Deutsche Telekom AG

Yeah. Thank you.

Good afternoon, everyone and welcome to our Q3 2019 conference call. With me today are our CEO, Tim Hottges; and our CFO, Christian Illek.

Tim will first go through his highlights and the news of today, followed by Christian, who will talk about the quarter's financial in more detail and then we have time for Q&A. Before I hand over to Tim as always please pay attention to our disclaimer, which you find in the presentation.

And now I hand over to Tim.

Yeah. Thank you, Hannes, and welcome also from my side here.

Thank you for taking the time for our call today and let me start with summarizing three topics. The first one is the strong year-to-date results, which we are laying out.

The second one is the 2019 guidance upgrade, and the third one is the change to the dividend policy going forward. First of all, I'd like to stress the strong year-to-date results.

I think we have a fantastic operating performance in all business areas out of five segments, three segments are growing double digits and the others are all positive. This is the best quarter since 15 years at Deutsche Telekom.

So just want to keep that in mind for a moment here. All metrics, in all segments, we are growing, at least as far as promised in our Capital Markets Day and remaining very strong customer growth in all our markets, means as we are gaining market share.

Second, based on these results, we are raising our full year EBITDA guidance today EUR100 million on each on either side of the Atlantic, so we raise it by a combined EUR200 million at the Group level. And thirdly, we are updating our dividend guidance today.

For 2019, we are proposing $0.60 deal or no deal, $0.60 becomes the new minimum dividend and our dividend policy remains otherwise unchanged. Let me now go through my usual quick overview of our year-to-date performance, before Christian then provides a deeper dive into the Q3 results.

On 5 slide you see the foundation of our growth, which other high investment into the network. In Germany, we know past 24.5 million homes with super-vectoring speeds of up to 250 megabits per second, and we are well on track to our 28 million households by the year-end target.

This year, as outlined at the Capital Markets, we are completing our German FTTC footprint as planned and we are beginning to ramp up our FTTH deployments. Our initial focus here is on the subsidized build out in white spots on business parks and with collaborations.

We made further significant progress with our IP migration, now reaching 97% of German lines, so the end is clearly insight. And our German LTE coverage is at 98%, which is our full year target.

Just a comment here, we just saw the new P3 test coming out and it documents our strong leadership against Vodafone and Telefonica, almost one third better than the Vodafone network and significantly better than the Telefonica network, when it comes to coverage and to throughput. Our telco added 1,500 new sites in the last 12 months.

This is on track for our ambitious plans to increase our site footprint by one third by 2021. We continue to innovate as we illustrate with a few examples on slide 6.

For instance, you see the launched Europe's first smart speaker, and we further developed our campus network solutions in the B2B space. We won the rights for the 2024 UEFA Football Championship in Germany, where we are becoming champion.

And while this is an exciting opportunity to showcase our Magenta TV platform. Let me state very clearly that this does not market change in our TV strategy.

And we can discuss that later on. I think it was a great opportunity, which we took.

We remain primarily a content aggregator, so content ownership is not our primary goal. Moving on to slide 7, our strong momentum with customer continues, 14 million German homes already subscribed to our fiber products.

2.4 million more than a year ago. Across our European footprint, we had a 2.1 million converged customers in the last 12 months.

We added 3.1 million mobile contract customers of which 1.7 million organically. T-Mobile U.S.

continues to grow strongly and again raised its guidance for 2019. Branded postpaid net adds towards a new range of 4.1 million to 4.3 million net adds.

This compares to an initial guidance of 2.6 million to 3.6 million net adds previously. Moving to slide 8, here you can see that every segment is contributing to our growth, and delivering as promised at the Capital Markets Day or better.

Honestly speaking being now almost 20 years at Deutsche Telekom, this is the best quarter we have ever shown. Based on these strong results, we are raising our full year EBITDA guidance by EUR0.2 billion today to EUR24.1 billion.

Based on consensus, foreign exchange of $1.11, this would amount to EUR24.7 billion to EUR24.8 billion by the end of the year. We are not only passing on last week's T-Mobile U.S.

guidance increase, but we also raised our ex-U.S. EBITDA our guidance here in Europe by EUR0.1 billion to EUR13.5 billion total.

T-Mobile has also raised its guidance for 2019 CapEx. At the Group level, we pass this on as well and now project EUR12.9 billion for the full year.

Reflecting this, our free cash flow guidance remains unchanged at EUR6.7 billion based on consensus, foreign exchange. This would amount to just over EUR6.9 billion.

In the U.S., we have now gained many important approvals we have been able to convince a number of states of our case and we remain confident and optimistic that our planned merger will be approved. However, it is still unclear how long this might take.

Therefore to provide clarity, we propose a dividend of EUR0.60 for 2019 irrespective of the merger. EUR0.60 becomes the new minimum dividend.

The existing financial strategy remains otherwise unchanged. We believe this is the right proposal, both in the case of the merger and otherwise.

To avoid any misunderstandings we reiterate all our 2017 and 2021 capital market targets, especially our promise that ex-U.S. CapEx will not exceed the 2008 level.

And of course, as previously mentioned, we raised our 2019 guidance today. So what has changed since our last update?

On the one hand our merger has taken longer than expected and T-Mobile has performed very well in the meantime. On the other hand, we now have much greater clarity on 5G auction costs and timelines across our footprint, especially in Germany and in the United States.

We also decided to accelerate our 5G launch in the U.S. and we will now launch 5G to 200 million plus already in 2019.

We believe our dividend proposal strikes the right balance, is prudent and between the shareholder returns and prudent funding of the many attractive growth opportunities we have in our footprint. I know this was a very tough decision for us, and it wasn't easy to take that.

And I know and I appreciate that some of you expected a little bit more dividend payout in 2019. But again, all things considered we believe this is the right thing for us to do and to give you certainty about what we are doing for 2019.

With this I'd like to hand over to Christian, who will take you through the third quarter financials in greater detail. Thank you very much.

Thank you, Tim, and welcome to you also from my side. And let me start with the key financials on page number 12.

Q3 reported revenues grew 4.8% on an organic basis that would have been 1.7% which is very similar to last quarter. Q3 reported adjusted EBITDA grew 5.4% this quarter, and again that would have been 3% organically.

If we're taking a look at our EBITDA growth outside the U.S., I'm happy to report that our growth is now at 3.4% on a reported basis and 2.9% on an organic basis, which is very much in line with our mid-term guidance. Free cash flow is up by 17.5% this quarter and adjusted net profit by 7.5%.

Let's move to the next page 13, revenue and EBITDA in Germany. So revenues were up 0.6% this quarter and EBITDA was up 2.4% this quarter, which is very much in line with the previous two quarters, which we have seen in Germany and is bang in line with the full-year guidance.

The next chart, on the service revenue side, we grew at 0.6%, which is the same number as we had in the last quarter, but the mix is different. We are seeing a weaker mobile service revenue growth and that is offset by stronger fixed line revenues, which grew faster than in the previous quarter.

The fixed line revenues benefited from a higher regulated unbundling fee, which we introduced to the market in July, plus we introduced a single line price increase in September and that helped us to show a higher growth number here. We're taking a look at the mobile side.

As we said, our headline service revenue growth slowed down to 0.7% year-over-year, but there were two negative impacts. One is obviously the full quarter impact on the regulatory side which accounted to negative 0.9 percentage points.

And what we said in the Q2 call, we had a favorable revenue from the visitors in the third quarter 2018 and we don't see this in this quarter and that impact was around 1 percentage point as well. So taking all this into account that leads us to the conclusion that we don't see any change in the underlying trends and that we're going to confirm the mid-term service revenue growth of 2% in the mobile service area in Germany.

Next page, if we're taking a look at page number 15, you see that the commercial momentum in mobile is actually pretty healthy. Over the course of the full year, we have experienced a churn rate in the consumer space, which is below 1% which helps us obviously and what we also see is on the next page a strong momentum in data usage.

So the data usage grew from the last quarter to this quarter from 3.2 gigabit per month to 3.9 gigabit per month that is a Q-on-Q growth of 22% or an annual basis almost 60%. On top 55% of our Magenta branded mobile customers and 24% of our broadband homes are now part of a convergent relationship.

Moving to the fixed line side of the German house, what you see is, we're happy to report out that our momentum in the net adds in the broadband space has actually improved and you heard us saying in the last quarter that we were disappointed with the 28,000 net adds. We achieved 47,000 net adds without having any structural price moves in the German market and we will stay focused on maintaining that momentum.

For now 16 consecutive quarters, we added more than 0.5 million fiber net adds, of which 300,000 more than 300,000 are coming from the retail - from the retail side. We also added 67,000 TV customers, which is a continuous increase in growth rates.

On the line losses we had actually a step up to 231,000 this is obviously driven by the final stages of the IP migration and most lines are here comparatively low ARPU lines in the B2B space, and for the first time we highlighted, what's going to be the IP migration impact and what's going to be other line loss impacts. We are continuing to the next page, Germany fixed.

You see that the retail revenues in the fixed line fell by 0.7% that is actually an improvement Q-over-Q, because last quarter we had a negative decrease of 1.4% and that has obviously been supported by a stronger broadband growth, which is 3.5 percentage points year-over-year. Last quarter, we had 2.3%.

So that's also pretty much in line with our midterm guidance. Let's move over to usual slides from the U.S.

who already presented their excellent results last week. Again, another 1.7 million customers, now 26 consecutive quarters, with more than 1 million net adds.

The EBITDA under IFRS grew by 3.2% and if you, including the positive one-off, the hurricane reimbursements in Q3 last year, that EBITDA growth would have been 6.8%. On the performance metrics, you see that on the branded postpaid churn rate, U.S.

achieved a new record low on churn rates, which is 0.89 percentage points. The commercial results are obviously being supported by the great network, which we are having there and which was again confirmed by recent tests.

And what you also see is that the cost of service is slightly up year-over-year, but one result as we already mentioned, one root cause as you already mentioned, hurricane reimbursement in Q3 2018. On top, we are facing higher cost of service due to the accelerated 600 megahertz 5G build-out in the U.S.

And Tim said already, the U.S. is targeting 200 million plus by the end of the year.

Moving over to Europe, again, very, very good result in Q3. We added 280,000 new contract customers, 329,000 new converged customers that takes us to a household penetration of more than 47% which is an increase of 11 percentage point year-over-year and a solid to good broadband customer growth.

That commercial momentum, obviously turns into financial momentum. Q3 reported revenues were up 1% and EBITDA was up 4%.

If you take it on an organic basis, which is mainly an adjustment of UPC Austria and some slight adjustment on the product side, the revenues grew by 0.7% and EBITDA by 3.3%. That growth is actually based - broad based across the whole footprint, but to be honest, I think we have to highlight the grid team, the team around Michael Tsamaz again delivered an outstanding result in Q3 and we hope that they're continuing to do so in the future.

So when it comes to Europe, we're well on track with the full year guidance and also with our mid-term targets, which basically gets me to the next segment, which is System Solutions. And on System Solutions you will hear me saying pretty much the same thing, I said in Q2.

We're continuing making progress with our turnaround plan, but there is still a way to go. What you see on the revenue side is that the revenue is actually coming down by 4.5%, which is largely driven by a planned withdrawal of low margin business, such as end user business, but we're also faced with some negative growth rate in the classical IT space.

So these are the two main reasons why we're basically seeing a lower revenue number. Meanwhile, if you take a look at the order book that continues to develop well.

We're seeing a 20% or 21% growth in the order book year-over-year and having now basically EUR2.7 billion on our books. On the EBITDA side, year-to-date T-Systems grew by almost 11% and I think we're well on track to achieve the EUR0.5 billion EBITDA guidance which we gave you for 2019, and also confirming the mid-term targets.

Next chart on page 24 is Group Development and obviously their results remain impacted by this year's consolidation of Tele2, but also by the intra segment transfer of the Dutch towers into GD towers. Organically, the revenue growth was 2.7% and organic EBITDA grew at a stunning 15%.

It was very much driven by T-Mobile Netherlands which benefited from a very strong commercial momentum, but also synergies from the acquisition of Tele2. Like-for-like mobile service revenue grew about, grew exactly 2.6% in the third quarter.

On the tower side and you heard Tim saying this already, we added 1,500 physical mobile sites to the German footprint over the last 12 months. So we're on track with our guidance to add 9,000 sites until end of 2021 over the course of four years.

The recurring rental revenues grew by almost 4%, 3.9% exactly and EBITDA grew by 3.6% on an organic basis. Let me now move to the main financial items.

And let me start with the cash flow. So the cash flow, as I said earlier grew in this - during this quarter or the last quarter by 17.5%, which gets us to an almost 14% growth year-to-date, which is in line with our guidance.

Despite the fact that we're facing, higher-than-expected U.S. merger one-offs.

The net debt increased by EUR3.5 billion this quarter and that is mainly due to three effects. One is obviously we're facing the German auction payment.

Secondly, we're facing a stronger dollar that helps us a lot in the revenue and the EBITDA side, but it also adds to the absolute number of net debt. And due to the accelerated 5G build on the U.S.

we're also facing additional tower leases in the U.S. Then taking a look to the net debt to headline EBITDA ratio, in Q3, we're showing a 2.8 which is outside our communicated range.

But let me be very clear with you, by the end of the fourth quarter, we will be back in that corridor, obviously we will stay at the upper end of the corridor. But we clearly expect if we don't see a disaster on the dollar happening that we're basically returning back into the corridor.

So to sum it up, I think there was a strong quarter in Q3. We raised the guidance.

We are basically confirming the mid-term outlook and now on a final note on the dividend from my side. I think many things have been said by Tim already.

I think there was a very, very tough decision for those who have been involved in that discussion to be transparent. We ran numerous rounds in order to get to basically to this proposal, but as Tim said, the root cause is already.

I think it's the best possible balance between having a fair shareholder return, given us the flexibility to invest into growth, but also remain our rating, which is BBB plus. With that, I leave it for questions.

Thank you.

Thank you very much, Christian. And now we can start with the Q&A.

[Operator Instructions] So we start with Akhil, JPMorgan.

Yeah, hi, good afternoon. Thanks for taking the questions.

I've just got two please, both linked to today's decisions around the dividend. The first is on debt.

You talked about the EUR3 billion increase that we've seen this quarter in your net debt. And if we look at the awards for you provided, half of that is attributable to lease obligations being added to that balance.

I guess if you could just talk us through exactly what's going on there, I presume it's - with U.S. towers and I presume, U.S.

towers will continue to grow and therefore so the leases. So if you could just give us a bit of color on how that progresses and how we should think about this.

So that's the first question. And then the second one is on the actual dividend decision as a whole.

I guess it's understandable, your leverage is at the high end of the range or slightly above the range at the moment. And I guess if the deal goes through, leverage goes up, if the deal doesn't go through, you need to buy your spectrum.

So I guess the Board's thought process makes sense, but I guess what I'm trying to understand is, how did you actually arrive at the sort of dividend cut you want to put through. And I guess just the observation my end would be that the EUR0.10 cut is a - I don't know, circa EUR0.5 billion change in the total dividend cost.

So relative to the total debt, annual free cash flow, it's not the biggest number. So how did you reconcile these things when you start to balance all the different demands on the business.

Thanks a lot.

Let me take the first two questions. So first of all, the free cash flow, which we're showing is the reported free cash flow.

So it does include leases. And the EUR1.5 billion which you're going to see is actually an increase in right of use of EUR1.1 billion and also financial leases which were added in there.

And that basically explains the bridge of the EUR1.5 billion which you see there. On the dividend question, on the EUR0.10.

Look, there were a couple of - I think there is no mathematical equation. I think there was a lot of business judgment in that discussion.

What has changed relative to our original announcement of the dividend policy? One is obviously we were facing a significantly more expensive auction in Germany.

Secondly what we said is there is an accelerate build out on 600 megahertz in the U.S. and the U.S.

was clear that they are continuing with that acceleration. Certainly, I think we have, especially when it comes to the U.S.

more clarity on what's going to happen to the upcoming auctions, whether it's going to be the millimeter wave auction or whether it's going to be the CBRS auction which is now announced for June 2020 but that communication happened back in September this year. And also, we are expecting more clarity on the Seabird [ph] auction in the upcoming weeks and months.

And so that was, that was kind of the delta effect, which we're seeing and we were clear that we have to maintain the rating in the upcoming years. And then there's a third element, and I think Tim said it already.

Look, we are confident that we get this deal through, and that we get a positive outcome, but without any doubt, it's been delayed. The original plan was Q2 and this year, and now we expect in early 2020.

And I think we have to come up with a proposal, which is kind of balanced in a deal or no deal scenario. What we are going to pay out as a dividend in 2020, and that basically led to the conclusion that we're going to pay $0.60 in any case, deal or deal and that $0.60 is also the new floor going forward.

So that's kind of the explanation, how we got there, but it's not like that we have an excel spreadsheet who is giving you basically a number, which is calling out $0.60.

Thank you, Christian. And we might go back to this question later in the call, but next question for now is from Polo at UBS.

Yeah, hi. Just have some two questions, the first question is on network sharing, can you remind us what your views are - and the possibility of mobile network sharing in Germany.

So do you think there is scope for tri-lateral network sharing, from all the operators in large parts of the country. Alternatively, what are your views on the prospects of bilateral network sharing in Germany.

The second question is really just around German mobile service revenues. You obviously highlighted that there was a phasing issue around roaming revenues.

But how confident are you that German mobile service revenues will rebound in Q4, and you also talk about what the response has been to your new mobile tariffs that you have put through in September. Thanks.

Okay. Let me try to answer your question, Polo.

First thing on the network sharing side. Look, we have publicly said, you know that we are open to collaborate in every regard.

And it's anyhow, our interest to improve the capacity utilization of our sites here are in the German environment. Now the question is how could this network sharing could look like.

The first one area is where no mobile side is available today, maybe have heard about that the government has started a project, which is called MEG [ph] for mobile phone infrastructure, company which is providing infrastructure, so that everybody can purchase antenna actively or passively onto these sites. This is something discussed and we are supporting this - this initiative.

So I guess in this white spot areas, a lot of the money is coming from the government. And we just put our antennas shared or unshared into these slots.

The second areas where one of the operators has a network and another don't. We call that gray areas.

In these gray areas we are open to share as well. Now the situation, Germany is that we have a second advantage due to our huge investments over the last years with regard to size.

We just have passed the 30,000 sites in Germany. So our network is much better than from Vodafone and from Telefonica.

So I would not give this access immediately, but I would give that exit on the kind of tit for tat basis. So if we are getting offers from Telefonica and from Vodafone maybe 20 sites in Brandenburg and we can share 20 sites in Saxony or - this is the principal on how we are approaching these guys for the gray areas.

And on top of that we have our DFMG strategy which we implement as well that we are open for network sharing and sight sharing in this area on a commercial basis, which we are doing today. We have a sharing on mass of 2.3% already - 2.3 times already and we are interested for further telco location ratios to get to improve here.

So therefore there are various ways of collaborating. It's our interest to reduce our capital costs and it's our interest to better fulfill white spot areas.

Nevertheless, we keep our network leadership as a target in place. We do not want to give that up for free and too easy here.

So reciprocity is the name of the game. When it comes to the second question on the mobile market here, look, we have seen a growth in German market and by the way which maybe I haven't been mentioned yet is we are very pleased in German mobile market with regards to the net adds in our Magenta product line.

And this is a huge uptick, by the way, I was very pushing heavily pushing on this one, because I want to see the Magenta product being taken by the customers, because that's our premium product, and we have the lowest churn in these areas. We have seen in Q1 growth of 2.8%, we have seen a growth of 2.4% in the second quarter and we have seen a 0.7% growth in the third quarter, and you can say guys is there a decline in these areas.

The answer is no, because there is a sequential decline, which we - which we mentioned already in our previous calls, which is coming from the headwind faced from the international call regulation. This kicked in already in mid-May and I had materialized now in this quarter.

If we would exclude this effect, we would have seen a growth of around 1.6% in this quarter. So this slowdown is largely due to the quarter, the visitor revenues and these effects.

Nevertheless, this market is quite competitive as it was in the past and we have seen some aggressive movements from O2 which six months - includes the six months for free offering and which has resulted as well in gains for their brand. But nevertheless, we have this insight and we keep ourselves committed that we are aiming for 2% CAGR growth on in the specific German market segment.

Thank you, Tim. Next question is from Mandeep at Redburn.

Hi, thank you for giving me the question. So look, first question I really have is, on the Sprint deal term.

The deal, not actually expire last week. So can you say why you have an extended the deal terms.

That's the first question. The second question is, there's a lot of noise in the market around lifeline, contingent liabilities and so on and so forth.

Excluding any other factors to the - from the point of view when may or may not be significant contingent liabilities that you weren't originally aware of. Do you have a condition in the negotiation to be able to change the terms of the deal?

Thank you.

So look with regard to the long stop date and the deal terms here, John Legere has commented on this at the team U.S. earnings call.

And there is no further comment on this, from my side. It is correct that you know since the beginning of November both parties can unilaterally cancel the BCA and that's why we are, but I'm not adding anything to John's comment here.

Thank you, Tim. Next question is from - I hope we answered Mandeep's questions here.

And next question, to the extent we can answer is right now. And Fred - next question is from Fred at Bank of America.

Hi, good morning. So good afternoon, sorry.

So two questions. First of all to come back on the first question from Akhil on the leverage.

So the lease liability seems to be increasing steadily and we're EUR16.1 billion in March, now it's EUR18.1 billion. And so I think the question was more if you could discuss mechanism and the drivers for that going forward.

So not this quarter basically, if you look at next few years should we expect that liability linked to the U.S. to continue to go up.

And then the second thing, sorry to come back on the dividend. In a no deal scenario, we have a permanent reset at EUR0.60, as you say that after that your growth will reflect EPS.

So if you can share with us a bit, if we stay in that scenario what has changed beyond the higher costs for spectrum in Germany. I guess your need for mid-band spectrum in the U.S., probably not that new when you presented your full year outlook 18 months ago.

If anything, credit conditions have probably improved. So we're just trying to understand here, what's new in the no deal scenario?

Let me answer the question on the leverage. I think the required CapEx and the lease liabilities part of the new outlook in the U.S., and I think what we also have to bear in mind is, obviously you add additional rights of use and you have to pay interest for this.

But that basically - in parallel, increases your reported EBITDA as well. So from this perspective, we don't see any further significant deterioration.

I think as I said it earlier, Q3 is being impacted by the payment of the spectrum, which we don't face in the next quarter. And it's also been impacted by a negative dollar when it comes to absolute net debt numbers, but we don't expect any further deterioration from the U.S.

in the future.

Okay. So coming to - Fred, to your second question.

And let me just reiterate about this dividend discussion which we have had here internally. Look we have since 2009, we have a kind of strategy, we call it, let's say financial market strategy, which says, there are three stakeholders, which we always have to reflect in a proportionate way.

The one is, let's say, the business that we invest sufficiently into the operations. The second one, the debt holders that we keep always our debt rating stable in the range which we have had.

By the way, we have the telco with the longest stable rating in the history of Europe here almost 10 years or the BBB plus rating. And we have said, there should be an appropriate sharing of the cash flow with our shareholders.

So this was the discussion, which we had at the beginning of the quarter to say, okay, it looks like we have a great contribution from the operational side, but on the other side, there is the question around the transaction now. Nobody was expecting that 2019 is a year without a decision on the deal.

So there were two kind of camps. The one camp which we made, which my shareholder said look we expecting the deal comes and the dividend is going to be EUR0.50.

And the other camp says, as long as there is no deal just follow up the old dividend policy and increase your dividend with the earnings per share which was the guidance given at the Capital Markets Day. Now we came to the conclusion that between EUR0.50 and EUR0.70, a wise compromise is EUR0.60.

And what we saw as well at the same time is that we said, look, EUR0.60 should be the new minimum dividend, why? Because we have, since the last 18 months we have outperformed in the U.S., we have outperformed in the European market, and therefore the certainty about, let's say, the underlying free cash flow profile of our business has improved.

So that is why we are saying, it's not any more EUR0.50 in the merger scenario, it's now EUR0.60 which is a clear commitment from our side that we believe in the future of our operations and it's free cash flow and profitability profile. So that's the first part of the question.

The second one is now, do we see anything which you don't see going forward? When it comes to the investments, look, you have seen the German auction.

I think it's a good message to the German politicians to say, guys, if you are taking out the money out of our pocket, you know, here is the consequence on the dividend side. So they might not like it in the Ministry of Finance here, but this is, let's say, one message and we have to reflect that.

But going forward, we have now higher build-out obligations for 5G services. In Germany, we have an accelerated 5G build-out of our T-Mobile operations and on top of that we have the spectrum auctions, which we foresee and we do not know about the outcome, which is in the Midland area and in the millimeter wave band, which are coming in 2020 as well.

So what we want to give here is kind of stability that we have the financial power, that we have the balance sheet, that we have the rating. And at the same time a fair and appropriate dividend yield for our investors going forward and we give a commitment, that this 60 is not the new basis for what we are doing in the next year.

And for me, this is a personal and for Christian myself a personal strong commitment towards the investor community.

Okay. Next question is from Christian at HSBC.

Christian, please.

Yeah, hi, thanks. Coming back to the mobile service revenue, I mean overall, otherwise, good results in Germany, but it kind of stood out.

So in terms of Q4, if we look forward a quarter, is it fair to assume that the whole visitor roaming stuff is kind of going to a normal level again. And yeah, generally speaking, you increased prices at the beginning of September.

Are you seeing any impact from the new portfolio, would be good to get a bit of color on that, on the current momentum, generally speaking? And then secondly on the content strategy.

You're saying you're not changing the overall strategy and when it comes to content, but you're not disclosing numbers. But if you believe the press, they're telling something like EUR200 million that you may invested in the rights.

I mean you get maybe some sub-license fees, but it sounds like a big investment for a turnaround that's only one month in 2024. So can you maybe explain why you decided to buy the rights, what you believe they will bring to you.

And yeah, why this is not the new normal in terms of content strategy. Thanks.

Yeah, Christian. Let me start with the mobile service revenues.

And as you know, we don't give any quarterly guidance on the mobile service revenue. What we have given is that we stick to the 2% on a mid-term basis, but to kind of bridge the Q3 results, we had 0.7% mobile service revenue and we had a one-time negative effect on the visitor revenues which gets you kind of an underlying 1.7%.

Secondly, I think we introduced the new tariffs at the IFA in September. I think it's too early to really say it's, there are huge success or they're not - they're not working, but what you can see is an early indication is obviously our contract net adds which has accelerated from Q2 to Q3.

So I think I would take this as an early signal that the price moves - are moving in the right direction. So but I think to make a final assessment on the new tariff strategy, it's a bit early.

So on the content side. Look, the first thing is that, 2024, the world has changed, in 2024 customers will have heavy use of 5G services.

Think about a country like Germany, where the leader in the technology is offering its customers a 5G service to watch the games, to enjoy all the content around this, not only in front of the TV service, but everywhere where they want to see. If you have seen the first folded screens, which are now in the market from Samsung.

If you see the products coming, I can tell you the way how we will enjoy the championship in Germany will be different. And if the market leader in Germany is with its technology leading this showcase, I can tell you, this is paying into our brand, which is already a very strong today, but this is the one thing.

The second thing is, I can tell you, this is something where we could easily today distribute the content via other broadcasters. Everybody is interested to get that.

RTL was on it, the handset we have - the public ones are interested in this one. And we have that on entertain.

We always have said that we will not have that exclusively only of our network. We will not exclude, let's say anything on this content side, but we will have it for us and for our customers and as well for partners, if they have a recent price for that and will share offering.

So this is definitely part of the rebalancing of this right portfolio, which we have acquired. And on top of that I think we will be able to attract even new customers to our TV platform during this period because spot is very attractive content and especially if it's taking place in German market.

And we have given you commitment that we're going to increase our customer base to 5 million customers in the upcoming year. So again, our content strategy is an aggregator, a content aggregator strategy where we from time to time are a little bit more sexy, by having some things others don't have.

And this is, let's say, what we said in the past and that is how we're moving forward. And I strongly believe that we are going to be able to make money out of these rights prospectively.

Thank you, Tim. Next question from George at Citi.

Please.

Yes, hi there. And thanks for taking my questions.

I have two. The first one is around flexibility regarding the balance sheet and obviously you've mentioned, you plan to go back within the range, but maybe towards the top end.

Is it possible to give us an idea of what levers you have to offset any potential outflows with or without Sprint in the next couple of years? And obviously we all - we're all aware of your tower portfolio, but whether there are other assets that you are perhaps considering for example, Telecom, Italia is look at datacenters.

I'd be interested to hear more broadly, how you think about the different types of assets and also the countries you are in. And then my second question to the extent you can comment.

I mean there's been a couple of RTs closing in the last month, one regarding to systems and the other one regards to Atlantic Telecom for different renewals of contracts or earlier termination of contracts of the management. And part of your T-Systems, given the volatility wanted to see if you can assure us is nothing we should worry about in terms of the operational outlook.

And with regards to there, whether there is anything in Romania, we should read from that. Thanks a lot.

Okay. So let me - let me start with the comments on T-Systems and Atlantic Telecom, we are aware of these of these rumors, to be honest.

This is gossip, but there is no fundamental behind it. I called out the great performance in that quarter as outstanding and is outstanding.

I think, Michael and his team is delivering very credibly, very good results over the past years and we are betting on him that they will do the same in the future on T-System, same story. We are happy that we have an increasing order entry, we're progressing on the transformation at T-Systems to be honest - Adel has been prolonged in this contract.

So just recently, so there is nothing behind this. On the first question on the balance sheet.

So the biggest thing is what we're betting on is our growth strategy, which is we wanted to continue to grow on the EBITDA line. We wanted to continue to grow our free cash flow around 10% every year and that is something, how we basically want to deleveraging going forward.

And as you know we're not speculating on any kind of M&A activities. What we said on the towers, we're always open to go different venue.

But it's too early and too premature to basically discuss with you, whether we have a dedicated plan. And therefore, I think we are just betting on our operational strength in the business, we're operating in.

Okay. Next question is from - thanks, Christian.

Next question is from Jakob at Credit Suisse. Please.

Hi, good afternoon just one question on fixed line, you obviously highlighted quite high line loss as a result of the IP migration, it didn't seem to have particular impact financially. Just on the KPIs.

Can you remind us what your expectation is, I think you've previously said that the line loss should start to wind down this year? So is kind of a tail end, or is there any change in that.

And then if you, maybe just comment on why the high line loss didn't really seem to have much of a financial impact in the quarter. Thank you.

So maybe going to the line losses here, first. The biggest driver of the line losses is the end of the IP migration and I mentioned that earlier, it's 97% while we stand at that point in time.

And there is another quarter to go, but we are very close to the end. And I can promise you one thing, next year you should see significantly low line losses.

And by the way, I make a personal statement on that one, because otherwise they are going to kill somebody in this organization. So on the B2B side, and the B2C side where other sources for this line losses.

On the B2B side, it's the clean-up effect, which we have with customers who are identifying old analog services. And they're just cutting the chords here because they don't need it anymore.

So this is one effect, which we see, which is coming from the closure of this broadband platform here with B2B customers. They simply reduce the amount of the connectivities in their facilities.

On the B2C side, we saw a higher single play line losses in the consumer segment, and that was driven from our price increase in September. As you know, we have increased our single play prices.

And we saw some additional churn coming from that angle. The people are mainly cutting their costs and not using the service anymore are going to only digital services here.

So this is, let's say the second driver on the B2C side. Nevertheless, what I want to stress here at that point in time, I'm quite very happy with the Q3 performance on the broadband product, because if you take this IP effect out of the equation and our market share, netted market share on broadband product is close to the 40%.

So we are very close to the area where we want to be and this is mainly driven by the vectoring our rollout across the country, aiming for 28 million customers, households by the end of the year. I mentioned that numbers.

We have a good momentum on the TV product side here. And therefore we see that these new capabilities which we bring into the network on the one-time driving down the churn.

And on the other side, attracting new customers. So this is a very positive development and next year this effect is going to be accelerate, because we then - have no negative impact from the IP migration anymore.

Okay, thanks. And the next question is from Usman at Berenberg.

Please.

Hello. Thank you for taking my question.

I've got two questions please, firstly on the U.S. situation.

And secondly, sorry to come back on the dividend. I mean in the U.S., I guess you're up against a tricky situation here.

Right. Where the - if you end up in a scenario where the deal has not completed and the C-band auctions are coming up.

We'll, how do you - how do you balance that, with obviously I mean, Sprint has good spectrum, you won't need any C-band if that deal completes, but if that deal doesn't complete then you need that spectrum. So how do you think about the options there.

And then just on the dividend, so I just want to run some math by you and I would be interested in your thoughts. I mean if I look at your free cash flow guidance for this year, EUR6.7 billion.

If I look at the accruals for finance leases, the repayments of which are not included in your cash flow. But those accruals are hitting your balance sheet every year.

Those are around EUR1.5 billion to EUR2 billion. So if I take EUR6.7 billion less, around EUR1.5 billion to EUR2 billion for those accruals.

And then I take off an average kind of annualized spectrum spend, over the last five years, it's been averaging around EUR3 billion, EUR1 billion in euro, $2 billion in the U.S. You land up with a free cash flow, all-in, which is below the dividend commitment of EUR3.4 billion pre the cut, EUR2.9 billion after the cut.

So I mean it just seems like, unless that issue is addressed, I mean leverage pressures are just going to continue to build. Right.

So just any thoughts on that would be would be helpful. Thank you.

So Usman, first, by the way, I think, because I'm going for the dividend statement, and free cash flow guidance is wrong. I just wanted to make that clear.

I think your assumptions are wrong, but Christian goes into the detail on this one. Let me go into the U.S.

and the question about the spectrum situation here. And it's right, we have since May seen a number of developments regarding the U.S.

spectrum auctions and we were quite successful in what we did there. Just starting with the millimeter wave bands.

And the two out of four auctions on the 24 gigahertz and 28 gigahertz auctions were accomplished and we gained 500 megahertz of spectrum in this specific. Then, so we were quite successful in what we have achieved on this area.

From December, we will have 3.4 gigahertz spectrum auctions, and in the upper 37 gigahertz, 39 gigahertz. And I think in the 47 gigahertz area, there will be auctions coming.

And as we have always said, we have prepared from our side anticipated as well financially, what that would mean in our guidance. So this is something which we knew already when we drafted our 2019 plans and beyond.

Then there is the CBRS spectrum, which is partially licensed and partially unlicensed. This is complicated spectrum plan which had to be developed over the times.

And in September 29th, the FCC decided to conduct a CBRS spectrum auction in June 2020. This is 70 megahertz of licensed spectrum and a 3.5 gigahertz area, which is coming to the market.

So there is time to go on this spectrum and we will then definitely know where we stand with regard to the deal. And what that would that mean for us going forward, whether we have to - not to participate.

And then we have the C-band area. This is this mid-band spectrum and which is as well coming to the market and the FCC has decided finally on the timeline.

It's coming up in the coming months. So and we cannot speculate when that is and how that is going to take place and whether this is in conflict with our deal approval and the final decisions, which we are expecting here.

But we do not see a kind of collusion here, and we are very confident that we will know at the beginning of 2020 whether we have a deal or whether we end up no deal.

Okay. So let me add a couple of snippets to this.

So first of all, on that EUR6.7 billion, which you're alluding to, I think what you've seen right now that we're growing free cash flow comparatively speaking more than 10% every year. So that will help us going forward.

On the finance leases, and if you've taken the stronger dollar into account, it's actually - our prediction of EUR6.9 billion. The second one on the finance leases, I think the number is discoverable.

I think it's more a EUR1 billion than anything else. And the third one is, obviously the dividend decision is taken into account, the clarity to the capital markets, but also what we expect in terms of outlook.

And what we expect in terms of outlook is also factoring in that we were maintaining our ratio. So from this perspective, I think we have factored in all relevant factors which got us to the conclusion of EUR0.60.

I think it's also fair to say that this year, for instance, our free cash flow guidance is after about $0.5 billion will - deal-related expenses. And furthermore, I think it's also fair to say that we, in the U.S., we have an exceptional growth, that's now going on for five years, which has a negative working capital impact as well.

So maybe part of the evaluation when do you next look at those numbers. When we - now we move on, and next is Andrew.

No, sorry, Ulrich at Jefferies. Hello, Ulrich.

Hello. Can you hear me?

Okay, let's try again. Thank you.

Just two questions please. The first one is on the German broadband market, you called out in the second quarter that the market was curiously slow you highlighted this already that - this is not, it's recovered in the third quarter.

And it's not a share issue, could you maybe sort of now with quarter, one and a half quarters later sort of describe what your analysis is on the situation, because broadband penetration in Germany is not particularly high. So it's a bit curious why the market growth should really slow down, so drastically, so quickly, so suddenly.

That's my first question. My second question is on the - on the sort of wholesale situation in German mobile, Vodafone seem to have stepped away a bit from stated policy in the UK, by giving a very large MVNO deal which came as a bit of a surprise to everyone I suppose.

Is that really means they are thinking about the differently, across Europe rather than just in UK? How do you view the - your approach to the German wholesale market in mobile?

Is this a competitive question or do you simply look at this and say we do what's right by our business. I mean we don't really care what others do.

So in other words if Vodafone start negotiating with other people in a different way, with a different starting point, would that effect your approach to that market as well. Thank you.

So look, Ulrich. I know you are a little bit bearish about the German fixed line market already for quite some time.

Look, I'm a little bit more optimistic. And as usual on the subject, and I think the Q2 was an unusual quarter.

And you saw that, let's say, the third quarter was a very strong one and we had a fairly steady over the years, our commercial performance in this one, despite the fact that we were impacted by some of the IP migration here. Now, we were able to improve our netted performance significantly and what we see as well is that Vodafone and Liberty is focusing increasingly on monetization of their own cable infrastructure.

So what we see is that new customers cannot book DSL tariffs anymore with us. They are now - they are going to cable access only.

So this is, let's say, something we expected here, but it's not affecting our netted numbers. Because, we open new vectoring super vectoring areas and what we even do in cities where we do that, we regain market share from cable operators and you have even seen some weaknesses of the smaller cable operators in the German market at the same time.

So we are doing, pretty aware of that one. And if I take the number on the retail fiber net adds, we had 318,000 additions here.

And I think this is quite an encouraging number going forward. So I cannot share that this market is heavily slowing down.

I cannot share that Vodafone might change their strategy. We anticipated that and as I said earlier, we have a lower churn and we have good net adds here at the same time.

So therefore, we are very close to the 40%, we are not that, yet there, but we are absolutely on the right track in this regard. And when the IP migration is being accomplished.

I can tell you we have even a less churn expected from our side. So we are very optimistic on this one.

Now, second question, look I can be impolite and say, you don't should ask me, ask Vodafone. But look, I'm trying to be as service-oriented as possible here.

I don't know whether it's right or wrong, what they're doing in the U.S. in the UK market, sorry.

I think the UK market anyhow, different than the German market here. And it was.

I saw that Vodafone was suffering a bit from the churn, they were facing with - and some angst into the Q2 network, but they were very disciplined in the way how they let that happen. So I have a lot of respect for Vodafone in this regard and that they're looking on how can they monetize their network leadership in the best way and not to know we're selling it to everybody.

We have anyhow a quality competition here in Germany. That is why, everybody is trying to invest so heavily into mobile side and trying to improve the coverage and always you know leading the P3 chase, blah, blah, blah.

So I do not see that Vodafone is changing their behavior in this German market towers. The kind of more utilization oriented strategy, we all have learned the lessons in Germany, what it would mean if you have an uncontrolled excess of MVNO on your infrastructure at lower prices.

So therefore I do not see that Vodafone is becoming irrational on this one. And for us what we have said in the past will be as well our strategy for the future.

We are very consistent towards MVNOs.

Thank you, Tim. And next is Andrew at Goldman.

Please.

Thanks. Afternoon, everyone.

I had just a couple of extra questions on the kind of infrastructure self-help opportunity in Germany. Maybe I'm wrong, but you sounded quite reluctant on a wider tower sharing deal in Germany, do you see a risk that your competitors do sign a broader deal away from you.

And if that were to happen would you have to get involved, so as not to miss out on efficiencies there. And then a second question.

Since the last quarter's call, we've seen more of your competitors suggest they're open to infrastructure asset sales including increasing Orange potentially open to fixed line asset stake sales, any update on your scope to share investment costs in fixed would be greatly appreciated. And then does any of this, the tower sharing, the infrastructure asset sales, does that present meaningful upside to your free cash flow guidance or downside to your CapEx guidance?

Thank you.

So on the tower sharing, let me kind of reiterate what has Orange said, I think. On the white spot sharing where there is no opportunity to differentiate.

I think the best economic model would be, if we share the burden among all operators. So ideally, it's all of us basically working together.

On the gray spot sharing where we have distinct opportunities to share with other M&Os to basically up both networks. I think the natural partner for us would be Vodafone, because given their quality of their network that is closer than Telefonica's, obviously we have the best one.

Secondly, if you take a look how they approach customer, especially in the retail space, they have similar price plans and so forth. So I don't know what's happening on Vodafone's and Telefonica side.

I assume you're alluding to that potential negotiation; I don't know this. But from a natural combination, I think a better fit would be DT and Vodafone.

And on infrastructure sales, as I said, we have no plans right now, which we can communicate, whether there is any plan whether there is any plan to sell something. As you know, we are totally persuaded infrastructure investors and we want to basically keep our infrastructure leadership wherever it's possible and I think that is the strategy of Deutsche Telekom.

And selling off assets would be an opposite direction.

Look, let me say some additional words, because I don't want to see it as being a laggard, a laggard on selling assets or non-core activities and whatsoever. The opposite is the case.

But it has always to do something, what is the right timing and what's the right way going forward. Look, it was a very, very wise decision from us not to sell our tower costs.

We have already privatized and put them into a different entity almost a decade ago. In 2,000 we established the telco, DFMG as a company and this company is providing us with an EBITDA of more than EUR400 million EBITDA today.

And by the way, heavily growing. You have seen on our slide number 8; you have seen as a Group Development segment is growing in a double-digit way.

And it's not only the unbelievable successful turnaround in the Netherlands, which is supporting that, but as well the super performance which we have in the DFMG. So the moment we have keep that asset or not selling it yet, we are increasing the value of it.

Now you're totally right. We should not miss the bus, if there is a bus coming, but I'm not afraid about that one.

We have 50,000 towers, which we are managing, we are by definition, the biggest telco. I can tell you, everybody is talking to everybody, so let's see how this is deploying.

We can run this business on our own prospectively, but we are willing and considering even partnerships as I mentioned earlier. So I think as long as we are not desperately sitting and have to sell that business, we are looking for the right opportunities in this environment.

And when it comes to future asset sales, I think we haven't made any decision, the Netherlands with this super turnaround after their Tele2 deal, just to give you another inflection point here. Today, we passed from number three and number two in the Dutch market on mobile, because Vodafone has shown slower numbers.

So even here we are now improving our market position significantly. And therefore this is always an option, which we can consider on the asset sale side.

But at the right timing and at the right value.

So when it comes to the question on upsides on the free cash flow guidance or downsides on the CapEx guidance, my answer would be neither nor. We are reiterating the 10% free cash flow guidance and obviously for a better, we are better.

And what Tim already said in his speeches, we're going to keep the CapEx guidance for Deutsche Telekom ex-U.S., which was always saying its peak 2018 and from there its maximum slow down and keeping this constant. So there is no additional headwind to be expected on the CapEx side.

Thanks, Christian. Next is Josh at Exane.

Please.

Hi, there. Thank you.

Just the one question from me. Following the price arbitration, we saw two weeks ago between Telefonica and Drillisch.

Have your expectations of a fourth network owner in the German market changed? And likewise, has it changed your view of how mobile competition is going to develop in Germany going forward?

Thanks very much.

I think Josh, maybe, if I answer that, it's really up to United Internet to decide the strategy here was the first network build. I mean have entered the sports spectrum, they've entered obligations and what they will do is, it is up to them.

So I think that's probably all we can say to that. So next question from Ottavio at SocGen.

Hi, good afternoon gentlemen. I have a couple of follow-up questions.

The first one is on network. You discussed in a lot of details about network sharing.

As I mean to a purpose, and the purpose is basically to improve your coverage. So my question is actually different, it's - how big is the coverage requirements and how many sites you will need, first to hit the requirements of the license on rural and for densification in urban?

So if you can tell us, probably, I don't know if you read it on your plan, how many sites you need between now and 2024? The second one is also another follow-up, this time it's on the media strategy.

You clearly said at least what I understood is that the rights to purchase for year 2024 was relatively opportunistic move. What that means that on the next round of bidding for the Bundesliga and the Champions League rights, you're not going to participate.

And the third, it's and if I can I ask - but, a straightforward one. What's your low cap on the T-Mo stake if the deal with Sprint goes ahead?

Thanks.

So let me start on the network question on the number of sites. As we said already, we want to increase our network portfolio by 9k over the course of four years until end of 2021.

And I think that to a large degree covers at least the network requirements until end of this year. On that question from now to 2024, I think the biggest demand is clearly sitting in the white spots.

And that depends on the sharing model that we're coming across with. So everyone's building out, obviously, that number is theoretically triple as high as it would be, if we are, if we would share, if we would share basically with nobody.

So from this perspective, it is - I think it's premature to make a statement on the number of sites, obviously it has to be reflected, because it's a legal obligation when it comes to the build obligations. And therefore, I think we should actually from an economic point of view, come to a conclusion that we basically share among all M&Os when it comes to the white spots because that lowers the burden for everyone.

But our commitment again is roughly a run rate of 2,000 sites a year. So you can do the equation until 2024 and that would be another 8,000 sites, which we would build by our own, if we're just maintaining that run rate.

Correct. Christian.

This was the number. And on top of that we have the 10,000 micro sites which we built in the cities, which we established on there.

And to be market leader on the 5G services, all of this is included in our CapEx envelop being laid out and if there is additional sharing opportunity this would improve our profitability. So that was not part of the plan at that point in time.

And with regard to the media strategy, look, I do not want to be repetitive on this one, but I might be boring. We have not changed our content strategy.

It is a little bit, let's say, call it opportunistic, but we smelled some opportunity to differentiate here in this market and to just remind us on where we stand with Magenta to follow. And we have a lot of, let's say, good features content aggregated in our and the TV proposition and by the way, we extended our class home TV service with an IPTV proposition and mobile service proposition exclusively, which we have out there in the market as well.

In the so-called Megathek which is - there is the content we have TV series. We have movies we have all, let's say the region exclusive and interesting wise very easy to access even the big streaming platforms.

Being it Netflix, being at maxdome, being it Amazon Prime, this - this streaming service access was very easily via that platform already today. On the spot side we have established Magenta sports channel and we got some attractive rights here like the Basketball League or like the Ice hockey league in Germany, which we are able to offering exclusively.

And on top of that, we have deal with Sky, a deal which is enabling us to include Sky Services like Bundesliga or conference and other services into our Magenta Sports suite. So that's the kind of reselling and partnership deal, which we have with Sky, which is working nicely to complement the full set here.

So this is how we see the world going forward. There are no material changes, which we have in mind.

But if there are opportunistically some series like Handmaid's Tale or whatever being offered, which we think are fitting into the portfolio, we will add them and we will buy these rights even exclusively. So nothing to change in principle but opportunistically we cannot exclude that we move in specific topics.

So on the lock-up question, I think we have a four year lock up after closing. So that would be my answer to the question.

Okay. We have time for two more questions now.

So next is Simeon [ph] at Barclays.

Hi guys, thanks for taking the question. Just a quick one on convergence.

So you've obviously pushed it quite hard across Europe and in Germany as well and you had good success in Germany with smaller discounts than some of your peers. But I noticed that you reduced those discounts recently.

So I'm just wondering how you think about the balance between convergent discount and pushing convergents further because we've seen convergent penetration may be slow down slightly in the last few quarters. Thank you.

We love convergence. And by the way the convergence, which we have offered so far is very much a tariff convergence.

And that means you know combining a mobile tariff for the fixed line tariff in an intelligent way now, including the family and the like and we have pushed that, it's correct, because we see the benefit of that one. We have more ARPU, because more members in the family are using it.

We have this EUR9 an addition to the old package, which we know. And the second one is we have a low churn, which is helping us because the value is in the base.

And last but not least, we have a higher customer satisfaction, our trim is in the 70s, which is our peak KPI, when it comes to customer satisfaction. So the upselling opportunities on TV as well something which we strongly believe in this one.

And therefore, I think the way how we positioned on Magenta high-end service was very, very good, because you know people didn't know exactly what it was. So the mobile customers were complaining and got a fixed line offer.

And the fixed line customers thought there is something on the mobile side and they got a mobile offer. So we were not so specific in the way what convergence really is.

Now we have now a base which is growing. I'm very happy about how Srini Gopalan and took that up in the European side and how fast you know the German, sorry, the non-German take-up rates are.

And they're still on a very high accelerating mode. Now what's the way forward.

The way forward is we call it internally true convergence. So the question about convergent products and think about and home OS - a home operating system which is easily serving all different applications at home.

Today we offer a smart home service, which has its own operating system. We have a TV service, which has its own operating system.

We have the - communication suite, which has its own operating system. So if we have a router, which is enabling all this kind of service ideally easily maybe even cloud-based.

If we have one voice certification service, which is able to steer each of the service proactively going forward. We really come into converged customer experience at the whole.

And that is let's say for us the true convergence that you are, that you have hybrid service mobile and fixed line, which is enabling higher speeds and better latencies that you have one operating system, which is supporting all different function as we just mentioned and that we can bundle that in an easy way with our, with our tenant structure underlying tenant structure. So on top of that one app is supporting as well then mobile and fixed line capabilities.

And promising, we are working on this one. We have shown already some of the stuff at IFA and there's more to come during the course of 2020.

But that the next step is after bundling is now true convergence with regard to product. So to prolong Tim's answer on the impact on run rates, because we lowered the discount.

We had 80,000 in Q2 and 90,000 Magenta, net adds in Q3. So we don't see this right now, but I think again, same answer holds true as for the mobile question.

It's early stage to make a final statement here, but we have the opportunity to actually of course correct if necessary.

Thank you. And that brings us to the last question from Matthijs Van Leijenhorst, Kepler.

Yes, good afternoon. Two questions from my side.

First one looking at the Netherlands, it appears that you quite turned to corner over there. What's the long-term strategic solution for the Netherlands, because it's still included in Group Development.

And the second one is on - it's a bit of a follow-up on the U.S. spectrum auction, you clarify you gain more visibility on upcoming spectrum auctions, but just for my understanding.

In case you don't get the green light for the Sprint deal, do you need to have the same amount of spectrum or do things change? And the reason for asking is that, if I'm correct, initially in case of a no deal scenario I had the impression that T-Mobile U.S.

would reignite, it's EUR9 billion share buyback, but if I look at the press release, it appears that this is also off the table. Those are my questions.

Okay, so. I like your question with regard to the Dutch market, because I remember the day when we were sitting here and there was a discussion about selling the asset and some of you said look better to get this off the balance sheet than rather trying to fix it.

And that was - there were offers on the table of EUR2.3 billion at that point in time, and I said, I will never sell that business, we have the duty to fix that business. Now, this business is super, super strong, they had very disciplined cost approach, they first introduced affordable unlimited data tariffs.

They had a new brand repositioning to become a strong challenger in this market. We built a network, which is by the way, not only the best network in the Netherlands, it's the best and highest scored network in the P3 test across Europe.

So it's number one in Europe at that point in time. With regard to speed, reliability and consistency, we have done some inorganic move with Tele2, integrating this business into our services.

And being able to offer now even fixed mobile converged services with a very strong B2B offering. On 5G, we are ready to go and to move forward, and the synergies for the full year is well on head with regards to the integration.

So we have now 600,000 fixed line customers in a growing segment as well. So we are very happy on how valuation has turned around from maybe EUR2.3 billion and I saw some of your guys from the sell side talking about EUR4 billion for this joint entity here, on the way how we are going forward.

Now. Do we have another strategy for this Company?

No. This is the strategy which we want to play out, fixed mobile convergence and a leading position in mobile.

Your question might be is this long-term, strategic piece of our portfolio. We always said, this is part of the Group Development and we might consider steps going forward.

If you think about the cookie jar idea that might be part of our cookie jar. And if we IPO-ed or sell it, but no decision has been taken at that point in time, but prospectively, this is clearly an optionality for us.

So far, we are enjoying the new, a good performance and the number 2 position in the Dutch market, which we recently achieved.

So on the U.S. question, two things.

We don't want to speculate on any potential auctions, although it has become more clear, what's going to happen next year in the U.S. And we said that we're going to participate at the gigahertz spectrum auction which will start in December.

And on the share buyback, I think we have buyback authorization that remains in place.

Okay. Thanks, Christian.

And I think, pass back to Tim for any final remarks.

Yeah, thank you again. And please again if some of you were a little bit disappointed with regard to the dividend outlook, I hope that we were clear on why we are doing these things.

I think it's sustainable, well balanced approach which we took here from our side. And we are totally convinced that we will get the deal at the end of the day.

And in this situation, we would be all better off than we were before this decision and we give us clear commitment going forward. I think if I look to the portfolio, we have seen an outstanding quarter with three segments growing double-digit.

I do not know any time in the history of Deutsche Telekom nor in the competition, where we have seen this kind of development very proud about the performance of my organization. Nevertheless, there is a lot of other things to do.

I think we have a clear path in Germany with regard to 5G and the way how we are performing. We already fulfilled the LTE build out obligations, which is very good for us.

So we are very much focused on 5G and we are convinced, we have a winning strategy on this one. I think the main topic is now switching our VDSL, vectoring a build out, which is coming to an end into the fiber factory.

And this is for me on Germany, the number one priority on how we go into this fiber factory now at affordable economical terms. And secondly, the cost and the productivity improvement of this German organization.

And I'm not rating this too high, but we see already good, good improvements. And if you just reflect to the margin, which we have laid out this month.

So on the cost side, we are making progress as well, but we have to do more. On Europe.

I'm very happy that this FTTH rollout, which we haven't discussed here loudly is on a very strong track and this business is growing by an EBITDA outperformance of 5% the mobile networks, or any whole leading in 11 out of 13 countries, we run the P3 test. But I think we have a very good FTTH build out plan now for these European countries, so that we can keep our very good, very good market leadership on that one.

And on the U.S. I appreciate and thank you for the support that we were able to build out 600 megahertz.

We are now ahead of the wave. By the end of this year we will have already achieved 200 million households in the U.S.

with the 600 megahertz with this a 5G ready band. So it's not investment which we lost this is investment in head of the wave to keep our leadership there and we are convinced that we are going to have with the deal, anyhow, an even better positioned.

John Legere and Mike Sievert, they will announce today, our attempts Tim for the states. What this deal will bring to them, so please have a look at 4 o'clock this afternoon, we will give more certainty about how not about let's say building out.

We have said at not about, but we will say a lot about the competition, how we see that going forward and how we can help American society to overcome digital divide here. So another to convince the leave in states to support the deals.

And last but not least, our two systems turnaround is making great progress, order entry strong, EBITDA outperformance improving and big changes on the governance taken telecommunication service being integrated into one division within our organization big step going forward. So I think even here, I see a lot of light at the end of the tunnel.

With regard to next year's big commitments on a free cash flow positive development in this area. So you see us in good mood of driving our business further down, further up into the operations here, and we will all are seeing us probably on the conference may be amongst any conference next week to further detail the topics.

Thank you very much for listening today.

Yeah. Thank you.

Also from my side. So it's 4 PM, the German time that is the odd carrier one for the new T-Mobile and if there are any further questions.

As always, please contact us directly in the IR department and have a good rest of the day. I pass back to the operator.