Earnings Call: Q3 2020

Nov 6, 2020

Thanks, everybody, for joining on this Friday morning foggy Friday morning in Hamburg for our presentation on Q3 and year to date results. I'm jumping into it because I'm sure that you have all already read our publications. Overall, we are very happy with the year to date results. Subscriber base in total is still growing. We go into some details later on. EBITDA is plus €3,400,000 compared to the previous year, and free cash flow with €220,000,000 is also performing very well. That's a growth of almost 10% compared to the previous year. Ingo Arnold will explain a little later what our projections are for the rest of the year and what opportunities we might take out of the positive free cash flow. Going into more detail, and some of you have already commented it, I think postpaid worked really well with relatively good growth, a continuous growth for a lot of quarters. Meanwhile, the business is working really well. They we have adopted the channel mix towards more towards online and direct as a not only as a result of the new normal situation, but also on purpose and it is a the result of an ongoing management proper management of the channel mix. We have added here Funk and Flex, the pure ad based tariff plans. We keep it separate for the moment. You see also there, we are still growing. Investing here in marketing so far. This is really word-of-mouth and the pure success of the product model. Waipu TV compared to previous year, significant growth. We have told you that in Q3, we do not expect any growth there. So I think the small 1% growth is a confirmation of the success of the product. Still, there were no real interesting events on TV. Freenet TV is certainly a little bit the a bit disappointing also to us from a pure RGU perspective. But when we when you do sensitivity on the new price tag, you will join our thought that the this will over will be overcompensated by revenue and specifically by the margin growth. So we have expected some of this churn, and I'll come back in a second again. Some of what I said is listed on Page six of this presentation, what were the key topics and the key achievements of these past three months. I think the corona limitations were hitting us in the early days or March. We have soon and fast adopted to the situation. We've told you that even April, onethree of our shops were still open. We have changed some of the opening hours. We have combined our outbound activities on telephone with the new shop system. We have set up a number of initiatives to still use the shops as a primary contact point for those customers who are starving for this kind of methodology, and we continue to do so. Preenet Flex was launched once again a tariff plan, which is pure F based. The tremendous thing is that the entire very painful and difficult customer journey in Germany with entry of private data, ID data, copying ID, etcetera, etcetera, is bypassed in that product. And we see that adoption rate and promote net promoter score on these products are really great. We have signed after a long, long discussion and specifically a long, long technical process. We have we can now start to put Netflix as a co subscription for WIPO as well as the product portfolio in mobile. And last but not least, Gravis with a very strong year 2020 is now assigned to be an Apple education partner. On TV and Media, well, the launch of WIPO and the combination bundles with Netflix is certainly a breakthrough also in the perception of our competitors and very much so from the German channels. I think that was a really great deal in by all means. And we've started and launched on October 3, so the German national holiday, the second so called national multiplex on digital audio broadcast. We are now bringing in the first couple of channels, which are our own, and we have four partners that have already launched their channels and are now available nationwide. On group level, and Ingo will talk about some details on it, I think we are very happy that I think next week, is the new EGM of Sunrise and UPC. We do the proper handover. This all worked really well. We will get the money very soon and then have the respected inflow of almost EUR 1,100,000,000.0. And respectively, we have already started prior to this the share buyback as a compensation for the non payout of our dividend for 2019. For the, I would say, a discussion intense discussion with you, we have tried to give more transparency and more insight into our channel mix and into our multichannel strategy. On Page seven, you see that we are split it in the gross adds and the renewal. You see that in gross adds, the retail with 43.6% is by far more important than on the renewals. The driving force here is our partnership with MediaMarktSaturn, which is incorporated and their share on renewals is really low. These renewals are all done directly with a non retail, so not in a brick and mortar location. Why do we believe into this multichannel strategy at the can you do we know whether we're still here? Still heard. Okay. I'm just I was just told that this was only a strange noise in our phone here. So what is what about non retail and the all kind of direct channels? I mean, the amazing thing is that we can optimize, change the campaigns, change pricing, test pricing, test combinations, all these things on a basically real time daily basis. The majority of this optimization is system based with our based on our business intelligence knowledge, and it's AI driven. So we can adopt to any competition, to any short term opportunity really fast, really close. And this is the big advantage of direct to consumer activities. By the way, we include here that also our partner MSH, somedasatone, is meanwhile contributing a significant part of their gross adds also through their direct channels to their websites and through their apps. So the good thing is that you're very fast. Unfortunately, where there's always the other side of the same coin, in this field you have way more competition, there's high transparency, and our competitors, you name them, Vodafone, DTAG, Telefonica, United, they have basically the same toolset. So it's a constant rush to work against your direct competition. You try to outsmart them, obviously, but it's very transparent, and this is also why the online channel is not always really cheaper. What is the big advantage in the USP of retail of brick and mortar? This is transactions and interactions on a with a high human element. It's typically based on relationship. And this relationship creates the opportunity for upselling, be it warranty extensions, be it insurances, be it any of our digital lifestyle options. These things work way better way better on with the human interaction. I think we've all experienced this. Most likely, we are all customers of Amazon. But we tend to order three items a day with Amazon one by one, not taking into consideration that you get three packages, that there is three times postage handling, there is three times all this. And even though Amazon is certainly the world expert in dynamic pricing and all these elements, still their cross selling is very weak. And I think we all experience it. So there is a certain proportion of individuals that prefer the human interaction, and our concept of local hero stores really works out well. So the conversion in these elements of upselling and cross selling and detachment rate is super high. And this is why if you continue to do so, successfully upsell to the core product, then retail remains a profitable and very important channel. The second perspective that we take on our daily channel split is that we differentiate between captive channels and non captive. So how much of those interactions do we have to pay third party and how many of those transactions are not in full control? On this page, you can see that the total amount of renewals and gross adds is handled by the EDITAP 39% plus 31% are handled via channels that we are in full control and we can handle in full control. And the same goes for the TV segment, where only 20% of the transactions are handed purely by third party, where we cannot influence the entire customer experience, the entire customer journey. So this is an overall trajectory which we want to continue, and we think this is the most important part of the strategy to get into the full control, to deeply understand the customer journey, to optimize the click path, etcetera, etcetera, as well as to individually talk to the customers and to review how they enjoyed or not enjoyed the interaction. On Page nine, we continue with VincenzFlex. I mean these are the perfect example of this direct interaction. There is no intermediate selling these products. It's just our own team that runs the media campaigns, the social media campaigns, etcetera, etcetera. FRANK was, as you may remember might remember, the first product in Germany with an unlimited daily data and an unlimited and a tariff plan, which you could pay on a daily basis and pause within the month at a certain limit. Based on this new architecture, we have implemented FLEX. FLEX is back again to the typical and very well established monthly contracts. People can cancel it every other month. We offer it as a difference to FUNK on the Vodafone premium network in three versions, five, ten and fifteen gigabytes. We have listed here the conversion, 50% is the five gigabyte plan, 30 is the 10 gigabyte and 20% goes up to the high volume 15 gigabyte. We have on top of the social media campaigning and the word-of-mouth activities, we have done a combined TV campaign for freenet TV and freenet Flex to test this. We have well, learned that the combination is difficult to understand, and the impact of this specifically on FLEX is not a very high one. But I think it's still an important step that we kind of reunite majority of our products under the Freenet brand, and we will continue to do so. As I said in the beginning, and we have not trying to hide this also in our corporate news, the FreeNet TV, Page 10, FreeNet TV RGUs are going down. Those of you that have joined the half year call will remember that we have predicted this is going down. On the one hand, there is an effect this amounts a total of minus 14,000. It is the former satellite customers, which run out of service. So but there is still another around 50,000 of the pure terrestrial customers that have gone away. We have called all these customers or the majority of these customers or sent them an email to learn what is the reason why. It it we have learned that the the the bigger part of it came out of the voucher customers, and these people said, well, I've had the voucher and not but we have we did not we the majority of our hours in front of the TV is not on the private channels, not on the extra services that you provide. I think there is things like RTL not continuing to show the Formula One and some and no specific events and so on and so forth. So people say, well, it's not worth paying €7 for the minimum hours that I watch the private TV. So I I would I would would argue that it's not about the the price as such, it's about the benefit and the price value situation that lead to this. We think that and by the October, it shows the direction that we will, at the turn of the year, go somewhere in the range of €900,000 When we decided for the price increase, we have a 20% price increase, and we have expected a churn of 5% to 6%. Meanwhile, it looks more that it's going to be 10%. But on the equation, you will easily do the math that it's still a profitable and accretive move with the price increase, and it also shows and demonstrates to us that we might do another one anywhere next year or the year after. Going to next page on waipu.tv. As I said, there's only 1% gain of new customer net adds in the third quarter. I think I was positive that we have even created some net adds. This was highly expected if I look at the recent numbers that I have seen this morning on the third quarter, we are very much going towards the €550,000,000 I'm sure that by the end of the year, we will be able to report these numbers to you. There is some nice topics, which I've explained to you before and mentioned. Also in Waipu, we are trying to raise prices. Perfect Plus is going up. We typically add a couple of new features or a couple of new channels in parallel with price increases. Certainly, we also have now to experience what the price elasticity and the price sensitivity of our customers are. But once again, we are positive, and we have once again done the same logic. We have raised the prices and incorporated into our business simulation a certain level of churn. But still, as I said, we are expecting a $550,000,000 by the end of the year. What is the outlook for the fourth quarter? We are middle of the fourth quarter. We don't see significant changes in the market, no real price pressure. By the way, we will start five gs our own five gs offerings early in 2021. If we look at the market, there is a very slow adoption of five gs. The iPhone 12 is not bought for five gs, but because it's iPhone 12. And the demand on a private consumer level is super low, not to say nonexistent. Think different from the big networks that provide their services also to big corporations that have internal usage for five gs. It is not an end consumer product as such. In our research also showed that the majority of consumers do not understand the difference anyway. So we still expect further net adds growth in the subscriber base. And Gravis has started their Christmas business already early October. Apple margins are not tremendously high, but we see that there is no downturn from the second light shutdown in Germany so far. On TV and Media, I will not repeat the numbers. On a group level, we confirm the guidance and the completion of the Sunrise transaction is now becoming real. Having said that, I'd like to hand over to Ingo Arnold to go through the financial part of his presentation. Yes. Thank you, Christophe. Good morning, everybody, also from my side. I start on Page 13 with the overview of the group financials. I'm very happy that we have such a strong EBITDA development in the first nine months of the year. The revenue was relatively stable. The gross profit, slightly down. But all in, only 1.1% decrease. And the EBITDA was 3.7% up in this in a year where we had the crisis. So I think, again, we show that we are very resilient to such a crisis and that our business model is very strong. Moving to the mobile segment on Page 14. Here, definitely, what you can see is that there is no impact visible from COVID-nineteen and from the situation here. The revenue is very, very stable compared to last year. The gross profit is down by something like EUR 13,000,000 in the first month period. I think we already explained all the reasons to you in the last call. But I think the main reason was in the first quarter that there was an extraordinary hardware bonus in Q1 twenty nineteen, which was something like EUR 6,000,000. And then we had some effects in the second and the third quarter from roaming, from lower usage and also from the regulatory effect from the mobile number portability, what we saw there. But I think what we also showed is that with a lot of efficiency measures, most of them are recurring. And with implementing these measures, it was possible to overcompensate the loss in the gross profit and to show a very, very positive EBITDA development here in the mobile business. This is based on the figures on Page 15. Christoph already talked you through the increase of the customer base of the postpaid customer base. So this year, we gained something like 102,000 customers already, and this is much, much better in comparison to 2019. So I think we have a good base here also for 2021 to increase the service revenues on this base. Because what you can also see is that the ARPU is stabilizing again. I think there were some roaming effects, which are not profit relevant for us. But there were these roaming effects, especially during the travel season. The travel activities were much, much lower because of COVID-nineteen. But we see that the effect in the third quarter was even smaller. And so all in, I would say we are on a stable ARPU level. Digital Lifestyle revenues, slightly up as expected at the beginning of the year. Moving to the Media segment. I think what we see here, what is important, and we have had a lot of discussions about it in the past is that when you were criticizing that the contribution to the group EBITDA would be too small, I think what we see now is that we already have in the first three quarters, we generated an EBITDA of EUR 64,000,000. And if you put this into connection to what we received during the whole year, you see that it's getting more and more important here for us as a group. Moving to Page 17, you see that mainly Exerring is contributing to the increase in the gross profit and in the EBITDA of the TV and Media segment. This is based on the growing number of subscribers for sure. And think it's we are happy that since May, we only see positive EBITDA contributions month by month from AXA Ring. And therefore, I think we already forecasted it. What do expect for next year is definitely a positive all year result from XERING. Looking into the figures of Media Broadcast, you see that, yes, we saw the RGU slightly decreasing during the last quarter, but we do also see on the back of the price increase that it was possible to increase our EBITDA and our gross profit further. So it is a very successful story here on the B2C business. And in the B2B business, the optimization comes together with the start of the digital radio, the next multiplex, which could be started at the October. But also in the third quarter, we were more successful with our digital radio here. Moving to the free cash flow. And, yeah, I do not want to be too optimistic here because we see EUR $220,000,000 here already at the September. Yes, I think this is near to what we guided up to the end of the year. But we have some phasing effects here in the working capital. So definitely, up to the end of the year, we will not stay with only will not stay only with EUR 22,000,000 working capital net working capital change here. There will be some negative effect in the fourth quarter. We still expect some tax payments, but this is based on the authorities. So I'm not sure what will happen, but I expect further payments for the fourth quarter. CapEx, I think we had a third quarter where we invested something like EUR 15,000,000. I think something comparable can be expected also for the fourth quarter because we have still to invest into the Digital Radio business here. And therefore, the CapEx levels in the third and fourth quarter were higher than in the first two quarters here. On the leasing side, I think no surprises. Interest payments slightly lower because the interest rates our loans are getting a little bit lower, especially with the lower leverage. And I think this is the perfect bridge to Page 19, where we see some other main financial KPIs. On the one hand, the equity ratio is now at nearly 230%. So also from this side, you can see that our balance sheet is much more healthy than it was before. But also, if you look into the leverage, we now do have a leverage of 4.3, which is much better than last year. But what we also see is putting into consideration the values of Sunrise and of CECONOMY, then we do only have an adjusted net debt of 1,400,000,000.0 And if you put in addition, put into consideration of 1,000,000,000 of this leverage is linked to leasing contract, then you see that we do have a let me call it a bank leverage or bank financing leverage, which is only something like 0.4. So I think a very healthy balance sheet, what we see now. And yes, there will be a move when the transaction in Switzerland takes place, hopefully, in November. I think there are good signs that it could work very fast. Then it would not only be an adjusted net debt and adjusted leverage, which is so low, but then it will also be the normal leverage, which moves down. Coming to our guidance on page 20. Yes, we already discussed that in the free net TB RGU we had to and we have to or had to change our guidance here from a stable view to a significant decrease. When we published our guidance, it was not clear that we do the price increase, and it was not clear how it would work and what the churn would look like afterwards. Now we have a better view on it, and therefore, we had to change it. But without any impact on the financial guidance. So we still expect a stable revenue without Motion TM. We expect an EBITDA between EUR $415,000,000 and EUR $4.35 And we are very convenient with the free cash flow guidance, which is EUR $235,000,000 to EUR $255,000,000. So this is it from the financial side. So I think all in very good figures. And now I do open the floor for your questions. And the first question received is from Polo Tang of UBS. Your line is now open, sir. Please go ahead. Good morning, everybody. Just have two questions. The first question, is really just can you clarify what's happening with your churn in terms of your postpaid mobile base going into Q4? So has it started to move higher and normalize after the low levels that you saw in Q3? And can you clarify what is happening with your shops? So do they all remain open during the new lockdown or some of them closing? That's the first question. And the second question is really just a bigger picture question on the German mobile market, which is what's your view of what will happen with the fourth mobile network build in Germany? And if it does go ahead, would you be willing to distribute and resell one on one contracts? Yes. Thanks for this. I mean, on realized churn, we have we continuously see that churn intake compared to previous year is lower, and this is started in March and is continuing. So we do not expect this to change to the old version. Once again, that is compared to previous year. If we take a view on free to churn potential, we also see that it's compared to previous years, it's going down as a result of a couple of measures as well as, I would say, a certain fatigue on changing the tariff plan, optimizing themselves. People do have LTE tariffs. They have a data package which is suitable to them. So we see that continuing, which at the same time means that the ratio of renewals and gross adds, the balance is more going towards the renewal. So no change to this. Second question or second part of this question, as of today, all our shops are open. That is the case for mobile competitor shops as well as Gravis, but also our biggest partner, Mediasatone. So far, the German government continues to claim that retail will not be shut down during the next couple of weeks. I there's no reason to disbelief. I think that's working. But at the same time, we we see that the footfall came down in any of the in any of the channels, but the the number of tickets that we do at the cashier is the same. So, obviously, people are not going out to do shopping as an entertainment and do some now and then do some do some spontaneous buy. But those one that have a reason and the purpose to walk the you can generate about the same number of revenues and tickets. So far, we do not expect an impact on transactional level and on revenue level. On United Internet, well, obviously, they are getting under time pressure to provide their services. They're also getting under time pressure to find a proper agreement with Telefonica. We are not really participating in any of this, but we are based on our old long term relationship with United Internet Alliance and Alliance. And we have spoken to them. They we have they have reminded us that, anyway, any of the holders of Frequency, it needs to give access to to us, and we would certainly consider reselling their products. But I think that is still rather far away. Thanks. The next question we received is from Christian Fangmann of HSBC. Your line is now open, sir. Please go ahead. Yes. Good morning. It's Christian. I have three questions. First one is on the very strong Q3 net adds. My question is, how do you see the value mix within that one developing? And is there any color you can share with respect to is more coming from the Vodafone network from the DT network? How are consumers purchasing these days? And is the strong momentum that you have seen in Q3 kind of also staying in place in early Q4? What are you seeing in terms of the mobile net adds? My second question is on free cash flow. Your guidance is $235,000,000 to €255,000,000 You've seen year to date very strong and much better than expected free cash flow development. Is it fair to assume I mean, you mentioned some remarks with respect to working capital and so on in the fourth quarter, cash taxes potentially going up. Is it fair to assume you will be towards the mid- high end of that guidance range for the full year? And my last question would be on the outlook for 2021 with respect to the lower commercial spend and costs that you've seen throughout this year. And you said some of that is structurally still to remain. So maybe can you share a bit of light on what you expect in terms of commercial spend and the underlying spend, which could also positively impact 2021 in terms of the cost base? Thanks. Cost to serve. Yes. Thank you, Christian, for this question. I mean if you look at the detailed numbers, the fact that I mean, there is some of the net adds is coming out of FreeNetflix and FUNK. Flex only started. This is Vodafone. Overall, Vodafone is the strongest partner at this very moment. They we will also start the five gs with Vodafone. So I think they gain internal share as a result of very close interaction cooperation and the high willingness of them because they they see that we basically broaden and widen their their sales platform. I think Deutsche Telekom is a bit more distinctive in in working with us at this very moment that may change again. So, yes, we are we are gaining a bit more in Vodafone. At this, they become more important. And on the other hand, we have we are we have gained a couple of thousands more than we did before when we signed a a closer nonexclusive, but a closer midterm agreement with Check24, which is a price comparison machine on the Internet. So I think if we look at the value mix, well, on the one hand, we have the premium network Vodafone, which we where we can attack with flex and so on and so forth. But since it's SIM only not on a on a on a reasonable price level, but not premium. And at the same time, of these gains on the broader level come from Check twenty four. So I would say it's it's maybe stable, but it's or a slight go go down in the ARPU, yeah, which we will not see as 50,000 out of 7,000,000 or 8,000,000 is not making a big difference. But if I look at the deeper numbers on, like, the second and third digit level, I would say ABPU of these new customers is somewhat down compared to the to the base. And on a value contribution level, we still remain to see that we only acquire customers with a positive life cycle within the at least the first round of their contract, and we are even more careful on those ones that can cancel their contracts. I think value wise as well, LCE lifetime contribution wise, we're okay. We stay at the same level, but they're a bit lower on ARPU. If I may, and Ingo, you will certainly continue on this. On the cost base, I think it's hard to say what's going to happen in 2021. We are certainly trying to freeze any of SG and A marketing, etcetera, etcetera, where we were very efficient this year. At the same time, nobody knows then when when kind of the market is opening again, what will be the technical moves of any outcome of of our competitors. And certainly, we prepare to react. There's one element out of the market or completely disappeared, which helped in the previous year and also at the start of this year, at least. On the hardware side, you basically are confronted with a duopoly of Apple and Samsung. So the the, like, five years attacker who who created a bigger competition on Android, driving Samsung opening being open for marketing funds, driving worldwide to really ambitionly gain market share. I mean, that's the momentum which I don't see any replacement of this for 2021. And that, at a certain level, may cause that we have to invest a bit more. So if we look at gross margin, I think there will still be some pressure coming from that end because the hardware industry is not contributing to a growth in the market. Yeah. Maybe I can add from my side. Good morning, Christian. I think, yes, it is definitely our ambition to make some of these efficiencies what we saw during the year to make them recovering. But it is a little bit early to quantify it now because we all know that the world will look a little bit different, hopefully, that we can say after the virus then. And therefore, it's difficult to quantify it, but it is our ambition. On the other hand, coming to your third question, I think it was not really a surprise. And I already prepared the answer during my presentation, as you also mentioned. I think, yes, it looks difficult not to meet the guidance range. This looks difficult if you do only have two twenty million But as I tried to figure out is, we still have some open ends. Therefore, I do not want to narrow the range in this call now. But I'm definitely sure that we will land between $2.35 and $2.55. Okay. Thank you. And the next question received is from Yemi Falana of Goldman Sachs. Your line is now open. Please go ahead. Good morning, everyone. Thanks for taking my question, and congratulations on the quarter. Just one for me on use of proceeds. Could you remind us on your priorities as you receive the Sunrise cash in? Is there an expectation that you regear the group? Also, is fixed wholesale an attractive prospect in your mind? Do you see any attractive m and a opportunities, or is there potentially upside to shareholder return? Any color on that would be great. So maybe I start. I think we already discussed it during our last call. I think we definitely have to repay 800,000,000 of debt. Then there is an amount of EUR 300,000,000 where we have not yet decided how we will use it. But definitely, we would like to do something in the interest of the shareholders. This could be that we I think we have these share buybacks out up to the end of the year. The program is running now. I think this is an opportunity, think we have to discuss internally. And on the other hand, I think the net debt is already relatively low. Maybe short reduction could be reasonable. I think we have not yet decided. But definitely, I think on the M and A side with the opportunities, we do not have a long list at the moment, what we could do. And definitely, we do not have one item on the list, which couldn't be as big as the 300,000,000 are. So I think at the end of the day, I do expect something like a mix, how we will lose the use the 300,000,000. But definitely, we stand to what we told everybody before that when we will create or generate a gain out of the investment of Sunrise, we will let the shareholders participate in it. And let me add a bit a little bit of color on M and A. I mean, if I look at it, fields would we look into? Well, telco in Germany, there is not much to buy. You know? Media, anything around around content, we think that telcos are not good. No experts in content development or content generation. So we should limit ourselves. And then we could look into something like IoT. Well, it's a very fragmented market with some big bets. But once again, we think that we are strong on the distribution and on the sales side on the sales side, but not on the production side. And then the third one, the fourth learning is that if you find profitable companies at a reasonable size, well then the prices are high up. So and the first point is that we certainly want to focus on Germany. So if we look at these three or four things as a filter, then the optional space is rather limited. Things that we are investigating on is e. G. On the on the new multiplex, we have just funded founded with our partner, Oschmann Media Group, a company to sell AdSpace. We have also thought about joining them with two or three or more channels. I think we have some more room to move there. It's not CapEx investment. It's not M and A, but it's maybe a bit more investment into extending our value creation in this field. But I think that's it. As as as as Ingo described, there is but there is maybe a long list of ideas, but there's not a long list or short list of targets. I really appreciate it. Thank you. The next question is from Joshua Miles of Exane. Your line is now open. Please go ahead. There. Thank you very much. Detail you've given us on Slide seven and eight, which is very helpful. My question is how has this share of onlineoffline and also captive versus noncaptive trended over the last year or two years? Just to try and get a sense of, particularly on the captive side, is this kind of a stable split, or is it one that's been changing one way or the other? And then just so I understand, the point you're making here, I believe, on slide seven is that online profitability may be lower given the competition with your competitors, but it's still an important sales channel given the kind of flexibility. Is that the right read of this or not? Would be great to hear. And then the second question just on the EBITDA beat this quarter. So you call out in the press release that overhead costs were down about EUR 6,000,000 this year in the quarter. Could you give us a kind of rough estimate of how much of that is due to things like COVID-nineteen and how much is underlying cost cutting? Just to get a sense of what we should expect the run rate of that cost and therefore, run rate of the EBITDA to be for next year. Yes. Thanks, Joshua. Yes, I mean, the captive as well as the non retail both have grown over the years. I think we've never been very transparent. It is it was always a strong it was always stronger direct than everybody thought. So yes, it has grown, and I think it will continue to grow. But at this level, we are not talking about big chunks. It's like 05%, 1% maybe or maybe two or three maximum per year. But it's the ambition in both in the captive feeling in the captive to do even more. Expect for our main partner, Mediasettoen, we are always very happy when they are strong, and they do a great job. And I think in many of their assortments, they are even a winner coming from the crisis. So yes, we want to continue to do so. But and I think you did the proper reading, yes, I think a balance of these two, the multichannel balance is a strength because we we know how online can become a very tough channel overnight if one or the other player opens his wallet. So I think your reading is perfectly fine. I think to answer the other question, Josias, it's a little bit difficult, to be quite frank here, because what cutting is clearly linked to COVID-nineteen. Yes, it is easy to say where we had a short term work and where we got some money from the government, it's something like EUR 3,000,000. Yes, this is definitely linked to COVID-nineteen. But for example, if I do save some marketing expenses, wouldn't it be possible to do it without COVID-nineteen? Is it only possible because of it? So this is a little bit difficult. I think and this is what we tried to explain earlier. We look into all of these things, and we look into it and make it hard for the next year. So we try we are just in the process of doing our budgeting. And I think at the end of this process, we have a much better view what of it will be recurring and what will be nonrecurring. But it's difficult to say today. I think definitely, is a COVID-nineteen effect, but it's too difficult to quantify. Thanks. That's really clear. Thank you. And the next question we received is from Ulrich Garte of Jefferies. Your line is now open. Please go ahead. Thanks very much. I have four, I think, very short questions. The first one is on the very strong EBITDA in the quarter. Could you confirm that there were no sort of very clear one offs like provision reversals or anything of that sort in there? The second question is on this online, offline, comments that you made that were quite interesting, already been debated so far, could you comment what whether there is a a difference, an ultimate difference in age profiles? In other words, whether that that mix shift essentially just just is an aging thing, and and that that obviously then influences your view on the long term future. I would just like to to touch on aspect of it. My third question is, the share buyback that you mentioned, the €100,000,000 that is progressing very slowly according to the releases you've put out. It sounds like you won't be able to make €100,000,000 with the sort of rate at which you buy. What is holding you back? Is that is that just liquidity? And if it is liquidity, could you comment to what extent that informs your views on on how to return cash to shareholders? Because if the liquidity is low, is it the right thing to sort of look at share buybacks at this point? And then my last question, if I may, the the Treenet TV, you're sort of making a comment that the churn is higher, but still, it's accretive essentially 5% less to revenues than you thought it would be when you planned the move. So that must be a net hit to your earlier business plan. Where have you absorbed this in the full year guidance? Is this stronger bits coming out of TV media elsewhere? Or is that the mobile business? Or is it just the room that you had in the guidance in the first place? Yes. Well, thanks. I mean, on the free net TV, we have to be realistic. The price change was in May and July, so we have only half year effects. Anyway, then these vouchers that now run out and create churn were still vouchers paid a year earlier. So the immediate impact this year is, yes, not that big, I'd say. But Ingo will give more details on the share buyback. Also Ingo will give some comments. I can just say, I mean, the best thing is that the volume is low. And certainly, for the shareholders, share price is low. But for the program, the low share price is certainly something which helps us and also our biggest shareholder is still telling us that he thinks it's the right move and we go the right direction. But I mean, I think we spent so far about EUR 28,000,000, 29,000,000, and it will be hard to spend the 100,000,000, but we still believe that on this share price level, it is the right measurement. On the on offline, well, yes, it would be an easy answer to say that shows that that's the these are the young ones. These are the old ones. No. It's not. It is it's it's a major driver is SIM only versus subsidized combination with hardware. That's one driver. It's different a little bit from the from the where people live. We are traditionally, our shops work really well and are are in smaller cities. And I would even say kind of rural central of rural areas, These kind of people, whether they are old or young, still are more traditional and they remain to be traditional. So I think in midterm, I believe, and once again, mentioned Mediasatron where, you know, we are shareholder and we are in very deep discussions about how retail overall will work out. We see that the the shopping centers suffer most from from the corona situation, and the shopping centers also suffer because their social demographics is widespread age wise, but spending power is is rather low. We do not hold the shops only if very few ones on the real expensive high street where the mix is tend tends to be younger than in the small countries small counties. So overall, my projection would for the next be for the next three to five years, this will remain the same. Retail has a a strong is a strong element. And I think midterm, it's more of a mix. People might come into the shop, buy, and then combine it on the website and do additions. We have for three years now, we have a the possibility for the consumers to set the date or or to ask for a meeting at a set date in the shops. And this is not only used by those that have bought in the shop, but also by the online users when they need some help, etcetera, etcetera. So I think we need to transform the shops into a meeting place, into a place where we can do service, where we can do help desk, etcetera, etcetera. And by having it, we create a interaction and relationship between the the customers and our shop representatives, and then they will take the these upsets and cross sells. So I think it's not so much a matter of demographic, but of the proposition of the shop. And from my side, Ulrich, good morning. I'm not 100% sure if you've got your first question correct. But if I got it correct, I just would like to confirm that there are no extraordinaries in the results. So it is ordinary course of business, what we see here. To your second question, the share buyback. Yes, I think we are also a little bit disappointed that it could not go faster. But I think there's a regulation out. You are not allowed to buy as fast as you want. It is all based on the daily volumes what you see. And therefore, what we do is we just do it in the framework of the rules, and we do as much as what is possible inside these rules. So we do not stop it or we do not reduce the daily volumes. We ask our bank to buy whatever is allowed to do. And it's I think we have onethree of the volume now. And yes, if it goes in this speed, it would be difficult to do the whole program up to the end of the year. But maybe the volumes will increase and then it could go much faster. Your last question concerning free net TV. Yes, we see small impacts on the gross profit side, where we are a little bit lower in comparison to what we budgeted. But on the other side, the marketing spendings are much lower than we expected. And so it is overcompensating the effect that the churn is a little bit higher than we basically expected at the beginning. Thanks very much. Thanks for bearing with me on that many questions. Thank you. And the next question received is from Steve Malcolm of Redburn. Your line is now open, sir. Please go ahead. Yes. Thank you, guys. Thanks for taking the questions. Three, if I can. First of all, thanks very much for Slides seven and eight. They're really helpful and interesting. I just want to go back to those and refer to the comments you made in the sort of the retail, non retail mix. I mean given that, given the shift, given what's happening in COVID, is that making you think more fundamentally about the number of stores that you You know, does it make you think you should have less of those going forward as the mix moves away from retail? So that's that's really question one. Question two is, can you just define exactly what a captive channel is? I I assume that's kind of media marks that are in the mobile comm debitile stores and any online transactions that come through your direct website. But could you confirm that? And then just going back to TV, I mean, with the benefit of hindsight, do you think you got that pricing decision wrong? And looking forward, you know, should we expect that business to suffer, you know, quite a lot of margin squeeze if you can't take price? Or I assume your content costs are probably rising. And when you try and take price, it appears that the consumers are pretty resistant to it and and want to leave. So I'm trying to understand why you don't see sort of growing margin pressure in that TV business going forward. Thanks a lot. Yes. Thank you. Well, the first thing on the stores, no, I don't think that we will bring stores down. The number, I do not see a need if local or regional shutdowns will continue or remain an element for the entire society. I think our approach is more bringing the cost per store down. How can you do that? Well, first of all, you can talk to the landlord because also the landlords know that the demand is is going down. So they are compared compared to a couple of years ago, they're quite flexible. Second thing is we are trying to optimize opening hours. Yeah? We we we we do for all for almost all the shops, we do measurements on footfall, and we are learning now that well, traditionally, our shops open nine or 10:00 and are open till 08:00 in the evening. We have a couple of shops on our a reasonable number of shops yet where we limit these. We have we have a dozen of shops where we test now that we only really open them in the afternoon for four to five hours. And the rest of the day, we only do meetings which were which were preplanned. And our guys in the shop do interact with the customers higher by phone, WhatsApp calls, video call chats, etcetera, etcetera. So we're trying to and and it's easy to imagine that, I would say, the typical shop on in our in our the typical shop cost today is and this is averaging across the entire shop chain. About onethree is lease and maintenance. About twothree is personnel. So if we go into shorter cycles into lower number of sales reps at the same time, while we work on 60% or 65% of our cost base. And at the same time, we talk to the landlords. So I think, currently, my team in the shop in the retail in the retail unit is more working on how can we keep the the sales at the at the existing level or even increase it, but how can we optimize the cost side without impacting consumer perception. Captive is any channel where we do not have a third party intermediate. So that's our own website. That's our own apps and customer service. This is our active campaigning in on the telephone. And non captive is media market at all. It's third party retailers. It's certain even third party online shops that only get a commission, and we are not in control of what they actually do. So in a cap the the characteristic of a captive channel is that we define the offer, we define the prices, we define how and when things are done. So we are in full control, and we we design and optimize customer journey. In MediaMarktSaturn, it's our people and it's our promoters, but still MediaMarktSaturn, they do the advertising. They do the specific local or Internet or or national campaigns. And the third thing on the content cost, no. We don't don't experience an increase or a pressure on content cost. We have long and this is, like, three to five years deals with all the major content providers, and these are set deals at set prices. So any price increase we do goes to not to a 100%, but to the majority, way big majority of the increase remains with us. There is a couple of content costs which are variable, and there's also a couple of other third party costs like technology, etcetera, which is slightly variable, price increases, yeah, tend to go straight into our pocket and deliver more than 80% gross margin. Grow the margins in the TV business going forward? I think it's stable margins or increasing margins if you take price increases in consideration. But content costs are not increasing. We haven't seen that. And do you think this year's price price was too much with hindsight? Or you can get away with smaller ones going forward? Or Well, I mean, you do not do price increases without testing. And the testing showed it makes no difference whether we increase it by 5%, 10% or 20 So certainly, you go for the biggest one because you would prefer one significant step instead of constantly repeating. The German rules tells the the legal environment tells us that we need to send the customer a letter or an email saying, and the header must be price increase, and then you must inform them that this price increase allows them to immediately cancel the contract. So you don't wanna do that every other month. You wanna do that, like, if you do it once, then you do it in a significant way. On Waipu, for example, we do a 25%, but we say that if you're an existing customer, you get more content and you get a discount on the price increase. Yeah? I mean, we're doing all these kind of mechanisms in order to avoid the visibility within the possible legal framework. Okay. That's very helpful. Thank you. Thank you. The last question for today is from Wolfgang Spest of Bankhaus Lampe. Your line is now open, sir. Please go ahead. Yes. Hello. Good morning. Two follow ups from my side. You sold during the quarter a free net digital G and B. Is there anything of that that ended in the Q3 reporting? Or can we expect something for Q4? And the second one, you probably already had some prelim talks with the mobile operators. Do you can already share some indications how your purchase conditions for 2021 should look like? Wolfgang, I would like to start with the free net digital question. It's with a small sale here. Therefore, I think we did no big reporting about it. And also in our financial figures, we will not have any big impact here, not for the future and not for this year. So therefore, no, there's nothing to expect for the fourth quarter. Yes. And I think the proceeds were repaid in shares, and we're having these shares. On the conditions, I mean, we are not reviewing the conditions on the tariff level on either monthly, quarterly or yearly basis. If we implement a telephonic FUNK or FLEX, we have a purchase agreement with Vodafone. And this is not limited for the year, but it's kind of limited for the tariff plan. So I do not expect any significant changes. The bigger part is the one where we talk about annual bonuses, etcetera, etcetera. All the indications that we see so far is that we will continue to our just to be on the same level, I'd say. So, no, we do not expect short answer is we do not expect any relevant changes. Okay. Thank you. You. As there are no further questions, I hand back to the speakers for closing remarks. Yes. Thanks, everybody, for participating and listening and contributing with your questions. Thanks also for the feedback on the management presentation. We wish you all the best. Stay healthy, and see you soon. Bye bye.