Earnings Call: Q1 2019

May 9, 2019

Good morning, ladies and gentlemen, and welcome to the Freenet AG Analyst and Investor Conference Call regarding the Results of the First Quarter twenty nineteen. At this time, all participants have been placed on a listen only mode. The floor will be open for your questions following the presentation. Let me now turn the floor over to your host, Gustaf Wiedernek. Ladies and gentlemen, please hold on a second. Mr. Vilanenk, please go ahead. Thank you very much. Warm welcome to everybody. We had some connectivity problems. It was fixed line. This is not our core business. So we failed. Thanks for giving us some extra time. And again, a warm welcome for our today's conference call on the Q1 results. I'd like to start immediately with the presentation. Overall, my summary is that the first quarter ran exactly as we have planned it and we are perfectly on the trajectory for the full year guidance. Revenues are on an absolutely stable level from previous year even though the old UCAV radio program was phased out. So we have compensated that with more service revenues on the other end. EBITDA is up. Certainly, a big proportion of it is from IFRS. But even without IFRS effect, we have a slight growth. I'm following the projection for the full year guidance. Free cash flow is up and Ingo will give you a brief on that one in a second. And most importantly, the subscriber base year on year grew by 320,000 subs. And quarter to quarter it was also going up. That is seen on the next page. During the quarter, there's a slight growth in the subscriber base. I'll go into the detail of each of the three components. Postpaid dropped by 0.5%, but it was an actively managed activity across a number of elements, which led to that I would say negligible little downgrade. Free net TV up a little bit and waifu on the growth path, which indicates that the 350,000 will be rather easy one, but I'll come back to that in a second. Let me start with the overall situation or the view on the mobile telephony piece, the postpaid piece, which is the most important. As you know, there are four components where we kind of intervened and actively managed during the past quarter. This was not a singularity to the quarter. This is something which we have already done in the fourth quarter, but with more emphasize in the first quarter, we have let go some of the less efficient channels. There is some minor activities online with partners that we have basically reduced. And we have cleaned out a couple of affiliate partners where fraud or debt from the customers was identified later the year and this is why we switched them off. Second element to the optimization of margin and customer base is that we have reduced the share of low end tariff plans and there is more detail on the upcoming page. We also have seen the hardware industry not delivering significant new innovation. This is then this impacts then the subsidized postpaid business mainly on our own retail channels as well as on Mediasatone. And we have had a very strong performance with in the first quarter and that also led to the fact that finally we started the second quarter. We have their full LTE plans on any of our plans available in Vodafone, DTHG and PEPF was a little lower in the first quarter, but it reflects also the last year. So I would say those four elements led to the fact that we have actively managed gross add development and consequently the net add development led to over 5% down in quarter by quarter plus plus but still plus 1.4% year on year. So we feel very comfortable with that. On the next page, we've given you some more details on the change in tariff mix. I mean, the statement I think is very simple. We have we let go some of the tariffs below €20 that corresponds to my statements on channel mix and on subsidies from previous page the share of those ones came down by 5% of total, whereas tariff plans on the higher level €20 plus was growing. This consequently also impacts short term, but more importantly mid term the ARPU. The other step that was introduced in March was on next page, We have launched our new marketing campaign for the past four years. We have we had our main testimonial cost driving the message of good value for money, attractive pricing based on research and a lot of testing. We have now switched to a new very strong campaign stressing the effect of what I call the local heroes. So in our shops you will be supported in readjusting your phone, changing your phone, doing all kinds of extra services. The campaign tests really well. The services are very much appreciated. And it addresses not only the needs of existing customers, but also of the regular footfall. So tracking and recognition and brand protection, all those KPIs tend to prove that this new campaign is really delivering what it was supposed to deliver. And I think it also fulfills the type guys of more service and less of a price further price war in the market. Having said that, even though it does not belong to the first quarter, but to the second one, this week on Monday, we have launched our new product and this product is addressing a couple of the things that I have just mentioned before. The entire product, FreeNet Funk or Funk in German is a product which you can only order after you have downloaded an app. There is no availability in the shops. There is no availability online. Customers have to download the app. Within the app, they can then choose the number. The entire identification process is within the app. Then they can ask for the delivery of the SIM card. Either they can pick it up, but typically, the first three days, we've seen that they ask for postal shipment. In the bigger much important areas, there's also same delivery cooperation with locally, I think it's pizza delivery and so that would also deliver the SIM. Customers activate the SIM card through reading a QR code via the app. The entire interaction, the entire pausing of choosing the pausing of the tariffs, etcetera, etcetera. It's all done within the app and the app delivers also additional information, especially for young people. What is your data consumption on a day? Who is the ones that you talk? How often? And what's your overall consumption in voice SMS and text, etcetera, etcetera. It is kind of a hybrid product because you basically, if you choose the day by day tariff plan, you're billed every day and the sole methodology on payment is PayPal. On the next pages, we have given you some indications of what the app looks like, but I highly invite you just to download it and experience it yourself. And there's only two dairy plants, so be simple. One is unlimited, including text, data and voice. It's €0.99 a day. You can stop it, you can pause it. People have full flexibility. And the secondary plan is a one gig a day plan for €0.69 a day. Again, they can pause it, they can stop it, they can there's no need to basically cancel the contract. After a certain period, we cancel it automatically, but customers can change that. And by the nature of these tariffs, if we would ever do a promotion or if we would ever have to change the prices, by nature, all the customers automatically get the benefit of new pricing because otherwise, I mean, they basically would cancel and reorder. Feedback in the press social media has been very positive. So far, we can basically only read the number of downloads, which we will not disclose, but we have a very positive first day indication build side to many others put it on their front pages of their online apps and activities. So I'm sure that next round of second quarter call, will give you more insights on it, but we're very excited with the positive feedback external and internal. So let me move on to the TV segment. First page here, which is Page 11. This is the trajectory of Waipu subscribers. So these customers that take advantage of the full set of private channels HD recordings, etcetera, etcetera. You are all aware that there's also free product with the public channels only. We're doing really well. There's a growth of 115% year on year. There is a plus 34,000 quarter on quarter. So we feel very comfortable with the original guidance. We have recently done a survey once again on our customers. The customer age on average is 44 years. It's twothree male, onethree female, which is the one this is an indicator of who we relate to in terms of payment. The usage might be a bit different. I myself, I'm the subscriber for my family and obviously my wife and my children watch it. So they would count me as a male subscriber. The average is more than ten years younger than the regular German linear TV consumer. So we tend to be a bit younger, but not really early adopter type of thing. These people are majority working and they tend to live in a household with more than two people, which also shows that the multi room options and the multi user option is something that is very attractive. Next page, we've shown you what is the current usage that we measure. You should be well aware that any of the subscribers whenever he or she is using the service, can identify the hardware, we can identify the type of connectivity. We see even the DSN or broadband provider and we know all these details. And obviously, we collect those data in order to later on, a, adapt to their individual needs and also to use it to improve targeting of TV advertising. The key message here, 80% of the usage is on big screen, which posted after a little while people realized that Waipu TV is not a mobile television entertainment, but is the best alternative for cable or satellite or even DVDT to in the household. I will not go through the entire details of Page 14, But we'd like to indicate that there is a constant flow of new feature sets and new benefits. In 2019, as we have lined out before Apple TV, Android TV will be launched. There will be a full a pure 100% Android TV solution in the third quarter, most likely with the Freenet branded remote control and the Freenet branded dongle or little set top box. The instant restart is about to be launched and there's a constant inflow of a number of new channels. There's also some ethnic channels in about to roll in. The two big steps that we have achieved or the team in Munich has achieved during the quarter was that finally we have signed and installed and launched the cooperation with Axel Springerferlag. At least the Germans are well aware of the Bildzeitung and the Bild family comprising also Outerbild, Computobuild and many others. We have over six months work with BUILD SEATING or with BUILD's VALXCOPE on a 724 channel that is delivering critical information, the regular news, everything that you can you all know from BUILD. And there are sub labels such as car mobility documentaries as well, but also not on computer technology. The channel, if people choose the channel on the remote control, there's immediately a live program, which indicates there's a constant lineup of program. And then people can also with one click switch into the full library and stock of build Zeitung. The good thing about that is it's our pilot program with this kind of complexity. The entire thing is based on the robot that the team has created and is about to be patented so that we can basically plug into any moving picture library and create a program out of it. We are not only the technical solution provider, but we also do the media selling here on those channels. And I think it's the first of hopefully a number of new channels that we launched. We have done ADSC before, we have done MediaCraft before and RocketBeans. But I think Bilt should be kind of a lead in of a new dimension of television in Germany. The second real achievement, which is very positive and from Preenet's point of view a revolution. Finally, after twenty five years being a service provider to the network operators, we become kind of the operator and they become our service provider O2. Telefonica Germany has launched only last week their own OTTPTV solution based on a sales cooperation with the team of XLRingWIPO in Munich. So they act as a sales partner, which I think is very exciting. There was a long work with those guys. There was a public tender on the solution. We had, as far as I know, there were Telefonica internal solution. There were many others that they have looked at. And finally, they have decided that working with the guys of Waipu delivering our original product to their customers So really I'm really very positive about it. Obviously, we will not be able to communicate a lot of details there because that's subject to Telefonica giving disclosed number of customers that they have required for us. But obviously, for the entire story of Waipu, this is a breakthrough moment. And we are talking to a couple of other big partners that also would love to have Waipu as a product for their own sales force. Last but not least, it comes on the Finet TV, so the antenna B2C business. There as well, if we compare by end of the year, we have crossed the 1,000,000 RGUs and a slight surplus in the first quarter. So I think this proves that that one drop in Q3 was a unique event that happened and we have explained that before, but we're positive for the full year that we will have remainder of customers higher than €1,000,000 After that kind of qualitative look at products and the performance, I'd like to hand over to Ingo Annoy for the financial review. Thank you, Christoph. Hello, everybody. So from my side, first of all, I start on Page 18. First of all, I would like to confirm what already Christoph told you. I think what we published here today and what we saw in the first quarter is a total confirmation of the guidance for the full year what we gave. So we are fully on track on this. So what you see on 2018 is the revenue stable at 6 and €89,900,000 The gross profit, which is slightly increasing because of some IFRS 16 effects from $223,000,000 to 02/27 Without this effect, it would be also stable. And also, if we look into the EBITDA, there is this CHF 11.4 increase quarter by quarter, but this is based on IFRS 16. And if you just compare the EBITDA without IFRS 16, it's very, very stable around €96,000,000 €97,000,000 If we change to page 19, so we did it the first time with our last figures that we announced also to give a more detailed view in the segment and to show what the intersegment allocation effect is. So on Page 19, on the upper end of the slide, you just see the figures including it. There you see that mobile is very stable, TV and media slightly increasing, other holdings slightly decreasing. But what I think what is more important is to talk about the line without intersegment allocation. And what you can see here is that mobile shows an increase of 8,700,000 And yes, partly this is because of lower gross adds and lower costs for SAC and for SRCs, but it is also a good margin what we saw. So it's a perfect confirmation that this business is very stable and that we do not see any problems, any pressure in this year. And so I do not understand these comments, what we see very often because, again, it's a proof of the concept, and it is a proof that this business here is very, very stable. Then if we look and if we change to TV and Media, here we see that there's a decline of €6,100,000 This is mainly driven by the Analogue Radio business here in the first quarter. And but as you know, last year, this was not stopped in the first quarter. So we had the Analogue Radio business last year. So during the year, this effect will go down because there will not be any positive EBITDA. There were no positive EBITDAs in 2018. So it is only something which we will see a lower way in the second quarter, but with what we will not see in the third and fourth quarter. Then we see the other holding. There, we also see a decrease of €2,900,000 in EBITDA. This is based of some project costs, what we have, some personnel costs. It is also it's a onetime effect more or less. So I do not expect it to continue in the other quarters. We have these effects in the first quarter to show here. If we change to Page 20. On Page 20, I think, first of all, if you see the revenue in the Media Broadcast, this is something what you see here is decreasing. This, again, is the Analogue Radio business. In all the other segments here and without this Analogue Radio business, you see slight increases in the revenue. If we move to the gross profit, here again, you see that the mobile without intersegment allocation is plus 9,000,000 Therefore, you see that the €8,700,000 what I showed before from the EBITDA, this is nothing to do with savings on the SG and A side or something like this. It's a real profit which is from the business here. If we change to Media Broadcast, here we see in the gross profit the minus 4.2%, again from Analog Radio business mainly. And we see that ExaRing in terms of gross profit and also in terms of EBITDA, it is very stable to what we did last year. And so we are steering it in this way. As you know, we are steering XERing by EBITDA budget what we grant them, but and they have to deliver as much gross adds and as much growth, which is possible in the framework of EBITDA what we give to them. Moving to the free cash flow on this page. This is better than last year's €7,000,000 You see here the new leasing part, which is increasing here in this bridge. I think what you see is the EBITDA is €11,400,000 higher from IFRS 16, and you see that the leasing is higher. The out payment here is something like 11,000,012 million euros higher. So this is something that compensating effect. If you see the other changes in comparison to last year, you see slightly increasing interest payments because we have higher gross debt here. And what you also see is a lower number of CapEx. So we only paid out €6,800,000 in the first quarter twenty nineteen, which was €11,000,000 in 2018 and this is because we had less CapEx to pay for Media Broadcast. Changing to the mobile business on page 21. Yes, I think Christophe already explained that we focused on profitability here. It was not it was definitely also driven by the finance department here that we wanted to focus on quality here and that we wanted to focus on profitability. So we accepted to see a loss in net adds here in the first quarter. But this is something what we steered and what we wanted to have there and what we accepted. But we are aware and we are very confident that in the long run, this will optimize our profitability here. The ARPU, it is 18.8% in the first quarter. So it is stable. As you know from the past, it is possible €0.20 lower, zero two zero up. In all these cases, we talk about a stable ARPU, and this is what we also do here. I think in the second quarter, it's also possible that it increases by €0.20 So it is stable, no big change. Moving to the digital lifestyle revenue, This is something what we see here that it is a little bit saturated. Yes, you have to we have to be quite frank here. So what we do at the moment, we stabilize the revenues in this part of the business. What we try to do, and this is also part of the margin increase what we saw in the first quarter in the mobile business, is that we try to optimize the profitability of this portfolio. And this worked fine in the first quarter, and we try to do so also in the following quarters. Moving to Page 22. I think most of the parts here we already discussed. I think what is important is if we look into the revenue is that the postpaid service revenue quarter on quarter is increasing. So it's another sign that the business is very stable. And so from $383,000,000 to $387,000,000 And all in, the service revenue is slightly increasing from four seventeen million to $4.20 Moving to the TV business, this is on Page 23. I think on the Page 23, most of the impact what we show here, we already discussed. Therefore, I would like to directly move to 24% because here we see a little bit with more transparency in what segment of the TV business we saw the move. What we see here in terms of gross profit is that the loss what we see in Media Broadcast in comparison to last year's quarter, It is mainly driven by the Analogue Radio business what I already described. So you have a €5,700,000 loss in the gross profit B2B and you have a €3,600,000 loss in the EBITDA B2B. What is important to know here is that we started a personal restructuring because of selling the business. I think we already reported about it. And so we will have a significant reduction of personnel costs here starting on the April 1. So you do not see these effects in the first quarter. You will see the effect first time in the second quarter. So yes, you have this decrease here and this abbreviation in the first quarter, but this will not continue in the following quarters. In the B2C business, here we have some we had some additional sales of hardware, etcetera, in the first quarter twenty eighteen. But what we also have, and I think most of you are aware of this situation, We have something like a glide path here in the conditions with the private channels. So we have slightly increasing cost with the private channels year by year. I think it's not increasing every year, but this year there will be this slight increase and we will also see this in the following quarters, but the effect will not be as big as in the first quarter. Moving to the balance sheet on Page 25. What you see on Page 25 is that the equity ratio is slightly decreasing. This is only linked to the start of IFRS 16 because you have higher asset value here with €4,900,000,000 and therefore the equity ratio is increasing. But in itself, there is no other reason for this. Then we have the net debt and we show it now in a very conservative way. And this net debt is increased from 3,800,000,000.0 to 4,200,000,000.0 So without IFRS 16, it would be decreased. But because of the effects from IFRS 16, it was increasing. And in the last column here, you still see if we would deduct the market values of the equity investments what we have, it would only be 2.4. I think I already talked about it in the last call. It is important for me to talk about the pressure on us again here because sometimes I think it was a little bit overvalued from you. I think it is important for us and it is still our target to reduce the net debt to levels below 3.5. But we have a healthy balance sheet here. So it is not necessary to do something in a very short period. All the financials what we have, all the covenants are in line with what we plan to do in the next month and what we guided and so on. So I think, yes, it is our target to reduce it, and I stick to it definitely. But we do not feel any pressure in our daily action here out of this. So that's the financial figures from my side. I would like to start the Q and A now. The first question comes from Christian Fangmann from HSBC. Please go ahead with your question. Yes. Good morning. It's Christian. I have a couple of questions. First one on the postpaid net add trend. I mean the results were weaker than expected. I get the point regarding refocusing on more valuable customers and you've shown the pie charts that are very helpful. But if we look out for the rest of the year and also given your new launch of MobiCom Digital Funk, what can we expect in terms of trends for the rest of the year? Are they staying around the zero level? Or are you anticipating a step up in the rest of the year? Mean, I know you can't predict claims, but at least a rough indication would be helpful, I think. Then I think the other one was on TV revenue. That was a €10,000,000 drop year over year just from a reported standpoint. Is a bit of a box for us is clearly the legacy B2B business. Now obviously without the analog radio business, But what is kind of the trend for that kind of part of the business? I think if you could give a bit more granularity around that, it would be helpful. And then lastly, maybe on ViperTV with the new cooperation that you have now with O2, isn't your Viper TV target a bit conservative? I mean, is there are you seeing that it could be substantially higher? Or was it already part of your guidance anyway? And yes, think that's it for now. Yes. Thank you, Christian. I think all valid questions. First one on the postpaid. I mean, the guidance was that there was we were planning to be a bit higher than the return of the year. And I think it still remains on that level. If I look at I compare our development with the one of Deutsche Telekom, I think they've lost 1% quarter on quarter. We are down 0.5% for maybe somewhat different reasons, but we still believe that the market overall will absorb the volumes that we planned. So we speak to the guidance, which said it will be by the end by the turn of the year, we will be a bit higher than on January 1. So that also indicates that we need to we foresee more we foresee growth again mainly in the second half of the year because that also corresponds a little bit to our churn rates, etcetera, etcetera. And I think Finite Funk is a little bit of a hybrid because it's in a way it's a postpaid and in a way it's paid by per use. We will need to see how we incorporate that depending on the size it will deliver, but that's something which we have not made our mind up. On the TV revenues or media revenues, the downgrade by €10,000,000 is the UQAWE business, which was dropped. So given the fact that we had last year we had two quarters, first and second with Unclever's revenues that is the driving force for the drop this year for the first half year and the second year. This will wash out And the increase on waipu will not fully compensate this year. So overall, I would say year on year, I would assume a wash for the full year. So a downgrade on first and second and then slight upgrade from the day to day business in the second and then a wash. And the last question that I have seen was or I've heard was Daipu. Again, we are not sure but this the sales cooperation with Telefonica was not part of our plan because back then the contracts were not signed. I cannot guarantee whether we will only show our internal revenues or whether we will also show kind of the subscribers and users on Telefonica because that's something which we have not discussed yet because certainly they will also have to report on it And we don't know exactly what the granularity will be because part of their customers will have it as a triple play offer, etcetera, etcetera. So we have to come back. But definitely, $3.50 was a standalone without Telefonica. And we will that the revenues that are generated will be reflected in our business. I think we can be we have to beg your patience after the second quarter. Thanks, Christoph. As a follow-up to that one, but is my understanding right that the customer ownership is with you and not with O2? Is that correct? It's actually a split one. On the so we can address those customers within the Waipu platform, and that includes any revenues generated out of upsell, cross sell on VOD and on advertising. But O2 also has those customers in their own ownership because at least that was the intention that typically they would sell it into their customer base. So it's a double customer ownership. But we can market those customers on within the TV application. Okay. The next question comes from Usman Ghazi from Berenberg. Please go ahead with your question. Hello. Thanks for taking my question. I've got three questions, please. The first one was just on Waipu. You mentioned in the presentation that Waipu is approaching breakeven. I was just wondering if you could perhaps give a bit more clarity. I mean, given that EBITDA for Waipu this year, I think you guided to slightly above minus 10. I mean, are we talking I mean, are we talking about breakeven at some point this year on Waipu? Or is it more further outstatement? Second question was just on the personnel costs in the TV and media business. So am I right to understand that in H1, the loss of the EBITDA from the Analog sale is offset by the personal cost, but in H2 when you will just have a net benefit from the personal cost reductions given that the loss from the analogue sale was already booked in H2 last year? Final question was just on the mobile gross profit. Obviously, encouraging development given the reduction in SAC and SRCs. When you do look to go back into the market, do you expect the benefit on the EBITDA from the SAC and SRCs to reverse out through the end of the year? Or is there a structural reason why that might not happen? Think, Usman, thanks for your questions. I think on the personal cost at Media Broadcast, I think, yes, your interpretation is totally right. So in the second half of the year, there should be a positive EBITDA effect from the loss of from the decrease of personnel costs. So this is totally right. Concerning the mobile gross profit, I think a lot of things were running fine for us in the first quarter. And so we had different positive effects, as I already mentioned also from Ditch Life trial, but also from Saxon SSE. So you are totally correct here. I think I do not expect every quarter now with such EBITDAs. And as we already said, we would like to pick up on the growth here again. So I think I would not expect it to see it again. I think part of it, yes, should be stable for the year and should not be eaten off by increasing net adds during the year. But I think this would only be a small effect, which would be stable. And on TV, your question was, I'm sorry? Yes. So on Waipu, I think the guidance has been that Waipu is on an EBITDA minus yes. Yes, I got it. So what we do at the moment is we steer the business with an EBITDA target. So we sell the management minus 15,000,000 EBITDA a year is fine, and they should grow the business as fast as possible. And what we see at the moment is that there is still a dynamic and there's a big dynamic, So it makes a lot of sense to use the money to grow the business. So it could be possible to be breakeven this year, but then I would not see any growth. So this would not make sense with the starting business to steer it in this way. Therefore, I would not promise to have a breakeven next year or this year. And as long as we steer it in this way and as long as we see the dynamic, I would expect a better EBITDA in 2020. So I would expect something which is below minus 10%. And then in 2021, I think that's a good chance to see a breakeven. Thank you very much. Thank you. The next question comes from Heiko Paolo from Commerzbank. Please go ahead with your question. Hello, good morning. I hope you are well. I have two questions. Firstly, on your TV cooperation with Telefonica. Would it also work with Telefonica's new cable products, I. E, can their customers, in theory, get an Internet only cable line and combine it with Raipu, do you have insights? And the second question is on Sunrise. I wanted to know if it is possible, based on the legal situation, to, in theory pool your voting rights with other standardized shareholders under this law without basically acting in concert? Thanks. Well, on the first one, certainly, I think it is the origination of the Telefonica Germany ambition to go into OTT IPTV is that they have, I think, a customer base of €2,000,000 in DSL. The potential access to the cable network would enlarge the potential. And furthermore, if in our customer base of Waipu, can see and identify whether the customer has a copper or a glass fiber or a cable connectivity. And we can go give them a very specific offer either to change, but also to address them and to let them know that cable might be more expensive than our offering. So I would highly anticipate that this is definitely Telefonica's ambition and that is also something which we foresee if the cable market is opening. So, it's definitely creating an extra opportunity. On Sunrise, that's a tricky question. I would say, whatever our opinion will be and whatever our voting will be at the end of the day, we would certainly announce it prior to the actual event. And then whoever shares our opinion is free to join our well to express the same opinion. So in that sense, it's not the pooling. If we would I think what is not according to my understanding of the Swiss law, we could not go to others and ask them whether they vote with us, but an exchange of opinions is not only possible, but already happening. Fully understood. Thank you. Next question comes from Ulrich Harter from Jefferies. Please go ahead with your question. Yes. Thanks very much. I have three questions, please. The first one is, in in when you described the net adds, the postpaid net adds in the first quarter, you focused very much on decisions you've made, discretionary decisions, it sounds like. But obviously, there is a sort of bit of a competition in particular, I think, from Telefonica at the moment in terms of promotional activity. So could you comment to what extent that has directly influenced your trends and or your decisions in terms of what Telefonica has decided to do and what you're seeing in the market? That's my first question. Second question this is slightly technical thing. But on on on the slide on the ARPUs in mobile, I noticed that in the new definition, the the ARPU without hardware, so the one we are now focusing on, that actually has declined and, admittedly, only about 20¢ a year on year, but it has declined to 18.8. The ARPU in the old definition is shown as actually having grown by 30¢ a year on year. So could you explain the discrepancy in the trends between the old and the new definition? I think that's not directly a question of the hardware sales, but also of the structure of the tariffs and the subsidy clawback, but I'd be interested in in in in in the reasons. And my last question, if that's alright, is I understood you changed the intersegment allocation for the full year retrospectively in the fourth quarter. Now in the first quarter, you said some of the intersegment allocations are going a different way from the full year. Does this mean that the full year intersegment allocation that we're actually seeing as reported irrespective of what the quarters of 2018 look like? The full year one isn't representative of the full year intersegment allocations to be expected in 2019. And I understand was the full year 2018 allocations were actually the clean ones that were representative of what is to be expected in 2019, but I'm not entirely sure after the first quarter now. Thank you. Thanks, Ulrich. On the first one, on the net adds, well, I think on the charts, we said that all these effects and measures are interrelated, and it's very difficult to fully separate them. We have seen on Blau and also on some of the O2 promotions aggressive price downs. And as a consequence, we always have to decide for ourselves whether we follow such a or we mirror such a promotion or whether we step back. And as a consequence, the share of higher value tariffs aside from it. So, yes, so then you can answer the question, but what was prior so who was following home? Were we stepping back prior to their activity or the other way around? I couldn't tell you, to be honest. And I think, to be honest, also the level of promotions every now and then is a little bit overstated. If we look at approximately 8,000,000 so called new subscribers acquired a year in Germany, a two week promotion by O2 or Mega Macta Thorn is a drop not in the ocean, but in lake. Yes, we look at those. We have also seen and I can give you a different indicator. Last year very we had a very prominent new player in the field, which was Check24. They really have grown heavily last year. According to our knowledge, when we do not publish anything because they're private, their level of acquisition on mobile dropped by 20%. And if we look at today's hit list on best price, then you will find 20 different tariff plans from the British United Internet Group. So then we take a decision whether we would follow this and say we'll put in a new offer and we have tested it actually early April. So we put our offer €02 below our Drillisch offer and it took four hours for Drillisch to go €01 below ours. So I mean, is kind of the daily change that we have decided that we test it. We see whether the others react and what the volumes are. But we also take the decision to step out of it. So it's I think we described our activity. I cannot really give you the answer whether it's one or the other or who was first. It's kind of an overall reason, as Ingles said, I mean, we sit down every other week on the offers. There is the component guys that say, life cycle on this offer resulting from the real airtime CPO, the acquisition cost, the delivery cost, the promotion effort, the price downs. This is how it looks like. It's like big column tables every other week. And then it was a bit more rigorous than they were before and I think it proves to be right. So, we will continue in that policy, but that's it. On the ARPU, the observation is an obvious one. The hardware the level of hardware within it is a result of the hardware pricing. And implicitly, the hardware price is an indicator of the acquisition mix from hardware. So if you do a lot of iPhones and a lot of Samsung S10, it's a bit different than if you look at it. Mean 20 plants by 6,000,000 customers is about 1,000,000. So if you look at this, if you have 50,000 or 80,000 a month, but the mix is different, this immediately impacts this hardware included issue. Ulrich, hearing your question about allocation, I asked myself if transparency makes the life more complex or not. But what I think what I understood and therefore I try to answer your question is, I think the main way of doing these segmentation, these allocations in the past was that the mobile business was there was a profit on the mobile side and there was a decrease on the TV and media side because on mobile there were a lot of marketing things and so on what they did for TV and media. And this was already decreased in 2018, but this will further decrease in 2019. And this is what you see if you see the figures of the first quarter that there is still an effect. And if you watch into the figures without Internet intersegment allocation, there you see that the mobile results are increasing by And this is still the same effect what we saw last year. There will be this effect in this year because the allocations will be lower during the year. But I think it is something what we planned and what is mirroring the business. That that's very clear. And and and I I understand I understand what what you're describing as. It's simply not the same allocation. It's allocation overall sort of changes. And and 2018 wasn't just sort of the new normal. It was it was just a step in the in that direction. Okay. Definitely. Thank you. At the moment, there seem to be no further questions. The next question comes from Martin Jungfleisch from Kepler Cheuvreux. Please go ahead with your question. Yes. Hey, thanks for taking my questions. I have two. First one is on the focus on more valuable customers that you mentioned. If I look correctly, other players such as Strelish, they also want to focus on higher value customers. But also, I suppose that the M and Os want to keep their higher value customers in their retail brands. So what makes you confident that your strategy will be successful? You also mentioned that you had a lower performance with DT and O2 in this quarter. Can you also provide some color on how the relationships with the operators have developed over the past few quarters? And the second question is on your TV and media segment. You mentioned that you're getting close to breakeven. So what would you say is a good mid term EBITDA margin assumption for the TV and Media segment, given that you expect further increase in content cost? And how do you rate the operating leverage in that business? Thank you. On the first one, well, my conclusion would be that everybody understood that discounting and feeding Schneeppier and Jager is not a wise strategy. I think overall, the market, the regular German consumer is ready to pay anywhere between €20 and €35 next month. And I think everybody hopefully, more and more, we come back to a reasonable level. So in that sense, I feel very comfortable to be on the same page as our dear colleagues. As I mentioned before, I just looked at the BT figures this morning. They have had quarter on quarter also a loss of 1% in their mobile postpaid base. On Telefonica, we cannot see it because I think they do it, they show it blended. But yes, I think the market is ready to pay for a reasonable service. Overall relationship, I think there's no big change. Vodafone is currently the ones that it's the easiest to work with