freenet AG

XETRA:FNTN

Earnings Call Transcript 2020-Q1

[Operator]

Dear ladies and gentlemen, welcome to the conference call of freenet Ag regarding the presentation of the Q1 results 2020. At our customer's request, this conference will be recorded. [Operator Instructions] May I now hand you over to Christoph Vilanek, who will lead you for this conference. Please go ahead, sir.

[Christoph Vilanek, Chairman of Executive Board & CEO]

Hello, everybody. A warm welcome to all of you to our today's Q1 results presentation, which is certainly has 2 key messages. First one is that we've had a very good and satisfactory Q1 and the indications for the rest of the year, which we will give in more details, look really well. This is why we confirm the guidance. And the second key message from last night was that we have decided anonymously with the entire Board and Supervisory Board to cut the dividend, and we will go into more detail for the reasoning in a couple of minutes. I'll start with the management summary on Page 4. As I just said, overall, first quarter operation, it looks really good. We have to admit that the COVID-19 crisis only started at the mid of March. This is why a lot of the references today will include April because we have no final closing, but we have the operational KPIs, which makes us feel comfortable with the current outlook.The main changes was that, certainly, in mobile as well as in the hardware sales with GRAVIS, the COVID-19 drove online sales up versus the retail sales. We have a certain decrease on the gross ads, mainly from MediaMarkt Saturn's stationary sales and from our own retail shops, but at the same time, aside of online, we also saw a lower churn intake during those 2 months. In the comment here, it says no final numbers yet, while the churn intake is always a delay or concerns a delay, and we cannot really balance it, but we are comfortable with the outlook. The overall margin losses from accessories and hardware have been compensated by lower expenses on the other side. On TV, we saw no specific additional uptake, but we saw certainly a higher usage. And even though it's a smaller part of our business, B2B payments have -- some of them have been delayed, mainly in the DAB and radio area where the private radio stations obviously have a short-term liquidity issue with a long -- a lot of cancellations in advertising.So overall, we are very convinced of the resilience of our business model. We see also a couple of differences versus the regular telcos. Free cash flow and liquidity is really strong, and this is why we feel comfortable to reconfirm and reassure full year guidance for 2020. At the same time, and Ingo Arnold will elaborate in more detail, we are facing a significant refinancing. We decided not to even apply or think about public funding, which at this point of time would not be necessary, but we also want to avoid to run into a necessity of public funding if the banks would blackmail us with the refinancing in fall. And this is why we thought it might definitely make sense to keep the dividend onboard to save, to keep the money in the company on the balance sheet. We won't spend it for other things, but we -- give us some flexibility and freedom for the future. Having said that, let me give you an overview on what the crisis or the COVID-19 did to us on Page 5. Certainly, we have immediately installed a committee -- internal committee to have a full everyday overview about the impact, about the health situation, et cetera, et cetera. Primary focus as in any other company was to separate risk groups to give the staff the safety and the feeling of safety. We have established mobile office abilities for any of our companies within the group. We have established hygiene rules, et cetera. And from last week onwards, we started to really bring the people back onboard. I guess, as of today, anywhere between 55% and 65% of the people are back in the offices. We work with A/B shifting. We separate key people. We have, from day 1, told the people that if we go to short-time work, we will compensate the losses and full -- pay full 100%. And we've also told our people in the shops that even though the sales will be down, we would pay them the same commissions as we did on average for the last 4 months. I think the result of this is that we have a highly motivated team. They're very excited about what the company did for them. We have very positive reactions overall. We have also equipped them with the necessary face covers, et cetera, et cetera. Currently, there's about 1,000 people still in short-time work, mainly from the shop front. We have reduced the opening hours for the time being as well as the service level in customer care, but we've realized that our customers also do appreciate our overall ability. We have not stopped any of the lease payments, but we have renegotiated with about 50% of our landlords to review. And we have achieved now six-digit number of reductions on that front. Operationally, approximately 200 shops were constantly open. I think that was one of the impacts of our very liberal and very fair treatment of the individuals. Shop managers went to see the land -- the mayors in the cities. They explained them how important it was for individuals to have their mobile phones repaired, updated, et cetera, et cetera, and this took a positive reaction. As I said, about 1/3 of our shops were always open. We had reduced opening hours. From last week, we are now almost -- except for some of the bigger shopping centers, we are open again. We have a somewhat reduced level of service there, but we have seen last week that revenues were up to pre-COVID level. We have not reacted at all with any price down so far and any special promotions. It's the opposite, we're trying to keep prices up. We have also, I think, made fair treatment to our franchise partners and third-party retailers. And they also appreciated, and they also -- they even gave interviews in the special interest press of the industry that mobilcom-debitel is a very fair partner. On the run rate, if I want to say so, on Page 6, I won't go through all the learnings. Very interesting maybe is that MediaMarkt Saturn online sales, even for mobile contracts, was up significantly. Overall, MediaMarkt Saturn is obviously down in sales, but they've done a great job. I think, overall, their online sales are increasing significantly. They have accelerated their supply chain and logistics technology in order to fulfill customer demand. We saw that the renewals of contracts are significantly up. And as I mentioned, specifically in March and April, we saw order intake -- churn intake, about 20% lower from previous year and about 25% lower from our internal planning.GRAVIS had an interesting route. They have record revenues in March and April, mainly driven by 6x higher online sales. This will lead to a fact that we can cover the cost that we have still with the brick-and-mortar business and the people on short-term work. In freenet TV, we have the price increase implemented on direct debit from 1st of May. We are currently distributing the vouchers for -- in retail, and this is a little bit delayed. waipu usage is up, and I'll talk about that in a second a bit more. So overall, results Q1 and April net sales impact, less than 25%. So far, we don't see an increase significant or visible increase in bad debt. ARPUs are stable. The fact that we are heavily on flat rates does not lead to a -- the usage increase does not lead to more revenues. Overall revenues are fine. Some of the constraints, as I mentioned before, for example, the roaming or heavier usage or things like that would impact a typical telco network operator, do not impact freenet at all due to the business model. Page 7, summary of the key numbers. Revenue, EUR 648.8 million; EBITDA, EUR 104 million; and free cash flow, EUR 50 million. And the base is doing well. On Page 8, we show the details of the quarterly performance. Postpaid up by 22,000. Freenet FUNK, plus 1,000. Actives, we did not really promote it in the first quarter. freenet TV, a little down; I come back to that in a second. And waipu is plus 44% with really strong performance. So the total subscriber base increasing to 8,430,000 subscribers, delivering a sustainable revenue stream for the rest of the year. Going into a bit more detail on Page 9. Postpaid customers, it's the third quarter with consecutive growth. Again, we're very happy about that. We also foresee it for the second quarter, at least a flat development. I'd say, this is at least what we can see from end of April. So we think we can -- the mentioned drivers lead to a minimum stable development. I've talked about some of the key changes. There's also some interesting observations, the entire free dealership, these people, private entrepreneurs, same as franchisers, they're really active. They basically changed from a brick-and-mortar to a telephone and online business. They are on equal performance in April than last year. And I've talked about the shops and the churn intake already.Page #10. freenet TV, still above the 1 million customers. I've mentioned last time, and I will repeat that for another 2 quarters, there is about 14 -- currently, still 14,000 satellite customers that will be leaving over the next 9 months. More importantly, we have increased the pricing as of 1st of May from EUR 5.75 to EUR 6.99. This price increase was pretested and showed some churn indication. But overall, even if the churn would go up to 8%, it would pay back. Currently, the intake is plus 3% to 5%, depending on the individual segment. So overall, this will increase gross margin and EBITDA mainly next year. The -- as I said, the -- part of the customers, about 50% of the customers buy a voucher in retail. This retail -- in retail, we can only exchange or switch from the old to the new vouchers within the month of May. So there will be some delay with the increase of pricing for the voucher customers, but I hope this is not -- will not be significant. We have restarted our TV campaigns last week for the renewal peak time in June, July and August.On Page 11, a quick look at waipu.tv. There is a good development within this quarter to a total number of subscribers of 453,000. Overall, very positive. Also, the O2/Telefonica is doing really well. We have launched again a number of new additional TV channels. As of today, the portfolio consists of 98 HD channels and 35 other channels, so a total of 135. The waiputhek is a new feature, which is gaining a popularity specifically over the last few weeks where the usage is up. It's not only your own recordings, it's the access to a number of libraries from public and private channels. So it's a huge library of top-quality entertainment. Platform service level, we have never mentioned that, but it was interesting to see that when the crisis started and usage was up by 30%, still, the platform performs really well with 99.9% even though the heavier usage. Having said that, I hand over to Ingo Arnold. And I think the more important topic about financial performance, stability and outlook.

[Ingo Arnold, CFO & Member of Executive Board]

Thank you, Christoph. Good morning, everybody. I would like to start on Page 12. I think the basic topic, what I have to say is, I think it is responsible for us as a company here to show responsibility for this company. And therefore, we have to decide to keep as much liquidity as possible on our balance sheet because we are in a crisis at the moment, and I think this is typical in every crisis, what you see, that you have to keep your liquidity on the balance sheet. And this is not based on any changes in the quality of our business. But first of all, on Page 12, I would show you some measures, what we have taken to optimize the cash during April. So the first quarter is not influenced by these measures. But what we did is we are looking in all incoming payments every morning, and we are monitoring it very closely. And what we can say today at the beginning of May is that if I would not know that there is a crisis, I would not see it from the paying behavior of our partners here. So everything is fine on this side. On the other side, we try to maximize our cash position. So we are in talks with our partners about payment terms, et cetera, et cetera. I think at the moment, it does not really look necessary to do so, but we would like to be prepared if the situation could go or would go in a direction, which we could not see today. We also have discussed internally and also with banks and with authorities about federal funding. But all what we can see out of these programs is that this would give us maybe some flexibility in the short term, but it would reduce our financial flexibility in the middle term and in the long-term. And therefore, with all the decisions what we take, it was very important for us to avoid using any federal funding. So therefore, for example, it could be possible that it would -- or it would not be possible for us to pay any dividend for years, and we think this outlook is much worse than do a onetime suspension of the dividend. So on Page 13, what we have looked into is the reactions of the financial markets in the weeks since the crisis started. And what we saw there, and I think you are more expert than we are, but I think some of the developments are very obvious. One of the development was that on the equity market, the volatility was much, much higher than before. And on the debt market, we saw that the credit default margins were increased dramatically. So the market saw a lot of risks here, and this would also mean a risk for us if we have to do some refinancing in autumn and in spring next year. So we also watched into the promissory note market because we have some promissory notes due. And therefore, the first idea would be to refinance the due promissory notes in the promissory note market. And what we saw there is that we saw only very few transactions. We saw a lot of delayed transactions, and we do also affect -- we do also expect a lot of additional transactions because of the crisis in autumn and spring next year.So at the end of the day, we saw a very tightened situation here. And this was part of the assessment, what we did, and then we looked into our own figures. And to make it very clear here, we still see our balance sheet is very solid. It is very robust. So from this point of view, there would be no need to postpone or to suspend a dividend payment. It is only because we have the need to refinance EUR 700 million of promissory notes in autumn and in spring. And therefore, we think it is necessary, and it's more or less our duty to keep the money on the balance sheet now.And to give you an overview of the current performance of our business, I would ask you to switch to Page 14. First of all, here, you can see that our performance on a group level is very, very solid. We see, without putting into consideration, MOTION TM. We see an increase in revenue on the one hand, which is driven by GRAVIS, already mentioned by Christoph. On the other hand, in the gross profit, we see a decrease after all extraordinary effects of something like EUR 6 million. All these EUR 6 million are based on a onetime effect, what we had in Q1 '19, where we get a bonus payment from the hardware industry, which is -- if you look into the other quarters of '19, which was a real onetime effect, and we never saw it again. And so putting this into consideration, it is a stable gross profit, what we see. And on the other hand, what you could also see, if you look into the EBITDA figures, is that even the gross profit effect, what we saw there, that this could be overcompensated by savings on the SG&A side. So I think a very, very stable picture of what we have here. Moving to the next page to the mobile segment. Most of the things, what I already mentioned on the group level, you can also see here on a -- in the mobile business. I think it is very, very stable. And I think what is important and what you can see under the last bullet here is we have this special decision or this decision from the regulatory authorities to put the mobile number portability fee down to EUR 6.82. So yes, this will affect our business during the year and our profitability, but I do only expect a 1 million digit effect here. And I think we will have to wait and see how big it will be because on the other side, we do not have to pay this fee. And so partly, it will be a compensating effect, what we will see here. Moving to the KPIs of the mobile business on Page 16. We see here on -- and already mentioned by Christoph, again, an increase in the postpaid customer base by 22,000 in the first quarter. A very stable view here. And yes, there were small effects from corona or COVID-19 in the last 2 weeks of March, but these effects were not that big. ARPU stable with 18.4% in comparison to the last quarter of '19, where it was 18.5%. And in the digital lifestyle revenues, we see -- I think what we promised is a stable development. We still see a slight increase here from EUR 42 million to EUR 43 million. Moving to the Media -- TV and Media business. I think what we see here in comparison to the first quarter of '19, a relatively stable picture on the revenue side. Here, we lost some revenues from the event business at media broadcast because as they are no events, you cannot generate any revenues there. And already the 2 weeks, which were without events in March, show an impact here, but it is more or less only a revenue impact and the impact on the profit side is relatively small. On the gross profit side, also a relatively stable picture, what we show here. And the same for the EBITDA. So we see a stabilizing business here. I think we saw some ups and downs in the last years. And sometimes you were surprised by this. But I think now if you compare Q1 '19 with Q1 '20, it is a very stable picture of what we show here. Looking into the single companies, what we do have in the Media and TV segment on Page '18. What you see here, and this makes us very proud, and we are very happy about this, is that we see the signs. From the IPTV business, we see that the gross profit is increasing and that the EBITDA is increasing by 2 -- even EUR 2.6 million, which is a very high amount for the IPTV business. You know that it generated an EBITDA of minus EUR 15 million in the last years -- in each of the last years. And now what we promised was that there will be an increase, and this is what we really see in the figures of the first quarter here.In the Media Broadcast business, the B2C business is relatively stable with a stable number of customers. On the B2B side, we see a decrease of the gross profit of the EBITDA here, which is based on the lower revenue from the event business, but more from some effects from the radio business, where we have some delays, which caused the deviation here. But it is more or less a phasing effect, and we will compensate it in the following quarters.On the cash side, Page 19. I think without any surprises, we are on the high end of the frame, what we gave you from the guidance range. This is not -- we do not see any effects here from the measures, what we took around COVID-19. It was just a fine managed quarter what we saw here with a good intake on the cash side. Page 20, some of the financial KPIs fully on track here. The equity ratio is 26.6%. The net debt or the leverage is 4.7 as expected here and putting into consideration the assets what we have, and reduce the debt by these assets would mean that we do have a leverage of 2.7 at the end of March. So also here, I think we are fine with the figures, what we have here. And therefore, I would give back to the operator now to open the Q&A.

[Operator]

[Operator Instructions] The first question is from Christian Fangmann of HSBC.

[Christian Fangmann, Analyst of Telecoms]

I have a couple of questions, but I'll leave some room from my colleagues as well. First one is obviously on the dividend. I mean, I get the point that you're cautious on the repay that you have in the next 12 months, roughly speaking, but I mean, it still looks like it's a drastic decision to cut the dividend entirely. So maybe can you explain in a bit more detail what you are seeing in terms of the tightened situation on the promissory notes? And what drove the decision really in the end to do that because I think it was unexpected? Secondly, on the operations, I just want to double check the new regulation on the porting fees to EUR 6.85, and I think you charged customers around EUR 30 before. I thought because you're not really a big volume driver that the net effect is close to 0. So now you're flagging this as a new incremental risk. And single-digit million impact on EBITDA, is it more, let's say, EUR 1 million, EUR 2 million, EUR 3 million? Or are we talking about EUR 3 million, 4 million, EUR 5 million? And the last point on the tax payments. Because you guided for EUR 50 million, which is about EUR 20 million higher than your underlying cash tax rate, are you still expecting this to be paid this year because I think we have not seen that in Q1?

[Christoph Vilanek, Chairman of Executive Board & CEO]

Thank you, Christian, for the questions. Let me start with the dividend, and it was obvious that this will be a topic for today. I may say that I have actually started to question the dividend payment as the first one internally, and we had long discussions with Ingo Arnold and then led -- end of last week, led to the conclusion that we would have a Board meeting on Monday -- on Sunday on the AGM. So -- and obviously, this was not expected. Otherwise, there would not be an ad hoc statement. So what drove our decision? First of all, we said, well, overall, liquidity looks fine, but we know that we need to have that refinancing in November and in March. We do -- we cannot predict what the COVID-19 leads to, but we could assume that there is a second round maybe in fall. If we would now give away the EUR 200 million, we think that the banks would know about that and would know about our shortage. So maybe the conditions and the interest rate would therefore go up. Furthermore, we also see that the entire refinancing on KfW, the interest rate, including the fees, is about 2%. So first assumption, well, we're going to be in an environment even now that will lead to a way more expensive refinancing if you deploy, let's say, 150 extra points to EUR 700 million, that's about EUR 10 million a year, that is almost 10% on -- per share in cash. So that was the first driving force. So don't get into a situation where you need to go back to the banks, and they can blackmail you. The second one is certainly under the given circumstances, deleverage, the 4.7. And this would be extended to close to 5, if we would pay out. It would be another element of the banks under these circumstances maybe raise the risk fee even more. So it was really a cautious -- my initial thought was to be cautious and not end up with the banks determining the conditions but having the flexibility to at least abstain from the first refinancing to have enough by November. Under the given circumstances our cash pool would be more than EUR 400 million. So we could skip the refinancing of the first one and just pay back, and that gives us a lot more flexibility. So I think that was, at the end of the day, the initial sort, then we were reflecting on the option of not cutting it in full scale, but put it to half or something. And that is more a human decision of saying, well, if you disappoint people, then you can -- the level of disappointment is the same if we cut it to half or cut it full. I have spoken with a number of individual shareholders this morning, even private people that either called me or e-mailed me, and I explained them that the extra fees that we would have to pay for refinancing. They would go against free cash flow. They would go against the long-term dividend. And last but not least, we would avoid the public funding. And then there was the third option to delay or to postpone the AGM to fall. Well, if you do that on a game series, and you would say it even worsens the situation because if we would say the AGM would whatever be on 5th of December and the refinancing is due on the 30th of November, you were even more under the pressure of either delivering a good refinancing. And if this one fails, you either go back to the state government, then you are not allowed to pay a dividend or you have to tell your shareholders, well, we have failed in a good refinancing and we're short in cash. So I think it was a level of these questions. And then the final one was that we said, when we want to stick to the dividend policy and we want to stick to our financial policy and we need to make sure that we can, in the future, out of a strong business development or commercial development, we can -- we want to secure a dividend for the future. I think -- I mean, these were the thoughts. And as I mentioned, I think Ingo and myself, we started to reflect on this some time ago. We looked into refinancing. We even checked refinancing with some of the banks to get kind of an idea what's going on, what their thoughts were. And we also had a couple of talks with our investment bankers on their opinion. So overall, this led to 2 of us thinking about it. We've discussed it yesterday afternoon with our colleagues in the Executive Board. Everybody is aware that we are kind of disappointing on the one hand side, and we are breaking a long-term promise that we do. But we felt to skip the promise for 1 year and saving it for the next 5 is a better choice than to run into a risk of third-party deciding on it and giving away that freedom. So I think -- I hope this is a full-sized satisfying answer. On the mobile number portability, yes, we have charged -- many years, we've charged premium pricing for mobile number portability. It's approximately 500,000 cases a year. We do not charge all of them or did not charge all of them because there were promotions running against it. But if you take a couple of hundred thousand cases, you can see that the new regulated prices will have an impact. At the same time, they have -- we have also changed the pricing to the network operators. All in all, I think the impact on a full year scale is maybe a EUR 3 million, EUR 3 million to EUR 4 million, depending on how the volume develops.

[Ingo Arnold, CFO & Member of Executive Board]

For your question about the tax payments, yes, it's relatively low in the first quarter. When I -- when we guided the tax figure in our March call, we already said that it is based on the postponements in tax request from the authorities from 2019. So there were some postponements, but what we see at the moment that they are still postponed. So there is a chance for the whole year that the postponement -- the tax authorities will be postponed, will work postponed during the year, especially after the crisis now. But I think if they are not postponed, it will be EUR 50 million even after the first quarter was only EUR 6 million. But if they are not postponed at the end of the year, then it could be EUR 50 million.

[Operator]

The next question is from Joshua Mills of Exane.

[Joshua Andrew Mills, Research Analyst]

I've got 3, please. The first is quite straight forward. You mentioned lower gross adds. Could you give us an indication of what percentage your gross adds have come down year-on-year? And that would be great. The second is on your online versus off-line sales split. Could you remind us what that was in 2019? And maybe give us an indication about how that has changed since the month of April. Be also great to know what the difference in terms of profitability between you selling online and off-line if there is any at all. And then third, I just wanted to come back to the dividend policy because you made a few interesting comments there that is a debate whether you cut entirely, whether you cut by 50%. A number of other telcos, which have cut their dividends during this crisis, have not given a firm commitment that they will be base then to the previous level post crisis, simply because there is so much uncertainty. I'd like to know from your perspective what you think is going to change over the course of the next 12 months, which will allow you to return to a full 80% dividend payout and whether given what you've just described with potentially some liquidity issues. You mentioned yourself that leverage, if it were to get towards 5x, would become an issue. Why you decided against using this as an opportunity to rebase the dividends on an ongoing basis? And why do you think that's important to your equity story?

[Christoph Vilanek, Chairman of Executive Board & CEO]

Yes. Thank you, Josh. On the gross adds since we never speak about absolute numbers, but on the postpaid customers with subsidized headsets, the gross adds came down in April about 20%, 25%. On SIM only, it stayed at the same level as before because SIM only typically is pure online. We have -- as I said, we have seen the reductions on MediaMarkt Saturn overall because we -- in our internal reporting, we see often online with them. But overall, they have certainly gone down by about 25%. Our retail stores, about 15%. Part of this things coming down have been compensated by higher renewals. And our reading is that what we call rotational churn, people that decide at the storefront that they would not renew because the new offer seems better to them or something. This is obviously going down. So this partially compensates the loss in gross adds. There is no final numbers because that will take a little time. So -- and the trend in April was the same as the last -- the 2 weeks, the last 2 weeks of March. Overall, when we talk about off and online split, we certainly add up SIM-only and subsidized. And we tend to talk about transactions, but in gross -- in customer acquisition, the split on and off-line is 50-50. And now having -- what I saw in April is more like 60-40 so the online went up a little bit, but the losses in off-line drive the change in the ratio. And that's approximate numbers. In SIM-only, the ratio is the higher one. And on renewals, well, we split -- don't split off and online, we split direct or indirect. And we include incoming calls, we include our own website, we include our customer care. In renewals, the transactions -- direct transactions is more than 75%. So if we look at total number of transactions, about 60% online or direct and 40% off-line. And that changed a little bit right now, obviously, but the first few days in May show that the pendulum goes back. Finally, on the dividend, well, I mean, even now and even with our projection, we could pay out a dividend of 80%. So why shouldn't we do it under a proper, let's say, a situation where we either refinance or pay down at least the promissory note in November? The business stays a business which is highly cash generating and we really feel comfortable with the 80% payout. I mean the next question would be, what is the -- what is your view on cash -- free cash flow next year? I think it will be on -- definitely on a level where the overall absolute term of the dividend will be higher than 150. So -- and we saw no reason to change because we want to keep the profile of the company and the stock. And certainly, we hope that this is appreciated sooner or later and stock price will reflect it. Certainly, it did not, over the last 8 months.

[Operator]

The next question is from Polo Tang of UBS.

[Polo Tang, MD & Head of Telecom Research]

Just have a few different questions. First of all, can you give us a sense of what's happened to mobile data usage trends across your subscriber base in April during the lockdown? So has mobile data usage increased significantly? Or has it gone down as people have switched to using Wi-Fi and fixed broadband? So that's the first one. The second one is really kind of coming back to your desire to have financial flexibility. Can you maybe give us your latest thoughts in terms of how you're thinking about your stake in Sunrise? And whether you'd be open to monetizing it sooner rather than later in terms of giving yourself more financial flexibility? And then also just a kind of follow-up on your comments about liquidity in the promissory note market. You said it was a lot lower and this gave rise to some uncertainty. But can you maybe talk through what other sources of funding are available? Have you considered the bond market? Or bank loans? And how attractive is one option over another?

[Christoph Vilanek, Chairman of Executive Board & CEO]

Okay. Well on the data, we did not see a significant update, exactly -- it was exactly what you said. I mean people are working from home, are being more indoor than they did before. So we did not see an increase in mobile data because they use Wi-Fi -- fixed line Wi-Fi from home or those ones that are in the office. So I mean the data in at least -- the data consumption in our customer base goes up as soon as people are out in the whatever, in sports and on the weekends, outside. I think -- so therefore, no significant changes. And once again, in our business model, we source or purchase the data volume with the operators on a flat rate as well. So there is no change to us, whether there is under or overusage. In that sense, we do not even monitor it on a daily basis for that specific reason. Second one on Sunrise. I think you all also have a look at Sunrise and a view on it. I think they did -- the new management does an excellent job. They have, parallel to Swisscom, mentioned that they are reflecting on the future fixed-line opportunities after having turned down the optionality with cable. And I have understood from the public statements of Andre Krause that he's is about to find a sustainable midterm solution, and I think that was appreciated in the market. So we very much believe in the management, we are really excited about the plans that they have internally discussed with us where we have excess. We feel very comfortable with the shares, and the share price overall is doing really well, given the overall market development. So I think that is the first element. And now to your second question, is that a -- well, a potential source of refinancing? Is this giving us -- or are we, let's say time-wise, thinking more about selling some shares or bringing down our total portfolio?Well not right now. We always said this is not a topic for us before 2021. And I think that for the remaining time, stays the same. But never say no, because if the stock price goes really up, if -- there might be opportunities. But at the same time we were comfortable with the dividend. So I think from today's perspective, we will -- we would keep our promise and say, it's not a topic before 2021.

[Ingo Arnold, CFO & Member of Executive Board]

Then your question about the refinancing market, yes, definitely, we are not limited on the promissory note market. But also if you look in the bond market, the environment is not that open. It looks not that easy for us to refinance there. So I would say it is not that we are limited to it, but we see similar problems also in other debt markets. On the equity side, I do not know if you target it in this direction. As we see the share price of freenet undervalue, definitely, it would not make sense to do an [ ABB ] or whatever on these levels. So -- but we think about every opportunity, but we do not have clear signs from the market that something would work there.

[Operator]

The next question is from Jonas Blum of Warburg Research.

[Jonas Blum, Analyst]

Just on follow-up first on the dividend cut. I mean so if you managed to refinance the upcoming 2 promissory loans via debt, could you just give us some insight about what you would do with the current cash at hand? Will you opt for share buybacks? Or will you just pay out special dividend? Or will you perhaps also just use to delever your current balance sheet? And then secondly, 2 questions on your B2B TV Media business. Firstly, you talked about DAB + multiplex. Second business opportunity coming this year. Can you just quantify this opportunity for us? What will be the EBITDA impact 2020, 2021 when it will be analyzed? And then secondly, just on the missing revenues from public events, as you talked about it, so it's EUR 1.6 million in missing EBITDA. What should we expect for the full year if coronavirus-related difficulties for public events will stick a bit longer?

[Christoph Vilanek, Chairman of Executive Board & CEO]

Yes. Thank you. Well on the first one, I cannot answer the question. I think we should do it step by step. Freedom and optionality means that we do not talk about exactly -- or there is the obvious options that you have mentioned, but there is no kind of decision tree that we put down in paper and would disclose. It is about gaining optionality. It is about getting the freedom. And in a positive scenario, you'll end up with exactly where we are, maybe even better in operations, the refinancing works really well. Well then it obviously, the outcome is a different one from the other one. But as we -- I -- nothing as difficult as to look into the future of macroeconomics and the impact on banking, et cetera, et cetera, why we will not make a statement or speculate, but say step by step. But overall, it's our commitment that the money is the ones of the shareholders and not ours. The second one, as I said, we have -- Media Broadcast is running carriage fees for radio transmission and TV transmission. Some of the smaller radio stations have notified us that they have a liquidity shortage. We're talking here about payments in the order of magnitude, about EUR 1 million or EUR 2 million a month in total. And they are delayed. They asked for a reduction, which we have rejected, because the majority of the cost is lease cost, which we also pay to third party. And some of them have asked us to delay this by 6 months, and we are reviewing this. So it's -- I think it's much more of a liquidity or cash situation than a real change in the payment. But we're talking -- once again, we were talking about EUR 1 million, EUR 1.5 million a month. So we're not talking big money if we compare it to the total business. On the digital audio broadcast, the second multiplex is planned to start in early October. We have now signed approximately 10 out of 16 channels we have signed with -- and there is 3 more options. So there's currently 3 open and we are in talks with a couple of applicants for it. So this will definitely be a very attractive package. The impact this year will be, I would say, neutral, except for the fact that there is a CapEx need of EUR 5 million or EUR 6 million. And then I would say, in 2021, in the second half of the year, it will turn into a positive one because of the introductory cost on servicing, technical implementation and low advertising income in the first 6 to 12 months because it's not measurable. So I would say, CapEx in 2020, and neutral in 2021 and then from 2022, a -- well, I would say, first, 2022 EUR 5 million to EUR 8 million EBITDA and then growing to above EUR 10 million

[Ingo Arnold, CFO & Member of Executive Board]

And maybe to add, the investment in 2020 as part of our CapEx guidance. So no additional CapEx. And then about the loss in the Media Broadcast. Here in the B2B business, it's only a minor effect from the event business. It is mainly from the radio business where we have some delays. So it is only a phasing effect, what I already mentioned. So it will be compensated in the upcoming quarters.

[Operator]

The next question is from Ulrich Rathe of Jefferies.

[Ulrich Rathe, Senior European Telecommunications Analyst]

So my questions would be, first, can you comment on the -- what -- on how you perceive the Media-Saturn viability in the current situation? It's a chain, maybe built on a brick-and-mortar. I think there was some news flow about the operational difficulties they're currently facing and some of the emergency funds that are potentially tapping, I think, in the media.You have a very tight business relationship, so you have some insights. But it's also important for you. So I'm wondering how do you see the viability of that operation going forward and your exposure into that? Second question is, could you comment on your SME exposure? I suppose it is small, but could you just give us some pointers as to the size? And then I have just a clarification question. You commented on the good -- the traction of the waipu sort of partnership with Telefonica Deutschland. Are the Telefonica Deutschland subscriber figures included in your quoted waipu figures? Or is this a separate bucket that -- and you're only quoting the sort of retail customer that you have yourself?

[Christoph Vilanek, Chairman of Executive Board & CEO]

Yes. Thank you for the question. Telefonica is included. The SME answer is also short one, no exposure. It's so minor, we are more on the SOHO level, and we don't see any problems there. And on this economy Media-Saturn topic, I have to split the answer as a shareholder and a Board member in the Supervisory Board, it's obviously -- obvious that I have inside information, which I cannot disclose, and I have to be very vague on this. If I take my operational hat, what we can see is that -- I mean, Media-Saturn Germany was on the path to become a multichannel and omni-channel operations, including changing the supply chain and including more centralization of supply chain on the one hand, but also creating shipment centers out of the individual locations.This path to an ability has been super accelerated through the recent needs. So we have seen a dramatic increase on online sales. We have seen that overnight, basically, the individual retail shops across Germany were able to ship a product straight to the customers that ordered it online. So kind of like they have a logic of having 450 additional warehouses and shipments. So I think the need show the power and the strength of that organization. By the way, similar to what I've described before with our own shops -- and I think that was better than I personally would have thought that they could enable it. And on our postpaid business, they have also, very fast, were able to switch more to online than they ever did before. I think that is -- the liquidity needs they had, which are basically from the fact that -- I mean they lived -- they order their order goods, and they have very long payment terms, typically anywhere between 3 and 6 months. So everything that they've sold in November and December for Christmas business was due to be paid right now. And exactly the 6 weeks prior to the payment date, there was no income or a lower revenues. So I think that was a kind of 2 effects that were time-wise, very unfortunate, and that led to -- or leads to that significant liquidity needs. And the -- I mean they had an ad hoc statement of the KfW's loan. The plans and the projections they have used for that were taking at least 1 more COVID shutdown round into consideration. So they were very, very cautious and very, very, I would say, negative in their projection, knowing that even the first one was now shorter than they have anticipated. So I'm very optimistic about the overall performance that they will soon recover and I have seen the numbers on our own shop-in-shop systems of the first week after the reopening, and they were getting beyond 50% of pre-COVID state. So I think recovery of sales will be very fast. And therefore, I don't -- I'm not worried about their sustainability.

[Operator]

The next question is from Usman Ghazi of Berenberg.

[Usman Ghazi, Analyst]

I've got 3 questions, please. The first question was just to clarify that the EUR 300 million in undrawn credit facilities that you currently have that I believe are at 1.7% interest rate. I mean that -- you can use that to repay the promissory notes or part of the promissory notes if it comes down to it. So that was the first kind of question. The second question was just linked to the significant fall in the SG&A in mobile this quarter. I mean is this linked to the hardware business for which you saw a EUR 6 million lower kind of bonus? Or is it -- or was it driven by something else? And if it was driven by something else, I mean, is that -- how sustainable is the reduction in the marketing cost at this kind of level through the rest of the year? And then just a final question again, on the dividend itself. I mean clearly, I guess, I mean, it's coming across that the primary reason for cutting the dividend is to avoid higher interest costs on issuance of new debt. So just related to that, I mean, what kind of indications were banks giving to you when you had that conversation on potentially diversifying your sources of funds to settle the promissory notes?

[Ingo Arnold, CFO & Member of Executive Board]

yes. Thank you, Usman. So for the working capital topic, yes, we have a EUR 300 million line where what we could also use to repay anything. So we are free to use it. And we just took EUR 40 million. But I think it would -- was not necessary to take it. So we still have the EUR 300 million from the -- from this facility.And then on the SG&A point, I think, yes, it was -- I think it was lower marketing spending in the first quarter. I would not say that this is -- you can copy this in the next quarters. So I think it helped to compensate the special effect from this hardware bonus, which was missing this year, and which was extraordinarily last year. But I think we did this marketing savings on the TV side and on the mobile side. But I think whenever the business starts again and Christoph already described earlier, we already started some marketing campaigns again in the second quarter. So I do not expect it to be a recurring effect. Then on the dividend and on the cost, what we would have to refinance it. I think the first reason was not that we see higher cost. The first reason was that we were unsure if it was even possible to refinance it. This was the first reason. And then the second reason was that we do not see where the market would be at the end of the year. And the quotes, what we see, were something like 1% to 1.5% higher than the current financing what we have. But we cannot be sure that in a situation at the end of the year, where it is something like a blackmailing situation if it would not be higher. So I think they tell us today that it would be possible with such higher margins in autumn, but we do not exactly know how the situation would look like.

[Christoph Vilanek, Chairman of Executive Board & CEO]

Maybe I can add one more. I hate to talk about this corona stuff every day, as many of you may be. I mean we have shut -- in Germany, we have shut down the country because the government speculated about a heavy crisis and the situation that they -- we could not give enough intense care. So now we have 70% of the intense care beds are open and available. So while you can either blame them for being too cautious, or you could say, well, if this ever happened, yes, well then you are -- the blame will be much more. I think that is exactly the same approach that we have used for our dividend. Yes, we could cover it with the revolver. Yes, we would cover -- could cover it with this and this and this. But if there is a second round, if this round starts in early November, if the retail is shut down once again, adidas and all the big companies go into trouble. Suddenly, they -- the banks will raise the risk earnings enter on the spread. Yes, it is a -- it is a cautious move. But I feel more comfortable with a cautious move where I could go back to the shareholders and say, here is the money. We've deployed it in a proper manner, and you will get more in the future than under other circumstances.

[Usman Ghazi, Analyst]

Great. And just one follow-up, if I can, please. Just from the marketing spend, specifically. I mean -- so the -- your net add performance has been quite robust, I guess, despite the lower marketing spend. Is that not giving you the -- some room to maybe [ maintaining ] efficiency overall?

[Christoph Vilanek, Chairman of Executive Board & CEO]

Yes. Usman, this is a very valid question, which keeps me not awake, but busy. The question is, this could -- were we able to bring down marketing spend because of the crisis and everybody kind of like chose not to browse around and to go to change its provider. Yes? Well then the only reason for the lower marketing cost was the market. If this was not the case, but people suddenly decided not to migrate any more their contracts, then it is a sustainable recurring effect, and this would minimize marketing costs. If I knew, I could give you an answer. Right now, we're speculating. And right now, we're trying to get a deeper understanding. Once more, I said churn intake. So what we measure is, every day we get churn in. So people notify that they would terminate that contract. These terminations they are -- the spectrum is from people that have only signed up for a contract yesterday. And in order to not forget in 24 months, they cancel it immediately. So this is like a smallest group, but is this -- this was -- and the other one, the other end of it is people that their contract runs out in 3 months' time. And they cancel it now second to the termination date.So is the fact that the churn intake has come down, is that effect of people don't care about it while they sit at home and are worried about the future? Or is it because they care and say it's not necessary to have another device or a better contract? I don't know. We're trying to understand it. We're trying to talk to these individuals. We do a lot of research, but there is still a significant part of uncertainty, and this is why the operational teams notified the finance guys that they should not expect marketing spend to be lower for the rest of the year. At least not yet. We don't have the full insight.

[Operator]

The next question is from Wolfgang Specht of Bankhaus Lampe.

[Wolfgang Specht, Analyst]

Yes, just 2 additional ones from my side. First one on waipu. We are aware that high-quality content is important. You talked in later sessions about attempts to add quality content. Can you give us an update how the negotiations are here? And the second one is on asset disposals. A colleague mentioned already Sunrise. My question rather goes into the direction of infrastructure. Could it be an idea to sell additional assets from Media Broadcast or from EXARING? And how are you let's say, ideas here?

[Christoph Vilanek, Chairman of Executive Board & CEO]

Yes, thank you. Well on waipu, you're certainly right. I -- we are -- we're getting closer to get the expected content deals, and I will not give you an indication on what it is. But we're getting very close. We are in the technical implementation and the contracts are signed. And soon, this will be released. On the asset disposal, well, on Media Broadcast, the digital audio, the DAB and the DVB-T, that -- this will be owned by us, and we don't see any disposal there because it is the core of the value creation. And that is specifically different from what we did on FM radio, where we were in a regulated environment and basically needed to do it to avoid a deep regulation, which would be lead to a negative EBITDA. On the EXARING infrastructure, we have certainly reviewed that, and there is every now and then -- there is even talks on what this infrastructure could deliver and create on -- for others. But once again, there is no concrete talks and plans. It is, as you said, it's an optionality. But any of those infrastructure disposals always, there's so many variables in it, and we don't work on any of those right now. And I would not expect any of those happening at least in 2020.

[Operator]

The next question is from Yemi Falana of Goldman Sachs.

[Yemi Falana, Business Analyst]

So you've spoken today about your confidence on the neutral impact of coronavirus and our guidance. We've seen a mixed impact from other operators. So a more negative impact due to loss roaming revenues and handset sales, are partially offset by cost-cutting and lower churn. Could you give a bit more color on the revenue pressure that you see? And the impact on net adds as well as the impact on the mitigating factors at the EBITDA level? And then secondly, on service revenues. Service revenues continue to decline in the quarter, driven by lower international roaming and lower ARPUs. How do you see this trending through the rest of the year? And is revenue exposure -- any color on revenue exposure would also be really helpful.

[Christoph Vilanek, Chairman of Executive Board & CEO]

Well I think on the second one, we don't think the ARPU would change. And I think there is -- when we've been criticized heavily for our -- or questions for our business model for many years. But under these circumstances, this business model is more robust than any other. Because overusage, underusage, heavy data usage, changes in roaming consumption, et cetera, will -- are not impacting our model. That's the story about the service provisioning. We don't buy capacity, we don't buy volume. We don't pay for extra volume. And this is what drives the solidity and the resilience of the freenet business model, and that is explaining the differences. And we have -- I mean, we've certainly seen it when we look deep into and discuss with our Sunrise colleagues, and they show us what the impact was technically on data consumption on the network on roaming. So we know exactly what you're talking about. But once again, I mean, we are immune against these kind of impacts. We don't -- otherwise, we don't have the upside at the same time. On this compensation, let me -- I'll illustrate it in an example. We do -- last year, we did about EUR 2 million a month on accessories in our retail chain. And the margin, it's a good margin. So when we lose that because the upselling of accessories and extra services in retail is even now in an opening environment, is still difficult because people are busy. They want to focus on their -- there's not enough time to do all these kind of upsells. So this is where we have losses in gross margin. But these losses, if we add them up, are overcompensated by the savings that we create -- we get from our short-term work where we -- I think right now, it's about 1,000 people, which we have on 50%. And on this 50%, we get -- they get -- the social welfare system pays them the net, and then we pay the difference. So overall, we have savings, I guess, it's about EUR 1,000 per employee, per month. That is on short-time work, and this is approximately the same that we lose on gross margin. The same for -- we said on the marketing spend, we've brought marketing spend down and the -- at the same time, we have lower net adds. But still in the first quarter, we were also able to meet all the bonus thresholds with the network operators. I think that is the ultimate -- that is -- the real heavy impact would be if we would significantly lose not gross adds, but customer base on any of the 3 networks because there are threshold payments on an annual bonus. And Ingo mentioned that before, that is high numbers. But if we look at the net development, as you can see, it's a positive net development. We -- I personally think that in the second quarter, we will be close to net adds, maybe plus/minus 0. That's at least after 1 month, my assumption, and then we will go up again in third and fourth quarter. But once again, I mean, that was -- in our planning, we were 4 quarters positive and I see the maximum risk that we get close to is 0 in the second quarter. So overall, this mix -- this is why we are relaxed is the wrong word, but confident on our business.

[Operator]

[Operator Instructions] The next question is from Heike Pauls of Commerzbank.

[Heike Pauls, Equity Analyst]

Yes. I just have a small follow-up question. On the EUR 700 million of 2 refinancing, how much of the amount is due in October? And how much March? Is it roughly 50-50? Or is it a different split? And maybe also in this context, you made it clear that this is not your default scenario, but is there any scenario you see that could make you pause dividend payment for a second time?

[Christoph Vilanek, Chairman of Executive Board & CEO]

Well it's EUR 250 million in November and EUR 450 million in March. The second question is a difficult one. Well if the world turns in the other direction, then I think everything will change. No, we don't see anything. But I don't know, I mean if there is a complete shutdown of the globe in November, then I think we will have to review this. But under proper reasoning, seeing what's going on, seeing what the crisis impacts our business, we don't see any reason. And we are -- we took that one step in order to protect the future. And if we go through that, then the future will be a bright one.

[Operator]

The next question is from Joshua Mills of Exane.

[Joshua Andrew Mills, Research Analyst]

Just one follow-up for me as well. On your comments regarding not deciding to take state aid, and in fact if you did that, you would have to maybe suspend your dividend for a number of years, is that the result of discussions you've had directly with the government? Or just looking at the market generally? And are there not types of aids that you could take, be it with reduced rental payments or following schemes that would allow -- would have allowed you maybe to free up some liquidity and also maybe avoid cutting the dividend now? I'm just interested about the view that you have that you do it now all in one go, and then we can go back to normal, whereas the alternative was a multiyear suspension of the dividend and how you've got to that conclusion?

[Christoph Vilanek, Chairman of Executive Board & CEO]

Well we got to that conclusion because we are in a -- I mean, Ingo Arnold is in a special Board of Commerzbank. I am a member of CECONOMY Board where we have gone through the entire exercise, and I have seen it with some other companies. The -- any of these public funding also includes a minimum funding of 10% to 20%, depending on the size of your normal house banks. And so we did not apply for any of it, but the house banks told us that this would -- they demand this and this, and this would include all kind of restrictions, bonus payments, up payments for you -- for the management, also payments for the Supervisory Board, bonus payment for the entire staff. There is tons of restrictions within a group of companies and so on and so forth. So we did not verify it individual on our profile, but we've had the chance to watch it, witness it and follow it with other companies, and this led to the conclusion. We have -- I think we have one more question, and I think we need to close down after this one, but we may -- will now take the questions of Simon.

[Operator]

Okay. So Simon Coles from Barclays.

[Simon Alexander Arulraj Coles, Research Analyst]

Just quickly on the IPTV trends. If the numbers include Telefonica Deutschland, and we've seen the lockdown. So I would have thought we would have maybe seen an uptick in demand. But you said you didn't actually see an uptick in subscriber addition. So I'm just wondering how you expect the performance of that to go going forward? Because I think general expectations is that, that continues to grow quite nicely.

[Christoph Vilanek, Chairman of Executive Board & CEO]

Well I think the -- I mean the finding is actually that in a phase where the people are anyway bound in their homes and they have TV -- a TV access, where the likelihood of them switching is lower than if they go out and watch in the whatever, outside or in their summer houses and so on and so forth. So this is why I think the uptake, the fact that we have a positive uptake in the first quarter, is a regular one. And the second one, April was okay, but it -- we were not specifically strong there. I think the Telefonica story is more, when are they launching their integrated packages for broadband access, including TV? This is obviously their plan. As far as we understand from public statements, they are about to -- or they are thinking about this, what they call it, anonymous access. So whether it's 5G, whether it's broadband or cable, people will all -- consumers will not even realize or decide. It's an integrated package. And we have understood that if -- as soon as they launch this, they will include waipu.tv as their recommendation. And I think that would deliver a overall significant uplift. But I cannot give you any indication on when they are ready to do so because the cable -- wholesale in Germany is technically a new one, and I guess, it's not going to happen before the end of the year. At least, this is what I can read in the papers, and I cannot disclose any internal discussions with Telefonica.

[Simon Alexander Arulraj Coles, Research Analyst]

Okay, great. And you don't think the lower marketing had any impact?

[Christoph Vilanek, Chairman of Executive Board & CEO]

No. Not really. Cool. Well then I may thank you, all of you, for joining this call. It was great to talk to you. It was also great to hear some back noise where I have at least identified some of you have children, and I'm in home office. We wish you all the best, stay healthy and take care.

[Operator]

Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect now.