Earnings Call: Q1 2020

May 4, 2020

Dear ladies and gentlemen, welcome to the conference call of Renate AG regarding the presentation of the Q1 results 2020. At our customers' request, this conference will be recorded. As a reminder, all participants will be in a listen only mode. After the presentation, there will be an opportunity to ask questions. I now hand you over to Christoph Wiedermeck, who will lead you for this conference. Please go ahead, sir. Hello, everybody. A warm welcome to all of you to our today's Q1 results presentation, which is certainly has two key messages. First one is that we've had a very good and satisfactory Q1 and the indications for the rest of the year, which we will give in more details, look really well. This is why we confirmed the guidance. And the second key message from last night was that we have decided anonymously with the entire Board and Supervisory Board to cut the dividend, and we will go into more detail for the reasoning in a couple of minutes. I start with the management summary on Page four. As I just said, overall, first quarter operationally looks really good. We have to admit that the COVID-nineteen crisis only started at the March. This is why a lot of the references today will include April because we have no final closing, but we have the operational KPIs, which makes us feel comfortable with the current outlook. The main changes was that, certainly, in mobile as well as in the hardware sales with Kravis, the COVID-nineteen drove online sales up versus the retail sales. We have a certain decrease on the gross adds, mainly from Mediamaxter Thorn's stationary sales and from our own retail shops. But at the same time, aside of online, we also saw a lower churn intake during those two months. In the comment here, it says no final numbers yet. Well, the churn intake is always a delay or concerns a delay, and we cannot really balance it, but we are comfortable with the outlook. The overall margin losses from accessories and hardware have been compensated by lower expenses on the other side. On TV, we saw no specific additional uptake, but we saw certainly a higher usage. And even though it's a smaller part of our business, B2B payments have some of them have been delayed mainly in the DAB and radio area where the private radio stations obviously have a short term liquidity issue with a long a lot of cancellations in advertising. So overall, we are very convinced of the resilience of our business model. We see also a couple of differences versus the regular telcos. Free cash flow and liquidity is really strong, and this is why we feel comfortable to reconfirm and reassure full year guidance for 2020. At the same time, and Ingo Arnold will elaborate in more detail, We are facing a significant refinancing. We decided not to even apply or think about public funding, which at this point of time would not be necessary, but we also want to avoid to run into a necessity of public funding if the banks would blackmail us with the refinancing in full. And this is why we thought it might definitely make sense to keep the dividend on board to say to keep the money in the company on the balance sheet. We won't spend it for other things, but we give us some flexibility and freedom for the future. Having said that, let me give you an overview on what the crisis or the COVID-nineteen did to us on Page five. Certainly, we have immediately installed a committee internal committee to have a full everyday overview about the impact, about the health situation, etcetera, etcetera. Primary focus, as in any other company, was to separate risk groups to give the staff the safety and the feeling of safety. We have established mobile office abilities for any of our companies within the group. We have established hygiene rules, etcetera. And from last week onwards, we started to really bring the people back on board. I guess, as of today, anywhere between 5565% of the people are back in the offices. We work with AP shifting. We separate key people. We have, from day one, told the people that if we go to short time work, we will compensate the losses and full pay full 100%. And we've also told our people in the shops that even though the sales will be down, we would pay them the same commissions as we did on average for the last four months. I think the result of this is that we have a highly motivated team. They're very excited about what the company did for them. We have very positive reactions overall. We have also equipped them with the necessary face covers, etcetera, etcetera. Currently, there's about 1,000 people still in short time work, mainly from the shop front. We have reduced the opening hours for the time being as well as the service level in customer care, but we have realized that our customers also do appreciate our overall ability. We have not stopped any of the lease payments, but we have renegotiated with about 50% of our landlords to review, and we have achieved a six digit number of reductions on that front. Operationally, approximately 200 shops were constantly open. I think that was one of the impact of our very liberal and very fair treatment of the individuals. Shop managers went to see the land the mayors in their cities. They explained them how important it was for individuals to have their mobile phones repaired, updated, etcetera, etcetera. And this took a positive reaction. As I said, about onethree of our shops were always open. We had reduced opening hours. From last week, we are now almost except for some of the bigger shopping centers, we are open again. We have a somewhat reduced level of service there, but we have seen last week that revenues were up to pre COVID level. We have not reacted at all with any price down so far and any special promotions. It's the opposite. We're trying to keep prices up. We have also, I think, made fair treatment to our franchise partners and third party retailers, and they also appreciated. And they also they even gave interviews in the special interest press of the industry that Mobicom Davidtel is a very fair partner. On the run rate, if I want to say so, on Page six, I won't go through all the learnings. Very interesting maybe is that Medialarc's total online sales even for mobile contracts was up significantly overall. Mediasatone is obviously down in sales, but they've done a great job. I think overall, their online sales are increasing significantly. They have accelerated their supply chain logistics technology in order to fulfill customer demand. We saw that the renewals of contracts are significantly up. And as I mentioned, specifically in March and April, we saw order intake churn intake about 20% lower from previous year and about 25% lower from our internal planning. Travis had an interesting route. They have record revenues in March and April, mainly driven by six times as higher online sales. This will lead to a fact that we can cover the cost that we have still with the brick and mortar business and the people on short term work. In Freenet TV, we have the the price increase implemented on direct debit from May 1. We are currently distributing the vouchers for in retail, and this is a little bit delayed. Wiper usage is up, and I'll talk about that in a second a bit more. So overall, results Q1 and April, net sales impact less than 25%. So far, we don't see an increase a significant or visible increase in bad debt. Abiels are stable. The fact that we are heavily on flat rates does not lead to a the usage increase does not lead to more revenues. Overall, revenues are fine. Some of the constraints, as I mentioned before, for example, the roaming or heavier usage or things like that would impact a typical telco network operator do not impact Freenet at all due to the business model. Page seven, summary of the key numbers. Revenue, 6 and 48,800,000.0 EBITDA, euros 104,000,000 and free cash flow, 50,000,000, and the base is doing well. On Page eight, we show the details of the quarterly performance. Postpaid up by 22,000. FreeNet Funk plus 1,000 in actives, we did not really promote it in the first quarter. FreeNet TV, a little down. I come back to that in a second. And Waipu with plus 44,000,000 with a really strong performance. So the total subscriber base increasing to 8,430,000 subscribers, delivering a sustainable revenue stream for the rest of the year. Going into a bit more detail on Page nine, postpaid customers. It's the third quarter with consecutive growth. Again, we're very happy about that. We also foresee it for the second quarter, at least a flat development. I'd say this is at least what we can see from April. So we think we can the mentioned drivers lead to a minimum stable development. I've talked about some of the key changes. There's also some interesting observations, the entire free dealership, these people, private entrepreneurs, same as franchise, are really active. They basically changed from a brick and mortar to a telephone and online business. They are on equal performance in April than last year. And I've talked about the shops and the churn intake already. Page number 10, freenet TV, still above the 1,000,000 customers. I've mentioned last time, and I will repeat that for another two quarters, there is about 14 currently still 14,000 satellite customers that will be leading over the next nine months. More importantly, we have increased the pricing as of May 1 from $575,000,000 to $699,000,000 This price increase was pretested and showed some churn indication. But overall, even if the churn would go up to 8%, it would pay back. Currently, the intake is plus 3% to 5% depending on the individual segment. So overall, this will increase gross margin and EBITDA mainly next year. The as I said, the part of the customers about 50% of the customers buy a voucher in retail. This retail in retail, we can only exchange or switch from the old to the new vouchers within the month of May. So there will be some delay with the increase of pricing for the voucher customers, but I hope this is not will not be significant. We have restarted our TV campaigns last week for the renewal peak time in June, July and August. On Page 11, a quick look at waipu.tv. Is a good development within this quarter to a total number of subscribers of 453,000. Overall, very positive. Also, the o twoTelefonica is doing really well. We have launched again a number of new additional TV channels. As of today, the portfolio consists of 98 HD channels and 35 other channels, so a total of 135. The is a new feature which is gaining popularity specifically over the last few weeks where the usage is up. It's not only your own recordings, it's the access to a number of libraries from public and private channels. So it's a huge library of top quality entertainment. Platform service level, we have never mentioned that, but it was interesting to see that when the crisis started and usage was up by 30%, still the platform performs really well with 99.9% even though they have a usage. Having said that, I hand over to Ingo Arnaud, and I think the more important topic about financial performance stability and outlook. Thank you, Christoph. Good morning, everybody. I would like to start on Page 12. I think the basic topic, what I have to say is I think it is responsible for us as a company here to show responsibility for this company, and therefore, we have to decide to keep as much liquidity as possible on our balance sheet because we are in a crisis at the moment. And I think this is typical in every crisis, what you see, that you have to keep your liquidity on the balance sheet. And this is not based on any changes in the quality of our business. But first of all, on Page 12, I would show you some measures what we have taken to optimize the cash during April. So the first quarter is not influenced by these measures. But what we did is we are looking in all incoming payments every morning, and we are monitoring it very closely. And what we can say today at the May is that if I would not know that there is a crisis, I would not see it from the paying behavior of our partners here. So everything is fine on this side. On the other side, we try to maximize our cash position. So we are in talks with our partners about payment terms, etcetera, etcetera. I think at the moment, it does not really look necessary to do so, but we would like to be prepared if the situation could go or would go in a direction which we could not see today. We also have discussed internally and also with banks and with authorities about federal funding. But all what we can see out of these programs is that this would give us maybe some flexibility in the short term, but it would reduce our financial flexibility in the middle term and in the long term. And therefore, with all the decisions what we take, it was very important for us to avoid using any federal funding. So therefore, for example, it could be possible that it would it would not be possible for us to pay any dividend for years. And we think this outlook is much worse than do a one time suspension of the dividend. So on Page 13, what we have looked into is the reactions of the financial markets in the weeks since the crisis started. And what we saw there, and I think you are more expert than we are, but I think some of the developments are very obvious. One of the development was that on the equity markets, the volatility was much, much higher than before. And on the debt markets, we saw that the credit default margins were increased dramatically. So the market saw a lot of risks here. And this would also mean a risk for us if we have to do some refinancing in autumn and in spring next year. So we also watched into the promissory note market, because we have some promissory notes due. And therefore, the first idea would be to refinance the due promissory note in the promissory note market. And what we saw there is that we saw only very few transactions, we saw a lot of delayed transactions, and do also expect a lot of additional transactions because of the crisis in autumn and spring next year. So at the end of the day, we saw a very tightened situation here. And this was part of the assessment what we did. And then we looked in out into our own figures. And to make it very clear here, we see we still see our balance sheet is very solid. It is very robust. So from this point of view, there would be no need to postpone or to suspend a dividend payment. It is only because we have the need to refinance EUR 700,000,000 of promissory notes in autumn and in spring. And therefore, we think it is necessary and it's more or less our duty to keep the money on the balance sheet now. And to give you an overview of the current performance of our business, I would ask you to switch to Page 14. First of all, here you can see that our performance on a group level is very, very solid. We see without putting into consideration MotionTM, we see an increasing revenue on the one hand, which is driven by Grabez, already mentioned by Christoph. On the other hand, in the gross profit, we see a decrease after all extraordinary effects of something like EUR 6,000,000. All these EUR 6,000,000 are based on a onetime effect, what we had in Q1 twenty nineteen, where we get a bonus payment from the hardware industry, which is if you look into the other quarters of 2019, which was a real onetime effect, and we never saw it again. And so putting this into consideration, it is a stable gross profit, what we see. And on the other hand, what you could also see, if you look into the EBITDA figures, is that even the gross profit effect, what we saw there, that this could be overcompensated by savings on the SG and A side. So I think a very, very stable picture what we have here. Moving to the next page to the mobile segment, or what most of the things what I already mentioned on the group level, you can also see here in the mobile business. I think it is very, very stable. And I think what is important and what you can see under the last bullet here is we have this special decision or this decision from the regulatory authorities to put the mobile number portability fee down to EUR 6.82. So yes, this will affect our business during the year and our profitability, but I do only expect a €1,000,000 digit effect here. And I think we will have to wait and see how big it will be because on the other side, we do not have to pay this fee. And so partly, it will be a compensating effect, what we will see here. Moving to the KPIs of the mobile business on Page 16, we see here on and already mentioned by Christoph, again, an increase in the postpaid customer base by 22,000 in the first quarter, a very stable view here. And yes, there were small effects from corona or COVID-nineteen in the last two weeks of March, but these effects were not that big. ARPU, stable with 18.4% in comparison to the 2019, where it was 18.5%. And in the digital lifestyle revenues, we see I think what we promised is a stable development. We still see a slight increase here from EUR 42,000,000 to EUR 43,000,000. Moving to the Media, TV and Media business. I think what we see here in comparison to the 2019, a relatively stable picture on the revenue side. Here, we lost some revenues from the event business at media broadcast because as there are no events, you cannot generate any revenues there. And already the two weeks, which were without events in March, show an impact here, but it is more or less only a revenue impact, and the impact on the profit side is relatively small. On the gross profit side, also a relatively stable picture, what we show here, and the same for the EBITDA. So we see a stabilizing business here. I think we saw some ups and downs in the last years. And sometimes you were surprised by this. But I think now, if you compare Q1 twenty nineteen with Q1 twenty twenty, it is a very stable picture what we show here. Looking into the single companies, what we do have in the Media and TV segment on Page 18, what you see here, and this makes us very proud and we are very happy about this, is that we see the signs from the IPTV business. We see that the gross profit is increasing and that the EBITDA is increasing by even EUR 2,600,000.0, which is a very high amount for the IPTV business. You know that it generated an EBITDA of minus EUR 15,000,000 in the last years in each of the last years. And now what we promised was that there will be an increase, and this is what we really see in the figures of the first quarter here. In the Media Broadcast business, the B2C business is relatively stable with a stable number of customers. On the B2B side, we see a decrease of the gross profit and of the EBITDA here, which is based on the lower revenue from the event business, but more from some effects from the radio business where we have some delays, which caused the deviation here. But it is more or less a phasing effect, and we will compensate it in the following quarters. On the cash side, Page 19, I think without any surprises, we are on the high end of the frame, what we gave you from the guidance range. This is not we do not see any effect here from the measures what we took around COVID-nineteen. It was just a fine managed quarter, what we saw here, with a good intake on the cash side. Page 20, some of the financial KPIs, fully on track here. The equity ratio, 6.6%. The net debt or the leverage is 4.7%, as expected here. And putting into consideration the assets what we have and reduce the debt by these assets would mean that we do have a leverage of 2.7 at the March. So also here, I think we are fine with the figures what we have here. And therefore, I would give back to the operator now to open the Q and A. So we will now begin our question and answer The first question is from Christian Fangmann of HSBC. I have a couple of questions, but I leave some room for my colleagues as well. First one is obviously on the dividend. I mean I mean, I get the point that, you know, you're cautious on on the repay that that you that you have in the next twelve months, roughly speaking. But I mean, it still looks like it's a drastic decision to cut the dividend entirely. So maybe can you explain in a bit more detail what you are seeing in terms of the tightened situation on the prematurely notes and what drove the decision really in the end to do that? Because I think it was unexpected. Secondly, on the operations. I just want to double check the new regulation on on the porting fees to €6.85 and I think you charged customs around €30 before. I I thought because you're not really a big volume driver that the net effect is close to zero, so now you're flagging this as new incremental risk. And single digit million impact on EBITDA, is it more, let's say, 1,000,000, two three million? Or are we talking about $30,000,045,000,000 euros And the last point on the tax payments, because you guided for €50,000,000 which is about €20,000,000 higher than your underlying cash tax rate. Are you still expecting these to be paid this year? Because I think we have not seen that in Q1. Yes. Thank you, Christian, for the questions. Let me start with the dividend. And it was obvious that this will be a topic for today. And I may say that I have actually started to question the dividend payment as the first one internally, and then we had long discussions with Ingo Arnold and then led end of last week, led to the conclusion that we would have a Board meeting on Monday on Sunday on the AGM. So and obviously, this was not expected. Otherwise, there would not be an ad hoc statement. So what drove decision? First of all, we said, well, overall, liquidity looks fine, but we know that we need to have that refinancing in November and in March. We do we cannot predict what the COVID-nineteen leads to, but we could assume that there is a second round maybe in fall. If we would now give away the EUR 200,000,000, we think that the banks would know about that and would know about our shortage. So maybe the conditions and the interest rate would therefore go up. Furthermore, we also see that the entire refinancing on KfW, the interest rate, including the fees, is about 2%. So first assumption, well, we're going to be in an environment even now that will lead to a way more expensive refinancing. If you deploy, let's say, 150 extra points to EUR 700,000,000, it's about EUR 10,000,000 a year, that is almost 10% on per share in cash. So that was the first driving force. So don't get into a situation where you need to go back to the banks and they can blackmail you. The second one is certainly, under the given circumstances, the leverage to 4.7, and this would be extended to close to five if you would pay out, would be another element of the banks circumstances maybe raise the risk fee even more. So it was really a cautious my initial thought was to be cautious and not end up with the banks determining the conditions, but having the flexibility to at least abstain from the first refinancing to have in that by November under the given circumstances, our cash pool would be more than two more than €400,000,000 So we could skip the refinancing of the first one and just pay back, and that gives us a lot more flexibility. So I think that was, at the end of the day, the initial thought. Then we were reflecting on the option of not cutting it in full scale, but put it to half or something. And that is more a human decision of saying, well, if you disappoint people, then you can the level of disappointment is the same if we cut it to half or cut it full. I have spoken with a number of individual shareholders this morning, even private people that either called me or e mailed me, and I explained them that the extra fees that we would have to pay free cash flow. They would go against the long term dividend. And last but not least, you would avoid the public funding. And then there was the third option to delay or to postpone the AGM to fall. Well, if you do that on a game series, and you would say it even worsens the situation because if we would say the the AGM would, whatever, be on December 5 and the refinancing is due on the November 30, you are even more under the pressure of either delivering a good refinancing. And if this one fails, you either go back to the state government, then you are not allowed to pay a dividend or you have to tell your shareholders when we have failed in a good refinancing, we are shorting cash. So I think it was well, a level of these questions. And then the final one was that we said, well, we policy and we want to stick to our financial policy. And we need to make sure that we can, in the future, out of a strong business development or commercial development, we want to secure a dividend for the future. I think I mean these were the thoughts. And as I mentioned, I think Ingo and myself, we started to reflect on this some time ago. We looked into refinancing. We even checked refinancing with some of the banks to get kind of an idea what's going on, what their thoughts were. And we also had a couple of talks with our investment bankers on their opinion. So overall, this led to the two of us thinking about it. We've discussed it yesterday afternoon with our colleagues in the Executive Board. Everybody is aware that we are kind of disappointing on the one hand side, and we are breaking a long term promise that we do, but we felt to skip the promise for one year and saving it for the next five is a better choice than to run into a risk of third party deciding on it and giving away that freedom. So I think I hope this is a full size satisfying answer. On the mobile number port portability, yes, we have charged many years, we've charged premium pricing for mobile number portability. It's approximately 500,000 cases a year. We do not charge all of them or did not charge all of them because there were promotions running against it. But if you take a couple of 100,000 cases, you can see that the new regulated prices will have an impact. At the same time, they have we have also changed the pricing to the network operators. All in all, I think the impact on a full year scale is maybe a €3,000,000 3,000,000 to 4,000,000 depending on how the volume develops. For your question about the tax payments, yes, it's relatively low in the first quarter. When I when we guided the tax figure in our March call. We already said that it is based on the postponements in tax requests from the authorities from 2019. So there were some postponements. But what we see at the moment that they are still postponed. So there is a chance for the whole year that the postponement the tax sorry, fees will be postponed, will work postponed during the year, especially after the crisis now. But I think if they are not postponed, it will be EUR 50,000,000, even after the first quarter was only EUR 6,000,000. But if they are not postponed at the end of the year, then it could be EUR 50,000,000. Thank you. The next question is from Joshua Mills of Exane. Your line is now open. Hi there, guys. Thank you very much for taking the questions. I've got three, please. The first is quite straightforward. You mentioned lower gross adds. Could you give us an indication of what percentage your gross adds have come down year on year? And that would be great. The second is on your online versus offline sales split. Could you remind us what that was in 2019 and maybe give us an indication about how that has changed into the month of April? It'd also great to know what the difference in terms of profitability between you selling online and offline is, if if there is any at all. And then thirdly, I just wanted to come back to the the dividend policy because you made a few interesting comments there that, you know, there's a debate as to whether you cut entirely, whether you cut by 50%. A number of other telcos which have cut their dividend during this crisis have not given a firm commitment that they will rebase them to the previous level post crisis simply because there is so much uncertainty. I'd like to like to know from your perspective what you think is going to change the course of the next twelve months, which will allow you to return to a full, 80% dividend payout and whether given what you've just described with potentially some liquidity issues. You mentioned yourself that leverage, if it were to get towards 5x, would become an issue. Why you decided against using this as an opportunity to rebase the dividends on an ongoing basis? And why you think that's important to your exit story? Yes. Thank you, Josh. On the gross adds, since we never speak about absolute numbers, but on the postpaid customers with subsidized handsets, the gross adds came down in April about 20%, 25%. On SIM only, it stayed at the same level as before because SIM only typically is pure online. We have as I said, we have seen the reductions on media market at full overall because we in our internal reporting, we see often online with them. But overall, they have certainly gone down by about 25%, our retail stores about 15%. Part of these things coming down have been compensated by higher renewals. And our reading is that what we call rotational churn, people that decide at the storefront that they would not renew because the new offer seems better to them or something. This is obviously going down. So this partially compensates the loss in gross adds. There is no final numbers because that will take a little time. So in and the trend in April was the same as the last two weeks of March. Overall, when we talk about off and online split, we certainly add up SIM only and subsidized, and we tend to talk about transactions. But in gross in customer acquisition, the split on and off line is fifty-fifty. And now having what I saw in April is more like sixty-forty. So it's the online went up a little bit, but the losses in off line drive the change in the ratio. And that's approximate numbers. In SIM only, the ratio is the higher one. And on renewals, we split don't split often online, we split direct or indirect. And we include incoming calls, we include our own website, include our customer care. In renewals, the transactions direct transactions is more than 75%. So if we look at total number of transactions, about 60 online or direct and 40% off line. And that changed a little bit right now, obviously, but the first few days in May show that the pendulum goes back. Finally, on the dividend, well, I mean, even now and even with our projection, we could pay out a dividend of 80%. So why shouldn't we do it under a proper, let's say, situation where we either refinance or pay down at least the promissory note in November. The business days, a business which is highly cash generating, and we really feel comfortable with the 80% payout. I mean the next question would be what is the what is your view on free cash flow next year? I think it will be on definitely on a level where the overall absolute term of the dividend will be higher than €1.5 So and we saw no reason to change because we want to keep the profile of the company and the stock. And certainly, we hope that this is appreciated sooner or later and stock price will reflect it. Certainly, it did not over the last eight months. The next question is from Paula Peng of UBS. Your line is now open. Yeah. Hi. Thanks for taking the questions. Just have a few different questions. First of all, can you give us a sense of what happened to mobile data usage trends across your subscriber base in April during the lockdown. So has mobile data usage increased significantly, or has it gone down as people have switched to using Wi Fi and fixed broadband? So that's the first one. The second one is really, kind of coming back, to your desire to have financial flexibility. Can you maybe give us your latest thoughts in terms of how you're thinking about your stake in Sunrise and whether you'd be open to monetizing it sooner rather than later in terms of giving yourself more financial flexibility? And then also just to kind of follow-up on your comments about liquidity and the promise to read note market. You said it was a lot lower and this gave rise to some uncertainty. But can you maybe talk through what other sources sources of funding are available? Have you considered the bond market or bank loans? And how attractive is one option over another? Okay. Well, on the data, we did not see a significant update. Exact it was exactly what you said. I mean, people are working from home, are being more indoor than they did before. So we did not see an increase in mobile data because they use Wi Fi, fixed line Wi Fi from home or those ones that are in the office. So, I mean, the data in at least the data consumption in our in our customer base goes up as soon as people are out in the, whatever, in sports and on the weekends outside. I think so therefore, no significant changes. And once again, in our business model, we source or purchase the data volume with the operators on a flat rate as well. So there is no change to us whether this is under or over usage. In that sense, we do not even monitor it on a daily basis for that specific reason. Second one on Sunrise, I think you all also have a look at Sunrise and a view on it. I think they did the the new management does an excellent job. They have parallel to Swisscom mentioned that they are reflecting on the future fixed line opportunities after having turned down the optionality with chemo. And I have understood from the public statements of Andre Krause that he is about to find a sustainable midterm solution. And I think that was appreciated in the market. So we very much believe in the management. We are really excited about the plans that they have internally discussed with us, where we have access. We feel very comfortable with the shares, and the share price overall is doing really well given the overall market development. So I think that is the first element. And now to your second question, is that a well, a, a potential source of refinancing? Is this giving us or are we, let's say, time wise, thinking more about selling some shares or bringing down our total portfolio? Well, not right now. We always said this is not a topic for us before 2021. And I think that for the remaining time stays the same. But never say no because if the stock price goes really up, if there might be opportunities, but at the same time, we will be comfortable with the dividend. So I think from today's perspective, we would keep our promise and say it's not a topic before 2021. And your question about the refinancing market, yes, definitely, we are not limited on the periphery node market. But also, if you look into bonds markets, the environment is not that open. It looks not that easy for us to refinance there. So I would say it is not that we are limited to it, but we see similar problems also in other debt markets. On the equity side, I do not know if you target it in this direction. As we see the share price of Freenet undervalued, definitely, it would not make sense to do an ABB or whatever on these levels. So but we think about every opportunity, but we do not have clear signs from market that something would work there. Thanks. The next question is from Jonas Blum of Warburg Research. Your line is now open. Yes, good morning. Thanks for taking the questions. Just one follow-up first on the dividend cut. I mean, so if you manage to refinance the upcoming two promissory loans via debt, could you just give us some insight about what you would do with the current cash at hand? Will you opt for share buybacks or will you just payout special dividend? Or will you perhaps also just use it to delever your current balance sheet? And then secondly, two questions on your B2B TV media business. Firstly, you talked about DAD plus multiplex. Second business opportunity upcoming this year, could you just quantify this opportunity for us, what will be the EBITDA impact 2020, 2021, when it will be analyzed? And then secondly, just on the missing revenues from public events, as you talked about it. So it's $1,600,000 in missing EBITDA. What should we expect for the full year for coronavirus related difficulties with public events will stick a bit longer? Yes. Thank you. Well, on the first one, I cannot answer the question. I think we should do it step by step. Freedom and optionality means that we do not talk about exactly or there is the obvious options that you have mentioned, but there is no kind of decision tree that we put down in paper and would disclose. It is about gaining optionality. It is about getting the freedom. And in a positive scenario, you'll end up with exactly where we are, maybe even better in operations. The refinancing works really well. Well, then it obviously, the outcome is a different one from the other one. But as we I well, nothing as difficult as to look into the future of macroeconomics and the impact on banking, etcetera, etcetera. Why we will not make a statement or speculate, but say step by step. But overall, it's our commitment that the money is the ones of the shareholders and not ours. The second one, as I said, we have media podcast is running carriage fees for radio transmission and TV transmission. Some of the smaller radio stations have notified us that they have a liquidity shortage. We're talking here about payments in the order of magnitude about EUR 1,000,000 or EUR 2,000,000 a month in total, and they are delayed. They asked for reduction, which we have rejected because the majority of the cost is lease cost, which we also paid to third party. And some of them have asked us to delay this by six months, and we are reviewing this. So it's I think it's much more of a liquidity or cash situation than a real change in the payment. But we're talking once again, I mean, we're talking about €1,000,000 €1,500,000 a month. So we're not talking big money if we compare it to the total business. On the digital audio broadcast, the second multiplex is planned to start in early October. We have now signed approximately 10 out of 16 channels we have signed with and there is three more options. So there's currently three open, and we are in talks with a couple of applicants for it. So will definitely be a very attractive package. The impact this year will be, I would say, neutral, except for the fact that there is a CapEx need of EUR 5,000,000 or 6,000,000. And then I would say, in 2021, in the second half of the year, it will turn into a positive one because of the introductory cost on servicing, technical implementation and low advertising income in the first six to twelve months because it's not measurable. So I would say CapEx in 2020 and neutral in 2021. And then from 2022, a well, I would say, first, 2022, euros 5,000,000 to €8,000,000 EBITDA and then growing to above 10,000,000 And maybe to add, the investment in 2020 is part of our CapEx guidance, so no additional CapEx. And then about the loss in the media broadcast. Here in the B2B business, it's only a minor effect from the event business. It is mainly from the radio business where we have some delays. So it is only a phasing effect, what I already mentioned. So it will be compensated in the upcoming quarters. The next question is from Ulker Schatte of Jefferies. Questions would be, first, can you comment on the on how you perceive the media as a tone viability in the current situation? It's a it's a chain mainly built on brick and mortar. I think there was some news flow about the operational difficulties they're currently facing and sort of emergency funds that are potentially tapping, I think, in the media. You have a very tight business relationship, so you have some insights, but it's also important for you. So I'm wondering, you know, how do you see the viability of of of that operation going forward and and your exposure into that? Second question is, could you comment on your on your SME exposure? I I suppose it is small, but could you just give us some pointers as to the size? And then I have just a clarification question. You commented on the good good traction of the WIPO sort of partnership with Telefonica Deutschland. Are the Telefonica Deutschland subscriber figures included in your quoted Waipu figures? Or is this a separate bucket that and you're only quoting the sort of retail customers that you have yourself? Yes. Thank you for the question. Telefonica is included. The SME answer is also short one, no exposure. It's so minor, we are more on the SOHO level, and we don't see any problems there. And on the economy media Sarton topic, I have to split the answer as a shareholder and a Board member in the Supervisory Board. It's obviously obvious that I have insider information, which I cannot disclose, and I have to be very vague on this. If I take my operational head, what we can see is that I mean, Mediasatto in Germany was on the path to become a multichannel and omnichannel operations, including changing the supply chain and including more centralization of supply chain on the one hand, but also creating shipment centers out of the individual locations. This path to an ability has been super accelerated through the recent needs. So we have seen a dramatic increase on online sales. We have seen that overnight, basically, the individual retail shops across Germany were able to ship products straight to the customers that ordered it online. So kind of like they have a logic of having four fifty additional warehouses and shipments. So I think the the need showed the power and the strength of that organization, by the way, similar to what I've described before with our own shops. And I think that was better than I personally would have thought that they could enable it. And on our postpaid business, they have also very fast able to switch more to online than they ever did before. I think that is the liquidity needs they had reside basically from the fact that I mean, they live they order goods, and they have very long payment terms, typically anywhere between three and six months. So everything that they sold in November and December Christmas business was due to be paid right now. And exactly the six weeks prior to the payment date, there was no income or lower revenues. So I think that was a kind of a two effects that were time wise very unfortunate, and that led to or leads to that significant liquidity needs. And the I mean, they had an ad hoc statement of the KFW's loan. The plans and the projections they have used for that were taken at least one more COVID shutdown round into consideration. So they were very, very cautious and very, very, I would say, negative in their projection, knowing that even the first one was now shorter than they have anticipated. So I'm very optimistic about the overall performance that they will soon recover. And I have seen the numbers on our own shop in shop systems of the first week after the reopening, and they were getting beyond fifty percent of pre COVID. I think recovery of sales would be very fast. And therefore, I don't I'm not worried about their sustainability. Thanks very much. The next question is from Mr. Garfield of Berenberg. Your line is now open. Hello. Thank you for taking my question. I've got three questions, please. The first question was just to clarify that the 300,000,000 in undrawn credit facilities that you currently have that I believe, believe, you know, are at a 1.7 interest rate. I mean, that that you can use that to repay the promissory notes or part of the promissory notes if it comes down to it. So that was the first kind of question. The second question was just linked to the significant fall in the SG and A in in mobile this quarter. I mean, is this is this linked to the to the hardware business for which you saw a 6,000,000, you know, lower kind of bonus? Or or is it or was it driven by something else? And if it was driven by something else, I mean, is that how sustainable is is the reduction in in the marketing cost at this kind of level through the rest of the year? And then just a a final question again on the dividend itself. I mean, clearly, I guess, I mean, it's coming across that, you know, the the the the primary reason for cutting the dividend is to avoid higher interest costs on on issuance of new debt. Is this just related to that, I mean, what kind of indications were banks giving to you when you had that conversation on potentially diversifying your sources of funds to settle the promissory notes? Thank Yes. Thank you, Usman. So for the working capital topic, yes, we have a EUR 300,000,000 line. Well, what we could also use to repay anything, so we are free to use it. And we just took EUR 40,000,000, but I think it wouldn't was not necessary to take it. So we still have the EUR 300,000,000 from this facility. And then on the SG and A point, think, yes, it was I think it was lower marketing spending for the first quarter. I would not say that this is you can copy this in the next quarters. So I think it helped to compensate the special effect from this hardware bonus, which was missing this year and which was extraordinary last year. But I think we did this marketing savings on the TV side and on the mobile side. But I think whenever the business starts again, and Christoph already described earlier, we already started some marketing campaigns again in the second quarter. So I do not expect it to be a recurring effect. Then on the dividend and on the cost, what we would have to refinance it, I think the first reason was not that we see higher costs. The first reason was that we were unsure if it would even possible to refinance it. This was the first reason. And then the second reason was that we do not see where the market would be at the end of the year. And the quotes, what we see were something like 1% to 1.5% higher than the current financing what we have. But we cannot be sure that in a situation at the end of the year, where it is something like a blackmailing situation, if it would not be higher. So I think they tell us today that it would be possible with such higher margins in autumn, but we do not exactly know how the situation would look like. Maybe I can add one more. I hate to talk about this corona stuff every day, as many of you maybe. I mean, we have in Germany, we have shut down a country because the government speculated about a heavy crisis and the situation that we could not give enough intense care. So now we have 70% of the intense care beds are open and available. So while you can either blame them for being too cautious or you could say, well, if this ever happened, yes, well, then you are the blame would be much more. I think that is exactly the same approach that we have used for our dividend. Yes, we could cover it with the revolver. Yes, we would cover it with this and this and this. But if there is a second round, if this round starts in early November, if the retail is shut down once again, Alidas and all the big companies go into trouble, suddenly, they the banks will raise the the risk addings and so on the spread. Yeah. Cautious it is a cautious move, but I feel more comfortable with a cautious move where I could go back to the shareholder and say, here's the money. We've deployed it in a proper manner, and you will get more in the in the future than under other circumstances. Great. You know, just just one follow-up if I can, please. Just from the marketing side specifically. I mean, since it the you know, your NetApp performance has been quite robust, I guess, despite the lower marketing spend. Is that not giving you, you know, the the some room to maybe improve the efficiency? Yeah. Osman, this is a this is a this is a very a very valid question, which keeps me not awake but busy. The question is, did could we were we in were we able to bring down marketing spend because of the crisis and everybody kind of like chose not to browse around and to go to change its provider, yes, well, then the only reason for the lower marketing cost was the market. If this was not the case, but people suddenly decided not to migrate anymore their contracts, then it is a sustainable recurring effect, and this would minimize marketing cost. If I knew, I could give you an answer. Right now, we are speculating. And right now, we're trying to get a deeper understanding. Once more, intake. So what we measure is every day, we get churn in. So people notify us that they would terminate that contract. These terminations, they are the spectrum is from people that have only signed up for a contract yesterday. And in order to not forget in twenty four months, they cancel it immediately. So this is like a small group, but this this was and the other one the other end of it is people that their contract runs out in three months' time, and they cancel it now, take it to the termination date. So is the fact that the churn intake has come down, is that effect of people don't care about it while they sit at home and are worried about the future? Or is it because they care and say it's not necessary to have another device or a better contract? I don't know. We're trying to understand it. We're trying to talk to these individuals. We do a lot of research, but there's still a significant part uncertainty, and this is why the operational teams notified the finance guys that they should not expect marketing spend to be lower for the rest of the year, at least not yet. We don't have the full insight. The next question is from Wolfgang Spitz of Bank of Sample. Your line is now open. Yes. Hello. Good morning. Just two additional ones from my side. First one on Waipu. We are aware that high quality content is important. You talked in later sessions about attempts to add quality content. Can you give us an update how the negotiations are here? And the second one is on asset disposals. A colleague mentioned already Sunrise. My question rather goes into the direction of infrastructure. Could it be an idea to sell additional assets from Media Broadcast or from Exarin? And how are your, let's say, ideas here? Yes. Thank you. Well, on Waipu, you're certainly right. We are getting closer to get the expected content deals, and I will not give you an indication on what it is. But we're getting very close. We are in the technical implementation and the contracts are signed, and soon this will be released. On the asset disposal, well, on media broadcast, the digital audio, the DAB and the DVBT, that this will be owned by us, and we don't see any disposal there because it is the core of the value creation. And that is specifically different from what we did on FM radio, where we were in a regulated environment and basically needed to do it to avoid a deregulation, which would be led to lead to a negative EBITDA. On infrastructure, we have certainly reviewed that. And there is every now and then, there is even talks on what this infrastructure could deliver and create on for others. But once again, there's no concrete talks and plans. It is as you said, it's an optionality. But any of those infrastructure disposals always there's so many variables in it, and we don't work on any of those right now. And I would not expect any of those happening at least in 20 The next question is from Ian Pillano of Goldman Sachs. So you've spoken today about your confidence on the neutral impact of coronavirus in your guidance. We've seen a mixed impact from other operators, so a more negative impact due to lost roaming revenues and handset sales, partially offset by cost cutting and lower churn. Could you give a bit more color on the revenue pressure that you see and the impact on NetHat as well as the impact on the mitigating factors at the EBITDA level? And then secondly, on service revenues. Service revenues continue to decline in the quarter driven by lower international roaming and lower ARPUs. How do you see this trending through the rest of the year? And is roaming exposure any color on roaming exposure Well, I think on the second one, we don't think the ARPU would change. And I think there is when we've been criticized heavily for our or questions for our business model for many years. But under these circumstances, this business model is more robust than any other because over usage, under usage, heavy data usage, changes in roaming consumption, etcetera, will are not impacting our model. That's the story about the service provisioning. We don't buy capacity, we don't buy volume, we don't pay extra volume. And this is what drives the solidity and the resilience of the Freenet business model. And that is explaining the differences. And we I mean, we've certainly seen it when we look deep into and discuss with our Sunrise colleagues, and they show us what the impact was technically on data consumption on the network, on roaming. So we know exactly what you're talking about. But once again, I mean, we are immune against these kind of impacts. We don't otherwise, we don't have the upside at the same time. On this compensation, let me I'll illustrate it in an example. We do last year, we did about EUR 2,000,000 a month on accessories in our retail chain. And the margin it's a good margin. So well, we lose that because the upselling of accessories and extra services in retail is even now in an opening environment is still difficult because people are busy, they want to focus on their there's not enough time to do all these kind of upsells. So this is where we have losses in gross margin. But these losses, if we add them up, are overcompensated by the savings that we create we get from our short term work, where we I think right now, it's about 1,000 people, which we have on 50%. And on this 50%, we get they get the social welfare system pays them the net, and then we pay the difference. So overall, we have savings, I guess. It's about EUR 1,000 per employee per month that is on short term work. And this is approximately the same that we lose on gross margin. The same for we said on the marketing spend, we've brought marketing spend down. And the at the same time, we have lower net adds. But still in the first quarter, we were also able to meet all the bonus thresholds with the network operators. I think that is the ultimate that is the real heavy impact would be if we would significantly lose not gross adds, but customer base on any of the three networks because there are threshold payments on an annual bonus. And Ingo mentioned that before, that is high numbers. But if we look at the net development, as you can see, it's a positive net development. We I personally think that in the second quarter, we will be close to net adds, maybe plusminus zero. That's at least after one month, my assumption. And then we will go up again in third and fourth quarter. But once again, I mean, that was in our planning, we were four quarters positive. And I see the maximum risk that we get close a zero in the second quarter. So overall, this makes this is why we are relaxed is the wrong word, but confident on our business. Very helpful. So the next question is from Heiko Pault of Commerzbank. Your line is now open. Yes. Hello. Just had a small follow-up question. On the EUR 700,000,000 of two refinancing, how much of the amount is due in October and how much in March? Is it roughly fifty-fifty or is there a different bit? And maybe also in this context, you made it clear that this is not your default scenario, but is there any scenario you see that could make you pause dividend payment for a second time? Well, it's $2.50 in November and $4.50 in March. The second question is a difficult one. Well, if the world turns in the other direction, then I think everything will change. No, we don't see thing, but I I don't know. I I mean, if there is a a complete shutdown of the globe in November, then I think we will have to review this. But under proper reasoning, seeing what's going on, seeing what the crisis impacts our business, we don't see any reason, and we are, we took that one step in order to protect the future. And if we go through that, then the future will be a bright one. Okay. That was clear. Thanks. The next question is from Joshua Mills of Exane. Your line is now open again. Hi there, guys. Thank you. Just one follow-up for me as well. On your comments regarding not deciding to take state aid and the fact if you did that, you would have to maybe suspend your dividend for a number of years. Is that the result of discussions you've had directly with the government or or just looking at the market generally? And are there not types of aid that you could take, be it with, you know, reduced rental payments or furloughing schemes that would allow would have allowed you maybe to free up some liquidity and also, maybe avoid cutting the dividend now? I'm just interested about the view that you have that you do it now all in one go, and then we can go back to normal, whereas the alternative was a multiyear suspension of the of the dividends and how you've got to that conclusion. Thank you. Well, we got to that conclusion because we are in a I mean, Ingo Arnold is in a special board of Commerzbank. I am a member of the economy board, where we have gone through the entire exercise, and I have seen it with some other companies. The any of this public funding also includes a minimum funding 10% to 20% depending on the size of your normal house banks. And so we did not apply for any of it, but the house banks told us that this would they would demand this and this, and this would include all kind of restrictions, bonus payments, up payments for the management, also payments for the supervisory board, bonus payments for the entire entire staff. There is tons of restrictions within a group of companies and so on and so forth. So we did not verify it individually on our profile, but we have had the chance to watch it, witness it and follow it with other companies. And this led to the conclusion. Thank you. That's really clear. Thanks. We have I think we have one more person. I think we need to close down after this one, but we will now take the questions of Simon. Okay. So Simon Kotz from Barclays. Just quickly on the IPTV trends. If the numbers include Telefonica Deutschland, and we've seen the lockdown, so I would have thought we would have maybe seen an uptick in demand that you said you didn't actually see an uptick in subscriber additions. So I'm just wondering how you expect the performance of that to go going forward because I think general expectation is that, that continues to grow quite nicely. Well, I think the I mean, the finding is actually that in a phase where the people are anyway bound in their homes and they have TV, TV access, where the likelihood of them switching is lower than if they go out and watch in the whatever, outside or in their summer houses and so on and so forth. So this is why I think the uptake the fact that we have a positive uptake in the first quarter is a regular one. In the second one, April was okay, but we were not specifically strong there. I think the Telefonica story is more when are they launching their integrated packages for broadband access including TV. This is obviously their plan. As far as we understand from public statements, they are about to or they are thinking about this, how would call it, anonymous access or whether it's five g, whether it's broadband or cable, people will or consumers will not even realize or decide. It's an integrated package. And we have understood that if as soon as they launched it, they will include WIPO TV as their recommendation. And I think that would deliver a overall significant uplift. But I cannot give you any indication on when they are ready to do so because the cable wholesale in Germany is technically a new one. And I guess it's not happen gonna happen before the end of the year. At least this is what I can read in the papers, and I cannot disclose any internal discussions with Telefonica. Okay. Great. And you don't think allure marketing had had any impact? No. Not really. That's great. Thanks very much. Cool. Well, then, I made thank you all of you for for joining this call. It was great to talk to you. It was also great to hear some back noise where I have at least identified some of you have children, and I'm in home office. We wish you all the best. Stay healthy, and take care. Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect now.