Dear ladies and gentlemen, welcome to the Capital Markets Day 2021, including the Q3 2021 results of freenet AG. At our customer's request, this conference will be recorded. As a reminder, all participants will be in a listen-only mode. During the call, there will be an opportunity to ask questions. If any participant has difficulties hearing the conference, please press star key followed by the 0 on your telephone for an operator assistant. I now hand you over to Tim-Frederik Oehr, Head of Investor Relations, who will lead you through this agenda. Please go ahead.
Thank you. Good morning, everyone. From my side, a warm welcome to our Capital Markets Day 2021. Let me briefly discuss the agenda for the call today. In the first part, Ingo Arnold will present the Q3 results. In the second part, Christoph and Ingo will provide detailed information on market opportunities, key focus areas for the next years, and financial trends up to 2025. Those parts will close with the Q&A. The Q&A session for the Q3 results is limited to 20 minutes and will end at 10:45 A.M. CT. Therefore, I ask you to keep your questions short so that everyone has a chance to ask questions. Of course, the IR department will be available for questions afterwards. With this short note, I now hand over to Ingo for the presentation of the Q3 results.
Okay. Good morning, everybody, from my side. Thank you, Tim. I start with the results. What you saw from our publication yesterday evening. I think, again, a very, very successful quarter. Yes, it's an easy job here to present these figures because I think in all dimensions, very, very strong. Starting with a group overview here of the financials. On the one hand, the group revenues are stable, compared to the first nine months of 2020. In the third quarter, even higher than last year. I think it's 100% what we guided: a stable revenue line here. In the gross profit, yeah, it's very positive.
If you leave out the gross profit from freenet digital, what we sold at the end of Q3 2020, in each single quarter of 2021, you see an increase of the gross profit during the year. In the third quarter, again, 214.8 versus 214.1 in Q3 2020. EBITDA, it's already up in each single quarter. Again here, comparable to the gross profit, you see an increase of nearly EUR 5 million. All in, we see an increase of 4.4% now. It's still very strong on the one side from the business itself, what you see in the gross profit, but on the other side, also from the cost side.
I would like to emphasize that the cost reductions are not decisive for the good result. What is decisive here is the good gross profit, and I think this is the base also for the projection we will present later on for the next years. Looking into some subscriber figures here. In the post-paid business, again, a slight increase in the third quarter, 25,000 customers. Also in the app-based tariffs, Funk and Flex, there's an increase of 6,500 in the last quarter. In waipu.tv, it is an increase of 24,000.
Definitely not disappointing here because if you compare it with the growth of the third quarter in 2020, where the business grew only by 5,000 new customers, I think this is typical for the summer quarter, and therefore, the 24,000 increase in waipu.tv is again a very strong figure. Slightly disappointing for some of you maybe is the decrease of the subscriber base in freenet TV. I think we already announced it during the year. We see it quarter by quarter. What is very important for us is that even with the decrease of the RGU, the EBITDA is increasing, and at the end of the day, this is the most important figure for us here. Moving to the mobile business.
Here, I think the headline is hitting the point here. It is rock solid. I think you do not see any weakness in this business, especially if you look into the service revenues post-paid, which are the most important ones for us. You see in comparison between the Q3 , you see an increase by EUR 11 million to EUR 392.6 million in the Q3 here. I think also here, the important top line here is growing. I think what is not that important for us is the line of the hardware business. It is slightly increasing with reopening of shops, but as it has no high margins, it is not really important for us.
It is only a slight increase, but this is not an important fact here. Moving to the gross profit in the mobile business. What we see here also is an increase in the gross profit quarter by quarter to EUR 164.2 million from EUR 162.8 million. It is an increase comparable to something that we already saw in the second quarter. Here you see how strong the business is. You do not see it 100% in the EBITDA because the cost situation is not as good as in the quarters before.
Still, the bad debt level is low, but we still do have all the provisions on the balance sheet, what we had built at the end of last year. Moving to some KPIs of the mobile business. Very important, the ARPU, it is EUR 18.40 in the third quarter 2021. It is even higher than in the third quarter 2020, so it is an increase what we have not seen for a very long period. At the end of the day, as I did before when it was slightly down, I would say this is a stable ARPU, and I would not forecast now for the next quarters that the ARPU will increase quarter by quarter. It is a stable situation.
The ARPU is an important figure for us, but it is not the most important figure for us. I think we explained it, especially during the call at the end of the second quarter. We see that roaming is partly back. This is not important for us in terms of profit, but we see especially from the private side that travelers are starting again during the summer. So we see a slight increase in roaming, but we are not back where we were before the crisis. Digital lifetime lifestyle revenues also very. It's a perfect picture what we see here. Again, an increase up to EUR 52.2 million in the third quarter now. It was a very strong quarter.
I think what is very important for us is that we have more and more subscription plans which are part of this digital lifestyle portfolio here. With these subscription plans, the business is much more sustainable, and I think this is something what you saw during the COVID-19 crisis. Normally you would expect that you have a lot of reselling here, which would decrease during a shop closure. What you see is that quarter by quarter it could be increased, and this is because we have more and more subscription plans which are part of the business here. Moving to the TV business, which is the growth part of our business. I think all what we promised is now reality.
What you can see is that the revenues are increasing, especially because of a growing number of customers in the IPTV, waipu.tv business. On the other side, in the gross profit, I think the quarter what we see here was the best quarter what we ever had here in the TV business with EUR 46.1 million. It's a very good development what we see. Also in the EBITDA, we see an increase on a 9-month basis to EUR 72.1 million. I think it's a perfect fit that in all dimensions or in all parts of that segment here, we see an increase.
freenet TV was growing by EUR 4.2 million, and I think this is a confirmation of what I said today and what we said during all these calls. Yes, we see a decreasing number of customers in the freenet TV business, but we see an increase in EBITDA, and therefore we do not care that much about the decreasing RGU figure. In the B2B business of Media Broadcast, we see first effects from digital radio. Therefore, we see this slight increase of EUR 1.9 million. In the waipu.tv business, as we see the effect from the growing number of customers, and therefore we see an increase of EUR 7 million in the first 9 months compared to the last year.
Yeah, definitely it will be a positive result all in this year. Moving to the free cash flow. Free cash flow is even higher than the upper range of our quarterly guidance what we published because we published a guidance of EUR 50 million-EUR 60 million a quarter. Now we have a result of EUR 60.8 million as a free cash flow in the third quarter. Compared to last year it is definitely lower. As you all know, there were some working capital effects last year which were based on prepaid invoices from some of our partners, and therefore it looked better than it really was. Last year then the fourth quarter was worse.
This year, this will not happen because we have a, I would say, a normal free cash flow in the third quarter, and therefore we will have a normal free cash flow in the fourth quarter, which will be something between EUR 50 million and EUR 60 million again. Moving to the KPIs, financial KPIs. I think still here again very strong figures. We see on the one hand the equity ratio, which is 41.3%, and this is even that strong as we have the impairment of the fiber network right-of-use of EXARING, which we did in the second quarter. And therefore it's significantly above the lower limit what we set at a level of 25%. It's a very strong balance sheet on the equity side.
On the other side, our net debt, it's 1.9. Definitely, it is influenced by the dividend payment, what we did during the year. With 1.9, it's below the 3.0, what we set as the upper limit here. Putting or leaving the leasing out of the view here and just focus on the bank net debt, we see that the leverage is 1.0, and therefore it's a very healthy balance sheet what we do have here. Moving to a last page, which is the guidance, what you know, I think we increased the guidance in terms of EBITDA and free cash flow some weeks ago.
What we do see now is in the subscriber guidance, I think, yes, all what we guided here will really happen. I can confirm this. On the financial side, yes, the revenue will be stable. The EBITDA and the free cash flow will be at the upper end of the range what we published. It's math what you can do. I think the risks are relatively low for the last quarter that something could go wrong here. Maybe one hint to the share buyback program.
As you all know and as you all can see from our publications, during the last quarter, we had an order out, which was to buy shares below the 21 EUR share price. We have not seen it. I think in the last weeks, we could not change our order because we had a quiet period. I think now we have to rethink the limit what we gave to the market. I expect starting some buy next week again. We have not yet fully decided, but definitely we are interested to buy further shares during the year. This is an overview about the financials at the end of the Q3 .
I think I give back to the operator to start the Q&A now.
Thank you. We will now start the Q&A session for the Q3 results. If you have a question for our speakers, please dial zero and one on the telephone keypad now to enter the queue. Once your name has been announced, you can ask a question. If you find your question answered before it's your turn to speak, you can dial zero and two to cancel your question. If you're using speaker equipment today, please lift the handset before making your selection. One moment please for the first question. We have a first question. It's from Jonas Blum, Warburg. The line is now open for you.
Jonas, in case you're talking, we can't hear you.
We have the next question. It's from Ulrich Rathe, Jefferies. The line is now open for you.
Yeah. Thank you. I first have two questions. The first one is the shops were open throughout the period, but the non-service revenue
The non-mobile service revenue in mobile are in decline. Now, on your presentation, you are talking about the hardware revenue is actually growing. Could you comment on the difference? Is that essentially M&A related or what is going on there? What is declining there? Related to this also, I mean, with the shops open throughout Q3, the postpaid subscriber intake was actually slightly weaker this year than last year. Now, you know, could you comment on that being a competitive issue or a marketing phasing issue or what that might be?
My second question, you might wanna defer it to the second half of the presentation, but there is a comment in the results release about smart pricing having been started in some regions. Could you comment on what exactly that is? Thank you.
I would like to start with the hardware question. What you can see in the figures is that there is a slight increase compared to last year. I think what is important to remember is that last year, Gravis was very successful in the second and the third quarter because a lot of people were working from home, so it was necessary to buy a lot of hardware in the Gravis stores. Definitely the revenue is lower this year. It is on the level of 2019, so it's not bad what we see, but last year there was an untypical increase of revenues from Gravis, and therefore the increase now looks not that big from the hardware side.
In the normal shops, definitely we see an increase.
Yeah, if I may add, I mean, for Gravis, the Q4 is key on revenues. I think the last week prior to Christmas is by far the strongest week overall. Last year for the reasons mentioned by Ingo, we had an untypical seasonality. On the development on retail concerning gross adds and net adds, I mean, in fact, we see an increase in renewals, and we see a slight decrease or rebalancing on gross adds, which I think is overall the sentiment of the market. The number of gross adds as a general number is going down for years and years now. It's just a shift between the types of transactions which is not fully transparent in our reporting.
Overall, the number of transactions was on the same level as prior to the crisis in our own shops in franchise and in third-party retailers. MediaMarkt-Saturn, they were still suffering somewhat to a certain extent to some lockdowns. We see there that the footfall, and I think that also is consistent with their own reporting. Footfall is a bit down, but the purchase dedication of the people showing up is bigger, so conversion is better than before. Overall, I would not confirm the impression or the observation. I would rebalance it with the types of transaction, as I explained.
On the smart pricing, I will refer to that point, and we'll give you way more detail in the next piece or next part of our presentation today.
That's fair enough. Thank you very much for the first explanation, though.
The next question is by Martin Hammerschmidt, Citi. The line is now open for you.
Yeah. Hey, everyone. Two questions please from my side. On shareholder remuneration, I think you've indicated in the that you will hit the upper guidance of your cash flow. You have low leverage and see limited M&A opportunities if that's still valid. How should we think about shareholder return going into next year, given that sort of the free cash flow is ahead of your original target? Beyond the EUR 1.50 dividend, would you prefer a special dividend or do buybacks again? My second question is on the postpaid net adds. We've seen obviously strong growth from O2 yesterday, and comments that they expect to continue growing at a healthy clip, and competition to remain rational. Do you see that as well?
In particular, have you seen Vodafone getting a bit more commercial with you guys? Any thoughts on the view, how you see competition unfolding from here would be great. Thank you.
Yeah. Good morning, Martin. I start with your questions about the remuneration. I think first of all, I think we have a guidance out which says 80% of the free cash flow will be paid to the shareholders. I think it is positive because when we have a higher free cash flow, then the dividend is higher, and if we have a lower free cash flow, then it is lower. This is the mechanism which is behind it, and I think it will be what we will do. It's also part when you, I think we discuss it later on, up to 2025. At the moment, we do not seek to change anything to this rule here.
You ask about special dividend what or whatever when the SBB will not be fully used.
I think it is too early to say because today we do not know if it will not be fully used. It would be possible. If you see the volumes, what we did at the beginning of the year, or at the end of February, when we started the second SBB. With these volumes, it would still be possible to use the whole amount of EUR 135 million. Is it so realistic? Yeah, maybe not. I think it is not today, it is not the day to decide what we do with the additional money or the free money. I think we have to discuss, we have to consider, but we have not done now.
Yeah. I would also confirm what Ingo says. I think we're happy that the development is as it is. We will see how we treat the SBB. I think that is a decision that also will have to be discussed once again with the advisory team, respectively with the supervisory board. On the net adds, you mentioned the strong performance of Telefónica. I mean, if we do our internal breakdown on our net adds, and we do it by network, and then put it into a ratio to the overall volume within the Telefónica network. I think we're on track or we're on the same page with their growth. We can see that.
I would state that Telefónica right now with their portfolio, they're in a very strong position. It's very competitive. I think they have been quite consistent over the past 12 to 18 months. Also their hard work on not only the network as such, but also network perception pays back. We see that also reflected in the reactions of our customer base. I think that is no doubt a strong move, and we appreciate it because we also take advantage. The same, the reference to the Vodafone deal. I think any of us is doing within a certain seasonality some hard push on volume. I have seen the Vodafone offering, which I think was a 6 months free of charge offering.
I personally seeing tests in our channels do not like the offer as such because it takes the risk that people take the advantage, but then step out or try to step out and cancel at least the prolongation of the contract as soon as they are stepped up to the regular price. I tend to dislike these kind of step-up offers. I would put it on my list. It looks like the typical seasonal show. Vodafone business year is thirty-first of March. They typically spend more money in third quarter, which is the first quarter on the calendar. Then they review their spending and their tactics in January.
They try to take advantage from the year-end rally where all the others typically look for, like, holding money back, and trying to keep things tight. I think that is nothing exceptional. I would also confirm that overall it's a more rational market. We see that, I think the cheapest United Internet offer on unlimited data is EUR 70, so that the former price breaker, United Internet, is a lot more calm right now. I think that helps, and that is everybody acts in the same manner.
Great. Thanks very much.
As a reminder, if you want to ask a question, please press zero and one on your telephone to enter the queue. We have a next question. It's from Polo Tang, UBS. The line is now open for you.
Morning. Thanks for taking the question. It's really just about the outlook for the mobile market. I mean, you're sounding a lot more constructive. Historically, you've always sounded a bit cautious and indicated that mobile was more of a stable business going forward. Can I ask what has changed your view?
Oh, yeah. I think I'll give you an answer in the presentation of the outlook. If I may postpone, but I will come back to your questions after that one, if this is okay for you.
Okay, thanks.
The next question is by Ulrich Rathe, Jefferies. The line is now open for you.
Yeah, thanks. I didn't want to monopolize earlier, but one more question is on the DTT decline. I mean, you're saying it doesn't really matter because the EBITDA is growing on the price rise, and I thought, fair enough. But it is, of course, slightly concerning that this drift in the customer base continues so long after the price rise, which suggests there's something more structural going on. So back to this question which we raised, I think earlier in the year already. At what point do you expect, and at what level do you expect this customer base to stabilize? Yeah, that's the question. Thank you.
Yeah. Ulrich, with all the optimism and all the constructive view, I think that is an unanswered question also from our side. What we do is we do interviews with people that cancel the contract, and it turns out that the vast majority is moving their flat, and if they move elsewhere, they find other infrastructure pre-installed, and this is when they're going out. The ultimate question is the long tail base the one that well is less mobile in their living in their lifestyle, and saying that staying in their current flat and relying on the current infrastructure. We do a lot of questioning this. We do a lot of research on it.
We also try to better understand where the other 2.3 or 2.4 million DVB-T active users are that are not taking our service. I wanna be honest here, I'm—it's very hard for me to predict where the real tough and heavy and really stable, sustainable long tail starts. I think it's anywhere between 700,000 and 800,000, but I cannot really say where it is. We have to track it.
Thanks to the price increases and also thanks to the transmission payments that we get on the B2B side of DVB-T too, before you see mid-term a stable EBITDA coming out, even if there is a further decrease on the customer base, but not yet in a position to state where it's gonna be on the RGU side.
Thanks. That's a very open answer. Thank you very much.
The next question is by Jonas Blum, Warburg. The line is now open for you.
Thanks again. Can you hear me now?
Perfectly well.
Great. All right, just a quick one on the guidance. I mean, you're looking at the upper end now for 2021. Can you just specify if that includes the release of the Q4 2020 bad debt provision or is it without? And secondly, I was just wondering about the 2022 budgets from the network operators. Are you already in discussion and do you recognize any rethinking of the counterparts in terms of retail whether they want to increase or decrease their own footprints?
Let me start with the second question. Typically we don't do budget negotiations with the network operator at this period of the year. We do that during the first quarter and most likely it lasts 'til in the second quarter. It's mainly a discussion on annual incentives, quarterly incentives and alike. Where the focus currently is with them is to find a way how to work on the 5G network activities to make 5G tariff plans available to a wider range of our customers. We are in a position to offer 5G, but not to the full extent that we would have expected.
We are not in a hurry, but because of a nonexistent demand in the end consumer base, but still, that is a focus. On the footprint, I think we still remain with a strong belief of a omni-channel presence. We are currently gaining some traction on the third-party retailers, so we have increased the number of those ones that accept us as one of or as their preferred provider, which indicates that the network operators, mainly Vodafone and Deutsche Telekom, are still stepping out or more stepping out of the retail than others do. I mean, they both come from a number of 1,200-1,400 stores, and I think they both step down below or to the direction of 1,000.
That leaves an open space for us to catch opportunities, specifically in smaller cities, where it feels that they have problems to run profitable storefronts. I hope that gives you a flavor, but I don't see big changes on that front there. I think on the that provision.
Yeah. I think, the bad debt side, I'm still not sure what the new normal will be, and therefore it would not make any sense to release the provision at the end of the year. Therefore, if we project now that we will be on the upper end of the guidance, then definitely the provision will not be released. It will be still there in the books.
Thanks a lot.
The next question is by Adam Fox-Rumley, HSBC. The line is now open for you.
Thank you very much. I wanted to ask a question about freenet TV, please. You mentioned earlier in the year about sports possibly being a good catalyst for take-up. I think on reflection in Q2, people enjoyed being outside in the sunshine a little bit more. I wondered if you could talk a little bit about your performance in Q3 and what was attracting customers in, you feel in particular. Looking forward, kind of what is your positioning for Q4? I know you're gonna talk about Sky a little bit more in the later presentation, but how you're positioning the TV proposition would be helpful. Thank you.
I mean, as Ingo mentioned, the uptake in waipu.tv in Q3 2021 was way higher than last year. I think last year we were missing these specific sports events, such as a football championship or Olympic Games. But that inspires people to watch TV, to drive their consumption and usage. And we obviously took benefit. One of the key sources of new customers these days for waipu.tv is really any kind of event on TV.
We do on social media, for example, we do ads where we say, "Tonight you're gonna see this and this on RTL," or, "Tonight this and this is gonna be available on ARD, and this and this is available on ZDF." Whatever it is, mainly it's sports or event type of programming. Not series or movies, but event-based stuff. This attracts people then basically to click, to activate, to go into the app, to take advantage of recording, et cetera. Then the key question is how to convert these people into a regular usage. If you understand this journey that people get during the day, get pushed into some content, and then they download the app, they register.
Sports events, which are repetitive, at least for a certain period of time, are more attractive than like one-shots where people basically take advantage of watching it on their iPad or on their smartphone and then step out again. That is kind of the ongoing wheel that we are pushing here. The waipu.tv stick has the clear intention to then bring people into a position where they do cord cutting, where they replace their current device. With waipu.tv on the, I'll talk about some of the features in more detail in a second.
We see even after the first few days of selling the device that their usage goes straight to the living room. Usage is much more intense. These are the people that are switching off their legacy technology in terms of access. Our proposition will remain on delivering everything that is attractive to a broad audience with additional value from what we call the new TV channels that these are the channels that are partly exclusive to us. We see that on our usage share split, the new TV channels in total are increasing.
Out of the total usage, it's, I think it's these days, it's we go into a direction of up to 10%, which is enormous because the focus in Germany is still remaining on the, like, top five channels. I think these things work out really well. We also see that, as of fourth of November, we still see a good development also on waipu. I see for the full year, definitely a number beyond the 700. Overall, we see that the dynamics remains consistent. We still believe that the overall segment of IP/OTT is getting more prominent on a daily basis, and we can take advantage.
That's great. Thank you for that answer. If I could just follow up very briefly on the first part of it. I mean, I assume you do track the kind of engagement levels that you have on those social media platforms. Can you say whether those are trending upward? Are you seeing more engagement with those promotions and those tweets and et cetera?
Yes, we do see a lot more engagement, and we do also see more interaction. Unfortunately, when you drive volume on the engagement side, it does not immediately convert into or it kind of dilutes a little bit your conversion rate. So I think that is the balance that we have to manage.
Got it. Thank you very much.
There are no further questions, and so I hand back to Christoph Vilanek.
Yeah. Thanks a lot for the discipline. It's 10:43, and we're going into the outlook. If I may just add a couple of sentences to the Q&A and also to the Q3. Today is November fourth. The Q4 is running perfectly well along the lines of our projections. The trajectory and the final results, and the early indicators of the results in October also confirm everything that we've said. You can be assured that we have reviewed these numbers also in the last few days prior to today's outlook in order to make sure that you know that we've for years always been a bit conservative, and some of you mentioned it.
I'm not saying that what comes now is conservative, but we are not changing our overall attitude that it's our clear ambition to deliver on promise and a little bit over-delivery is part of our sentiment and our feelings. We expect, I think a regular Christmas business, not impacted too heavily by the hardware shortages that we have seen in a meaningful way in October. Right now, Samsung and Apple are well on track. We're a bit worried about January, February, but that goes for the entire market. We wouldn't be impacted more than others. If overall availability is lower than, customers will most likely only delay hardware sales instead of stepping out because there is no real alternative.
Having said that, I'd like to go into a longer block of telling you what we're working on and what the company is dedicated to. On our website, you might have seen the vision before, in an overall review process that we have conducted within the last six months. We've also reviewed the vision, and we still believe that it is a strong statement. It's still valid. It's well-perceived internally. And it's a vision that goes in many directions for the shareholders, for the partners, for the consumers, and for the individuals that dedicate their personal work time and lifetime into this company. Derived from the vision, our mission needs to adapt in certain aspects to more digitization of our daily life.
It remains though to be the growth through products and services out of what we call digital lifestyle. Even more than in the past and based on a lot of deep insights in data, which I will give more flavor to it in a few pages later, we dedicate ourselves to understanding the end consumer and trying to detect the wishes that they might not know themselves. We also believe that digital first is an ultimate prerequisite for whatever we do, both in our transactions with the consumers but also internally. The level of digital and automized and automated and app-based transactions is increasing, and it's working really well. I'm also very excited that our employees enjoy it and support it.
Still, two levels or two elements to our mission are key, and we consider them differentiating us from others. The one is that advice and neutrality in advice, so the substance of being a service provider, not owning an own network, is giving us the advantage to react on the demand and on the individual demand, depending on location, age, preferences, and so on and so forth. The other aspect is proximity. You may say that online is always available, but I think there is an aspect, and I keep saying that also internally, there is an aspect of having physical individuals close to your customers, people that can be seen, can be talked to, can be found in the shops. So customer proximity and a clear understanding of the individual demand are building factors of a successful mission.
If we ask ourselves for freenet 2025, which is the name of the internal program, we were asking ourselves what do we want? Where do we wanna go? The first one is obviously we want to grow. We want to grow in any of our KPIs, and we need to grow in order to fulfill customer needs. We need to change, and we want to change because we have understood that constant transformation is the only way not to survive, but to stay ahead of the others, to stay in front of the competition. The competition is not only the three network operators or let's call it the four network operators, including the future one.
It's also staying ahead of competition that is trying to get into our customer ownership to get a larger share of wallet of our customers. We need to be up to date. We need to understand trends. We need to be ahead of the others in order to keep our position. If you do so, you need to understand what you do best, and you should focus on what you do best. I think we have a clear understanding on what we do best. We remain a telco. We remain a customer-centric organization providing interaction and transaction. That also excludes automatically some areas where we would not go into broader content productions. We would not go into product development to a large extent. We will focus on the assets that we have.
Still, we believe that we need to get faster, and we will be faster than we were in the past. As a result of the previous four points, and last but not least, we should stay with our proposition. The proposition is to remain an independent supplier of our services, and we should be reliable and sustainable. We believe in omni-channel, and we express this belief in this long sustainable position with our retail chain, with our partners on the storefront, by expressing it not only towards the customers, but also towards our partnership. The overall statement is, or the summary of everything we do remains digital lifestyle. It is, I think we have started to use this terminology back in 2012. I think back then we needed to explain what it is.
Today, I see copycats that use the same expression and terminology all over the place. We have understood that this is the core of our business, but it's also in the middle of our society. There's slight and small changes on the right-hand side. We say that the growth is going over the entire customer life cycle, and I will explain to you what the difference is to what we had before on this page. If I review the last 10 years and I do the outlook for the upcoming 5 years, then we see a clear transformation in three dimensions.
I think the first 10 years when I was in charge and Ingo was supporting me back then, still as the head of our controlling and finance department, the driving KPI was subscriber acquisition costs and subscriber retention costs. We were driving these numbers down, and we were hoping that by doing so, we would improve our KPIs in terms of EBITDA, EBIT and EBT. The last 5 years, we focused on product life cycle. We've changed our mind from pure acquisition cost to the equation of what is the monthly margin over a 12 or 24 month contract and compare this to the SACs and the SRCs.
It was a wider view, but we've also learned through the much broader portfolio with digital lifestyle services, TV and video services, that this is too small, too limited view on our performance. We have implemented, and it is mainly an implementation, on the data warehouse side, on the technology side, on the process side, and also on the finance side too, with measuring data and measuring KPIs, so that for the next five years, we put customer lifetime value in our focus.
The difference is that we are not looking anymore to optimize a single product on a single contract life, but we include in the view, and I'm trying to make up figures now in order to not disclose details that are relevant also for competition. We know that customers that we have acquired in our own shops have a lower churn and a higher probability to renew the contract. This is something which we knew in the past, but we did not include it in our financial modeling, and we did not include it into the decision-making of which channels should have which share on the acquisition side. That obviously has a strong impact on what's going on.
The same goes for retail customers, where cross-selling is much easier, not only live in the shops, but also during the period of their lifetime. It turns out that they are more likely to accept additional offers than pure online buyers. You might say that this is mundane. Yeah, it is mundane, but you, even if you realize it's a big and heavy duty to put it in your modeling. That is the ultimate difference between the past five years and what we have entered in 2021. We've prepared it and tested it in 2019 and 2020, and we are now live and working on this. As a consequence of what I've said, the proposition is different. We've been a company considering itself a sales machine, and we consider ourselves today as a team to manage a customer base.
Manage a customer base obviously includes the fact that there might be people churning and you might refill the base. If you have the ambition to grow overall, the refilling is not good enough, but we should add new customers to the customer base, and we have ambition to have net adds. But it is a different proposition from the past, we consider ourselves to work on the development and the management of the customer base. As a consequence of those two, we also reviewed our organizational design principles. In the years of 2010, we came out of a merger. We were dedicated to systems and processes, and we have changed this also, having two more members in the executive board.
The way we have organized ourselves were based on competencies and also on legacy, which was right for the past 5 years. For the coming years, we will change to a functional organization. In order to do so, we also have communicated internally, that a mind shift is necessary in all functions. Putting the active customer base management into the middle of our action also means that we need to put it in our KPIs, in our goal setting, and in the incentive systems. This is instead of the pure sales machine which we have considered ourselves to be for the last almost 30 years. The second one is a data-driven and at the same time creative approach towards our customers and towards transactions.
Data-driven must not mean to have a super brain power sitting elsewhere in the highest floor. It means that everybody down to the last single individual needs to understand that any transaction and any interaction should be reflected or should be prepared by using data. Last but not least, the awareness of corporate responsibility is something that we see as a need, not only from society and regulation, but also as a demand, especially from young people within our corporate structures. On the following pages, I will illustrate a couple of those aspects a bit deeper. The first one is a picture here, I think which speaks for itself, the difference from product life cycle to customer lifetime value.
The major difference is that we do not see a single product range or segment separated from each other. We do not limit it to the contract lifetime of whatever it is, 12 or 24 months. We look at an individual, and we optimize the compound margin across all products, across all touchpoints, and not only for 12-24 months, but for the full lifetime of an individual. We've mentioned the so-called smart pricing model, and on the next three pages on synergy benefits, I'll give you more detail on this. What it says at the end of the day is on the right-hand side. Whatever we do is an individual combination of the offer that a customer gets, such as promotions, hardware prices, tariff plans, and the like.
Which channel we do the offer and whether we do the offers across channel fully consistent or maybe differ by channel. It's a question of timing. Quite obviously, it's a difference whether you get a newsletter early in the morning or late in the evening, but it also is a difference what your own attitude is and so on and so forth. What are the drivers or what are the determinants that we can put into our machines to do real-time modeling? It's data on what is the tenure or total lifetime of a client, of a customer, of a contract, or of a product. What is the behavior of our customers? Do they contact the service call? Do they use the app? Which touchpoints are their preferences?
Can we detect whether touchpoints they use are in a certain sequence? Is these people that they do calls and afterwards check online or the other way around? Are these people that face us, our sales reps in the shop, are they using the other channels at the same time, or can we track them across the touchpoints? What is the usage? What is the transaction preferences? What are the channels that they use most, and what differentiates channels for them? And last but not least, what are couple of personal admitted data that might have a strong impact on their at the end of the day on their buying behavior?
The challenge is that you cannot either you don't have all the data fully integrated for every customer, and it's hard to detect what might be the one single data point that is most important for one customer that might also be different for another one. The team from Antonius Fromme, they have worked hard. It's a team of almost three dozen data scientists. Did a lot of testing, and we've moved with the results from one size fits all and to today, a one-to-one communication and to one-to-one offer. We are illustrating it here. When a consumer gets into the renewal phase, in the very past, we did one size fits all.
We sent one offer, and we were hoping to be successful. Then we were obviously splitting it into segments. The differentiation was by offer, by hardware, et cetera, et cetera. Nowadays we are on a real one-to-one in all dimensions. Whenever people get a letter, or get an email, or they go and log in on the website, we include in real time all the data we have, and we change the offer, or we adapt it to the individual needs of person. We don't do that because we find it funny or interesting, but we do it because it adds value. These are indexed impact of test groups. We haven't rolled it out to the full extent into the entire base.
This is what we are starting right now on retention and prevention, and stepwise also on the new customer acquisition. We illustrate here that on retention, this is when a customer has terminated its contract, and we try to bring them back. What do we typically do? We review. In the past, we've reviewed the tariff plan, we reviewed the offer they received, and then we've put another offer out. Today, is this the first time they renew? Is this the second time? How did they behave last time? What was the triggering event last time that they finally came back? Do we know anything about their complaints, et cetera, which might have changed from the previous period to this period?
As a result, we can do a much more dedicated offer, but not only the offer, but also the way we approach the consumer. We might start a conversation or the interaction with the consumer by mentioning the mistakes that we've made, and we would never have done that before. So what is the drivers of the additional value, the life cycle value then? Well, it might be the tariff plan. It might be the initial down payment for the hardware. It might be that we shift from a pure SIM to a combination of SIM-only plus a price plan for hardware, or we do financing of hardware and installment payments.
All these small elements, at the end of the day, add to the fact that in the test groups, we could improve retention life cycle contribution by almost 25 percentage points. On prevention, which is prior to a cancellation, the active should show up with the end consumer, is a +10% result. Even on the gross add side, and that obviously goes mainly for online, we see a first impact of 5%. I mean, these are the things and great drivers of a positive development, even though there are other elements within the organization that we have changed and that also contribute to an improved performance of the entire company. One is obviously digitization. We digitized almost any internal processes.
We today do almost everything by app, internal HR processes, and any processes in terms of signing off, procurement, et cetera, et cetera. More importantly, we have seen that, for example, our sales reps are working with Teams and Zoom instead of doing physical meetings. The number of meetings has come down, and we will now not only take the advantage of this, but also change the organization accordingly and take the advantage of savings on that end. Second element is that we have for eight months the Executive Board has had a review of any of the IT projects and IT demand letters that were created within the company. The five of us wanted to deeply understand how do we do things?
What are the drivers at the end of the day of the bottlenecks in our technology development, and how could we improve? We have defined individuals across the entire organization only lately as gatekeepers for our key topics and focus areas that create maybe not the value, but that create a huge effort on the IT side, on the finance side, et cetera, et cetera. To give you a simple example, number portability is still a tricky piece of our business. When I have asked who is the person in charge of number portability, it turned out that we have almost six people being in charge because they do it differently when we do the new FUNK and FLEX products. We do it differently for retail. We do it differently for online.
In the past, this seemed to be our strength, to be very fragmented, to be very precise on individual need. We have understood that this we need to go back to standards in order to accelerate development and our ability to adapt to changes in the market or in the demand of our individual customers. The third element in our guidelines, if you try to simplify and standardize, you also need to make the entire team understanding where you wanna head to. What is our strategic elements in terms of improving processes and the like? We do not want to demotivate the innovation power of our individuals through standardization. The way we do it is that we give guidelines. More guidelines than we did in the past.
We limit misinterpretations and misdevelopments all over the place. This also is reflected in our new target operating model. If you as an external may look at this, you might say, "Well, this is quite obvious, an obvious solution." We did not work like that. We did not work like that for very good reasons. We think that we need to change. We have implemented this as of first of November, and people seem to like it a lot because it's a much more transparent logic. On the left-hand side, you see what we call the product house. This is Rickmann von Platen.
He's in charge of sourcing the products, creating the products, and putting them basically into the internal shelf, or you even might say in the internal warehouse. In the middle, management control of steering the business is Antonius Fromme. He is heading the entire BI and data team. They develop, and they put together the offers for the individual customers. They are our brain machine in order to put all the products into the not only on the shelf or in front of the consumer, but do it in the right order with the right individual offer, try to optimize the next best offer, the channels, et cetera, et cetera. This is really a highly data-driven, super sophisticated team that deploys all latest technology such as machine learning and AI. On the right-hand side, we have customer interaction.
I'm in charge of this. These are the units that really speak or communicate to the end consumer. That is marketing, that is online, and this is our stationary sales, also customer care. This is really where the customer interaction goes on. Logically, the KPIs of the three of us are complementary. The product house is basically going for the gross margin. The customer interaction is in charge of delivering the number of transactions at best cost, and the management control team is in charge of creating an EBITDA prior to SG&A. Ingo and his team in the finance department are not only monitoring it, but giving their constructive input and putting the finger into the wound of further optimization, playground.
The same goes on the lower end of the picture. We have renamed the so-called IT department by the terminology of technology and processes, and they are also in charge of the continuous improvement. We think that these steps will contribute very well to our future ambition, freenet 2025. I have mentioned the topic of ESG and CSR, and I won't go into all details here. We have started a lot of initiatives, including our green line accessory brand Networx is our own internal brand. For these, we will define before the start of the next reporting season in 2022 our timeline for all key parameters such as carbon dioxide footprint, et cetera, et cetera.
Let me give you an example on how we bring this also to all the shops, but mainly steer it through the entire company. 2016, we started to work with Fairphone as the first player in Germany. We became the largest distributor in 2018. We have launched their 5G phone only this summer. Now we are about to launch Fairphone. Fairphone will be the first phone in Germany where the back of the device and all the materials that can be done out of recycled material are recycled. The battery can be replaced. There is no blister, no foils.
It's so-called grass paper covers, et cetera, et cetera, and boxes. We even charge the individual a hardware deposit, which allows the user to bring back the device within the next five years. If they bring it back to us, we will pay back the hardware deposit. I think such a product which is then available to all our employees as well, all the shop representatives got an individual pack with all the details on it. I think it helps. This also creates a deep understanding of the importance, not only on the top line of an annual report, but also in the individual minds of our employees.
Let me now step a bit into some details on the product and on the marketing side. Only six weeks ago, we started our big TV, social media, online, and below the line campaign with Dieter Bohlen. Everybody who is German might know that this guy is, I think, well, more well known than even the future chancellor. That might change if he becomes the chancellor, but so far, Dieter Bohlen has a higher recognition in public. He is our new hero to bring all our brands under the roof and umbrella brand of freenet, which we will also be starting to review our retail footprint, and we are intending to replace mobilcom-debitel as a main brand and also as the shield on top of the shops.
We have established freenet-digital.de as our core hub online for any of our brands. Under Freenet Digital, you will realize which brands are under the roof and under the umbrella of freenet, and they are all available there. Freenet becomes the home of digital lifestyle, as it was in our internal terminology, but it was not shown to the end consumer. Managing the brand is one dimension. Managing the customer journey is the other one. We are reporting to you that we have the ambition to do more and more in captive channels, which is also reflected in the numbers on the. I'm not seeing the chart anymore. I hope that you are still seeing the chart. You will see on the left-hand side that the captive channels are still growing.
One dimension is the captive channels. The other one is owning the customer journey, so determining what the consumer sees, and this is going beyond the captives, also in third-party free dealers, business distributors, and the like. We have done the exercise of reviewing our portfolio also in terms of brands, and we've listed the brands that we are using from now on for mobile. For mobile product is freenet Mobile as a pure SIM-only and online distribution only. FUNK as the app distribution only. freenet FLEX as the combination. Sparmobil as a strong brand focusing on SIM-only with omni-channel. We will replace mobilcom-debitel by our new MegaTarife across the board.
These are the products including a hardware subsidy and will replace what we called in the past mobilcom-debitel. If we look now, thanks for the comment, I think it was Ulrich Rathe who said we sound more optimistic on the mobile side. Well, let me first line out what we think as macroeconomic factors that challenging our business, our mobile business here. There is obviously price erosion. It may have slowed down, but the trend to SIM-only has an impact on overall pricing. We still believe that there is pressure. There's saturation. There's regulation, such as on roaming and so on and so forth.
We have a lot of impacts from compliance costs, minimum wages, and last but not least, a declining subsidy in our home country, Germany, in our home market. These are downward trends that we need to balance and ideally overcompensate through our internal activities. We have introduced those measures to you in the last 10-15 minutes. The one driver against it is the customer lifetime value concept. It's the smart pricing. It's the expansion of our captive channels. It's internally the digitization and the cost efficiency and introducing an umbrella brand and focusing marketing and expenses. It's a strong simplification, not only in the internal organization, but also in media planning and in handling the customers.
We were trying to illustrate on that page that with all these measures, we are absolutely convinced that we'll be able to overcompensate the downward trends or the downward pressure from the other levers. Therefore, we will also be capable and able to improve and to increase EBITDA contribution, gross-margin contribution from mobile. The same obviously goes for digital lifestyle. There, the strategy remains the one that we have started with a long time ago. We have over the years expanded the portfolio from the pure security and insurance stuff like Kaspersky and Norton, or a bad guarantee, which is an insurance for the hardware, to all kinds of other services. These go into various directions and will remain a differentiator.
With freenet, you are introduced a portfolio, and you have a curated app portfolio which we offer to you, where we give you, in some cases, price advantages, which you can be charged through our mobile service invoice on a monthly basis. We have seen a tremendous success of this segment within our activities. I think first year we've reported it was even 2013. We saw a 12% CAGR in the last five years. Looking at the Q3 numbers, we will go beyond the EUR 190 million hurdle this year. We see an upside of another 10%-15% or 10%, even 20% over the upcoming five years.
This is gonna be a contributor on the revenue side of more than EUR 220 million within the next three, four years. The EBITDA margin, as you know, is very attractive. The one piece that was missing over the last almost 10 years was a focus on internet access. We restarted the internet access with a fixed mobile installation and unlimited data cards. They are now available for a year. We are successfully selling it, typically with a FRITZ!Box router. Six weeks ago, we started a pilot on DSL fixed network internet access in selected shops. We replaced the commission-based business which we did in these shops, and tried to better understand what are the preferences of the consumer.
We are planning a full rollout of VDSL, a free internet fixed line offer in 2022, and we will give access through other technologies such as cable and FTTH, starting at the end of 2022, and kickstarting and launching all of them in 2023. What are the key differences? We will remain with our core promise, no CapEx, asset light, so wholesale service provider type of business approach. We will not go into voice. Our customers do have a handset. They do have a flat rate, so we do internet access only. It's a simplification, and it's also for internal processes, a big ease coming from being agnostic towards number portability, et cetera, et cetera, on fixed line.
We are technology agnostic in terms of access. At the end of the day, our consumers will just have internet access, and we're gonna decide for them which technology is underlying. The first indication and the first projection says that out of this business, we will have an EBITDA contribution of EUR 15 million-EUR 25 million within the next five years. But it's also the fundament for the concept of converged offers. I'm not changing my mind that converged offers are something which is maybe valid for 25%, 25%-35% of the German consumers, but we do not neglect it. We are, with the new internet access product, in a much better position also to drive value from convergent products.
We did not express an extra value or EBITDA contribution out of converged products, but we think convergence as we lay it out here is an additional source of customer lifetime value. Obviously, adding to what we have today, we want to add the fixed network. We will have access to cable via Vodafone. We will have access to fiber, satellite, and obviously 5G as a means and OTT entertainment. We have only recently started to do the first 5G broadcasting tests in Hamburg with a couple of channels also moving there into new directions and into new dimensions. This is a good starting point to go into our TV media segment. You know that these are. From our internal way of looking at it is four pillars.
It's the waipu.tv OTT TV platform. It's the freenet DVB-T, including the B2B part of it. It's the Media Broadcast as our infrastructure company there in Antenne Deutschland, representing the digital audio broadcasting. If we look at the development of the TV market, here are the numbers from the German market. The development on subscribers on cable access points, on cable satellite, DVB-T, IP, and OTT TV. You can see that the heavy growing one is the, what it's called today, the OTT, and out of it, we are holding a significant market share. Everybody, including ourselves, is convinced that cable, satellite, and DVB-T too will still go down further. IP, the pure IP, and the OTT will basically mix up.
There is an underlying technology shift from broadcast towards unicast, and it was much easier to illustrate this trend by just showing which VOD products are out there in the German market with a significant market share. The Mediatheken, it's obviously Netflix, it's the new Sky Q offer as well as DAZN. If I may say, we put it into the middle for good reasons, it's waipu.tv. If we take the projections that are available in the market, you can take a linear approach on IPTV, OTT households, and then you would end up with more than 11 million subscribers of this technology by 2023. There is also other projections and trajectories that suggest that sooner or later there will be exponential growth to more than 30 million.
We will not discuss in detail what the projections might mean to waipu.tv in the two scenarios. In our 2025 ambition, we have only included the linear scenario, and we have anticipated that we will lose market share, not because our product is not strong enough, but because we respect that Vodafone and Deutsche Telekom and some other players will also take their share. Even going down in the linear scenario to only 20% market share, our subscriber base will definitely cross beyond 1 million by 2025, and more than 2 million 2023. I personally consider this as a conservative outlook. We can support this significant change with the launch of our waipu.tv stick. It's the first 4K TV stick out of our house.
It was silently launched, so it was made available to the press and made available on the waipu.tv homepage only 2 weeks ago. As you can see, it looks like a regular remote control. This is what our research showed. People are missing the 1 button for ARD and for the German public TV, and 2 for ZDF, and so on and so forth. We want to have straight access to YouTube and Netflix, and this is included on our remote control. It also includes the access to our own VOD service, waipu.tv, and it has all the features of linear TV and zapping.
It replaces the old outdated and old-fashioned remote control from cable or satellite, and it includes all the perfect features and benefits from a virtual PVR, from access to all your devices in parallel, and so on and so forth. We have not done a loud launch with it because we were limited in the shipments. That is the sole product where we also are facing semiconductor shortage. Within the first 5 days, we've sold more than 2,000 units without spending a single penny on marketing. As I said before, freenet TV will remain a heavy contributor in terms of EBITDA as a combination of the B2B business, the B2C element, and the opportunities to increase prices.
Even though the subscriber base and the RGUs might go down, the overall EBITDA will remain on a stable level for the next four, five years, according to our projection. This certainly has in its modeling a projection on the RGUs. As I stated in my answer earlier during the call, we are not in a position to disclose or fix a number. The one thing we are sure about is this picture that the EBITDA contribution will remain stable. Media Broadcast is the largest service provider in the media industry for connectivity, et cetera, et cetera. We're working for Bundesliga, for Deutsche Telekom, for Magenta, et cetera, et cetera.
The service levels and the technology that we deploy is state-of-the-art. This is small contributor to the business, but a big contributor to the relationship with the public channels and to other TV producers. On the 5G side, we have set up our campus network in our own location. We are testing a lot of stuff there with the first B2B customers. We are convinced that on the 5G side, we will be shortly in a position to show our competence. There are some contracts in negotiations which are not yet to be disclosed, but I think you will understand much better as soon as we can disclose it.
I also mentioned that we are currently testing 5G broadcasting for the first time as a potential internal replacement for DVB-T2. The same goes for the DAB market. Media Broadcast is doing the business piece of it. It's the pure service business. We have one, the DAB platform rights for North Rhine-Westphalia. We have done the same thing for Hamburg. There's a lot of regional hotspots that we are still able to cover and to acquire with long-lasting contracts. This entire business model on DAB, taking advantage of existing infrastructure, existing antennas, is gaining pace, and will remain to gain pace, and replace the former FM business. In parallel to that, we run with our partner, Müller Medien and Antenne Deutschland.
It's a 50/50 between Media Broadcast and the Absolut Radio Group. Under this umbrella, we are running on the left-hand side at our own expense and our own effort. These days, five channels under the Absolut brand on DAB+, one which is Absolut Relax, which we run on the first multiplex, and we have also pure streaming offers. As of the third of October, with our partner, AIDA, the cruise company, we have launched AIDAradio, and there is one more channel left, which we want to run at our own risk.
We are in constant negotiations with potential media partners on the content delivery side to help us to fill the last gap, not on the multiplex, but in the radio media landscape in Germany. Next to that, we have third-party providers such as Antenne Bayern and Rock Antenne, which is the biggest private channel in Germany. They're paying transmission fees to Antenne Deutschland and at the end of the day, to Media Broadcast for the service. In parallel, we do the ad marketing or the ad sales for not only our own channels, but also for some of these third-party programs that are on the platform. The vision here is today, radio media is split in a duopoly.
RMS is the nationwide service for private channels and AS&S for public channels. We have founded ad.audio in a joint venture with Ströer. Ströer is well known as the third biggest media supplier in Germany, on a national level, next to the one of RTL and ProSieben. They are coming from digital and out-of-home, but they are entering with us into the radio arena. On the right-hand side, you can see that this is an EUR 800 million national market. It's still a growing market on the audio side. Our vision for ad.audio is to become the one single point of contact for any national radio on the digital audio broadcasting.
Obviously, only 50% of the outcome will go into our pockets, but we see huge potential there. To sum up, for the Media Broadcast piece, and I think it's answering one or two questions that were asked before. We think that the pure TV, the terrestrial TV, B2B, B2C has a current EBITDA contribution of 65%. We consider it to be a stable business. Radio is currently 25%. This is definitely a growing business which will have a significant impact on the P&L from 2023. There is event and network business which remains as it is. Having said that, thanks for listening to this longer presentation.
I'm sure there's a lot of questions behind it, but before we go into questions, I would like Ingo to sum it up and to show you what this will end up in our numbers, in our P&L over the upcoming four years.
Yeah. Thank you, Christoph, for the impressive outlook. I think what we see here, and we were sometimes criticized in the past that we do not have a growing business. I think what we see here is that some of the ideas what we started during the last years that we will see the fruits out of it in the upcoming years. Therefore, what we did from this operational outlook, we transmitted it into a financial outlook. I think the two most important figures from my point of view are that on this base, we definitely see an organic EBITDA growth in the next years, and we definitely think that more than EUR 520 million of EBITDA will be possible in 2025.
This would mean that there will be a CAGR of something like or more than 4% during the next five years. Looking in detail into the figures, I think the starting point here for the EBITDA is the EBITDA of 2020, where we saw an EBITDA of EUR 426 million. How do we see the split? We think from the initiatives in the mobile communication business, we see something like EUR 30 million-EUR 60 million. From the TV and media, something like EUR 35 million-EUR 65 million. From the cost efficiency, something like EUR 5 million-EUR 15 million. I think we have not discussed this part of the optimizations, the cost efficiency measures, but I think we have a successful history here.
Since we were part of a private equity business, Christoph and myself at debitel, I think we learned a lot of lessons there, and therefore. From my point of view, it is fine to write down EUR 5 million-EUR 15 million. I think this definitely is a conservative figure, what we see. Looking into more detail into these figures or into these potentials, from my point of view, the mobile core business, I think we already saw these optimizations during 2021. I think with the CLTV concept and with the smart pricing concept, what Christoph explained earlier, I think something like EUR 5 million-EUR 15 million is this should be possible even with the headwinds what we put into consideration here.
From the Digital Lifestyle business, I already discussed it during the Q3 of the results. I think we already see that the revenues are already increasing during 2021. We will reach something like a revenue of up to EUR 200 million during this year. The revenue increase, what was shown on Christoph's slides, will definitely could be transferred into an EBITDA increase of EUR 10 million-EUR 20 million. In the freenet Internet business, I think it is a new offering. I think it was one of Christoph's comment that convergence is not part of this EUR 15 million-EUR 25 million. I think this is also another chance, which could bring us here to the higher end, definitely bring us to the higher end of the range. 15-25 seems to be possible here.
Moving to the TV and Media segment. Yes, definitely, the biggest growth path is waipu.tv and is the OTT business. It is a conservative view of the market development, what we use here to calculate an EBITDA increase of EUR 25 million-EUR 35 million. The freenet TV business, I think here it is compared to the 2020 freenet TV EBITDA. What we already saw and what I presented is that in 2021, there will be an increase of something like EUR 5 million already. The EUR 0 million-EUR 10 million here looks not too difficult to reach. On the Digital Radio side, I think one of the last topics which Christoph explained, EUR 10 million-EUR 20 million looks reasonable.
We calculated it. We were not too aggressive about the advertising business, but even without it and with the transmitting fees, what we get, EUR 10 million-EUR 20 million, seems to be possible. All in, from my point of view, a very sustainable projection, what we have here. I would like to emphasize that this is not a new guidance. There will be a 2022 guidance at the end of February, as usual. I think it is a ambition, what we have, and it is a realistic outlook from my point of view. Moving to the last page of the presentation here. The EBITDA increase will definitely lead to a free cash flow increase.
What we did here is, we used the relation between free cash flow and EBITDA, how it is today, and copied it in the future. Without Sunrise, in 2020, we had a free cash flow of EUR 203 million, and now we forecast something like more than EUR 260 million. It is an increase of EUR 60 million. On the EBITDA side, it is an increase of EUR 95 million. What we forecast at the moment here is that
The free cash flow will even increase slightly higher. The increase will be slightly higher than on the EBITDA side. Shareholder remuneration was already a topic earlier in the call. Yes, we stick to the 80% distribution figure, what is part of our financial policy. Also in the next years, we plan to pay out 80% of our free cash flow. With this increasing free cash flow, what we forecasted, this will be even higher than today. I think we are not 100% clear at the end of the day of if all of it will be dividend or if we will do some further share buybacks. I think this has to be decided in the future.
I think this is very important, the business growth combined with a higher shareholder return is what we've promised further for the future. I think we are really optimistic to deliver it. Also from my point of view, from financial point of view, I'm very optimistic that it will be possible to realize what we promise here or what we forecast here. Therefore, I would give back to the operator to start the Q&A on this ambition.
Thank you. We will now start the Q&A session for the Mid-term Ambition 2025. If you have a question for our speakers, please dial 0 and one on your telephone keypad now to enter the queue. Once your name has been announced, you can ask the question. If you find your question is answered before it's your turn to speak, you can dial 0 and two to cancel your question. If you're using speaker equipment today, please lift the handset before making a selection. One moment please for the first question. We have the first question. It's from Ulrich Rathe, Jefferies. The line is now open for you.
Yeah. Thank you. I'd like to start with three questions on the operational model more than the financial. The first one is freenet is a very commercial organization. Arguably, the single-minded focus on closing the sale drives the success. A shift towards compound margin per customer also means spending more time on low-margin products to keep high-value customers happy. How does this work in practice with the salespeople who are, you know, quite incentivized to close the deal when they suddenly have to sort of deal with low-margin stuff just because a high-value customer walked into the store? Second question is smart pricing. I mean, there's a fundamental issue here that it starts a bit of a cat-and-mouse game.
Customers, once they become aware that there are different prices available to different customers, they will cotton on to the idea. They will try to sort of get the lower prices, of course. How do you view that? My last question is the internet business that you want to start. Is that simply a reseller model in the mold of the current service provider model in mobile, so customer ownership, resale margin, but no technical infrastructure, or is there anything else in business there? Thank you.
Okay. A simple answer on the internet, it's our own cost and our own expenses, so it's a typically wholesale model. So we have full customer ownership. On the second question, I do not see. Fact is that this, the key parts of the offer are not transparent to the individual. When we do include a purchasing power of a certain location or of a certain individual in an offering, then it's basically an offer that we give you individually on the touch points that we control. And that is embedded into a full set of elements. So it might be hardware activation fee, tariff change, treatment of your other contracts, et cetera.
It's not like these offers are, you're paying $10, but new customers pay $5. This is not transparent, and part of the smart pricing is to keep it intransparent to the individual. The first one, I'm not sure I got, honestly, I got your concept or your concern. If I include customer lifetime value in my judgment, for example. I mean, day-to-day life this, now November, December, we have a certain flexibility on where and how to generate the necessary gross adds and renewals for the last eight weeks of this year. The team needs to take a decision whether we're gonna push online or offline, whether we push internal channels versus externals.
Do we want to take advantage of the heavy seasonality in MSD, yes or no? Do we include iPhone 13 into the offering or we leave it or we limit it only to go to real demand versus we put it at the front door as one of our core offers. If I put these things need to be reflected in customer lifetime optimization. It's not about mixing low margin and high margin, it's about a deeper understanding on long-term contribution of an individual and treating it accordingly. If I understand that I acquire a customer, and I can predict that this customer will most likely never, ever accept a cross-sell offer.
If this is the case, then I cannot spend the same amount on a customer, whereas on a customer that is highly likely to take TV on top, to take internet on top, to purchase accessories with our shops. Yeah. I think that is understanding the consumer, and this is database marketing at its best. Not losing margin, but increasing the share of wallet, increasing the overall margin on the individual without sacrificing the short-term and periodically gains.
Thank you.
The next question is by Joshua Mills, BNP Paribas Exane. Your line is now open for you.
Hi, guys. Thank you for taking the questions. I thought I'd start just by talking about the main business, the telecommunications aspect, and then perhaps if there's time later, go on to the TV. On the mobile communications ambitions, my first question is can you give us, if possible, more detail on your current reseller contract? We'd really love to know, as part of the customer acquisition, the kind of average duration, the visibility you have on commission terms and volume commitments from your three main mobile providers. Just to clarify, is the guidance you're giving on the mobile core business for modest growth based on contracts you have visibility out to on 2025 or are you assuming that terms both with DT, Vodafone and Telefónica plus economy will stay the same?
That's a kinda long-winded first question on, can you give us some more detail around mobile. The second question on broadband, the EUR 15 million-EUR 25 million EBITDA target. It'd be great to get an understanding of what kind of market share ambition and EBITDA margin pricing, et cetera, et cetera, lies behind that calculation, as I'm sure you've done the math. Then finally, I think earlier in the deck, there's a slide that talks about 1&1 as an untapped potential in mobile reseller. Have you had active discussions with them? Are you in active discussions with them about becoming a reseller? Or is this simply highlighted as a potential opportunity which may or may not materialize? Thanks very much.
Yeah, thank you for the question. Last one, we are in conversation with United Internet, 1&1, on the topic. We do not have a contract yet, but we have expression from both sides that both interested in getting into an agreement. Since their own network will only be available, whatever, 12 or 14 months from now, and it will take a little time to give us enough uptake. I'm very sure that we will find an agreement to work together in a typical service provider model. On the network operator contracts, I mean, we cannot disclose the details of these contracts for obvious reasons.
In our five-year outlook, we have taken all the knowledge and all the experience from the past 28 years. In general, we have anticipated that the overall setup will remain the same, which means very much of a typical MVNO model with Telefónica, more a service provider model remaining on Vodafone and DT. We have certainly done our projections and trajectories on overall revenue per network, gross adds, net adds, and customer base per net add, and we have deployed historic numbers in terms of margins, et cetera. We do not anticipate, and we have no reason to anticipate material changes to the current contracts and to the current agreements.
We have deployed the necessary conservatism on the numbers because we also know that things could change, but we feel super comfortable with the setup, and the five-year plan includes scenario planning for either of the three. On the freenet Internet side, at the EUR 15 million-EUR 25 million, there is a full set of numbers per access technology behind it. There's also an assumption on ARPUs behind it. There is also a detailed setup of terms that we will offer to the end consumer, and that might be. I wouldn't call it disruptive, but might be different from what is currently available.
I have to ask for your patience because we do not want to disclose the USP and the pricing at this stage, neither to you nor to the market in order to protect our opportunity there.
Great. Thank you.
The next question is by Martin Hammerschmidt, Citi. The line is now open for you.
Yeah, thank you. On the agreement with Dieter Bohlen, I mean, just to get a better understanding, what is your ultimate goal here? Is it trying to get postpaid net adds up? Is it trying to unify the whole sort of product under in the freenet ecosystem? Is it focusing on accelerating waipu.tv? I'm just trying to understand what he brings to the table, and what your expectations are for the partnership. On the waipu.tv, and previously you have mentioned that you're still waiting sort of for this hockey stick growth to come through. Is that hockey stick growth backed into your ambition, or is that ambition based on more of a linear growth profile? Thank you.
Yeah, the later questions are always the easier ones to answer. No, the projection is based on the linear model which we have shown on the page, for the simple reason that we are more believing in the hockey stick or in the exponential growth, but the question is when is the starting point? Projection numbers are based on the linear scenario. The proposition with the Dieter Bohlen campaign is that all the research shows that the legacy of our so and so many brands, the legacy of the merger back then between debitel and mobilcom, has created a lot of friction in our brand communication.
For years and years, I was thinking about how to, how can we establish a knowledge that these brands all belong to one group? How can we put freenet as the core sending brand into the middle? The Dieter Bohlen engagement and the Dieter Bohlen campaign is exactly made to deliver on that goal. We have seen over the first six weeks, we've seen that unprompted awareness of the brand, prompted recognition of the brand already is increasing. The understanding that freenet is providing mobile services, internet services, and TV entertainment has grown extremely in its perception and knowledge. These things work really well together.
At the end of the day, we hope that people understand that, whenever they go into freenet, be it a physical shop or be it the online presence, this is the home of waipu, this is the home of freenet TV, this is the home of the former mobilcom-debitel, now MegaTarife, and this is the home of klarmobil. The entire campaign is set up to deliver that, and as I said, the first six weeks and the very, very first measurement shows that it works perfectly well for that. We have a running contract with Dieter Bohlen to create new advertising up until the end of August next year, and that we can use produced advertising longer, up to the end of 2022.
There's also an option to prolong the contract, but it's way too early to say. The next detailed measurement on the performance, qualitative as well as quantitative, it's gonna happen in January, and then we will do a first review and the first reiteration of the campaign.
The next question is by Usman Ghazi, Berenberg. The line is now open for you.
Hi, gentlemen. Thank you for taking my question. I just wanted to make sure if you can hear me first.
Yes.
Great. Thank you. If you can bear with me, I've got four or five questions here, so, you know, I'll just... I wanted to start first with mobile. In your projections of the EBITDA increase, could you indicate, you know, what kind of customer growth and/or captive channel penetration is assumed in order, you know, for you to be able to deliver growth in the core mobile business? That was the first question. The second question was on the freenet kind of TV business, so you know, your business excluding waipu.
I mean, in that business, if I look at the financials today, you know, you've got roughly EUR 90 million of EBITDA, you've got EUR 16 million of leases, so you know, the net contribution to EBIT actually is around EUR 30 million from that business. But we know that, you know, the subscriber base of freenet TV is gonna be coming down, so this is, you know, you've mentioned that you'll be looking to migrate those onto either 5G broadcast or IPTV. So I just wanted to understand, you know, what the outlook for the lease payments of roughly EUR 60 million is gonna be. I mean, can we assume that those come down, because your dependency on, you know, on this infrastructure comes down over time?
Will it take until the last customer has been migrated for those lease payments to be out of the equation? That was the second question. The third question is going to the fixed internet EBITDA contribution that you have. You mentioned that, you know, you will launch in 2022. Sorry, launch in 2023. Infrastructure will be in place by 2022. But are these contracts signed already or, you know, do you expect the contracts to be signed next year, and if so, is there any risk attached to that? That brings me to my final question, and I apologize to the listener.
In your overall group guidance, for the cash flow increase related to the EBITDA increase, I mean, obviously, it's a strong projection that you're putting out, but I'm just surprised that it's not a bit stronger because obviously EBITDA increase is coming through roughly, you know, EUR 90 million plus. You know, I guess the tax payments are gonna be fairly low in this period, given you have the tax asset. Interest payments are going to be, you know, stable to down, given, you know, the leverage is low and your interest costs are low and there's a bit of deleveraging happening as well. Less CapEx is going up, you know, to deliver some of this growth.
I guess the drop. I would have expected it to be higher on free cash flow from the EBITDA increase. Any kind of color on that would be great. Thank you.
Yeah. Okay. Usman, thank you for your questions. I think I start with your first one about the customer growth in mobile. All in, what we forecast here is a development comparable to what we saw in the last quarters. It's a slight increase per quarter. I think we see the saturated market, but we still think that an increase of up to 100,000 per year here on the net add side is possible. Definitely it will be mixed between SIM-only, bundled contracts and also app-based tariffs are what we sell. The profitability, I think we have in the bundled business, we have different profitabilities of tariffs, and in all other ways, we do also have different profitabilities.
We mixed it all in, but at the end of the day, I would say it does not make a big difference if at the end of the day I have 20% from no-frills or if I have 40%, because the profitability in the average is not that different. We did a deep and concrete calculation on this. I think at the end of the day, it does not make a real difference in terms of EBITDA if I do more SIM-only or if I do more bundled business. On the TV side, I think the lease payments, you are correct. It's something around EUR 60 million at the moment. I do not think that we will see any changes in the following years here.
Our calculation is based on stable pricing. We have long-term contracts here with telecom, and I do not expect, and we do not expect in our projection any changes here. On the fixed Internet side, yes, we already or we are just starting with some LTE 4G offers here in this arena. We did some reselling during the former years already. Therefore, we also have a good base of calculating the business and calculating volume. I think as Christoph described, the method to get the customers will be different and the structure of the tariffs will be different. This may help to get even more customers further on.
I think what we did here is that we started already or we are just starting, but it is on a very, very low level. What we see is a lot of reselling in this area and therefore, and this is what we do for years now, but I think the big improvement is that we switch from reselling to customer ownership, and I think this is very important. You asked about the cash flow in the long-term forecast, if I understood it correct. Yes, you are correct. I do not see, for example, an increase in interest.
Yes, there will be an increase in taxes because we will create more profit and then the tax rate, the tax will be higher, not the tax rate, only the tax payment will be higher. On the working capital side, I think we will need more money. It's a question of how many routers we need, for example, for the internet business. Then it's a question how the hardware business or the. Anyway we'll develop what we need for a digital lifestyle in working capital or in inventories. What we calculated is that there will be definitely an increase in the following year. I think this is typical. If you increase your business, you increase your working capital need. On the CapEx side-
I think, yes, it will. We will stay on an asset light basis, but there will be additional CapEx payments for all segments. For example, for the digital radio, we already did some investments, but there are ongoing CapEx. For example, for the IPTV business, we have. It's a flexible figure, what we do have in CapEx, but the more customers we have, the higher the CapEx is. It is not a big amount, but there will be an increase. All in, I would say, and this is what I tried to say when I discussed the cash flow outlook. From my point of view, it is conservative as we took the base. What we see in reality, we forecast it for the future.
What we said is, at the moment, the EBITDA is doubling the free cash flow, and therefore we said the same measure would work for the future. It is conservative. There are some chances that it would get even better. For now, as we have some uncertainties here, we just did it this way.
Uh,
Thank you very much. Yeah. Sorry, can I just ask a follow-up? On the fixed internet side of things, so just wanted to ask, have the contracts with Deutsche-
Yeah.
Vodafone, are they in place or not?
Yeah. Well, there is for the regular DSL a contract in place. There is a kind of like a pre-contract conversation on cable, and there is ongoing talks on FTTH, satellite, et cetera. But for the launch in 2022, the contract are signed.
Okay. Thank you.
The next question is by Ulrich Rathe, Jefferies. The line is now open for you.
Yeah, thank you. I just broke it up a little bit. Just if you look at your differentiation, your point of differentiation versus the rest of the market, I have two questions. The first one would be, why do you think in your mobile core business, the network operators couldn't follow suit or even outpace you? Is it that they on the retail basis, I'm not talking about the wholesale relationships that were asked about earlier. So the retail basis, is it because they don't understand it, they cannot execute it or because they have fundamentally conflicting goals? If you can't comment on that.
The second question is, you highlighted on one of your first slides that the key differentiation that you seek to provide is being impartial and independent. But there is, of course, this slightly cynical view on what freenet is, that it's just a sales organization following incentives set by the mobile network operators. Sorry if that sort of sounds a bit blunt here, but it is sometimes how freenet is discussed. How would you address that, you know, apparent conflict between appearing to customers impartial and independent and offering everything, but in reality, you're just going after the money as it's being offered by the MNOs at any point in time? Thank you.
I mean, on the first one, I think the network operators have boundaries such as huge organizations in their own shop chains. They have, compared to us, most likely a much higher personnel cost, SG&A costs, et cetera. I'm not talking about the network as such. I'm talking and spectrum costs. I think they are bigger operations with all the difficulties of bigger operations, long-term obligations, works council, et cetera. I think we are just smaller, leaner, and therefore faster. We are more flexible with third-party retailers, and we are faster in adapting, whatever its technology, its offerings, and so on and so forth.
Whereas on the other hand, if the big companies, I mean, if they decided for a direction, you can't stop them. I think it's the old game of being David against Goliaths. Smart, small, lean, mean, clean versus big, heavy, but very sustainable. I think just there's room for both in the market. The second one, yes, I think that is valid, but that is valid in a period of growth. Because in a period of more growth in the market, fewer sales, fewer gross intake is the driving force. Nowadays it's about share of wallet, it's about understanding the customer, it's about giving them the right choice. It's about an intelligent pricing per segment.
No doubt, Telecom has a heavy and very loyal footprint in premium customers, in customers that are happy and ready to pay a lot more than ours are. I would compare it with any other business. Mercedes-Benz cannot only sell the S-Class. There is room for the VW Golf as well as for the Dacia Logan. I think we've just found our place in the mass market spectrum, and this must not be, and this goes for any other industry as well, this must not be, in terms of profitability and margin, must not be weaker. It's just a different segment. Deutsche Telekom is going for their conversion product. They have still a huge fixed network footprint. They have subscribers that they're constantly paying 20 EUR for fixed network, even not using it.
They have a huge base in SMEs and companies, large companies. They have a widespread offering and a widespread focus, and we're taking just a small piece out of it. We are addressing 10% of the market, and we're very happy with not addressing the other 90.
Thank you very much. If I can add one. Tim, stop me if that. If too many people are on the call.
No, it's fine.
A lot of the earlier questions, or quite a few of the earlier questions, sort of have an underlying question there that hasn't been explicitly asked yet, which is, ultimately, you as freenet management don't know how the mobile network operators will approach the wholesale business. So how can you talk about an EBITDA in 2025? Deutsche Telekom, Vodafone might just turn around and decide that it's not worth to deal with freenet. I think that's sort of the underlying undercurrent there. Could you summarize the factors that give you confidence that the fundamental business model will continue to work? And in particular, can you comment on any specific statements of regulatory support in this respect? Thank you very much.
Yeah. Thanks for speaking up and giving us the chance to lay it out. I mean, we have seen an auction on the 5G frequencies, and in that auction, they have the obligation to work with us and the obligation to give us access on any level of the technology is written in the preconditions, and it is an obligation. The thing that's not written down is what this obligation means in terms of amounts, in terms of margins. We also have a long-lasting relationship giving us a certain level of margins. There is a legal framework based on contracts, based on repetitive attitude that gives us the freedom to anticipate and to project a similar level for the future.
There are obviously also legal disputes with the network operators every now and then. There is also hearings with the regulator. From some of the rulings of the regulator or some courts, the same as from the day-to-day life and work with the network operators, we consider this relationship, at the end of the day, as a beneficial one for both ends. Honestly, I know that there is always this doubt and this questioning of it, but I'm not spending more than a day a year in thinking about that topic. It's... If this was a super unprofitable relationship for the operators, they wouldn't do it. I think if we go bottom line, it is a quite beneficial and quite profitable relationship.
We also are kind of the existing challenger for their internal organizations. I've said that before. If I was the CEO or whatever of any of the other, I would love to have a constant best practice to compare with. There is not much more to the answer, but the regulation seems fair to us. The rules are set and are in favor of this kind of competition in the German market. There are rulings, some of them are public, some are not public, even in 2021, where courts have decided to give access to ourselves and to others into the networks of the operators.
By definition, if I was an operator, I would not admit it, and I would not state it the way I state it. In fact, I don't see an ongoing conflict. It's the opposite. I see a constructive, common work on the market.
Thank you very much.
The next question is by Joshua Mills, BNP Paribas Exane. The line is now open for you.
Thanks, guys. I'm going to just pick up on that last question, again then. I guess over the last few years, your EBITDA margin on service revenues hovered around in the low 20% or so. I think when you were describing the points, just now, you made it clear that you've got legal rulings, legal disputes in the past that you've won about access. My question is, have you ever or recently had a legal dispute about margins? If this were to go to court, and let's say that the MNOs were to cut you out completely, which I agree is unlikely, but let's say that did happen, what margin do you think the regulator would allow you to deliver, and how would that compare to the 22%? That's the first question.
The second is just on waipu.tv. Just love a bit more detail on a couple of points. Firstly, what is the absolute level of EBITDA today? Just so we can calculate what the growth you are targeting implies. Perhaps if you could give us a split of the fixed and variable costs, because I think the economics of waipu.tv and how the revenue drops through to EBITDA has been difficult to work out in the past given the start-up costs. Just love to kind of understand what the longer term EBITDA margin on this business will be when we put it through our model. Thanks very much.
Okay, on the first one, we haven't had a legal dispute on conditions so far. Whenever we got close to it, we found a way to do it on a contractual level. I think this is a fair response. On waipu.tv, ARPU is around EUR 7. There is a variable cost. They consist of technically transmission cost plus content cost, plus other servicing costs, customer care, billing, et cetera. I think these would be around 40%, closer 50% of the current ARPU level.
Mm-hmm.
There is about a fixed cost related to around 60 FTEs. We do not believe that the 60 FTEs would dramatically change if this was double the size because it's technology, it's IT, it's customer care. There's little customer care, there's product management. Whether they serve 1 million, 2 million or 500,000 customers is making no big difference. Out of that, you can model it. We are currently very disciplined in marketing. We spend. We have a spending limit on the individual customer. Once again, I will not disclose it, but we make sure that any of the customers is profitable within its lifetime.
We expect this business to scale up because of the low fixed cost going against the revenue. All other costs are variable. There are some of them, such as technical costs, transmission costs, are also decreasing with volume. The thing that is one-to-one variable is the content cost.
I think whenever, Josh, you start to model it, I think you could also ask him, and he can give you some additional hints to make it easier for you. You asked about the EBITDA, which is the base. This year it will be something like EUR 5 million.
That's really helpful. Just to follow up on that first comment. You got close to having these discussions or legal disputes on margins. I'm aware that there were some discussions and disputes which nearly went to court in the late 2000s. Have there been more recent events than that? Have there been any legal disputes say in the last couple of years on the margin contribution between you and the MNOs? Thanks.
Yes, there have been court rulings also within the last 18 months. The majority, not to say 100%, were in our favor.
Great. Thank you.
The next question is by Usman Ghazi. The line is now open for you.
Hi, thank you for the opportunity again. Just two additional ones, please. First on waipu.tv. You know, we've seen Netflix starting to get into video games now. I mean, does this give you an opportunity to broaden the offering beyond just content and into beyond the TV content and into games as an upselling opportunity? Or has that been factored in at all in your current projections? The second question is just on the realignment of sales and the organization to you know, towards smart pricing and looking at customer lifetime value. I mean, has the kind of change on incentives and organizational structure, has this been done already or is this to be implemented over the coming quarters? Thanks.
Yeah. Thanks, Usman. The first one, no, we are not intending to expand the waipu.tv offering beyond moving images or moving pictures, games and the like. We do not see a proper scalable business model as of today. I'm not saying we won't find it, but we are not preparing it, and we don't think that this is, relative to other opportunities, would be the right area to invest capacity and competence. What was the second question again?
Organization.
Oh, this one.
The organization.
Yeah. The organization physically and from reporting lines and also has now been implemented. It took us, unfortunately, a bit longer to find an agreement with all the relevant internal authorities than we thought. It's now in place from October. It's up and running now from first of November. The entire incentive scheme and the KPIs cannot be changed during this year because people have contracts and we need to follow the existing agreements. We are working on setting it up so that from the first of January, goal setting and incentive schemes will be according to the new system.
There are no further questions for the moment, and so I hand back to Christoph Vilanek.
Well, thanks a lot, gentlemen, for being patient and staying with us for two and a half hours. As Ingo said, I'm sure that, aside from giving you a lot of details and information, we have also created a lot of new questions. Please feel free to get in touch with our team in order to facilitate a proper conversation and more detailed insight and understanding of our projections. We've decided to go into that detail and into that midterm 25 perspective, I think two or three months ago. I can assure you that we have anticipated a lot of what you've questioned today and you are about to question in the next couple of weeks.
We're happy to take the opportunity and the challenge to discuss that with you. Once again, thanks for joining and thanks for your time. Goodbye.
Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect.