1&1 AG (1U1) Earnings Call Transcript

[Interpreted] Good morning, ladies and gentlemen. My name is Oliver Keil. Allow me to welcome you on behalf of our CEO, Ralph Dommermuth; and our CFO, Markus Huhn, for the presentation of financial 2021 and the forecast for 2022. The Board will present the financials and forecast in the context of this conference and explain the forecast for 2022. As usual, we will be available for your questions after the presentation. Thank you very much. May I give the floor to Mr. Dommermuth now.

[Interpreted] Well, thank you very much, Mr. Keil. Good morning, ladies and gentlemen. Welcome to our conference. I'll start with the company development 2021 and will give you a short status update on our 5G network development and then Mr. Huhn will give you the financials for 2021 and the forecast for 2022. The company development is as follows: our digital business is broken down into broadband and mobile phone. For broadband, we are the largest alternative DSL provider in Germany, serving 4.24 million broadband connections. We offer VDSL and fiber-to-the-home complete packages, including voice, IPTV from a single source via 1&1 Versatel. Partner company provides the last mile either Deutsche Telekom or city carriers. We are doing fairly well in our services. We have won connects landline test several times in mobile phone services where Germany's leading MVNO provider with 11.19 million service contracts. We offer this from our primary brand 1&1 as our cobrand GMX and WEB.DE and the discount brands, which we own together with Drillisch AG. Again, we have good quality here in terms of customer satisfaction. We were the first place by Connect in 2021. The customer contracts last year developed positively, we were able to conclude an additional 600,000 contracts, a total of 15.43 million by now. Growth was driven by mobile Internet with 670,000 new connections. With broadband lines, we have a slight decrease of 70,000 connections. Revenue last year increased by 3.2% to EUR 3.9 billion, including a EUR 3.123 billion worth of service revenue, which represents a growth of 3.4%. On top of that, other revenue, which is usually low margin revenue, particularly smartphones that we offer to our customers with subsidized rates and that are paid back in the course of the contract period. What's interesting is the EBITDA by segments. We make a distinction between our Access business, which is our current business and the buildup of our 5G network. If we take a look at the Access segment, we were able to increase the EBITDA operatively to EUR 709 million. Why operatively? Well, in 2021, we had an out-of-period value, which is actually from 2020 and in 2020, we had a once-off volume. And if we adjust this, we can see that our operative EBITDA has been increased by 8.9%. I think that is a significant increase 8.9% at 3.4% growth of service revenue, I think that shows that we handle our customer base very well and are very good in upselling. Concerning the buildup of 5G, your own mobile phone network, we had higher expenditures than in 2020, EUR 37.9 million in 2021 compared to EUR 13.9 million last year -- the year before. Now the next page shows a summary of growth of customer contracts, plus 4% revenue increased by 3.2%. As I had mentioned, the EBITDA adjusted for out-of-period and once-off values growth by 5.3% to EUR 671 million. And if we take out the cost of our -- the buildup of our network, we actually had an increase of 8%; 5G doesn't generate any business yet. The operative EBIT grew, similarly to EBITDA, increasing by 5.2% to EUR 507.3 million. EPS, operative again, has increased to EUR 1.94, up from EUR 1.92. The Board will suggest to the Annual General Meeting in '22 to payouts EUR 0.05 per voting share. You know that we are subject to the 5G AktG. We expect significant investments this year into the 5G network, which is why we would like to keep the money in the company right now. And that takes us to the buildup of our 5G network. Let me give you the status overview. In 2019, we're able to acquire frequencies at 3.6 and 2.1 gigahertz. We are also renting frequencies from Telefónica at 2.6 gigahertz. This will run until the end of '25 when we will have our own frequencies available. We were also able to make an agreement with Telefónica last year. We also have created or closed a general contractor agreement with Rakuten, and we're able to agree on the leasing of antenna sites from Vantage Towers. We are now in the process of building up the network with 1&1 Versatel partner organization that builds optic-fiber optic network connecting decentralized data centers. At the same time, the antenna locations are being set up, we are mostly relying on colocation. So we want to extend existing locations, and we are building core and edge data centers. This is ongoing right now. And we think, as you can see on the next slide, that the next -- the first 1,000 antenna locations will be commissioned by the end of 2022, thus meeting our rollout obligations. We're also cooperate -- we're negotiating with further tower companies for additional colocation locations. We're also negotiating with partners to build new antenna sites because we won't be able to cover the entire network with colocation sites. Whether we will retain these antennas or whether we will sell it and lease them -- sell them and lease them back has not yet been decided. What's also an important milestone is the acquisition of the 800 megahertz frequencies, which is being discussed in Germany, how this should be auctioned. For us, it is important that this be discrimination-free so that we have a fair chance of acquiring frequencies. We will see this auction at the beginning of 2024, but this is out of our control. This is going to be decided by the federal network agency. So we are well established. If you catch your minds back, we didn't even have the national roaming contract within the Telefónica last year. We didn't have an agreement with Rakuten as a general contractor. We had no agreement with Vantage Towers or with 1&1 Versatel. All of that has been done by now. Our team is growing. We're building our own team that is responsible for the buildup of the network. So we're quite optimistic that things will pan out as planned. Well, thank you very much for your attention, and I'll give the floor to Mr. Huhn.

[Interpreted] Yes. thank you, Mr. Dommermuth, and good morning from my behalf as well. I'd like to take you through the financial figures on the next pages of the past financial year. I want to start with the revenue situation on Page 14. Mr. Dommermuth has already mentioned the turnover and the cost of sales have been dropped to EUR 2.7 million, which is a drop of 6%. The result has increased to EUR 199 million, which is a plus of 32.6%. These 2 positions reflect the effects that Mr. Dommermuth has mentioned earlier on, which is the EUR 129 million off in 2021 and the EUR 39.4 million of off-period results. If we adjust these 2 positions, the operative turnover costs would be increased by 1.4% and the gross results would have been increased by 8%. So this is a very nice development compared to the service turnover as well. The sales costs have increased to EUR 467 million, the distribution costs, which is an increase of 34.2%. And these are the higher cost for sponsoring and marketing. The Administration costs were EUR 126.1 million, which is an increase of 26.7%, and this includes the initial numbers of our 5G mobile network. This is also the reason for the high increase 5G cost, EUR 24 million alone so that the increase in the administration costs were only EUR 2.7 million. The other financial costs have been dropped by EUR 27.8 million and the assets to minus EUR 78.4 million. The result of the operative activities was EUR 146.7 million. The financial results at minus 11.6 includes expenses for the investment to the 5G of white -- covering white spots. When we acquired the frequencies in 2019, we had an agreement with the Ministry, which meant that the payment was postponed over the next 12 years. And then on the contrary, we agreed to invest EUR 50 million into the covering of white spots, and that will be levered by the financial results, and that ends up to EUR 11 million. And without that, we would have been coming out at the same level as the year before. The tax -- profit before taxes was EUR 535.1 million. The tax expense is EUR 165.1 million, so that we add at a consolidated result of EUR 370 million. On the next page, you see the balance sheet. The sum with EUR 7,063.7 million, an increase of EUR 365 million compared to the year before. On the active side -- on the asset side, we see that by the short-term assets, which have increased by EUR 340 million -- EUR 307 million, the rest is from free liquid means because of the financial agreement with United Internet. The short-term liabilities have increased by EUR 81.5 million, which is mainly due to the application of the reverse charge proceedings by invoicing communication services. That means the service that we provide are invoiced without VAT, and we pay that VAT directly to the financial tax office, and that means we have short-term liabilities for that respect. The long-term liabilities have dropped by EUR 73.5 million. That depends -- or that is because of payment for the frequencies in 2019. The asset capital has been increased by EUR 370 million. On the next page, you see the cash flow calculation the net cash impairment in 2021 was EUR 432 million after EUR 450.7 million in the year before. The main reason for this drop was based on the upfront payment for the new VDSL contract in 2021 and that was about EUR 200 million. On the other side, we had expenses from this payment, which were resolved. So that at the bottom line, the end is 126.3 million in accrued expenses, and the result was EUR 360.6 million, which is EUR 37.2 million CapEx and EUR 313 million investment of free cash at United Internet. The cash flow from financing activities with EUR 81.2 million is at the level of before comprising of dividend payments EUR 8.8 million, leasing liabilities with EUR 11.6 million and repayment of spectrum liabilities of EUR 61.3 million. So that in the result, we have a free cash flow of EUR 349.8 (sic) [ 394.8 ] million after EUR 243.7 million in the year before. On Page 17, you see the development of the operative EBITDA to the free cash flow, EUR 671.9 million is the operative EBITDA. And in addition, we have the EUR 39.4 million off-period revenues, leading us to the EBITDA of EUR 711.3 million and that is reduced by the buildup of the contract assets and liabilities. Due to our growing customer base, this position grows by EUR 48.7 million. And then we have the accrued expenses, which is the balance of the down payment for the VDSL contract minus the payments made for that of EUR 126.3 million. The result from reliabilities of related companies is positive with EUR 25.4 million. The other working capital is negative with EUR 8.2 million. And the taxes result to minus EUR 121.5 million. And the CapEx mentioned minus EUR 37.2 million. So that we end up with a free cash flow of EUR 349.8 million. Looking at the forecast for the next year 2022, our service revenue is planned with a plus for 2022 to EUR 2.3 billion after EUR 3.1 billion in 2021, the EBITDA will be kept on previous year level at EUR 672 million. This includes EUR 70 million starting up cost for the 5G network. In the past business year, this was EUR 38 million, and the operative subscriber growth is expected to be a plus of 650,000 contracts after about 600,000-plus in 2021. The operative result will be reduced by off-period effects from the TKG adjustment of a minus of 200,000 contracts and the CapEx is expected to EUR 400 million roughly after EUR 37 million in the year before. These are mainly driven by investment into the buildup of the 5G mobile network, mainly in the first year investments in computer, software and platforms which are necessary to operate that network, and of course, in the extension of the sites and investments into antennas. So with that, I'll hand back over to the operator, and we are ready to take in your questions.

[Interpreted] [Operator Instructions] Now we have time for the first question. The first question comes from Ulrich Rathe, Jefferies.

[Interpreted] Well, I would like to start with 2 questions. The first one pertains to customer growth. You just mentioned that you expect 650,000 operative additional customers against 200,000 shifts from the Telecommunications Act. I have 2 questions of content. Why is this effect so high for 1&1? Other operators have indicated this pressure, but you can't really lose them all if there's only a shift. So why is that a relatively high negative effect that you're expecting at 1&1? And then I found that this is not included in the annual report. Why is this not included in the annual report and is only shown on this slide? My second question is concerning the network project. Progress seems to be a bit slowed down, topic additional contracts for further antenna towers than soft start with the 1,000 locations to replace your broadband business by the end of the year. Should we understand this such that you are procrastinating the whole project a bit until you find out about the details of the 800 megahertz? Because you said that there is no assurance of a continuation of the broadband business for 1&1. I'd like to hear your opinion on that.

[Interpreted] Well, concerning the first question, customer growth. I don't know what the effects with the competitors will be. What we've seen, the competitors haven't given any details so far. For our side, we can only say that the notices that we're receiving on contracts, we don't see more customers leaving us. But in the past, under the previous legislation, customers were receiving up to 12 months' worth of services before the notice became effective. Under the new act, the customer can leave the contract within a month so that the notice is effective much faster. And we forecast that this will have an effect of -- on 200,000 contracts this year. The question on why is it not given in the business report? I think it is shown in the letter of the Board on Page 8 of the report. The question concerning the extension of our network -- the buildup of our network, it's not true that we are procrastinating the buildup because there's uncertainty concerning 800 megahertz frequencies. We are in the process of taking all preliminary steps, Rakuten has started their work there on schedule. They have reached all the milestones that we have prepared, including Vantage durations. We're taking the necessary steps in order to build the antennas. It's all on track. We -- the negotiations with the other tower companies took a bit longer than we had originally expected. The negotiations turned out to be more complex than we had expected, but we're, again, quite optimistic that we will be able to get a good contract results. No deliberate procrastination, but more effort and complexity involved than we would have expected a few weeks ago. But on the other hand, where we were able to conclude contracts we have made good progress in operative implementation.

[Interpreted] May I -- sorry, let me add to that. Why are we starting in 2 stages? Well, we don't have national roaming initially. And initially, we have no function for cell handover. And this is why we start with fixed wireless access products. That means that you can put a WiFi router or a cube into your home and use it to place your phone calls. That's the first step. And once that is up and running, we'll take the next step, creating the mobility function. And in the summer of 2013, we will start national roaming, and then there will be a short period of stability where we only allow new customers to connect and then some weeks later. We will conclude with the final steps moving existing customers. That means that we'll have to port nearly 12 million phone numbers that will be a period of about 2 years before all customers have been migrated to the new network. That's the schedule, the timeline. Concerning the 800 megahertz frequencies, I said that I'm sure that there will be no simple extension. Why? Well, because these frequencies have been -- have to be allocated discrimination-free, and that's what I hear everywhere that allocation of these frequencies will take the new entrants into consideration, i.e., us. I don't know what the upshot will be, but I'm sure that it won't be just a straightforward extension. Vodafone, Telefónica get their licenses extended, that's not what's going to happen.

[Interpreted] The next question is Jonas Blum, Warburg Research.

[Interpreted] I have 3 questions as well. First of all, concerning wholesale. Could you give us a status update on the negotiation with Freenet? And is there any restrictions with respect to Telefónica Germany? The second question is tower companies. Could you remind us how many players you are negotiating with and to what extent? What that could be with respect to further additional sites? And the question concerned to that, is there a CapEx risk if you don't close any more negotiations? And the question -- the third question is a comment of Mr. [indiscernible] I think saying that a mandatory roaming would be considerable for the extension of the 800 megahertz licenses and -- for Vodafone and Deutsche Telekom, the question, would that be a possible solution to win a second player for roaming for baseline ?

[Interpreted] Okay. Let me start with the wholesale negotiations. As to now, we have no concrete negotiations ongoing with that respect. We have to set up our network and then we can start thinking of that. What is stopping us now is the national roaming agreement with Telefónica. Because as of today, that prohibits wholesale and as the mobile services have to be offered across all Germany, that means a tariff is always the share -- of our share and the roaming share from Telefónica that makes it impossible for us to now sell our offer by third parties with the third parties having the customers and doing that. What we can do is branded reselling, which is more or less a standard procedure as of today. If you look at Aldi today, for example, you're not doing a contract with Aldi, you contract with Telefónica, that is what we are allowed to do. As long as we are the contract partner that is okay. But as of today, we are not allowed to combine the wholesale -- the national roaming services with our own services, which is Freenet with mobilcom-debitel and we can't offer that. But that is something where we have different opinions with respect to Telefónica, and we'll have to settle that difference of opinion with Telefónica. The different tower companies, we are in negotiations with 2 companies or in discussion rather, which is about colocation for a couple of thousands of sites. I think we're looking at 4,000 possible additional sites here beyond the ones that we have from Vantage already. And it is clear that when -- if these discussions don't lead to success or we can only win one of these partners, we will not be able to have built these sites and colocations and we'll have to build new sites instead. And the CapEx risk is given if the new sites will be held by us in the long run. What has become customary in the past years from the Anglo-Saxon area, but that is being taken over by many telcos in Europe that they build sites and directly sell them and lease them back. And these are offers that we have available, and we tend to go down that path as well. I don't think we are going to have passive infrastructure in form of antenna in our portfolio in the long run. But I can't promise that as of today. As of today, we are not expecting any CapEx risk and aside, no matter whether it's a colocation, where it's not ours or we build it, sell it and lease it back, that state will not be -- that site will not be on our balance sheet. And you asked also about a quote from Mr. where he said that Vodafone and Telekom may be obliged to do roaming in the auctioning of the frequencies. Of course, I can't comment on that very well because I didn't say it. Mr. said it, but what I imagine is that in the case that they say there is a mandatory roaming that, of course, that cannot only be mandatory for Telefónica alone, they can't audit them -- auction them. And if Telefónica gets them, they have to do national roaming and if Vodafone or Telekom get them, they don't. And the question is, of course, even if that were the case, if you think it all the way down the line, if you can exclude us, why shouldn't we not auction a frequency and offer a national roaming to another partner? We could do it just as well as Vodafone or Telefónica could. So in that respect, I am quite relaxed. As I said, I think this has to be free of discrimination and the regulations whatever may apply then is up to the federal offices to decide.

[Interpreted] Can I just ask again on the tower companies, which had to be additionally put on by third parties, would that have a significant difference in cost from what the offer is now?

[Interpreted] Well, that's not a big difference. It always depends on the sites that we are more expensive and less expensive ones. And as far as we see it as of today, that is not going to be a significant difference.

[Interpreted] The next question is by Martin Hammerschmidt.

[Interpreted] Well, thank you very much. I would like to get back to the first question concerning the customer growth in these 200,000 net losses you expect. Why is that not a zero-sum game for the entire industry? If everybody loses customers, they have to migrate somewhere and 1&1 has a solid networks, why is that not a net benefit for 1&1? That's the first question. The second question is you said that the tower negotiations turned out a bit more complex than expected. What part is so complex? Is it the pricing, the locations or maybe other components? And the last question I have, in your interview with [indiscernible] newspaper, you spoke of EUR 5 billion that need to be invested over the next few years, you have the various components, Rakuten, Vantage, 1&1 Versatel, can you give an approximate split of what you expect in OpEx and CapEx or is that not yet possible?

[Interpreted] Well, thank you very much. Let me start with the impact of the new Telecommunications Act. As has been said, customers with a minimum contracts length of 24 months used to go into an extension and automatic extension of the contract with a notice period of 3 months. So we had an extension of contract periods by 3 to 12 months. Now they can give notice within 1 month. And your question is, if your customers go away, you should gain new customers as well. Well, the fact is that we don't see all our notices here, our customers leaving us, but only a part of it. And this is due to the fact that some customers have already made a new contract along the other one, the old one to continue. So with the customer, for instance, once they buy a new mobile phone, still has an old customer running for another 5 months. They made a new contract to get the phone and let the other one run. That's not necessary anymore now. They can give notice now within a month, and that is the effect we're anticipating. We will see this effect for a 12-month period. After that, it will have balanced out. In these 12 months, we'll see the strongest effect in the first quarter, then less than the second quarter, less even in the third quarter and least of all in the fourth quarter because it overlaps. Customers who anticipates notice don't have an impact in the second, third or fourth quarter where they would have had it in the past. So customers who anticipated to the second quarter won't have an impact on the third and fourth quarter anymore. So this wave kind of will flatten out over time. So we have the highest peak in the first quarter, then less in the second, less in the third and least in the fourth quarter. That's our forecast. Now if we ended the business now then it would develop in the other direction because then when we normally would discontinue this business, we'd have x amount of contracts, if we discontinued the business overnight. Then at the end of the day, we'd have as many notices to issue as we have now. Concerning the second question, the tower companies, why is it more complex? Well, such a contract has hundreds of pages plus attachments and a lot of detail is covered by those contracts because you have to make rules for a long-term cooperation running for 20 years with extension options in our case, and this forecast of what will be 20 years from now? How will prices have developed by then? And how will they develop in any extension period? And can we simply use a straightforward price increase mechanisms or do we have to have a fundamental adjustment somewhere along the line? And what happens if this fundamental adjustment makes it unattractive for one side or the other? That makes it very complex. So that's my experience from these negotiations. And those are the main issues we're dealing with here because we're -- we have a very long-term outlook and don't make a contract for the next couple of years. We want to be happy with it for many years. And of course, the other side has the same outlook, they are infrastructure providers. And so those are complex negotiations. But I'm quite optimistic that just like with any other problem, there will be solutions for this one as well and that we'll find them over the next few weeks. I'm really optimistic here. And your final question then was what's the breakdown of the EUR 5 billion in OpEx and CapEx in the interview? I'd said if I add up what we've already spent on frequencies and add what we've ordered in terms of hardware, antennas and software, then it takes us to a fiber optic hardware. If we look at what we've already ordered for the next few years, it all has to be delivered, then this tops up to EUR 5 billion. But this will not be CapEx all of it. Of course, the antennas are CapEx. We own them. The equipment of the data centers is CapEx. It belongs to 1&1, but the shell of the data centers, for instance, that is made available by 1&1 Versatel, all the fiber optic cable is made available by third parties, locations are made available by Vantage. And so they're OpEx for us. But I can't give you an exact breakdown now. We will be happy to do that when we've finalize everything when we've made the contracts that are still missing. When we've auctioned or acquired the frequencies that we still lack, then we can tell you what our business will develop over -- how our business will develop over the next few years.

[Interpreted] We have another question from Ulrich Rathe, Jefferies.

[Interpreted] Three shorter questions. The first one, could you detail on the drop of landline customers? Is that just out of focus because the focus is on mobile communications and that is why this is little bit of slack? Or is that something that you want to address again more strongly in 2022? Another point is the CapEx level of EUR 400 million, which is at least above the market expectation when it was announced, would you go as far as saying that as the start-up level and you should expect something lower in the years to come? Or would you go as far as to say how much the start-up costs or the ramp-up costs would be from this EUR 400 million? And third question is inflation. Specifically on the Vantage Tower IPO, here, the company declared that the MSS and I think Vodafone have 2% inflation cap, I think. So whatever -- wherever inflation may be it will be never be above 2% in the contracts. Do you have that in your contract as well with Vantage? And maybe in the overall picture, could you, at this point in time, comment on the expectations of inflation and how that is going to affect your business case with respect, for example, to energy costs and other aspects as well?

[Interpreted] Before Mr. Huhn comments on the CapEx question, I would like to answer the other 2 questions. Concerning the contract with Vantage Towers is something we cannot publish any details on because it is not possible to disclose it, but I would be happy if you ask Vantage on the regulations that we have made with respect to price developments. But without the agreement of our partners, I wouldn't want to talk about that, breaching possible confidentiality. And the drop of the landline contracts, we have -- landline business is a good business for us because we can increase turnover and profit every year despite a dropping number of customers. Of course, we are not happy that we are losing customers, even if it's only a small number. We are, of course, up to grow in this area as well. To do that, we had to drop the prices and intensify marketing and sales. And to do that for, "old or transitional technologies" because at the moment, we are mainly offering ADSL and VDSL and that is why we decided not to go over the line in these old technologies in terms of investments, but rather turn towards new technologies, we are more and more able to offer FTTH. We have just finalized a contract with Telekom in the past few weeks, and we are starting to work that market from that perspective now. And that is where we see the future in the next couple of years where we are more open to do more investment while the ADSL and VDSL business is rather something that we'll, of course, carry on with. But as good as possible as well, but not to put more load balance on the Telekom nets, the Versatel net has a high utilization rate. Anyway, the Telekom network is something that we have to pay customer by customer and we have no pressure there at all. Why should we invest into marketing, lower the prices with all the effects in the customer base to keep ADSL and VDSL up which will drop and decline over the years anyway. And against that background, we want to move to FTTH as this is growing continuously increased marketing and sales there. As well, we want to learn how to work in that business, and then we'll see that it will balance hopefully, and the customer losses, that we have in ADSL, that's where we are losing the customers, while VDSL is slightly growing still where we then could be able to compensate these loss of customers by FTTH in the future, that's where we see the future and that's where we want to invest.

[Interpreted] And coming to the question on the CapEx, I mentioned earlier the EUR 400 million include a larger sum for the initial ramping up and equipment of the core data center, including the platforms and the necessary software, which is needed to operate that kind of network. In next year, there is going to be investments as well, but these are going to be lower than 2022 and the investment sum that we are forecasting for next year is going to be lower than what we are planning for 2022. So I'll try to answer the question in this way. The market has a consensus, what direction, what range the investments can move in and that is what we have been planning and expecting for next year as well.

[Interpreted] The next question comes from [indiscernible].

[Interpreted] I only have a short question concerning these 1,000 antenna sites that you want to have by the end of 2022. How many sites do you have already? How many locations or are there any locations already?

[Interpreted] Yes, we have some locations. We have test operations running already on different locations, but that's a handful only. And we are working on the full steam in order to develop the other locations, the colocations to get this done by the end of the year. And that is what our contracts with our partners are designed to achieve. We are following up on this very closely. We're on track everywhere with Vantage, Rakuten, 1&1 Versatel. And if this continues, then we will manage to achieve our first target. We have to see that we started late in the game. We had the frequency acquisition in 2019 and we would have liked to start in 2019. As you know, we only -- we're able to conclude national roaming with Telefónica in May 2021, and we can't start operating a network without national roaming because you're not allowed to be a network operator and MVNO provider at the same time, which is right. And we have more than 11 million customers we have to cater to. And we have no option to say, oh, well, we'll just start operating the first 1,000 antennas because that very day, we would have had to start migrating our customers to our national network. And without national roaming, we wouldn't have had any customers at the end of the day. And so for us, that was an important moment, this national roaming agreement that we finally concluded in 2021. You know that the real option in our MBA contract with Telefónica that we drew that in 2018, it took us 2.5 years to negotiate the terms. And at the end of the day, the EU supported us in terms of pricing so that we were then able to make a conclusion, conclude the contract. And of course, we would have loved to do this quicker. Now it is as it is. We have to step on it and achieve to develop our network, this first stage of our network. It's 25% of our budgets by the end of 2025 and 50% of our budget to 2030. We hope that we can achieve the next stages much faster, that is at least the plan. And we have more preparation time for these targets. The 1,000 antennas, that will be a tight schedule, no doubt. But what is really about what's going to be relevant for our business, we will be able to handle this very easily as planned in our business plan.

[Interpreted] Yes. Maybe another question following up on this. What happens if you don't manage to achieve the first 1,000 antennas because you can justify that very well? If you don't achieve the 1,000 antennas by the end of the year, would that be still acceptable?

[Interpreted] Well, I can't say anything about that. That's a decision by the Federal Network Agency. I expect that we can achieve this target by the end of the year. So I never thought about what happens if we don't. Of course, we can't promise you. Who knows, I don't have to speak about the overall political situation, supply chains, et cetera, et cetera. You know more about that than I do. I can't give you a rock-solid commitment now, but I can tell you that we are on track with our plan to achieve these 1,000 antennas. We have reached all the milestones in good time. So I have no reason to believe that we will not achieve the next milestones. And that's why I'm quite optimistic that we'll make it in time with 1,000 antennas. And we report on a regular basis to the federal network agency. So we are in constant dialogue with the agency on our network extension on the milestones we have, the contracts we have concluded. We don't do that on a monthly basis. But maybe it is on a monthly basis, actually, that we actually give an extensive report to the Federal Network Agency. They have 100% transparency concerning our contracts, our milestones, everything.

[Interpreted] Miss Moore , Oliver Keil. I'd like to go to the English room to see if there are questions. Yes, that's okay. There are no more questions from the German room, so we'll switch over to the english room now.

[Operator Instructions] And the next question is from Polo Tang, UBS.

I have 2 questions. So the first question is really just a clarification in terms of network build costs. So if you come back to the EUR 5 billion figure that was mentioned previously, can I clarify if this includes any OpEx or is it just a CapEx number? And can you clarify over what time frame this EUR 5 billion is being spent? Does it include any costs for the 800 megahertz spectrum? Also, just to focus on CapEx if you exclude spend in terms of CapEx on the core network and CapEx on data centers can you give us a rough idea in terms of what we should expect in terms of CapEx per cell site? And also, how should we think about the OpEx per cell side? So that's the first bucket of questions. And my second question is really just about the broadband market. Can you maybe just comment a bit more about the competitive dynamics in terms of what you're seeing with the German broadband market. So only Deutsche Telekom appears to be seeing growth. So do you think the market is mature? And also, how do you think about future growth in your broadband business? Is it more about growing ARPU and people trading up to faster speeds? Or do you think you can kind of also grow by adding subscribers too?

[Interpreted] Yes. Let me start with the second question. In our customer base, we do see a good development as far as the APO is concerned, which is growing. And as I've just said, we want to carry on with that, in particular, with the elderly technologies, ADSL, VDSL, we don't want to see any drops in the customer base. We have competitors that offer at lower prices than we do. Vodafone and Telefónica are less expensive than we are. Telekom offers roughly at our offer. At our level, if you order a Telekom online and that's our only sales channel, we have more or less the same terms and conditions as we do offer. So in this point, we are not very low-priced, but we develop our base. We want to concentrate, however, on the newly starting business of fiber to the home. And in the past, we have been working with city networks, but the footprint was over seeable, and now Telekom is starting until end of '25, I think, they want to reach 25 million households and maybe it was 20 million, I don't remember properly, excuse me for that. But by that, we have much more marketing opportunity with these new technologies. And that's a business that we were lacking off before, and that is why we do assume that with the customer drop in the old technologies, in particular, ADSL, we're going to see a growth in FTTH and that will balance it off. And we'll have to see how that develops, how long that will take, but that is our rough strategy as a whole. Despite of the drop in customers in the broadband business, we had higher turnovers and revenues in the last year than in the year before.

[Interpreted] On the question of the CapEx expenses that we see in the 5G context, we had named the EUR 5 billion figure. These include the payment obligations for the contract from the next year. This also includes the frequencies which are in the auction 2019, the expenses for the 800 megahertz frequencies are not included here. The CapEx and OpEx is concerned in detail, we cannot yet comment on that too much. We'll be able to do that when we can make the business case transparent as a whole. For this year, we have guided the EUR 400 million CapEx. And of course, this includes larger components of core -- of platforms, which are initial and which will not repeat in the next year in this dimension. So that is why we expect CapEx in '23 to be below the level of '22. And the components that we find under CapEx Mr. Dommermuth has mentioned this before, I think that is the antenna, which are going to be effective on the CapEx as well as computers and software that will be installed in the data centers. The data centers themselves will be rented from Versatel as well as the fibers and the infrastructure from the tower companies.