Good afternoon, and welcome to Deutsche Telekom's Conference Call. At our customer's request, this conference will be recorded and uploaded to the Internet. May I now hand you over to Mr. Hannes Wittig.
Yes. Good afternoon, everyone, and welcome to our Q2 20 20 conference call. With me today are our CEO, Tim Hoetkers and our CFO, Christian Ihlich. To be precise, Tim is actually in a remote location. And Tim will first go through a few highlights, as always, followed by Christian, who will talk about the quarter's financials in more detail.
And after this, we have time for Q and A. And please, as always, pay attention to our usual disclaimer that you find in the presentation. And with that, I hand over to Tim for his opening remarks.
Yes. Thank you, Hannes, and welcome everybody here also from my side. I think it's a big picture day, as Hannes pointed out in the pre prep call today, showing that we are well on track both sides on the Atlantic's, giving the highlights of our very strong first half results. As usual, my overview will be followed by Christian, and he is going then into the details. I think this was a very special quarter.
We incorporated Sprint's operation and we created the New T Mobile. And with New T Mobile, we even created the New Telecom. We entered a win win agreement in this quarter with SoftBank, creating a big option value for Deutsche Telekom shareholder going forward. And we delivered operationally on a very strong basis despite COVID. And I hope you have compared our numbers with the competitors' numbers.
I'm really proud about my organization and how we performed. We delivered headline growth, both inorganically anyhow and organically, commercial growth and strong earning growth and we're ahead of our larger European peers on EBITDA. In the U. S, we overtook AT and T and branded customers. And outside of the U.
S, our organic EBITDA grew by 4%. We maintained our high investments and we took big steps towards 5 gs leadership on both sides of Atlantic, love to go into that one later on. Despite COVID-nineteen, we reiterate our full year guidance for ex U. S. EBITDA, which we handed out to you before COVID and with regards to the free cash flow.
And we are also able to provide strong full year guidance for the whole group, including the new T Mobile. I'm also really happy that we are seeing record employee and customer satisfaction. Honestly, in pieces double digit growth. And outside of the U. S, we had the highest employee satisfaction ever measured.
Customer satisfaction is also up to record levels in Germany and elsewhere across our footprint. And even this is a good message, people really appreciate the work we have done so far in this COVID crisis, providing good connectivity, very stable, resilient services. Move on to Page 4 and the Sprint merger, which is putting us into a total different league. 1st, in the U. S, we have now overtaken AT and T in terms of branded wireless customers.
2nd, we have the best spectrum position. You know that it is a spectrum deal and we will build the network on this basis to the best infrastructure in the U. S. And we have confirmed $43,000,000,000 of synergies. And Neoplis, we are trying to beat this estimate.
I think it's even very good to see how this new team around Mike Zeville is coming together and the great spirit which this team has working remote but executing along every KPI which we have laid out pre merger. Slide 4 shows a few key stats of the new Deutsche Telekom First merger. We are now a 100,000,000,000 dollars turnover company. We are providing an annualized EBITDA close to €40,000,000,000 Our balance sheet is now €270,000,000,000 big and we employ 230,000 people across the globe. And we look forward to huge benefits and future returns from this transaction for Deutsche Telekom's shareholders.
Let's look at quick summary of our first half year financial performance on Page 5. Headline financials are up strongly boosted by the first time consolidation of Sprint. That said, organic revenues were stable year on year and organic EBITDA was up 8.6% in the first half. I think this is an unbelievable strong number comparing that most of our competitors are suffering big time due to COVID crisis. Free cash flow was up by 19.6% year on year.
And all segments contributed to our strong EBITDA growth with one small exception, our system unit, which was not able to mitigate corona related headwinds completely. On Page 6, we show some of our key investments outside of the U. S. Look, we call it the flying wheel, which is going on. In Germany, we now cover 35,500,000 lines with fiber, of which 1,800,000 with gigabit connectivity.
In the EU, we passed 6,300,000 with gigabit capable lines, bringing the total footprint, including Germany, to 8,100,000. And we now have almost 500,000 lines on super vectoring, up 4 times in the last 12 months. We added a benchmark agreement with the city of Munster to our FTTH toolbox, and that is the way of partnerships going on. We further improved our service KPIs. Our first contact resolution rate, which is our most important KPI for services, up more than a quarter in the last 12 months.
Complaints are down by almost half. T Mobile won the JD Power Customer Care Award again with the highest score ever seen. And we keep investing in mobile network leadership, and we have geared up in 5 gs. I come to that on the next slide. I always promised that we are taking over 5 gs leadership in all our markets.
And when we spoke last time, I think we hided a bit our plan for Germany. Remember I said, look, let's see what we are announcing throughout the year, but now we can talk about it. We are now covering half of the country with the full 3 carriers of 2.1 gigahertz spectrum. Very silently, we have bought spectrum free spectrum from Telefonica, 2.1 gigahertz, deploy that on our infrastructure across the country. And we are now able to provide this coverage all over the places without building new sites.
And on top of that, we are building leading 3.6 gigahertz coverage. So we are just accelerating our build out by using 2.1 gigahertz with free spectrum. And in addition, over time, when we get the approval for all the new rooftops and towers, we will increase our 3.6 gigahertz coverage on top of that. And with this, we will more than double provide speeds for our German customers already by the end of next years. And as you know, this is, the way ahead for our German peers.
I'm very happy and very proud about the technical team of Germany who made this silent strategy, live, and that we have now an advantage of 4 to 5 times more coverage than Vodafone and even a significant advantage when it comes to speed. Last week, you heard T Mobile U. S. Talk about the great progress we are making. T Mobile US achieved a world first by launching standalone 5 gs Nationwide last week.
And TMUS already covers over 250,000,000 POPs with 5 gs in 600 megahertz area. 5 gs in 2 point 5 gigahertz has been deployed in 8 markets and there we see average speeds of 300 megabits per second. And as you also heard on their call, T Mobile is upgrading sites to 2.5 gigahertz at a rate of 700 sites a week. We also invested in 5 gs elsewhere in Europe. In the Netherlands, we defended our spectrum lead in last month's auction and we already cover 80% of the Netherlands with 5 gs and aim for full coverage by year end.
And we are also off to a strong start in other European markets, especially Austria and Poland. Looking to Page 8, I'd like to draw your attention to our customer growth because this is the basis for what we are. We are not only a yield company, we're even a growth company. And we remain strong during the crisis. Remotely, we were selling more by our service center than ever before.
In our European footprint, we added 1,300,000 new converged customers. And in Germany, more than 15,000,000 homes are served by our fiber products now. And we saw solid mobile customer growth on both sides of the Atlantic despite corona, and Christian will give you all the numbers for each of the markets. On Slide 9, let me explain you our guidance for this year. I'm taking this in steps.
Our ex U. S. Guidance is very simple. There is no change. This is despite the COVID-nineteen crisis.
We are able to mitigate the headwinds so far, and we believe we can do this for the remainder of the year. Our group guidance is based on our ex U. S. Guidance. For EBITDA, it was 13,900,000,000 euros At the contribution from T Mobile's year to date, for EBITDA based on IFRS, this was 9,500,000,000 At the midpoint of the guidance, you heard from T Mobile last week €11,200,000,000 including Sprint.
And finally, we deduct the U. S. GAAP IFRS bridge that we expect for the remainder of the year minus 400,000,000 For 2020, Group EBITDA, this gives you around €34,000,000,000 For Group free cash flow, this adds up to at least $5,500,000,000 And this is after an expected group cash CapEx, no cuts at all, with now €17,000,000,000 of volume and this is without spectrum. And again, this is based on the TMUS guidance last week, plus an unchanged outlook for Europe. So very brave, very committed and very strong half year of Deutsche Telekom in this difficult environment, beating our competition.
And that's enough for me today. So I hand it over to Christian.
So thanks, Tim, and welcome also from my side. Let me start with the typical overview on Page 11 and highlight some of the financial results. So reported revenues were up 35%. On an organic basis, we would have been a negative 0.6% after the 1.1% growth, which we showed last quarter and that is very much driven on the top line throughout the COVID-nineteen crisis. If you take a look at the EBITDA after leases, this month growth including Sprint by 56% organically, you see there is a strong 8.4% after the 9%, which we showed last quarter.
Our performance also on the ex U. S. Is very stable and nice. So reported on a reported basis, our EBITDA grew by 3.3 percent organically by 4.1 percent and last quarter we basically reported out a 4.2% growth. Free cash flow has massively improved by almost 60% this quarter and the contribution is coming from both sides of the Atlantic.
The earnings adjusted earnings per share were down by 4% this quarter and obviously we have a big increase in net debt, but we will get into this one in more detail later on. If we're moving to the next page, you see the organic growth momentum DTX U. S. And the U. S.
And you see that we're showing a very stable progress on both parts of the business. So let me give you also a little bit of an update on what is the impact on the corona crisis, which we gave you an overview throughout the Q1 results. And I would say by and large, we're pretty much seeing what we were anticipating. So we're seeing a significant impact, especially in Q2 when it comes to retail roaming, but also when it comes to less visitor revenues. And that is very much in line with the expectation which we had.
We are also seeing on the flip side, which is a tailwind effect that the out of bundle revenues, especially in Germany and to a lesser degree in other European operations are much higher than we anticipated it to be and that obviously offsets some of the roaming effect. We're seeing on B2B, I would say a bifocal result. Obviously, the enterprise business of T Systems is impacted significantly, whereas the SMB or SME business is still steady. On the other two impacts equipment revenues and bad debt development, we haven't seen a lot of deterioration in the second quarter. Its equipment revenues are down a bit.
On bad debt, we don't see anything. I think we're seeing basically very much comparable performance to last year's results. So the key question is now going to be what's going to happen in the Q3 and what's going to happen in the Q4. Obviously, we have only limited visibility, but for the time being, what we're assuming is that we're basically staying in line with that impact, which we have shown you in Q1. That is also one of the reasons why we are basically reiterating the guidance both on EBITDA and free cash flow for the business ex U.
S. Let me move over to the segment performance and start as usual with Germany. And let's move over to page 13. What you can see is basically overall revenues grew by 1.1% and the EBITDA growth sees a or saw a slight acceleration to 3%, but and that's actually well above our full year target. So from this perspective, very, very nice.
The total service revenue growth accelerated to 1.6% year over year. This is very much driven by the fixed line performance, which we have seen in the Q2. Moving to the next page 14, mobile service revenue declined by 1.1%. That obviously includes all the roaming effects. If we would exclude the roaming effect and the visitor effect, we would be close to 2%, which would be in line with our midterm guidance on the service revenue.
Also if you compare the performance in the previous year with this year, obviously we had to fight against a strong quarter in the Q2 last year. And therefore, we expect that we're going to see a slight improvement in the second half when it comes to the mobile service revenue. And again, as I said, the guidance which we gave at the Capital Markets Day of 2% remains intact. Fixed line revenues were up almost 3% year over year, very much driven by the strength of the broadband revenue growth, but also wholesale showed a very strong result. We talked about the tailwind effects of the out of bundle calls.
If you basically carve those effects out, they would qualify for 1 point 3 percentage points of these 2.9 percent. And you see that this is really significant what we're seeing here. So we expect this out of bundle revenue to stay there, but also what we're seeing is that the momentum is coming slightly down. So it's not like that's comparable, for example, with the March or the April numbers, which we have seen. We move into Page 15.
You see that the commercial performance remains pretty intact. So we continue to see significant growth in Magenta 1. We have registered about 110,000 branded contract net adds. I would say that's an almost normal intake slightly below that. The B2C churn remains on a low level at 0.8% and also we're seeing a significant increase on mobile data usage with our contract customers and that 50% obviously supports our more for more strategy.
We have now 3,500,000 customers on stream on that is an increase of 400 1,000 customers since the beginning of the year. Moving over to the next chart on Page 16. I think you may recall I was complaining about the broadband performance in Q2 last year and said, okay, we have to improve from here. This year, I have to reverse that assessment and I have to applaud for the performance of that 87,000. That is 3 times the numbers we have seen from the guys in the Sudorf and it's also the 2nd consecutive quarter where we're really well above the 40% net edge year at least according to our analysis.
And I think this is a very, very strong result. Also, if you're taking a look at the line losses with negative 62,000 that is pretty much a third of the previous year's line losses. And I think we'll look back into those, and we couldn't find a lower number since 2,004. And we had to stop at 2,004 because we didn't have any further documentation of the previous years. On fiber connection, we added about 400,000 fiber connections this quarter.
So that is comparable with last quarter. The TV performance is okay, but it's really also impacted by the shop closures and the limitations you have once you enter a shop. So from this perspective, I would say it's an okay result, but relatively speaking, probably the weakest number on that chart. If we're going to the next page 17, you see that the retail fixed revenues have grown by 2% and that is, as I said, driven by the broadband revenue growth of 5.5%, but also wholesale grew of 3 reasons: 1, there is upselling into higher bandwidths the second one, we have seen stronger interconnection revenues And I think we have to also bear in mind that the unbundling fee has been increased last year and that is obviously positively impacting the revenue growth of the wholesale business. So overall, I would say a very, very strong quarter from the German team.
We're really pleased also with the consistency how they're executing. So I'm confident that we see hopefully a similar result in the upcoming quarters. So if we're moving to Page 18, again, the U. S. And you know that the U.
S. Have given their Q2 results and also their guidance last week. In this 1st combined quarter, T Mobile reported a mobile service revenue growth mobile service revenue of €13,500,000,000 and an adjusted EBITDA of €6,900,000,000 Unfortunately, we have certain pro form a perspective unavailable on IFRS basis, so therefore, we have to basically take a look at the absolute figures. We move into the next page. You see how we're executing on an operational basis and T Mobile continues to grow their customer base, also in that combined with their combined company.
And bear in mind, the Sprint customer base was on a shrinking basis. So I think this has to be also factored into that equation. So the team is now working full steam ahead in order to basically combine the company to bring the network to life, which we promised. And I think what they already achieved is quite astonishing. So the Sprint retail outlets have been rebranded by beginning of August, 85% and if we knew that beforehand of the Sprint customers have a compatible handset on the T Mobile network.
More than 10% of the Sprint post back traffic is already on the network. We have that rollout of 2.5 gigahertz in 8 major markets and we ramped up the 600 rollout to 700 sites a week. So from this perspective, I think despite all the complications you have with the COVID crisis, I think T Mobile US, the new T Mobile is really off for a good start. Moving to the next chart, which is the European performance. And the European performance was especially impacted on the revenue side by, a, the roaming impact, which actually kicked in as anticipated, and that is a negative one.
We also had some negative revenue impact on the ICT business. So that one is also consistent with what we've seen at T Systems. And there were some currency headwinds, which we had to face, which basically qualify for almost for more than half of that revenue decline. However, if the team was able to basically respond to that top line challenge by rigorous cost management and that helped the European segment on an organic basis to basically show a consecutive EBITDA growth now for the 10th consecutive quarter. And by the way, I forgot to mention this, Germany is now on quarter 15 with consecutive growth.
If we move into the commercials of Europe, I think they're looking very good and solid to good. We see a good intake on contract net adds, especially given the fact that the first and the second month of the second quarter were really slow and we were really concerned, but then we had a massive rebound in June and that helped basically to show the quarterly numbers. You know that the European segment is very keen in order to drive customers into a converged contract relationship. This is why we have another 265,000 new converged customers and they're covering now more than 50% of their broadband base with that converged offering. Again, we had 69,000 net adds on the broadband side, very much in line with the previous year and we had a slight increase of 20 ks on the TV side.
So I think very solid performance and especially I'm really confident given the rebound which we have seen in June that we will continue to see good results from Europe. Now to the weak part of Q2 performance, that is T Systems. And I think as you may recall, we said in the Q1 call, so who is impacted relatively the most by COVID? And we said we expect this to be T Systems. Unfortunately, we were right.
So and you see that impact here now playing out in the second quarter. On a 12 months running basis, the order entry is down by almost 4%, revenues are down by 3.4%. The adjusted EBITDA is down on a reported basis by 2023 or 20 21 on an organic basis, doesn't matter, it doesn't move the needle. I think we have to bear in mind this is on a reported basis 29,000,000. However, I think that is you see that there is a negative impact on their business, and we expect that those headwinds will continue.
We're also hopeful that we see some positive signs in the second half, but there's one thing for sure, we have to accelerate the transformation on the T System side in order to respond to that situation. Group Development, on Page 23. So what you see is a very strong revenue growth of 4.8%, by the way, the strongest revenue growth which we have seen since we established this segment. Adjusted EBITDA grew by 13.2 percent driven by basically three effects. 1 is the positive revenue momentum, which we see in both business segments, the merger synergies, which are kicking in and the T Mobile Netherlands operations and a lot of other efficiency measures, which they have taken.
So it's a very strong performance, which we've seen on the Group Development segment performance. So if we move into the next page and we see basically a drill down on the Dutch business, again, the Netherlands are able to grow their customer base despite the COVID-nineteen crisis and I think this is a very good net order intake net contract intake. Also what you see that in a shrinking market and a shrinking Dutch market, T Mobile Netherlands is able to grow by 2 point 3%, also solid broadband net adds and a very, very strong earnings momentum. So this is really a very strong result. So next page, on towers very quickly.
I think we're seeing that we have a continuous recurring revenue growth in the tower business and that also the EBITDA after leases growing year over year. This is there is no surprise in that tower business development also relative to the previous quarters, but we're really happy with the performance of the GE Towers business. So that basically gets me to an end of the review of the operating segments and let's move on the group financials on Page 26. So as I said, free cash flow is up by 57%. That is very much driven also from the cash flow from operations and the contribution is actually coming from both sides of the Atlantic.
As you have seen also, DTX US has basically beaten the consensus on EBITDA and obviously, it has a positive impact on the free cash flow. If I'm taking a look to the net debt, the net debt moved from $77,000,000,000 to 100 and 21,000,000,000 And there is obviously that €44,000,000,000 consolidation effect from Sprint. I'm getting through that detail later on. We had in the first half a solid free cash flow performance and a contribution of 3.9. Overall dividend payouts of which the German one was the biggest one was €2,800,000,000 was €2,900,000,000 And we had spectrum auctions in the U.
S. And also in Hungary that explains the €900,000,000 and we had some favorable effects coming from the dollar when it comes to the net debt, which basically worked in our favor of 1.7 that gets you in that vicinity of 121,000,000 If we move into the next chart, let me explain to you the first consolidation of Sprint. So what you see here, the $44,100,000,000 can be basically divided in 3 sections. 1 is what are the net financial liabilities that's €35,000,000,000 Also we had to add leasing liabilities which are basically tower leasing liabilities of 6.8 and that is totally comparable to what you see in US GAAP. Then there is a different treatment of lease spectrum between the U.
S. GAAP and IFRS. On IFRS basis, you have to basically activate this on the balance sheet and therefore that increases your net debt by another €2,500,000,000 and this is what's been shown here that is the €2,500,000,000 the long term contracts of that 2.5 gigahertz spectrum, which we having in which we inherited from Sprint. So and if we now break down the net debt, you see that the I would say, the net debt prior to leasing liabilities is close to 100 billion now and that we have another leasing liability contribution of EUR 24,000,000,000 and that translates into leverage ratios, including the leasing liabilities of 2.9. That shouldn't surprise anybody because we always said as soon as we are basically consolidating with Sprint, we're leaving the quarter And if you take a look at the ex or pre IFRS 16 basis that would be 2.73.
So I would basically leave it as is and open up for the discussion.
Okay. And we can now start with the Q and A part. And I would be grateful if you could limit yourself to 2 questions today, given that due to another commitment, we only have about 30 minutes for Q and A. But of course, we have a bunch of follow ups, as you know. So with that, I give pass to the operator to announce the first question.
Ulrich Schraetel from Jefferies. May we have your question, please?
Yes. Thanks very much. So my first question would be the TV ads. You mentioned that they were slightly slower because of the shop closures. I'm just wondering why that doesn't affect the broadband intake.
So what's the attachment rate lower in the quarter? And then what are the reasons for that? And the second question is maybe on the GD Towers business. Just a fundamental question there. Are these revenues based on actual contracts that are sort of framed in commercial terms?
I mean things like MSAs? Or is this intra company transfer pricing that's ultimately decided in the finance department that determines the reporting of these tower revenues and EBITDA? Thank you very much.
Okay. Well, Richard, I will start with the first part of the question and then Christian is going to the second one. Look, we had this I think you were referring on the TV, that's mainly on the German situation. And it's right that the lockdown was something where people they were building up their connectivity at home, their Internet services, their speed, but they haven't changed, let's say, as much TV service at the same time. So we had this international promotion, which we had put out, which is the Disney Plus and we were quite successful on the Disney Plus with 700,000 around 700,000 additional net adds, which we have created on this one.
But nevertheless, I think on the TV side, this was not an edit service, which we were able to write. It was more about adding speed to the customers here at the German locations. So why that was? I think in this situation, people were not willing, let's say, at least to change their entertainment service and even saving some money in this regard. But this is just a guess I have to make here for my I do not have the details on why we were suffering here from my angle.
Tim, may I add something? I think if you take a look to the distribution and how service is being bought, the shop is absolutely the most important area for the TV business and it's hard to explain product. So you need to have time in order to persuade a customer. And even as we open up the shops again, you don't have that same football in the shops right now as you had it prior to the crisis. And I think that negatively affected the TV net adds because the strongest channel for broadband is still the call center, right?
So it's being bought on different channels. And I think I would add this to your explanation as well.
Excellent.
So on the tower revenues, very clear, it's based on an MSA. The MSA is being compared with external customers. You can be rest assured that the German segment wouldn't allow to pay more for the services than 3rd party customers buying for the same service. So I think it's based on MSA and it's based on, I would say, market oriented pricing. And therefore, I think these commercial or the commercial performance, you would see a similar commercial performance as this would be a 3rd party company.
Christian Sundman from HSBC. May we have your question, please?
Yes, thank you. Because I only can add 2, I'll focus on Germany. You had a very strong fixed line performance in the Q2, more than offsetting the weakness on mobile service revenue. What are you seeing in terms of trends also with respect to the low churn environment, which definitely benefited you in the Q2? If you look into early Q3, do you see that low churn environment still benefiting you?
And then looking into the second half, from a cost saving perspective, is there anything we need to bear in mind except for the last mile tailwind that is not going to sustain? Q2 was very strong on the EBITDA margin front. And then maybe, Tim, I know it's a 2.5 question, but Tim, your view on the Tecagenovelle, so the Telkoloa Amendment, what's your view on the current status that will be helpful as well? Thanks.
Okay. Let me start with the broadband stuff here. And look, the first thing what we see here and definitely and you're living in Germany is that our network is perceived being stable. We have built vectoring, super vectoring on almost now for Germany 90%. We have 80% on our, let's say, ownership, which we are serving.
And customers were really well served during this COVID business customers were served via our networks and we had no outage at all in our infrastructure. What we see is a significant improvement on the customer satisfaction. So by the way, we haven't seen a jump like this in the history. Now on top of this good perception on customer service, we are on the consumer side, we had finished the IP migration And we are almost close to finish up on the IP migration, the B2B area as well. So we had no additional churn from this angle anymore, which was hurting us.
And on top of that one, people are sticking with the reliable brand in the crisis. That is what we see. So new offers like the ones we have seen from Eins and Eins, like 6 months for free promotions on the tariffs, they might have resonated with people at the base of the market, but not without the customer base of Deutsche Telekom. So they were not that price sensitive on this topic. And all of this was driving churn down, customer satisfaction up and on top of that, up speeding services at the same time.
So I think this is the recipe, which we had. And on top of that, I don't know was it 180% or whatever, but our service people approaching customers with new services where we have built higher bandwidth, we're even quite successful in outbound calling, which gave us another uptake on our broadband side. So we are now where I always wanted to have the company in this 40% range. We achieved that without making our service for free, like 6 months for free or 12 months for free or whatever for free. So but with a reliable product and that's the way which we can even going forward.
And then are you going to the second one and then I'll make the third one.
Okay. Just on the fixed line performance because there was a question from Christian whether we expect any changes in the second half. So what I think what I said in my presentation already that the out of bundle revenue result is coming down a bit. So we don't expect the second half being as strong as the first half. And I think that is one which have to be taken into account.
And another one on a positive side is if you have a very juicy win back rate from cable customers right now, which also proves that the performance of the vectoring network and the performance of our overall setup is really attractive to consumers. So on the I think if we're taking a look on the cost side on the first half, I think we're tracking along the indirect cost reduction targets for this year. You remember the €1,500,000,000 across all segments. And I think I would expect that we don't see a lot of changes in the second half, but always bear in mind there is a Christmas quarter. We don't know what's going to happen.
So there's always promotional activities and all this stuff. So I wouldn't expect any kind of massive changes on the cost side and the promotion side, but not everything is being taken into account right now and the tile rollover is not recurring after H1 because year over year obviously we had that increase in summer last year. So we don't see that positive tile effect replicating in the second half. So but I think everything is captured in the reiterated guidance of 13.9
percent? Let me address this regulatory topic and the tick again of ELA, which is out for discussion. And to frame it at the beginning, our expectation is that the Teck Aguirre amendment is creating an even much more investment friendly and current legal framework for facilitating and accelerating the FTTH rollout. I think from an 5 gs perspective, look, more or less the strategic problems are solved. But from an FTTH acceleration built out perspective, the TKK has a big chance to improve the environment.
I think Germany should use the opportunity for a general reduction of regulation and bureaucracy, especially against the background of the corona crisis and all the economic challenges which we have, I think the network operators who are willing to invest should be relieved from a lot of additional burdens in the ticker gear. There are obstacles in the build out obligations And there is a law which is in discussion, which is an acceleration, which is a little bit less federal system but more central approach to help us to accelerate the build out. This is a very important piece. 2nd, national roaming obligation. I think the EU code sets out very strict requirements on this one.
I think United Internet should invest into their own business. We are open for discussions with these guys. But the current draft version, which we have on the table, reflects the existing EU codecs. So therefore, I think this is on the right track that there is no mandatory national roaming, forcing us in deflating our big investments, which we have taken over the last years and finding a commercial agreement with partners who want to use this infrastructure. The 3rd part which is important for us in the Tega G is the rental privilege.
And the current draft reflects the EU codex and includes the removal of the Devenkostenprui Lake. So this should happen within the next 5 years. And I think this is very important thing because if you want to build profitable FTTH and you cannot access up to 25% of the households in Germany, our profitability is limited by that one. And on top of that, even from an antitrust perspective and a competitive perspective, this is not helpful for consumers, we are challenging this status quo. This is currently baked into the proposal.
The FTTH regulation itself is reflecting positives as well. For instance, the switch from ex ante to ex post regulation is part of that or non discriminatory excess regulation is part of that. But I think beyond that, we need a much more consequent step going forward with regards to the FTTH build out when it comes for instance to reciprocity with regard to excess fees. So if we are using the infrastructure of somebody and they're using ours, reciprocity should conclude the same prices or regional price differentiation as an option or nondiscriminatory wholesale excess regulation. These are pieces where we have to work on detail over the last years.
Everything will be solved in the ticket again over Lyon. But there is an institution called Bonsetzanger too who as well can help us beyond that in the framework of the things. So in principle, a lot of topics suggest but not solving all the issues on FTTH yet.
Next is Georgios Iyarudyakounou from Citi. May we have your question please?
Good afternoon and thank you for taking my questions. Both on Germany, my first question is more around strategy. There's a new head of Germany, and I was curious if you could share any initial thoughts or priorities that Srini has for the business in terms of maybe cost cutting? And also, I believe some of your European operations have been a bit more active in content historically. I know it may not be the most popular thing nowadays, but whether you do see perhaps some opportunity in looking a bit at strengthening your content?
And then the second question is around the 87,000 net adds and the outperformance versus your main competitor. I think you've already given some explanations earlier to Dominik's question, but I was wondering if there's any data you could share with us. I believe you don't track NPS, but any customer satisfaction surveys you are doing, whether you are starting to see a shift versus the performance of your competitors? Thank you.
Let me start with the first part of the question and maybe, Christian, you might help me then on this one. The first one with regard to Srinivas, look, for me, I'm very happy that our supervisory board came to the conclusion that Srinivas is the right guy for running the German role, because it's his proven track record of combining growth mindset with efficiency, which he has shown in the past. Not only from his Indian history at BATI, but as well from what he has shown in the European landscape. I think he is so in detail of technology, understanding the capabilities of efficiency. He is always challenging the status quo and trying to find new ways.
Look what he has done from coming from a mobile carrier in the European environment to a pure TV and even fiber player there and how efficiently he has driven this business, I think this is qualifying him for taking this bigger role in the German landscape. Now with regard to his priorities, Germany is very successful. And so the good things should not be questions. That is for sure. We have made a huge step going forward on the 5 gs side, on the mobile services side.
We are leading here the PEC significantly, and even with the 5 gs attempt beyond where we were in the past. We have done a lot of things on the customer service side, which is impressive if you see our net promoter scores, our TRIM results and the amount of complaints and the cost, by the way, which came down by less service issues. We have seen that on the B2B side, we are growing in a segment where nobody else in Europe is showing that performance. And we just included the DC part, the telecommunication service part of T Systems in this to become even more customer oriented than this. These are all questions where he has to deliver and execute on our ambitions.
I think what he's about is very much about the fiber rollout, because the way forward is now after finishing the IP sorry, the VDSN and super vectoring build out, we are now focusing on making FTTH as efficient as possible and finding ways of deploying FTTH at a larger scale beyond 2,000,000 households on an annual basis. And the way of doing that, the way bringing this to the customers, the way of growing our segment in this area beyond where we are today in a profitable manner is definitely something Srini is bringing to the party. The digitization of Germany is another task which is driving, which will help us in the customer and the extra mile as well in the productivity, which the German organization is working on. And we have commitments with regards to cuttings, which we want to deliver. And the last thing is, we have made so much efforts and so much progress in the internationalization of our group over the last 5 years that it's now as well, at one point, to internationalize Germany and to get this international view on the German entity is another cultural element, which we are driving with this appointment.
So I think the best people for the most difficult and most complex jobs, this is always how you should play it and this is why he's the best man at that position at that point in time.
Why shouldn't I take the second one on the 87 ks? So first of all, George, I wouldn't say there's anything special about Q2. And the $87,000,000 is very much comparable with the $83,000,000 in the previous quarter. We were always arguing that consumers are buying for a number of reasons and not only because of speed. And obviously, we have over time massively increased our quality in the service, the quality of the proposition.
We again won that big test on TV. Proposition. We again won that big test on TV and also the performance of our network because we have now about 500,000 super vectoring as Tim said earlier on, we don't have any drag from the all IP migration anymore because it's been finalized. And we're always arguing that there is a structural negative impact coming from the all IP migration. Once this has been finalized, obviously, the numbers have to become better.
And we see this since Q1. The third one is cable migration. We have quite a bit of surprising positive results on cable win backs. So it looks like we were discussing with you in the previous quarter that Vodafone is moving customers from their wholesale relationship they're having with us onto their own network, but not everyone is agreeing to this. And I think we're taking part of those customers who have been touched and that actually supports our growth as well.
And I think there is then the COVID impact. I would sense, I can't prove it, but I think in a time of crisis, consumers tend to turn to the market leader who they trust the most. And I think that is also a positive effect, which helps us throughout this crisis.
Next question is coming from Joshua Mills from Exane. May we have your question please?
Hi there. Thank you for the two questions. The first is just related to some comments which Tim made at the AGM in June where you laid out the ambition to have a full optical fiber network by 2,030 saying that fiber to the home is the future for Germany. Has anything changed in your thought process or conversations with the regulator around the ultimate mix you'll have between fiber to home and vectoring? Or is this still consistent with the message you've given us before on the fiber factory?
And then the second question, just been more of a technical one. How do you account for the value of your call option for the 45,000,000 T Mobile shares at the $103 which is now in the money. Is that part of your net debt calculations? And if I can maybe just check on this, what kind of leverage position would you feel comfortable at executing on that option if you have ambitions to increase your exposure to the U. S.
Over time? Thanks.
Okay, Josha. Let me start with this FTTH question. And the first one is, our vectoring and super vectoring discussion, which we was heavily challenged from the outside world, sometimes even from politicians saying, why have you been started with FTTH alone only. And looking hindsight, it was the maybe the best and most clever decision we have ever taken in history because of the environment. COVID in 2020, we would have provided 80% of the customers with lower than 16 megabit per second or beyond or below.
And 20% of the people would have had an FTTH service. So this country would not have worked the way how it did without vectoring and supervectoring. Now this comes to an end. We have now we are now on the vectoring rollout, which is all this Amazon replacements, which is more software change in the street cabinets. What we are working on, where we can do that.
So there's another opportunity for that one. But I want to now bring this company to the next step into the FTTH leader. And we always have been the network leader. I think impressively on mobile and 5 gs, we have a clear path on what we want to do over the next years. On FTTH, we have to learn a lot of things.
In the past, we had this year, we had about $1,000,000,000 investments to pass 500,000 lines. We are focusing on schools, on the subsidized build, on new builds, on business parks. So these are the areas where we are working on this right now. But in addition, we have launched new partnerships with EBITDA, with the city of Munster recently. And on top of that, we are now learning how to gear up the FTTH rollout in a much more productive and efficient way.
And that is what I'm trying to do. I want to approach this business unit with a more kind of factory approach. That means get more for the same amount of money. We are not providing a new CapEx envelope today for next year. We have provided a CapEx envelope for this year, which is consistent to what we have said in previous meetings.
We have €8,000,000,000 ex U. S. Investments, which we can invest, of which €5,500,000,000 are being spent in Germany, a lot of them into the fiber build out. And I hope that we are now scaling up from 500,000 beyond 1,000,000 into 2,000,000 on an annual basis and learning to deploy that faster and cheaper. And at the same time, I'm trying to work with politicians to support our way going forward, to say, look, guys, if we don't have a business case, we will not invest.
And the others are waiting until we are investing. They're not investing on their own. I'm leaving the €7,000,000 commitment from Deutsche Glass was at the moment out of sight. But when it comes to the huge landscape of Germany, we need another environment of political direction. And this is I have a lot of open ears on this one.
People are considering what they can do, and I'm getting more and more optimistic. At the same time, we're doing our homework.
Okay. So let me try to answer the value of a call option. So the transaction price of the call option was 0. Therefore, it's the recognition on the balance sheet is also 0. So there is no net debt increase.
But there is a difference between the transaction value and the fair value and that's roughly €1,000,000,000 and that will be amortized in the P and L under other financial income over the course of 4 years. And if there is a massive, massive, massive increase of the T Mobile share price and the intrinsic value of the 44,000,000 share option is increasing significantly, obviously that will have a positive impact on the EPS. So that's my understanding on how we deal with this.
Polo Tang from UBS. May we have your question please?
Yes. Hi. Thanks for taking the questions. Just two questions, bigger picture questions. The first one is really just on Huawei.
We've obviously seen an increasing number of restrictions and bans on Huawei in a number of European markets. So what's your view as to what will happen in Germany? And how would Deutsche Telekom be impacted if there were restrictions or limitations in the use of Huawei equipment? And the second question is really just a bigger picture question on consolidation in M and A. So we obviously had the EC decision to block the 302 merger in the UK in 2016 that was recently overturned by the European General Court.
But I'm just interested in terms of your perspective on the sector. Do you think this opens the door to further consolidation across Europe? And do you detect a change in attitude from politicians and regulators on the subject of consolidation?
Okay, Polo. Let me try to answer these big picture questions here. Look, yes, we see that, let's say, for instance, the British National Security Council decided that the sourcing of new Huawei equipment is no longer allowed after year end of 2020 and that they have to take components out of the system. So you have seen this week the German IT Security Institute, we call it BSE, they have published their security guidelines. And there was some bit of press speculation as well.
And we have no privileged insight into when a final decision will be taken in Germany, but we don't think anyone is advocating a rip and replace scenario for Germany here as well. And I anyhow think that it's a little bit over exaggerated the topic that Deutsche Telekom is exposed, that's strategically dependent on Huawei. This is not the case. We are not dependent on any kind of vendor. The question is about, let's say, the time to market of new technologies and innovation.
And the question is as well about the economics around it. I think that the German political situation is on a more neutral stand with regards to the Huawei. They are focusing very much on the security aspects of vendors, by the way, all vendors. So the IT security, that's something which is on its way going forward. They are really forcing an open run migration.
I hope that they even put that into the legal environment because this is helping us a big time not only to get more control about, let's say, all the boxes which we are buying. But as well, it will help us from an efficiency perspective to disaggregate our infrastructure and cloudify a lot of the steering mechanisms here. And I hope you're aware about the Open RAN engagement, which we are showing here in this system. We will we have informed, let's say, the German government about where we are using our Huawei equipment. We are not using any kind of Chinese equipment in our core network infrastructure or let's say a few which we are rebuilding.
We are now talking more about, let's say, the access nodes. And in this case, we are providing both Ericsson and some Chinese equipment for 5 gs services these days and even the 4 gs build out. So that's where we are. Let's see the political position, how this evolves over time. And we are not dependent on any kind of vendor.
We have a multi vendor strategy. And 35%, by the way, of our vendors are coming from the U. S, 25% coming from Europe, another 25% from Asia, including China and the rest of the world. So this is where we stand. And I think we Germany is having a more neutral stand here.
Okay. So let me basically take on that EU consolidation question. Look, we've heard this as well. We've heard Madame Bestager or Breton commenting favorably around a stronger consolidation of the EU telecommunications sector. But I recall this very vividly as I returned 2015, everyone was talking about this and in the meantime, not a lot of this has happened.
So I think we're listening to this. Obviously, that was always our point of view that the market is way too fragmented in Europe and that we don't establish scale economics broad enough. But I think we have to be realistic what is talk and what is actually action. And the good point on this one is, I think we have so much growth opportunity besides that question that I think we have a very good future in front of us. Whether we get a stronger consolidation, yes or no.
Andrew Lee from Goldman Sachs, may we have your question please?
Good afternoon everyone. Thanks for taking my questions. I had 2. 1 was on your firstly on shareholder returns thoughts following your Q2 update. So we clearly seen better team as performance.
You raised guidance there, faster synergies and sounds likely now to raise its total synergy guidance. And I just wondered, has that changed the timing in which you can raise DT group shared returns? How do you think now about the mechanics or the route to upstreaming cash to shareholders? For instance, would you start raising dividends as soon as you hit that net debt to EBITDA ceiling of 2.75 times? Any help on how you think about that would be really appreciated.
And then the second question was just about how you think now about the strategic positioning of Timas. Do you think it needs a greater convergent exposure? Any comments on that would also be helpful. Thank you.
Look, very quickly, I guess, maybe you go deeper into this dividend decision. Honestly, I cannot release any kind of shareholder return thoughts at that point in time. It's too early. We are managing, let's say, this crisis, the integration all at the same time. We are very happy about the progress we're making, but there is no discussion in the group at that point in time, which we can share at that point with regard to the future remuneration.
But we definitely have to understand that. Nevertheless, there's one issue on the U. S. We have the deleveraging effect, which we are driving in first hand. But Christian, you might add something on this one.
With regards to your the other question, I think exposure to convergence, no. The answer is no. And you see that the growth integration, the focus on mobile services, the 5 gs, the fixed mobile substitution opportunities which we have on our mobile network, the huge capacity which we are providing now to the market, the enter into the B2B market which we are driving, this is, let's say, 1st priority and these are the low hanging fruits, which we are driving. Looking to the market environment, I do not see so much progress being made on the convergence side from our competition there. So that's we have so much potential to grow in the environment that I would say it's no urgency at that point in time to focus on convergence or any kind of deal with regard to convergence.
So Andrew, a couple of perspectives from my side. So first of all, on the shareholder returns on the DT side, there is no change at all. I think we can continue with what we already communicated. Now on the 2S Tmovia U. S.
Performance, I think if you take a look at the merger case, and I base my assumptions always on the merger case and then we see whether performing better or not. I think there is a massive, massive deleveraging kicking in after 3 years, which is 'twenty three and obviously that continues to be that case from 'twenty three onwards. The second point is because we haven't decided on any kind of shareholder return strategy with the T Mobile US yet. The second thing is you have seen T Mobile announcing a shareholder return policy back at the Capital Markets Day in 2008. That was the 2, 3, 4 program.
So that wouldn't be something new. If they have excess cash that they basically return it back in terms of a share buyback program. But right now, I think it is too premature to discuss about a shareholder return strategy in the U. S. Because I think that has to be discussed internally before we discuss this externally.
Thank you, Christian. With that, unfortunately, we have run out time. So I would like to maybe go back to Tim for any final observations, and then we follow-up directly as usual with ourselves at the IR department. So Tim, do you want to add anything or wrap up?
Anders, and thank you guys for joining us today. I think delivering what we have promised, that is, let's say, the biggest task which we have in mind. And you have seen that we have a very strong first half of the year on both sides of the Atlantic. So the hedge, which we always had in mind, is working. I think the next half year, our hands full on deck, a lot of things to be done, the delivering of the benefits of the T Mobile Europe merger for our customers and as well for our shareholders is from utmostized employment.
We want to deliver more and faster on growth, on build out and on profitability when it comes to the networks. The network is a basis of what we're doing. And the more we can do, the better it is. But we have to do that in a very efficient way. And for me, strategic wise, I would not say everything is solved, but the biggest focus we should have is the FTTH for Germany and the factory approach which we are driving.
So this is something to be discussed going forward with Sweeny and the team. We should improve the regulatory framework at the same time. So Germany is going into the phase of pre elections. And in this time, it's very important to understand the progress with regard to digitization FTTH. So everybody is open minded these days and listening what we are doing.
The next one is digitize, digitize and digitize. So when something is unclear in the company, we should digitize. This is on a good progress within the company, but you cannot do enough of it, both internal processes, but as well with regard to the customer interaction. And this is, let's say, another big change, which is helping us to save for fiber and save for profitability. So the digitization is definitely something which is at our desk.
And the last thing is the derisking of the T Systems business and the improvement of the performance going forward. And this is operationally and strategically a big question for us we are discussing. So even here we have enough to do so. Knowing that some of you are on vacation, time has gone over, I hope that more companies and people are coming back to the offices soon. And with this, I'd like to say thank you for your trust and for your support over the last time.
And let's move on.
Thanks.
We'd like to thank you for participating at this conference. We are looking forward to hear from you again. Goodbye.