T-Mobile USA Robert Dotson CEO & President

Transcription

1 T-Mobile USA Robert Dotson CEO & President January 9, 2006

2 Disclaimer This presentation contains forward-looking statements that reflect the current views of Deutsche Telekom management with respect to future events. The words anticipate, believe, estimate, expect, intend, may, plan, project and should and similar expressions are intended to identify forward-looking statements. Forwardlooking statements are based on current plans, estimates, and projections, and therefore you should not place too much reliance on them. Such statements are subject to risks and uncertainties, most of which are difficult to predict and are generally beyond Deutsche Telekom`s control, including, without limitation, those factors set forth in Forward-Looking Statements and Risk Factors contained in Deutsche Telekom s annual report on Form 20-F filed on March 15, If these or other risks and uncertainties materialize, or if the assumptions underlying any of these statements prove incorrect, Deutsche Telekom s actual results may be materially different from those expressed or implied by such statements. Deutsche Telekom does not intend or assume any obligation to update these forward-looking statements. This presentation contains a number of non-gaap figures, such as OIBDA, OIBDA margin, CPGA, CCPU, EBITDA and EBITDA adj. for special factors, EBITDA margin adj., capex, special factors, adj. net income, ARPU, free cash flow, and gross and net debt. These non-gaap figures should not be viewed as a substitute for our GAAP figures. Our non-gaap measures may not be comparable to non-gaap measures used by other companies. To interpret the non-gaap measures, please refer to the Reconciliation to pro forma figures in the Q1/04 interim report or the Reconciliation to pro forma figures posted on Deutsche Telekom s Investor relations link under With regard to OIBDA, OIBDA margin, CPGA, and CCPU, please see the reconciliation in the backup to this presentation and the T-Mobile USA earnings release published on November 9, 2005.

3 U.S. Wireless Industry Robust Growth 2006 Industry Growth Penetration headroom (mid to high 80s) Carrier-slowed growth appears self-imposed Landline replacement accelerating Industry Consolidation Price stability Quality up churn down Wireless penetration (%) E Monthly churn rate (%) 2 Industry Ecosystem Renewed investment & innovation Venture capital start-ups Device & infrastructure suppliers E Page 3 1 Source: Citigroup. 2 Average of quarterly rates. Source: Merrill Lynch.

4 Global T-Mobile Business Delivering U.S. benefits Europe driven by stronger Germany Europe: 4.0 billion cash contribution 1 YTD 05 Germany: 2.4 billion Europe leading 3G: web n walk Internet in Your Pocket Testing and selective deployment of 4G platforms Global scale 83 million customers $1.6B in hard global savings Infrastructure & handsets U.S. current & future DT growth engine Firm DT commitment to U.S. Participation in AWS auction Page 4 1 Adj. EBITDA capex. Europe incl. Eastern Europe.

5 T-Mobile: Top Two in U.S. Growth Exceeded 20 Million Customers Size 2003 AT&T Wireless Consistent performance all metrics 5,000 Year over Year Performance 25,000 ($ million) 20.3 M ( 000) 4,000 20,000 $3.2 B 3,000 15,000 2,000 1,000 $1.2 B 10,000 5, ,000 Q3/01 Q3/02 Q3/03 Q3/04 Q3/05 Service rev. OIBDA/adj. EBITDA Customers -5,000 Page 5

6 Delivering DT Profitable Growth Objective OIBDA margin 31% in 2005 (thru Q3 2005) Service revenues % to $9.0 billion OIBDA % to $3.1 billion OIBDA margin (%) YTD '03 YTD '04 YTD '05 Page 6 1 Q1-Q3. OIBDA divided by total revenues less equipment sales.

7 T-Mobile USA Happiest Customers in Wireless Brand awareness 96% Half the spending of other national carriers 1 M+ quality prepay customers past 12 months 1 Back to Back #1 JD Powers All 6 Regions Overall Customer Satisfaction Retail Service Customer Care Most focused wireless company No significant impact of consolidation Postpay churn reduced from 2.5% to 2.3% (thru Q3 vs. 2004) Page 7 1 Q Q

8 Exploded Geographic Coverage 56% in 2005 Over 500,000 sq miles 1900 and 850 roaming (Roaming cost per MOU down 87% 1 minimal CCPU impact) ~33,000 total cell sites (Almost 3,500 in ,000+ planned in 2006) Spectral Efficiency/Capacity AMR & SAIC Rated #2 nationally JD Powers call quality performance study Page

9 Cost Efficiency Operational Legacy Rivaling or besting carriers 2x size Disciplined marketing, sales and distribution Scale benefits 83 million customers globally CPGA in Q3/05 ($) 1 CCPU in Q3/05 ($) T-Mobile Cingular Sprint Nextel Verizon T-Mobile Cingular Sprint Nextel Verizon Page 9 1 Source: Citigroup estimates.

10 Developing New Consumer Data Category Data ARPU 1 (in % of postpaid ARPU) Data ARPU almost doubled since Q Approaching 1 million Converged Device Users ~700k BlackBerry 300k Sidekick Q1 '04 Q3 '04 Q1 '05 Q3 '05 Page 10 1 Does not include WiFi.

11 Future Growth Home Opportunity U.S. broadband penetration >40% 1 (29% y-o-y increase) Riding WiFi Asset/Knowledge base Motorola, Nokia, and Samsung devices currently in user trials Commercial launch 2 nd half 2006 Page 11 1 U.S. broadband penetration in % of U.S. households (source: Citigroup)

12 T-Mobile s Mission: Most Highly Regarded Service Company in America Leading growth brand leveraging global scale Top Rated by Customers Driving consumer adoption of data Delivering DT s mission of Profitable Growth Page 12

13 Backup

14 Customers (million) Q1/04 Q2/04 Q3/04 Q4/04 Q1/05 Q2/05 Q3/05 Customers Prepaid customers Postpaid customers Page 14

15 MOUs/Postpaid Customer/Month Q1/04 Q2/04 Q3/04 Q4/04 Q1/05 Q2/05 Q3/05 Page 15

16 Churn (%) Q1/04 Q2/04 Q3/04 Q4/04 Q1/05 Q2/05 Q3/05 Blended churn Postpaid churn Prepaid churn Page 16

17 ARPU ($) Figures in US$; US GAAP format. Q1/04 Q2/04 Q3/04 Q4/04 Q1/05 Q2/05 Q3/05 Blended ARPU Postpaid ARPU Prepaid ARPU Page 17

18 CCPU and ARPU - CCPU ($) Q1/04 Q2/04 Q3/04 Q4/04 Q1/05 Q2/05 Q3/05 CCPU ARPU - CCPU Figures in US$; US GAAP format. Q4/04 CCPU includes cumulative lease accounting charge taken in the fourth quarter which increased CCPU by $4. Page 18

19 US GAAP Reconciliation: CCPU The cost of serving customers, or cash cost per user ( CCPU ), includes all network and general and administrative costs divided by the average total customers during the period. We believe CCPU is an operating measure of the cost of serving a customer, and can be calculated and reconciled to T-Mobile USA s interim statement of operations 1 as follows: $ million Q3 04 Q4 04 Q1 05 Q2 05 Q3 05 Network costs General and administrative Total 1,052 1,268 1,239 1,290 1,331 Plus: Subsidy loss unrelated to customer acquisition Total cost of serving customers 1,152 1,390 1,411 1,443 1,464 CCPU ($/month) See T-Mobile USA earnings release published on November 9, Q4/04 CCPU includes cumulative lease accounting charge taken in the fourth quarter which increased CCPU by $4. Page 19

20 CPGA ($) Q1/04 Q2/04 Q3/04 Q4/04 Q1/05 Q2/05 Q3/05 Figures in US$; US GAAP format. Page 20

21 US GAAP Reconciliation: CPGA Cost per Gross Add ( CPGA ) is calculated by dividing the costs of acquiring a new customer, consisting of customer acquisition costs plus the subsidy loss on customer acquisition related to equipment sales, divided by gross customers added during the quarter. We believe that CPGA is a measure of the cost of acquiring a customer and we use CPGA as an integral part of our internal reporting. CPGA can be calculated and reconciled to T-Mobile USA s interim statement of operations 1 as follows: $ million Q3 04 Q4 04 Q1 05 Q2 05 Q3 05 Customer acquisition costs Plus: Subsidy loss Equipment sales Cost of equipment sales Total subsidy loss Less: Subsidy loss unrelated to customer acquisition Subsidy loss related to customer acquisition Total cost of acquiring customers CPGA ($/new customer added) Page 21 1 See T-Mobile USA earnings release published on November 9, 2005.

22 Service Revenues and OIBDA ($ million) 2,208 2,464 2,612 2,748 2,854 3,040 3, ,081 1,166 Q1/04 Q2/04 Q3/04 Q4/04 Q1/05 Q2/05 Q3/05 Service revenues OIBDA Figures in US$; US GAAP format. OIBDA for Q4/04 includes a $200 cumulative charge related to lease accounting, of which $176 million relates to prior quarters of 2004 and earlier years. Page 22

23 OIBDA Margin in % of Total Revenues excl. Equipment Sales Q1/04 Q2/04 Q3/04 Q4/04 Q1/05 Q2/05 Q3/05 Based on figures in US$; US GAAP format. Page 23

24 US GAAP Reconciliation: OIBDA OIBDA is a non-gaap financial measure, which we define as operating income before depreciation and amortization. In a capital-intensive industry such as wireless telecommunications, we consider growth in OIBDA to be a meaningful indicator of potential future profitability. OIBDA should not be construed as an alternative to operating income/loss or net income/loss as determined in accordance with GAAP, as an alternative to cash flows from operating activities as determined in accordance with GAAP or as a measure of liquidity. We also use OIBDA as an integral part of our internal reporting to evaluate the performance of our senior management. We believe that operating income (loss) is the financial measure calculated and presented in accordance with GAAP that is the most directly comparable to OIBDA. OIBDA can be reconciled to T-Mobile USA s operating income (loss) 1 as follows: $ million Q3 04 Q4 04 Q1 05 Q2 05 Q3 05 OIBDA ,081 1,166 Depreciation and amortization Operating income (loss) See T-Mobile USA earnings release published on November 9, OIBDA for Q4/04 includes a $200 cumulative charge related to lease accounting, of which $176 million relates to prior quarters of 2004 and earlier years. Page 24

25 Capex 1 ($ million) 2, Q1/04 Q2/04 Q3/04 Q4/04 Q1/05 Q2/05 Q3/ : not including joint venture with Cingular. Q1/05 capex include $2.46 billion related to the acquisition of the Cingular network in California and Nevada and $376 million related to other expenditures. Q2/05 capex include $235 million that were due to T-Mobile USA s joint venture with Cook Inlet Region Inc. successfully being awarded mobile licenses in 35 markets by the FCC as a result of Auction 58. Figures in US$; US GAAP format. Page 25