Good afternoon, 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.
Yeah. Good afternoon, everyone, Welcome to our Second Quarter 2020 Conference Call. With me today are our CEO, Tim Höttges, and our CFO, Christian Illek. To be precise, Tim is actually in a remote location. Tim will first go through a few highlights, as always, followed by Christian, who will talk about the quarter's financials in more detail. After this, we have time for Q&A. Please, as always, pay attention to our usual disclaimer that you find in the presentation. With that, I hand over to Tim for his opening remarks.
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, giving the highlights of our very strong first half results. As usual, my overview will be followed by Christian, and he's going then into the details. I think this one is a very special quarter. We incorporated Sprint's operation, and we created the new T-Mobile. With new T-Mobile, we even create the new Telekom. We entered a win-win agreement in this quarter with SoftBank, creating a big option value for Deutsche Telekom shareholder going forward. We delivered operationally on a very strong basis despite COVID. 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 earnings growth. We're ahead of our large European peers on EBITDA. In the U.S., we overtook AT&T in 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 5G leadership on both sides of the Atlantic. Love to go into that one later on. Despite COVID-19, 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. 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. 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. If this is a good message, people really appreciated the work we have done so far in this COVID crisis, providing good connectivity, very stable, resilient services. Move on to page four and the Sprint merger, which is putting us into a total different league. First, in the U.S., we have now overtaken AT&T in terms of branded wireless customers. Second, we have the best spectrum position. You know that. It is a spectrum deal, we will build the network on this basis to the best infrastructure in the U.S. We have confirmed EUR 43 billion of synergies. Hopefully we are trying to beat this estimate.
I think it's even very good to see how this new team around Mike Sievert is coming together and the great spirit which this team has working remote, but executing along every KPI which we have laid on pre-merger. Slide four shows a few key stats of the new Deutsche Telekom post-merger. We are now EUR 100 billion, our turnover company. We are providing an annualized EBITDA close to EUR 40 billion. Our balance sheet is now EUR 270 billion big, and we employ 230,000 people across the globe. We look forward to huge benefits and future returns from this transaction for Deutsche Telekom's shareholders. Let's look a quick summary of our first half year financial performance on page five. 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 unbelievably 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 T-Systems unit, which was not able to mitigate COVID-related headwinds completely. On page six, 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 35.5 million lines with fiber, of which 1.8 million with Gb connectivity. In the EU, we pass 6.3 million with Gb capable lines, bringing the total footprint, including Germany, to 8.1 million.
We now have almost half a million lines on super vectoring, up four times in the last 12 months. We added a benchmark agreement with the city of Münster to our FTTH toolbox. 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 service, is up more than a quarter in the last 12 months. Complaints are down by almost half. T-Mobile won the J.D. Power Customer Care Award again with the highest score ever seen. We keep investing in mobile network leadership. We have geared up in 5G. I come to that on the next slide. I always promise you that we are taking over 5G leadership in all our markets.
When we spoke last time, I think we hid it a bit our plan for Germany. Remember I said, "Look, let's see what we are announcing throughout the year." Now we can talk about it. We are now covering half of the country with the full three carriers of 2.1 GHz spectrum. Very silently, we have bought spectrum, free spectrum from Telefónica, 2.1 GHz, deployed that on our infrastructure across the country. We are now able to provide this coverage all over the places without building new sites.
On top of that, we are building leading 3.6 GHz coverage. We are just accelerating our build-out by using 2.1 GHz with free spectrum. In addition, over time, when we get the approval for all the new rooftops and towers, we will increase our 3.6 GHz coverage on top of that. With this, we will more than double provide speeds for our German customers already by the end of next year. 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, that we have now an advantage of four to five 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 U.S., achieved a world first by launching standalone 5G nationwide last week, TMUS already covers over 250 million pops with 5G in 600 megahertz area. 5G in 2.5 GHz has been deployed in eight markets, there we see average speeds of 300 megabits per second. As you also heard on their call, T-Mobile is upgrading sites to 2.5 GHz at a rate of 700 sites a week. We also invested in 5G elsewhere in Europe.
In the Netherlands, we defended our spectrum lead in last month's auction. We already cover 80% of the Netherlands with 5G and aim for full coverage by year-end. We are also off to a strong start in other European markets, especially Austria and Poland. Looking to page eight, I 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. We remain strong during the crisis. Remotely, we were selling more by our service center than ever before. In our European footprint, we added 1.3 million new converged customers. In Germany, more than 15 million homes are served by our fiber products now.
We saw solid mobile customer growth on both sides of the Atlantic despite corona, Christian will give you all the numbers for each of the markets. On slide nine, let me explain you our guidance for this year. I'm taking this in steps. Our DT ex-U.S. guidance is very simple. There is no change. This is despite the COVID-19 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 DT ex-U.S. guidance. For EBITDA, it was EUR 13.9 billion. At the contribution from T-Mobile's year to date for EBITDA based on IFRS, this was EUR 9.5 billion. At the midpoint of the guidance, you heard from T-Mobile last week, EUR 11.2 billion, including Sprint.
Finally, we deduct the US GAAP IFRS bridge that we expect for the remainder of the year minus EUR 0.4 billion. For 2020 Group EBITDA, this gives you around EUR 34 billion. For Group free cash flow, this adds up to at least EUR 5.5 billion. This is after an expected Group cash CapEx, no cuts at all, with now EUR 17 billion of volume. This is without spectrum. Again, this is based on the TMUS guidance last week, plus an unchanged outlook for Europe. Very brave, very committed, and very strong half year of Deutsche Telekom in this difficult environment, beating our competition. That's enough for me today. I hand it over to Christian.
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. 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. That is very much driven on the top line throughout the COVID-19 crisis. If you take a look at the EBITDA after leases, this one 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 DT ex-U.S. is very stable and nice. On a reported basis, our EBITDA grew by 3.3%, organically by 4.1%, and last quarter, we basically reported out a 4.2% growth.
Free cash flow has massively improved by almost 60% this quarter. The contribution is coming from both sides of the Atlantic. The adjusted earnings per share were down by 4% this quarter. Obviously, we have a big increase in net debt, 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, DT ex-U.S. and the U.S. You see that we're showing a very stable progress in both parts of the business. Let me give you also a little bit of an update on what is the impact on the coronavirus crisis, which we gave you an overview throughout the Q1 results. I would say, by and large, we're pretty much seeing what we were anticipating.
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. 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. The key question is now going to be, what's going to happen in the third quarter and what's going to happen in the fourth quarter? 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're 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. Let's move over to page 13. What you can see is basically overall revenues grew by 1.1% and the EBITDA growth saw a slight acceleration to 3%, and that's actually well above our full year target.
From this perspective, 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 second quarter. 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. If you compare the performance in the previous year with this year, obviously, we had to fight against a strong quarter in the second quarter 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.
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 1.3 percentage points of these 2.9%, and you see that this is really significant, what we're seeing here. We expect this out-of-bundle revenue to stay there, but also what we're seeing is that the momentum is coming slightly down. It's not like it's comparable, for example, with the March or the April numbers, which we have seen. We're moving to page 15. You see that the commercial performance remains pretty intact.
We continue to see significant growth in Magenta One. 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 in mobile data usage with our contract customers, and that 50% obviously supports our More for More strategy. We have now three and a half million customers on StreamOn. That is an increase of 400,000 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 three times the numbers we have seen from the guys in Düsseldorf, and it's also the second consecutive quarter where we're really well above the 40% net add share, at least according to our analysis. 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. I think we'll look back into those, and we couldn't find a lower number since 2004, and we had to stop at 2004 because we didn't have any further documentation of the previous years.
On the 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. 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 three reasons. One, there's upselling into higher bandwidth. The second one, we have seen stronger interconnection revenues.
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. 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. I'm confident that we see hopefully a similar result in the upcoming quarters. 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 first combined quarter, T-Mobile reported a mobile service revenue of EUR 13.5 billion and an adjusted EBITDA of EUR 6.9. Unfortunately, we have certain pro forma perspective unavailable on IFRS basis, so therefore, we have to basically take a look at the absolute figures. We're moving to the next page.
You see how we're executing on an operational basis. T-Mobile continues to grow their customer base, also with that combined company. Bear in mind, the Sprint customer base was on a shrinking basis. I think this has to be also factored into that equation. The team is now working full steam ahead in order to basically combine the company to bring the network to life, which we promised. I think what they already achieved is quite astonishing. The Sprint retail outlets have been rebranded by beginning of August, 85%, and we knew that beforehand, of the Sprint customers have a compatible handset on the T-Mobile network. More than 10% of the Sprint postpaid traffic is already on the network. We have that rollout of 2.5 GHz in eight major markets, and we ramped up the 600 rollout to 700 sites a week.
From this perspective, I think despite all the complications you have with the COVID crisis, I think T-Mobile U.S.,, the new T-Mobile, is really off for a good start. Moving to the next chart, which is the European performance. 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. There were some currency headwinds which we had to face, which basically qualify 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, that helped the European segment on an organic basis to basically show a consecutive EBITDA growth now for the 10th consecutive quarter. By the way, I forgot to mention this, Germany is now on quarter 15 with consecutive growth. If we're moving to 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, 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. They're covering now more than 50% of their broadband base with that converged offering. We had 69,000 net adds on the broadband side, very much in line with the previous year. We had a slight increase of 20,000 on the TV side. I think very solid performance. Especially, I'm really confident given the rebound, which we have seen in June, that we will continue to see good results from Europe. To the weak part of Q2 performance, that is T-Systems. I think, as you may recall, we said in the Q1 call, who is impacted relatively the most by COVID? We said we expect this to be T-Systems. Unfortunately, we were right. 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 23 or 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, EUR 29 million. I think that 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-Systems side in order to respond to that situation. Group development, on page 23. 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%, driven by basically three effects. One is the positive revenue momentum, which we're seeing 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. It's a very strong performance, which we have seen on the group development segment performance. 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-19 crisis, and I think this is a very good net contract intake. Also, what you see that in a shrinking market, in a shrinking Dutch market, T-Mobile Netherlands is able to grow by 2.3%. Also, solid broadband net adds and a very, very strong earnings momentum. This is really a very strong result.
Next page, on towers, very quickly, I think we are seeing that we have a continuous recurring revenue growth in the tower business, and that also the EBITDA after leases is growing year-over-year. There is no surprise in that tower business development also relative to the previous quarters, but we are really happy with the performance of the GD Towers business. That basically gets me to an end of the review of the operating segments, and let us move on the group financials on page 26. As I said, free cash flow is up by 57%. That is very much driven also from the cash flow from operations. The contribution is actually coming from both sides of the Atlantic. As you have seen also, DT ex-US has basically beaten the consensus on EBITDA and obviously has a positive impact on the free cash flow.
If I'm taking a look to the net debt, the net debt moved from EUR 77 billion to EUR 121 billion. There is obviously that 44 consolidation effect from Sprint. I'm getting to that detail later on. We had, in the first half, a solid free cash flow performance and a contribution of EUR 3.9. Overall dividend payouts, of which the German one was the biggest one, was EUR 2.9 billion. We had spectrum auctions in the U.S. and also in Hungary. That explains the EUR 900 million. We had some favorable effects coming from the dollar, when it comes to the net debt, which basically worked in our favor of EUR 1.7. That gets you in that vicinity of $121. If we move into the next chart, let me explain to you the first consolidation of Sprint.
What you see here, the EUR 44.1 billion can be basically divided in three sections. One is, what are the net financial liabilities? That's EUR 35 billion. We had to add leasing liabilities, which are basically tower leasing liabilities of EUR 6.8 billion, and that is totally comparable to what you see in US GAAP. There's a different treatment of lease spectrum between the US GAAP and IFRS. On an IFRS basis, you have to basically activate this on the balance sheet, therefore, that increases your net debt by another EUR 2.5 billion. This is what's been shown here. That is the 2.5, the long-term contracts of that 2.5 GHz spectrum, which we inherited from Sprint.
If we now break down the net debt, you see that the, I would say, the net debt prior to leasing liabilities, close to EUR 100 billion now, we have another leasing liability contribution of EUR 24 billion. 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 corridor. If you take a look at the ex or pre-IFRS 16 basis, that would be 273. I would basically leave it as is and open up for the discussion.
Okay. We can now start with the Q&A part. As always, if you'd like to ask a question, please press star one on your touch tone and your name will be announced by the operator today. Should you require to cancel your question, please press star two. I would be grateful if you could limit yourself to two questions today, given that due to another commitment, we only have about 30 minutes for Q&A. Of course, we have a bunch of follow-ups as you know. With that, I give pass to the operator to announce the first question.
Ulrich Rathe from Jefferies. May we have your question, please?
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. What's the attachment rate lower in the quarter, what are the reasons for that? The second question is maybe on the GD Towers business. Just a fundamental question. Are these revenues based on actual contracts that are sort of framed in commercial terms, things like MSAs? Or is this intracompany 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, Ulrich. I will start with the first part of the question, then Christian is going to the second one. Look, we had this, I think you were referring on the TV ads mainly on the German situation. It's right that the lockdown was something where people, they were building up their connectivity at home, their Internet services, their speed. They haven't changed, let's say, as much TV service at the same time. We had this international promotion, which we had put out, which is the Disney+. We were quite successful on the Disney+ with around 700,000 additional net adds, which we have created on this one.
Nevertheless, I think on the TV side, this was not an added service which we were able to provide. It was more about adding speed to the customers here at the German locations. 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. This is just a guess I have to make here. I do not have the details on why we were suffering here from my angle.
Tim, may I add something?
Please go ahead.
I think if you take a look to the distribution and how a service is being bought, the shop is absolutely the most important area for the TV business. It's a hard-to-explain product, so you need to have time in order to persuade a customer. Even as we open up the shops again, you don't have that same footfall in the shops right now as you had it prior to the crisis. I think that negatively affected the TV net adds, because the strongest channel for broadband is still the call center. It's being bought on different channels. I think I would add this to your explanation as well.
Excellent.
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 third-party customers buying for the same service. I think it's based on an MSA and it's based on, I would say, market-oriented pricing. Therefore, I think the commercial performance, you would see a similar commercial performance if this would be a third-party company.
Christian Fangmann from HSBC. May we have your question, please?
Yeah, thank you. Because I only can add two, I focus on Germany. You had a very strong fixed line performance in the second quarter, 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 second quarter? If you look into early Q3, do you see that low churn environment still benefiting you? 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. Maybe Tim, I know it's a two-and-a-half question, but Tim, your view on the TK Novelle, so the telecom law amendment. What's your view on the current status? That would be helpful as well. Thanks.
Okay, let me start with the broadband stuff here. Look, the first thing what we see here 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. Customers were really well served during this COVID situation. All the home offices, especially in the rural areas, were based on our infrastructure. On top of that, most of the 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. By the way, we haven't seen a jump like this in the history.
On top of this good perception on customer service, we are on the consumer side, we had finished the IP migration. We are almost close to finish up on the IP migration, the B2B area as well. We had no additional churn from this angle anymore, which was hurting us. On top of that one, people are sticking with the reliable brand in the crisis. That is what we see. New offers like the ones we have seen from 1&1, like six months for free promotions on the tariffs, they might have resonated with people at the base of the market, but not with the customer base of Deutsche Telekom. They were not that price sensitive on this topic. All of this was driving churn down, customer satisfaction up, and on top of that, up-speeding services at the same time.
I think this is the recipe, which we had. 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, were even quite successful in outbound calling, which gave us another uptake on our broadband side. We are now where I always want to have the company, in this 40% range. We achieved that without making our services for free, like six months for free or 12 months for free or whatever for free. With a reliable product, and this is the way which we can even going forward. Christian, are you going the second one and then I'll make the third one.
Just on the fixed line performance, because there was a question from Christian whether we expect any changes in the second half. I think what I said in my presentation already, that the out-of-bundle revenue result is coming down a bit. We don't expect the second half being as strong as the first half. I think that is one which have to be taken into account. Another one on a positive side is we 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. 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 EUR 1.5 billion across all segments.
I think I would expect that we don't see a lot of changes in the second half. Always bear in mind, there is a Christmas quarter. We don't know what's going to happen. There's always promotional activities and all that stuff. I wouldn't expect any kind of massive changes on the cost side, on the promotion side. Not everything is being taken into account right now. The TAL rollover is not recurring after H1 because year over year, obviously we had that increase in summer last year. We don't see that positive TAL effect replicating in the second half. I think everything is captured in the reiterated guidance of 13.9.
Let me address this regulatory topic and the TKG-Novelle, which is out for discussion. To frame it at the beginning, our expectation is that the TKG amendment is creating a much more investment-friendly and current legal framework for facilitating and accelerating the FTTH rollout. I think from a 5G perspective, look, more or less the strategic problems are solved, but from an FTTH acceleration build-out perspective, the TKG 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 TKG. There are obstacles in the build-out obligations.
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. Second, 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. The current draft version, which we have on the table, reflects the existing EU Code. 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 third part, which is important for us in the TKG is the rental privilege.
The current draft reflects the EU codex and includes the removal of the Nebenkostenprivileg. This should happen within the next five years. I think this is a very important thing, because if we want to build profitable FTTH, and you cannot access up to 25% of the households in Germany, our profitability is limited by that one. On top of that, even from an antitrust perspective and a competitive perspective, this is not helpful for consumers. We are challenging the 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 nondiscriminatory access regulation is part of that. 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 access fees. 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 access regulation. These are pieces where we have to work on detail over the last years. Not everything will be solved in the TKG-Novelle. There is an institution called Bundesnetzagentur who as well can help us beyond that in the framework of the thing. In principle, a lot of topics addressed, but not solving all the issues on FTTH yet.
Next is Georgios Ierodiaconou from Citi. May we have your question, please?
Yes, 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. I was curious if you could share any initial thoughts or priorities that Srini has for the business in terms of maybe cost-cutting. 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. Whether you do see perhaps some opportunity in looking a bit at strengthening your content.
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 Dominic's question. 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, maybe, Christian, you might help me then on this one. The first one with regard to Srini. Look, for me, I'm very happy that our supervisory board came to the conclusion that Srini is the right guy for running the German role. It's his proven track record of combining a growth mindset with efficiency, which he has shown in the past. Not only from his Indian history at Bharti, 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 a 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. The good things should not be questions. That is for sure. We have made a huge step going forward on the 5G side and the mobile services side. We are leading here the pack significantly. Even with the 5G 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 TRI*M 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. We just included the TC part, the telecommunication service part of T-Systems in this one 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. The way forward is now after finishing the IP, sorry, the VDSL and super vectoring build out, we are now focusing on making FTTH as efficient as possible.
Finding ways of deploying FTTH at a larger scale beyond 2 million households on an annual basis. The way of doing that, the way of 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 he's driving, which will help us in the customer interaction, but as well in the productivity, which the German organization is working on, and we have commitments with regards to cost cuttings, which we want to deliver.
The last thing is, we have made so much efforts and so much progress in the internationalization of our group over the last five years. 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. I think the best people for the most difficult and most complex jobs. This is obviously how you should play it. 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 87,000? First of all, Georgios, I wouldn't say there's anything special about Q2. The 87 is very much comparable with the 83 in the previous quarter. We were always arguing that consumers are buying for a number of reasons, and not only because of speed. 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. Also the performance of our network, because we have now about 500,000 super vectoring customers. From this perspective, I think the customer is always buying for a basket of reasons, and I think that is the biggest supporter.
The second one is, as Tim said earlier on, we don't have any drag from the All-IP migration anymore because it's been finalized. 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. We see this since Q1. The third one is cable migration. We have quite a bit of surprising positive results on cable win backs. 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.
Not everyone is agreeing to this. I think we're taking parts of those customers who have been touched, and that actually supports our growth as well. 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. 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 2030, 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 the home and vectoring, or is this still consistent with the message you've given us before on the Fiber Factory?
The second question, just been more of a technical one. How do you account for the value of your call option for the 45 million T-Mobile shares at $103, which is now in the money? Is that part of your net debt calculations? If I can maybe just check on this, at 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, Joshua. Let me start with this FTTH question. The first one is our vectoring and super vectoring discussion, which was heavily challenged from the outside world. Sometimes even from politicians saying, "Why haven't you started with FTTH alone or only?" Looking hindsight, it was 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 below. 20% of the people would have had an FTTH service. This country would not have worked the way how it did without vectoring and super vectoring. Now this comes to an end.
We are now on the vectoring rollout, which is all this MSAN replacements, which is more hard software change in the street cabinets, where we are working on, wherever we can do that. There's another opportunity for that one. I want to now bring this company to the next step, into the FTTH leader. We always have been the network leader, I think impressively on mobile. In 5G, 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, this year we had about EUR 1 billion investments to pass 500,000 lines. We are focusing on schools, on the subsidized build, on new builds, on business parks. These are the areas where we are working on this right now.
In addition, we have launched new partnerships with [inaudible], with the city of Münster recently. On top of that, we are now learning how to gear up the FTTH rollout in a much more productive and efficient way. 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 EUR 8 billion ex U.S. investments, which we can invest, of which EUR 5.5 billion are being spent in Germany, a lot of them into the fiber build-out.
I hope that we are now scaling up from 500,000 beyond 1 million into 2 million on an annual basis. Learning to deploy that faster and cheaper. 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." The others are waiting until we are investing. They're not investing on their own. I'm leaving the 7 million commitment from Deutsche Glasfaser at the moment out of sight. When it comes to the huge landscape of Germany, we need another environment of political direction. 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. Let me try to answer the value of a call option. The transaction price of the call option was zero. Therefore, the recognition on the balance sheet is also zero. There is no net debt increase. There is a difference between the transaction value and the fair value, and that's roughly EUR 1 billion. That will be amortized in the P&L under other financial income over the course of four years. If there is a massive increase of the T-Mobile share price and the intrinsic value of the 44 million share option is increasing significantly, obviously, that will have a positive impact on the EPS. That's my understanding on how we deal with this.
Polo Tang from UBS, may we have your question, please?
Yeah. 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. 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? The second question is really just a bigger picture question on consolidation in M&A. We obviously had the EC decision to block the Three- O2 merger in the U.K. in 2016. That was recently overturned by the European General Court. I'm just interested in terms of your perspective on effect there, do you think this opens the door to further consolidation across Europe? Do you detect a change in attitude from politicians and regulators on the subject of consolidation? Thanks.
Okay, Polo. Let me try to answer this 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 at the end of 2020, and that they have to take components out of the system. You have seen this week the German IT Security Institute, we call it BSI, they have published their security guidelines. There was some bit of press speculation as well. We have no privileged insight into when a final decision will be taken in Germany. We don't think anyone is advocating a rip and replace scenario for Germany here as well. I, anyhow, think that it's a little bit over exaggerated the topic that Deutsche Telekom is exposed or 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. 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. The IT security, that's something which is on its way going forward. They are really forcing an Open RAN migration. I hope that they even put that into the legal environment, because this is helping us 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.
I hope you are aware about the Open RAN engagement, which we are showing here in this system. 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. In this case, we are providing both Ericsson and some Chinese equipment for 5G services these days and even the 4G build-out.
That's where we are. Let's see the political position and how this evolves over time. We are not dependent on any kind of vendor. 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 across the world. This is where we stand. I think Germany is having a more neutral stance here.
Okay. Let me basically take on that EU consolidation question. We've heard.
Sorry.
We've heard this as well. We've heard Madame Vestager or Breton commenting favorably around a stronger consolidation of the EU telecommunication sector. I recall this very vividly as I returned back to this company in 2015. Everyone was talking about this, and in the meantime, not a lot of this has happened. 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. I think we have to be realistic, what is talk and what is actually action? 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 two. One was on your, firstly, on shareholder returns thoughts following your Q2 updates. We've clearly seen better TMUS performance. It raised guidance there, faster synergies, and sounds likely now to raise its total synergy guidance. I just wondered, has that changed the timing in which you can raise DT group shareholder 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 x? Any help on how you think about that would be really appreciated. The second question was just about how you think now about the strategic positioning of TMUS. Do you think it needs a greater convergent exposure? Yeah, 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 this crisis, the integration all at the same time. We are very happy about the progress we're making, 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. 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 firsthand. Christian, you might add something on this one. With regards to the other question, I think exposure to convergence, no. The answer is no.
You see that the growth, integration, the focus on mobile services, the 5G, the fixed mobile substitution opportunities, which we have on our mobile network, the huge capacity which we are providing now to the market, the entry into the B2B market, which we are driving. This is, let's say, first 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. 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.
Andrew, a couple of perspectives on my side. First of all, on the shareholder returns on the DT side, there is no change at all. I think we're going to continue with what we already communicated. On the T-Mobile U.S., performance, I think if you're taking a look at the merger case, I base my assumptions always on the merger case, we see whether performing better or not. I think there's a massive deleveraging kicking in after three years, which is 2023. Obviously, that continues to be that case from 2023 onwards.
The second point is because we haven't decided on any kind of shareholder return strategy with T-Mobile U.S., yet. The second thing is you have seen T-Mobile announcing a shareholder return policy back at the Capital Markets Day 2018. That was the two, three, four program. That wouldn't be something new. If they have excess cash that they basically return it back in terms of a share buyback program. 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 of time. 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. Tim, do you want to add anything or wrap up?
Thank you guys for joining us today. I think delivering what we have promised, that is the biggest task which we have in mind. You have seen that we have a very strong first half of the year on both sides of the Atlantic. The hedge which we always had in mind is working. I think the next half year is our hands full on deck. A lot of things to be done. The delivering of the benefits of the T-Mobile U.S., merger for our customers and as well for our shareholders is from utmost highest importance. We want to deliver more and faster on growth, on build out, and on profitability when it comes to the networks. The network is the basis of what we're doing, and the more we can do, the better it is. We have to do that in a very efficient way.
For me, strategic-wise, I would not say that everything is solved, but the biggest focus we should have is the FTTH for Germany and the factory approach which we are driving. This is something to be discussed going forward with Srini and the team. We should improve the regulatory framework at the same time. Germany is going into the phase of pre-elections, and in this time, it's very important to understand the programs with regard to digitization, FTTH. Everybody's open-minded these days and listening what we are doing. The next one is digitize, and digitize. 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.
This is, let's say, another big change which is helping us to save for fiber and save for profitability. The digitization is definitely something which is at our desk. The last thing is the de-risking of the T-Systems business and the improvement of the performance going forward. This is operationally and strategically a big question for us we are discussing. Even here we have enough to do. 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. With this, I 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.