Good afternoon, and 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 over to Mr. Hannes Wittisch.
Yes. Good afternoon, everyone, and welcome to our full year 2019 and Halfway CMD Update Conference Call. With me today are our CEO, Tim Huttkus and our CFO, Christian Eelrich. Tim will first go through his 2019 highlights, and he will present the halfway update since our 2018 CMD, and this will be followed by Christian, who will run through the quarter's financials. After this, we have time for Q and A.
Before I hand over to Tim, please, as always, pay attention to our disclaimer, which you'll find in the presentation. And now it's my pleasure to hand over to Tim.
Yes. Thank you, Hannes, and welcome also from my side. By the way, before I start with my long speech, I want to say happy birthday because Deutsche Telekom is turning 25, and therefore, we are celebrating our birthday. Even our press conference today took place with cake, so feel shared with a virtual cake today. But we've made 2 presents for us today.
The first one is this super performance, which we had in 2019, and I think we will go into the numbers in very much detail. We are very proud about what we achieved. And the second one is about the progress we made on the Sprint transaction. And we see light at the end of the tunnel, and we are now very confident that this deal is taking place with all the benefits it's going to have for us here at Deutsche Telekom. And even for Europe, I think it's very important just having a company like Deutsche Telekom is able to be or to come into the number one position in the U.
S. At one point in time. This is, I think, a historical day for us. Now before I go into the detail, let me talk a little bit about what we're doing. As Hanul said earlier, we have a halfway update of our Capital Markets Day, And we just want to show you where we stand with the execution of that program and what has been achieved so far and how we're looking forward on the things.
And therefore, it's a little bit longer and more detailed and even you have seen we have made a special presentation for you. I will start with some overviews charts followed by the 2020 guidance And then I go into the highlights of each of the segments. But please, there's much more details in this presentation about every single item we addressed at Capital Markets Day. So please have a look into this document again or discuss the topics with our Investor Relations team around harness. Let me start on Page 3.
And on the left, you can see what we call here the telecom flywheel. Investments are driving growth, customer growth, and the customer growth combined with efficiency is driving financial results and the financial results gives us the opportunity to do investments and investments customer growth and the customer growth with the productivity is creating value. So this is simply what we are doing over the last years. And step by step, we're executing on the big game changers for our operations. So what were my highlights in 2019?
The first one, we completed 2 major multiyear and by the way, even multimillion programs in Germany. The one is our committed FTTC build out, almost 90% now of Germany covered, low churn. And the second one is the all IP migration, which we here now formally declare accomplished. There are certain smaller things on the B2B side, which are following, but nevertheless, the majority is done. And by the way, we're not talking about Germany, we're talking about 7 markets in Europe, 6 of them are already fully IP and the last one is now following.
We're ramping up 5 gs at a high space on both sides of the Atlantic, by the way. For the first time in history, the U. S. Team is ahead of AT and T and Verizon because with our 600 megahertz spectrum, we were able to deploy 5 gs in almost 200,000,000 households already, which is ahead of the others. We achieved another year of strong growth and financial growth ahead of our capital markets targets.
Look, sometimes, I even you know I can't believe it, but every year, we have overachieved the main KPIs in this regard. And the segment contributions, because we are not growing only in the U. S, we're growing in all segments. The growth is confirmed by today's guidance and very important because there were some concerns from our shareholders and investors. We are back in our debt rating comfort zone, Christian will talk about that later on.
But you see, as promised, we are very safe in our BBB plus rating again, which is very important for us. And as well, you see later in the presentation, we also made good progress with regards to agility. Obviously, I thought I'm always agile, but that's the new buzzword. But what I think more important, the digitization is something where we did a digital health check within the organization, as we called it, and trying to understand where we stand. And the outcome is very encouraging.
Honestly, I didn't know all the digitization efforts within this company, and I'm very impressed by the magnitude of this initiative. ESG, we are number 1. And honestly speaking, remember, I was in New Mexico, I even made it clear here, earlier 3 years ago, we made we started our sustainability and initiatives here within this company. We made good progress on this one. We included ESG into our corporate strategy.
The strategy is more or less stable over the last year, but this is a new attempt that we even strengthened that everybody thinks that way. So we will have a big attempt towards ESG going forward, but let's talk about that later. And last but not least, the biggest thing of everything, the merger with Sprint. If you don't have enough to do, which I can imagine, Please have a read of the decision from Judge Marrero, the 179 pages. I'm very impressed.
I'm very impressed how he judged the situation and how it's overseen and the competition in this market, and I think he did a great assessment. I'm very happy about the outcome of this process. So Page 4, the U. S. Deal, what an incredible journey this has been.
We started our business was almost dead and everybody told to sell it, it was shrinking. Then the Un carrier came, team effort between U. S. And Germany with regard to investments and the Un carrier strategy, huge investments, almost €58,000,000,000 into the assets over the years. The unprecedented turnaround, historical one, and I'm maybe using this work for the second time, but you know that there hasn't been a turnaround like this in our industry so far.
And now honestly, we are we have all the pieces strategically in place to supercharge this business and to create even more upside for our customers and shareholders. And our is going to be to become the number 1 in the U. S. Not more and not less, but this is our attempt. We are very happy about the decision so far, and we can confirm the enormous benefits of the merger and the business case.
So we are now working through the mining steps to get the merger done. And hopefully, in the Q2 2020, we are able to close the transaction. Before we go through the details, let's look at quick summary of our 2019 financial performance, which you can see on Page 5. It's a simple story, and we grow across the board. And this is very important because it's not only based on one pillar, it's based on all the pillars which we are operating in.
All the segments are growing and all the profitability metrics are growing too. And if you see the numbers, even more impressive, it is 6.5% revenue growth. It's a 7.2% EBITDA growth. It's a 15.8% free cash flow growth. It's almost 78% growth on the earnings.
And if you adjust them, it's still an 8.9%. These are the numbers from my mind here. So if I'm not 100% correct on every second, we know a number here, but this is the target. And I do not know any kind of other telecommunication operator who's even coming close to these numbers. So let's go through the flywheel in more detail.
Page 6, Germany, we passed 35,000,000 homes with fiber. We passed 28,000,000 lines with super vectoring. 99% of the lines have been migrated to All IP. In the European Union and our businesses, we passed 10,000,000 homes with fiber, of which over 3,000,000 are already with full fiber. And on the mobile network side, we are leading.
There's only one market where we are not perceived the best network. In all the markets, we have the leadership position in. So this differentiation via best quality is paying off. And thank you for letting us invest a bit more than our competition. I think it's paying off.
We have on the 5 gs side, 4.50 5 gs sites, which are up and running. And we will connect all the major cities with 5 gs by the end of this year. So we are well on track in this regard. 20 big cities going to be connected. Page 7.
Our customer growth remains strong. It is the European footprint where we added 2,000,000 converged customers. I think 9,600,000, I want to say hello to the number $10,000,000 Hopefully, it's coming soon. So then we have really big base of our customer in converged offerings already. 15,000,000 homes are served by our fiber products in Germany.
As I said, low churn on this one, and we saw very solid mobile customer growth on both sides of the Atlantic. Let me spend one sentence on Germany with regards to fixed line. It is the task of the organization to now better utilize these investments which we have taken. It's the task of the organization to create less churn because the base is the utmost, most important. And there's one thing clear for us, if we want to see a reasonable amortization of this infrastructure, the 40% market share is a must have for our organization.
So the task of fighting back on certain initiatives from our competitors is clearly defined. 40% is the number which I'm expecting from our B2C and B2B heads in the German fixed line environment. Moving on to indirect costs. And by the way, since Thomas Dunford has left and Christian came into office, we're making big progress on costs. So and you see that we had €1,500,000,000 net indirect cost in our Capital Markets Day.
Thomas was talking about it. Christian is executing. I love that, Christian. We have €800,000,000 run rate savings, and we are perfectly on track now for this target, as you can see on Page 8, by the way, best greetings to Thomas who sits in Patagonia and all the best for you. So all the segments and many activities are contributing to this savings.
Look, I'm making a little bit, let's say, fun here, but this is a very serious effort in the company. Service efficiency improvements in Germany are helping us big time. We have again halfened the amount of service complaints and cases here in Germany. I'll come to that in a second. We have made big progress with digitization.
I go to that in a second. And the T System turnaround, selling off business which are not profitable, focusing the portfolio, cutting out middle layer management, This is paying off. So we see good improvements on the T Systems turnaround as well. This altogether is helping us to reduce our costs. The digitization is, I say, I don't know whether this is a statement or whether this is our ambition, but I was asked, Tim, if I would wake up in the morning at 2 and I do not know what to do, what the strategy of Deutsche Telekom is, should I do?
The answer of that would be simple. I would say digitize. You cannot do enough about that one. Whether you are in the service, whether you are in the marketing with big data, whether you are in the technical area with the softwareization and the virtualization of our infrastructure, whether you are in the SG and A, wherever you are, just digitize because this is the biggest lever for creating productivity, time to market, best customer experience. So it must become the DNA of this organization.
And this slide is complex. Sorry, guys, for that one. It is just the peak of the iceberg of the initiatives. And I have asked Hannes to give you a day where you are understanding all the initiatives in the segments, in the different functions on how we are driving digitization within its architecture, and then you can make your own assessment on how good we are. I think we are doing a decent job here and can be always more.
We have increasing success with our customer app, for instance. We have a penetration of 93%, for instance, in Greece. In Germany, we're 30%, so we have to do more in this one. I expect more penetration there. But nevertheless, I think it's understood in the organization.
In Germany, we are using almost 3,000 bots in different areas, which are helping to become faster, more productive. And we leverage digitization to improve the efficiency of our FTTH build out. This entire planning, the entire rollout, everything is in a new digital tool. So this helps us significantly to reduce the bureaucracy and complexity of the planning and build phase. Sales and T Systems and Service activities are getting digitized with our tools from the well known institutions where the ServiceNow or Salesforce and others.
And our German IT has shifted towards an agile delivery. So most of our projects are run by 8 big tribes in the organization. And honestly, this is something which sounds easy, but it's a very complex undertaking to integrate all the functions into tribes, overcoming the silos in big organizations. On Page 10, let me quickly recap how we think about capital utilization. I mentioned that already.
And there's one thing which is driving it, and this is sharing. Life is for sharing, and we do share a lot of our infrastructure already and we will do more about that one. We will give others access to our infrastructure and we will use more 3rd party infrastructure ourselves. So whole buy is becoming more relevant in our business. So this is helping efficient investments in the industry, and it's helping conservation as well.
So remember, we called it the Alainster Willigen at one point in time. We are making good progress in this regard, whether it's the EBITA deal, whether we have a hold buy agreement with NETCO loan, whether we are having a deal with Deutsche Glassfaer in this regard or whether it's the 4000 or 6000 sites which we are sharing with our telecommunication competitors here in the European German landscape to overcome white spots, which we have to close to offer a very good infrastructure. Page 11. Let me talk about sustainability. And I think we do not need sustainability as a chapter on Page 274 on the annual report.
What we need is a sustainable business model. And sustainable build model means that everybody in the organization, everybody is really thinking about how he can address topics like CO2 emission reduction, plastic free environment, renewables and other topics. So therefore, we included that as the major change to our strategy as well to the Capital Markets Day. And we are putting even money where your mouth is. We have put money behind that.
Look, to give you one example, that the U. S. Is investing into solar panel companies and using renewable energies to fulfill or to handle their energy consumption that we have already, in Germany, 100% of the entire energy consumption based on renewables. And that by next year, in the whole business of Deutsche Telekom, 100% renewables will be used, that we have the task of reducing our CO2 emission by 90%, knowing that we have an increasing energy demand, that we have 25% lower value chain emissions per customers by 'twenty 3 as a target should show you that everybody in the organization should think, should try to understand and improve the situation. This is not going away.
We don't want that it's going away. We have achieved already some achievements here, but we are still at the beginning. If I talk about plastic free environment, if I talk about the legacy of 26,000 cars in Germany, We make a big attempt towards e mobility in our company. So this should show you that we are on a good track. And by the way, I'm very happy that the ESG ratings, which were recently published, and Christian, you might go into that one later on as well, are showing outstanding performance for Deutsche Telekom.
In a lot of rankings, we already perceived as number 1 position. Let me move on to Page 13, which shows you that we are not only growing in the U. S. For the 2nd year in a row, we are also seeing strong growth on this side of the Atlantic with all segments contributing last year. And we are in all the segments ahead of the Capital Markets guidance.
So it's not just the U. S, it's as well the European entities. Now if you go to the Page 14, let me reiterate and give you the new guidance on Deutsche Telekom. We expect EBITDA after lease for the group to grow by 3% to €25,500,000,000 and free cash flow are to grow by 14% to €8,000,000,000 We stick to the stable ex U. S.
CapEx promise that we gave you at the 2018 Capital Markets Day. And as usual, you can find the detailed segment level guidance for our business in the appendix to this presentation. As you know, this year, we were 6 $100,000,000 ahead of our EBITDA guidance and ahead of our free cash flow guidance. So we took that as a new starting point. And on top of that, we are now expecting the 3% growth.
So you see us very confident about this very ambitious target in an industry around me, which makes me always depressive. Now how are we going to make that? Page 15, you see the German business, which is very important for our activities. And despite all the market noise, we are delivering steady commercials in these operations. In 2019, we added more than 500,000 contract net adds and almost 200,000 broadband net adds.
Our mobile customer churn is down to a record of 0.9 per month. 60% of our own branded mobile customers are converged. And thanks to our market leading platform, we added 500,000 new TV customers in the last 2 years. Honestly, I believe even our commercials on TV are very strong and they're working very nicely. Just have a look into this one, 2 comedians are selling the product in a way not seen before.
And we grew in B2B despite the headwinds from the IP migration. This was not an easy task because at the moment where you are talking about analog to IP, everybody questions why do I need this connection, and we discussed that in previous calls. But despite that, we had the net adds just mentioned. Page 16, I think the numbers speak for themselves. And for me, this is very important to understand what is happening in the machine now, the engine room of this company.
And because this is the oil of the machines. And that's 3 KPIs. The share of agile projects has grown 6 fold to 60% in the organizations. When we come to, for instance, to our OSS for FTTH, this was 2019 and 2019, and we will further improve this. We have started to ramp up rescaling, but clearly, this is a big challenge for us, and we have to go.
We have even adapted our cultural values, our guiding principles in the company, where we said that we have to grow our people, but everybody has to stay curious as well because it's not just about the programs. It has to do as well with our employees who should be curious about change and entering into new roles. And what for me, the most impressive one is how the IT as an enabler for all our business has improved and has contributed. Peter Leuchardt and his entire team here in Europe made an outstanding job, and this is something we can see as a consequence of this good IT performance on the next slide. So for me, very important, the service arena.
And there are a lot of areas where we made good progress. Just give me a quick feeling about what's going on. Waiting times down 43%, complaints down 50% after a year where we reduced it already by 50%. Missed appointments are down 84%. And by the way, we don't measure that the way that we ask our people whether they have missed the appointment.
We ask the customers whether they felt we missed the appointment. Fault repairs are down 19% and first time resolution is up 30%. I think the last topic is for us the most important one, and we want to significantly improve this KPI going forward. It's noteworthy that we achieved this improvement in customer experience despite the ongoing IP migration and the associated disruption, which we're coming with that. And we expect an even further slowdown of complaints and other things in 2020 because of the end of the IP migration for most of our customers, especially the B2C customer side.
This, by the way, is then driving costs down. And the moment where we have costs down, we have cash flow to invest or even to share that with you guys. So this is the flying wheel again, and that shows how we think about things. Moving on to the network side on Page 18. Here you can see and in the middle is, by the way, the chart Christian likes most because this is not our slide, it's a slide which is always published by German journalists.
And what you can see here is that we always had a significant mobile data speed advantage and that we have extended this advantage over Vodafone and Telefonica. And by the way, guys, these guys are loudly announcing, by the way, we are carrying most of the data traffic in Germany, and therefore, we are the guard horse of the mobile market. Congratulations. And the other guys like Vodafone says, and we have most of the SIM cards registered in German networks, €50,000,000 Congratulations. Guys, I give a shit.
The average mobile data space is what matters and the customers who are coming to us matters and what they're paying as a revenue and are willing to contribute to that, it matters. And we are by far service market leader, we are by far the quality leader in this network, and we are by far the perceived network leader in mobile. And this was right and it's going to be right, and I think this slide speaks for itself. On FTTC, the next slide, it's a little bit different, but even here, I think we took the right actions here. At least the customer numbers are supporting this.
We now serve 80% of German homes with at least 50 megabits per second. Honestly speaking, Hannes, this number is wrong. I think it's higher already, the 80%, but that is just a number. And 60% with at least 100 megabits per second, We have 28,000,000 households serving up to 2 50 megabits per second. And combined with this Super TV offering, which we currently have, it's helping a lot to convince new customers, but at least at least as well reducing the churn in this field.
So which brings me to Page 20, because we can call the FTTC rollout and almost finalized. And therefore, the big question going forward is now what is happening now on the FTTH side, and we call it the FTTH factory. And you can see that on that slide what we are aiming for. 1st, we want to ramp up our FTT rollout, our own FTT rollout to 2,000,000 FTT home sales per year, latest from 2021. And that's what we are working on.
We don't want to start from scratch. We have already done some homework. The first one in Germany, everything is expensive, including the FDTA road to us. So we had to work hard to reduce the cost of the cost per home cost. Now we are below €1,000 already.
We are still striving for significant further reductions in the way how we are deploying it. Most of the costs are construction costs, and therefore, we are pushing legal wise, but even other things to get this cost reduced. I already mentioned our new fiber OSS, which we have, which is another piece in the puzzle. And even here, we made important progress in how to this system is digitizing the entire process. On top of that, we made important progress with the fiber collaborations.
We have a 1,500,000 line project in Stuttgart, which is up and running. And we have a similar sized project together with EV Etail, our proud partner in the north, to establish a fiber joint venture here as well. And we got approval for this deal and for the conditions and the way going forward, which makes it important because this is a blueprint for all the other partnerships which we are striving for going forward. We are also working on the right commercial framework for fiber. So we want to be constructive, and we are in a dialogue with a lot of place, including the regulator, to establish that they're not inefficient, 3 of redundant infrastructures being built.
If we can use an infrastructure of a 3rd party, we will do so. We do not have to build it ourselves, and we will be always open on wholesale as well that somebody is using our infrastructure because it doesn't make sense to overbuild fiber infrastructure in areas. If there is no access, we're not letting it happen, but this is not the problem which we are seeing right now. So Page number 21, European Businesses. The EU segment achieved 3% organic EBITDA growth last year.
This is the 8th consecutive quarter of EBITDA growth. And guys, do you remember this was one of our problem trials and we were very brave on because we always found it a little bit like the orphan child in our portfolio. And because we always found it a little bit like the orphan child in our portfolio. I think Srini Gopalan and his team did a terrific job over the last year and the way how they turned it into a real gem. And I'm very happy.
It's not just cost businesses, where he is now driving differentiation. If you see the fiber to the home build out, which is aiming in this country, it's significantly beyond 50% penetration. So he has a clear path towards FTTH. Group Development, so our tower business and the Netherlands business. Talking of good plans, the next slide is clearly showing that having a good plan is the start point, but execution is even more.
They did beyond the improvement of the business. They integrated the Tele2 merger, very successful in the Netherlands business and without remedies. And we proved that it's possible to get one player out of the market and at the same time, increasing competitiveness and the profitability of the business. So I think, hopefully, some Brussels authorities are listening to this call here and looking at the Slide 22 because you can easily find out that it was the right thing to let us run and challenge the status quo of KPN and Vodafone in this environment, and we are doing terrific. The mobile share rent mobile service revenue growth is in the vicinity of 3% over the last 4 quarters, 90% EBITDA growth, €150,000,000 synergies on the merger, realized higher spectrum efficiency.
And achieving with this the mobile leadership, we were the winner of the P3 and the umlaut test for the 5th year in a row. And for me, the most important one is because sometimes you get criticized of bad network in a country, I always say, by the way, we know how to build networks because the best network ever measured in umlaut is the T Mobile network, which is the T Mobile network in the Netherlands. So that's the Dutch business. We are very optimistic with regard to the future, very entrepreneurial management running this. Going to Page number 23, which shows you the towers.
And I know you're very curious about our towers. There's so much noise on towers and sometimes some voodoo as well. But let's, for a moment, focus on the fundamentals of this business. First, you know that we have a very large and attractive tower portfolio. And what you know as well with the 5 gs deployment, this tower profile is growing at a hype space.
We are the lead tower operator in the German market. And by the way, even in Europe, if you combine all the European towers, there's no else no one else bigger than we, but let's focus on Germany first. And this market offers above average growth opportunities because of sharing and because of new sites, which we are adding to this portfolio. The 5 gs build out obligations are a guarantee for growth of this business. We collaborate well with our peers.
And at the portfolio, we have a 2.3x sharing colocation ratio on these towers already. And what you can see, we have even strengthened the entrepreneurship in that business under GD And Thorst Langheim and his team and Bruno Jacob Feuerborn were able to cyclically ramp up the EBITDA from $585,000,000 to $771,000,000 So this is a significantly increased business of almost €200,000,000 within 1 year, which is, I think, a very impressive achievement. Now let's move to one of the problem trials of the past, or I would call a swallow, not a spring yet. So therefore, we're in the middle of the turnaround, but with encouraging results, which is Tisystem. And let me just pick up a few highlights from the slide here.
1st, we have completely and reinvented our sales approach. We have massively cut costs through shoring, especially to India, digitization, massive overhead reductions. We are aggressively restructuring our portfolio in the way what's in and what's out. And we decided to integrate the telecom business into our German operations, which is then a fully integrated organization for TC, for Mittelstand, bit to the large enterprises, which gives us a much more efficient, much more cohesive execution. We had intercompany targets in between and a lot of complexity, which we are eliminating by now giving it to one hand.
IoT and security gets carved out to make them even more agile that they can sell via the T Systems sales pipe, via the P. Deutschland sales pipes, but even via their own sales pipe, which is helping us and beyond. And we are exiting end user services, where we switch to a new model how to organize our mainframe services with a partner so that we are not running unprofitable or no margin businesses. So this is just a piece of the story, but I was most impressed by the order entry, which we have seen by the end of the year. Just from my mind, we had more than 40% more order entry than the year before and our targets.
TMUS, ongoing momentum, moving, seeing what's happening there. And guys, it sounds so easy what we are doing here. 2019 had cost a lot of energies, a lot of energies, both on this landing. On our side, doing all the negotiations, traveling back and forth, back and forth. And every night, just yesterday night, we had another phone call until 11 o'clock in the morning, so to settle up the things.
So but despite this second task, which we all had to carry, the U. S. Had an outstanding performance, and we expanded our network. We launched 5 gs and low band to 2 100,000,000 pops in December. I mentioned that at the beginning.
For the first time, T Mobile is ahead of AT and T and Verizon. So we're not smaller. We're ahead of these guys. So much earlier than previously planned. I know some of you were not happy about the CapEx here, but I think it was worth doing it.
And customer churn came down to record lows. I think these guys are at the same level now as our European operations, the market leader operations. And we delivered yet another year of strong growth, both on postpaid and on profitability. We did well standalone. And if this dealer would not have come to a conclusion, I can tell you we would have not quoted bankruptcy, but it would have been a different situation.
But nevertheless, we were very confident to find a way then in this space as well. But together with Sprint and the opportunities about the spectrum efficiency, we are much better off now. On Page 26, we show some highlights how we implement the strategy going forward. And the first thing is a strategy is a strategy is a strategy. And that 82% of our people, of the 218,000 people in this organization are giving us the feedback, we understand the strategy and can explain the strategy to a 3rd party shows me that we have an aligned interest in this organization with regard to implementation.
And having good results give this organization the mental strength and the work starts the power to get these things executed. And we are now adapting step by step the needs of these different activities along that line. And I do not go into every element of this one. You can easily find out that there are a lot of priorities, which we have to do. But there's one thing which we changed, and this is the green arrow, which you see under simplified digitized X-ray and X responsibility, which is the act responsibility element.
And therefore, we want to make that clear to everybody that not only a few people should think about sustainability, that everybody has the duty on this one. Page 27, we won't stop. I hate this graph because this is a silly street, but nevertheless, I like the topics on the right side. And these are the priorities going forward. We made good progress so far, but there's still a lot to go.
Despite some improvements, our customer satisfaction metrics are not yet where we want to have them. I want promoters on the brand more than we have today. We have less distractors, but we need more promoters. We need to become more digital and agile. I said that digitize should be a headline of what we are doing.
We should become more diverse and even more innovative to a certain extent, braver in the way how we're doing things. We need to monetize the good infrastructure better, which we have because the capital efficiency is not where it should be at that point in time. We should face the best way to get German's FTTH done. This is a strategic imperative for politics, but as well for us as well, which we have to solve. And as mentioned, we cannot wait to deliver the amazing goodness from the T Mobile U.
S. Sprint recharging effort here, the combination, which we are totally excited about. In other words, guys, we won't stop until everyone is connected. And that is the purpose of this company. I think from if you look to the Capital Markets, they are results so far.
We had good years and a good execution around that one. There's always things which you can improve. And I can tell you, we feel strong today, but if you are having a victory, humility is the name of the game. And if you suffer or if you lose one time, you should not lose your self confidence. So we're enjoying that moment just for a second, but we know that humility is a good advice not to become complacent.
And I can promise you one thing, as long as I'm sitting here, I will keep these guys awake. Thank you
very much.
Thanks, Tim. I'm still awake and welcome from my side. Look, my presentation looks a bit different today. We have removed some of the redundant information of the previous presentations and adding more trends analysis. I hope you're going to find this useful.
So let me start with the key financials on Page 29. Reported revenues were up in the 4th quarter by 5.4%, taking us to a full year growth of 6.4%. On an organic basis, that would have been a growth on 3.3% in Q4 and 2.8% respectively for the full year. Obviously, the 2 biggest effects between reported and organic is Tele2 and foreign exchange rates. Our reported adjusted EBITDA after leases grew 8.2% in the 4th quarter and 7.2% over the full year.
Organically, we have grown the 4th quarter by 6.5% and 4.2% in the full year. Let's take a little bit look at the ex U. S. EBITDA performance in the 4th quarter. Ex U.
S, we grew our EBITDA by 9.3% and that takes us to a full year growth of 4.7%. On an organic basis, we grew by 8.8% in the 4th quarter and 3.7% on a full year basis. A couple of peculiarities here. A, this is clearly ahead of what we said at the Capital Markets Day with regard to our corridor 2% to 3% B, actually guys, ex U. S.
In the 4th quarter grew on EBITDA levels higher than U. S. That is not a usual observation, which we're having here. And I think this was coming from all segments. The contribution was coming from all segments.
And I think the European team is really happy to provide these kind of EBITDA growth. Free cash flow was up 23% in the 4th quarter and 16% on a full year basis, which is also above our guidance of around 10% and the adjusted EPS grew by 8% year over year. So let's go into the segment performance and start with Germany as usual. Again, if you take a look at the adjusted EBITDA performance, another quarter of 2.4% growth. So again, at the upper range of the communicated EBITDA growth corridor of Germany, The total service revenue improved by 1% year on year and that was supported both from the fixed line as well as from the mobile side.
And this is what we're going
to see on the next page on Page 31. The mobile service revenue actually recovered from the one off in Q3. So we have seen a 1 point percent service revenue growth in Q4. On a full year basis, that was 1.9% despite
quite a
bit of regulatory headwinds and we still remain comfortable with our midterm guidance of 2% service revenue growth. Taking a look to the other to the right hand side of the chart, fixed service revenues improved to a 0.7% growth and that was very much driven by whole sale and also by the broadband growth, and that overcompensated the decline in our legacy business as well as the IP migration headwinds. Moving to the performance in mobile. As you can see, the commercial performance in mobile is really healthy. 57% of our mobile contract customers are now within a convergent offering.
Our B2C churn has come down to 1%. We're still seeing a very healthy data usage growth in Germany of almost 60% year over year and we have now more than almost 3,000,000 customers, which basically enjoy the stream on service. Next page, our commercials and fixed. So what you see is another 47% on broadband net adds in that quarter, despite the fact that the market has shrunk by about 30%. Our fiber net adds dropped below €500,000 and that was actually due to weaker growth in the wholesale, but our retail net adds remained strong.
By the way, almost 30% of our FTTC subs are already on speeds of 100 megabits and more. Again, a very continuous growth and good growth in the TV space. So Q4, 74,000 net adds on Magenta DB gets us to growth year over year of 265,000. And also what you see is that the line losses actually have improved between Q3 to Q4 to 170 1,000 line losses and we expect that since we have finalized the B2C IP migration that we see further improvements in 2020. Next page, taking a look on 34.
So what you see is actually we had a very strong broadband growth of 4.9%. You see a very strong wholesale growth, which is basically being driven by a higher speed up selling, but also due to the unbundling fee price increase, which started in the Q3. Despite the fact that our total retail revenues are still shrinking, but this will come to an end as the single play migration will finalize and also the connection revenues will finalize. And you see that positive trend from negative 1.4 percent to negative 0.4 percent and I expect this to continue to improve. Let's move over to T Mobile US.
And as you know, T Mobile US has communicated both their numbers as well as their guidance on Fab 6. So let me be short here. Again, they won 1,900,000 new customers, 27 quarters with more than 1,000,000 net adds. The EBITDA was growing by 3.7 percent and this is very much due to some renewable energy derivatives, which actually impact our IFRS EBITDA performance. If you compare their performance on U.
S. GAAP, they would have been grown by 9.2%. What you see on Page 36 is some of the key KPIs and Tim already talked about them. A very low churn rate of about 1%. We have still a very strong network and we are defending this with our 5 gs build out strategy and the ARPU levels remain generally stable.
Let's move over to Europe. And again, the performance in Europe was very good from a financial perspective. Reported revenues up 3%, EBITDA up 5% in the 4th quarter on an organic basis 3.8% 5.7%. This is due to the deconsolidation of Albania to a large degree. If we're taking a look at the commercial figures of Europe, I would say commercials were strong, are strong and expected to be strong.
If you take a look at their contract net adds, another 250,000 which they added, another 70,000 in broadband net adds. FMC net adds, another 300,000. Their household penetration with convergent offerings in Europe is now 49%, which is a year on year increase of 9 percentage points. I think it's very impressive. And also you see that the TV net adds are trending up.
Moving over to T Systems, I think we're making good progress on our ambitious turnaround plan. The plan is obviously strongly the underlying trend is moving in the right direction. So we're basically withdrawing from some low margin business, but adding some good growth PU revenue into the revenue mix. We also see the strong EBITDA performance after leases of 36% year over year. And again, T Systems has delivered more than €500,000,000 of adjusted EBITDA, which is very much in line with the guidance, which we have given at the revenue growth for the segment was up 0.9% and a revenue growth for the segment was up 0.9% and it was very much driven by some intergroup revenue phasing between DFMG and Germany.
The organic EBITDA after leases grew by almost 10% and the commercial performance, which you're going to see on Page 41 is really impressive. So very strong contract net adds in the Netherlands, also very good broadband net adds. The mobile service revenue growth is 2.8% plus. The market is shrinking by 2%. So you see that they're really performing against the overall market trend.
And you also see that the adjusted EBITDA year over year was growing by 13%. On the tower business, we actually added 1800 towers in 2019, of which 1400 were new builds. The recurring revenue only grew by 2%, but that is due to the intergroup phasing and the EBITDA after this group on 7% basis and that is organically. So let's close out on the key financial figures on Page 43. So you see the free cash flow bridge on free cash flow after leases, which has grown Q4 2018 over Q4 2019 by almost 23%.
You see it's very much driven by the strong cash flow contribution from the operations. And we have fact that we have to absorb some U. S. Merger related one offs. The EPS grew by 23% or 24%, which you can see on the lower right hand side of the chart.
And that is another increase of $0.08 over the year, which means an 8% growth. And the final chart is obviously the net debt chart. We reduced net debt from almost €79,000,000,000 to €76,000,000,000 There are 2 major root causes for this. The good one is the very strong support from the cash flow out of the operations. And we were a little bit lucky also on the ForEx side because that helped us by another €1,000,000,000 reducing the net debt from almost €79,000,000,000 to €76,000,000,000 And it got us back into the ratio as I said it after or during the Q3 call into our leverage corridor, which is 2.25% to 2.75%.
And we're back into a ratio, which is 2.65%. So with that, I would like to open it up for Q and A. Thanks. I'll hand it over to Hannes.
Thank you, Christian. Now we can start with the Q and A part. Sorry, the presentation was a bit longer than usual, but I hope you found it useful. Cancel the questions with STAHL 2 and you can also send us questions via a webcast or sometimes even via email. So we start the Q and A today with Akhil at JPMorgan.
Yes. Hi, good afternoon. Thanks for taking the questions. I've just got 2, please. Firstly, if we can start with towers.
Tim, you mentioned the strong growth potential you're seeing on
your tower business. But I
wondered if you could talk about the strategic thoughts around towers. We've seen Vodafone at the results commenting that you weren't keen to share towers in Germany. So just some comments as to why is it a structural issue or is it strategic And how we think about monetization of towers in general as well? And then secondly, just a question around German pricing. We've seen Telefonica Deutschland very recently moved to unlimited plans.
Just keen to understand how you think about that? Would you think it's a threat or would you think it's complementary in terms of more for more? Thanks.
Let me Akhil, let me start with the Cowen question. Look, I don't share the point of view that we're not sharing because I think Tim already presented this. We have an agreement among all 3 competitors to actually share 6,000 passive infrastructure towers in the white spot area. We also So, I would say there is a significant sharing already. So, I would say there is a significant sharing already.
And so, I'm not sure where this comment is coming from. But what we always said on the tower business is let's solve the business model first. There was one for us it was a big question on how to basically share the pain in the white spots. We have found a solution for this, how we upgrade our network performance by having gray spot sharing. And bear in mind, there is a big growth opportunity in the German market with all these build out obligations, which we're having and with the 4th player coming in.
So I think we have a lot of value creation ahead of us. And what we always said is on towers, we keep the options open. And since we have carved out the business beginning of 2000, you can take a look at the numbers and how they evolve. So we're not ruling out that we're going to do anything with towers. Everything is basically, for us possible.
But right now, for us, it's important to actually get to the optimal business model when it comes to developing our tower business. Tim, do you want to do the pricing? Okay.
So Telephone Germany has made a few changes recently and pricing. And the first one is, I think, the doubling of the data allowances for 20 gig, €30 per month and for 10 gig as it was for 10 gigs before. And they have introduced the speed tiered unlimited pricing in the market, removing the 6 months for free promotions. Let's just say what we are talking about. Now for the speed tiering, Surely, this could appeal to some customers.
There's no doubt about that. But we always thought we are the market leader and it's not us starting this. We had a pricing disregard and we set the high price bar on this one, but this is something which we expected. We have now to see how attractive 2 megabits unlimited are for the customers and for $30 that is something which we will carefully watch for us. What we have done is we have doubled the allowances, which was our initiatives in as we actioned on this one.
And what we learned from our side is that from a pricing perspective and from a customer service perspective, the customers appreciated, let's say, our offers. You have seen our decent churn. You have seen even the net add numbers, which we were able to generate in the Q4. So therefore, as you see the convergence numbers, which are always including mobile and fixed line services as well. We have the stream on option in it as another offer.
So we keep confident that with the strategy, which is different to the O2 strategy that we are comfortable to generate our 2% medium term mobile service revenue growth. So that's how we look at that point in time.
Thank you, Tim. Just maybe also one thought of mine on the Vodafone comment. I think that we're also primarily referring actually to the active network sharing side rather than the passive side. And on that, we think that we found the right balance and the right agreement for ourselves to balance network leadership and efficiency considerations with the gray spot sharing that we have agreed and which is also complemented, of course, by the white spot sharing on the active side. And then we move on to Polo at UBS.
Yes, hi. I've just got 2 questions. The first one is on German broadband. What impact are you seeing from Vodafone and their push on 1 gigabit broadband speeds? And is there more pressure on you to accelerate your FTTH rollout?
Second question is really just about the German all IP migration. Now that it's complete, can you maybe talk in more detail about how we should think about voice line loss and broadband net adds going forward? Or another way of asking the question is, is how much of a drag each quarter was all IP online losses and broadband net adds in Germany? And could you remind us in terms of quantum of cost saving benefits we should expect from All IP migration? And when should we start to see this feed through into Germany EBITDA?
Thanks.
First question, look, it seems an aggressive move from Vodafone. So I got it the way that they have they're closing down the Unitymedia branch and therefore they have to do some things to attract the attention to the Vodafone brand in this regard. It's by far too early to say what the impact of this one is. They call it a promotion through 5th April. Let's see how this is working and how is that affecting us.
Look, my assessment is, why do they have to reduce their premium product by a price cut of almost 50%. That seems to be that they have problems on selling their products. Is that the sign of weakness here? What we see there? So let's wait.
For us, it's very clear. We have an ambition of 40%, and I said that earlier, with regard to our broadband net adds. We have an infrastructure, which can easily be filled with this market share and the churn. And we will react accordingly if we see the impact of this one. So that's where we are.
I do not see an immediate impact on the FTTH business case or whatsoever because we have a mixed calculation. Let's see this is evolving over time. But today, I would not have sleepless nights because of that.
Okay. On the all IP migration, let me just repeat what Tim said. In any case, we want to defend our ambition to achieve 40 percent net add share. And I think that is important to us. So if you take a look on how we assess the forced migration, the negative impact on the net adds on broadband due to the IP migration, we always said that's in the vicinity of around 10%, which basically drags our net adds here down.
So, that should at least be should improve to a large degree. If you take a look on the IP migration, we have now migrated about 99% of all lines. So the only area which is still left is the more complex B2B area. And I would say on your specific questions on line losses take Q4 versus Q3 as an indication. So we expect significant improvement over the course of the year.
And I think we should show you these numbers once we have finalized Q1.
Okay. With that, we move on to the next question and that's from Christian at HSBC, please.
Yes. Hi, good afternoon. Thanks. A couple of questions. First is actually on the deal.
It was rumored that you might renegotiate the price. I mean, can you tell us at least anything on the timing or on that process, generally speaking, or whatever you can share in that respect would be helpful? And then on the German business, there's a huge debate on worldwide in Germany. Is there anything you can share with us in terms of details, what the, let's say, the worst case impact would be? And then also in terms of the political debate, what you're hearing that would be helpful to get an update from you and your view on this?
And then lastly, Paul already touched on the FTTH point, but I'm asking a slightly different question here. I mean, Deutsche Glatfader announced that they would roll out FTTH to 6,000,000 homes in Germany. So what's your take on this? It's a meaningful number, so I would be interested in your strategy in that respect. Thank you.
Okay, Christian. First thing is on the deal. Look, as you know, we had the longest update in the business combination agreement has expired. So both parties have the right to walk away. Nevertheless, both parties are very interested to get this thing done, especially after all the efforts we made and all the approvals we got and the business case of this company going forward and the cost synergies, all of this is very well intact.
So therefore, we are quite excited about these deals. Nevertheless, we have a phase now for closing mechanisms. We have discussions among ourselves to formalities. And I'm not disclosing whether we are renegotiating the price here or anything else. This is something which has to take place between partners before something is getting announced here.
So therefore, no comment on M and A. Second thing is the German business and the Huawei debate in Germany. Look, the assessment is as follows. We have seen recently that Brussels and Thierry Breton, the new commissioner, has offered a toolbox to the industry. I think it's a very reasonable package and it makes a lot of sense what's in there.
It demonstrates one thing. It demonstrates guys we have to do something our own with regard to encryption and with regard to the software steering. 2nd, it stresses clearly that one of the big negatives why we have these difficulties with regard to different RAN infrastructure is the lack of Open RAN and the Open RAN software. So enforcing Open RAN is something. The third one is the idea about penalty sanctionizing mechanisms, which should be embedded into legal enforcement into the legislation is another topic, which makes totally sense.
So this is the way going forward. I do not see from what is discussed in Brussels nor in Germany any kind of impact as we have heard that from BT or Vodafone on their regulation. Yet we have a clear position that Germany wants to see the core network being Chinese free. That is for us an easy effort going forward to make that possible. And the rest is up for the governmental decision.
The conservative party has come to conclusions on this one, and now there's a debate on the governmental body. But it looks like we find a solution here or the German government finds a solution which we are able to implement.
So let me dwell on the question of Deutsche Glassfaden. First of all, if I'm not mistaken, currently they're passing around 600,000 homes passed. So if they want to build out, they will be at 7,000,000. So that sounds quite like a challenge, but we appreciated it. We appreciate this to a large degree because we always said we cannot build out fiber for Germany just coming from Deutsche Telekom.
So I think there will be some overbuild also into the into our vectoring infrastructure, which we expect. But bear in mind, we have to a large degree very performing cable network, which is already overbuilding our vectoring network. So that would be an additional competitor. And the third one is, I think a point which Tim may clear in the very beginning, we're open for whole buy. So we have struck the first contract with Deutsche Glassfahr in a small city called Ludinghausen, where we have a whole buy contract, but I think you always start small and then you embark from there.
So I think it's going to be a combination that we're probably we'll see some overbuild that we will rely also on their infrastructure, but it appears to be quite a big challenge from €600,000,000 to almost €7,000,000
Yes. And we have super victory, of course. So, George at Citi is next, please.
Good afternoon and thank you for taking my questions. Firstly, Tim, congratulations for your 20 year anniversary the other day. I have two questions. The first one is around Sprint. And obviously, the closer we will get to the deal being approved, the more we have to think about the impact on your financials.
So I was wondering if there was anything you could share with us around the EBITDA transition from Sprint to Timo's to Deutsche Telekom numbers or whether at least you can give us an idea of whether the impact on leverage you identified a couple of years ago is similar to the one we should expect now or whether something may have changed? And then my second question is really a follow-up from Christian's earlier question on fiber. I mean, your wholesale revenues are now growing over 3% in the last couple of quarters. I just wanted to understand whether you expect that to be 2020, maybe the peak in terms of wholesale tailwinds because of this overbuilt? And then on similar angle in a way with these agreements with Deutsche Class Passer, I was just wondering moving from on net to off net for you, do you think the premium you can charge to the retail customers is sufficient to keep the profitability of the customers more or less the same?
Thanks.
Unfortunately, on the impact on financials with Sprint, there's no news because we don't know anything further. We will have full access to their numbers, to all of their accounting numbers and so forth whenever we have closed the deals prior to that we are not allowed to talk to them. So therefore, we can't give you any kind of more transparency on those numbers. We would love to, but we can't. So, and on wholesale revenues, look, I think, 1st of all, I'm happy with that 3% growth, which we're seeing in the wholesale area.
We have some structural tailwinds. This is obviously the that the wholesale numbers have come down. So it looks like that the competitors are moving on their platform as well. So we have to closely watch this. But I think it's too early to tell you whether it's going to be having an impact, a dramatic impact.
I think we have to watch out in the upcoming quarters how this evolves.
Christian, next is Steve at Redburn, please.
Yes, good afternoon guys. And to echo George's comments, congratulations on 20 5 years at most. So mostly congratulations on not giving a shit about your other competitors in Germany. That was great to hear. Yes, a couple of questions.
Just coming back to fiber, I read the sort of slides and heard your comments. And I guess like every operator, you want to maximize return on fiber, but that they're not always able to do that and that's sort of modeling challenge that we have. Can you just sort of maybe give some early thoughts on how you go about doing that? Do you think JVs are the way forward? Do you think you can charge a premium for FTTH over your current super vectoring wholesale products?
Do you think you need copper switch off? All those sorts of issues. And maybe just give us an idea of when you think you can sort of lay out the enablers and the parameters that you think about maximizing returns. And secondly, just on the sort of U. S.
EBITDA reconciliation. I mean, the sort of gaps got steadily bigger on the sort of power purchase agreements in the U. S. You started the year last year at $600,000,000 ended up, I think at $900,000,000 You're flagging for another $900,000,000 gap this year. Can you just remind us what this gap is and which EBITDA measure you think is better and whether you think EBITDA as a whole for U.
S. Is trustworthy given the sort of growing nature of this gap? Thank you.
So, Steve, let me start with the fiber question and how we see the work going forward. The first one, I hope you would agree that it was the right thing to deploy vectoring super vectoring first. And talking about more than 80 percent of the households being covered with 2 50 megabits, seeing the nice numbers on the nethertz side, despite the IP migration, which we have seen. And on top of that, even the revenue development and the integration with TV service, I think you would easily agree from a commercial perspective that this was the right thing to do. 2nd, we had to prepare ourselves for the fiber build out, the fiber factory.
And on top of that, the subsidization policy, which the government has laid out, that tons of money, which are lying there and not being freed up yet for subsidization, which makes it much more viable for us to invest and to build fiber in these regions. Now we will burn the chips and we'll move into the fiber factory very soon. And then what we're doing is fiber wherever it makes sense and wherever it is possible. Up to 2,000,000 households prospectively being deployed on this one. We will drive costs down so that we make it cheaper.
That is something a learning curve issue. And by the way, I saw that at BT as well, how they were able to use this learning patterns here. And there's definitely, definitely, our willingness for collaboration. So wherever somebody has built a fiber infrastructure, being a Deutsche Glass or so ever, if he's coming with reasonable terms for us, we will utilize the infrastructure with our customer base. What is lacking today?
So subsidization is there, collaboration works, fiber factory is improving. So what is lacking, I think, is a clear regulatory environment in Germany. And it's still unclear under which conditions the German government is or the Bundesnettzagen tour is willing to regulate. For instance, copper switch offs and copper switch offs, which are driving definitely the profitability of an environment network or to which conditions is the German government willing to change the housing association privilege, which is a very important point for the profitability of fiber to the home in Germany. Cable is blocking that, but I think if Germany wants to see more fiber deployment, they have to overcome about this restriction in our market.
So I think there's not only us who can do something, there's even the regulator who's forced to give us a constructive competitive oriented infrastructure piece here. And that is what we are working on in parallel. I'm not worried about this issue because I see that with 2 50 megabit with a good price offer, you can win and convince customers in a lot of, let's say, areas. In a lot of areas where FireEye is needed, we are ahead of the game. Take just example of the business parks and schools.
So we are moving on. We are now accelerating our FTTH build out. We are using more and more money for that, which we free up from the former FTTC build out. And this is helping us. We keep the envelope of €5,000,000,000 stable for the German entities, the footprint here for the upcoming years, but more and more money is going into this one.
Collaborations is definitely part of that and we are negotiating with a couple of people at that point in time and it's just around it.
So on the second question, U. S. EBITDA reconciliation from U. S. GAAP into IFRS, 3 major factors, which basically explain for the bridge.
1 is stock based compensation, which is around €400,000,000 1 is different leasing treatment, which is around €400,000,000 and the third one is the renewable purchasing agreements, which hit us about €100,000,000 in this year. So this is why the bridge was €900,000,000 in 2019. In our guidance, we basically plan for a bridge of 850. So we reduced the impact of the renewable energy contracts. And that is the explanation on the drivers.
On your question, what's the right number? Obviously, the T Mobile you asked folks comparing themselves with their local competitors. So therefore, you have to do it from a U. S. GAAP perspective and we have to translate it into an IFRS perspective.
So I would say it depends on against which competitive battlefields you compare yourself and I would always say compare yourself against the relevant competitors, which is in AT and T and Verizon, and therefore, U. S. Gave us obviously the adequate accounting principle.
Thanks, Christian. So next is Fred at Bank of America, please.
Hi, good afternoon. Two questions, two follow ups, please. First of all, on the U. S, you say you need to wait for the Sprint accounts. But if you look at the performance of both Timur's and Sprint in the last 2 years, you've seen some pretty large variations.
So for instance, you targeted a year 1 free cash flow of €1,000,000,000 to €2,000,000,000 in year 4 was €10,000,000,000 to €11,000,000 Is this still the right ballpark for NewCo? And how can we think about the loss of business from the subscriber base disposed versus wholesale revenue recovered? And then a follow-up on the FTTH debate. We've seen a lot of your peers like KPN and Swisscom who had posed fiber to the home to focus on fast FTB rollout, not pushing back towards fiber to the home as the right strategy to 2 phase cable. So are you still confident with your phasing of up to 2,000,000 lines a year?
Do you feel further political pressure to deploy FTTH faster? And from a commercial standpoint, you seem reasonably relaxed about whether from pushing gigabit products, but you can comment on whether you think you're in pressure here as well. Thank you.
So let me start with the U. S. Question. And then obviously, that is an M and A related question, which we usually don't comment on. But let me flash a little bit of data on this.
Look, we have redone the case back in summer July 2019. And the U. S. Team clearly said that the whole case stays intact, although some line items obviously deviate from the original signing case. For example, the underperformance has run the over performance of T Mobile Yes, refinancing costs has significantly come down.
Ever since then, I think we haven't seen any additional remedies. And what we're doing right now is that we're saying the case is in total intact. But we cannot give you more granularity on that one because, again, we have to take a look into the details and look under the hood of Sprint to really figure out how it looks like. So, obviously, there's a delay in the case that obviously impacts also, the signing case versus what we're going to see at the end of the day once we're moving over the finish line. But again, bear with us a bit until we have the details in front of us and then we can elaborate more on these topics.
Just on the FTTH question, I think Tim has addressed these questions largely. I mean, we are not today guiding for anything different than what we have shown in the presentation or communicated in the Capital Markets Day. We have a plan for fiber. We will reallocate resources as stated. We are focusing on the key pain points at this point in time rather than big headline rates.
We have 1,600,000 lines passed, and now we leverage all the tools that we have described on in the presentation to deliver. We monetize our super vectoring. We have 28,000,000 homes with speed up to 2 50 megs, and that number will also increase further in the coming years. So let's see how that works. Politically, there's no shift in the debate at this point in time.
So next is James at New Street.
Thank you very much. Good afternoon. I had two questions, please, following on with regards to potential impacts of Sprint transaction. As when you put the slide up when the deal was announced in 2018, you showed that you would be willing to go above your leverage threshold for 2 years. I wanted to check if that was still the case, that you'd be willing to go above the 2.75 times just for a 2 year period.
And as a follow-up to that, could you comment assuming the deal does go through on what your appetite would be to buy spectrum in the C band auction? Or do you feel that with the 2.5 gigahertz spectrum you would acquire from Sprint, that your spectrum portfolio would be pretty adequate and there would be less need to bid in the C band auction? Thank you.
So, I think, as you're alluding also to the Capital Markets Day, the impact of Sprint and leaving the quarter of 2.75, what we said is we are reaching the quarter in year 3, absolutely correct. And we have no further indication to deviate from that perspective. And on C band, I think it is too early to comment on C band right now. Let's figure out how the auction design will look like, when it's going to take place. But right now, I think we're oddly focused on getting the final things out of the way and get the merger over the finish line.
Okay. Next, we like to hear Ulrich at Jefferies.
Yes, thanks. My first question would be in the annual report, when you sort of break down on the divisional basis, the different guidance items, I think the indication is that the CapEx in Germany would actually be down in 2020. Is this in the context of the items you listed earlier, Tim, about the necessary sort of moves you expect on the legislative and the regulatory front? Is that essentially sort of a signal that you're cutting CapEx until these things are settled, I. E.
A sign of strength? Or how would you sort of frame a CapEx cut in a situation where I think there's some political debate about the quality of the mobile networks and the need in Germany to roll out to roll out fiber on an accelerated pace? That would be my first question. The second one is on the sort of 40% market share target. Haven't mentioned that for some time.
I think this was a very high profile target for some years and then it sort of didn't pop up in the communication. Where do you see yourself at the moment in terms of overall market share? And does this actually mean you have a bit of catch up to do, I. E, you might potentially get a bit more aggressive at this point or am I misinterpreting this? Thank you.
Ulrich, this is very semantic question, but anyway, I would not rate it as a statement as a question. Look, our German CapEx is €4,200,000,000 for the Deutschland entity, where we are building fiber and the network and 5 gs service and like. And this €4,200,000,000 stay absolutely flat, €4,200,000,000 the productivity gains, which we have at the factory and other things that we get more out of the CapEx than what we had so far. Why have we said in the annual report and the prognosis that we have a slight decline and I remember that one, there is in the overall footprint of Germany and we always show the CapEx of the whole German inclusive of the systems activities. This is the €5,500,000,000
We have
a decline from €5,500,000,000 to €5,400,000,000 So €100,000,000 less in the total footprint. And to be precise, in our German mentality, we said there's a slight decline. So that is let's say how you should understand that.
Tim, let me add to that. I think on this $4,200,000 we have a slight decline for 2020 in TDK, but we increased the CapEx envelope in BFNG and this is exactly because we want to comply with the build out obligations. So overall, you're right, it's the 4.5.4, but there is a shift between DFMG and TDG in 2020. Slide 1.
On the 40% market share target where we are pretty close, we are also despite the OLAP migration pretty close in terms of the net adds share in 20 19. I think you have surely tracked this over the last few years. We have been responsible and steady in our approach to this. We have a chartered choice. We have 300,000, 300,000 and 200,000 broadband net adds in Germany.
200,000 last year was severely impacted by the IP migration. And so I think this is a very steady development. Now of course, we want to maintain our 40%. So we've said that a few times today, and we mean it. But we have also shown that we have a good way of managing that and being responsible overall.
So I would say with that, we move on to Robert at Deutsche Bank.
Yes, thank you. Going back to Chinese matters where there is trouble on a couple of fronts, are you seeing any impact yet from supply chain difficulties in China on your German Enterprise Corp. Customers and their ICT plans and spending or even on your own supply chain at this stage? Thanks.
Robert, look, we took the decision considering the health and the situation for employees to step out of the Mobile World Congress, which was a tough one. But we didn't want to see people have a flu, they didn't put in quarantine and then isolated the organization. A lot of concerns of the people. So we took this tough decision, despite the fact that there haven't been so many cases in Spain or in Europe yet. So this is to be just caring about our people here.
The second thing is the coronavirus is definitely something which we should all be worried about. This is touching all value chains because the production of most of the industries is somewhere happening over China. And we have seen that a lot of the companies after New Year breakdown have started much slower and later than previous year. The Apple announcement yesterday is related to the Foxconn situation. Foxconn has had started very slowly.
Now we do not have a shortage of Apple handsets at that point in time because of our storage, which we have here and the products which are on its way to us. So the longer it takes, it might affect us. We do not see any impact on Samsung. We have talked to these guys with our task force, and we do not have even shortage of Huawei or other phones here. So that is not an issue.
On the network side, the task force gives us the feedback that there might be some components later being affected. You should know that most of the areas we have at least 2 vendors. So we have a certain hedge in the way how we're doing it. And on top of that, we have storage as well. So look, the longer this coronavirus will take and the more it is going to affect the Chinese industry, then it might affect us today.
Today, we do not have any shortage nor on network nor on handsets, and we keep you posted.
Thanks, Tim. With that, we take 2 more questions. So one is from Joshua at Exane, please.
Hi there. Thank you for the questions. Just 2 for me. Firstly, on the tower side, you talked about the growth opportunity from building new towers in Germany. I'd love to hear a bit more about the other organic growth opportunities, mainly through increasing colocation.
And specifically, whether you're learning anything new via your part with Deutsche Telekom Capital Partners and Xonnex in Switzerland? And then secondly, just on the 5 to home factory points, you talk around the €1,000 per home pass number, which I assume is the average. We've seen that come down already. Given some of the new initiatives, which you've talked about, what is the range of fiber to the home deployment costs now in Germany? Are we looking at 500 to 1500, 800 to 1200?
Just be great to get a sense of where this could fall to longer term. Thanks very much.
So, let me start with the tower question. Obviously, as I said, the biggest opportunity is basically coming, if I may say, opportunity from the builder obligations, which you all have to comply with, which is builder obligations, which will heavily touch the white spots, but will also affect our rooftops when it comes to 5 gs. Look, on the colocation potential, the current colocation ratio of DSMB is 2.3 among 3 competitors. So there if you want to reach to full potential, it can be moving up towards 3, but that is, I think, what's been left. And the open question is to what extent the 4th player will get into play, whether they basically will be seeking for additional co location, but we haven't seen a clear indication from this one.
On look, partnerships is part of the option space going forward. But since we haven't defined the option space, I would basically leave it there and say, yes, that's part of the option space. On FTTH, look, the target is obviously on average to get to below €1,000 But let me be clear, if you take a look to the build out cost in the different areas, if you go into dense urban areas, obviously, we're seeking more towards €500,000,000 to €600,000 If you go into suburban areas, so more in the vicinity of €1000,000 to €1500,000 And if you go to rural areas, it can go up to 30,000 areas, but this is subsidized obviously, right? So it very much depends on the mix where you want to build out. And I think an average number doesn't tell you a lot.
I think you have to really cluster it down in which area you want to build out and you want to have target costing in metropolitan areas, which are well, well, well below €1,000 which are more in
the vicinity of €500,000,000 to €600,000,000 Okay. And with that, the last question, please, from Otavio at Societe.
Hi, good afternoon. A couple of questions. The first is a follow-up from the deal in the U. S. I appreciate that it's difficult to comment on financials.
But it's basically less likely to spring to more related to other players. When you present deal, you basically give a target of $15,000,000,000 for integration costs. And the reason why it was relatively high is because you actually included all the contractual penalties for breaking the lease for the tower we have to decommission, plus also all the contractual penalties to renegotiate the debt. Now considering I have 2 years to talk to tower co in the U. S.
And of course to the debt holders. Do you reckon that $15,000,000,000 is still relevant or there could be some savings on the integration cost? A follow-up also on the intercompany debt with Timoz. When you presented the deal a couple of years ago, you said that you were planning to reduce the intercompany loans by half, I reckon it's between $6,000,000,000 to $8,000,000,000 sorry. What's the plan to reinvest into liquidity when it reached you in Germany?
And the third one is on the legal challenge you actually brought to the deal been approved between Vodafone and Libertigobel. Were you telecolonbus and mettolone if I'm not wrong? If you can share the rationale and which sort of remedies you want to achieve, that's what these are the challenges. Thanks.
Lucretavio, I understand that you have this question with regards to the business integration plan. And I can tell you only one thing. We have to do the closing. We have to put the plans together. There are a lot of plans still in the clean room, which we have to also bring together and then we come back to the market.
I'm not now one that Christian or myself are speculating about is this in or this is out or whatsoever. The only thing what I can tell you, what we know and we had a board meeting last week, I was in the U. S. For 4 days. We had an intensive discussion about what we see.
The logic of this deal is fully intact with all what we know. And it's intact from the cost synergy perspective, what we see. It is even intact from because when we did the deal, we anticipated a significantly higher interest cost for this high yield refinancing. It's the best window at that point in time to get this thing up and running. We had even anticipated our business case, which you probably don't know that we might have additional remedies or legal costs to carry, which are not foreseen at that point in time.
But there's still a little bit of way to go. And therefore, I would find that with and I like your position here. I would find it illegitimate to make a pure statement on one single item here. Look, if you ask me for my stomach, my stomach tells me that the case has even improved compared to the 22 months ago when we started with our business case here, the communications to Capital Markets.
So on the intercompany debt from T Mobile, you asked in the 8,000,000,000 dollars which will flow in our direction here at DTAG dollars, sorry. Obviously, we have maturities of about €5,000,000,000 which we have to refinance every year. And that will probably create a lesser amount of work in the Treasury Department because this thing is coming back. But look, we have clear CapEx plans. We have clear net debt plans.
And I wouldn't expect any kind of changes even if there are $8,000,000,000 coming from the U. S. Into DHL.
Okay, Christian. Thank you very much. I think we also have the question on Vodafone, Liberty Global and Potential Remedies. We have always said the housing, what the issues are from our perspective is the dominance in the TV market and the dominance in the housing market. And we feel those were not adequately addressed in the merger ruling.
And so that's why we feel this needs to be reassessed. And with that, I pass back to Tim.
Okay. I just want to say happy British to Dutch Telecom. We just crossed the $100 in the U. S. Market.
So therefore, we started $15.60 as we all recall. It's an unbelievable story and we are very confident in the way how we move forward here. We enjoyed the moment here at Deutsche as well. It's a good year 2019, but a lot of things to be done going forward. I think I hope you get some more details on where we stand with regard to capital markets commitments.
We're going on roadshow now, hopefully, to see you all on tour guys. And thank you for listening and supporting us over the last year.
Thanks, Tim and Christian. And don't forget, we own 63% of T Mobile, right, which is now at 100%. So with that, thanks also from my side. And if you have any further questions, please contact us at the IR department. Have a good rest of the day.