Good afternoon, welcome to Deutsche Telekom's conference call. At our customers' request, this conference will be recorded and uploaded to the Internet. May I now hand you over to Hannes Wittig.
Yeah. Thank you. Good afternoon, everyone, welcome to our Q3 2019 conference call. With me today are our CEO, Tim Höttges, and our CFO, Christian Illek. Tim will first go through his highlights and the news of today, followed by Christian, who will talk about the quarter's financial in more detail, and then we have time for Q&A. Before I hand over to Tim, as always, please pay attention to our disclaimer, which you find in the presentation. Now I hand over to Tim.
Thank you, Hannes, welcome also from my side here. Thank you for taking the time for our call today. Let me start with summarizing three topics. The first one is the strong year-to-date results, which we are laying out. The second one is the 2019 guidance upgrade. The third one is the change to the dividend policy going forward. First of all, I like to stress the strong year-to-date results. I think we have a fantastic operating performance in all business areas. Out of five segments, three segments are growing double digits, and the others are all positive.
This is the best quarter since 15 years at Deutsche Telekom. Just want to keep that in mind for a moment here. On all metrics, in all segments, we are growing, at least as far as promised in our capital markets day. Remaining very strong customer growth in all our markets means as well gaining market share. Second, based on these results, we are raising our full year EBITDA guidance today, EUR 100 million on either side of the Atlantic. We raise it by a combined EUR 200 million at the group level. Thirdly, we are updating our dividend guidance today.
For 2019, we are proposing EUR 0.60, deal or no deal. EUR 0.60 becomes the new minimum dividend, and our dividend policy remains otherwise unchanged. Let me now go through my usual quick overview of our year-to-date performance before Christian then provides a deeper dive into the Q3 results. On five slide, you see the foundation of our growth, which are the high investments into the network.
In Germany, we now pass 24.5 million homes with super vectoring speeds of up to 250 megabits per second, and we are well on track to our 28 million households by the year-end target. This year, as outlined at the capital markets, is we are completing our German FTTC footprint as planned, and we are beginning to ramp up our FTTH deployments. Our initial focus here is on the subsidized build-out in white spots , on business parks, and with collaborations. We made further significant progress with our IP migration, now reaching 97% of German lines, so the end is clearly in sight.
Our German LTE coverage is at 98%, which is our full year target. Just a comment here. We just saw the new P3 test coming out. It documents our strong leadership against Vodafone and Telefónica, almost one-third better than the Vodafone network and significantly better than the Telefónica network when it comes to coverage and to throughput. Our towerco added 1,500 new sites in the last 12 months. This is on track for our ambitious plans to increase our site footprint by one-third by 2021. We continue to innovate as we illustrate with a few examples on slide six.
For instance, you see the launched Europe's first Smart Speaker. We further developed our campus network solutions in the B2B space. We won the rights for the 2024 UEFA Football Championship in Germany, where we are becoming champion. While this is an exciting opportunity to showcase our MagentaTV platform, let me state very clearly that this does not mark a change in our TV strategy. We can discuss that later on. I think it was a great opportunity which we took. We remain primarily a content aggregator, so content ownership is not our primary goal.
Moving on to slide seven. Our strong momentum with customer continues. 14 million, one, four, German homes already subscribed to our fiber products, 2.4 million more than a year ago. Across our European footprint, we added 2.1 million converged customers in the last 12 months. We added 3.1 million mobile contract customers, of which 1.7 million organically. T-Mobile US continues to grow strongly and again raised its guidance for 2019. Branded postpaid net adds towards a new range of 4.1 million net adds-4.3 million net adds.
This compares to an initial guidance of 2.6 million net adds-3.6 million net adds previously. Moving to slide eight. Here you can see that every segment is contributing to our growth and delivering as promised at the Capital Markets Day, or better. Honestly speaking, being now almost 20 years at Deutsche Telekom, this is the best quarter we have ever shown. Based on these strong results, we are raising our full year EBITDA guidance by EUR 0.2 billion today to EUR 24.1 billion. Based on consensus, for an exchange of 1.11, this would amount to EUR 24.7 billion-EUR 24.8 billion by the end of the year.
We are not only passing on last week's T-Mobile U.S. guidance increase. We also raise our ex U.S. EBITDA guidance here in Europe by EUR 0.1 billion to EUR 13.5 billion total. T-Mobile has also raised its guidance for 2019 CapEx. At the group level, we pass this on as well and now project EUR 12.9 billion for the full year. Reflecting this, our free cash flow guidance remains unchanged at EUR 6.7 billion. Based on consensus foreign exchange, this would amount to just over EUR 6.9 billion. In the U.S., we have now gained many important approvals.
We have been able to convince a number of states of our case, and we remain confident and optimistic that our planned merger will be approved. However, it is still unclear how long this might take. Therefore, to provide clarity, we propose a dividend of EUR 0.60 for 2019, irrespective of the merger. EUR 0.60 becomes the new minimum dividend. The existing financial strategy remains otherwise unchanged. We believe this is the right proposal, both in the case of the merger and otherwise.
To avoid any misunderstandings, we reiterate all our 2017 and 2021 capital market targets, especially our promise that ex U.S. CapEx will not exceed the 2008 level. Of course, as previously mentioned, we raised our 2019 guidance today. What has changed since our last update? On the one hand, our merger has taken longer than expected, and T-Mobile has performed very well in the meantime. On the other hand, we now have much greater clarity on 5G auction costs and timelines across our footprint, especially in Germany and in the United States.
We also decided to accelerate our 5G launch in the U.S., and we will now launch 5G to 200 million POPs already in 2019. We believe our dividend proposal strikes the right balance, is prudent, and between the shareholder returns and prudent funding of the many attractive growth opportunities we have in our footprint. Guys, I know this was a very tough decision for us, and it wasn't easy to take that.
I know and appreciate that some of you expected a little bit more dividend payout in 2019. Again, all things considered, we believe this is the right thing for us to do and to give you certainty about what we are doing for 2019. With this, I'd like to hand over to Christian, who will take you through the third quarter financials in greater detail. Thank you very much.
Thank you, Tim, welcome to you also from my side. Let me start with the key financials on page number 12. Q3 reported revenues grew 4.8%. On an organic basis, that would have been 1.7%, which is very similar to last quarter. Q3 reported adjusted EBITDA grew 5.4% this quarter, and again, that would have been 3% organically. If we're taking a look at our EBITDA growth outside the U.S., I'm happy to report that our growth is now at 3.4% on a reported basis and 2.9% on an organic basis, which is very much in line with our midterm guidance.
Free cash flow is up by 17.5% this quarter and adjusted net profit by 7.5%. Let's move to the next page, 13, revenue and EBITDA in Germany. Revenues were up 0.6% this quarter, and EBITDA was up 2.4% this quarter, which is very much in line with the previous two quarters, which we've seen in Germany and is bang in line with the full year guidance. Next chart. On the service revenue side, we grew at 0.6%, which is the same number as we had in the last quarter, but the mix is different.
We're seeing a weaker mobile service revenue growth, and that is offset by stronger fixed line revenues, which grow faster than in the previous quarter. The fixed line revenues benefited from a higher regulated unbundling fee, which we introduced to the market in July. We introduced a single line price increase in September, and that helped us to show a higher growth number here. We're taking a look at the mobile side. As we said, our headline service revenue growth slowed down to 0.7% year-over-year, but there were two negative impacts.
One is obviously the full quarter impact on the regulatory side, which accounted to - 0.9 percentage points. What we said in the Q2 call, we had a favorable revenue from visitors in the third quarter 2018, and we don't see this in this quarter, and that impact was around a percentage point as well. Taking all this into account, that leads us to the conclusion that we don't see any change in the underlying trends, and that we're going to confirm the midterm service revenue growth of 2% in the mobile service area in Germany.
Next page. If we're taking a look at page number 15, you see that the commercial momentum in mobile is actually pretty healthy. Over the course of the full year, we have experienced a churn rate in the consumer space, which is below 1%, which helps us, obviously. What we also see is, on the next page, a strong momentum in data usage. The data usage grew from the last quarter to this quarter from 3.2 Gb per month to 3.9 Gb per month. That is a Q-on-Q growth of 22%, or on an annual basis, almost 60%.
On top, 55% of our Magenta brand mobile customers and 24% of our broadband homes are now part of a convergent relationship. Moving to the fixed line side of the German house. What you see is, we're happy to report out that our momentum in the net adds in the broadband space has actually improved. You heard us saying in the last quarter that we were disappointed with the 28,000 net adds. We achieved 47,000 net adds without having any structural price moves in the German market, and we will stay focused on maintaining that momentum.
For now, 16 consecutive quarters, we added more than half a million fiber net adds, of which more than 300,000 are coming from the retail side. We also added 67,000 TV customers, which is a continuous increase in growth rates. On the line losses, we had actually a step up to 231,000. This is obviously driven by the final stages of the IP migration, and most lines are here comparatively low ARPU lines in the B2B space. For the first time, we highlighted what's going to be the IP migration impact and what's going to be other line loss impacts.
If we're continuing to the next page, Germany Fixed. You see that the retail revenues in the fixed line fell by 0.7%. That is actually an improvement Q-over-Q because last quarter we had a negative decrease of 1.4%, and that is obviously being supported by a stronger broadband growth, which is 3.5 percentage points year-over-year. Last quarter, we had 2.3%. That's also pretty much in line with our midterm guidance. Let's move forward to the two usual slides from the U.S., who already presented their excellent results last week. Again, another 1.7 million customers.
Now 26 consecutive quarters with more than one million net adds. The EBITDA under IFRS grew by 3.2%. If you including the positive one-off, the hurricane reimbursements, in Q3 last year, that EBITDA growth would have been 6.8%. On the performance metrics, you see that on the branded postpaid churn rate, U.S. achieved a new record low on churn rates, which is 0.89 percentage points. The commercial results are obviously being supported by the great network which they are having there and which was, again, confirmed by recent tests.
What you also see is that the cost of service is slightly up year-over-year, but one root cause is the already mentioned hurricane reimbursement in Q3 2018. On top, we are facing higher cost of service due to the accelerated 600 MHz and 5G build-out in the U.S. Tim said already, the U.S. is targeting 200 million POPs by the end of the year. Moving over to Europe. Again, very good result in Q3. We added 280,000 new contract customers, 329,000 new converged customers.
That takes us to a household penetration of more than 47%, which is an increase of 11 percentage point year-over-year, and a solid to good broadband customer growth. That commercial momentum obviously turns into financial momentum. Q3 reported revenues were up 1%, and EBITDA was up 4%. If you take it on an organic basis, which is mainly an adjustment of UPC Austria and some slight adjustment on the product side, the revenues grew by 0.7% and EBITDA by 3.3%. That growth is actually broad-based across the whole footprint.
To be honest, I think we have to highlight the Greek team. The team around Michael Tsamaz , again, delivered an outstanding result in Q3, and we hope that they're continuing to do so in the future. When it comes to Europe, we're well on track with the full-year guidance and also with our midterm targets, which basically gets me to the next segment, which is Systems Solutions. On Systems Solutions, you will hear me saying pretty much the same thing I said in Q2.
We're continuing making progress with our turnaround plan, but there's still a way to go. What you see on the revenue side is that revenue is actually coming down by 4.5%, which is largely driven by a planned withdrawal of low-margin business, such as end-user business. We're also faced with some negative growth rate in the classical IT space. These are the two main reasons why we're basically seeing a lower revenue number. Meanwhile, if you're taking a look at the order book, that continues to develop well.
We're seeing a 20% or 21% growth in the order book year-over-year, and having now basically EUR 2.7 billion on our books. On the EBITDA side, year-to-date, T-Systems grew by almost 11%, and I think we're well on track to achieve the EUR 0.5 billion EBITDA guidance, which we gave you for 2019, and also confirming the midterm targets.
Next chart on page 24 is group development. Obviously, their results remain impacted by this year's consolidation of Tele2, but also by the intra-segment transfer of the Dutch towers into GD Towers. Organically, the revenue growth was at 2.7%, and organic EBITDA grew at a stunning 15%. It was very much driven by T-Mobile Netherlands, which benefited from a very strong commercial momentum, but also synergies from the acquisition of Tele2. Like for like, mobile service revenue grew exactly 2.6% in the third quarter.
On the tower side, you heard Tim saying this already, we added 1,500 physical mobile sites into the German footprint over the last 12 months. We're on track with our guidance to add 9,000 sites until end of 2021 over the course of four years. The recurrent rental revenues grew by almost 4%, 3.9% exactly. EBITDA grew by 3.6% on an organic basis. Let me now move to the main financial items, and let me start with the cash flow.
The cash flow, as I said earlier on, grew during this quarter or the last quarter, by 17.5%, which gets us to an almost 14% growth year-to-date, which is in line with our guidance, despite the fact that we're facing higher than expected U.S. merger one-offs. The net debt increased by $3.5 billion this quarter, and that is mainly due to three effects. One is obviously we're facing the German auction payment. Secondly, we're facing a stronger dollar that helps us a lot on the revenue on the EBITDA side, but it also adds to the absolute number of net debt.
Due to the accelerated 5G build-out in the U.S., we're also facing additional tower leases in the U.S. If you taking a look to the net debt to headline EBITDA ratio in Q3, we're showing a 2.8, which is outside our communicated range. Let me be very clear with you. By the end of the fourth quarter, we will be back in that corridor. Obviously, we will stay at the upper end of the corridor. We clearly expect if we don't see a disaster on the dollar happening, that we're basically returning back into the corridor. To sum it up, I think that was a strong quarter in Q3. We raised the guidance.
We're basically confirming the midterm outlook. Now on a final note on the dividend from my side, and I think many things have been said by Tim already. I think that was a very tough decision for those who have been involved in that discussion. To be transparent, we ran numerous rounds in order to get to, basically, today's proposal. As Tim said, the root cause is already, I think it's the best possible balance between having a fair shareholder return, giving us the flexibility to invest into growth, but also remain our rating, which is BBB+. With that, I'll leave it for questions. Thank you.
Thank you very much, Christian. Now we can start with the Q&A. As always, please press star one if you want to ask a question. I will announce your name when it's your turn. Should you require to cancel your question, please press star two. You can also send this question via webcast or email. We start with, as it were, Akhil at JP Morgan.
Yeah. Hi, good afternoon. Thanks for taking the questions. I've just got two, please, both linked to today's decisions around the dividend. The first is on debt. You talked about the EUR 3 billion increase that we've seen this quarter in your net debt. If we look at the waterfall you provided, half of that is attributable to lease obligations being added to that balance.
I guess if you could just talk us through exactly what's going on there. I presume it's to do with U.S. towers. I presume U.S. towers will continue to grow and therefore so will the leases. If you could just give us a bit of color on how that progresses and how we should think about it. That's the first question.
The second one is on the actual dividend decision as a whole. I guess it's understandable your leverage is at the high end of the range or slightly above the range at the moment. I guess if the deal goes through, leverage goes up. If the deal doesn't go through, you need to buy U.S. spectrum. I guess the broad thought process makes sense. I guess what I'm trying to understand is how did you actually arrive at the sort of dividend cut you want to put through?
I guess just the observation my end would be that the EUR 0.10 cut is a, I don't know, circa half a billion change in the total dividend cost. Relative to the total debt annual free cash flow, it's not the biggest number. How did you reconcile these things when you thought to balance all the different demands on the business? Thanks a lot.
Let me take the first two questions. First of all, the free cash flow, which we're showing, is the reported free cash flow, so it does include leases. The 1.5 which you're going to see is actually an increase in rights of use of 1.1 and also financial leases which were added in there. That basically explains the bridge of the 1.5 which you see there. On the dividend question, on the EUR 0.10. Look, I think there's no mathematical equation. I think there was a lot of business judgment in that discussion. What has changed relative to our original announcement of the dividend policy?
One is, obviously, we were facing a significantly more expensive auction in Germany. Secondly, what we said is, there is an accelerate build-out on 600 MHz in the U.S., and the U.S. was clear that they're continuing with that acceleration. Thirdly, I think we have, especially when it comes to the U.S., more clarity on what's going to happen to the upcoming auctions, whether it's going to be the millimeter wave auction or whether it's going to be the CBRS auction, which is now announced for June 2020. That communication happened back in September this year.
Also, we're expecting more clarity on the C-band auction in the upcoming weeks and months. So that was the delta effect which we're seeing, and we were clear that we have to maintain the rating in the upcoming years. Then there's the third element, and I think Tim said it already. Look, we're confident that we get this deal through, and that we get a positive outcome. Without any doubt, it's been delayed. The original plan was Q2 in this year, and now we're expecting early 2020.
I think we have to come up with a proposal which is balanced in a deal or no deal scenario, what we're going to pay out as a dividend in 2020. That basically led to the conclusion that we're going to pay EUR 0.60 in any case, deal or no deal, and that EUR 0.60 is also the new floor going forward. That's the explanation how we got there. It's not like that we have an Excel spreadsheet, who's giving you basically a number which is calling out EUR 0.60.
Thank you, Christian. We might go back to this question later in the call. Next question for now is from Polo at UBS.
Yeah. Hi. Just have two questions. The first question is on network sharing. Can you remind us what your views are on the possibility of mobile network sharing in Germany? Do you think there's scope for a trilateral network sharing from all the operators, in large parts of the country? Alternatively, what are your views on the prospects of bilateral network sharing in Germany?
The second question is really just around German mobile service revenues. You obviously highlighted that there was a phasing issue around roaming revenues. How confident are you that German mobile service revenues will rebound in Q4? Can you also talk about what the response has been to your new mobile tariffs that you put through in September? Thanks.
Okay. Let me try to answer your question, Polo. First thing on the network sharing side. Look, we have publicly said that we are open to collaborate in every regard. It's anyhow our interest to improve the capacity utilization of our sites here in the German environment. The question is, how could this network sharing look like?
The first one are areas where no mobile site is available today. Maybe you have heard about that the government has started a project which is called MIG, Mobilfunkinfrastrukturgesellschaft company, which is providing infrastructure, so that everybody can put his antenna actively or passively onto the sites. This is something discussed, and we are supporting this initiative. I guess in these white spot areas, a lot of the money is coming from the government, and we just put our antennas, shared or unshared, into the slots.
The second area are areas where one of the operator has a network and another don't. We call that gray areas. In these gray areas, we are open to share, as well. The situation in Germany is that we have a significant advantage due to our huge investments over the last years with regard to size. We just have passed the 30,000 site in Germany. Our network is much better than from Vodafone and from Telefónica. I would not give this access immediately, but I would give that access on a tit for tat basis.
If we are getting offered from Telefónica and from Vodafone, maybe 20 sites in Brandenburg, and we can share 20 sites in Saxony or something like that. This is the principle on how we approaching these guys for the gray areas. On top of that, we have our DFMG strategy, which we implement as well, that we are open for network sharing and site sharing here in this area on a commercial basis, which we are doing today. We have a sharing on masts of 2.3 x already. We are interested for further tower co-location ratios to improve here.
Therefore, there are various ways of collaborating. It's our interest to reduce our capital costs, and it's our interest to better fulfill white spot areas. Nevertheless, we keep our network leadership as a target in place. We do not want to give that up for free and too easy here. Reciprocity is the name of the game. When it comes to the second question on the mobile market here. Look, we have seen growth in German market. By the way Which maybe haven't been mentioned yet is we are very pleased in German mobile market with regard to the net adds in our Magenta product line. This is a huge uptick.
By the way, I was heavily pushing on this one because, I want to see the Magenta product being taken by the customers because that's our premium product, and we have the lowest churn in these areas. We have seen in Q1 a growth of 2.8%. We have seen a growth of 2.4% in the second quarter, and we've seen an 0.7% growth in the third quarter. You can say, "Oh guys, is there a decline in these areas?" The answer is no, because there is a sequential decline, which we mentioned already in our previous calls, which is coming from the headwind faced from the International call regulation.
This kicked in already in mid-May, and had materialized now in this quarter. If we would exclude this effect, we would have seen growth of around 1.6% in this quarter. The slowdown is largely due to the quarter visitor revenues. Nevertheless, this market is quite competitive as it was in the past. We have seen some aggressive movements from O2, which includes a six months for free offering and which has resulted as well in gains for their brand. Nevertheless, we have this in insight, and we keep ourselves committed that we are aiming for a 2% CAGR growth in this specific German market segment.
Thank you, Tim. Next question is from Mandeep at Redburn.
Hi. Thank you for giving me the question. Look, the first question I really have is on the Sprint deal term. Did the deal not actually expire last week? Could you say why you haven't extended the deal terms? That's the first question. The second question is, there's a lot of noise in the market around Lifeline contingent liabilities and so on and so forth. Excluding any other factors from the point of view where there may or may not be significant contingent liabilities that you weren't originally aware of, do you have a condition in the negotiation to be able to change the terms of the deal? Thank you.
Look, with regards to the long stop date and the deal terms here. John Legere has commented on this at the T-Mobile U.S. earnings call. There's no further comment on this from my side. It is correct that since the beginning of November, both parties can unilaterally cancel the BCA, and that's where we are. I'm not adding anything to John's comment here.
Thank you, Tim. Next question is, I hope we answered Mandeep's questions here. Next question to the extent that we can answer it right now. Next question is from Fred at Bank of America.
Hi. Good morning. Good afternoon, sorry. Two questions. First of all, to come back on the first question from Akhil on the leverage. The lease liability seemed to be increasing steadily. There were EUR 16.9 billion in March, now it's EUR 18.1 billion. I think the question was more if you could discuss the mechanism and the drivers for that going forward. Not this quarter, but if we look in next few years, should we expect that liability linked to the U.S. to continue to go up?
The second thing, sorry, to come back on the dividends, in a no-deal scenario, we have a permanent reset at EUR 0.60. As you say that after that, your growth will reflect EPS. If you can share with us a bit, if we stay in that scenario, what has changed beyond the higher cost for spectrum in Germany? I guess your need for mid-band spectrum in the U.S. probably not that new when you presented your full-year outlook 18 months ago. If anything, credit conditions have probably improved. We were just trying to understand here what's new in a no-deal scenario.
Let me answer the question on the leverage. I think the required CapEx and the lease liabilities are part of the new outlook in the U.S. I think what we also have to bear in mind is, obviously you add additional rights of use and you have to pay interest for this, but that basically, in parallel, increases your reported EBITDA as well.
From this perspective, we don't see any further significant deterioration. I think, as I said it earlier, Q3 is being impacted by the payment of the spectrum, which we don't face in the next quarter. It's also being impacted by a negative dollar when it comes to absolute and net debt numbers. We don't expect any further deterioration from the U.S. in the future.
Okay. Coming to, Fred, to your second question, and let me just reiterate about this dividend discussion, which we have had here internally. Look, since 2009, we have a kind of strategy, we call it, let's say, financial market strategy, which says there are three stakeholders which we always have to reflect in a proportionate way. The one is, let's say, the business that we invest sufficiently into the operations.
The second one are the debt holders that we keep always our debt rating stable in the range which we have had. By the way, we are the telco with the longest stable telco rating in the history of Europe here. It's almost been 10 years of the BBB+ rating, and we have said there should be an appropriate sharing of the cash flow with our shareholders. This was the discussion which we had at the beginning of the quarter to say, okay, it looks like we have a great contribution from the operational side, but on the other side, there's the question around the transaction now.
Nobody was expecting that 2019 is a year without a decision on the deal. There were two kind of camps. The one camp, which we met, which my shareholder said: "Look, we're expecting the deal comes, and the dividend is going to be EUR 0.50." The other camp says, as long as there is no deal, just follow up the old dividend policy and increase your dividend with the earnings per share, which was the guidance given at the Capital Markets Day. We came to the conclusion that between EUR 0.50 and EUR 0.70, a wise compromise is EUR 0.60.
What we saw as well at the same time is that we said, look, EUR 0.60 should be the new minimum dividend. Why? Because since the last 18 months, we have outperformed in the U.S., we have outperformed in the European markets, and therefore the certainty about, let's say, the underlying free cash flow profile of our business has improved.
That is why we're saying it's not anymore EUR 0.50 in the merger scenario. It's now EUR 0.60, which is a clear commitment from our side that we believe in the future of our operations and its free cash flow and profitability profile. That's the first part of the question. The second one is now, do we see anything which you don't see going forward? When it comes to the investments, look, we have seen the German auction. I think it's a good message to the German politicians to say, "Guys, if you're taking out the money out of our pocket, here is the consequence on the dividend side."
They might not like it in the Ministry of Finance here. This is, let's say, one message, and we have to reflect that. Going forward, we have now higher build-out obligations for 5G services in Germany. We have an accelerated 5G build-out of our T-Mobile operations. On top of that, we have the spectrum auctions, which we foresee, and we do not know about the outcome which is in the mid-band area, and in the millimeter wave band, which are coming in 2024 as well.
What we want to give here is kind of stability that we have the financial power, that we have the balance sheet, that we have the rating, and at the same time, a fair and appropriate dividend yield for our investors going forward. We give a commitment that this 60 is now the new basis for what we are doing in the next years. For me, this is a personal, and for Chris and myself, a personal strong commitment towards investor community.
Okay. Next question is from Christian at HSBC. Christian, please.
Hi. Thanks. Coming back to the mobile service revenue. Overall, otherwise, good results in Germany, but it kind of stood out. In terms of Q4, if we look forward a quarter, is it fair to assume that the whole visitor roaming stuff is kind of going to a normal level again? Generally speaking, you increased prices the beginning of September. Are you seeing any impact from the new portfolio? Would be good to get a bit of color on that, on the current momentum, generally speaking.
Secondly, on the content strategy. You're saying you're not changing the overall strategy when it comes to content. You're not disclosing numbers. If you believe the press, they're citing something like EUR 200 million that you may invested in the rights. You get maybe some sub-license fees. It sounds like a big investment for a tournament that's only one month in 2024. Can you maybe explain why you decided to buy the rights, what you believe they will bring to you, and why this is not the new normal in terms of content strategy? Thanks.
Christian, let me start with the mobile service revenues. As you know, we don't give any quarterly guidance on the mobile service revenue. To kind of bridge the Q3 result, we had 0.7% mobile service revenue, and we had a one-time negative effect on the visitor revenues, which gets you an underlying 1.7%. Secondly, I think we introduced the new tariffs at the IFA in September. I think it's too early to really say they're a huge success or they're not working. What you can see as an early indication is obviously our contract net adds, which have accelerated from Q2 to Q3.
I think I would take this as an early signal that the price moves are moving in the right direction. I think to make a final assessment on the new tariff strategy, it's a bit early. On the content side. Look, the first thing is that 2024, the world has changed. In 2024, customers will have heavy use of 5G services. Think about a country like Germany, where the leader in the technology is offering its customers a 5G service to watch the games, to enjoy all the content around this, not only in front of the TV service, but everywhere where they want to see.
If you've seen the first folded screens, which are now in the market from Samsung, if you see the products coming, I can tell you the way how we will enjoy the championship in Germany will be different. If the market leader in Germany is, with its technology, leading this showcase. I can tell you, this is paying into our brand, which is already very strong today. This is the one thing. The second thing is, I can tell you this is something where we could easily, today, distribute the content via other broadcasters. Everybody's interested to get that. RTL was on it.
The ARD and ZDF, the public ones, are interested in this one. We have that on Entertain. We always have said that we will not have that exclusively only over our network. We will not exclude, let's say, anything on this content side. We will have it for us and for our customers and as well for partners if they have a recent price for that, we'll share offerings. This is definitely part of the rebalancing of this rights portfolio, which we have acquired.
On top of that, I think we will be able to attract even new customers to our TV platform during this period, because sport is very attractive content and especially if it's taking place in German market. We have given new commitment that we're going to increase our customer base to five million customers in the upcoming year.
Again, our content strategy is an aggregator, a content aggregator strategy, where we from time to time are a little bit more sexy by having some things others don't have. This is, let's say, what we said in the past, and that is how we're moving forward. I strongly believe that we are going to be able to make money out of this rights perspectively.
Thank you, Tim. Next question from George at Citi, please.
Yes. Hi, thank you for taking my questions. I have two. The first one is around flexibility regarding the balance sheet. Obviously you've mentioned you plan to go back within the range, but maybe towards the top end. Is it possible to give us an idea of what levers you have to offset any potential outflows with or without Sprint in the next couple of years?
Obviously we're all aware of your tower portfolio, but whether there are other assets that you are perhaps considering, for example, Telecom Italia is looking at data centers. I'd be interested to hear more broadly how you think about the different types of assets and also the countries you are in.
My second question, to the extent you can comment, there's been a couple of articles in the last month. One regarding T-Systems and the other one regarding Hellenic Telecom, for different renewals of contracts or earlier termination of contracts of the management. Particularly on T-Systems, given the volatility, I wanted to see if you can assure us there's nothing we should worry about in terms of the operational outlook and with regards to OTE, whether there's anything in Romania we should read from that. Thanks a lot.
Okay. Let me start with the comments on T-Systems and Hellenic Telecom. We are aware of these rumors. To be honest, this is gossip, but there is no fundament behind it. I called out the Greek performance in that quarter as outstanding, and it is outstanding. I think Michael and his team is delivering very credibly, very good results over the past years, and we're betting on him that they will do the same in the future. On T-Systems, same story. We are happy that we have an increasing order entry. We're progressing on the transformation at T-Systems.
To be honest, Adel has been prolonged in this contract, so just recently. There is nothing behind this. On the first question on the balance sheet. The biggest thing is, what we're betting on is our growth strategy. We wanted to continue to grow on the EBITDA line. We wanted to continue to grow our free cash flow around 10% every year. That is something how we basically want to deleveraging going forward. As you know, we're not speculating on any kind of M&A activities.
What we said on the towers, we're always open to go a different venue, but it's too early and too premature to basically discuss with you whether we have a dedicated plan. Therefore, I think we're just betting on operational strength in the business we're operating in.
Okay. Thanks, Chris. The next question is from Jakob at Credit Suisse, please.
Hi, good afternoon. Just one question on fixed line. You obviously highlighted quite high line loss as a result of the IP migration. It didn't seem to have a particular impact financially, just on the KPIs. Can you just remind us what your expectation is? I think you've previously said that the line loss should start to wind down this year. Is this kind of the tail end? Or is there any change in that? If you can maybe just comment on why the high line loss didn't really seem to have much of a financial impact in the quarter. Thank you.
Maybe going to the line losses here first. The biggest driver of the line losses is the end of the IP migration. I mentioned that earlier, it's 97% where we stand at that point in time. There's another quarter to go, but we are very close to the end. I can promise you one thing, next year you'll see significantly lower line losses. By the way, I make a personal statement on that one because, otherwise they're going to kill somebody in the German organization. On the B2B side, and the B2C side, where are the sources for this line losses on the B2B side?
It's the cleanup effect, which we have with customers who are identifying old analog services. They're just cutting the cord here because they don't need it anymore. This is one effect which we see, which is coming from the closure of this broadband platform here with B2B customers. They simply reduce the amount of connectivities in their facilities. On the B2C side, we saw a higher single play line losses in the consumer segment, that was driven from our price increase in September. As you know, we have increased our single play prices, we saw some additional churn coming from that angle.
The people are mainly cutting their cords and not using the service anymore are going to only digital services here. This is, let's say, the second driver on the B2C side. Nevertheless, what I want to stress here at that point in time, I'm very happy with the Q3 performance on the broadband products. Because if you take this IP effect out of the equation, our net add market share on broadband products is close to the 40%. We are very close to the area where we want to be. This is mainly driven by the vectoring rollout across the country, aiming for 28 million households by the end of the year.
I mentioned that numbers. We have a good momentum on the TV product side here. We see that these new capabilities which bring into the network are on the one time driving down the churn and on the other side attracting new customers. This is a very positive development. Next year, this effect is going to be accelerated because we then have no negative impact from the IP migration anymore.
Okay, thanks. The next question is from Usman at the Berenberg, please.
Hello, thank you for taking my question. I've got two questions, please. Firstly, on the U.S. situation, secondly, sorry to come back on the dividend. In the U.S., I guess you're up against a tricky situation here, right? If you end up in a scenario where the deal has not completed and the C-band auctions are coming up, how do you balance that? Obviously, Sprint has good spectrum. You won't need any C-band if that deal completes. If that deal doesn't complete, you need that spectrum. How do you think about the auctions there?
Then just on the dividend, I just want to run some math by you and I'd be interested in your thoughts. If I look at your free cash flow guidance for this year, EUR 6.7 billion. If I look at the accruals for finance leases, the repayments of which are not included in your cash flow, but those accruals are hitting your balance sheet every year. Those around EUR 1.5 billion-EUR 2 billion.
If I take EUR 6.7, less around EUR 1.5 billion-EUR 2 billion for those accruals, and then I take off an average kind of annualized spectrum spend, over the last five years, it's been averaging around EUR 3 billion, EUR 1 billion in Europe, EUR 2 billion in the U.S. You land up with a free cash flow all in, which is below the dividend commitment, of EUR 3.4 pre the cut, EUR 2.9 after the cut. It just seems like unless that issue is addressed, the leverage pressure is just going to continue to build, right? Just any thoughts on that would be helpful. Thank you.
Usman. Usman, first, by the way, I think Christian going to the dividend statement on free cash flow guidance is wrong. I just wanted to make that clear. I think your assumptions are wrong. Christian goes into the detail on this one. Let me go into the U.S. and the question about the spectrum situation here. We were quite successful in what we did there. Just starting with the millimeter wave bands and the two out of four auctions on the 24 GHz and 28 GHz auctions were accomplished, and we gained 500 MHz of spectrum in this specific band. We were quite successful in what we have achieved on this area.
From December, we will have a 3.4 GHz spectrum auctions and in the upper 37 GHz, 39 GHz, and I think in the 47 GHz area, there will be auctions coming. As we have always said, we are prepared from our side and anticipated as well financially, what that would mean in our guidance. This is something which we knew already when we drafted our 2019 plans and beyond. There's the CBRS spectrum, which is partially licensed and partially unlicensed. This is a complicated spectrum plan, which had to be developed over the times.
In September 29th when the FCC decided to conduct a CBRS spectrum auction in June 2020. This is 70 MHz of licensed spectrum in a 3.5 GHz area, which is coming to the market. There's time to go on this spectrum, and we will then definitely know where we stand with regard to the deal, and what that would then mean for us going forward, whether we have to participate or not to participate. Then we have the C-band area. This is this mid-band spectrum and which is as well coming to the market. The FCC has decided finally on the timeline. It's coming up in the coming months.
We cannot speculate when that is, and how that is going to take place, and whether this is in conflict with our deal approval and the final decisions which we are expecting here. We do not see a kind of collusion here. We are very confident that we will know at the beginning of 2020, whether we have a deal or whether we end of no deal.
Let me add a couple of snippets to this. First of all, on that EUR 6.7 billion which you're alluding to, I think what you've seen right now that we're growing free cash flow, comparatively speaking, more than 10% every year. That will help us going forward. On the finance leases, and if you'd taken the stronger dollar into account, it's actually our prediction is EUR 6.9 billion. The second one on the finance leases, I think the number is discoverable. I think it's more EUR 1 billion than anything else.
The third one is obviously, the dividend decision is taken into account, the clarity to the capital markets, but also what we expect in terms of outlook. What we expect in terms of outlook is also factoring in that we're maintaining our ratio. From this perspective, I think, we have factored in all relevant factors, which got us to the conclusion of EUR 0.60.
I think it's also fair to say that this year, for instance, our free cash flow guidance is after about half a billion EUR of U.S. deal related expenses. Furthermore, I think it's also fair to say that we, in the U.S., we have an exceptional growth that's now going on for five years, which has a negative working capital impact as well. Maybe part of the evaluation when you next look at those numbers. Now we move on and, next is Andrew at-- No, sorry, Ulrich at Jefferies. Sorry, Ulrich.
Hello. Can you hear me? Okay, let's try again. Thank you. I have two questions, please. The first one is on the German broadband market. You called out in the second quarter that the market was curiously slow. You highlighted already that it recovered in the third quarter, and it's not a share issue. Could you maybe sort of now with quarter or one and half quarters later, sort of describe what your analysis is on this situation? Broadband penetration in Germany is not particularly high. It's a bit curious why the market growth should really slow down so drastically, so quickly, so suddenly. That's my first question.
My second question is on the sort of wholesale situation in German mobile. Vodafone seem to have stepped away a bit from stated policy in the U.K. by giving a very large MVNO a deal, which came as a bit of a surprise to everyone, I suppose.
If that really means they're thinking about it differently across Europe rather than just in U.K., how do you view your approach to the German wholesale market in mobile? Is this a competitive question, or do you simply look at this and say, "We do what's right by our business. We don't really care what others do." In other words, if Vodafone start negotiating with other people in a different way with a different starting point, would that affect your approach to that market as well? Thank you.
Look, Ulrich, I know that you are a little bit bearish about the German fixed line market already for quite some time. Look, I'm a little bit more optimistic, as usual, on this subject. I think the Q2 was an unusual quarter. You saw that the third quarter was a very strong one and we had a fairly steady, over the years, commercial performance in this one, despite the fact that we were impacted by some of the IP migration here. We were able to improve our net add performance significantly. What we see as well is that Vodafone and Liberty is focusing increasingly on monetization of their own cable infrastructure.
What we see is that new customers cannot book DSL tariffs anymore with us. They are going to cable access only. This is something we expected here. It's not affecting our net add numbers because we open at new super vectoring areas. What we even do in cities where we do that, we regain market share from cable operators. You have even seen some weaknesses of the smaller cable operators in the German market at the same time. We are doing pretty well on that one. If I take the number on the retail fiber net adds, we had 318,000 additions here. I think this is quite an encouraging number going forward.
I cannot share that this market is heavily slowing down. I cannot share that Vodafone might change their strategy. We anticipated that. As I said earlier, we have a lower churn and we have good net adds here at the same time. Therefore, we are very close to the 40%. We are not yet there, but we are absolutely on the right track in this regard. When the IP migration is being accomplished, I can tell you we have even a less churn expected from our side. We are very optimistic on this one. Now, second question. Look, I can be impolite and say, "You don't should ask me, ask Vodafone."
Look, I'm trying to be as service-oriented as possible here. I don't know whether it's right or wrong, what they're doing in the U.K. market. I think the U.K. market is anyhow different than the German market here. It was. I saw that Vodafone was suffering a bit from the churn they were facing with 1&1 into the O2 network. They were very disciplined in the way how they let that happen. I have a lot of respect for Vodafone in this regard, that they're looking on how can they monetize their network leadership in the best way and not selling it to everybody. We have anyhow a quality competition here in Germany.
That is why everybody's trying to invest so heavily into mobile sites, and trying to improve the coverage and always leading the P3 test. I do not see that Vodafone is changing their behavior in this German market towards a more utilization-oriented strategy. We all have learned the lessons in Germany, what it would mean if you have an uncontrolled access of an MVNO on your infrastructure at lower prices. Therefore, I do not see that Vodafone is becoming irrational on this one. For us, what we have said in the past will be as well our strategy for the future. We are very consistent towards MVNOs.
Thank you, Tim. Next is Andrew at Goldman, please.
Okay, thanks. Afternoon, everyone. I had just a couple of extra questions on the infrastructure self-help opportunity in Germany. Maybe I'm wrong, but you sounded quite reluctant on a wider tower sharing deal in Germany. Do you see a risk that your competitors do sign a broader deal away from you? If that were to happen, would you have to get involved so as not to miss out on the efficiencies there?
A second question. Since the last quarter's call, we've seen more of your competitors suggest they're open to infrastructure asset sales, including Orange potentially open to fixed line asset stake sales. Any update on your scope to share investment costs in fixed would be greatly appreciated. Does any of this, the tower sharing, the infrastructure asset sales, does that present meaningful upside to your free cash flow guidance or downside to your CapEx guidance? Thank you.
On the tower sharing, let me reiterate what has already been said, I think. On the white spot sharing, where there is no opportunity to differentiate, I think, the best economic model would be if we share the burden among all operators. Ideally, it's all of us basically working together. On the gray spot sharing, where we have distinct opportunities to share with other MNOs to basically opt up both networks, I think the natural partner for us would be Vodafone because given their quality of their network, that is closer than Telefónica's. Obviously, we have the best one.
Secondly, if you take a look how they approach customers, especially in the retail space, they have similar price plans and so forth. I don't know what's happening on Vodafone's and Telefónica's side. I assume you're alluding to that potential negotiation. I don't know this. From a natural combination, I think a better fit would be DT and Vodafone.
On infrastructure sales, as I said, we have no plans right now which we can communicate whether there is any plan to sell something. As you know, we're totally persuaded infrastructure investors, and we want to basically keep our infrastructure leadership wherever it's possible. I think that is the strategy of Deutsche Telekom. Selling off assets would be an opposite direction.
Look, let me say some additional words, because I do not want to perceive as being a laggard. A laggard on selling assets on non-core activities or whatsoever. The opposite is the case, it has always to do something, what is the right timing and what's the right way going forward. Look, it was a very, very wise decision from us not to sell our Towercos . We have already privatized and put them into a different entity almost a decade ago. In 2000, we've established the Towerco , DFMG, as a company. This company is providing us with an EBITDA of more than EUR 400 million EBITDA today.
By the way, heavily growing. You have seen on our slide number eight, you have seen the group development segment is growing in a double-digit way. It's not only the unbelievable successful turnaround in the Netherlands, which is supporting that, but as well, the super performance which we have in the DFMG. The moment we keep that asset and not selling it yet, we're increasing the value of it. You're totally right. We should not miss the bus, if there is a bus coming, but I'm not afraid about that one. We have 50,000 towers, which we are managing.
We are by definition, the biggest towerco. I can tell you everybody's talking to everybody. Let's see how this is deploying. We can run this business on our own, perspectively, but we are willing and considering even partnerships, as I mentioned earlier. I think, as long as we are not desperately sitting and have to sell that business, we are looking for the right opportunities in this environment. When it comes to future asset sales, I think, we haven't made any decision. The Netherlands, with this super turnaround after the Tele2 deal, just to give you another inflection point here.
Today, we passed from number three and number two in the Dutch market on mobile, because Vodafone has shown slower numbers. Even here, we are now improving our market position significantly. Therefore, this is always an option which we can consider on the asset sell-side , but at the right timing and at the right value. When it comes to the question on upsides on the free cash flow guidance or downsides on the CapEx guidance, my answer would be neither nor. We are reiterating the 10% free cash flow guidance.
Obviously, if we're better, we're better. What Tim already said in his speech is, we're going to keep the CapEx guidance for Deutsche Telekom ex-U.S., which was always saying it's peak 2018. From there, it's maximum slowdown and keeping this constant. There's no additional headwind to be expected on the CapEx side.
Thanks, Christian. Next is Josh at Exane, please.
Hi there. Thank you. Just the one question from me. Following the price arbitration that we saw two weeks ago between Telefónica and Drillisch, have your expectations of a fourth network owner in the German market changed? Likewise, has it changed your view of how mobile competition is going to develop in Germany going forward? Thanks very much.
I think, Josh, maybe if I answer that. It's really up to United Internet to decide their strategy here with the fourth network build. They have entered, they've bought spectrum, they've entered obligations, and what they will do with it is up to them. I think that's probably all we can say to that. Next question, from Ottavio at SocGen.
Hi, good afternoon, gentlemen. I have a couple follow-up questions. The first one is on network. You discussed in a lot of details about network sharing as a means to a purpose. The purpose is basically to improve your coverage. My question is actually different. It's how big is the coverage requirements? How many sites you will need, first to hit the requirements of the license on rural and for densification in urbans? If you can tell us, probably, I don't know if you wrote it down your plan, how many sites we need between now and 2024?
The second one is also another follow-up, this time it's on the media strategy. You clearly said, at least what I understood, is that the right to purchase for year 2024 was relatively opportunistic move. Would that means that on the next round of bidding for the Bundesliga and the Champions League rights, you're not going to participate? The third, it's another I can ask, but it's a very straightforward one. What's your lockup on the T-Mobile stake if the deal with Sprint goes ahead? Thanks.
Let me start on the network question on the number of sites. As we said already, we want to increase our network portfolio by 9,000 over the course of four years until end of 2021. I think that to a large degree covers at least the network requirements until end of this year. On that question from now to 2024, I think the biggest demand is clearly sitting in the white spots. That depends on the sharing model we're coming across with. Everyone's building out. Obviously, that number is theoretically triple as high as it would be if we would share, basically with nobody.
From this perspective, I think it's premature to make a statement on the number of sites. Obviously, it has to be reflected because it's a legal obligation when it comes to the build obligations. Therefore, I think we should actually, from an economic point of view, come to a conclusion that we basically share among all MNOs when it comes to the white spots, because that lowers the burden for everyone. Our commitment, again, is roughly a run rate of 2,000 sites a year. You can do the equation until 2024, and that would be another 8,000 sites, which we would build by our own, if we're just maintaining that run rate.
Correct, Christian. This was the number. On top of that, we have the 10,000 microsites which we built in the cities, which we established down there, and to be market leader on the 5G services. All of this is included in our CapEx envelope being laid out. If there is additional sharing opportunity, this would improve our profitability. That was not part of the plan at that point in time. With regard to the media strategy, look, I do not want to be repetitive on this one, but I might be boring. We have not changed our content strategy.
It is a little bit, let's say, call it opportunistic, but we smelt some opportunity to differentiate here in this market. To just remind us on where we stand with MagentaTV. We have a lot of, let's say, good features, content aggregated in our TV proposition. By the way, we extended our classical home TV service with an IPTV proposition, a mobile service proposition exclusively, which we have out there in the market as well. In the so-called Megathek, there is the content.
We have TV series, we have movies, we have all, let's say, the original, exclusive and interesting-wise, very easy to access, even the big streaming platforms, being it Netflix, being it Maxdome, being it Amazon Prime. These streaming services are accessible very easily via that platform already today. On the sport side, we have established a MagentaSport channel, and we got some attractive rights here, like the basketball league or like the ice hockey league in Germany, which we are able to offering exclusively. On top of that, we have a deal with Sky.
A deal which is enabling us to include Sky services like Bundesliga or Champions League and other services into our MagentaSport suite. That's a kind of reselling and partnership deal, which we have with Sky, which is working nicely to complement the full set here. This is how we see the world going forward. There are no material changes which we have in mind.
If there are opportunistically some series like "Handmaid's Tale" or whatever being offered, which we think are fitting into the portfolio, we will add them, and we will buy these rights even exclusively. Nothing to change in principle, but opportunistically, we cannot exclude that we move in specific topics. On the lockup question, I think we have a four-year lockup after closing. That would be my answer to the question.
Okay, we have time for two more questions now. Next is Simon at Barclays.
Hi, guys. Thanks for taking the question. Just a quick one on convergence. You've obviously pushed it quite hard across Europe and in Germany as well, and you've had good success in Germany with smaller discounts than some of your peers. I noticed that you reduced those discounts recently. I'm just wondering how you think about the balance between convergent discounts and pushing convergence further, because we've seen convergent penetration maybe slow down slightly in the last few quarters. Thank you.
Sorry. We love convergence. By the way, the convergence, which we have offered so far is very much a tariff convergence. That means combining a mobile tariff with a fixed line tariff in an intelligent way now including the family and the like. We have pushed that. That's correct. Because we see the benefit of that one. We have more ARPU because more members in the family are using it. We have this EUR 9 in addition to the old package, which we know.
The second one is, we have a lower churn, which is helping us because the value is in the base. Last but not least, we have a higher customer satisfaction. Our TRI*M is in the 70s, which is our peak KPI when it comes to customer satisfaction. The upselling opportunities on TV is as well something which we strongly believe in this one. Therefore, I think the way how we positioned our MagentaZuhause service was very good because people didn't know exactly what it was.
The mobile customers were coming and got a fixed line offer, and the fixed line customers thought there's something on the mobile side, and they got a mobile offer. We were not so specific in the way what convergence really is. We have now a base, which is growing. I'm very happy about how Srini Gopalan took that up in the European side and how fast the non-German take-up rates are, and they're still on a very high accelerating mode. What's the way forward? The way forward is, we called it internally true convergence. The question about convergent products.
Think about a home OS, a home operating system, which is easily serving all different applications at home. Today, we offer a smart home service, which has its own operating system. We have a TV service, which has its own operating system. We have the classic communication suite, which has its own operating system. If we have a router, which is enabling all this kind of services easily, maybe even cloud-based. If we have one voicification service, which is able to steer each of the services proactively going forward, we really come into converged customer experience at the home.
That is, let's say for us, the true convergence, that you have hybrid service, mobile and fixed line, which is enabling higher speeds and better latencies. That you have one operating system which is supporting all different functionality we just mentioned. That we can bundle that in an easy way with our underlying tariff structure.
O n top of that, one app is supporting as well the mobile and fixed line capabilities. I promise you, we are working on this one. We have shown already some of the stuff at IFA, and there's more to come, during the course of 2020. The next step is after bundling is now true convergence with regard to products.
To prolong Tim's answer on the impact on run rates, because we lowered the discount, we had 80,000 in Q2 and 90,000 Magenta net adds in Q3, so we don't see this right now. I think, again, same answer holds true as for the mobile question. It's early stage to make a final statement here. We have the opportunity to actually course correct if necessary.
Thank you. That brings us to the last question from Matthijs van Leijenhorst at Kepler.
Yes, good afternoon. Two questions from my side. First one, looking at the Netherlands, it appears that you quite turned the corner over there. What's the long-term strategic solution for the Netherlands? Because it's still included in group development.
The second one is a bit of a follow-up on the U.S. spectrum auction. You clarified you gained more visibility on upcoming spectrum auctions, but just for my understanding, in case you don't get the green light for the Sprint deal, do you need to have the same amount of spectrum or do things change? The reason for asking is that, if I'm correct, initially, in case of a no-deal scenario, I had the impression that T-Mobile U.S. would reignite its $9 billion share buyback. If I look at the press release, it appears that this is also off the table. Those are my questions.
I like your question with regard to the Dutch market, because I remember the day when we were sitting here, and there was a discussion about selling the asset. Some of you said, "Look, better to get this off the balance sheet than rather trying to fix it." There were offers on the table of EUR 2.3 billion at that point in time, and I said, "I will never sell that business. We have the duty to fix that business." This business is super strong. They had this very disciplined cost approach. They first introduced affordable, unlimited data tariffs.
They had a new brand repositioning to become a strong challenger in this market. We built a network, which is, by the way, not only the best network in the Netherlands, it's the best and highest scored network in the P3 test across Europe. It's number one in Europe at that point in time with regard to speed, reliability, and consistency. We have done some inorganic move with Tele2, integrating this business into our services. Being able to offer now even fixed mobile converged services with a very strong B2B offering.
On 5G, we are ready to go and to move forward, the synergies for the three years are well ahead with regards to the integration there. We have now 600,000 fixed line customers in a growing segment as well. We are very happy on how the valuation has turned around from maybe EUR 2.3 billion, I saw some of you guys from the sell side side talking about EUR 4 billion for this joint entity here on the way how we're going forward. Do we have another strategy for this company? No. This is the strategy which we want to play out. Fixed mobile convergence and a leading position in mobile.
Your question might be, is this long-term a strategic piece of our portfolio? We always said this is part of the group development, and we might consider steps going forward. If you think about the cookie jar idea. That might be part of our cookie jar, if we IPO it or sell it, but no decision has been taken at that point in time. Prospectively, this is clearly an optionality for us. So far, we are enjoying the new good performance and the number two position in the Dutch market, which we recently achieved.
On the U.S. question, two things. We don't want to speculate on any potential auctions, although it has become more clear what's going to happen next year in the U.S. We said that we're going to participate at the gigahertz spectrum auction, which will start in December. On the share buyback, I think we have a buyback authorization that remains in place.
Okay. Thanks, Christian, and I think pass back to Tim for any final remarks.
Yeah, I guess. Thank you again, and please, again, if some of you were a little bit disappointed with regard to the dividend outlook, I hope that we were clear on why we're doing these things. I think it's a sustainable, well-balanced approach which we took here from our side. We are totally convinced that we will get the deal at the end of the day. In this situation, we would be all better off than we were before this decision. We give a clear commitment going forward.
I think, if I look to the portfolio, we have seen an outstanding quarter, with three segments growing double digit. I do not know any time in the history of Deutsche Telekom, nor in the competition, where we have seen this kind of development. Very proud about the performance here of my organization. Nevertheless, there's a lot of other things to do. I think we have a clear path in Germany with regard to 5G, and the way how we are performing. We already fulfill the LTE buildup obligations, which is very good for us.
We are very much focused on 5G, and we are convinced we have a winning strategy on this one. I think the main topic is now switching our VDSL, our vectoring build out, which is coming to an end, into the Fiber Factory. This is for me, on Germany, the number 1 priority on how we go into this Fiber Factory now at affordable economical terms. Secondly, the cost and the productivity improvement of this German organization. I'm not rating this too high, but we see already good improvements, if you just reflect to the margin, which we have laid out this month.
On the cost side, we're making progress as well, but we have to do more. On Europe, I'm very happy that this FTTH rollout, which we haven't discussed here loudly, is on a very strong track. This business is growing by an EBITDA performance of 5%. The mobile networks are anyhow leading. In 11 out of 13 countries, we won the P3 test. I think we have a very good FTTH build out plan now for these European countries, so that we can keep our very good market leadership on that one. On the U.S., I appreciate and thank you for the support that we were able to build out 600 MHz.
We are now ahead of the wave. By the end of this year, we will already achieve 200 million households in the U.S. with the 600 MHz with this 5G ready band. It's not investment which we lost. This is investment ahead of the wave, to keep our leadership there. We are convinced that we are going to have, with the deal anyhow, an even better position. John Legere and Mike Sievert, they will announce today our attempt for the states what this deal will bring to them. Please have a look at 4:00 this afternoon. We will give more certainty, not about, let's say, building out.
We will say a lot about the competition, how we see that going forward, and how we can help American society to overcome digital divide here. Another attempt to convince the leaving states to support the deals. Last but not least, our T-Systems turnaround is making great progress. Order entry strong. EBITDA performance improving. Big changes on the governance taken. Telecommunication service being reintegrated into one division within our organization, a big step going forward.
I think even here I see a lot of light at the end of the tunnel with regard to next year's big commitments on a free cash flow positive development this area. You see us in good mood of driving our business further up into the operations here. We will all see us probably on the conference, maybe Morgan Stanley conference next week, to further detail the topics. Thank you very much for listening today.
Yeah, thank you also from my side. At 4:00 P.M., the German time, that is the Un-carrier one for the new T-Mobile. If there are any further questions, as always, please contact us directly in the IR department and have a good rest of the day. Pass back to the operator.
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