023 was also already fully adjusted for this OpEx to CapEx shift or whether we should use a different normalized EBITDA for 2023 on the basis of this OpEx to CapEx shift.

Currently, I would take the EUR 193 million as a comparison where Markus mentioned the number with the 2 in front of it. So targeting the EUR 200 million for this year compared to EUR 193 million last year.

Okay. So it means that the OpEx to CapEx shift was all accounted for in Q4 '23 last year in relation to the 2023 year?

Yes. I -- out of my head, yes. I think it was all accounted for in Q4.

The next question comes from Mark Chapman from CreditSights.

Just looking back on Slide 14 about the -- essentially, the conversion target and I'm noticing that the conversion for those migrated in FY '23 and 1Q '24 is only picking up very slightly, doesn't seem to be approaching the above 50% target within sort of 4 to 6 months that we had expected. So can you help me understand why we should expect that rate to increase going forward? Is there a difference in the cohorts between the earlier ones migrated? Or what is the kind of -- what gives you confidence that the migration is going to be as high as you've indicated.

Yes, Mark. What we are now starting is really also the actual booking process. So we inserted in the newspapers -- in local newspapers in all these terms where we are that a lot of people have now informed about that pipe migration. So because also press takes that up in the past, and we are now answering also this, okay, just to be informed, it could happen that we are now locking. So to be honest, it was football championship and Olympics in Paris. Now we are starting and getting first disconnections, which will rise, and we are approaching customers that we are doing that also with our door-to-door channels and this will bring up a penetration on the second level. So we are getting more experience how to address customers. But at the end, it is -- now we are starting the new phase of adding actual blocking of connections.

I see. So to paraphrase, it's more the approach that you're taking now, you're kind of more ready to accelerate that rather than the change in the nature of the contracts. Is that a fair assumption?

Yes. It was also together with the housing associations. We said first of all we are sending letter with new housing association. You are collecting contract. Then we are sending letters and we are sending our sales people in the third or fourth step. And we are now in the third and fourth coming from the third or fourth steps, we are really approaching customers and say, okay, the alternative of not signing now is that you will be blocked. And here is for the second in the flat or we can also block sometimes in whole apartment that we are or whatever. And this is now taking place, and of course, will then bring penetration higher because some of our customers might thought that we are playing with that argument, and now we are doing it. And by doing it, they are then signing contracts.

The next question comes from Peter Jurik from Tresidor.

The first one I was hoping to ask about is on the bulk migration and you say 25% in Q3, could you give us a little bit more detailed commentary around how you plan on attacking that? And maybe some comments around it. So for example, you said that you're starting disconnections on TV, and it sounded like that's on the older cohorts. But for example, how many active TV connections do you have right now that are not paying, as a number maybe that's quantitative and how do you plan on converting that? What's your plan of attack? I would love to hear a little bit more detail.

So right now, when you look at the column 3 -- Q3, out of this 59%, we already signed up for 25% of contracts. So we are missing 300,000, 400,000 contracts in this cohort, for example. And this is what I exactly saying, we are now in the process by our technicians, by our door-to-door agents in negotiations with housing associations, sending letters to tenants, knocking on the doors and saying, here's now the alternative, sign a contract or I have to now access the socket in the living room because I block it here or I can do it in the basement. And this is now the approach which we are doing.

I see. So you're turning off, it's not just 2023 cohorts. It's also the Q3 cohort?

No, no. To be honest, it is our constant business now doing that. And this is what I'm seeing also all what we learned here, we will now bring it also to the chart when you are on Page 14, the 58%. This we also have work to do. And this is where I see growth possibilities on the TV side. Because these contracts are already on individual contracts. And we now developed and have to manage the bulk migration, new sales approaches, new ideas and a sales machinery is ramping up still like I showed in the chart before. And now we are sending them as well into these cohorts. And for us, now the -- to be honest, the bulk migration is a never-ending story or signing up now in the future because then our whole base is more on an individual base. So blocking or having ideas how to convince customers is now also in the DNA of our sales people more than before. And for that is for me really a hidden growth path, which we can gain off in the future.

Okay. And just at a high level, I mean, you've commented on here quite a few things, but as a management assumption, what gives you guys confidence, what continues to give you guys confidence that you think you'll hit -- give that 50% bulk migration number just because we are seeing lower numbers?

Because what I see right now is our concept of -- like I mentioned before. So having that Q3 numbers also, we will work on them for the whole second half of the year. So it's Q3. We also can do it in Q4, we will work on in these numbers and having mailings again and so on and so on. And this gives us confidence to reach these numbers.

Okay. Understood. And just one housekeeping. Apologies maybe I didn't catch it fully during the prepared remarks. But could you remind us again, what is the delay in the IP, the Internet transition. You said that you expect a delay to the second half. Is that -- is that because of housing associations internal discussions to make switches? Or is that the sales team not being ready? What was behind that?

Are you referring to the slightly later net adds in IP coming in the second half. Is that the question?

Yes.

Some of the contracts are like I showed you before, bundled contracts. And what we saw, and I mentioned it in the Q1 call as well, that when the -- we are approaching our customer on the TV migration. And then they said, "Oh, this is a good thing. I will sign a re-contract, combined with a bundled contract with IP, but my migration will take place in first of July. So please sign me up for that contract. So the IP bundled contract is then also put in place in first of July instead already planned in the Q2 or already in Q1. And this is the annualization effect, which we are facing now throughout the bulk approach. And this is throughout the IP group loss adds and the net adds come later. And this is the revenue impact and the reason for the impact.

Okay. I understand. And I guess that's also what you're already seeing in your July, August numbers as you comment. Okay. Makes sense. And just one more question on IP. In the Excel sheet that you provide with several KPIs, the SAC costs for Internet acquisition went to EUR 300 from about EUR 225 last year. What's behind that? And is that a one-off? Or is that what we should continue to expect to be a normalized number going forward?

I mean we are in a bit of a special market situation at the moment with the extreme push in the TV side. There is a lot of competition at the moment. and there is a lot of a high amount of contracts being processed. So we truly believe that this is more of a one-off character and should go down back to normal. But again, we are selling higher bundled shares and higher speed tier shares and thus, commission are usually higher for the door-door agents and the shops if we sell high tier products, which help us then on the ARPU plan going forward. So I think 2 effects. One is under an ARPU, speed tier mix and the other one is probably the push at the moment that we are also using the deadline of the 30th of June, which was used in the media from a lot of competitors as well. So that's why we pushed a bit stronger in order to get into Q3 and Q4 and get the numbers up again.

Okay. So what do you think would be a sort of equilibrium level after the bulk move is in the rearview mirror. Is EUR 225 the right number? Or is it a little higher than that?

It's the mix of the bundled share that we have to go forward in the tier share. So probably hard to predict what's the precise number, but I assume we should go back into the EUR 220 to EUR 240 range instead of staying at the EUR 300 range.

I would expect that the bundled share will go a little bit down, not in this year, but coming to '25 because then the bulk migration is over and this is linked as the bundled share jumps. I would expect the high tier share of customers are looking for higher tier products hopefully rises, and this is a mix then of that. And then let's see what competitors are doing, yes, but a little bit lower by the bundle mix could be less, let's see that.

It's also a matter of channel mix as well. The door-to-door channel is increasing, steadily increasing. As we said that the number of agents is increasing. They obviously have a higher commission share. Then we have to look at online, what's the online efficiency on the campaigns and the affiliate partnership marketing spendings that we have. So it is a blend mix of whether do we see growth, but be assured that we always look at the incremental costs of increasing sales in each channel and we allocate the costs accordingly and make sure that we are in an efficient approach maximizing sales going forward.

Okay. That's brilliant. And my last question is also a little bit of a housekeeping question. So in H1, you've had about EUR 22 million of nonrecurring costs, could you give us what you expect for nonrecurring cost for the full year? And could you just remind us of what the components of those nonrecurring costs are?

So the biggest portion of the nonrecurring costs, first of all, the [indiscernible] in March, which is roughly EUR 10 million to EUR 12 million. Then we have the bulk migrate which is significantly an higher portion on our NetCo-ServCo split. There will be -- these are the first half number and also a double-digit number on transformer at the end of the year which are the biggest portions I would see, and there are minor stuff like internal management, some personal items and so on, which at the end also will end up by EUR 4 million, EUR 5 million, EUR 6 million or whatever.

So apologies if you were coming in and out there a little bit just so I repeat. So any EUR 10 million to EUR 12 million NetCo-ServCo split also in the double digits and then some EUR 5 million to EUR 7 million of sort of management adjustments and that's kind of it, right?

Yes. That's it. The bulk migration is another topic. I don't...

Yes, bulk migration, the first number Markus mentioned was half year, so we probably see a lot more also coming in the second half, yes.

And so what is the bulk migration normalization, you're just -- I'm not sure I'm familiar with that, apologies.

We have additional costs that we wouldn't have had on the marketing side, on the customer contract service side that we have to bring in all these contracts on top of normal business. So that's a possibility to adjust it into nonrec because it's one off.

Understood. And so what's the expected full year number? Total?

EUR 40 million to EUR 50 million.

Sorry, I didn't hear that. Apologies. EUR 40 million?

EUR 40 million, yes.

The next question comes from Ethan Garber from Imperial Capital.

I had a question, just looking at the other aspect of the granular approach to your sales machinery as you described it. How long do you expect to have the ramped up door-to-door and telesales type activities, things that seem elevated intentionally because of this heightened competitive transitional moment? Do you expect to keep those at the same levels that you indicated of sales force for the next year? Or do you think that, that will ramp down as you handle the majority of the bulk transition?

I would say it's -- what we are now -- now a clear answer, we want to ramp it up from these numbers. We are now also stabilizing, we will lose, of course, some of our agencies which are focused on the bulk migration but then exchange them to normal agents, which are then in an own area and so on and so on. So we are ramping up. So what I mentioned before, we are capable for more than 400 agents on the door-to-door side, for example, and this is what we are still aiming for ramping up. We are performing better on the retail side, changing here the models and ramping up and telesales are still in the magnitude, we also want to ramp up here and also to make possible on our customer care side. So sales in tier is a possibility, which we are now also focusing on for the future. So on the sales side, still ramping up.

And is the retail -- are those actually PYUR branded stores? Or are you sort of cohabitated with another telecom offering? Or how are those situated?

Yes. On the PYUR branded shops, which are a franchise system, which we are working with still we are only operators operating on 40 sites and the rest are retail channels, which we are using. So we are in Germany, it's [indiscernible] we did promotioning. We are using normal retailers who are selling other operators as well. But if you as a tenant, are with the retail shop and asking in your address, it is only PYUR you can choose for 1-gig product. And so we are using these outlets as well. So they are not well branded PYUR. But when you are walking in, you see they are selling Telekom, Vodafone, PYUR as well. And then they -- by typing in your address, they find out you are living in Berlin. And your 1-gig supplier is PYUR and here is a contract. And this is also still ramping up these active outlets, we are naming that, yes.

And which ones do you have the most flexibility if you, in the future, decide to wind down some of that incremental investment? Is it the ones that were you're cohabitated as opposed to the 4 that you described as PYUR branded?

Once again, your question, sorry.

Yes. Which type of retail presence gives you the greatest lease flexibility so that when your investment returns maybe start to diminish as you've reached saturation, which ones give you the greatest flexibility to exit the lease?

Also in our franchise system, you can exit the lease if we are seeing the sales are going down because penetration are on the [ 50s ] or whatever site we then are moving away from this site. So we have the flexibility, either on the own retail or franchise stores or on the other side. And the good thing is that everything is -- these are not our salespeople. They are completely sales commissioned and result driven. So if you're doing your sales you get your commission, which is CapEx.

The next question comes from [indiscernible] .

Two questions from my side, please. On the outstanding EUR 120 million in capital contribution from your shareholder again. And so just to be sure that I understood your previous answer correctly, you do expect that inflow of the EUR 120 million to happen before the end of this year, correct?

Correct.

Okay. Great. And then you stated that the liquidity position is better than planned. However, when I look at the business plan that you presented last year in November, I think you were projecting ending cash of EUR 87 million for 2024. So how does this square with today's cash balance, which is already lower than that?

In today's cash balance, the EUR 120 million is not yet included. That's probably one of the reasons. I mean if we look at the cash flow that we have seen in the comparison, looking half 1 this year compared to last year. If we look at operating cash flow minus investing cash flow, as expected, this has gone up. We've been improving the operating cash flow by EUR 5 million and have increased the investing cash flow by EUR 10 million. So all cash usage has improved or as we needed from EUR 10 million to EUR 16 million, which is in line with expectations. But as we've mentioned, we are working strictly on a very concise path. Looking at the capital allocation, we've improved our net working capital position in the first half of the year and we have a very strict CapEx management going forward. And therefore, we do expect to be slightly better in the liquidity position compared to what we previously anticipated in -- at the end of last year when setting up the plans for this year.

We have a follow-up question from Mr. Khanna.

Sorry, the line was getting a little not clear when we were talking about what your expectations are for nonrecs for full year. So I was wondering if you could just please go through the numbers again. I think A&E you said full year between EUR 10 million and EUR 12 million. Bulk migration, I could not get that number. I think you said for NetCo-ServCo that's about a double-digit cost and then other nonrecs are between EUR 5 million to EUR 7 million. So I guess if you can just correct or tell me these numbers, which are written down are correct? And maybe just remind me again what the bulk migration cost will be for the full year, please?

I mean we are now really in the details of very specific numbers. I mean we gave a range of EUR 40 million to EUR 50 million in total and of which the refinancing is around about EUR 10 to EUR 12 million and then the transformer, the NetCo-ServCo split will be double digit. And then we will have the migration of the TV bulk. I do not have the exact number at the moment, but it is something probably also in the double digit. And then we're talking about personnel and other impacts that we touched earlier. So that gives you a direction.

[Operator Instructions]. We have one follow-up question from Mr. Guerra.

Just -- I mean sorry for the question, but clarification again on Slide 14, when you mentioned that in Q2 '24, 150 are the cohorts of the bulk base to individual in Q3 '24 is 590 of which, respectively, you had at this stage, a 40% conversion rate for those in the Q2 cohort and 25% plus in Q3 cohort. I still don't understand and don't understand how to reconcile if I take the Q2 '24, so when you refer to 150,000 bulk based individual, how to reconcile this cohort to the numbers, implied numbers on Slide 15 of 730 migration or migration of 730,000 of bulk contract, which has de facto terminated in Q2. So how should I understand this 730 reduction in the bulk TV contracts in Q2 versus what you referred to 150 only cohort in Q2 '24.

I am not 100% sure of your question and you're hard to understand. Your line seems to be not really good. Can we maybe pick this offline?

No, it's very simple. And I think it's for the sake of all investors. So Slide 15, your TV access bulk went down from 1,153 to 373, so that's a decrease of 730 bulk contract in TV services, okay? How do I reconcile this reduction in Q2 '24 with the only 150,000 cohorts of bulk base to individual as shown on Slide 14?

So I would say the easiest way is when you sum up the numbers on Page 14, we will end up by 910,000. Correct?

910,000 is what you expect to successfully convert it?

Sorry. When you -- I just want to answer your question on the customer base what I understand. So when we start everything, it is a number, I would say, look at Q3 '23. We have 1,290,000 customers on bulk. When I do the math with these graphs on 15 put them together with 14, we are having still on Q2 '24 373 on bulk and referring to Page 14, additional 910 in the changing process. When you sum up these numbers 373 to 910, you will end up by 1,283,000 which is near to that what you see in Q3 '23 where we're saying we are on a stable basis. And what we are saying is what we are showing on 14, but these are not the exact, these are the cohorts which we worked in -- we have 60,000 units in fiscal year '23, we wanted -- where we can shift from bulk to individual we have [ 121 ] and so on and so on. This is what the graph in 14 shows and here are penetration rates, which we already achieved as a snapshot. This is the basic for the data. This is what we want to make transparent to you.

Okay. So the community of 910 being 60 plus 110 plus 150 plus 590 are the cumulative numbers of bulk contract, which has already switched?

Which are in the switching process because [indiscernible]. The Q3 cohort is still being processed for the next 6 to 8 months.

Yes. But you are...

Okay, even though, you recall them as already out of bulk contracts as of June.

Exactly. In that case, you are right. Yes.

Okay. But then I would like to understand also in practice. If you are a customer indirect customers under bulk TV services. And this contract has ended in June '24, okay. But it will take you 4 to 6 months trying to convert this previously a customer under bulk contract into individual contracts. During this period of time, during this 4 to 6 months period, does the customer still receive TV services, but under which contract, how is it being paid? How are you paid for these TV services? It doesn't mean that during this conversion period the customers stop receiving the TV signal.

No, it is not stopped. The customer still gets the TV signal and he is in a phase in between because normally, he paid it by his ancillary cost by the housing association but will get it back because normally, he will get it in advance. And until the end, we not signed an individual contract, he is in the -- to be honest, in the free flow and this is what we are now acting with blocking the customers or switching off the TV signal and putting also our assumption on penetration rates.

Ladies and gentlemen, that was the last question. And I would like to turn the conference back to Mr. Artymiak for closing comments.

Markus?

Yes, I'm happy to do that. Markus here again. Thanks for listening to our presentation. And of course, some of you are already in contact with Nicolai setting up for backup calls or questions. Happy to do that and looking forward for November I think it is for the Q3 call and doing our business, and thanks for attending the call. Thank you. Have a nice day.

Ladies and gentlemen, the conference has now concluded, and you may disconnect your telephones. Thank you very much for joining, and have a pleasant day. Goodbye.