Deutsche Telekom AG

Hannes Wittig - Head, IR Timotheus Hottges - Chief Executive Officer Thomas Dannenfeldt - Chief Financial Officer

Polo Tang - UBS Akhil Dattani - JPMorgan Fred Boulan - Bank of America Merrill Lynch Andrew Lee - Goldman Sachs Ulrich Rathe - Jefferies Sam McHugh - Exane Ottavio Adorisio - Société Générale Justin Funnell - Credit Suisse Usman Ghazi - Berenberg Mandeep Singh - Redburn

Yes, good afternoon, everyone and welcome to our full-year 2017 conference call. With me today is our CEO, Tim Hottges; and our CFO, Thomas Dannenfeldt.

Tim, as always, will first go through his highlights, followed by Thomas who will talk about the quarter's financials in greater detail and after this, we have Q&A. Before I hand over to Tim, please pay attention to our usual disclaimer, which you will find in the presentation.

And now I'll hand over to Tim.

Yes. Thank you, Hannes and a warm welcome also here from my side.

Great having you all on the call and looking into what Deutsche Telekom is doing. I will use my time as well for giving you a bit update about Germany and about the infrastructure investments which we have done and we're going to do, so it is a little bit longer now my speech.

That said, jumping immediately on to Slide 4 and talking about the highlights, and I think this was a good year for Deutsche Telekom. We delivered on our guidance.

We are growing strongly in all metrics. We have laid the important foundation for future growth in most of the business by good infrastructure and by customer growth and therefore I think we are on a good track.

Our capital expenditure amounted to €12 billion last year and we spent $8 billion to acquire over 30 MHz of nationwide [ph] low-band spectrum in the U.S. on top of it.

Turning to the best networks, to offer the best customer experience, this is exactly what we are working for in all our operations and you know that I'm always making clear that we are very pure telco investors in what we are doing and the network investments is supporting our customer growth. This was strong across the board and has even accelerated in a number of our European markets and I think we see good development.

We grew revenues and EBITDA despite our currency headwinds and in spite of our massive investments, our net debt remained within our comfort zone, and we were able to grow our free cash flow by 11% last year. Based on this, we are proposing an increase in our dividend as promised to $0.65, so I think all good news.

Let's start with our usual update on innovations and to highlight a few, we launched our narrowband IoT network in eight countries. We completed the rollout for our European aviation network which is set to launch soon.

Mobile work congress [ph] will be a big launch date and presentation on this subject. In Germany, almost 400,000 homes are using our hybrid router, more than 100,000 additional homes subscribed to our smart home offering last year.

Digitization for us is a comprehensive concept starting at the network layer with our industry-leading all IP migration and we are using 1300 bots to automate processes in our German service operations alone. On the customer facing side, let me highlight the 11 million visits we saw on our German digital service app or the 40% penetration of our Greek mobile app, just you know to give you an indication for all the markets we have here and growing in good numbers.

But clearly this is just the beginning. Expect to hear a lot more on this front from us on the Capital Markets Day which we have scheduled for May.

On Page 6, starting with the demand and customer momentum which we had is quite strong and this is not only a U.S. story anymore, it's in all our markets.

T-Mobile you know in the U.S. already reported 5.7 million net additions in 2017, in Gemini we added almost 3 million fiber customers to reach almost 10 million customers by year-end and customer satisfaction is very high and our market share performance that was as capable, that was as cable is even improving.

Convergence remains the centerpiece of our strategy. We have now 6 million converged customers in Germany and in our European operations, 1.5 million more than 12 months ago, interesting wise if you look to net promoter scores or to the TriM satisfaction values.

These customers have the highest rates from all our customers within the operations and this is helping us a lot because we get even you know supporters or promoter for our products. On the B2B side, our cloud revenues grew by 12% in 2017 driven by much higher growth in our public cloud services.

Going to Slide 7, on the next we see the strong customer growth in our European operations, including Germany and the Netherlands, primarily driven by commercial turnaround in our European segments. We added 12 million contract customers in 2017 over 40% more than in 2016.

You see with the change in management we even see a change in the growth trajectory of our operations here. And our broadband customer growth accelerated to 558,000 in Germany, the time where we had negative developments in this regard a very slow flattish is over 600,000 I think is a clear statement in our industry in Germany.

Service revenues on this side of the Atlantic are moving into positive territory despite regulatory headwinds and would have grown 1.3% last quarter without these headwinds. On the next slide I would like to update you on a number of capital allocation decisions we have taken in recent months.

So the portfolio is very important from our perspective as well to change the face of Deutsche Telekom. Let me first highlight the moves we announced last December to strengthen our convergence proposition in a number of markets.

The takeover of UPC Austria, we are with this substantially strengthening our competitive position. UPC Austria is a well performing cable operator and we see significant synergies, both on the cost and on the revenue side.

In Poland, we decided to enter into negotiations with Orange Polska for comprehensive fiber wholesale agreement and in the Netherlands we announced the takeover of Tele2 in a bid to create a stronger competitor in a highly converged market. In the U.S.

we acquired Layer3 TV creating a new platform for our carrier innovation and growth around content aggregation. And we also took the decision to transfer BT into our pension fund.

This has benefits for our credit rating while not affecting our governance rights. So it is a good impact for the balance sheet but it's not you know changing anything in the way how we support Ostia the company.

To be clear, there is no strategic REIT across from what is basically a technical move here from our side. In order to be clear, this transfer is voluntary and not in response to any funding obligations as had been our previous voluntary annual funding payments which in recent years amounted to €250 million and which we have now decided to discontinue.

Moving on, two of our subsidiaries T-Mobile and OTE have announcements to return cash to shareholders. We have decided not to participate in the T-Mobile buyback and have instead opted for an increase in our share.

I have already mentioned that we want to pay a dividend of $0.65 for 2017. What's new this year is that we will no longer offer the dividend in kind whoever introduced it.

So we introduced that instrument to give shareholders a choice and to help us funding our strategic investments especially in the turnaround of T-Mobile U.S., but we have listened to you and with T-Mobile U.S. now generating substantial free cash flow we have decided to discontinue the dividend in kind moving to a full cash dividend instead and no further dilution on the stock.

German infrastructure, now going into deep dive into our operations, we are aware of some concerns regarding infrastructure spend in Germany. So let's give a little bit flavor around that one.

Let's start on Slide 9. Here you can see that we are spending way more than our competitors, more.

We are investing well over €5 billion. If you include T-Systems it's well over €5.5 billion and we are investing in fiber, obviously only fiber.

We are not deploying kappa, only fiber. Last year we deployed 40,000 km of fiber double the amount in 2014.

Our investments since the end of 2013 have taken our German fiber coverage to over 70% and our LTE population coverage to 94%. What we care most about our - is about the customer feedback and here the situation is very clear.

As I already mentioned, we had almost 10 million customers on our fiber infrastructure direct or indirect well over 1/5 of German homes and businesses. And we have 11 million customers on our LTE network and this number is growing strongly too.

So where are we going now from here? Let's start with mobile.

One of our investment priorities in the coming years is the coverage of LTE white spots, for instance in certain rural area or although motorways and high-speed rail tracks. For this, we were quadruple the run rate at which we deploy towers in Germany from around 500 annually in recent years to round 2000 in the coming years.

As a consequence, our tower unit will invest around €100 million more this year already and this will increase our population coverage by 3 million to 98% in the next two years. And as always we are happy to host our competitors on our towers where it makes sense.

Moving on to the fixed line which you see on Page 11, at the end of 2018, our fiber coverage will be around 80% by the way as always promised and our speeds will step up massively with super vectoring. At the end of this year already 15 million and I repeat that, 15 million German homes will have access to speeds of up to 250 Mb per second.

Going forward we will continue to deploy fiber towards the gigabit targets laid out by the German Government. We will bring our dense fiber networks even close to the customers.

Where it makes sense and under the right conditions we also want to collaborate with our infrastructure investors like either ETEL while we announced the plan to jointly pass more than 1 million homes with FTTC we are building and FTTH homes in the next 10 years or even use other networks through whole buy agreements as we want to make our networks available to others on fair commercial terms. Another near-term priority are German business districts.

Here we have announced plans to connect more than 80% of businesses with fiber by the early 2020 and we are well underway as you can see in our almost weekly announcements here. Aside from infrastructure, TSI and our German B2B business, we work to digitally enable businesses and public authorities not least with our industry-leading IoT and cloud services.

As you can see on next Page 12, our German CapEx will remain broadly at last year's elevated level, plus the incremental investments in our tower company. We had previously told you that we were comfortable with endless consensus of about €4.3 billion to €4.4 billion for our German unit.

Today's guidance is equivalent with this, although the distribution is a little different with more CapEx in our central unit and on top of this there is the incremental spend for towers in our group development unit. Within this framework we are ramping up our fiber deployments to 60,000 km in 2018, remind this year we were in 2017 it was 40,000.

We will complete our promised vectoring our rollout in 2019. And then in the coming years we will maintain our high spending levels towards the gigabit targets, assuming a fair and reliable regulatory framework.

To maximize our time to market and our return on investment, we will leverage our fiber investments through a technology mix that includes fiber-to-the-building, fiber-to-the-home, but also fixed wireless and hybrid solutions. As before, we will leverage governmental subsidies and defend our fair share.

Our strategic goal remains to bring the maximum possible speed to the maximum number of people as efficiently and as quickly as possible. And by the way this is paying off already every single day while we are sitting here.

We will provide you with more detail on the Capital Markets Day, but these are our main coordinates that you should be expecting. Moving on to our financial performance in 2017 very quickly said and by the way this is the fourth year of growing in all parameters.

Our revenues grew by 2.5%, adjusted EBITDA by 3.8% and free cash flow by 11.3%. Adjusted for FX, our revenues would have been grown by 3.6%, our EBITDA by 4.9% and our free cash flow by 12%.

You will remember that we raised our EBITDA guidance twice during the year to reflect T-Mobile's guidance upgrade, we delivered against this raised guidance. Our reported ex-U.S.

EBITDA was at the low end of our 12.9 billion to 13 billion guidance range, but adjusted for the disposal of Strato would have been in the middle of the guidance range and would have grown by 1%. On Page 14, you can see how much growth we have delivered in recent years compared to our 2015 capital markets guidance.

That's my favorite chart. Including 2017 and adjusted for FX our revenues would have grown at an average of 4% in the three years since 2014.

Our adjusted EBITDA before handset leasing at an average at 5%, but comfortably ahead of our 2015 capital markets guidance. And our free cash flow at an average of 11% in line to slightly above our guidance as we have used the extra head room to invest even more into our future growth.

And by the way one slight comment aside, if you look to the return on capital employed it's well ahead of our capital costs. As you can see on the next page we expect to keep growing strongly in 2018.

We expect revenues to grow adjusted for foreign exchange at the impact of IFRS 15 which is you know a big exercise. We expect our EBITDA to grow to €23.2 billion, this is €1 billion more EBITDA and our free cash flow to €6.2 billion.

At the consensus exchange rate of 1.19 the EBITDA guidance would amount to €22.7 billion and the free cash flow guidance to €6 billion. Again, at last year's average exchange rate we were guiding for CapEx of €12.5 billion, another step up compared to the €12.1 billion we reported for 2017.

You should not be concerned about that one, at the consensus exchange rate our CapEx guidance would be €12.3 billion. The increase in 2018 is due to the tower unit as mentioned as well as to systems where we anticipate additional investments into our European roads tower business and into the Internet of Things growth business.

Importantly, we expect growth on both sides of the Atlantic. T-Mobile already guided on eighth of February.

For our ex-U.S. operations we anticipate 2018 growth of around 13.2 billion from 12.9 billion in 2017 driven by Germany and our European operations.

Now let me turn it over to Thomas to review our fourth quarter in even more detail and glad to take your questions later on.

Yes, thanks Tim and a very warm welcome to everyone from my side as well. For the full year our revenue grew 2.5% and our adjusted EBITDA rose 3.8.

In the fourth quarter our revenues and EBITDA declined, but adjusted for FX our revenues would have grown 2.7% and our EBITDA would have been stable. Our reported net profit rose 46.8% for the full year.

In the fourth quarter we had an impairment charge related to Poland of €800 million and a tailwind of 1.7 billion from the U.S. tax reform, so a net benefit of 900 million for Q4.

The 1.7 billion gain reflects lower deferred U.S. tax liabilities.

As a result of the U.S. tax reform T-Mobile expects not to be a cash tax payer until 2024, four days later than previously expected and the future effective tax rate would drop from almost 40% around 25%.

Now let's have a closer look at the segment performance, starting with Germany. Our fourth quarter sales were up 2% partly due to a stronger handset business, but even our reported service revenues grew by almost 1% which marks a historic and exciting turnaround.

Driven by this top line improvement and by cost efficiencies, our EBITDA grew 4.7%. The key message here is, we expect growth to continue in 2018 and 2019 as you can take from our annual report.

More details on this at our Capital Markets Day. On Slide 19, you can see that our reported total service revenues improved further in both fixed and mobile.

These trends are shown after headwinds from roaming, fixed and mobile termination rate cuts, and in 2017 these regulatory headwinds totaled 200 million. For 2018 we us estimate these headwinds will only be at a level of 30 million to 40 million.

Excluding regulatory headwinds, mobile service revenues growth would have been 3.6%, similar to last quarter, while fixed service revenue growth would have been 0.9%, slightly better than the 0.7% we had in the third quarter. In some excluding regulation Germany total service revenues would have grown at almost 2%.

In both B2B and B2C, this growth is mainly driven by successful up selling. The market has embraced more for more logic and our clear leadership in network performance and customer satisfaction.

Looking at mobile on the next slide on Slide 20, our commercial performance remained steady with 181 key branded contract net adds. We continue to see a favorable growth add mix driven by up selling to more data rich plans like StreamOn.

As you can see on Slide 21, mobile data growth remained strong at 38% year-over-year with the average usage now at 1.7 gigabytes. 42% of all branded Magenta mobile contracts are part of a convergent relationship, up 8% points in the last 12 months.

MagentaEINS homes spend on average €8.9 per month more with us than before. Moving on to fixed line on Slide 22, we rebounded to at 104,000 broadband customers.

This was our best quarterly net add performance since 2011 and we estimated this entailed a 34% share of the net adds in the market. For just for impact of our hard IT migration we estimate a net adds share of around 40%, which is as you know in line with our strategic target.

Demand for our fiber products remained strong and steady with another 700,000 additions this quarter with a majority again joining our retail platform. TV net adds were 50k in the fourth quarter bringing the full year total to 260,000.

This was better than 2016, but as you know, we have high ambitions here. Turning to our fixed products on Slide 23, our retail revenues fell a modest 0.6% year-on-year.

Within this category broadband revenues grew only 0.6% this quarter. This reflects the impact of promotions we launched last year plus the incremental headwind from our hard migration.

The tariff mix for those customers coming off promotion is actually tracking ahead of plan, and so we expect the broadband revenues run rate to improve again in the upcoming quarters. As mentioned, we now cover 71% of Germany households with our street fiber network.

69% of our access lines are already on IP up from 53% one year ago. To optimize the final leg of our industry leading all IP migration we have slightly slowed our run rate and now expect to effectively complete the migration in late 2019.

Moving on to our usual two slides on T-Mobile U.S. we have already presented very good results two weeks ago.

Now in the U.S. we won 891,000 branded postpaid phone customers as many as the rest of the market combined.

IFRS service revenues grew 4.8% while IFRS EBITDA fell 5.7% mainly due to negative effects from inclement weather. On the next slide as usual we show some selective performance metrics for our U.S.

operations. Our branded postpaid phone trend improved further and reached 1.18%.

Bad debt expenses reached a new record low reflecting improved customer quality. Our commercial results are underpinned by a strong network and recent Ookla and OpenSignal data confirms the clear T-Mobile LTE network leadership.

Excluding the impact from hurricanes, the cost of service would have been stable year-on-year despite low band build out costs. By year end 2017 T-Mobile U.S.

had already deployed 600 MHz spectrum covering 300,000 square miles and they target having 100 million pops clear and ready for deployment. In 2018, the company expects to spend an incremental 300 to 400 million of OpEx on its low band deployments resulting in improved network performance and coverage.

Importantly, the equipment being deployed is 5G ready and this would give T-Mobile a head start into the next generation services. So, moving on to our European segment, this was another quarter of strong commercial momentum.

We added 364,000 new contract customers, 87,000 broadband customers and 216,000 new converged homes. In Poland, our turnaround is now well underway.

Based on innovative propositions, significant expansion of our distribution footprint and network leadership in Q4 we delivered 124,000 postpaid net adds. Our revenues in Europe were stable this quarter.

Our organic EBITDA was down only slightly year-on-year. Building on our successful commercial turnaround, we expect our European segment EBITDA to grow in 2018 and this will be a historical first.

The next chart shows that we have now migrated 68% of our homes in Europe to IP. Our LTE coverage now stands at 94% and our fiber coverage has grown to 32%.

Moving on to T-Systems solutions on Slide 30, revenues and EBITDA both rose in Q4, the latter reflecting last year’s negative one-offs. Nevertheless, we are expecting EBITDA to decline in 2018 driven by increasing all IP migration costs and investments in new services especially the IoT, the Internet of Things area.

T-Systems is a mixed bag. The secular pressures from legacy IT depresses our order book as per our caution in Q3, but has also some pockets of strength.

Our enterprise Telco business is stable while our cloud and security businesses are growing strongly. More on this at our Capital Markets Day again where our new board member Adel Al-Saleh will outline his plans for the business.

The next slide shows group development, which now compromises mainly T-Mobile Netherlands and our German towers. We had another good quarter in the Netherlands with 77,000 contract net adds.

This marked the 10th consecutive quarter of contract customer growth driven by a strong network and strong commercial execution. Adjusted for regulation, Dutch service revenues would have been almost stable.

In 2017, our Tower business was impacted by transition costs after the [indiscernible] our German segment. In 2018 we expect EBITDA growth for this unit.

Mainly driven by EBITDA growth our free cash flow increased to €5.5 billion despite more than € 1 billion additional capital spending. Q4 growth in our adjusted net income was driven mainly by the U.S.

tax reform benefits as mentioned already earlier. Our net adds reduction reflected the growth in free cash flow and mechanical de-leveraging from the exercise of the T-Mobile U.S.

mandatory convertible in December. ROCE increased to 5.8% exceeding our WACC.

This means that on Slide 33 our balance sheet ratios remained right down the fairway with a net debt to EBITDA down to 2.3 near the midpoint of our target range. Despite paying 8 billion for spectrum in 2017 our net debt for the year only increased by 800 million.

Our balance sheet strength gives us confidence in removing the scrip dividend option as Tim has already mentioned in his speech. My final slide as always summarizes the strategy we've presented to you at the 2015 Capital Market Day and we finished 2017 with people, products, and attitude in place to build our growth story on an ever greater number of pillars going forward.

More on this at our 2018 Capital Market Day. And before I hand over to the operator for the Q&As, let me finally say something about my decision not to extend my contract beyond the end of its term by the end of this year then.

You know that I'm always trying to stick to what I promised and one of my promises I've given myself and my family some time ago is that I will exactly this, namely leave DT after now 26 years of service to find time for new opportunities. Nothing is lined up yet, and this is the point.

This is a personal decision and as you can see in today’s numbers and guidance which I believe are very strong, I will leave a house that is in very good shape. DT is a great company with strong well invested assets and excellent management team and lots of future growth potential.

I have known Christian Illek, my successor for more than a decade, and I'm sure you will find that he is the perfect successor. And we will be together until the end of the year to work on a smooth transition.

And I'm pretty sure I will see most of you on road shows and conferences in the upcoming weeks and months and of course for sure on the Capital Market Day in May. Now, I hand over to the operator for the Q&A.

Yes, hi thanks. I just have two questions.

The first one is on German fixed line service revenues. They've now grown for two consecutive quarters after several years of decline, however how optimistic are you that German fixed line service revenues can continue to grow going forward?

And my second question is really about the guidance in your annual report, so you state that you expect a strong increase in equities be cash flow for 2019 after $6.3 billion of DTX cash flow in 2018. So can you maybe talk a bigger picture about the main moving parts that are driving at DTX cash flow growth in 2018 that’s specifically why you're expecting the strong increase in 2019?

Thanks.

Look let me start with the first question. The first question is yes we are strongly convinced that the ARPU and the service revenues on fixed line is going to increase throughout the upcoming quarters and yes, why do we think that?

The first thing is, we have an unbelievable high amount of investments in the infrastructure. By the end of this year we will open up 15 million households up to 250 megabit per second this year.

So therefore, the offsetting opportunity for us is really great. The second thing is the promos rolling over, so we had these promos at the beginning.

Now we coming into the normal tenure of this contract and therefore we will see the ARPU and the revenue impact from that one as well. Thirdly, even B2B is growing in this area, so this is helping us on top of that as well.

And last but not least, the new areas where we are building vectoring and super vectoring even in areas where we are regaining or winning market share back from cable operators, so even here we see a positive momentum which is helping us on the service revenues. On top of that I'd like to mention and it is not your question but it's on top of that, we are growing on the wholesale side.

So reselling this network which is a big part for our profit stream as well with the higher value added to [indiscernible] Vodafone because it's not anymore only the ULL. It is now the full bit stream excess with a higher amount of contribution which we gain in this area, so yes we are very well convinced that this is moving on.

Hi, Polo. I'm taking the second question.

The answer is quite simple, we worked very hard to turn around the U.S. first, Germany second and Europe into growth in EBITDA and as you've seen our guidance conceptually it's quite simple.

All of them creating or generating cash contribution growth in ’18, ’19 onwards, so that is basically the one key element of the answer. And second element of the answer is we do not expect any headwind then in the same period of time from CapEx interest tax and special factors.

Special factor guidance I have given in 2015 capital market there is was, that there is a continuous slight decline potential for us because of the A structure and so no relevant headwinds from this area. So to summarize cash contribution free cash flow growth from U.S.

from DTX U.S., from Germany, from Europe, there is one missing part you know that is systems part as it's part of the DTX U.S. perspective I think we are in a good shape there, so that is driving basically the growth.

Hi good afternoon. I've got two questions loyalties from me.

Firstly just on CapEx and there's two little parts to it. The first is you've called out some investments that you're making into 2018 in towers, IoT and the tower investments.

I just wonder if you could comment on whether these are one off or do we see them as some ongoing spend as we go forward? And the second bit related to that is, Tim you mentioned the concerns the market has around CapEx in German fiber spend.

I just wondered if you could comment on the rhetoric we've heard from the coalition paper that came out a couple weeks ago, what your interpretation is as of that and just how we get a timeline going forward to get better clarity around CapEx? And then the second question was related to comments that we've seen on Bloomberg just around your message on a vote for Liberty deal, you've spoken seemingly quite vocally as to why you think that deal should not be approved, maybe if you would just elaborate on why that is, what are your key issues, what are your key concerns?

Thanks a lot.

Yes Akhil, I'll start on the CapEx and the numbers and I think then Tim will get in, in terms of the coalition negotiations and the potential Liberty or combination deal. So first of all, I think today's news in terms of our CapEx is very good news.

Basically we're starting with we deliver and we have delivered in our guidance a spot on guidance for the free cash flow versus the market expectation consensus, why CapEx is a little bit higher where is that little bit higher CapEx coming from? It's coming from basically two main areas.

One is the tower business, second is the systems and into systems again it's two parts, one is the road tolling stuff and secondly is M2M IoT. I think the good news is, we deliver free cash flow why we invest a little bit more, we invest more in two areas which are non-regulated, so that gives us a much better perspective looking forward in terms of returns.

Is that all one off or nothing one off basically it's a mixture of one offs and continuous so the tower part will be more continuous whereas for instance the tower element is the one has a one off characteristics. Market concerns about CapEx, yes I'm aware about that.

I think we've given a lot of insight today again. You've seen that the German CapEx remains in the vicinity which we have already given to the market, the 4.2, 4.3 vicinity.

You know that there is a chunk of roughly 2 billion of CapEx today been spent for fiber-to-the-street and IP which will be freed up during the course of the year ‘19 when we’ll finish that activities and will be reinvested again for further improvements. There is the total volume we've mentioned.

So I think there is everything said, my guess is it needs more detail and insight and a longer debate and we will take and it will take place on the Capital Market Day to convince the bears here that this is a fantastic plan and that is what will take place and happen then later on. So Tim maybe you comment a little bit on the coalition and Liberty deal.

Okay and parties in the government have agreed on a coalition deal and issued quite a long document including several items relevant to our sector. And I have heard that the word digitization is mentioned 227 times.

So you see Germany is in the digitization fever. That's said, the first thing is there's a fundamental shift for us relevant from current regulatory regime towards a model delivering incentives for private network investments.

So that is a very clear statement and quite encouraging. There is a statement that on a deployment of a nationwide gigabit capable network under 2025 is tossed and there is a founding of an investment fund for rural fiber deployment financed by auction proceeds and other resources.

And last but not least, the provision of new frequencies licensees are coming with coverage obligations to close wide spots and enable a dynamic 5G deployment, so these are some major items out of these documents. First we work on that the coalition agreed on ambitious goals for digitization and not only regarding infrastructure but as well in important fields like Public Administration, health, universities, education and the like.

We secondly clearly appreciate that the coalition supports private fiber investments by fundamentally changing the current regulatory regime. Fiber will no longer be regulated as Copper that is a quote out of this.

New rules for all companies willing to invest must now be implemented by the regulator. In addition we approve of measures taken by the coalition to provide networks with open access on commercial terms.

So I think that is quite encouraging on the way going forward. So the second thing it is a technology neutral wording.

So we are not forced, just to go into every household with fiber-to-the-home or fiber-to-the-building, but there is even fixed wireless access of 5G allowed, so a mix of technologies is drafted as the way forward. There is a significant subsidy program which is included for industrial areas and school overall.

The total amount of subsidies for the upcoming for us would be in the vicinity of €10 billion to €12 billion. This is huge, really huge.

So today the industry is not able to invest this amount of money, just two bottlenecks in the construction areas and other things, but at least this is the amount of money which is probably available from the government for the rural areas. 5G is playing an incremental role in the context of the coalition contract.

There was a discussion about national roaming and maybe some misunderstandings. Our interpretation or understanding from the international roaming idea is that it's not a must, but a can condition.

So in areas where others want to roam with their partners they can do it, but it's not a must obligation on that one. And there will be a significant amount of spectrum which should be made available for the industry to accelerate innovations in the environment.

So there's a lot of encouraging elements into that one especially the deregulation. There are some as well very ambitious statements as well into that one which are unclear.

So the fundamental framework is driven, but we have now to understand better how it's gets implemented. Your second question was with regards to the Vodafone Liberty and we have a lot of evidence that this thing might be happening soon.

We have our due diligence which is already taking place here and therefore it seems to be that there is some excitement around that one. Now our position as Deutsche Telekom on that one, remind us that Deutsche Telekom was pushed to sell the former cable operators into three pieces into the market.

We were not allowed to sell it in one piece at that point of time to Malone [ph]. We had to split it and with this we were as in the history of telecom unable to realize big proceeds because of the de-synergies of the split of this entity, but that was, at that point in time the position of the antitrust authorities in Germany that they did not want to create a monopoly on TV market nor on cable access.

Now, this is I think still the situation So what our position is and I'm very clear on that one, I think it's completely unacceptable. So I do not see that this kind of concentration in the cable market can be supported from regulatory bodies and the reasons for that well are many fold.

The first thing is the market concentration in the TV market. Look I don't believe that Germany wants to go into the situation like Eastern European markets are where TV markets are dominated by Telco players and with automatically political power is with telecommunication operators.

In this concentration the new combination would have a dominance in the TV market and therefore I think for the media companies in Germany this is something they might complain about it as well as Deutsche Telekom will. The second thing is that you are aware that almost a third of German homes is very difficult to access due to the uneven cost and privilege, the rental privilege which is creating a monopoly for these households.

And there were already remedies imposed when cable - when Unitymedia and KabelBW merged and this concentration in this housing association will even grow significantly throughout that merger. The third observation is that having a cable asset across the entire country and an symmetrical regulation for Deutsche Telekom with infrastructure of today, that must have been seen as an unfair treatment of one player as well.

So there are a lot of other arguments which are coming on top of that, so I think there will be no way that this deal is going to be approved and for us it's completely unacceptable.

Yes, thanks so much. Two questions again on the BT after transfer to the pension fund is that tax deductible and if it is do you guys get it or just made more money into the fund?

And then on the very strong broadband net adds in Germany in Q4, is that you guys being more active on keeping the customers who have been forced migrated and in Q1 so far have you seen any impact from the greater discounts from Vodafone? Thank you.

Okay, Hi Robert. I'm going to start on the BT question.

There is no change on the tax side nor is there any change on governance rides on EBITDA and free cash whatsoever. The only change is basically that with that move we reduced our pension deficit.

As you know, pension funding here in our case is voluntary, but still we always have a look at that and reduce that deficit significantly. The rating agencies I think they will incorporate that in their perspective and additionally we will stop that yearly voluntary to $250 million funding, but that's it basically no changes on tax, EBITDA or free cash flow whatsoever.

With regard to the second question and why is our Q4 is so strong, very simple as that. You know, our target of 40% market share and net add market share as well and so far there's a lot of pressure on our organization to achieve that.

And when it comes to the situation we were able to win a higher number of new customers in that respective quarter. The churn rate due to the new speeds which we are offering were kept stable and you know that there are very low and on top of that we are reaching new households now more than 70%, 71%.

And this was even an opportunity for us to up sell or to regain some customers from cable operators back into the operation. The number by the way is if you look to the gross add number it is higher.

If you exclude some head point which we are facing from the All-IP migration, so we have some incremental churns of a few 10,000 of customers due to All-IP. If we would not have had the All-IP migration we would have been already at the 40% market share level.

Thank you, Tim. Just quickly adding on the BT pension fund transfer does this, when once it is effected it is neutral to free cash, just to be clear, the funding payment is below the free cash flow in our current previous voluntary pension payment.

Hi, just to follow up on the previous questions around CapEx, so following the statement from the coalition what is your [indiscernible] right now on the fiber, regulatory framework can you talk about deregulation how is that consistent with what DEC [ph] is trying to do and do you have already some signals any positive reception on your willingness of no regulation on the DV with [indiscernible] review for instance? And then secondly on the same page, if you could give us a bit more insights on the assumptions you’ve taken in the CapEx guidance of flat 4.2 in ’18 and ’19 from a fiber rollout perspective, from a 5G perspective, so any color on what’s embedded in there would be a welcome.

Thank you very much.

Okay, good question Fred. As always look the, the answer is the following.

We do not have let's say a final calculation on what that all means because we have to understand what this $10 billion to $12 billion subsidies would mean for the rural areas. Interesting wise what we have learned is that the subsidies are not only to fiber-to-the-home.

They support everything that has to do with fiber, so we are only building fiber, so even this money which we are spending today is able to be subsidized. So the moment where we enable street cabinet with fiber which we are doing by the way every three minutes today and until the end of the year this area is ready even for subsidization.

Now on top of that what we're doing is the great coalition now, they know that it should be a mix of operators/carriers to build this gigabit infrastructure. So the next step for us is now to get the allowance and the approval for our cooperation models because there will be build out from our own but there will be a lot of areas where we will partner.

And today we have ETEL the most prominent one, but only to give in a flavor, we are ready for 70 corporations across the German footprint the moment we get the allowance from the political environment and the regulator.

And the second part of your question Fred, this is Thomas maybe again on the CapEx assumption and logic in between. As you know, we are firing on all cylinders to get the novelize rollout done in this year and it will - that will happen into 2019 onwards as well and we had some delay by of course by the EU regulatory authorities.

So that will take place in ’18. ’19 the super vectoring switch to mention that 15 million homes with a minimum speed guaranteed speed of 103 megabit and up to 250.

They all are pleased in there obviously first 5G investments and which is very important also from this year onwards a very strong development and deployment around business parks. We assume the demand is there because in B2B we see really the demand there in ’18 we will be installing FTTH to direct link ups some run 100 business parks in the upcoming years we want to cover, we will cover 3000 business parks with our build out initiatives and that equates in minimum of 80% of business locations within these parks with around 400,000 businesses and millions of workers, so that's all included in there.

And as I mentioned, if you look at the ’18, ’19 figures roughly a 2 billion amount of deployment money will come to an end by finalizing All-IP and that will then turn into the next level of improvement of the infrastructure.

Yes, good afternoon everyone. I had a question on overbuild and then just another question apologies on CapEx.

On the overbuild risk we've seen greater overbuild in a number of markets recently including the U.K. Do you think the economics of network rollout are evolving in Germany or more broadly so to raise the overall risk in B2C in Germany?

And then just secondly, some further clarity on CapEx brief uncertainty wish sort of the share price performance today. Can we take it that your midterm B2C fixed investment plans will not be a material departure from current spending levels given you're not announcing anything new now and obviously want to tell us if you're planning a big change in spending?

Thank you.

Okay, trying to answer that you know guys the first thing is, I know some of you might be concerned about the CapEx envelop and what we're doing. But if you look hindsight and looking back what we are doing is we are investing very efficiently into more bent with our customers and at the same time we do that by creating a high utilization of this new infrastructure.

And that is the reason that you see that the investments we are doing are resonating in a very good growth rate which we see on the broadband side. So that is what we do.

On top of that, we are open for reselling and as we have always been, so there is a wholesale model which is supporting our contribution to margin at the same time, so and this is something which we are removing on in our infrastructure build out. So I think this is well invested money and it's paying off already today.

Now with regard to this current situation, we have said, we have vectoring as the main prime area to cover are most everybody in Germany. Now that is our way for 2018 and a part even for 2019 and then we will have a share of 85% to 95% of this vectoring and super vectoring technologies in our footprint.

Now automatically with this in some areas there might be alternative fiber-to-the-home infrastructures from smaller places. This is a coincidence.

You know what is happening. Now what can we do about that one?

On the one side, we can compete. On the other side we can build a kind of sharing model with those guys, so that we cooperate and that customers who are asking for a higher bent with.

That they can get it already on our partners infrastructure while if they're staying with 50, 100 or 200 megabit, they keep let's say the original footprint which we currently have. On top of that we are developing areas now where we are not deploying the original plan where we find partners with either ETELL.

We are building fiber-to-the-home in one area in Germany alone. In Maryland [ph] about 4 per month.

We get subsidization and good economics on fiber-to-the-home build out. Therefore we are not building vectoring of these areas.

We immediately go to fiber-to-the-home deployment. We have business areas where we have decided to go there but only if 40% of the business owners are supporting to the fiber deployment.

And otherwise we will spend the money else, so I think we have a very clear cockpit of investments and utilization and you know re-financing the growth of our operations by revenue.

And a final sentence on the magic number, as you see prognosis we've published today you should also expect the magic 4.2 number we've seen for we guided for 2018 also in ‘19 that's what it's saying stable development for what we're guiding in ’18 here.

Yes, thanks very much and my first question is on free cash flow and sort of the pension situation there. I think you've said in the press conference that the transfer of the BT stake would essentially fund 60% of the pension liabilities and I think the target for the CTA was sort of 50%, so you are essentially there.

Doesn’t that mean that the CTA would actually start to pay pensioners us in scale any time soon and if yes is that not a support to free cash flow because obviously those payments wouldn't go for free cash flow anymore because the CTA is sort of outside of it. So I'm just wondering what the scale of these payments of pensions from the CTA would be now that it's fully funded post BT?

That's my first question. Second question is a bill clarification only on this super vectoring 50 million homes up to 250 minimum guaranteed, 103 megabit per second.

Can you give us some indication what percentage of the households you think can actually get 250 megabit per second and to what extent that is a scalable infrastructure, I suppose the 15 million are the ones who where it worked best and even the last shortest two plans, how this super vectoring looking in a German context at large? Thank you.

I apologize, I'm going to start with the free cash flow question first of all as I said it's all free cash flow neutral as the first of all to bring it into the CTA. And secondly, there is a headwind and a tailwind related to that.

You mentioned here the tailwind that there is start to pay already pension out of the CTA that's what will happen as a matter of fact on the other hand we will not have the TV anymore from the BT and that's more or less watched. So it's basically a neutral activity looking at the free cash flow it's not again looking at the pension deficit or the rating side, but from a free cash flow perspective it's a wash.

With regard to the super vectoring, what we have said is, if we talk about super vectoring, we can guarantee customers more than 103 megabit per second, so only that is clear, it's not like Kabel where you don’t get a guaranteed speed depending on how many customers are on that infrastructure. We guarantee at least 100 up to 250.

Now the number by - the question is one time you are talking about, but by the end of this year 250 more than 50% of the households will have this maximum speed up of 250.

Yes, good afternoon. Two questions please.

It feels like every night I turn my phone and I have an new thing saying you bought back more team of stock. I'd want could you to tell me how much you bought cumulatively in the last month or two and how much you're willing to buy in a bit more and about the thought process behind that?

And then secondly, kind of T-Systems is that is a bit of a black box, what gives you the confidence that you can kind of stabilize around 400 million EBITDA next year, given we’ve just had the big write-down and downgrades of estimates last quarter? Thanks very much.

So, first of all I'm going to start on the buyback. When [indiscernible] and John announced the share buyback from the T-Mobile's point of view he also mentioned that we as DT will also join that activity with a several hundreds of millions, I think we are in the vicinity of around 100 so far what we've seen.

And as guided or as announced that will be the vicinity of a few 100 million and then after a slot we we're using right now when DT so to say will stop again, I think then the T-Mobile guys will kick in again and do the tranche which is still missing to go and move up to the 1.5 billion. Is there anything I missed on this from your point of view?

Thomas from your point of view.

Why we’re doing it?

Okay, yes. Thank you I missed that element.

Yes, it was basically remember that was the time when basically it became clear that there would be no deal with Sprint and we feel and we still believe that the share of the current share price of T-Mobile here is significantly undervalued, that's number one and I think that is the rationale while T-Mobile yes started to do so and why we're doing it. And obviously the second element is, we moved ourselves into the position.

We wanted to do is there is something to distribute. There is think about 2013 and 2012, ’13, ’14 there was no cash to be distributed now at T-Mobile yes.

There is cash to be distributed and we feel it's an appropriate way especially as the stock is undervalued to use that this way.

So now what gives me let’s say confidence that we can stabilize to systems and even grow the EBITDA in 2019 and forward? Now, look the situation at T-Systems isn't easy.

So we have to work on that one, but it's not as bloody as sometimes mentioned. Now why is that the case?

The first thing is we have three divisions. The First Division is the telecommunications service area where we very early compared to Orange or even VT, moved into an IP service which we call Andrena [ph] you know that which is now launched.

We have the first customers which we are testing on this platform, which is enabling us to implement ST one [ph] services and substituting expenses NPLS. Now this is one thing where I see already a good track record and on top of that what I'm seeing is, that this business is not shrinking.

Compared to other telcos our business is flattish in this area, so therefore with the new product and with the current situation we are doing well despite the fact that we are facing negative effects in this area from All-IP and from a deal in 2017 which is now cleaned up. The second thing is, the area of growth.

We have areas of growth, we have cloud where we grow with 12% where we believe we can grow beyond that number because the market is growing fast on that one. And we have the IoT business which is currently an investment case with a negative profitability because we have upfront investments to support new platforms, new services like machine-to-machine service or IoT solutions.

The last thing is the T sec area in this division is already a showcase of success and it's growing very nicely. So therefore we do not see any reason why this very relevant topic of cyber security should slow down within the upcoming future.

Now the area of concern which we have is the IT outsourcing part and the IT part, but even in this IT part and I do not want to go into every detail on our hosted SAP service where we are market leader, but in these areas we have to do restructuring work. We have a new manager on it in this division and we have a new board member, Adel Al-Saleh, who are now very intensively working on restructuring of this entity.

They are in deep discussions with the unions. We have the idea of even splitting up pieces of this company into a more market focused entity.

These discussions ongoing, but with this we could even you know improve the way of becoming more agile, more closer to the customer. So therefore there is some evidence for us and some confidence that we turn it around and improve the situation and that is the task of what our Adel is working on and at the capital markets side you could tease from the father mouth on every single item how he is planning to do so.

Good afternoon. Thank you for taking the questions.

I have two, the first one is around the balance sheet and the leverage level. Over the last few months you announced a couple of acquisitions, you raise the dividend distribution in a couple of your subsidiaries, you're building up stake at [indiscernible] and you've moved to a completely cash dividend.

I was just wondering whether all these moves towards a higher level of leverage are going to be offset by other actions like disposals and whether you could also update us a bit on what you expect to see in terms of major spectrum payments in the next couple of years? And then my second question is on regulation in Europe.

I was wondering if you can share some thoughts I had of the communications code. Anything that may have changed recently from your discussions and maybe if you could also update us a bit around zero rating issues you had in a couple of your markets and whether there's a bit more understanding as we move into the next phase of investment?

Thank you.

Yes, maybe first of all on the first element of the question. I think after the $8 billion in the U.S.

in terms of the spectrum auction by the way several more billion prior to that in ’16 and ’15 on 700 spectrum and on some AWS spectrum, I think we are by the end of the year and including some of the topics at least most of them you mentioned we are at the end of ’17 we see a 2.3 times leverage ratio here and so we're right where we wanted to be number one. Number two is what is the thought process looking forward?

Thought process looking forward is quite simple. There is growth in the U.S., there's growth in Germany, there's growth in Europe on the EBITDA side and that will give us room to maneuver and help us to keep the leverage ratio where it should be, that's number two part.

I think on spectrum per se, I’m always not commanding and speculating on that one, that's very clear. I think what I can say is that, obviously there is some 5G spectrum coming up.

For instance there will be a mixture of a 3G and 5G spectrum auction coming up this year in Germany. I think on the other hand it is also clear that as you can see in the, what Neville and the U.S.

team for instance is doing on LAA that there is optionality to use unlicensed spectrum. So I think there is a need for additional spectrum looking forward, but there is in the license and unlicensed area spectrum available.

The key question will be much - will be how it's been made available. But no big concerns in terms of the balance sheet.

Tim, maybe on anything to add from your side or fine?

No, the only thing which I'd like to, on Germany, on Europe is that this sentiment for auctioning and making spectrum available is given for 5G in Germany we go into the auction of 3.x spectrum, so I think it's 300 to 400 megahertz which is coming to the market. And so this is something we expect to come.

If we can get more spectrum beyond 6 gigahertz and 26 and the U.S. kind of stuff, I mentioned that we are interested on doing so.

And so this is coming and what I can tell you that the political leaders understand very well that, they cannot just you know let the industry suffer from huge spectrum spending and at the same time expecting that we are building out the infrastructure. So I think it will be a balanced and what you see in the coalition contract already today is that they will consider a build out in the country side as a trade off against higher prices of spectrum, so this is something which I find encouraging.

Good afternoon gentlemen. I have a couple of questions and a followup from previous queries.

The first one is on the Liberty borders on if deal takes place it will be a followup from another deal we had three or four actually more years ago. It is a bigger scale, but you'll have the same hurdles that the team had experienced earlier, and if you go through the same process it's very likely the ball will come back to you.

Last time around you had the ability to stop the deal buy you preferred to settle. Now if that process will kick off and the ball will come back to you, would you do the same or this time you will actually try to stop the entire merger?

The second one is on the system solution. I'm sure that on the CMD there will be a lot of on the plans and also you give us a bit of a flavor about what you plan to do?

My other question it's very straightforward. You SBT you priced that any business that's not earning its right returns, you prepare to actually be a king maker and potentially to sell.

Now system solution you've got a lot of granularity, you are in a number of different businesses, you are grouped in three main pillars earlier. So the question is, do you really need to be in all these segments and if not which are the segments that you could be trade off and which are the segments that you believe are core for the growth and for also support the other business segment?

Thank you.

So the first question very simple. I've said it everything already in my statement.

I find this deal totally inacceptable. I do not see any kind of solution grown for the political authorities nor from a commercial perspective for the other place in our industry and therefore my position on this situation is very, very clear.

On the second part on T-Systems just for clarification, first of all basically there are three boxes, areas, segments, however you call them you, we should look at one is Telco business, two is the digital business, three is as Tim mention, the IT mainly IT sourcing part. The number one is doing good and it's by far not in that area of cash burn.

That’s very clear and it's very core. It's international Telco business and we're doing well there, noticing, that there are some headwinds in terms of All-IP but still doing good there and no reason to assume something different also on the midterm.

And has Tim mention, we've been very active also in innovating fast with concepts like Andrena [ph], so the second part is negative, but it's negative powers to teach a decision that's the digital box where you have to find the IoT and the M2M stuff, you find the cloud stuff, you find all those areas where you invest first and then later on you'll see the results. And so that is not a matter of an issue in the portfolio, but much more kind of normal pattern you see in areas where you want to invest for the future and just to mention I don't want to repeat that you see in the cloud growth, you see in T sec and so on.

So number one box not a discussion topic here. Number two box not a discussion topic here as well.

Number three box is one and you heard us saying three years ago, two years ago we are not willing to consider a sale of that IT outsourcing part of the business. We have to change that perspective.

We clearly said it's one of the optionalities. It is not clearly stating here, it's not saying that this will be the option the route forward, but it's an optionality for us and we're not ruling it out anymore.

So yes, if a combination or a sale is the best way looking forward and that's what Adel and the team is working right now on, what's the best way forward, what's the best ownership, we are open to that.

Okay, let me take a few questions from John Dan [ph] at RBC that he has submitted via email. So his first question is whether, in the free cash flow guidance that we have given includes a benefit of lower pension top up, so the answer is no as previously stated the pension top ups were always below the free cash flow line as defined by us.

Secondly, at the German spectrum auction the timing or any restricts or issues that DT is worried about is I think the timing is still not defined, but we expect clarity on the auction rules by midyear, but of course it is more complex process of German government formation may have an impact. The concern generically we would have is that any re-serviced obligations would be imposed because we don't see a reason for this and the coalition agreement is not recommending these, so it's supportive, but ultimately it is the decision of the German regulator and then finally Unitymedia.

Yes, so late this year then probably and possibly delay slightly into early next year, but that's what we are currently thinking, but it's not our decision. And then third, Unitymedia lost a MDU client is that anything to do with us I guess is the question.

So I think we've said earlier that the German cable industry has a stranglehold over the housing association market and we're not happy about that. That notwithstanding, you know that we have been trying to break into the strength of the hold and this is something that we continue to do.

So next question from Justin at Credit Suisse.

Thank you. Yes, and I have three follow up questions.

The German EBITDA guidance for 2018 is $5.6 billion. I mean it is around 1.5% EBITDA growth.

You’ve excited 2017 at about $4.5 so just wondering if be willing to describe that 2018 guidance is conservative base able or is there something coming up on the cost side that would essentially slow down the EBITDA growth rates? In terms of spectrum, do you think the German Government is going to ask operators the bit is to pay upfront, most of these licenses actually will be starting in the next decade or so to be paying for it, three to five years from now do you think I'll have to pay upfront to fund all these fiber subsidies.

And then finally on the [indiscernible] deal, I guess there's some encouraging signs on the regulation. Just wondering how the wholesale, so that is going to work there will you have control over the wholesale off or will ever tell be, I mean now there are wholesale offer to the market as well.

Thank you.

So first of all Justin, is still struggling with the last question to come back to that line. First of all the first question on the German EBITDA.

And I'd like to do two things here to be clear about German EBITDA and then DTX U.S. EBITDA because there's I know there's always some talk about what's going on with GHS thing.

So it's easier to cover DTX U.S. than it is all in.

There is no way to look differently, so Germany will grow from 8.4 to 8.6, that's what we clearly said and guided. And in mean time in parallel DTX U.S.

will grow from 12.9 to 13.2, so basically what we have said is last year from ’16 to ’17 is slight like-for-like increase at DTX U.S we move from like-for-like 12.8 to 12.9 this you'll move from 12.9 to 13.2 including GHS DT systems and Germany, which Germany will be the 8.4 to 8.6 and I don't think there is any cost issue related with that it's simply we go for the 200 and make that happen. Then second Tim?

Second question, the regulator will definitely ask for an advanced payment for licensees. He will not give that for free as always.

So they would probably organize and kind of auction for the market. And we are still working on the case that they might have distributed among the three players here in the industry, but I do not know what that is nothing which is mentioned in the coalition contract.

The idea is that parts of this money is going directly back into the subsidization for the road build out. So that is let’s say their plan but their nor numbers nothing else mentioned on that one and you know the situation of Germany, there are sufficient funding opportunities from the government given over the next two years.

So I am reading the text and understanding that they are looking for build out even for 5G in the rural areas is more important than the proceeds and I would guess that the funding or let’s say the money which is going into this auction would not be as high as primary auctions, but this is much too early to say because we do not know the auction design yet.

Okay, we have time for three…

How will wholesale deal work? Honestly, I was little bit struggling on kind of understanding the question.

Maybe we can get the person from Justin once more or maybe if that doesn’t and it's not possible and just in please contact us and we'll take it offline.

May be he was referring to the speculation that there will be a wholesale obligation for the new spectrum. Look, I think we as an industry and now I'm talking for my partners here in Germany who are building infrastructure as well this would be a mistake.

Why should an industry on the one side pay for spectrum, second then building in a very infrastructure across the country. Maybe even considering building out the rural set and at the same time giving this infrastructure to a third party who is not participating in the build out costs and just getting at variable levels.

This would be contra intuitive not only for us as investors or as managers, but as well for the goal call for the great coalition. So that's not something that this I expect that this is getting imposed on us.

And so therefore this would be contra productive for the 5G build out and the industries jointly aligned on the subject.

Okay, now we can take three more questions, so next one is from Usman at Berenberg. Usman?

Hello gentlemen. Thank you for taking the question now.

I've got two please, the first one was. On Slide 21 it just shows the average consumer data usage kind of slowing down from 80%, 60 to 50 to 38.

And I'm wondering whether that has anything to do with kind of the slower intake of LTE customers as we've seen with Telefonica Deutschland? And if so then, what is actually going on in the German market here?

That was the first question. The next question was just on digitization.

Tim, I think you mentioned in the press at one of the conferences that you felt Deutsche Telekom was lagging behind companies that KPN, and Telenor, I'm sure we’ll hear more of this at the CMD, but if you can elaborate on what you actually meant? Thank you.

Okay, look the first question on the average consumer data usage, my understanding that this is a percentage development if you look to the absolute numbers and the growth for us is very well in tucked and so therefore and I would not focus too much on this percentage than rather on the absolute number. The second question is the digitization and what I mentioned on that one.

There is a famous Goldman Sachs study about the digitization of our industry and how digital Telcos are and there was, the benefit of digitization within the companies and there was the implementation and the status of digitization being mentioned and in this kind of presentation Deutsche Telekom wasn't presented let's say in the upper right box. So we would let’s say at least the mentioned that there are challenges left to more optimize our entities.

Now looking into the operation I would say we were maybe a little bit bad in the way of selling it, because I know that some of our competitors are talking about how many bots they are using. We have counted them now and we came up to the 1,300 bots, so for Germany alone.

When it comes to the All-IP migration, this is a big digitization project and BT just started with this. We have 70% of our business is already on All-IP.

But nevertheless, I think it should be our focus going forward and that is definitely a task for us Srini Gopalan and for Dirk Wössner and to enable the customer interactions, but as well the internal process with modern tools and the best ways of doing it. And I don't want to push all the buzz words on you like using data lakes and artificial intelligence optimizing the internal processes and this kind of stuff, but this is definitely something I think as a challenge to increase customer satisfaction at the same time efficiency and productivity within the organization and therefore there is a bigger focus on that one.

Maybe I can add some more flavor on that because I think the key message is quite simple. It's a huge opportunity and it's a key priority for us and that means it's not on - and that means we're not only focused on the front and meaning the customer interface, but also the back end of our business which is sometimes underestimated to digitize the back end as well.

I think what we are seeing to give you some numbers and I think in the Capital Market Day we will talk you more intensively through, is basically on the front end for instance we've seen more than 11 million visits in our Magenta service app with an increase of 27% year-on-year, so you see at the front end that this is I think it's an industry phenomenon. You see it's improving significantly and obviously there is an upside to that.

We've been very early in the Austrian not call on introducing web based chat boards as well as the name is [indiscernible] there or German says online ratio including [indiscernible] is around 20% a little bit up of that. Tim mentioned the 1300 robots only at the customer front end on the German side, but what is important to us as well is make sure that the way we work in the company does change, so we have for instance initiatives running like create your own bot where we train people really to create their own bot and it's interesting to see how engaged people are to get that done and learn that and use that.

So I think there is what we are very active we're excited about the potential. And let's be honest we are just at the beginning to leverage that potential.

And so as I said we will talk you through in much more detail within the course of the next month and then the Capital Market Day.

Good. Thank you.

Moving on to the penultimate question is from Steve at [indiscernible]. Steve.

Good afternoon guys. Thanks for taking the questions.

First of all I want to come back to the Unity Vodafone situation and your very forthright comments on that, I mean logic would suggest that it's an easy deal. And following the logic of reason easy approval that it would get approved based on obviously with similar cable to cable and cable mobile deals, so do you dispute that, you think it would be [indiscernible] in Germany and if so why and if it's an European deal do you think all the presidents in Germany are as relevant as you make out?

And then just coming back briefly to government CapEx, you talked about the new subsidy envelope, I mean at present I think it's about €5 billion of subsidy available in Germany, but it sounds like very little has been allocated because it’s so difficult to access that subsidy. Can you comment on how much you've actually been able to get access so far and how much you think you can get over the next couple of years?

And then just coming back to the comments you made on the tower roll out in Germany, you said that you would wholesale where it made sense, can you sort of just give us some color on how the relationship between T-Mobile and the [indiscernible] business works and whether they have kind of right [indiscernible] and are able to secure the best sites before different – can come in and wholesale access on those targets as well? Thanks a lot.

Look, I do not know, who is at the end of the day deciding on the deal and that is something you have to question the Liberty and Vodafone guys. It might be that this deal is getting approved in Europe, but even Europe has to reconcile then their decisions with the German authorities and their consul office and so there isn't interaction between that second.

We haven't seen a case where media dominance has been regulated most of the business we have seen were a fixed mobile convergence, so in this case we have even a media discussion. And on top of that we have the specific situation of Germany of the monopoly in the housing associations of the cable operators which is something unique and the same is true for the abolition of the [indiscernible] which is needed to create a fair competition in this one.

So as I said, I cannot imagine reasonable amount of remedies which might be imposed for this. For me this is definitely the opposite of a no brainer.

It's completely unacceptable and therefore and independent who has to decide on this subject. He cannot ignore the facts of creating a monopoly and different markets.

With regard to the German CapEx guys, look I know that this is a concern of you guys. I do not really understand why and I will do my best in the next weeks you know to convince you why this is the best thing we can do.

And now in the areas where we get subsidization in the rural areas it is very difficult to say because it depends on competition. If there are two players who are interested to invest into an area, the subsidization is probably lower.

If there's only one like us investing to that one sometimes the subsidization is 70%, 80% or beyond which is coming from the authorities on that one. I can tell you we will only enter into corporation models based on subsidization when the payoff ratio is quite reasonable on infrastructure, but there is no kind of thumb rule which I could easily hold, but Thomas maybe you can help me on that one?

Yes, I think maybe to just to add on what you have said, the ratio as far as we know what we win was, what we lose in the whole subsidization game, which is not a new game it's nothing new. It's just another tranche which has been discussed, so for those which has been to have taken place already we are winning roughly two-thirds of that, that's the magnitude.

Tim is right, we've seen now areas where really there is subsidization now to connect some homes will FTTH at the cost of roughly €40,000 for per home of which we pay 1000 or 1,500 and the rest is subsidized which is giving you a kind of inside on some ways of subsidization which are potentially not reasonable, but anyway whatever takes place they are roughly two third is the magnitude we're winning there. We've been part in more than thousand funding programs during the last 12 months in total and more than 500,000 homes been covered with that.

So that's kind of from our point of view running activity since several years already and as long as we are in that vicinity of two thirds we feel okay. And then on the T-Mobile and Tower business I guess the question is, how to strike the right balance between having a proper and well set up and running Tower business move multi-tenant approach on the one hand and not giving up the crucial sites which make a difference in the network potentially.

On the other hand we believe that's doable. We all purchase kind of blacklisting thing.

There are some sites and it's a smaller in terms of percentage points a smaller percentage points, which really makes the difference and the vast majority is not making a difference. So the balance we're trying to strike here is quite simple exclude the few ones which make a difference don't share that and share the big-big majority of those you can share and that's basically the way we deal with that.

Yes, network leadership is about more than towers, but part of it and last but not least we close the questions with Mandeep, if we can have your question please.

Thank you very much for giving me the last question. I remember maybe three months, six months, a year ago, maybe 90% of the questions you got were exciting one about U.S.

M&A and upside potential and I was worried about the downside risk from German fiber. So maybe just give us your perspective on U.S.

M&A prospects, willingness to partnership in fixed to mobile convergence, got a Sprint deal come back, just sort of let's finish on a positive term?

Thank you, Mandeep for that. Look, the first thing is in the U.S.

we still clearly believe in the benefits of consolidation and we were and we are always open for any sensible transactions creating value for our shareholders in the United States or elsewhere by the way. And but we, as you know, we reached to end our merger discussion with Sprint in November and so therefore going forward look I don't know what's happening, but we keep awake, we keep open, we are listening and we are talking to the industry, but independent from our curiosity and let’s say even the willingness to create value and we have a very strong organic growth path.

Opening up from 230 million preps covered to a 330 million now. This amount of customers, which we can gain in these new areas and we are just in the middle of implementing our 600 MHz spectrum.

So these are huge opportunities for additional organic growth which is creating value that is by the way why we are not selling stocks, that is why we are believing to the share buyback program of this entity. We are strongly convinced about the value understand the loan [ph] basis of this company signaling ahead of what we see today.

So, I cannot report anything new on that front, but we keep our eyes and ears open on this note as well.

Okay, with that we conclude our call today. So thanks everybody for participating.

Thanks Tim and Thomas and should you still have further questions, we now kindly ask you to contact us directly at the Investor Relations Department and with that I give back to the operator.