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Edited Transcript of FNTN.DE earnings conference call or presentation 3-Mar-17 9:00am GMT

Thomson Reuters StreetEvents

Q4 2016 Freenet AG Earnings Call

Mar 3, 2017 (Thomson StreetEvents) -- Edited Transcript of Freenet AG earnings conference call or presentation Friday, March 3, 2017 at 9:00:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Christoph Vilanek

Freenet AG - CEO

* Joachim Preisig

Freenet AG - CFO

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Conference Call Participants

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* Usman Ghazi

Berenberg Bank - Analyst

* Ulrich Rathe

Jefferies - Analyst

* Vikram Karnany

UBS - Analyst

* Dominik Klarmann

HSBC - Analyst

* Robin Brass

Hauck & Aufhauser - Analyst

* Martin Jungfleisch

Kepler Cheuvreux - Analyst

* Maurice Patrick

Barclays - Analyst

* Benjamin Kohnke

Deutsche Bank - Analyst

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Presentation

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Operator [1]

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Good morning ladies and gentlemen and welcome to the Freenet AG analyst and investor conference call regarding the preliminary full year results 2016.

(Conference instruction)

Let me now turn the floor over to your host, Mr. Vilanek.

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Christoph Vilanek, Freenet AG - CEO [2]

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Thank you very much. A warm welcome to everybody. Thanks for joining today's call.

I immediately start with the presentation that is also on the website and should be available to all of you. I think we can look back to one more very successful year for the Freenet Group. A year that definitely was culminated by acquisitions and investments, but also by a very solid and stable core business, which is going to be the fundament of future successes.

Looking back, overall as I said, strong business performance. First, here with a contribution from the segment, TV and media. In the core business, our focus is still the customer ownership, which improved by 2.5% to 9,530,000 users, which is plus 230,000 year-on-year.

Luckily enough, our focus on postpaid customers contributed the majority of 203,000 new customers with 24 months contract on an annual basis.

The revenues increased by 7.8% to EUR3.36 billion, majority of the growth came obviously from TV and media, about EUR219 million.

Group EBITDA increased by EUR68.6 million to EUR438.8 million. Out of those, EUR36.5 million came from the consolidated pro rata net income from Sunrise.

The ARPU was stable based on a full year view and as we have already indicated some time ago, we will not talk about the guidance for 2017 today, because we have scheduled and inviting you for the April 12 to Cologne, to the headquarters of media broadcast.

There we will introduce you to the latest development in the TV area, also including new features ARPU the introductory figures install base of DVB-T etcetera, etcetera.

On the next page, I'll go a bit deeper into the five pillars of the business, in the mobile business overall I just said a growth in customer ownership alongside with a stable ARPU. Most important for us that we have LTE speed tariff plans on all the three networks.

We still think that the end consumer is not really aware or there is not really a need for the high-speed LTE, but the perception is there that this is necessary in order to fulfill customer demand.

Overall, we see an increase in brand recognition and awareness, we focus on three brands actually, Mobilcom Debitel for the subsidized 24 months' contract on all the three networks, klarmobil for the SIM-only area and [freenetMobile] for the heavy discounted tariff plans challenging the competitors. [freenetMobile] is mainly on the Vodafone network.

Furthermore, I think what really helped this year is that we have finally installed the multi-channel ability. Customers can order any kind of product in the shop and be shipped at home, they can pay it in the shop and be shipped at home, they can order products online or we serve it, we could even schedule meetings within the shops.

So, we saw that this functionality is state-of-the-art and I think the ability that we have developed on the basis of (inaudible) is unique in Germany and our customers appreciate that very much.

On the so-called digital lifestyle arena, the revenue stream grew by 29% to EUR137 million in the course of the full year. If you put that into the ratio of customers then you see that we generate about EUR20 out of those digital lifestyle services, across the entire customer.

Postpaid base, the portfolio was extended to more than 25 products, we continue to test and optimize partnerships. We have just signed a new contract with Kaspersky for virus protection, we will shift from Symantec.

We have also signed a partnership with Amazon on pre-installations and also on the Prime services, we will next week start with Amazon in our shops or in [path of] our shops with the Amazon Echo and so on and so forth.

So, I think the big change in 2016 was that we are not any more looking for the products, but the products are offered to us and the business partners do realize it, we have the strengths there which is unique and win-win for both parties.

Furthermore, we also measured the perception of the company and the perception of the Mobilcom Debitel brand and it turns out that more than 55% of those ones that have seen the advertising or are aware of Mobilcom Debitel do understand that this is not a mobile-only provider, but a digital lifestyle provider delivering many more products and services than others do in the market.

Well on the TV-Access, I limit the comment on this year's contribution of EUR290 million in revenues in 2018 in EBITDA. This is very much in line with what we have predicted last year on the Capital Market Day. We have only last week signed the final agreement with EXARING, so we are now on 50% or 50% plus one share.

So, we have the majority there as well, which a factor was the case, but is now finally we released. All the other details as I said before will be presented to you on April 12.

On the adjacent businesses, those are the ones that typically we do not talk much about, GRAVIS and the retail chain as such. I think they both performed according to our expectations in 2017. GRAVIS is a very seasonal business, it's still dependent on new product releases from Apple.

Even though we had assumed one more release last year, last quarter, fourth quarter was really strong and they have finally contributed their margin to the group.

We have in our energy business which is more business of EUR10 million in revenues, but still an interesting add-on for our retail chains and also in media markets. We have now found a way to do an own contract, so we will start to sign up contracts with our customer ownership, where we do the billing, so we will certainly see an increase there in revenues in 2017.

It will lower the margin a little bit because we do invest into customer acquisition. This is not going to be impacting the entire Company, so it's behind the (inaudible) but still worth mentioning it also in those fields we try to establish and exploit opportunities.

In distribution business under the umbrella of motion, we've been shipping almost EUR200 million for hardware and accessories to our shops, but mainly to third party business and third party shops and also in online mainly Freenet [AG] and Freenet Digital.

We're still working really well. We're very happy with the business. There are challenges, because mobile monetization is still weaker than the typical desktop internet monetization. I think we are finding the right steps there and we have a solid stable business there, which is helping us overall.

Also, because I just like the fact that we do it, you have all seen that for the requirements for prepaid have changed significantly, or will change from June 1, we do have an identification process established already seven years ago. We are now giving this as a third-party service to others and we are well prepared.

So, I think all these little companies that may not be relevant for the big [three points, EUR3 billion] overall business contributes in their small and to the business and to retail and to the others.

On the financial investment with Sunrise, the dividend payments, [the prices] are high as the correspondent interest. So, we had net benefit in order of magnitude of EUR50 million and the consolidation of the net income that our EBITDA was EUR36.5 million.

We are also happy with the development there. They have published their figures yesterday. You all may have seen it. I think overall, we are comfortable with the development there. We see that the management team, especially Olaf Swantee, built up, (inaudible) there after eight months you can see that his handwriting changes the company.

Very, very good results on the network quality, more dynamic development in the B2B area. So, we're very, very satisfied with the work that's done there and if it comes to our investment.

And on the next page number 5, there is a bit more detail on the customer base, well as I said, postpaid was growing by 203,000 year-on-year, so by the end of December plus 90,000 -- 80,000 in the quarter, which is I think a very solid result given the overall market circumstances. We are only counting 24 months' contracts, I think that's a bit different from some other figures that we see in the market.

We also appreciate that (inaudible) and United Internet have shown a bit more growth, but I think we are focused on the high-end playing field with good prices and solid margins. So, we went for quality instead of quantity.

On the no-frills area, you see a plus 30,000 year-on-year. This is lower than in the past because, as we said we count 24 months' contract for many years now in the postpaid. Overall, the customer base is now on the 12.06 million , the decrease in prepaid is slowing down, but still as the entire market prepaid is less attractive than it was in the past.

On page number six, the overall picture is that year-on-year we have a stable postpaid ARPU with EUR21.40. The data revenue share is approximately a third of it. You can see that we have seasonal variations. This is not a typical seasonal trend.

There are minor aspects that contribute to these kinds of little changes there, little variations quarter-by-quarter, but overall, we are happy that our prediction was right, that we will have a stable ARPU I think with EUR21.40.

We have a good basis also for the upcoming year beforehand. Over maybe one final word on the core business, the higher customer base year-on-year, plus the stable ARPU makes us very confident that gross margin etcetera, etcetera in the mobile core business remain on the existing level and there is opportunities still in the market to gain a bit in market share and to gain a bit in customer ownership in the course of 2017.

Again, I'm not sure about the quantification again, but it definitely will go further up in a decent manner.

Having said that, I'd like to hand over to Joachim Preisig, talking to you about financial statements and other financial details.

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Joachim Preisig, Freenet AG - CFO [3]

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Yes, thank you Christoph and good morning ladies and gentlemen and welcome also from my side. As usual I will give you a couple of additional information to the financials.

Please be aware that the full set of numbers will be published March, 23. Nevertheless I wouldn't expect in the KPIs any changes up to that date.

Group revenue increased to EUR3.362 billion driven by stable mobile business as Christoph said already on one side, and of course due to the contribution of media broadcast since March 2016.

Gross profit increased by EUR108.3 million compared to 2015 up to EUR898.7 million representing a 1.5% increase to almost 27%. As a consequence, EBITDA amounts to solid number of EUR438.8 million where Sunrise participates with EUR36.5 million.

Depreciation, amortization increased by EUR52.9 million based on the increasing property, plant and equipment and intangible assets related to the acquisition of media broadcast and of course the associated final purchase price allocation.

Interest result amounts to EUR54.9 million. The increase in the interest expenses is mainly attributable to the refinancing in connection with the recent acquisitions and also attributable to non-current liabilities of media broadcast.

Pre-tax earnings amounted to EUR236.7 million, then the after-tax position which amounts to EUR27.5 million. This position results from offset in tax expenses of EUR33.5 million, against deferred tax income mainly as a result of the write-up of deferred tax assets from the tax losses carried forward and then the Group results comes up with, I would say, stable EUR209.1 million.

On the next page then we have an overview between the segments, mobile and TV and media nevertheless. First of all, I would like to mention again that the overall forecast [average] cashflow position increased by 20% to a very solid EUR341.5 million, including the Sunrise dividend of round about EUR30 million.

In the mobile segment, we have a very solid topline supported by a very solid gross profit of EUR744 million. Of course, I repeat that again and the last time now, EBITDA is impacted by the Sunrise portion of EUR36.5 million.

And TV and media and I think Christoph mentioned that already a little bit, but I mean I think it's worth to repeat that its developing absolutely in line with our expectations and what we have so far communicated.

The revenues are mainly attributed to media broadcast because EXARING is still picking up the customers and might be an additional information here, the EBITDA split between the media broadcast and EXARING is the following that (inaudible) media broadcasting faltering round about EUR37 million and EXARING ended up the year with a EUR9 million loss as we have forecasted as well.

The next page then is basically talking about the balance sheet. We do not deliver full details so far, but nevertheless we gave detailed explanation with the Q3 report. No significant changes so far. The balance sheet totally increased from EUR2.7 billion in 2015 to EUR4.3 billion in 2016.

The net debt position increased to EUR735.8 million which is translating in a tax ratio of around about EUR1.7 million and we have explained that for that point, we too deduct a financial debt from the Sunrise portion which I think is just the fair methodology to look at it.

A little bit more interesting probably then the next page which is the cash flow statement. The cash flow from operating activity amounts to EUR389.6 million, which is significant higher compared to 2015. The main impact for that development are of course EBITDA dividend payments by Sunrise and smaller changes in the network and capital compared to 2015.

Cash flow from investing activities amounts to EUR862.4 million and this is mainly impacted by the purchase of Sunrise on media broadcast and (inaudible) we have a net capital position of EUR48.1 million which is what we have predicted so far.

Cash flow from financing activities, there we have couple of more positions I would like to lay out because it's really interesting to go through that and because its dominated by [vertical] paying back bank loans for media broadcast, these are our shareholders, this bank loan is EUR297 million.

Then we also have paid back the bonds, back in last April of round about EUR400 million and we already paid back portions of the bank loans [AMD] which we used for acquisitions of round about EUR350 million and again of course we also paid dividends about round about EUR198 million.

On the other side, this is offset by issuing promissory notes and bank loans with a total amount of EUR1.87 billion, which results in that balance of EUR521.2 million. And I think just to say it again, I think at the end we have a very solid free cash flow of EUR341.5 million which is slightly higher as we have in the guidance.

On the next page, then again, the detail which translates from EBITDA to free cash flow. I just can say it's all in line what we have predicted already and reported back in November.

There is one different portion of the summarized EBITDA had to be adjusted to the results which were published yesterday. Nevertheless, I think this doesn't have an impact to the free cash flow because, it's just (inaudible) through in that area.

Next page is really just for illustration. Not many comments to do about that because it's just explaining, it's the shareholders structure, the major shareholders from Freenet AG.

I am almost at the end of my presentation and I just would like to make the point that Freenet met or even exceed again the key targets which have been communicated to the Capital Markets for 2016.

And as Christoph already mentioned, there will be a deep dive in TV and media segment on the Capital Markets Day and we will also deliver then the new guidance.

What we haven't said so far, what I think is also important that we will suggest to go for a dividend payout of EUR1.6 per share as we have communicated in the last year and I will just say again that this is proof-of-concept whatever we do communicate, we also deliver at the end of the day.

Ladies and gentlemen, this is from my side. And I think we are going over now to Q&A.

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Questions and Answers

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Operator [1]

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(Operator Instructions). Usman Ghazi, Berenberg.

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Usman Ghazi, Berenberg Bank - Analyst [2]

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Hello gentlemen. Good morning. Thank you for taking my questions. I have a couple.

The first one is on the core business. If I look at your mobile service revenues, they obviously have inflected, they're growing now. However, if I look at the gross margin in mobile, it's flat, for the last four quarters or a rolling 12-month basis.

Gross margin has been flat despite the fact that mobile service revenues are growing, which obviously implies margin [inflection]. I wanted to understand why is there no operational gearing coming through in the mobile business despite the topline growth. That was my first question.

The second question was just on the on the outlook. I mean is there anything with respect to consensus that you feel uncomfortable with and you feel that the Capital Markets Day is needed in order to educate investors before you issue guidance or is that just too cynical of you of why the guidance has not been given today. Thank you.

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Christoph Vilanek, Freenet AG - CEO [3]

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Yes, Usman, thanks for the question. The first one is an easy one. There are hardware revenues in there and they make a growth. The fewer plain service revenues as such remain more or less on the same level and this is why the margin comes from the service revenues, not from the hardware. So, there is no margin inflection as such, it's just a [two curves] that --

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Usman Ghazi, Berenberg Bank - Analyst [4]

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Sorry, so even the mobile service revenues are growing, right. They are growing right now by around 3%. It's not the hardware, the mobile services are growing but --

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Christoph Vilanek, Freenet AG - CEO [5]

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You are right, but I think it's at a very minor level and the effect is not fully reflected in the margin. I would say to make it plain and simple its statistically a deviation more as a trend. It's always a mix of very bland, there is a mix of usage and this is impacted, but it's not a trend as such, it's a phenomena which you have rightly observed, but I would consider as a relevant trend.

On the outlook, well I think very early on last year I already I think in quarter two I already said that we will delay talking about the guidance and things like that to April. The reason is that the switch off of the DVB-T service to DVB-T2 is happening on the 28th in the night from the March 28 to the March 29.

We are now heavily selling hardware into all the different channels, but I think it is the most solid, because it was the most relevant question that I was asked the last eight months was like how many people will ever switch over to DVB-T2 and how many of those will finally convert.

I think it's worth waiting a month to understand like what these conversions are going to be, how many people have bought the product, what is the install base, furthermore by the March 16, we will also start an advertising campaign for the (inaudible) products, the first one ever and we want to take -- on the terms, we want to take the opportunity to give you a deeper insight in usage patterns, customer [demographics], types of services that are shown and viewed, we will also introduce a Freenet TV connect etcetera, etcetera.

So, the simplistic reason is that the D-day for DVB-T2 is March 29, and the launch campaign or the first real campaign with (inaudible) starts on the 16th.

If I would talk about guidance today, the first thing you would ask me is like what is the implicit number of subscribers for the two services and I will answer this question when I have more data and this data will be at a reasonable level available by the first week of April. That's it.

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Usman Ghazi, Berenberg Bank - Analyst [6]

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Great. Thank you very much.

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Operator [7]

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Ulrich Rathe, Jefferies.

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Ulrich Rathe, Jefferies - Analyst [8]

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Thank you. My three questions please. My first one is actually a follow up on Usman's question.

We're seeing a very strong revenues actually in mobile communications outside of service revenues and since you hinted that this is hardware revenues, could you comment on the mix between hardware revenues and these sales commissions, the sort of adjacent mobile revenues from the network operators that is also in these other revenues.

And what's the mix between the hardware in that and how is that going?

And second question is, with regards to the outlook, I understand you want to keep your powder dry on the TV business. I was wondering whether you are maybe willing to talk a bit about these indications for share gain opportunity in mobile, obviously, the mobile is a core business, maybe it's easier to talk about the outlook there.

Do you think there is a chance to essentially continue current trends or even improve them from a year which is what you seem to say, whether these share gains indications?

And then my last question is on the DVB-T2 transition, I understand that you want to sort of lay out the full picture on the April 24, but could you essentially comment whether the progress that you're currently seeing is encouraging or whether there is some hiatus in the momentum, whether you could just give very general high level indication how you see the bulk, the equipment sales and smart card sales process for the DVD-T2 launch. Thank you.

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Christoph Vilanek, Freenet AG - CEO [9]

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Well, let me start with the last one. That's exactly what we move into the April 3, because I know, and this is your job to be curious on this and to ask questions on this.

But we've also seen that in the switchover in other countries, France Italy, Ukraine, and we've always seen that the last four weeks before the switch off and the first two to three weeks after the switch off are the most relevant ones.

So, I definitely have indicators, I definitely feel comfortable with the whole thing. There are no negatives, but at the end of the day, any details might still change by 10%, 20% in the course of the next few weeks.

What I can tell you is that the biggest challenge for us was to make the 14 benders that we have, to make them produce enough devices in order to fulfill the theoretical demand by the day of the switch off. And this is what we have achieved. So, we haven't asked that product set top boxes, [CI Plus] modules and (inaudible) in the warehouse in order to fulfil the needs.

Now the question is, how much of this will sold through and this is only available after the switch off. This is, and I understand of your thinking, but this is probably we are going to work on it later on.

Second question, on the core business, as I said, I think there is, overall I would say the market conditions are rather established. We can see that -- and you have all looked at the detailed reports from the entire -- all market participants.

There is a rather stable development in Deutsche Telekom, with a strong focus on their integrated products Magenta, there is a strong effort in Vodafone to do the same.

We'll look at the Vodafone overall, but we can also see that with Vodafone as well as with Telefonica, the growth that they show in terms of SIM cards are coming from their partners meaning from [Freenet Generale internet and] (inaudible).

We witnessed that (inaudible) is still extremely aggressive on low margin and low cost tariff plans which I wonder how long they can work with it given the (inaudible) in roaming, cost for their customers, so overall my estimate and our internal planning is that we still think that the customer ownership and the postpaid customer base will grow in the course of 2017.

Maybe not in the same full size that we have seen in the last 12 months, the 200,000 again, but it's going to be definitely six digits and we are aiming for a similar growth and I think that is what the market can do right now.

We have raised prices on the discount segment, we went up by EUR2 or EUR3 for the last few weeks. It turns out that it does not change significantly the (inaudible) but we have also seen that (inaudible) is now going down again, they have a EUR8.99 offer for 4 gigabytes full plan, which shows that they have brutal pressure on their capacity.

Yes, I think that is my overall assessment. So, I think same kind of lever in terms of customer development for 2017, maybe slightly under pressure on the postpaid side but slightly under pressure means if its EUR0.20, it's still a change of 1%, so I think in that sense I would expect something above EUR21 again, but it certainly will drop a little bit from the EUR21.40 would be my guestimate by early March.

And I think on the service revenue question, Joachim will explain that again.

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Joachim Preisig, Freenet AG - CFO [10]

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I will not explain about service revenues because we published today preliminary figures and there is a total amount of EUR3.126 billion for mobile and one big reason for the increase compared to 2015 is as Christoph already explained is a piece of hardware, not one piece but a position of around about EUR50 million, more hardware revenues which were generated in 2006, compared to 2016 which explains how revenues are going up and also explains why the gross margin is comparable even slightly higher compared to 2015, because the hardware revenues they have an almost through zero margin already on the level of gross profit.

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Unidentified Participant [11]

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thank you.

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Operator [12]

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The next question comes from (inaudible). Redburn. Please go ahead with your question.

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Unidentified Participant [13]

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Thank you for taking the question. I just had a question on the sort of underlying mobile-only EBITDA. If one deducts the contribution from Sunrise, it looks like the growth has gone from positive EBITDA growth in Q3 or 2%, 3% to sort of negative 1% in Q4.

So, it looks to us like the mobile EBITDA excluding Sunrise was somewhat worse than consensus expectations. Can you maybe give a little bit of color on what's driving the EBITDA pressures this quarter but versus last quarter? Thank you.

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Christoph Vilanek, Freenet AG - CEO [14]

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Yes, thanks for the observation. I think it's right what you're describing but I think overall for the year we met the consensus and the expectations, we were a bit lower in Q4 but that was due to a strong Christmas business and also accompanied by a bit higher acquisition cost due to higher proportion or hardware subsidies.

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Unidentified Participant [15]

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Okay. Thank you very much.

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Operator [16]

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Vikram Karnany, UBS.

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Vikram Karnany, UBS - Analyst [17]

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Apologies. Yes, thanks a lot. Two questions. Firstly, in terms of Sunrise EBITDA contribution once again, yesterday they guided for a small decline in EBITDA in 2017.

Should we then assume that even adjusting for PPA 2017 contribution from Sunrise should again on a proportion basis be remain broadly unchanged. Any thoughts on that?

And secondly in terms of data usage, the German MNOs have reported pickup in terms of data usage in the last three quarters again from a low pace in German mobile. I was wondering if you can give us an indication what is the average usage in your network and how do you see the growth wrapping up in the future? Thank you.

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Christoph Vilanek, Freenet AG - CEO [18]

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Thank you very much. On the first one, well we cannot comment on this, there is no specific guidance or even more details on that. I think you relate to the fact that they said the range was 600 to 620 and its now 595 to 610.

Well, I think we cannot add any more to that. We will continue to very conservatively quarter-by-quarter put those into our planning, but it will not come as a surprise at the end of today, but we will only be following their figures and we are not in a position to comment it about any risk of inside information and so on and so forth.

On the data usage, well I think there are a few things which we have to differentiate. One is, in our customer base, since we agreed the mass market supplier from the history the average data usage in the order of magnitude of 600 megabits per month.

If we look specifically on those ones that have an LTE usage, we are on around 1.5, if we compare this directly with the network operators, we are somewhat below the operators as far as they tell us, they all measure our usage so they can't compare it in detail.

If we then deduct from the network operator's business customers, it looks as if we are in somewhat on the same level. No real difference between networks, so I think even though network quality might impact speed, consumption remains the same across the three networks in our customer base, a bigger take up on LTE speeds overall is seen, but as I said before, I think we might also have still comparably low penetration of smartphones.

I think but latest figures around 61% or 62% of our customers who have smartphones, so there is still some room to pick up. We also tried to monetize this data pickup. We do offer specific tariff plans for those like late adopters, I would call them that are led in.

we are also by the way testing right now a new set of tariff plans where we include for an extra of EUr2 a month, we include full roaming excess in order to test what sensitivity is on the roaming.

So, there we might be in good shape to talk about that with the Q1 results. So overall, I think on those ones that have LTE, we see that the data consumption growth is higher than it was expected two or three years ago. So we're very much in line with what the operators experience.

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Vikram Karnany, UBS - Analyst [19]

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Thanks, just one quick follow-up on the roaming point. Please can you clarify what sort of roaming headwinds you are facing on EBITDA in 2017. I appreciate there is an element in terms of (inaudible), as you say, but is there any kind of indication that--

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Christoph Vilanek, Freenet AG - CEO [20]

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Well the short answer is roaming will not impact our business, the roaming changes. And that's due to the fact that we have these very specific agreements and contracts under the service provider rules and this is why we'll not be impacted.

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Vikram Karnany, UBS - Analyst [21]

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Okay, that's clear, thank you.

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Operator [22]

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Dominik Klarmann, HSBC.

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Dominik Klarmann, HSBC - Analyst [23]

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Yes, thank you for taking the question. So firstly on the TV business, and I understand you released the B2C story to the capital markets day, but maybe you can update us on the legacy B2C businesses. What's the revenue outlook there? Maybe you can quantify the potential revenue losses from private broadcasters after the switch off.

And then there's also been some headlines on you potentially selling parts of the radio business. So what's the background there and is that a relevant EBITDA contributor?

And then I guess someone has to ask you about your plans with Sunrise. So any update on your thoughts there?

And a third question, I understand the roaming impact for yourself is limited, but maybe you can share some data points around how much your customers are travelling abroad on average. How many days per year, or whatever statistics you have that help us understand the magnitude of roaming. Thank you.

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Christoph Vilanek, Freenet AG - CEO [24]

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Okay, let's do it step-by-step in the order that you have given. B2B business, Media Broadcast is split into three pieces; radio, network services and TV broadcasting. TV broadcasting is about half of the total as of today, so about a bit more than EUR100 million.

The agreement with the private broadcasters is that they pay a little less from July 1, but that the difference is not even a two-digit million amount a year. So this can be easily compensated, even if we only have let's say 200,000 subscribers, that's about it.

So yes, there is an impact, but as I said, I think from the top of my head, order of magnitude is EUR8 million to EUR9 million less of broadcasting B2B income from the private broadcasters and that will be offset with the terms and conditions that we have agreed upon for the B2C cost of content and the license we pay to them.

So I think that's going to be on the TV side you will not see a change.

On the radio, what we've done is we have communicated that we will not own -- or we are about to sell the (inaudible) sending devices for (inaudible). This means that we will still do the service, we will still get the money for the service. We are the only ones that maintain it, but we have purely sold the hardware.

This hardware is almost written off. There will be a small cash in from the sale and there will be part of this cash in needs to be invested in order to set up the full service. So again on this one, this will not impact the revenues. It's a pure sale of passive infrastructure.

The reason why we're doing it, a logical next question is why are you doing it then? Well it's a regulatory move and I think it can be very plain and simple. We have had problems with the regulator I would say, since everything's written off. Basically there are no costs associated, so you have to give it almost for free to third party providers like [Uplink].

We said well, but we need to reinvest, we need to refurbish it, we need to -- some of the equipment is outdated. And then they said yes, but still it's written off, so the regulatory price is almost nothing.

We said okay then, the consequence is that we sell it basically to the broadcaster, so to (inaudible) we offered the service to them, but they will in future own the equipment and if the equipment is outdated and needs to be replaced, they have to pay for it. That's all, but no impact on revenue, no impact on EBITDA. It's a regulatory move, we get rid of the hardware.

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Dominik Klarmann, HSBC - Analyst [25]

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Sorry and the EUR8 million to EUR9 million revenue loss is for half a year, so the annual run rate will be double?

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Christoph Vilanek, Freenet AG - CEO [26]

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No, it will be an annual run rate.

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Dominik Klarmann, HSBC - Analyst [27]

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That is the annual run rate? Okay.

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Christoph Vilanek, Freenet AG - CEO [28]

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But as I said, then you can reverse engineer that a very low number of subscribers would immediately offset it, that's basically the deal.

So on Sunrise, thanks for having asked the question, there are three questions. The option 1 is everything remains the same. The second option is we get rid of the shares and the third option is we buy more shares and we do not comment on the likelihood of any option.

But we are comfortable with the development. We are active in the (inaudible) we accompany the Company and the fact that 12 months after we bought the shares they are on the same price level, also shows that we have not overpaid; we have underpaid. The Company develops as it should.

We think that the direction of the towers project, where they also get rid of the passive part of the network, is something that we have also strongly supported. It will lead to a deleveraging, so I think that's all we can say.

The last one on roaming, to be honest, I cannot really you a detailed report on this. We've looked into the roaming pieces. If I remember correctly from the latest analysis, the average customer is 12 days a year outside of the country.

You can easily guess what is the favorite roaming country for the Germans; it's Majorca, followed by Austria and Italy.

And that depends on the winter or summer season. But that's as far as we can tell. It is a minor part on our revenues.

Historically on roaming, we had very small margins. This is why it's not really impacting us and the fact that it's now included into the packages will lead to the situation that we might have a bit of a small step down on the ARPUs, because there's a number of customers that have international roaming options and this will not be necessary in future. But in terms of gross margin and EBITDA, it will not impact our business.

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Dominik Klarmann, HSBC - Analyst [29]

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Thank you and maybe one last question then on other revenue streams in the TV legacy business. There is the media production unit as well, any other headwinds apart from those EUR8 million, EUR9 million from the private broadcasters?

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Christoph Vilanek, Freenet AG - CEO [30]

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No, a very stable environment. The majority of those so-called network services contracts are long-lasting contracts, up to 10, 12 years. We manage, for example, for part of the -- in fact we manage the entire cable network and things like that, we do other services for the broadcasters.

It's extremely stable. We are reviewing with the management team on a monthly basis and we have secured revenues for the future. And this has not changed ever since we have done the first due diligence.

These plans are very flat line, a very, very constant business. There is also no relevant layoffs or anything like that. Very, very stable, I would say boring business. It's more an institutional utility investment on that end than anything else.

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Dominik Klarmann, HSBC - Analyst [31]

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Thank you very much.

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Operator [32]

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Robin Brass, Hauck & Aufhauser.

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Robin Brass, Hauck & Aufhauser - Analyst [33]

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Yes, thank you for taking my question and hello. One question on the Sunrise contribution, so if I understood correctly the PPA of Sunrise basically increased the amount where your share comes from.

Could you help me to understand, is this EUR120 million, EUR125 million of the PPA that increased your contribution for the EUR36 million of EBITDA?

And secondly, how much of the debt in your -- this year debt was rolled over on into new debt? Thank you.

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Joachim Preisig, Freenet AG - CFO [34]

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I'll start with the Sunrise results. I explained that already the last time, but I definitely agree; it's a very complicated process. Because yesterday Sunrise published their results, they published CHF87 million net income.

We have then to take the portion from March 23, up to the end of December, which translates then in EUR74.4 million.

Therefore, we have a share of a little bit more than 25%, which translates in EUR18 million net income, before elimination of the purchase price allocation, which is dedicated to Sunrise. Because you have to do an own [shadow] PPA at the end of the day.

This means that we have to add the Sunrise portion, which makes then a portion of around about EUR18 million. So that's the total amount which goes to EBITDA, infinite account is EUR36.5 million. Later on we have then to deduct an additional EUR50 million, which is our shadow PPA, you will find all these numbers then in the final report.

This results then at a net income position for us as freenet on the level of really net income of all the Sunrise. But in the EBITDA, it goes definitely with the EUR36.5 million.

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Robin Brass, Hauck & Aufhauser - Analyst [35]

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Okay and regarding the debt you rolled over this year, how much was that?

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Joachim Preisig, Freenet AG - CFO [36]

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Sorry, could you repeat that question, because I couldn't catch it?

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Robin Brass, Hauck & Aufhauser - Analyst [37]

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How much of your debt was rolled over this year in your free cash flow?

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Joachim Preisig, Freenet AG - CFO [38]

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Nothing. I mean I'm not sure if I understand the question. What do you mean exactly?

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Robin Brass, Hauck & Aufhauser - Analyst [39]

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That means you issued new debt this year, but you also repaid some loans. So how much overall was it that you basically rolled over?

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Joachim Preisig, Freenet AG - CFO [40]

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We paid back EUR350 million already and the rest is around about EUR1.5 billion that are rolled over then. I think this was the question.

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Robin Brass, Hauck & Aufhauser - Analyst [41]

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Okay, thank you.

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Joachim Preisig, Freenet AG - CFO [42]

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Okay, sorry for the misunderstanding.

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Operator [43]

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Ulrich Rathe, Jefferies.

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Ulrich Rathe, Jefferies - Analyst [44]

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Thanks very much, I didn't want to monopolize the first time, so I have two more questions. The first one is on Telefonica Deutschland.

I was wondering whether you have comments on the relative mix, is that shifting? Do you see the network quality of Telefonica Deutschland improving and that having a customer impact?

Also do you have any comments on the service quality issues that they reportedly had? It's interesting insofar as you already said, that they obviously have a lot of partner intake and I was wondering how freenet fairs in that mix.

The second question I have is a very big picture one on the German market. The Vodafone and Deutsche Telekom are obviously segmenting the market very heavily by keeping their LTE product exclusive and pricing it really at a very significant premium.

What is the risk, in your view, that once Telefonica's LTE becomes more credible that these relatively high prices from Deutsche Telekom and Vodafone become undermined overall and the market goes into a down drift?

What do you think, that essentially Telefonica will be able to price up towards these high levels and LTE will remain an exclusive high level proposition in the market, or not? Thank you.

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Christoph Vilanek, Freenet AG - CEO [45]

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That's a very good one, let me start with the Telefonica. I think we have obviously contributed to the entire customer shift. We also had to replace some of the SIM card stock from E-Plus to O2 and we have witnessed a switchover.

The interesting thing for me was that we did not have any problems when the real switch off of the E-Plus network happened, so the customers did not even realize. There might become dropouts, but that was then if somebody was in the logic second of the switch off on the phone, so that was minor and we couldn't realize.

Later on we were also confronted with the problems that they had on the network, but I have to say that the customers were, at least our customers on the Telefonica network, they were okay with our explanation and they were not suffering so heavily that it would have impacted churn or something like that on the network.

The customer service problems they've had did not affect us at all. We were trying to maintain our service levels, we were trying to catch the majority of the problems of our customers within our customer care and tried to avoid straight content into theirs.

So I think I've seen it, I've watched it, but we did not see an impact. Overall, we have to say that to keep up customer care quality these days is a real challenge in Germany. You might also have seen that we have handed over our customer care to Capita, which you will see in the number of employees with the next quarterly report.

They're not changing cost there, but you will see it in the -- well no personnel cost anymore, but now it's third party cost. We could easily hire another 500 agents there for our services. It's just that the entire market is understaffed, it's very, very difficult to get people on board, qualified people on board.

Customer care business today is -- those people need to have a certain level of IT knowledge, they need to be very capable to handle a number of legacy systems. It is still a demanding job, but on the other hand, Germans are not ready to pay for service and this is why we have paid basically minimum wage and the end result is that everybody is suffering the problems.

Capita took over our facilities and they told us the day of starting they currently are searching for 1000 additional agents, not for our service but for the service that they have acquired from others. So I think that is an overall problem which Telefonica was heavily affected. We are also affected.

Part of our outsourcing goes to Argentina now, we have outsourcing in that area. Our Sunrise colleagues do outsourcing in German language into Turkey. So this all shows that basically we have a full rate of employees in Germany, that is ultimately the topic.

On the third one, on the LTE, well I think Telefonica is in a pressure situation because the remedy that they have had based on the merger led to the fact that (inaudible) is bringing prices down and they have still a margin on very low end consumer prices.

They have also the obligation to give, to hand out, to make LTE available for all their wholesale partners, given the remedy and that leads to the situation that we see out there right now.

I think from an end consumer standpoint, when people talk about 220 or even 400 megabit speed, the end consumer -- on your smartphone there's no need for more than one Mbit. If you have a 4K picture on a five inch screen, you need about 600K or 800K. so there is no need for 6, 10, 20, 40, 50, 100 and so on and so forth.

And I think this is -- at the end of the day, Vodafone and Telekom are not monetizing the data speed; they are monetizing perceived network quality. And to be very honest, I think Telefonica is going to be a very, very long way and even four, five years down the road people will perceive the other networks as better ones.

This is a really tough statement in the direction of Telefonica, but I've had the discussion with Markus Haas.

To flip the perception with the end consumer is the most difficult thing and even connectors and things like that are not that relevant in Germany, it's still very different from Switzerland.

So my answer is the two, Vodafone and Telekom, will be able to charge premium prices compared to Telefonica, I would say, order of magnitude EUR5 to EUR10 a month and this will remain the same for the upcoming three to five years. My very personal guesstimate on that.

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Ulrich Rathe, Jefferies - Analyst [46]

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Very helpful, thank you very much for that.

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Operator [47]

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Martin Jungfleisch, Kepler Cheuvreux.

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Martin Jungfleisch, Kepler Cheuvreux - Analyst [48]

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Yes, hi, good morning, just a couple ones left. First one, maybe if you could tell us the number of customer gross adds and if you could split those maybe into the channels, pre-paid, post-paid.

And secondly, do you now increasingly push your SIM-only for the klarmobil brand, as we have witnessed in the latest TV commercial?

The second one then on the ID checking you mentioned for pre-paid products to third parties. Could you give us an indication on revenue EBITDA for this year and next? Is this anything significant, or no?

And then lastly on TV, not sure if you can comment on the sale of receivers for freenet TV. And also do you see increased competition now, because we have heard some reports about Vodafone pushing into the IPTV segment and DT now increasing marketing their bundle offer?

And do you take the switch off as an opportunity? And it's media markets are torn, incentivized to sell freenet TV rather than their other products, for example, the satellite dishes and IPTV products and so on, thanks.

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Christoph Vilanek, Freenet AG - CEO [49]

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Okay, thank you. Well the first one, gross add split and so on and so forth, we do not disclose it for competitive reasons and we will not change that.

Second one, split into -- is there a relevant shift into SIM-only away from subsidized? No, it's not, I think that remains the same. It's a bit driven by the innovations on the hardware market. When there is new hardware available, then the MD share is going up a bit.

And the opposite, if there is no hardware in our own retail shops, both products more or less sit next to each other on the shelf and there we can see the difference. But I think the upcoming months we will have new Nokia phones, some innovations from Samsung and HTT coming.

There is an excellent news-only product and there will be most likely iPhone 8 during this year. So I think subsidized market will remain the same size than it is in the past.

Third question on the web check, the company that we are running there is called CheckTech Services. No, this is not going to be -- will not have a relevancy in terms of revenues or EBITDA. I was mentioning it because we are prepared for this shift.

All the online activations for SIM-only need to be very (inaudible) of June onwards need to be verified. We have the technology there, we have a proven business there. People can do it via their PCs, their laptops, their tablets, or even in a smartphone app.

But this is going to be a challenge, for example, for ID. If you buy a new pre-paid with ID you need to do a web check, because they do not do a verification right at the counter. So I think there is going to be some challenges for people that are not prepared, but we will not see it in the relevant bottom line.

I also have to say that this is a total company of (spoken in foreign language), it's 50% owned by freenet and 50% sits with another shareholder.

MSH, yes, they do freenet TV, they also do waipu.tv. MSH believes (inaudible) will achieve a market share on TVBT hardware of 40% to 50%, which is even more than they would regularly do on so-called (inaudible) electronic equipment.

They are obviously incentivized not only making a typical margin which they organize with the hardware vendors, but they also get a -- would get a share if they sell vouchers for subscriptions and that is the same kind of contract they would have with HD-plus.

So yes, we are active there, we are working with them and certainly the fact that we've been around for 25 years helps. Also our promoters there are now working heavily on the TVBT for the next four to six weeks, because they expect a certain rush.

The last question on -- no, I will not give indicators yet on the devices sold. We have seen some campaigns, namely from Vodafone, trying to capture TVBT customers. Well I think that their competition, as long as it remains within (inaudible) rules, they have a little bit overstretched the rules and thanks to [Spiegel] and other online services, they have not really been applauded for it.

But taken a bit of a bat and also Hannes Ametsreiter himself called me and said that he apologized for that type of advertising, he was not happy either with it, but things happen with some overambitious people in the marketing department.

Overall, I think the fact that IPTV becomes more a -- or gets more of a presence in public notion is supporting our waipu activities and I think that is a positive trend which we see. I think at the end of the day, the key question is how long will it take for people to understand that IPTV is not OTT.

So it's not replacing -- or it's not an additional TV access for smartphones, but it is a relevant alternative access to cable and satellite and terrestrial. That's definitely something where we all need to work hard on.

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Martin Jungfleisch, Kepler Cheuvreux - Analyst [50]

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Okay, great, thanks.

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Operator [51]

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Usman Ghazi, Berenberg.

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Usman Ghazi, Berenberg Bank - Analyst [52]

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Hello, thank you for taking the follow-up. I just had a question on cash flows, Q4, the working capital, I guess, ended up being more positive than in the senses expected. I think people were expecting that the window of payment would come in in Q4. I guess that didn't happen.

Generally, is there more debt factoring, the free net debt to support the working capital in Q4? And if so, how much? Thank you, please.

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Joachim Preisig, Freenet AG - CFO [53]

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No, we have treated working capital as anticipated and as forecasted. And you remember that we adjusted a little bit, we had out there a guidance of EUR300 million excluding the Sunrise dividend. And we have mentioned in the call in November that we could expect a portion which is more the EUR310 million.

That's what we are proposing and that's what we have delivered. And we just did regular work on that position also in Q4, as we have done that all the time.

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Usman Ghazi, Berenberg Bank - Analyst [54]

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Can I just follow up? So if I look at the working capital change in 2016, it's minus EUR4 million, as it's disclosed in the presentation. However, we know that the media payment goes through working capital and I understood it to be EUR18 million to EUR20 million.

You've got the (inaudible) the Media Broadcast Group lease rentals that are being paid, that's EUR120 million. So how is it that the working capital, despite EUR40 million, is only minus EUR4 million?

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Joachim Preisig, Freenet AG - CFO [55]

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This is just regular things and you could add now 1000 additional provisions which are running through the net working capital, at the end of the day. On the other side, we also increased a portion of factoring by EUR20 million because, as I explained before, we made EUR50 million additional hardware revenues.

This also runs against working capital, so we just put action (inaudible) EUR20 million and as I said, this is regular work on the networking position, which is resulting in the minus EUR4 million.

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Usman Ghazi, Berenberg Bank - Analyst [56]

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The question is it sustainable? Because a positive inflow of working capital--

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Joachim Preisig, Freenet AG - CFO [57]

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Of course it's sustainable, of course.

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Usman Ghazi, Berenberg Bank - Analyst [58]

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Okay, so this is positive, this is positive inflow of working capital to offset the payment to Media Broadcast?

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Joachim Preisig, Freenet AG - CFO [59]

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Yes.

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Usman Ghazi, Berenberg Bank - Analyst [60]

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We should continue to model that for the next couple of years?

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Joachim Preisig, Freenet AG - CFO [61]

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I don't give the guidance so far, but it's sustainable free cash flow, because we also give a sustainable financial policy, what is the latest to 50% to 75% of the free cash flow. And we said all the time that we will pay sustainable dividend at the end of the day. So clearly--

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Usman Ghazi, Berenberg Bank - Analyst [62]

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So sorry, the question is -- just so I'm not misunderstanding, I'm not questioning the dividend, et cetera. All I'm saying is that it's quite hard for a business to sustain a positive inflow of working capital year in and year out.

Obviously for freenet there is almost a EUR40 million drag on working capital, because there's some payments that are in deep dive, they go through the working capital, that's fine.

But to offset that, they need a positive inflow of working capital every year. And we've seen that for the last two years. I'm just wondering how can that be sustained going forward.

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Christoph Vilanek, Freenet AG - CEO [63]

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Usman, if I may intervene here, I think you're right, but you're describing our ambition.

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Usman Ghazi, Berenberg Bank - Analyst [64]

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Okay.

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Joachim Preisig, Freenet AG - CFO [65]

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And just to state it again, because we started with minus EUR50 million net working capital back in 2011, if you remember. And it's just good working capital management at the end of the day and this is exactly what we have to deliver and what we will deliver.

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Usman Ghazi, Berenberg Bank - Analyst [66]

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Okay, thank you.

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Operator [67]

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Maurice Patrick, Barclays.

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Maurice Patrick, Barclays - Analyst [68]

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Yes, hi guys, it's Maurice from Barclays. So thanks for taking the questions, a couple of quick ones. The point you made earlier in the presentation about the end consumer doesn't see the need for high speed LTE, but you need it for consumer demand.

Lots of the mobile operators keep saying that you give people an LTE handset, they're used more, it goes faster, their (Inaudible) goes up, they're happier, they do much more with it. But you say people don't see a need for it, so I guess some more color around that would be very helpful, thank you.

And I guess the second question really around conversion products and again, Deutsche and Vodafone make a big deal about their conversion products. Do you play in that segment, or is that a different -- I mean do your customers come in asking for TV products, or do you very much operate in a different segment to that? Thank you.

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Christoph Vilanek, Freenet AG - CEO [69]

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Well on the first one, I think that I'm not contradicting what the operators say, I'm just saying that if an operator tells me that they're working on 225 megabit per second, then my question is what do you need it for?

And they say well, we need it because if under that [PlayStation] we have six customers with a tablet, watching 4K video, we need to have 225 because otherwise we could not deliver a decent service to the individual.

And I say the end consumer understands that even 42, if you have a big PowerPoint presentation and the big PowerPoint presentation loads in let's say 10 seconds, then I'm ready to accept it. Because well even my browser in my office will take a few seconds.

But this is for me contradictory. An end consumer needs one or two Mbit and then he can do everything he or she wants, if it's available. And the operators talk about a demand for 225 and then he says on 4.5, LTE 4.5 they could already deliver [one gig]. I say like what for?

So there is a need of network capacity to supply efficient delivery of service, because of the huge number of customers within a certain sell. But the individual has no need for more than one or two Mbit, even with high consumption, it just doesn't work.

We measure it on our IPTV, we deliver for a 60 inch TV screen, we deliver HD with 6 Mbit via [fixed line]. Please tell me what do you need 42.5 for. I hope that I could illustrate that is not a contradiction as such, but one is a technical statement from a network engineer and the other one is the end consumer perception and the end consumer need.

And the other one on conversions, yes, I think all incumbents across the globe focus now on conversions. I think the first [consignment] that have given that tip to go into conversions in effect in the year 2000, finally is there. I think it's helpful, I think what Deutsche Telekom does there on (inaudible) is they do a great job.

I think there is a market of let's say 25% of the entire households interested in such a product. So if the overall market for us is shrinking based on that, but I guess it's the same people that have been very loyal to Vodafone and Telekom before.

We do have an agreement with Vodafone and Telekom to do conversion products also for our customers, but we have seen that demand was relatively low on this.

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Maurice Patrick, Barclays - Analyst [70]

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That's very helpful. And a quick follow-up to the first question, I wasn't really saying that people need the gigabit speeds, but do they come into your stores saying hey, I want this one gigabit to be because I see it? Do they want to have it even if they aren't using it? Is it a key selling factor that works?

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Christoph Vilanek, Freenet AG - CEO [71]

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No, it's not, it's the key selling [stakes]. If you try to sell your service to the CIO of BMW, then with his 46,000 SIM cards and fighting with the wireless LANs in the production hold. For those people it is, but for 99.8% of the population, they don't even know what an Mbit is.

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Maurice Patrick, Barclays - Analyst [72]

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Great, very helpful, thank you.

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Christoph Vilanek, Freenet AG - CEO [73]

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But those people come in and say I would like to watch video on my handset and then you should have LTE, because on 3G sometimes it's not stable enough. But take an LTE product, that's it. So for them, LTE stands for moving pictures on their platform.

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Maurice Patrick, Barclays - Analyst [74]

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Thank you.

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Operator [75]

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Benjamin Kohnke, Deutsche Bank.

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Benjamin Kohnke, Deutsche Bank - Analyst [76]

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Yes, good morning, gentlemen, thanks for taking my questions. Just one quick step back to operations please. Now Q4 obviously seems very strong in terms of post-paid net debt and I understand you don't really share any details around this, but maybe from a [bird's] perspective, have there been any significant changes in your distribution mix in Q4? Or has it been relatively stable?

And maybe related to that and the follow-up to one of the previous questions, now Metro is now about to spin off the consumer electronics business quite soon. I was just wondering if you could share some thoughts if this will have any impact on your relationship with media markets with a future company going forward.

Will the people you talk to change in any way, or will the contract just go on as usual? Thank you.

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Christoph Vilanek, Freenet AG - CEO [77]

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Yes, thank you for that question. I think the one thing that we have seen last year and in the Q4 it was specifically visible, the SIM-only, so the non-subsidized business goes more and more into online and there is more and more competition.

There are players in the market with the relevancy that we haven't had a year before, for example, (spoken in foreign language). I think in the months of December, they did a nice five-digit number of activations.

We also know that Amazon is in Germany still looking for an exclusive partner for mobile telephony sales in their shops, so I think there is a shift from some traditional players to new ones.

As I said, like CHECK24 is doing a great job there, whereas others are losing a bit. Also some of our websites that we have historically run under our own brand, but under other brands we have seen that they go down a little bit.

We have seen a strong, very strong media market quarter, so brick and mortar retail is still strong. But even with (spoken in foreign language) we realize that their online is also becoming more and more important.

As far as I know and I speak to Peter [Haas] every now and then, the future CEO of that electronic unit, we are -- Germany is by far the best performing (spoken in foreign language) country in terms of mobile phones and mobile contracts and service contracts and such. They turned down, in Austria, their own brand.

They have lost significant market share in Switzerland, in Holland, where they had this Carphone Warehouse deal, it was never rolled out.

Having said that, all the signals that we get is from Peter and from the others that they are very, very happy about the relationship we have, the way we cooperate and this will not change at all through their IPO. I guess the opposite; they have many other fields of challenges, so they will -- and they're not challenging our relationship at all and the majority of people remain the same.

So I'm working with those guys for 14 years and this is the first year where we did not have difficult talks or arguments or any shouts or something like that.

It's a very, very good relationship, thanks to [Rickmann von Platen] in our team who is in charge of it. He could calm down and release all the problems that we've had in the past.

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Benjamin Kohnke, Deutsche Bank - Analyst [78]

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Very clear, thank you very much.

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Operator [79]

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Dominik Klarmann, HSBC.

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Dominik Klarmann, HSBC - Analyst [80]

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Yes, thanks, just on the future guidance, so far you've always given a very helpful, very detailed two-year guidance. Can I expect the same going forward and then on top obviously some sort of divisional breakdown?

Or how are you thinking about the parameters of the future guidance? Thank you.

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Christoph Vilanek, Freenet AG - CEO [81]

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Well we have, as Joachim said, first of all, we have delivered on promises. Second, we have always been -- tried to be as transparent as possible and as predictable as possible. So when we do the guidance for 2017, based on first quarter operational figures including the TV business, we will certainly deliver a quite detailed one with the segments for this year.

And I think we will not step back to a full detailed two-year guidance, but we will give indicators on the future developer for the year after.

We have actually in length discussed this internally. We think that the fact that we are now entering a new segment, that those acquisitions need to become more mature.

A two-year guidance in that business would be a bit too difficult, a bit too vague and we don't want to go back to ranges, but we will give a clear detailed guidance with all the parameters and segment breakdown for 2017.

And we will include indicators on 2018, whether we think it's going to continue the direction or something like. I guess it will be close to what you have seen before.

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Dominik Klarmann, HSBC - Analyst [82]

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Thank you.

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Operator [83]

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There are no further questions.

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Christoph Vilanek, Freenet AG - CEO [84]

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Well, thanks, everybody, for those interesting discussions, for those detailed questions. Looking forward to meet all of you in Cologne and I'm happy to take any questions there.

And I hope you can join the day, there will be lots of demonstrations and you will be able to experience the products. And I think that experience, seeing is believing, so please do us a favor and join. Thank you.