Deutsche Telekom, Inc Wall Street Analyst Forum's 20th Annual Institutional Investor Conference Transcript

Mar.26.09 | About: Deutsche Telekom (DTEGY)

Deutsche Telekom, Inc (DT) Wall Street Analyst Forum's 20th Annual Institutional Investor Conference Transcript March 26, 2009 10:30 AM ET

Executives

Gerald Scott – President and Founder, The Wall Street Analyst Forum

Nils Paellmann – VP, IR

Gerald Scott

In this morning’s program, we’ve got a somewhat diverse group of business services, technology, telecommunications services companies presenting today. This is the largest of the presenters at the conference, Deutsche Telekom. I guess I am tempted and I can't resist the temptation that even though I am an Irish Catholic kid from Boston, I live in Stowe, Vermont and I lead the Octoberfest parade on a spectacular German horse, a Hanoverian with a German saddle, in a German outfit and I speak a limited German, I know as I lead this giant German parade. And I couldn’t be more Irish Catholic, so that’s it [ph]. And everyone thinks ergo look at this great German out there on the horse, on the legendary German Hanoverian, which is one of the most prestigious horses in the world. In any case, that’s my German story.

Deutsche Telekom doesn’t need a lengthy introduction. Nevertheless, as a parent company of T-Mobile, the Europe’s largest integrated telecommunications carrier in terms of revenues and is one of the world’s leading telecommunications providers, Deutsche Telekom is setting international standards. The Company has three strategic business units – Mobile, BroadBand Fixed Network, and Business Customers.

Deutsche Telekom’s management is committed to delivering shareholder value including an attractive dividend for its shareholders. For 2007, Deutsche Telekom paid a dividend of $1.20 per ADR.

T-Mobile, the mobile communications subsidiary of Deutsche Telekom AG is one of the world’s leading mobile brands with 128 million subscribers in Q4 2008. Thereof 32.8 million in the U.S. T-Mobile USA is focused on rolling out its third generation 3G wireless network. By the end of 2008 the 3G network covered a population of 107 million inhabitants in approximately 130 major cities.

T-Home, the BroadBand Fixed Network division is Europe’s largest high-performance broadband and wireline communications provider with 15 million DSL lines. For their top 400 business customers, their Business Customer unit, T-Systems, offers a one-stop information and communications technology solutions.

As an internationally oriented Company, Deutsche Telekom is represented in about 50 countries around the world. More than half of the revenues from the first three quarters of 2008 were generated outside of Germany. The Group is committed to principles of sustainability and uses economic as well as social and ecological criteria as the basis for its actions.

Now, without any further introduction, I’d like to introduce Dr. Nils Paellmann, who is Vice President of the Company.

Nils Paellmann

Thanks very much, Scott, for the intro. I think that saves me my intros to a certain extent since you heard everything about the Company already. Just kidding. So, I am Nils Paellmann. I do the U.S. Investor Relations for Deutsche Telekom. So I am actually based in New York. But I spend a fair amount of time also back in Germany, usually around the quarterly results.

Okay. Usual disclaimer. I am not going to read it. Just I want to mention that we are listed on the NYSE, so that means that we also have to file with the SEC. So we have the usual documents that you can get there. For example, the Form 20-F, which is our Annual Report, which is a very detailed document. So if you are ever in need of more information, I would recommend looking at that.

Okay, a brief introduction. I am not going to talk a whole lot about the financials, the financials in the handout that you have there. I am just going to mention a few highlights and then I want to – I think I want to talk a little bit about what is the strategy of the Group in the current environment and what have we accomplished in terms of our strategy last year and then I want to give – leave some time for Q&A as well. So, that’s the agenda.

As already mentioned by Scott at the beginning, we are the Europe’s leading integrated telecommunications carrier, certainly in terms of revenue. Here you see our revenue back in 2008. You can see that the majority of our revenue, about 57% is coming from wireless, Mobile, which includes the U.S. About 40% of that is coming from the U.S., the remainder is coming from Europe.

We also have Fixed Network, which is basically our incumbents business back in Europe, 29% of revenue coming from that. BBFN stands for BroadBand Fixed Network. And then we have business customers, which is the third unit, which generated 14% of the Group revenue last year.

If you look at our results last year, reported revenue was down about 1.4%, primarily due to some revenue declines at the incumbent traditional business in Germany fixed line business, which was not fully compensated by growth in the wireless business. If you look at it, we also suffered last year a little bit from headwind from currencies, especially the strength of the dollar – sorry, the strength of the – well, the weakness – sorry the other way round, the weakness of the dollar in the first half of the year. If you correct for that on an organic basis, we actually were flat last year in terms of revenues.

Adjusted EBITDA was up just slightly. More significantly and that’s really a big focus of the Company, free cash flow was up 6.9%, as you can see here, to €7 billion. That was a significant achievement. And we have provided a guidance for 2009 that we are looking to maintain this kind of level of free cash flow. Also, we have – want to maintain the same level of EBITDA as last year.

Net income also improved last year. It more than doubled to €1.5 billion reported. Adjusted was €3.4 billion that also improved compared to the previous year.

Already mentioned, I think one of the biggest highlights from an investor perspective is that we continue to pay an attractive dividend. We just proposed the new dividend, which is going to be paid this year in May of €0.78 per share. That still has to be approved by the annual general meeting, which is taking place in April and then U.S. shareholders will get the U.S. dollar equivalent of that amount.

Dividend yield is currently more than 8%. Obviously, that’s a reflection of the share price too. We have a market cap, this was March 12, I think since then it actually has increased a little bit up $52 billion. We are listed on the New York Stock Exchange, ticker symbol is DT and also in Frankfurt, of course, we’ve been listed since the IPO in 1996.

We have about 228,000 employees worldwide including 38,000 here in the U.S. at T-Mobile USA. And first quarter results are coming out on May 7th.

So, I want to do, again, I don’t want to go through all the slides because then time will be used up and we won't have any time for Q&A, but I want to highlight the four areas of our strategy. This has been our strategy for last two years ever since we have had a new CEO. His name is René Obermann. He came from the Mobile division. And it basically consists of these four areas, which you see here.

So, number one is improve competitiveness in Germany and Central Eastern Europe. Number two is grow abroad with Mobile so that’s the U.S., of course, in particular, but also Central Eastern Europe. Third area is to – we believe there is a big trend that more and more people will access the Internet not on their – on the desktop, but on their mobile device or laptop. So we want to benefit from the trend that the Internet is mobilizing. And finally, we want to strengthen our Business Customer division or as we call it (inaudible) build network centric ICT business.

So, what I want to do is go through these four areas of our strategy, highlight a few things in each of these areas. And then I want to open up for Q&A. In the handout that you have, you have all the financials that you want to guide in more detail. You can certainly do that.

So, let’s start with number one. So the strategy of our is called focus, fix, and grow. So the first area here is improve competitiveness in Germany and Central Eastern Europe. This really has two dimensions to itself. On the hand, it’s to deal with some of the legacy cost structure that we have in Germany in the incumbent fixed line business.

So, the big focus there has been on reducing cost in order to secure the margin and in order to – yes, to – so we have for historical reasons – we have a large headcount in Germany, which due to change in technology, for example, we actually no longer need that kind of headcount, so the focus has been to reduce headcount, as we can see here. This is the headcount in Germany. So it went from 160,000 in Q4 ’06 to 131,000 or a little more than 131,000 in Q4 ’08. So, you see we’ve been able to reduce our headcount by around abound almost 30,000 people over the last two years and this has been done primarily by voluntary measures. So, there is no – it’s difficult given the structure that we have in Germany with a lot of civil servants still on board to have forced redundancies. So, we didn’t do any forced redundancies. We did everything through voluntary measures. So that early retirement, for example, or leaving the Company with severance paid.

But as the result of this we have, for example, in BBFN in Germany, which again stands for BroadBand Fixed Network Germany, we had a net OpEx reduction last year of €0.8 billion in the cost base.

But, if we talk about improving competitive – Germany and Central Eastern Europe, reducing cost, getting the cost base down is only one side of the coin. The other side of the coin is that we want to improve our market positioning. In particular, we wanted to improve our market share in Broadband.

And as you can see on the right hand side is how the market shares in terms of our share of net adds in the German Broadband market, so that’s DSL and cable modem, has developed since 2006. And you can see the red line here stands for T-Home, which is the brand name that we use in Germany for our fixed line business and you can see since 2006 we have been able to improve our share. It has been consistently above 40% since Q4 ’06 and most recently it actually was even slightly higher, 50%.

And as you can see, our gain in market share has come not at the – has come mostly at the expense of the alternative infrastructure operators, so those are the resellers, for example, ULL providers. You can see that the dark blue line how that has gone down since 2006. Cable has gained some market share, as you can see. they are coming from a low base in Germany. They have gained some market share, but not at our expense, as you can see. So, we’ve – on the basis of attractive product, we’ve been able to improve our market share.

For example, what kind of product do we offer – for example, we offer just to mention one – we also have triple-play also in Germany now, which has – which include IPTV. So it’s similar to the U-verse product that AT&T has in this country. And we ended last year with 480,000 triple-play packages sold in Germany.

Alright, so that was the big time business. Let me just watch the clock here a little bit. The next thing I want to talk about a little bit is T-Mobile Germany, so that’s our domestic wireless business. This business, we have in the past also faced some top line pressure due basically to competition and prices coming down in Germany, in German wireless and usage, not increasing sufficiently to make up for the price declines.

However, we have seen last year an improvement in the situation as well. If you look this is the service revenue, and you can see the year-over-year growth rate. So we basically in the fourth quarter last year, fourth quarter of ’08, for the first time in many years we’ve seen this kind of turnaround with a small revenue growth, 0.5% in the fourth quarter. At the same time, we have maintained a margin between 35% and 40%; that has been fairly consistent over the last few years.

Why has the revenue trend improved? Well, big factor actually was that our data revenue growth has improved. Our data revenues excluding messaging grew, as you can see here by 46% or 45.6% for the full year 2008 and the data revenue growth actually accelerated to 64% in the fourth quarter.

We are also the exclusive provider of the iPhone in Germany. We sold 333,000 iPhone 3G, for example, in the second half of last year. And those iPhone customers they are generating a very high revenue per customer. It’s about €77 ARPU per customer, which is much higher than our normal contract ARPU in Germany, which is around €30. So that’s the reason – that’s one of the reasons why we’ve seen this improvement in the revenue picture.

At the same time, we also see the MOUs, minutes of use per contract customer growing as well. So there are some evidence that there is some improvement in the voice price elasticity as well. It grew about 6% MOU per contract customer in 2008. But usage is still very low, especially compared to the U.S. Our usage per contract customer in Germany is round about 130 minutes or something like that whereas in the U.S. our U.S. contract customers for example use more than 1100 minutes per month. So there is a big difference there and we think there is still potential in Germany to further simulate voice growth and voice price elasticity. So that’s still a future potential here for the German wireless market.

Alright, let me talk a little bit about the second area, which is grow abroad with Mobile. So, Germany, we have some of the legacy issues that I talked about. The growth for the Company is really coming from the mobile operations outside Germany, especially from the U.S. Here you see the U.S. picture. So the U.S. remains the biggest growth driver for the Group. Last year, both for the full year as well as for the fourth quarter, we had double-digit growth in total revenues, service revenues, EBITDA, everything going up, margin improving.

We did see – I should mention that we did see a slowdown in customer growth in the second half of the year compared to the year before, so that is – I think that is partially the market. There was a slowdown in the market. If you look at AT&T or Verizon, they also saw some slowdown compared to the previous year. AT&T probably a little less because they had the iPhone, but Verizon they definitely could see a slowdown.

On the other hand, there are also some home-made issues so to speak. T-Mobile last year suffered a little bit from a lack of the 3G – the other competitors already had a 3G network up and running – and from a lack of competitive devices. So the big focus for the Group right now in T-Mobile USA is to make up for these statuses. So, for example, we started, we need to get more competitive in terms of devices. So last year we – in the fourth quarter, we launched the Google Phone, the G1 Phone as a first innovative device, but there is going to be more devices going to be launched this year.

Also, there is a big focus and then of course, already mentioned in the introduction at the beginning on expanding our 3G coverage. So, at the end of last year we had a 3G coverage of 107 million POPS. The plan is to basically double this in 2009. We were at – the reason why we are a little bit late with 3G in the U.S. is we needed to get spectrum first. So we bought back from in the AWS auction, which was in 2006. And then it took sometime to clear that spectrum, but basically now we are moving full steam ahead in order to catch up here and have a competitive network, so that’s the biggest priority for the growth. So, we are not slowing down, for example, in terms of CapEx this year in the U.S.

Okay, Central Eastern Europe, that’s another big growth area for us. Obviously, right now also a little bit in the headlines due to the economy there, but we have a strong position there. We are in places like Poland, Czech Republic, Hungary, Croatia, Slovakia, Macedonia, Montenegro, as you can see here. Those are the countries where we have Mobile operations in Eastern Europe.

Overall, there was a slowdown in the growth, as you can see in the fourth quarter, although most of the slowdown that you see here was actually due to currency developments. If you look at the underlying trends in terms of local currency, there was also a little bit of a slowdown but not as much. For example, in Poland, we still had 5% revenue growth in the fourth quarter compared to 7% for the total year round about, and we’ve seen similar rates of slowdown in other countries as well.

But once again, I think overall, those are good markets. We continue to generate healthy margins in this market. As you can see here, fourth quarter, for example, we had a margin of almost 35%. Fourth quarter margin is typically down a little bit but it was up about one percentage point from the year before. Churn remains very low. So, overall, I think this is an area where Deutsche Telekom has competitive strength I would say.

And we are also in the process of – not sure why that’s not coming – we are buying, as you probably know, we have acquired a stake in OTE, the Greek operator, the Greek incumbent operator, which is going to be consolidated from February 1st this year. That is going to further strengthen our position in Eastern Europe. That will add maturities like Romania, like Bulgaria, Albania and Greece, of course, is included in there as well. And they, by the way, they report numbers tomorrow, on the 27th, so if you want to look out for that, you can see those.

The third area I want to talk about a little bit, we are big believer that the Internet is mobilizing, in other words, more and more people access Internet applications, but also things like email, of course, on their mobile device or their Blackberry or their G1 or whatever.

And we are seeing very strong – we have the numbers to back it up. Last year data revenues without messaging grew by 29% overall for the Group to €2.5 billion. In Europe, the growth was around 45% to €1.4 billion and in the U.S. it was around 19% to €1.5 billion. So, in the U.S., the growth was slower actually than in Europe, as you can see. The reason, we believe, is the lack of the 3G network in the U.S., so we would expect this growth rate to accelerate in the future once we have more of the 3G network up and running and more competitive devices as we already started in the fourth quarter.

Okay, here you see some of the growth rates. I am not going to go through all the slides in detail. You can see web’n’walk users, those are the people who are paying for mobile Internet access in Europe, so you seen the numbers going up. myFaves in the U.S., which is a price plan is more voice-centric, but it also has higher data usage we’ve seen due to user interface. That has gone up. Quarterly data revenues in Europe, quarterly data revenues in the U.S. everything very strong growth. Again, I don’t want to spend – interesting here may be the UMTS also the 3G data volume in Europe. You can see this has really exploded from a very low base back in 2006 to now 2800 Terabytes of data volume in the fourth quarter of 2008. So, that’s really a big growth area. And we believe – I was on road show with our CEO the last few days. He believes that the mobile Internet eventually will be bigger than the fixed Internet. So he thinks there is a huge opportunity in this area, going forward.

This is the last area here, build network centric INT. So this is about our Business Customer business. The main business that we do now in this area is running like – we do IT services as well, so we are running computing centers and so on for large clients. For example, Shell, we won an outsourcing contract last year, running centralized applications and things like that.

This business has also improved its performance especially if you look at them on a quarterly basis. you see here, this is the total revenues in this business last year and you can see consistent improvement quarter-by-quarter and a turnaround in adjusted EBIT as well turning positive towards the end of the year. It’s still not – far from a stellar performance, but we are seeing some signs of improvement in this business.

Okay, here you see the target for 2009. I already mentioned them at the beginning. So we want to maintain adjusted Group EBITDA around the 2008 level. We want to maintain a strong free cash flow around the 2008 level. We want to also maintain an attractive dividend policy as we have had in the past. So those are the main targets for 2009.

Obviously, the economies in many countries, they are big issues right now, so I think this is – given the environment, this is, I would say, clearly – actually we are determined, but it’s the realistic but it’s also an ambitious guidance. I’d say that’s how I would term it. So this is not a no-brainer here, but it’s something that the Group will work for and we think it’s – given the environment, it’s the appropriate guidance to provide.

Here you see the – the other thing, I just want to mention this very briefly, we had, since you are probably not so familiar with the – how the Group was managed before, this may not mean all that much to you, but we had a restructuring in the responsibilities on the Board level and basically it’s going to look like this going forward. So, in the past we used to manage, for example, the Mobile business in Germany and the fixed business in Germany were managed separately. Now, it was agreed to integrate the fixed and mobile operations in Germany under one Board member, it’s actually a Dutch guy, his name is Niek van Damme. He will be – he is basically heading up the German operations.

Then, all the operations like OTE, Magyar Telecom, all the integrated operations we have in South East Europe will be managed by a guy called Mr. Kerkhoff. Then you have T-Systems. Then you have the CEO. The CFO is new as well. Anyway, just starting to say we changed our structure here in the past. Fixed and Mobile were managed separately and in the future in Germany they will be managed jointly. The same is true for South East Europe. We do believe that there are some conversions between these two areas. For example, in areas like network and of course in the U.S. we don’t have a fixed line business, so this doesn’t really apply to the U.S., but it applies to countries like Germany, Hungary, Greece, for example.

Alright. That’s really it. The next few slides are all on the financials. I am happy to go through those as well, but probably you can do that at your leisure as well. So, I want to – since it’s – we have about 10 minutes left here, I would – maybe if you have questions, I would rather address those and go through all the financials in great detail.

Question-and-Answer Session

Nils Paellmann

So, okay, over there.

Unidentified Participant

(inaudible).

Nils Paellmann

Yes, we have not provided EPS guidance. I can – the – traditionally, the Group has always provide guidance not in terms of EPS, but in terms of EBITD. As I mentioned EBITDA last year was €19.5 billion, so the guidance for the Group is that we will maintain that level in 2009. If we go to – do you have the presentation, sorry – so, since we provide guidance in terms of EBITDA, I am not so used to EPS, I must admit. But let me just take a quick look here. So our reported net income last year was €1.5 billion. We have about 4.3 billion shares. So, quick calculation, how much is that? That then – anyway that would give you the EPS. I would have to calculate it myself.

Unidentified Participant

The ADR is one to one with the ordinary –

Nils Paellmann

Exactly.

Unidentified Participant

$0.47 (inaudible).

Nils Paellmann

Yes. If you look at our – of course, adjusted EPS, which is maybe the more appropriate way to look at it, that was – adjusted net income last year was €3.4 billion. So that’s about €0.75 something like that. And now our Euro share price right now is €9.60, just to give you an idea.

Unidentified Participant

(inaudible).

Nils Paellmann

The adjustment that we do there, there are a number of adjustments. For example, we have – the biggest one is we have due to the headcount reduction in Germany, we have a large personnel restructuring provision, which we take out of – let’s go to the slide. I think it’s easier to explain it that way. If you go to slide 30, here you see our reported net income last year. You see we had €1.5 billion compared to €0.6 billion the year before. The main special factors that we would take out to get to adjusted net income are the ones at the bottom, so you had – EBITDA was impacted here €1.4 billion of special factors, including €1.1 billion related to personnel restructuring provision or personnel expenses. Then we had a charge in the charge in the net financial expense of €0.7 billion, which was due to a writedown in the carrying value of the OTE stake, which was related to a change in the discount rate. Then we had some other smaller writedowns in various countries. Those were the main factors. So you see here, this is reported net income was €1.5 billion compared to €0.6 billion the year before.

If you look on the next – no sorry, it’s the slide before, on page 29, you see the reported net income was €3.4 billion. That compared to €3.0 billion in the year before. So, this has been adjusted for the factors that I just talked about.

Unidentified Participant

(inaudible).

Nils Paellmann

And no – it’s a good suggestion. Again, the Group’s traditionally has not guided on EPS or net income, that’s why we – but it’s – I take that as a good suggestion. Yes.

Unidentified Participant

(inaudible).

Nils Paellmann

All good suggestions. You were asking about – I was told here to repeat the questions – about how we deal with pensions. So, basically what we have – we do not have an external pension fund. So basically we have two different systems that we deal with. We have one system that is for the civil servants that we have. We still have round about 60,000 civil servants working for the Company. So those are from the former government days. They are basically – the government takes care of the pensions. But we do have to make a contribution to a government pension fund, which is equal to about one-third of the salaries of the civil servants every year. So, that’s round about €800 million that we pay every year in the first quarter.

As far as the non-civil servants are concerned, there are Company pensions. Those are funded on balance sheet. So we have pension accruals on the books, which has to be formed to – in accordance with certain actuarial assumptions, and basically the ongoing pensions are funded from the business and are part of the personnel expenses. So it’s round about €1.2 billion-€1.3 billion per year.

Unidentified Participant

(inaudible).

Nils Paellmann

It’s fully funded, exactly.

Unidentified Participant

(inaudible).

Nils Paellmann

The discount rate I think is again for the – it’s only for the provisions, which are formed on the book, so it’s based on certain actuarial assumptions. I thinks it’s five – it’s around 6% if I remember correctly. But I would have to look it up in the Annual Report. But it’s – we do not have – I think the important point, we do not have an external pension fund with – which is, for example, under funded, like you would have at some U.S. companies or U.K. companies. So that’s not the issue for Deutsche Telekom. Yes.

Unidentified Participant

(inaudible).

Nils Paellmann

Right.

Unidentified Participant

(inaudible).

Nils Paellmann

Well, I think our market positioning in – the market position is different country by country. So, it’s not – also the image of T-Mobile in Germany is not the same as the image of T-Mobile in the U.S. I think in the U.S. of course we are one of – traditionally one of the smaller carriers, at least if you compare to Verizon, for example. So we’ve been in a position of being the challenger in this market and in order to attract customers we have traditionally relied on value. That’s basically the reason.

And as far as Germany is concerned, it’s actually the other way round. In Germany, we are charging a premium compared to our competitors because I think there our market positioning is probably closer to what Verizon has in this market, being more the incumbent, having the best network and – but also charging a premium. So, it’s slightly different.

We did start a second brand in Germany, which is called Congstar to appeal to the more value conscious segment of the market.

Unidentified Participant

And Central Europe?

Nils Paellmann

And Central Europe, again, you would have to look market-by-market, but in a lot of these markets, we are also more the incumbent, the – for example, in Hungary, just to mention one market. Yes.

Unidentified Participant

So, a few questions, if I may.

Nils Paellmann

Sure.

Unidentified Participant

(inaudible).

Nils Paellmann

December 31st.

Unidentified Participant

Okay. Next thing. In the United States some of the incumbent fixed line operators are facing some competitive pressure from new entrants (inaudible) cable –

Nils Paellmann

Right.

Unidentified Participant

Are you in Germany experiencing similar competitive pressures and what’s the competitive situation on the Mobile side of your (inaudible) in Germany? (inaudible) competitive situation in Germany, both for Mobile and fixed line business –

Nils Paellmann

Well, let’s start with fixed. You basically see it on this picture. So, if we look at broadband, which is – is the only sub segment, but in broadband basically you can see we have a little less than half the market. We had at the end of fourth quarter about 10.6 million broadband lines. Overall German market had 23.1 million, as you can see here, of which cable – cable doesn’t have the same importance in Germany as in the U.S. Cable only had 1.8 million broadband lines, as you can see here. So, the biggest competition we have traditionally faced is from other telecom operators that is meant here by ULL and others. So those are the ones, which use the unbundled local loop from Deutsche Telekom, which we have to give away at a regulated price. So they have 7.9 million. Those are carrier like O2, for example, which is part of Telefónica, AQA [ph], which is part of Vodafone. So those are the ones where we’ve traditionally faced the strongest competition.

We do have some resellers as well, although the reseller share, as you can see, has gone down. And we recently have been forced from a regulatory perspective to also offer naked DSL as a wholesale product. This is IT bit stream access unbundled at 0.2 billion. That’s just started. But basically – traditionally, you can see it on the right side. Cable is getting stronger, but coming from a small base. We’ve been able to maintain our market share. But we continue – we also continue to lose some lines in Germany. That is basically due to the competition we are facing as you can see here, of every new broadband line we are only getting 50%. That means typically the other 50% go to a competitor, and if they go to a competitor that usually means the line loss for us. So that’s pretty simple.

And in – as far as Mobile is concerned, again, we are the market leader in Germany. T-Mobile Germany is the largest carrier with round about 36 million customers. Vodafone has almost the same number of customers, almost the same size. And then you have two smaller carriers. So the two biggest carriers we have about 80% of the market. And then you have two smaller carriers. One is called E-Plus, another one is called O2. E-Plus, which is part of KPN, they have been gaining market share. They are kind of the challenger in the German market. But, overall, the German market has been relatively stable, as you can see from the margins here, so a relatively good situation.

From that perspective, the disadvantage of German Mobile has been – is really not being a very strongly growing market due to the amount of price competition there has been. Prices has been coming down. Usage increase has not be sufficient to offset the price declines although again the most recent quarter we actually did see a small revenue growth. So, some improvement in German wireless.

Nils Paellmann

I think one last question. Okay, sorry.

Unidentified Participant

(inaudible).

Nils Paellmann

Well, you already saw in the fourth quarter that the currencies do have an impact on our numbers. I showed the numbers before. Will it continue to have an impact this year? Yes, I would think so. The weakness of the Eastern – interesting enough, it seems – we have to watch it carefully – but it seems that wireless usage, for example, is holding up pretty well in the Eastern Europe markets despite the difficult economies. That may be as we’ve seen in the U.S. as well that wireless is really something that people are not likely to give up even in a kind of crisis situation. But really have to see and watch it.

If you look at our portfolio, overall, we have certain, in-built balances, so to speak. For example, in the fourth quarter the Eastern European currencies did get weaker, but at the same time the dollar got stronger, so we had a certain offset. Hopefully that stays the same, we don’t know where the dollar is going. It’s still – the dollar is certainly stronger than a year although it has recently gotten a little bit weaker again, which is a little bit disconcerting from our perspective, so we really have to watch it. But certainly that has an influence on our results. That’s clear.

Unidentified Participant

Thank you very much.

Nils Paellmann

Okay. Thank you.

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