Good morning, everybody. Thanks for joining today's call. Happy to talk about the H1 year, answer your questions. I'm sure we're gonna spend a little time on latest news on the move of United Internet. Let me first go through our numbers. We start on page 4. As you can see, we are well on track, I would say, even a bit beyond the original plan for the first 6 months. The subscriber base year-on-year has grown by 4.7%. Revenue is up as well, a little lower than we originally thought, due to some hardware, lower hardware sales, specifically in Gravis.
EBTA up by the half of the year on EUR 250, almost EUR 255 million. Obviously, this is beyond the half line of the year. We expect some more expenses in the H2 , but I can already indicate we see the outcome for the year at the very upper end of the range of the guidance. I think the EUR 500 million is more or less ticked off by now, and free cash flow is also growing by 5%, equally to the EBTA. If we go on next page, page five, you can see the breakdown of the customer base, the contract customer base.
Total base is 9.285 million subscribers. I think we're doing, doing really well there. As you can see, that was indicated in the last couple of months, the net adds on TV are higher than the one on mobile. That's actually what we have expected for the year. On the TV side, as you can see on the lower end of the page, left-hand side, freenet TV is still losing customers, but it's performed by the growth on IPTV, which is exactly according to the original strategy in the TV area that we have announced and are continuously explaining.
If we go one step deeper into the mobile on the next page, you can see mobile growth on postpaids as well as on the app-based tariff plans. We show them here because they are equally treated in-house as the postpaid. It's both are doing well. We have Q2 net adds were 37,000. You might remember that for the full year, we have said it's gonna be anywhere between 100 and 150. We are now close to 100,000. We are still expecting a positive net adds during the third and the Q4 , but a bit lower than with the headwind that we had in the Q1 .
We will definitely beat the 100-150. We will be in that range by the end of the year. We're doing really well. We're very happy about it. I think it resides from a couple of things. One is we're seeing an increasing share of SIM-only also in retail. That is a phenomena that we relate to the fact that there's no innovation on hardware, neither on Samsung nor on Apple side. Also, the equipment is longer lasting than it was in the past. More and more customers skip, I would say, skip around of hardware, and might come back with the next renewal for another one.
The smart pricing, so our pricing scheme, specifically on renewal, which is on an individual base, is bringing a higher number of renewals. If we compare internally, gross adds and renewal, renewal has been stronger than gross adds for the last couple of years already, but it's still stepwise increasing, and our renewal rate is doing really well. Another qualitative statement here, we are, our service hotline calls and service hotline contacts is going down as a result of significant measures in the area of standardization and optimization, specifically in complicated procedures such as number portability or number porting. The new, the new process that we have set up is self-administrative by the end consumer in a digital way.
This is significantly reducing the number of contacts and specifically reducing number of contacts that are negative contacts because of a frustration on the side of the customers. This also saves a bit of money. More important is that it generates a better, better scores on Net Promoter Score, Service Promoter Score. Last but not least, we have initiated already in January an internal group on artificially intelligent applications. I personally lead that, lead, lead that group. That's about 40 people across the entire company. We are searching and working on applications along the entire value chain, value creation. Up now there are right now there are about 10 projects up and running.
They will even improve not only customer care, but many other procedures within the company. By the way, any employee in our company has access to ChatGPT and some other applications. We really enforce them to trial and error within the necessary data protection limits. Next page, as already announced, a quick view on the on the TV side. You can see that freenet TV, the churn is slowing down, which we consider a positive signal. We don't think yet that we have kind of like the long tail bottom, but we're doing better than we did in the past year.
More importantly, Waipu TV has 100,000 net adds in the Q2 . Strongest quarter so far in history of Waipu TV. In the Q1 , we have 80,000. I think I just recently did a benchmark. I mean, Deutsche Telekom with Magenta did 50,000, we're doing 80,000. I'm curious what they do right now. We're very happy and feel confirmed on our strategy and our strengths on sales with that performance. For the rest of the year, I personally would assume that we will add another 200,000 net adds. The Q3 will be a little lower, the Q4 then will be super strong.
I deduct that from the campaigns that we are preparing and planning. We will continue to work with the testimonial, Dieter Bohlen here, and that really pays back. Brand recognition is doing well according to the measurement, the measures that we have. Everything is really positive there, and we have a lot of talks with potential inorganic partners or partners that are doing fiber on the local level. Really, really strongly side on Waipu, and I'm very happy with the performance. We on the next page, we have included a bit of a statement on the, I think it's called in English, ancillary cost privilege that is going away next year.
There is about 12 million households, and there is, on cable today, there is a big proportion that is yet convinced that they are planning to switch to IPTV. We cannot guesstimate on how long it's gonna take, but likelihood of switching to IP is growing, so we are preparing for that phase. We'll spend more money this year and next year on above-the-line brand marketing, et cetera, et cetera. We're addressing our own customer base, making them aware of the potential switch from July next year. We expect, this to help Waipu grow even faster than this year. I'm already at the end of my part with an outlook.
I think the H2 of the year, we're working on all ends, and I've mentioned it before, with a lot of applications, with the help of AI, on improvement of service quality. I think we have never been weak, but we see an opportunity there to be even better. We are preparing a full alignment of our own channels, meaning online and retail, own shops as well as franchise. Most likely from first January on, all offers will be equal. No difference between on and offline. We think that is a good proposal and a good, a good proposition towards the end consumer. We are preparing all details. Right now, we start the training with our sales staff.
I in an ideal world, from January, we have a more assortment for the end consumer, more time for the end consumer, and more service, and hopefully, more satisfaction for the end consumer. freenet Internet, we will increase the prices right now. Our price tests show that it will not slow down take-up rates, which are right now around 2,000 a month, which we have already indicated, I think, in the last call. We are adopting the Magenta Next, which is the family plans. There is a freenet Next right now in the staging phase. We will do that with Deutsche Telekom, but also with Vodafone. We are talking to a couple of fiber infrastructure suppliers.
It is quite obvious that they don't have a mobile offer, and we are talking to them whether we do combined offers, not only with Waipu, but also with mobile. I mean, the, the real big ones are Deutsche Telekom, Vodafone, they do it themselves. Also, Ark, which is the, the one of Telefonica, but there is a lot of others. And they have understood that to have a competitive offer, they need services such as mobile and TV, aside of their IP access. And on the, on the Waipu side, already mentioned a broader campaign, and we are starting by the end of the year with, I would call it self or the preparation of self-cannibalization with our hybrid stick, delivering IPTV as well as terrestrial signal.
This is the outlook. Let me sum up from my side. I think we're extremely happy about the first year, half year. We're very confident that we're gonna continue like that. We're happy that we did not have any problems on either of the KPIs, and operationally, company is running really perfectly well. Having said that, I'd like to hand over to Ingo for a deep dive into the numbers.
Yeah, thank you, Christophe. Good morning, everybody. I start on page 10 with the overview of the group financials. I think Christophe already mentioned, I think both of us, we are very happy with these figures. If you look a little bit deeper inside the figures, you see that the good performance is, is driven by the operational performance in both segments and not by saving any costs, which I would say is, makes it even more clearer how sustainable these, these results are, what we do see. I move directly to the mobile segment. I think here we see a continuing of the trends, what we saw in the, in the Q1 . Yeah, definitely the hardware sales are, in, in revenue terms, are lower.
We-- I think we are not nervous about it because the profitability in this part of the business is relatively low, so we do not lose any gross profit or EBITDA here. We only lose the revenue. On the other side, we are more than happy that the service revenue, where we generate much higher gross profit, is increasing even further compared to the quarter, the Q2 , 2022. I think also here, from a rev- revenue side, positive signals, which are also confirmed if you look into the gross profit. I think what you do see here is now that we have something like-- found something like a level here with EUR 172 million of gross profit.
It is confirmed again in this Q2 now, which is much, much higher than in the Q2 2022. If you look into the EBITDA, you see that the advantage is slightly lower compared to the gross profit development. This is based especially on an inflation, one-off compensation bonus, what we pay to our employees. It is with a group effect of EUR 2 million. This is something of a negative effect, but I think this shows that we do really find it important not only to talk about ESG, but also to do things here in the social arena. Moving to the some KPIs from the mobile segments. Very, very strong development in the digital lifestyle revenues.
Yeah, definitely lower than in the Q4 , 2022 and in the Q1 , 2023. This is a normal pattern because it is all around Christmas, Christmas business, where it is also much easier to sell digital lifestyle services. The EUR 53 million what we generated in the Q2 , 2023 is even an increase of 10% compared to the Q2 of 2022. Also here, a very, very strong signal, what we send. Looking into the ARPU, yeah, there is a slow increase if you compare it with the Q2 , 2022. It is not a structural effect, it is more based on the situation that more people are traveling. All in, I would still say that the ARPU is stable, and we are very happy about this.
Moving to the TV and media segment, a strong development here. If we compare the H1 of this year with the H1 of last year, there is an increase of EUR 12 million, of 12%, EUR 17 million in, in revenues here, this is mainly driven by the strong customer growth at in the IPTV segment in waipu.tv. This translates into a very strong increase of gross profit in waipu.tv by EUR 9 million on the, on a gross profit level. This is lower if we watch the EBITDA, because here, waipu.tv was only increased by EUR 3.2 million. This is based on additional marketing investments, what we, what we did during the year, to increase or to accelerate the, the, the customer growth here.
In freenet TV, slight increases, even with a decreasing base, because we, we, we see the effects of the price increase, what we did at the end of last year. In the B2B business of Media Broadcast, a stable development. Moving to the, to the free cash flow, to the EBITDA, to free cash flow conversion is, is still very high. We see a change in networking capital of EUR 41.9 million. This is affected by a further reduction of factoring by EUR 20 million in the H1 of 2023. If you see the, the tax payments, it is slightly lower than last year, but this is more or less a phasing effect. At the end of the year, I still expect to see something like EUR 13 million of tax payments.
CapEx, EUR 25 million in the H1 of the year is what we spent. This is driven, on the one hand, by the digital radio business, on the other hand, by the waipu.tv platform, where we modernized some things and put the platform on the next level. In leases, a stable development. In interest, also relatively stable. What we do see here is that as, as for everybody, interest rates are increasing, but on the other side, we decrease the volume of the outstanding debt, and therefore, a stable development in interest, interest payments.
All in, we see a very strong free cash flow of EUR 131.5 million compared to last year. It is an increase of EUR 7 million, but I think you have to put into consideration that last year we received a dividend from Ceconomy of EUR 5.5 million. If you put this into consideration, the free cash flow development is even stronger and is comparable to the development of the EBITDA. Moving to page 15. Here you see the on the one hand, you see the maturity structure of our debt. After the dividend or to pay the dividend in May, we used the revolver of EUR 50 million of the EUR 300 million outstanding revolver. It is already repaid in July.
This year, we do only have to repay another promissory note of EUR 35 million. There is the possibility that we do a refinancing in autumn, but there is no obligation because our cash situation is that good. I think we will follow the market, and then we will decide what timing we will, we will use to, to refinance, because definitely up to the end of 2024, and then with the maturities in 2025, we have to do some refinancings. Equity ratio leverage, I think all not only under control, but, but very healthy. Moving to the guidance, here also from my side, I can only confirm what Christoph already said.
From my point of view, I would, I would say today that I do expect the full year results at the upper end of the guidance in both terms, free cash flow and EBITDA, and I do even expect it with the inflationary effects, what we see, and I do even confirm it if we do additional investments into the, the, the TV business, especially at IPTV. I think a strong confirmation of also, and I think, from my point of view, a good guidance for the H2 and how we do see the business today. Having said this, I would, would like to finish and hand over to the, to the operator again to start the Q&A.
Thank you. You can state your question now.
Morning. Thank you for taking the questions. Just 3 quick questions. First one is, can you give your thoughts on the one-on-one national roaming agreement with Vodafone and what you think this means for both the German market and Freenet? Second question is, can you talk through what you're seeing in terms of competitive dynamics in the German market? Specifically, could you comment on what you've seen with Vodafone and their use of third-party channels? At Q1, I think you flagged that they were spending less, but I'm just curious as to whether this is reversed in Q2 and Q3. And the third question is really just coming back to the basic cable TV opportunity that you flagged.
I'm just curious in terms of how quickly you think the benefit or the upside could feed through into waipu numbers. Could we see a benefit already in terms of the end of 2023, or are we talking about something more medium term? Thank you.
... Okay. Yeah, thank you. First of all, I have to say that I think we were surprised about the press release the day before yesterday on Eins und Eins signing a deal with Vodafone. Surprised for two reasons. A, I thought this would happen later in the year, and B, I was not expecting Vodafone to cut a deal. I was expecting Telefonica to find an agreement. Congratulations to Ralf Dommermuth. I think he's obviously done a good move for him. I think he took benefit from the fact that Vodafone, new management, a lot of pressure on all ends. The guesswork says that this led to a obviously more attractive offer than the one that Telefonica has given him.
I think for the on the Telefonica side, I mean, they have given two years, they will be paid for the, for the commitment. They will prepare themselves for a future. They can better plan their own network capacity. It will reduce OpEx and CapEx on their end. I think it's a positive for us because the importance of freenet as their partner is increasing, and there might be broader opportunities than we had in the past because of them, depending very much or, or also, looking very much on what Eins und Eins does in terms of conditions, in terms of capacity needs, in terms of tariff plans. For us, a positive one on Telefonica. I think for Telefonica, yes, there will be a financial impact, but they have two years to compensate.
I think the first reaction of Markus Haas, when I spoke to him, was a positive one. He said, "I'm relaxed, we have enough time to prepare." For Vodafone, I think it's a move. It's, but I think it's only a short-term gain. They have not proven to be so successful in building out their network, et cetera, et cetera. I think, I think that it gives additional pressure to them. We have seen that their backbone was quite weak because it was underserved for a couple of years.
I think it will be a challenge for them to satisfy short term the needs that United Internet will do, and that leads me to the conclusion that migration will not only happen over the period to the end of 2025. Our relationship to Vodafone, I think it's not really affected. Yes, they will have a couple of million more customers on their network sooner or later, but at the same time, they also need to protect their own customer base also within our within our business relationship. They don't want us to move their customers to Telefonica, which would be an obvious arbitrage now. I think it's also from the, from that end, and we are not expecting a change in the relationship, and DT is not affected.
Overall I would not see what some of the comments were yesterday, that the market will now go down in pricing. I don't think so. I think it's more likely a more rational behavior. My personal belief is that at the end of the day, Eins und Eins and Vodafone are building one and the same network. There will be legally two, but in fact, they will coaly in building the networks and sharing part of the frequencies. Any other step would be totally irrational and waste of money, as I think they kinda join the effort in a sense.
On the, on the competitive, on the competition and regulatory side, I think the, the move proves even more that the regulator should create a tighter regime. Because in fact, to me, it looks more like we have 3 parties instead of 4. Once again, we need to protect competition in Germany. It's not only freenet, but, as I mentioned before, give access to others, such as fiber companies, et cetera, et cetera. Give them the access in a more regulated way than we have it today. We are protected through the fact that we have 7.5 million customers, et cetera, et cetera. Access to 5G, access to all the technologies for third parties should be enforced and enabled by the Bundesnetzagentur.
On the current situation in the market, yes, we have seen Vodafone specifically in the 1st calendar quarter to take out commissions and provisions. We have seen them change the gears again in Q2. We are not yet on the level that they spent before, but I would say money has come back, let put me that way. We are fine, but our acquisition mix across the networks has shifted. Vodafone for a long, I think the last three years was slightly ahead of the others. I think now telecom is the stronger network in our base in terms of new customer acquisition. We're not talking about 20% or 30% shift.
We're talking about a couple of percentage points, because at the end of the day, we serve the customer what they want. Third question on cable, cable TV. I think the awareness of the fact that the privilege, the ancillary cost privilege is going away, is increasing. Any alternative providers of TV signals enforce this and make it public. Again, it's only in July, then customers need to cancel their existing contracts. It's gonna take a little while till they understand it. The rule is going away by July, in summer, people are on holidays. We have seen yesterday that the German football will not be a trigger, either this year nor next year.
I expect the people kind of wake up on, on the opportunity to switch only in the end of Q2 , Q4 next year. We expect the real impact, relevant impact only in 2025. There will be an uptake in 2024, and I think the fact that we are getting faster and accelerated growth right now, is already an early indicator that the potential is there. Those people come typically from cable or satellite, because we need to had a signal before.
So the answer is, it's gonna, it's gonna move the market, but the significant changes, from my point of view, will only be end of 2024, and then the real impacts on customer base, EBITDA is only 2025. Up until then, I think we will find a couple of other partners on the fiber infrastructure side, with doing better and better in own acquisition. We have started now to sell the product in Mediamarkt Saturn. We have done a test in 40 markets, 40, 40 of their shops. We now, by end of October, we will expand this to full size, all 440. We see a good learning curve there.
We see that end consumers understand that there is an alternative and that they need to switch to take privilege of all the benefits of IPTV. All in all, a good development, and I think the extra pace will then come end of next year.
It's very clear. Thank you.
Martin Hammerschmidt, please state your question.
Hey, thanks for taking my questions. I also have three, please. The first one is on the Waipu TV. I think on the CMD in 2021, you soft guided for EBITDA in 2023 to be EUR 10 million-EUR 15 million, so that was in the Q1 . Now, you invested quite a lot in marketing to get ready for the changes in the freenet cost and privilege. Is that EUR 10 million-EUR 15 million still valid for this year, or do you see opportunities to invest more into growth and basically reap the benefit just a bit later?
Coming back to the 2025 guidance that you gave on the CMD, if we have everything the picture that we have now, do you think that guidance is now too low, given sort of the strong net ads that we see and also the new glass for the customers? My second question is, you've talked about new partnerships for Waipu TV on the last call. Now I was wondering, is there anything in the pipeline in terms of signing up? I think you mentioned it just now, city carrier, and basically cross your your TV product into, into their customer base. Maybe the last question is, could you split the Waipu TV net ads between sort of organic and what came from Deutsche Glasfaser? Thank you.
Okay. Yeah, thanks for the questions. First one, I think the EUR 10 million-EUR 15 million EBITDA are still valid in the sense of, unless we do invest more in above the line and acquisition, because we expense the acquisition cost immediately, so that has an impact. The fact that I said, till the end of the year, we anticipate +EUR 200,000, obviously, acquisition costs are higher than in the original plan, and the same goes for ATL. I think we're gonna end up more in the range of EUR 5 million-EUR 10 million at the end of the day.
There is an extra, if you want to call it an extra, I wouldn't call it investment, an extra expense of EUR 10 million in, approximately, in RTL and sex that were not in the budget. We feel comfortable now to spend it because I think in the past we were a bit reluctant to do so, because we all the tests showed that extra money is not giving extra customers. This is changing now. As I said, for example, the offer that we will do in November with Mediamarkt will be with the subsidized hardware and these things obviously cost money. From the EUR 10-EUR 15, I would think it's got to be more EUR 5-EUR 10.
Given the overall performance, I think that also indicates why we are not lifting guidance for this year yet, because we expect a bit more spending than we did in the H1 -year. By the way, the same thing, we will increase our minimum wage in the company by October 1, that is also impacting Q2 or the Q4 , H2 of the year, different to the first, to the H1 . There is a couple of changes that will then have an impact, obviously, also on this side with a good H1 of the year, we feel very comfortable to do so. The second question or the second leg was a guidance 520 for 2025.
I think there's no reason to change it right now because we said we're gonna be above 520. That, and that's, that's definitely still valid. I think it will depend very much on whether we are still in a high investment mode on IPTV or whether we start to kind of flat, flatten it out as we do in mobile. I think that will be the determinator finally on the result. No doubt, the 520 is definitely not an ambitious target and target anymore, given the fact that this year we're gonna, we're gonna be beyond 500, or the 5 will be the first, now the first digit.
I think you're totally right, but it's not yet at the stage to change the guidance as such. I can only repeat myself, and I think Ingo and myself, we fully agree that it is not an ambitious target anymore. It's more, well, ticked off, self-explanatory, easy to, easy to do, so we will, we will go beyond it. On the pipeline of partners, I think the pipeline is the same as the one that I was talking about in May. What we learned is that any of those potential partners are really slow moving. I think that is more a feeling than a quantitative statement. There is a lot of frustration on fiber expansion in Germany.
A lot of talking, a lot of money, but it's only theoretically money. Capacity on building and construction companies is still low. Any of the people that we have in the company that have ordered fiber, they're all waiting for years from signing a contract to the actual delivery. This is also happening when we talk to these companies, they say, "Yeah, we, we'd love to do, to do with you, but we cannot even tell you exactly how many new customers we will connect in the next couple of months." On Deutsche Glasfaser, we are halfway through on what they have on as active TV customers. We have about 40,000. We expect for the rest of the year, minimum, the same number.
That is, we are starting now in August with a special program for their customers. We also give them marketing funds to Deutsche Glasfaser to enlarge or widen their promotional activities. So far, they have done it in a very serious way, very cost sensitive. We are now pushing harder because what we see is the customers that hook up with that, with us from Deutsche Glasfaser, they will become active, they're good customers, they're paying, they are upgrading their packages to higher packages very, very soon. We feel comfortable to give them an incentive on bringing customers on board.
Understood. If I can just ask one more question as a clarification question. The new deal between one and one and Vodafone, you'll still be able to resell, the one and one, one and one contracts once the network comes out?
Thanks for the question. Thanks for the question. It's even better, because in the old contract, a sub-service providing on the pure MVNO customers, on the national, roaming customers, was a legal, legal issue between eins&eins and Telefonica. It was not yet confirmed that we could do so. Given this, given this old contract with Telefonica, I'm sure that eins&eins will make sure that in the new one with Vodafone, this clause will not be there again. I think that has improved our opportunity and speed up the opportunity to resell eins&eins.
Perfect. Thank you very much. Appreciate it.
The next question comes from Ulrich Rathe.
Yeah, thanks very much. Three questions for me as well, please. The first is on, on the overhead costs, which I would call anything between gross profit and EBITDA. That figure is up 10% year-on-year, in the Q2 . Ingo, I think you mentioned this one-off employee payment, but there's other costs rising as well in there. I'd be interested what the outlook for employee costs for the year and overall, this sort of cost inflation is in your thinking. One element of that, if I may, is that the loss allowance, I think you're highlighting the report, the loss allowance is stable year-on-year which is obviously a good thing, but it's still higher than the Q1 .
Is that, is there anything in there that's worthy of discussion? Second question is on GRAVIS. You're highlighting that it has very low margin, but there must be some fixed costs in there. Could you sort of explain what the operating leverage at GRAVIS is, given that it is really seems to really suffer on the revenue front? I'm sort of not entirely sure how to say it in either way, because there's very limited, very limited disclosure. I mean, these are shops and there are leases, and so it can't just be zero margin, no matter what the revenues are. We are interested to see, get some idea.
The last question is a bigger picture, picture question. I mean, there is a degree of sort of market discussion that I'm sure you're aware of, of about a potential share buyback, if only to mitigating rising taxes after 2025. I think you discussed that in the past, the tax issue. How should we think about potential share buybacks? Is that, is that essentially now off the table because you need to refinance a bit of debt, as you mentioned, if not in 2023, it is coming? And you feel like, do the refi first before, before you even think about that, or is there sort of a, a debate to be had about, about capital returns to shareholders at some point? Thank you.
Yeah, thank thank you for your question, Ulrich. Concerning the overhead cost, I, I think it is, it is even better than we expected at the beginning of the year, from, from my point of view. On the one hand, you were discussing the HR cost, and Christoph already added something about the minimum wage, where we will do something in the Q4 , which will increase the personal cost further. If you look into the personal cost and we already discussed it when we discussed about our guidance in February. We put something like EUR 10 million in the guidance for additional personal cost of the year, and this is something in this range, is something what I would confirm today. I think we are still on these levels.
I think the negative of the information is that we are still, still some stuff is missing, so some positions are open here, so we have some gaps, but I think this is the balance at the moment. We see increasing wages, but on the other side, we see some still a difficulty to find experts for different jobs here. I think at the end of the day, and this is the balance what we do have every year, but I would say something like EUR 10 million for the year. On the cost side, on the SG&A side, I think we already mentioned in one of the calls that we renewed the contract with Capita, who is doing our customer care.
I think, all in, the contract has not changed and the conditions have not changed, so we are fine with it. There was a different structure before, so now we pay average cost over the years, and this leads to an increase of, of SG&A of something like EUR 5 million in the H1 year. This is, is a negative effect, what we do see in our SG&A cost, but this was also part of our budget at, at the beginning of the year because we, we closed the contract at the end of last year. About bad debt, I, I would still say from today's point of view, all, all in, the bad debt for the year will be something like EUR 20 million. The, the, this...
It could also be something between 18 and 23, but it, it is something around 20. This is what we see. It is definitely much lower than before the COVID crisis, but it is higher as it was during the crisis. It, it is still on a low level, and the provisions, what we built, I think at the end of 2021, are still in place, so we, we have not changed it. Bad debt is on a, I think on a reasonable level now. Your question about GRAVIS. Yeah, I think in the past, we, we have not published any detailed figures, and I do not want to change it today.
Yeah, compared to the more than 500 shops, what we do have in retail, we do only have 40 Gravis stores, so the rent, rental cost situation, et cetera, is not that, that important. Even if we talk about decreasing revenues it is a good
... revenue what we generate there, and there is, there is no risk on this side. Your bigger picture, I do not see a direct link. If I understood you correct, there was a link between the tax issue and the share buy back. For us, or for myself I can say we do not see this, this direct link. I think share buyback, we have the allowance from the AGM to do share buyback. We are, and this is something what, what I can only continue to say and repeat, we are focusing on the business. We would like to invest it into the business.
I would not say a share buyback will not be possible, but up to now, we have not decided to do so, and we are still thinking about investing into the business. Let's wait and see what happens with the IPTV, what happens with 2024 and with the opportunities, what we do have there. It is not out of the words to do share buyback. Can you expect it that it happens in the Q3 ? No, definitely not. I think from time to time, we discuss it here annually on a board level, but it's nothing decided there. With the tax issue, this we only have a minimum taxation still at the moment. Things will change starting in 2025, 2026.
There will be still a lower taxation up to the end of 2028. After 2028, we will have to pay the full tax rate, yeah, we have to be prepared for this, anyway, we have to pay it then. This has no link to a share buyback. We do not have to prepare anything. I think it is part on in our long-term plans, what we do have, I think we, we try to optimize our free cash flow, therefore, I think that even the full tax payment won't be any problem for us.
Great. Thank you very much for these answers.
Okay. Okay.
The next is, Joshua Mills. Please state your question. It's your turn.
Hi, guys. Thanks for the questions. I'll just stick to two. The first is, is there any scenario in which you would consider looking at even a partial MVNO deal with Telefónica Deutschland? Obviously, they're gonna be left with a lot of excess capacity when Drillisch leaves the network. Is that something you would ever consider? If you did do that, do you think that it would be possible to maintain the kind of relationships you have with your other MSP partners? Is the first question. Then the second question is just around the advertising spend in TV. I think you're kind of characterizing this as a quite flexible line item that you can move in and out of.
My question is, in order to kind of maintain an organic net add run rate of, say, 50,000-100,000 YP subs a quarter, why shouldn't we think about the advertising spend as, as more structural? Why, why would the spend not be higher going forward? Do you see this as a, as a kind of one-off push in the next 12 months to try and capture the, the window of opportunity around the making costs and regulatory changes? Thanks very much.
Yeah, thanks, Josh, for your questions. The easy answer would be a triple yes. Yes, we consider, yes, it would not impact the relationship. On YPO, we think that it is worth planning more ATL for the next 12 months, given the environment with the ancillary cost going away. I think this is the period where people need to have a higher awareness. We would also believe that with a certain level of customers, you can bring ATL cost or stabilize ATL cost on a more normal level, because then you have high enough brand recognition, word-of-mouth, impact of partnerships, a broader distribution, et cetera. I think I hope this answers the ATL question.
Again, on, on, on Telefonica, yes, you're right. There is a phase out of capacity. Certainly, my and our first reaction was whether this is worth talking to them. We signaled to Telefonica that we should include such ideas in our regular conversations that we do anyway. I think there is no impact on the relationship to D.T. and Vodafone, because at the end of the day, they are not interested in what kind of business model and contractor structure we run with other, with other operators, but they want to secure their fair share within our base.
... they have a chance to do so, if they give us, a favorable conditions.
Got it. Can I ask in following up, how would that work in practice? Would you be looking at a kind of combination of reselling test the product as you currently do, and then maybe taking some mobile capacity to sell freenet banded contracts? You, what do you see as the advantage of having an MVNO model versus a reseller model? I think in the past, you've always highlighted that being an MSP-
Well, I think-
Please go on.
Well, in reality, and factually, it makes, it makes no difference for us. It's just a matter of, of financial engineering. In our current model, it's not about the fill rate. In our current model, we run more or less, very plannable margins on an individual SIM card. And in an MVNO capacity model, you would, you're, you're working against a fill rate. And profitability has a lot to do, whether you get close to the fill rate or not. I think it's, it's an, it's a difference in the way you plan your business. It's a difference in the way to, to steer network share within the, within our portfolio. Technically, it's, it's the same. It's just a difference in, let's say, in accounting, planning, and in the mechanism of generating profit.
Got it. I'm going to be annoying and ask a quick question.
No, no, no.
If that's the case, could you, could you do the same thing with Vodafone? Finally, I think in the past, you've indicated that your sales split is something like 40% DT, 40% Vodafone, 20% Testeutschen. Is that, is that broadly still the case today? Thanks.
Well, in general, any of these models are possible with any of the operators. We have today a different model with Telefonica than we have with Vodafone and DT. There we have a model which is more the old service provider. They give us a commission on acquisition cost and renewal cost, and a lower, let's say, airtime margin. Whereas with Telefonica, we have a pure margin model. That with the old rules not having IFRS, where we expense the acquisition cost over 24 months, this had a high impact on our way to do acquisition, customer acquisition, because high subsidized handsets historically only went to DT and Vodafone because we needed to fund them. Given the IFRS rules, these models are financially, for us, more or less the same.
In general, we have always asked also DT and Vodafone to move into other models. So far, those conversations always led to the fact that the, the transition phase is a difficulty, and this is why we still stick to the old model with them. I need to illustrate that if you, if we would change the model, their worry is that they have paid for a customer as a commission, and we will move this customer then in the new model, so that they are afraid that kind of they paid twice. The, the, the transfer from the old into the new model is the real challenge. And this is, yeah, why so far we have not been able to change the model.
At the end of the day, if we look bottom line, I think Ingo and his team do that calculation more or less on every single customer. Both models are the same in terms of gross margin for us. Yeah. We're looking for more favorable conditions, whatever they look like, we would have always take them. I think that has been our proposition, and it's gonna be in the future...
Great. Thanks a lot.
Yeah.
Great. Thank you. The next will be Titus Karn.
Yes. Thanks, thanks a lot for taking my question, for all the very helpful explanation on the call already. I just have a few other follow-up type questions. Maybe first, just on your potential future relationship to one-on-one, which could sell through you. Maybe, when would definitely that they can actually use you as a sales channel? When, kind of, do you have that discussion with one-on-one, and when would you expect that to actually impact your financials and your subscribers? How large is that opportunity? Maybe you can add on to this a little bit. Then also as a second follow-up, just on the potential changes in, in mobile regulation, and the potential regulated access to 5G.
Could you maybe remind us of the timeline and what your most likely outcome is out of the process, given that I think we see politicians actually now backing such a proposal now much more than they did in the past? Maybe as a, as a third very quick question, just on the minimum salary increase, which you mentioned. Could you maybe just quantify how much that impact could be probably in Q4 this year or on an annualized basis?
Yeah, I mean, I start with the 1st one. Well, I can't tell because, as we saw in the, in the press release, they have not started. They are starting to go into the details, and they want to finish before 1st of October next year, if I remember correctly. From 1st of January, they will run their own network, if you want to call it like that. I guess the national roaming will start, in ideal world, very, very soon. I would expect that we, at that, as soon as they have sorted out that stuff, they will also talk to us about reselling. I think it, with the financial impact will be 0, because neither will the market grow, nor will we have other customers than today.
The difference will be that while we could also take the ones that want Eins und Eins, the ones that want Eins und Eins today are the ones that want Vodafone. I don't see that the network, the pure network of Eins und Eins, will make the difference, at least for the next 24 months. We will certainly resell their product because it's our proposition to have all the networks, but this is not an extra, at least as I see it as of today. Second one, on B.Net R, well, if we would know, we would let .
They have no-- they, they, they kept telling us that they want to set up the rules, and the timing before the end of the year. I can't say more than publicly available because anything else is under a non-disclosure agreement with them. There's a strong feeling that they will go for an auction. There's a strong feeling that this will happen next year, but nothing is confirmed. As you rightly pointed out, the politicians are more aware of the pressure on them, creating competition. It would be easy for... Or I'm, I'm sure that the operators will now say, "Well, you can see that 1&1 was able to, to agree with Vodafone, so there is no need for regulation." This is their argument.
We would say, "We are going down to three parties, so I think you need to do regulation." I think these are the two ends, and both parties will try to lobby for their point of view. In the last one, we have today a minimum wage, which is EUR 27,800, and we will move this to EUR 30,000. This is about 700 people in the company that are immediately impacted because their salary today is typically lower, because all of them have a variable income.
It's about 700, I would say, that will, will be impacted, not every month, but a couple of months a year, depending on, for example, people in the shops that have a low performance month or so, then they drop, then they drop below that minimum wage. I think the impact involved on annual basis is EUR 6 million. Is that right?
Yes. That's definitely as a maximum, I would say.
Yeah.
So for the Q4 , maybe EUR 500,000-600,000, something like that.
Yeah. Yeah.
Okay, helpful. Thanks. Thanks a lot. Yeah, I think on the one-on-one relationship, the question was more, but I think you answered it as well, was on. I mean, you're, you're definitely in a stronger position if you have four parties to negotiate, negotiate with rather than three.
Yeah.
If you don't see it in the numbers.
That's, that's, that's definitely right. That's definitely right. I mean, this is what I said before. I mean, if they, if Eins und Eins is going into the market and is trying to sell with us, Vodafone will be under pressure to give us good, better conditions or to compete with the offer of Eins und Eins, because for the end consumer, perception might be that it's very much the same network.
Perfect. Thanks so much.
Thanks a lot. The next question comes from Adam Fox-Romley.
Thank you very much for all the answers so far. I, I just wanted to think a little bit more about the source of Waipu TV subscribers. You've obviously got 7.5 million subs. I wonder practically, how much cross-selling is there today of Waipu into that mobile base, and, and how does that work, if, if it, if it does? Secondly, or a sub-question, have you, have you done any interrogation of, of that base about those who are already taking or who currently take cable TV? Turning your, your addressable market slide more from the market into your existing customers. Thank you.
Yeah, thanks for the question. I mean, my first answer would be, we have about 40 million households in Germany and 130 million SIM cards. The first rule is divided by 3, then you have household penetration. That would lead that we are anywhere between two point some, 2.0, and 2.5 million households. Second is that the TV access is still something that, same as the, same as Internet access. Typically, the male head of a family is, is deciding. If you take that again, you can see that the cross-selling is not 7 million, but it's maybe 1 million potentially.
We do that, and we will not disclose that, but a relevant part of our today's subscribers on Waipu are mobile or Freenet mobile customers. It's a significant part, but it's significant. You also know that the product is also resold from Telefonica. It's the same logic. And the final answer is, if you look at Deutsche Telekom, knowing that they have whatever, 40 million fixed networks, so and so many million Internet access, and they have, in the Q1 , only achieved 50,000 net adds on TV, this is an indicator that the cross-selling is not that easy. People have a very tight relationship to their current remote control.
There needs to be any triggering event where they say, "Okay, now I'm changing." It might be a new TV set, it might be that they move from one place to the other, it might be that their digital set-top box needs to be replaced or has a default, whatever. When this triggering event is happening, then people are rethinking. We keep constantly informing our customers, we keep demonstrating Waipu in our shops. Yeah, it is still not TV signal is nothing that is a conscious, a conscious act. It's there. It's either a cable or it's a satellite, it needs a triggering event.
That's very interesting. could I just ask a second, which is there any tension whatsoever between the fact you've got this freenet brand, which is now everywhere, now that you've phased out, another Com Doubletel, and the Waipu brand itself? I mean, have you ever considered thinking that it should be freenet TV rather than Waipu TV, or is there too much now invested in the Waipu?
Oh, yeah. Yeah, you you're putting the finger into the wound. history was that we were a 50% shareholder, and the other 50% shareholder thought that if this was, if the Waipu TV product would be so tightly related to freenet, they would never have a chance to access for an exit, because the brand was too strongly connected to us. At that early stage, we have accepted that rule, and now we have invested five or six years into a different brand. If I could turn back time, well, then certainly I would put it under the freenet brand, but it would also limit other things.
I mean, the fact that Telefonica is now selling Waipu, I don't think that they would ever sell Freenet TV, because they would say it's too strong of a brand and too closely connected to us. There is advantages and disadvantages, and we came to the conclusion that it's not the time to turn it back.
Okay, really interesting. Thank you very much.
Many thanks. Yeni Falana, please state your question.
Morning. Thanks for taking my questions. The call has been incredibly helpful. Clearly a strong set of numbers, but it'd be great to understand how you're thinking about some potential downside risks into the H2 of the year. Could you maybe talk about how family plans are impacting the market? Vodafone and Deutsche Telekom have talked a lot about that in recent quarters. That'd be super helpful. Thank you.
I think might sound strange, but I don't see a, see a downside risk, except for things that will impact the world or the country, and it also impacts us, but I don't see a out of the business. The family plans, I think what the family plans absorb is the customers that today still have a prepaid with a discounter, such as ID, or EDEKA, Lidl, et cetera, et cetera. This is what we have learned from Deutsche Telekom. They told us that they, they can see it from number portability, that what the original source is. They have also learned that a relevant proportion, they're not in a position to disclose what they told us, but the relevant proportion is cannibalization from Congstar in their own base.
Not so, not everything is incremental. What we see right now with us is exactly the same. We're getting a couple of, of customers that move in from any discounts, prepaid SIM cards.
... that they had in the past. The offer is attractive and it's good, but it also has its limitations. Not everybody wants his parents to see the number statements. Not everybody wants the detailed consumption being watched by typically parents. It is an additional thing, and it works well, but it is not changing the market.
Thanks very much.
Thank you. Please, Simon Stipic, please state your question.
Good morning, team. Lots of questions already asked. I have two or three questions. One is, again, coming back to the free cash flow usage, you pay 80% of the dividend, 20% is left. Maybe, you can speak about the prioritization of the capital allocation in that regard. Second question, that is tied into the first question. In regard to refinancing, in 2024, you have a variable promissory note loan. I think it's EUR 140 million. Could you speak about any margin you would expect? Maybe also if you're already in negotiation for refinancing. Maybe in regard to freenet TV, user decline, that's very positive, slowed down to around seven.
Is there a particular explanation for that, especially on the background of previous quarters, where it always range between 25,000 and 30,000? Thank you very much.
Yeah, Simon, thanks for your questions. I think capital allocation, not that much new to say. You already mentioned that 80% of the free cash flow will be paid out as a dividend, and as the free cash flow is increasing, everybody can expect from today's point of view, also an increase in dividend. I think this is a good part of the, of the capital allocation for all of the shareholders. With the 20%, and I think we already talked around the a share buyback before, but still it is our wish to invest it into the the business. This is the, the... the top priority, and then we will see what happens. We think we pay a very high dividend. From today's point of view, I do not see an additional or higher dividend.
I think the dividend yield is fine, so I do not expect any, any changes there. You with your questions already built the link to the financing and to the outstanding promissory notes. I think basically our leverage is already very low, so we do not have to reduce our debt. Yeah, it is, it is more favorable than in the past, because today we pay higher interest rates than in the past. I think it is not definitely not our top priority to reduce to reduce debt. The refinancing situation, yeah, the margins have changed. Three, four years ago, in the promissory notes, we had to pay margins of something like to a 120 to 150 points.
At the moment, we have to pay something between EUR 180 and EUR 200. It's something what I would expect from today's point of view and if we follow, follow the market day by day. There would be a margin increase of something like 50, let me say 50-80 points, it will not change the world. Yeah, it is more expensive. This is also a question of, of, of timing and phasing when we will start to refinance. Maybe it's a peak now, nobody knows. I think we, we have to decide, and we, we follow it.
We have not yet decided when a refinancing will take place, but in the interest rates, what we paid and from the cash flow, what we published today, you see that up to now, the effect was very small, so I do not expect big effects in the following quarters. Your question about freenet TV, yes, it was a very good Q2 , and this could lead to a statement that we see the floor. I would like to say you have to be careful because as we started the service in summer, some years ago, we and a lot of people still using vouchers, which have a 12-month termination.
In the Q3 , a lot of vouchers will be, will be due, and some of the customers already buy new vouchers in the second quarter, even if they do not have to buy them. The, t Q2 , also in the past years, was a little looks a little bit better, than the average of the, of the yearly quarters. I-
I would be happy to see a floor. What I would expect from today's point of view, it's a lower figure in the Q3 . I think we still look for a floor, but we do not see it. All in the dimension, if we compare it with, let me say, in 22, the dimension is a little bit slow, bit lower. I think I would not-- I do not have the best news, what you could maybe have expected after the smaller decrease in the Q2 .
Great. All clear. Thank you.
Many thanks, Simon. Now, the last question comes from Usman Ghazi. Please state your question.
Hi, gentlemen. I just wanna make sure you can hear me first. Is that, is that okay?
Yes, perfect.
Okay, great. Thank you very much. I've got a few questions, please. Clarification questions first, then the real questions. There were some comments made around Wipu doing either 80,000 net adds in Q2 on an organic basis. Then there's also been some mention that Deutsche Glasfaser has done 40. I just, I just wanna kind of clarify what the real kind of organic run rate out of the 100,000 for Wipu was in Q2. Then on the H2 , guy, H2 kind of commentary that you expect Wipu to be doing 200,000, does that include the Deutsche Glasfaser contribution, or, or, or is that just pure kind of retail momentum?
That was kind of the first clarification question. Christoph, I think you also kind of mentioned that, look, the 2025 CMD guide of over 520 is is not ambitious because you expect you'll be doing something with 5 already in 2023. I just wanna Maybe I misheard that, but I just wanna make sure that that, that, that was or was not said in one of the responses to the earlier questions. Those are the two kind of first clarification questions, please. The other kind of questions I have, firstly, is on your comments regarding that you're exploring perhaps doing something different with Telefonica deutschland post this one-on-one news.
The question is that I mean, if I, if I look at how freenet is operated in the market, yeah, it's obviously been a very delicate balance of maintaining all, all relationships, DT, Vodafone being your primary partners, O2D being relatively new. You've always been very careful to not kind of cannibalize the network operators themselves, right? Because what we've seen with one-on-one is that they've, they've been much more ambitious with their mobile ambitions, ended up cannibalizing the operators. That then led to an acrimonious relationship, that then led to them wanting to build their own network to be free of this situation.
It seems to me that, I mean, any move that you make now to potentially move to any kind of MVNO model with, with the Telefonica deutschland could upset that delicate balance that you've created, and that has been to the benefit of freenet shareholders and all of that in terms of visibility on margins and planning and everything.
Ca- can you kind of just, perhaps give us some reassurance that these options that you are exploring with Telefonica deutschland wh- wh- while it makes sense to do so because you have an opportunity are not being done with the, with the, with the view to becoming suddenly very ambitious in mobile from a market share perspective and, and potentially upsetting the apple cart with, with your with DT and Vodafone, which, which I think are you still are your main kind of your customers are primarily on those two networks, right? Yeah, there's a bit of a long-winded question. Apologies for that, but, but I think it's important for the market to understand how you're thinking about this. Thank you.
Yeah, Usman, thanks. Thanks also for the last one. Simple on, yes, in the Q2 , we had 40,000 Deutsche Glasfaser, we think we're going to have another 40,000 till the end of the year. I would not call that inorganic. I would say it's just a sales channel, we need to build up on the sales channel. 40 has been in there and 40 yet to come. Second, on the 520, well, what can I say? It's in fact, so that we see 500 or 499 or 502 for this year, there's EUR 18 million to go, we don't think that.
Well, if we would, if we look at the track record of the past three years, and our development on TV and overall in the company, it's, it's likely that we will raise next year our, our range.
... and it's likely that we're getting closer and closer to the 520. full stop. I think you, you, you, you, you rightly understood. We are not here to say we will change that 520 number right now, but the good thing of the 520 was that we said we're gonna be beyond, and we, we just reconfirmed that we're definitely beyond. On the third one, on, on Telefonica, first of what we are not exploring. The question was, if now Eins&Eins is going away, in brackets, it's happening by the end of 2025, yeah, then capacity in the Telefonica network will be available, and Telefonica might want or might consider or might, anywhere in the next couple of months, think about replacing this with a different business model working with us. We are not exploring.
The whole thing happened 36 hours ago.
The question was, "Is conceptually, is this opening an opportunity?" I was not in a position 20 minutes ago to say, "No, definitely not. We're not going into it." I'm just saying, "Yes, there is an opportunity to talk," but there is one determination that any person involved has in this company. We live from what you call a delicate balance. We live from a balance, we live from an arbitrage, we live from an internal competition among the partners.
If Telefonica says, "We offer you a different business model," and we will then consider this, given our commitments to the others, given our long-term commitment and long-term incentive plans with the two other networks, and also seeing that there is a fourth player coming up, which we might also do service provisioning with, we would. These are all elements that we would take into the evaluation of a potential change in the business model. We are not saying or stating or putting just on the wall, we're now going for 25% of their capacity. This means that 60% of our customers need to be migrated, and we, I, expect now, 10 minutes after this call, a strange, a strange ring in my telephone from Srini Gopalan, telling me whether I'm crazy. No, it's not.
We are continuing our business model. We are not changing our business model. We are just-- I cannot deny that these things change, things and might lead to a different version of the conversations of Telefonica and ours.
Great. That's really helpful. Thank you very much.
Thanks for the question. Yeah, well, thanks, guys, for your patience. Thanks for the lot of question. It was a interesting conversation. Also, thanks for the second round of questions for clarification. I think that's important. I hope we don't end with any misunderstanding. If so, or if anybody wants a deeper insight, please, like always, feel free to call Tim and his team or Ingrid or myself. Other than that, I wish you a nice weekend.