Tele Columbus AG ($TC1)

Hello, and welcome, everyone, to the Tele Columbus AG Q4, 2026 Results Release Call. My name is Becky, and I will be your operator today. [Operator Instructions] I will now hand over to your host, Carmen Becker, to begin. Please go ahead.

Thank you, Becky, 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 AG for today's conference call following the release of our fourth quarter results, full year results for fiscal year 2025, which ended on 31st of December. This call is limited to 90 minutes. In case of any follow-up questions, please let me know. I'm here today with Christoph Luthe, Chief Executive Officer; and Tim Rhoenisch, Chief Financial Officer. Now I would like to remind you that Andy Lennar, our rating agencies are 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 markets 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. Such representatives are welcome to call my colleague, Sebastian Artymiak, to discuss any outstanding questions. Please note that the presentation was uploaded on our website 15 minutes ago. Having said that, it's my pleasure to hand over to you, Luthe, Christoph, the floor is yours.

Thank you, Carmen. Good morning, ladies and gentlemen, and welcome to today's quarterly earnings call. My name is Christoph Luthe, and it's my first call as CEO of Tele Columbus, following my start 6 weeks ago, actually. And allow me to begin with a few opening remarks. I accepted the role with a very clear objective: First, to successfully manage the challenging market and financial environment facing Tele Columbus today; and second, to position the company as a strategic valuable infrastructure asset within the German market, together with a strong and experienced management team. I have spent more than 20 years operating at the forefront of German cable and fiber infrastructure industry. During that time, we built and scaled major platforms, such as Unity Media, formerly the second largest cable operator in Germany. Later at Este, with CBC and Vitronet alongside Blackrod, we executed complex transformation programs and high value-add build strategies across the infrastructure and energy market. As a result, I understand very clearly where the operational and financial levers in this industry are. Tele Columbus has a strong technology foundation, an attractive network footprint and very importantly, a highly capable and committed team. Our priorities over the coming quarters are clear. We will stabilize the organization, sharpen operational efficiency with discipline and urgency and return the company to a sustainable path of profitable growth. Today's market environment, demands two important things above all else. Execution and the monetization of the fiber and HFC network and strict capital discipline. And this is exactly where our management focus is going to lie going forward. With that, let us dive into the agenda. We're going to have four major points today, starting with an executive summary, then into the operations, and at the end, we're going to do a Q&A. Okay. Let's start by looking at our market positioning. While our permit -- while our primary competitors are currently struggling with declining Internet customer bases, TC is maintaining a growth path. We are actively outperforming the market trend, securing a 5.7% year-on-year increase in our customer base. Even more positive is our quarter-on-quarter revenue jump of nearly 9%, providing that we aren't just adding users, we are successfully converting them into high-value revenue customers. We achieved 12,000 Internet net adds compared to Q3, with growth was fueled by 2 main factors. First, the typical year-end seasonality, and secondly, a strong execution during Cyber Week, where our promotional campaigns hit the market perfectly. What's really driving this financial success is the shift towards premium products. Close to 50% of our gross additions opts for high-speed plants of 500 megabits or higher. [Audio Gap] strong appetite for our premium packages is the main driver behind the 8.7% revenue growth I mentioned earlier and that puts us in an excellent future-proof position moving forward. Moving to our financial performance. In the fourth quarter of '25, we saw a solid revenue increase of nearly 4% year-on-year bringing total Q4 revenue up to EUR 105 million. This positive momentum was primarily driven by a steady expansion in our Internet and telephony and B2B segments. Looking at the full year revenue, which remained stable at EUR 422.7 billion, representing a minor decline of just 0.8% year-on-year. Normalized EBITDA experienced a nearly 10% year-on-year decrease. This drop was primarily driven by two account factors, lower own work capitalized and the fact that we didn't have the positive one-off prior year effects from the release of accruals related to signal fees. However, it's important to highlight that these headwinds are -- were partially mitigated by the structural benefits coming from our ongoing transformation and operational excellence initiatives. Finally, let's look at the CapEx development. Our Q4 CapEx expenditure decreased significantly by nearly 70% year-on-year, down to EUR 21.2 million. This sharp decline is a direct result of our highly selective approach to network infrastructure investment. It also reflects lower capitalized project costs following our standard year and capitalization assessment, allowing us to maintain the former mentioned strong capital discipline. [Audio Gap] thing about the competitive performance and market leadership. In the fourth quarter of '25, TC once again delivered the strongest Internet growth in the industry, outperforming the competition by a significant margin. To put this into perspective, for the second -- for the second quarter, all of our major competitors reported a year-on-year decline in their subscriber bases. What makes this achievement even more remarkable is how we achieved it. The growth wasn't brought with aggressive spending, it was delivered despite our continued strict cost discipline and a highly selective approach in marketing experience. The overall telco market remains challenging. That's characteristic by general decline across the board for our peers. On Page 8, I'm just going to talk about our customers and the related revenues. Starting at the left-hand side, our Internet basis is expected to grow from 72,000 RGUs in Q4 to 740,000 by Q4 in '25 representing a growth of around 6%. What is particularly encouraging is the increase in contribution from FTTH customers. Fiber-to-the-home subscribers are projected to grow from 82,000 and 104,000 over the period reflecting the continued demand for higher speeds and more reliable connectivity solutions. We also see consistent quarterly net additions through the year with especially strong performance expected in Q2 and Q4. Turning to the right side, Internet and Telephony revenues is projected to increase from EUR 55 million in Q4 to EUR 60 million by Q4 of '25, representing a growth of nearly 9%. Importantly, revenue growth is outpacing subscriber growth which reflects an improving customer mix, increasing fiber penetration and continued monetization of premium broadband services. Overall, these trends reinforce the strength of our strategy and demonstrate our ability to drive both customer growth and revenue expansion. On Page 9, a key highlight to our commercial strategy was our ability to maintain a high and stable share of premium products sign-ups, even during intensive promotional periods like Cyber Week. Instead of diluting our value with low tier discounts, we actively pushed our 250 and 500 MB offerings. This strategy was successfully and compressed share of low-tier plans. Looking at the infrastructure performance, our fiber-to-the-home footprint continues to show maturity. With our 230K FTTH homes connected footprint, we have already secured 104,000 Internet RGUs. This represents a 45% penetration rate in fiber which is significantly higher than on the footprint. Finally, we observed a decrease in our triple play bundle share. This shift was driven by two strategic factors. First, our decision to implement less aggressive bundle pricing to protect margins; and second, a higher volume of sales coming through our outline channel. Historically, the online channel attracts customers to prefer leaner packages, which naturally correlates with a lower 3P share that gives us a highly efficient lower cost acquisition route. Talking about TV access, the development this quarter was impacted by the intentional disposal of nonstrategic foreign signal footprint. This transaction affected approximately 70,000 TV subscribers. However, when we look past this one-off portfolio optimization, our underlying RGU development remained healthy and broadly in line with current market trends. In terms of churn, we continue to see steady engagement. Customer churn remained stable, holding at similar levels that we observed during previous quarters. This consistency demonstrates that our core customers' retention effort remains robust despite a highly competitive product mix. Now to gross adds. Looking at the sales pipeline, our gross additions actually improved compared to the third quarter of '25, which show a solid market pool. However, because we maintained a relatively low bundled share of 32% this quarter. The new additions could not completely offset the standard B2C share. Moving forward, balancing this mix will remain a key operational focus. And with that, I would hand over to financial part.

Thank you, Christoph, and good morning, everyone, on the line. It's a pleasure to join my first analyst call as CFO of Tele Columbus, having started in the role at the beginning of 2026. A couple of words, about myself, I bring many years of experience in finance and transformation, including situations that require strong financial discipline, operational focus and careful stakeholder management. That experience is highly relevant for Tele Columbus at the current stage. And I'm excited to partner with Christoph and the leadership team as we execute our strategy with discipline and clear focus on sustainable value creation and financial discipline. I also look forward to engaging with many of you over time and hopefully meeting you in person over the coming months. With that, let me take you through the financial highlights. On Slide 12, you see our revenue development in euro million quarter-by-quarter, starting with Q4, 2024, and the last quarter as reported Q4, 2025. As usual, our split by Internet and telephony, TV, B2B construction work and other. The main driver of our year-over-year development in Q4 2025 were, again, Internet and telephony and B2B revenues as stated by Christoph before. Growth is mainly driven by our customer base price effects and also a higher volume in these categories. Construction work saw a decline quarter-over-quarter, reflecting project-related revenue recognition and timing at year-end. With that, we reached EUR 105 million in Q4 2025, EUR 60 million in Internet and Telephony, EUR 27 million in TV revenues and B2B EUR 12.6 million asset growth, mainly driven by Internet and B2B offsetting decline in TV revenues. On the next slide, you see our CapEx overview, again, Q4 2025 on a quarterly split until Q4 2025. Especially, we saw a decline of minus 70% in terms of CapEx, excluding leases. That was mainly driven by high cost discipline in network infrastructure investments, which decreased due to spending on selected network areas and backbone and DOCSIS 3.1 as well as a more streamlined deployment approach. Moreover, our end customer related CapEx, including commissions and CPEs remained broadly stable with 9.9 -- with EUR 14.6 million in Q4 coming from EUR 15 million in Q4 2024. One number you see here with, let's say, an unusual sign is the minus EUR 3.3 million in other CapEx and -- which is mainly driven by IT CapEx and onward capitalized. Here are some more remarks. So basically, during the year-end closing process and in discussion with our auditors, we assessed certain capitalization items, mainly, as said, onward capitalized and IT CapEx under a more conservative approach. This formed part of a broader balance sheet cleanup and is aligned with our updated cash preserving business plan. Around EUR 15 million previously classified as CapEx were, therefore, recognized as operating expenses in Q4, also cleaning up the 3 quarters before that. This impact EBITDA obviously had no additional cash impact and our 2026 plan now reflects the stricter requirements from the outset. As of now, we aim for around 14% in terms of personnel costs in on work capitalized. Coming to the next -- coming to the next slide, you see our 4 financial KPIs in an overview, always 12 months 2024, 12 months 2025. Revenue, reported EBITDA, CapEx, excluding leases, as on the page before and operational cash flow. As Christoph stated, revenues remained broadly stable year-over-year with minus 0.8%, especially as also outlined by me, driven by Internet and Telephony and B2B growth. Our reported EBITDA decreased year-over-year, which mainly reflects as stated before, and you see on the next slide -- on the next graph, you see also our bars, you see the CapEx impact, mainly driven by onward capitalized and IT CapEx, which is then offset in CapEx, excluding leases. Then coming to our operational cash flow of minus 33%, so coming from EUR 183 million last 12 months 2024, down to EUR 120.7 million last 12 months in 2025. That is mainly driven by a phasing impact in -- back in 2023, where we had an extraordinary upside in 2024 of EUR 30 million in our accounts receivables, cash in. And on top of that, simply driven by our reduced expense levels in 2025 driven by our stricter cash management and cost management. Maybe really quick and sorry for that confusion, since we had some technical problems. Maybe coming back to Slide 13. Coming back to our normalized EBITDA, 12 months 2024 normalized EBITDA versus 12 months 2025 normalized EBITDA and the -- with that, the EBITDA bridge. The first main driver, as outlined before, our operating revenues reduced by EUR 3.6 million. And then our operating income benefited from the asset sale in Q3, Q4, which was already announced in the Q3 conference call, where we sold around 100,000 units with an upside of EUR 6 million. Our onward capitalized so that I already mentioned on the CapEx slide and also a deep dive on the overview slide, decreased by around EUR 50 million and as outlined before. Our direct costs reflects an absence of prior year post litigation settlement gain, I think that was also stated in the Q3 call where we had an accrual release of around EUR 6.7 million. Personnel costs, here we see the first benefit of the voluntary leave program and the restructuring efforts reduced by EUR 4.6 million and with that, a run rate between EUR 10 million to EUR 15 million on a yearly basis as also outlined in Q3, and we see that developing in 2026. Our marketing costs are driven by our cost measurements, which also shown in Q3, the reduced growth to still 6% but reduced growth versus the previous quarters, nevertheless, a saving of EUR 3.2 million. Then other OpEx that is where basically the remaining IT CapEx, so it's driven mainly by the remaining IT CapEx shifts from CapEx to OpEx and on top of that, the capitalization assessment, which we carried out and a couple of other cost increases. So now back in the right order and before now coming to the Q&A session, obviously, we would like to address a couple of points, which we didn't saw on the slide, but especially impacted our balance sheet. First of all, the goodwill write-off. So during our annual impairment test as of December 31, the test was based on the detailed long-term business case, the so-called cash preserving case, by management, including a 5-year planning horizon. Following the update of that plan, expected free cash flows were reduced versus the previous plan. This reduced the goodwill headroom and resulted in a goodwill impairment of around EUR 800 million in 2025. The total adjustment that you see in our balance sheet is around EUR 810 million and is related to another EUR 13 million -- around EUR 13 million in intangible assets. Importantly, this is a noncash accounting effect and does not impact our liquidity or operating performance. The impairment return reported equity negative, which is why we applied in also alignment with our auditors an extended 24 months going concern assessment. Based on our self-funding cash preserving business plan and the liquidity outlook, the financial statements were prepared on a going concern basis and reviewed with our auditors. We see this as a conservative reset of our carrying values and cleaner basis going forward. Further details on the impairment methology, as usual, are included in the annual financial statements. Then a couple of words to the currently ongoing refinancing process. As publicly known, certain lenders have formed a coordinated group. We remain in regular dialogue as also stated during the Q3 call, with our financial stakeholders and shareholders in the ordinary course. In this context, we have engaged Lazard and Freshfields, as stated, to support us in reviewing and optimizing our balance sheet and funding structure. As part of this work, we have also launched a request most recently, which is intended to give the company additional flexibility should we decide to engage further with existing creditor groups or advisers. However, since this process is currently ongoing, please understand that we are, therefore, right now not in a position to comment on specific exchanges with lenders, creditors and advisers on potential capital structure alternatives or shareholder-related discussions with our shareholder -- our majority shareholder, Morgan Stanley. Given the ongoing balance sheet optimization process, we also, for the time being, refrained from guiding the full year 2026. Of course, as soon as possible, we will update you on the guidance for the full year. What is important that we are comfortable that liquidity under the cash preserving case can be managed and updated recently. In addition, the short term shareholder equity commitment, which also was announced 2 months ago during March, was put in place purely as a precautionary measure. It has not been drawn. And as of right now, management is not expecting to draw the ECL. Thank you. Thank you for your attention, and I think we can move over to the Q&A session.

[Operator Instructions] Our first question comes from Jonathan Waite from Ares. Please go ahead.

Is that better? You hear me?

Yes.

Yes.

I've got a few, please. So first of all, just starting with the capitalization assessment that you did at year-end. Can you just confirm what was the total impact in terms of costs that were shifted from CapEx to OpEx, both for the fiscal year but also for Q4 specifically?

Sure. Thank you, Jonathan. So basically, the full year impact was around EUR 15 million, which was completely recognized in Q4. And with that in Q4, on a singular basis, it's around EUR 17 million and then offset by Q1 to Q3. So in total, around EUR 15 million.

And can you give more rationale as to what drove that reassessment? Because, I mean, I guess, it's been capitalized that way for a long time. So what was different this time?

Yes. I mean as you can understand that the previous years, we were operating under a different business plan. So already based on that, we had in 2025 simply different projects and also carrying value within these projects. But on top of that, I think it's -- right now, it's hard for me to comment on the years before. As I said, we went through a dedicated and in-depth exercise internally but also with our auditors to go through our projects, which, in the end, led to that shift from CapEx to OpEx of around EUR 15 million.

So was that 15 or 50?

Sorry, that's 15.

Yes, just checking. Yes, and in annual report, it was mentioned there was a disposal that had been agreed that would raise, I think you said low double-digit million proceeds in 2026. Are you able to confirm just the timing of that disposal? And if you can give more -- a more precise amount in terms of proceeds expected?

Sure. So -- so yes, as you correctly stated, and so we are in the process of selling a nonstrategic asset, signing occurred at the end of May. There are a couple of outstanding closing items, which we hopefully close, which are mainly on the buyer side. which we hopefully close latest by the end of June. We have decided on continuity in terms of valuation and proceeds but I think it's fair that we are expecting somewhere between EUR 25 million to EUR 30 million in relation to that transaction.

Great. And could you give more detail on what the asset is and what the contribution was to EBITDA last year?

So, as we are bound contractually that the asset is still confidential, it is as yet nonstrategic. We had the co-investor who holds 49%. And yes, as requested by the buyer side, right now, it is confidential, which asset we are selling exactly. The EBITDA impact was around EUR 14 million as we fully consolidated the assets in 2025.

Okay. Got it. And then if I could just ask around CapEx, so you've obviously decreased a lot this year. In the annual report, there was some guidance for 2026, suggesting a further reduction compared to 2025. So could you just provide more detail in terms of, a, what's driving the reduction? Is it mainly cash preservation? Is it partly housing associations delaying projects? Or is it more of an internal sort of reassessment of returns? And then also, do you see or have you seen any other fiber operators potentially taking advantage of that delay, are you coming in over building view in these areas where you're now delaying the CapEx?

Okay. Maybe we will split the question, so I'll start with the CapEx that we are expecting for 2026. So we expect another decline. And as previously stated, please bear in mind that this is under the cash preserving case in 2026 of double digit -- low double-digit million decline in terms of CapEx, and that is mainly driven by CPE and yes, it's actually mainly driven by CPE and a slight reduction in terms of IT CapEx and onward capitalized.

Okay. So there's no change in the actual fiber infrastructure that you're rolling out, at the same sort of pace as 2025?

Exactly. So we expect a similar pace in 2026, minimal reduction but a similar pace as in 2025 in terms of fiber deployment.

Yes.

Second part of your question regarding over saving CapEx, we are following -- the team is following the existing business case, where reduction of CapEx has been planned. And the team is spending the money very intelligent just to maintain footprint.

[Operator Instructions] Our next question comes from James Ratzer from New Street Research.

A lot of good questions actually already just asked there. So I was wondering if I could kind of follow on from those, please. So in particular, on the CapEx guidance, you just talked there that it's not really from a reduction in fiber build, but it's from a reduction, you were talking about CPE costs. So does that imply that you are expecting a sharper reduction in the number of customer net adds for this year? So I thought CPE tended to be linked to your net adds growth.

Thanks, James, and thank you for the question. So in terms of CPE, that is an internal effort that started in Q4 in which we started what we call a CPE recovery project. So we systematically call back our CPE, also our customer equipment and refurbish that with support of an outside company, and that drives the reduction in CPE CapEx in higher single-digit million numbers. So -- but now to explicitly answer your question, no, the CPE reduction is not linked to lower efforts in terms of customer base.

Got it. Okay. Fair enough. And then on the guidance, I was just intrigued by why in your prepared statements on the conference call you said you weren't willing to give guidance, but yet there is full guidance written in the annual report. So I just wanted to try to understand why then on the earnings call, you just said you weren't prepared to give guidance?

So yes, so basically, as I said, we are currently in the refinancing process, and we are currently operating under the cash preserving case, which we, hopefully, depending on the outcome of the refinancing process, can revise and then give you a clearer picture on the year 2026, hopefully, within the next 2 to 3 months.

So let's say there is a successful outcome on the refinancing. What then would actually change on the guidance, would you be expecting them to maybe have less of a CapEx reduction because you could deploy more fiber? I just wasn't quite sure what in the guidance metrics you've given on revenue EBITDA CapEx would change if the refinancing could be completed?

So if the refinancing could complete it, the management hopes obviously for higher funding, and with that higher CapEx, especially for fiber deployment and also for subscriber acquisition and that would then...

That's clear. Okay. And then so the last question I had, and I'll go back in the queue. You've just on EBITDA last year of EUR 128 million, you are guiding here that it should rise by mid double-digit million euros. So if I were to add EUR 50 million to that, are we talking one around EUR 180 million? And then what I wasn't quite sure is how the impact of this disposal is taken into account. So does that mean -- yes, so actually just be helpful to understand more precisely what's implied in that EBITDA guidance in the annual report, especially with the disposal.

Yes. Sure. So the guidance is on a like-for-like basis, so not assuming a deconsolidation of the nonstrategic assets. And on top of that, yes, as stated in the annual report, under the cash preserving case, and I think that's really important, we expect a low double-digit million EBITDA growth from 2025 to 2026.

Do you say look the annual report says mid-double digits, so I just wanted to check, you just said low there?

Okay. Let me double check, James, and we'll come back to you, but I can assure you that currently, under the cash preserving case, we expect low double-digit million EBITDA growth.

Got it. Okay. So if I were to take that as, let's say, EUR 20 million to EUR 30 million, but I would then to get to a reported figure, I would have to take off like a half year impact of this disposal, which could be, let's say, EUR 7 million, so would you be talking about EBITDA going to about kind of EUR 130 million, EUR 140 million reported for this year and the cash -- sorry, EUR 140 million to EUR 150 million in the cash preservation case? Is that fair?

James, let's take that, and we will come back to you and comment on that separately on the bridge, yes.

Our next question comes from Charlotte Pete from Shroders.

Just following up on that point, I think it might be useful for the wider group, if you could clarify the guidance? And then I just wanted to ask another question with regard to I mean, Deutsche Telekom has been talking about these possible changes, whereby these housing association contracts, if not have started to build in a certain time period would enable them to come in and roll out fiber. I just wondered where sort of that discussion or change is that, I mean any update on that would be helpful.

I'm going to take that question. I mean this results to the changing -- potential changing telecom law in Germany going forward, which might push into the direction that an operator may get access to an existing house situation. Not finalized yet, first of all, and our relationship to the organization seems to be so strong that there is an approach that we do have enough time to and get them secured.

Okay. And just one follow-up. So with regard to this nonstrategic asset sales, I mean, and you say this relates to 17,000 TV subscribers. Could you share the size of the footprint and is this footprint reported in your sort of data as part of the foreign network or you kind of connect to the foreign network?

I believe those disposal were customers, which were not in our own signal and has been sold out to Vodafone last year. This also was more strategic, not -- and had also no IP customers should have -- not have had any impact.

Okay. And then with regard to the...

I'm sorry, just to finish, and there's no relation to the other strategic disposal, which is planned for '26. It's completely different.

Okay. All right. But that is still a network that is one way, i.e., is it for -- I mean, -- where does it fall in your homes connected? On the data sheet, it's says you know, there's most of it appeared to be way, but is this part of the one way that therefore, it's written down in the foreign network.

So on the disposal, so just a -- disposal of the end of last year that is not reflected in our homes connected yet that will be reflected in Q1, where it is reflected in our TV RGUs already in Q4. So it's foreign signal TV RGUs only.

[Operator Instructions] We currently have no further questions, so I'll hand back over to Christoph for closing remarks.

Thank you very much for your time. If there are no further questions being asked, we would like to thank you for your time and we'll close the call for today. Thank you very much.

Thank you. This concludes today's call. Thank you all for joining us. You may now disconnect your lines.