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Good morning, ladies and gentlemen. A cordial welcome to our Q1 2019 Earnings Conference Call. Our CFO, Andre Driesen, will take about 30 minutes to take you through the presentation about our Q1 figures. Afterwards, we'll have time to discuss your questions and to answer your questions in detail.And let me pass the floor to Andre Driesen, CFO of 1&1 Drillisch AG.
Thank you. I'd also like to welcome you very cordially to our Q1 call. We'd like to give you an overview of our business development of the first quarter of 2019, and also give you an outlook on the total, on the whole year 2019.So let's start with the key figures of the 2019. The first quarter of 2019. Our customers have increased to 13.72, which is an increase of 880,000 new clients, new client contracts. In Mobile Internet, we've had an increase of 9.37 million clients, up a total of 9.37 and 4.35 clients in Broadband. So as you can see, most of the increase is from Mobile Internet, which that is in the past 12 months, you have 830,000 in new Mobile Internet contracts and some 50,000 additional Broadband contracts.Total revenue has -- total sales increased, revenues increased to EUR 912 million in the previous year was EUR 904.3 million, so an increase of 0.9%. Service revenue that is -- revenue from existing client, that is the -- those clients that are focused and the business that has the biggest impact on our revenue has increased from EUR 705.7 million to EUR 730.4 million in the first quarter 2019, meaning an increase of 3.5%.Well, when giving the forecast at the press conference, we -- at the annual statement of account we said that, due to our contract with Telefonica, we have a strong focus on these contracts on our end consumer contracts, which are channeled through Telefonica or Telefonica contract, and they have -- these contracts are somewhat more attractive than the Vodafone contracts, but in total there are more profitable for us. But due to the fact that there was this promotion and the decreased packaging contract price in the first 12 months of a contract, they have a slightly negative impact. If we adjusted for this effect the increase would be 4.8% instead of 3.5% adjusted. So an excellent result in service revenue and in line with our forecast and we're on the right track. With EBITDA in the first quarter of 2019, we've got to maybe of EUR 187.0 million, so 1.8% more than the previous year. This includes some effects outside of operating business. For instance was shift to IFRS 16, which only has an impact of EUR 1.1 million. So it's a fairly low impact. If we look at our business -- previous business model integration efforts -- effects that we had before. And if I go minus EUR 2.1 million and we have now -- we see the discontinuation of a -- the temporary price adjustment mechanism for prepayment agreements.So I'll be talking about these results in the EBITDA in detail. Later business justify overview of the figures. Without these effects we would have had an increase of -- from EUR 170.5 million to EUR 187 million from an increase of 9.7% EBITDA adjusted.On the next slide you can see our customer contracts. On the left hand side and in the graph, in the diagram, you see the comparison with the previous year an increase of -- from 12.84 million in the past year to 13.72 million this year in the current quarter. In Mobile Internet, we've got a -- increase of 830,000 clients year-over-year and in Broadband some 50,000 clients year-over-year of which 10,000 to happen in the first quarter of 2019. And you can also see the development of the net adds in Mobile Internet, where in the past 5 quarters the first quarter of 2019 was a bit weaker after Q4 2018. The Christmas quarter was very strong and we had a strong growth. And I mean, this is regular, normal, seasonal effects and we expect, all we've had some 200,000 new customer contract in the second quarter of this year.As regards, revenue 0.9% in total, but 3.5% in service revenues up to EUR 730.4 million in the first quarter. Other revenues, in particular the low margin hardware business has decreased by 8.7%, which has a few reasons. First, the lower number of new clients, but also the seasonal effects, the attractiveness of devices that are currently in the market and the cycles -- depend on the cycle of the hardware manufacturers, which new devices enter the market. So our focus clearly is on revenue -- service revenues on the existing business, and that revenues have increased nicely. And if we didn't have this split with a low driven where we're focusing on Telefonica and channeling most of our customers through Telefonica, then we would have had a -- or if we adjusted for this effect, it would be 4.8% .Now the next slide gives you a detailed view of the EBITDA, an increase of 1.8% to EUR 168.5 million, which is an EBITDA margin of 18.5%, as opposed to 18.3% in the previous year. Well, I briefly mentioned, the effects before, we have an impact of EUR 1.1 million from the first application of IFRS 16, we've got expenses of EUR 2.1 million expenses in connection with integration projects. And lastly, we have an expense of EUR 5 million, and we also have an effect of the decrease of EUR 17.5 million due to preliminary effect of the elimination of the preliminary price adjustment mechanism of a prepayment agreement. These preliminary -- these prepayment agreements currently are being evaluated by an arbiter courts, I mean, arbitration proceedings going on where we expect the decision to be taken in the -- well, in the course of the year, and we expect that these prepayment prices will be reduced, will be lower, and also that we will be able to take these lower prices from the beginning of the year. So that this is just the preliminary price. And adjusted for all these effects, the EBITDA has increased by 9.7% over the previous year.The next Slide shows you the new figures, where we look at our LTE clients and that we like to present to you regular. We started during that general press conference for 2018 and here you see the next development that we've seen since then, we've gone to 9.4 million customer contracts of which 5.5 million have an LTE connection and LTE contract. As compared to the end of 2018, this is an increase of 500,000, so compared to net growth in total clients you see a much stronger dynamism which is due to the fact that, of course, we take existing customer, existing customers and we take customers who extend their contracts not in the previous contract, but find the new contract attractive and then shift into one of the new contracts which are more profitable for us because selling through Telefonica and all of these LTE contracts nowadays.On the right hand side, you can see the difference in data usage. Year-over-year, we have a growth rate of 20%, pretty exactly 20% of data usage on the LTE clients that is those customers along the most contracts. You have an increase of 32.9% or stronger growth than of the total clients because they have a higher data speed, they have got higher data usage, data appetite. But on the other hand, we have a prepayment contract and thus, these contracts still are more profitable for us.The next slide shows you details on profitability as opposed to the compared with previous year. Here we looked at the cost of sales EUR 642.5 million almost exactly at the previous year's level for stable cost of sales with increased revenue. So gross profit from turnover has increased from 256% -- EUR 256 million to EUR 269 million, so by 3.1%. It shows you a different cost distribution and administration costs, other operating expenses, other operating income, impairment losses from financial assets.In total, just a slight change. The percentages were fairly high because the base of -- the base is fairly low, but in total, the EBITDA increase. The operating results have increased by 1.4% and the profit before taxes and the consolidated results have been impacted by these effects and -- included here of course, all these effects that we saw on the EBITDA are here as well, in effect here as well. The integration project -- projects the IFRS and the -- probably preliminary price adjustments.Okay. This brings us to the balance sheet, as compared to the end of 2018 have changed only slightly, it's changed from EUR 5.246 million to EUR 5.265 million, so some EUR 19 million and just an increase of 0.4%. So not much has changed in the composition of the balance sheet. The equity ratio was 81.6% and now in their consolidated result of EUR 89 million. This ratio has slightly increased to 82.9%.The next slide shows you the cash flow. In Q1 2019, we've got a net inflow of funds from operating activity by 17 -- of EUR 17 million, that is 161.5%. If we look at cash flow from invest operating activity, so we're in line -- operating activities were in line with our forecast and we -- so we had a good start. We also had an investment into contract assets and an increase of contract assets and liabilities with a negative impact of EUR 42 million. And a change in deferred expenses of EUR 41.3 million, which would place the burden on cash flow in the first quarter. This is a seasonal effect because the deferred expenses, these are prepayments to manufactures or to suppliers of preliminary prepayments and pre-contracts for expenses to be made in the future. So there will be the reverse effect in the quarters to come.And inventories and contract assets and liabilities, the cash burn and the increase result from the customer growth and the fact that we have had investments in connection with bundled contracts that is contracts that include both mobile and landline that include a device, that include a phone.Cash flow from investments has been very low in the first quarter of '19, that was EUR 2.3 million negative, before that it was EUR 10.2 million minus. However, next to the normal CapEx for our operating activities, our business, we had an -- a special effect of EUR 8.3 million in the previous year due to the sales of the yourfone Shop in 2017, which of course, we don't have in this year. Regarding financial activities, we had an outflow of minus EUR 14 million, which for about EUR 4 million were investments in own shares. And then we had our share buyback program in the first quarter, which was then finished in the first quarter, until that moment EUR 3.9 million were paid. And the other EUR 9 million were just payments in the framework of the cash pool or the investments.Now the free cash flow comprised of the net payments out of operating activities and the CapEx amounts to EUR 14.7 million in the first quarter '19, regarding -- compared to EUR 29.5 million minus in the first quarter of the previous year.On the next slide, here we can see the bridge of EBITDA to free cash flow. This -- are again, the major effect in a graphic display here. EBITDA was EUR 168.5 million, and then the position back in previous year was an effect because of the increased contract assets less than the previous quarters. In the previous year, we had about EUR 90 million of investments. Now we've got more and more inventory for that reason, we've got more customers paying the fees on a monthly basis. So the number is [ decreasing ], we've seen that in the past quarters and now at about minus EUR 42 million, which is a rather low amount. And this was still decrease in the next quarters.Inventories, again, a slight negative cash effect and then other working capital, I have explained that already on the previous slide, this contains or includes particularly the prepayments for advance services of a network operator. And then the other tax -- the usual tax payments that were made that was minus EUR 37.9 million, and then some CapEx, so the free cash flow in the first quarter 2019 amounts to EUR 14.7 million.Then -- page, next slide, you see this -- you know this I think, this is the development of a contract assets since in -- IFRS 15, we had to make the investments into our existing customers, and then the consequence this will have turnaround of course. So we see that as a kind of assets or liability and we decide accordingly and put in the balance sheet and here you see the increase and the growth rates, the contract assets was increased by about EUR 40 million in the first quarter, before it was EUR 75 million for instance.Next, I would like to give you an outlook. Now what do we intend to do in 2019, what's our focus. We would like to strongly increase our existing customers, the number of existing customers we used, still want to integrate 1&1 Drillisch, this is an ongoing process. We've seen quite some good progress, but in 2019, there's quite a long to do list, and we're continuously working on that. And we also want to continue to increase customer satisfaction of our customers, of course. Plus this is the major assets, our customers and our customer relations, and we're known for achieving high customer satisfaction values and service in mobile as well as in landlines. We are a ranking among the first. And of course, we would like to continue that with our service offers.We want to also increase the number of offers want to increase customer satisfaction by that continuously. Then we want to build up our own 5G network. This is what on our agenda this year. You know that currently there is the auction of the frequencies going on, it took much longer than actually was expected, and that's the status that we've got currently, when we receive frequencies, we would like to work on a national roaming agreement, and then we would start to prepare the network, to build up the network.So first of all, the frequencies than, the national roaming agreement and then we would like to build up the network that is the plan that we have.Now, what's our view regarding the figures. What do we expect regarding the key indicators in this year. In revenues, we can see that we will be able to increase the high margin service revenues by approximately 4% and the low margin hardware business, which depends on the attractiveness of new devices cycles and seasonal volatilities. So we'll have to see -- we'll have to wait and see how this is developing. Regarding EBITDA, we expect a growth of 10% -- around 10% to about EUR 800 million in the overall year, which includes that EUR 17 million -- EUR 10 million of the one-off from integration projects. We would like to make it more concrete. After the arbitration proceedings, which are still ongoing as I said. So this is about agreement with the prepayment for an advance service provider.That brings me to the end. So we started well in the new quarter on an operative basis, we have a good key indicators and we also see that our success story is continuing. Thank you very much, and now I'm looking forward to hearing your questions.
We've received the first question by Mr. Ulrich Rathe from Jefferies.
Thank you very much. I've got a few questions. The first one regards the price adjustments which is no longer given. Two questions about that. The first one this elimination. What effect does it have directly? Is that an increase of the cost because before that we had a decrease by the contract which now no longer exists or is it just a lack of price adjustment which was expected in the first place, which you say is 5.5 million. That's I'm not clear about? And second question, if I understood you correctly during the presentation, this is I believe you said, that you expect that the arbiter 3 months after the end of the auction will only take a decision. Did I get that correctly? And if yes? Why that deadline, why is the auction urging the proceedings? And another question regarding the revenues in end devices. In the report, I saw that this wasn't planned by the management and you've also changed your guidance now and focus more on service revenues. Now in device revenues, is that a matter of competition too from your point of view? Or is this just a question of the product cycles?
Thank you, Mr. Rathe for this question. The fact that we don't have the price adjustment mechanism anymore had an effect. Yes, of course, it was a price increase and regarding the still pending proceedings, we can't disclose all the details, of course. But regarding the basics, the spirit of this -- service of prepayment agreements is that we would have to be -- would have to have competitive and attractive terms and conditions. And there are some concrete and some more global clauses. And there was one concrete one, which was limited in time, preliminary. And by the end of 2018, it expired and we did not find a compensation or a replacement in due time because in parallel, we are still in the arbitration proceedings with this supplier, this proceedings started in -- at the end of 2017, and we already reported on that. And we made it clear that we expected to have a solution or a decision earlier. And now there's an overlap and this is why we say it's preliminary because the arbitration will decide in a binding way retroactively about the prepayment prices or service prices.And as soon as the auction is finished, we expect that the Arbitration Court can start their work. Why does it take longer? Why do we wait for the auction? We participate in that auction like other network providers, there also -- operators. So it's -- we are all prohibited to half negotiations during the time of the negotiations, and the [indiscernible] to the federal agency for networks told us to offer price that the Arbitration Court cannot start that work before that and the 3 months period is the maximum period that they can have.So during that time, a decision has to take place even earlier if possible. But we say, end of auction plus 3 months, that's what we expect, that's the framework, -- the timeframe that we have now.And then, we will know for sure, but we expect that the prices will have to decrease and not increase. So for us, it's a preliminary effect. And the end customer, the hardware sales, you asked about that to whether this is a matter of competition too. We're not selling any devices without a contract. So the device is just -- the possibility to sell the contract and depending on what devices will be launched and whether we have good connections to the providers and to the manufacturers to make attractive bundles. Okay, that's clear. But in March, we've seen with the competitors the new Samsung device was getting based on position. So we do that too. So in March and April, we've seen some good effect here. But regarding the first quarter in total, this didn't have too many effect. Of course, we also offer other devices, we also have a very inexpensive bundles. We also offer iPhones, but of course, there is some competition to some extent. But we will not differentiate ourselves by the hardware, but more by the other services or the payments needed, so competition is more taking place here.
The next question will come from Mr. Martin Jungfleisch of Kepler Cheuvreux.
First question is, regarding -- you said that you focus more on premium customers or high-end customers. Can you tell me whether the April, on the -- compared to the previous years increased. And can you maybe tell me a little bit of a split of across as on the 1&1 channels and other channels, as well as, explain the development of the churn please? And the second question is regarding the price comparison websites. Can you maybe highlight a bit the -- how the number for growth has an effect on price comparison? Or how this has changed compared to the previous year and what's the significance of this platform for the future? And my last question is about DSL. Some weeks ago, we had the news that telecom will -- or can increase the premium payment costs or the data service costs for ADSL. Can you tell me what effect this can have? And if you can, can you tell us whether you are in negotiation with Vodafone on -- with regard to this?
Okay, first of all on the APU, Mr. Jungfleisch you ask about the MBA and V&L [ IPU ], and generally the development of the IPU. We will not or we don't publish that, we don't publish that yet. But we've got 2 effect. First of all, while large packages with a lot of high performance, which we can [indiscernible] and V&L contract because we've got the speed and we've got the performance available. So this means increased IPU higher package prices, but well, we got the effect that we're focusing on Telefonica and the Telefonica based contracts and the Telefonica based prices in d profusion that we offer our Telefonica clients where we don't have any Vodafone based contracts. So Vodafone has a full flat where we now have a comfortable product and Telefonica which has high speed and the higher data for the first 12 months. They have EUR 10 discount for that first 12 months because these are current products that we're offering to our existing clients and it compensates. Why it is compensated that we have a stable IPU for DSL. As regards all MBA-MVNO or other advanced service contracts, prepayment contracts, we don't publish these figures in detail. So you then ask about churn. The churn is stable, stable at a low level, we're very satisfied about churn. Last year, we had lots of measures that we took and processes that we took that we already had at 1&1, we also use them or we introduce them and took a lift, which was something we did last year.And we are done with these -- with implementing these measures. And now we've got a highly transparent customer loyalty process and we're constantly trying to increase -- to further increase our good churn rate that we've got at the moment to continuously improve that even further. This is one of our focuses and one of our measures that we're taking and having higher management focus on the churn rate.Now price comparison. Well check 24 a very -- all these websites that offer comparisons. These are an important partner to us, this hasn't changed in particular for the Drillisch products, this is a highly important channel because their price is an important driver and one of the -- one of the main points, clients are searching for a low mobile price. And so we would like to be at the top with a Drillisch brands. With the 1&1 brands this has less of a focus. We have a different USP. We're not differentiating, we're not profiling or differentiating ourselves with through price at 1&1, but at Drillisch, yes we do.Now you asked for DSL and you asked about the advance service costs and while the ADSL knew that went through the news media. Yes, if we have old customer contracts, we do try to shift our existing clients into our modern layer 2 platform, if clients need higher speeds perhaps even to the layer 3 model if possible. And -- but we do have -- and so far as we still have ADSL plans we are affected and we are impacted. But it is not a significant amount which is why this did not lead to any adjustment or any change.
Do -- are we in negotiation with Vodafone?
No, we do not, we are fairly strict in our dealings. We see it as a risk negotiating anything with any network operators during the ongoing auction. So we don't have any negotiations with any network operators until the auction is over.
The next question is by Mr. Christian Fangmann of HSBC.
Christian Fangmann of HSBC. I've got a question on EBITDA. The EUR 70 million wholesale impact that you posted as a negative impact in Q1. You said it might take up to 3 months. What is that impact -- what was that implicate -- what's the implication for Q2. Because you have to keep working on the same basis as in Q1. Can you confirm this? I'm just trying to get the phrasing right. If we're building a model. So let's say, there will be a price effect later in the year. So you might probably expect a similar development for Q2, correct? And secondly, let me pick up on one of the questions of Mr. Jungfleisch. The split between Drillisch and 1&1 net adds. Could you perhaps enlighten us a little bit on any changes. Is there more net adds for 1&1 or Drillisch, that will be interesting to see? And thirdly, the handset sales. Could you tell us something about the bundling ratio? I think in Q4 we -- Drillisch, I think with 30% to 35% of all sales were bundles and the rest was SIM-only. Is there any change of Q1 compared to Q4 because we have a lower figure here compared to Q4? It would be interesting to know.
Thank you very much Mr. Fangmann for the questions. With EBITDA and the effects for the preliminary price adjustment, yes, you're correct. The timing is about right, if the an assessor takes a full time and takes the 3 months, even if the auction were to end tomorrow it would take 3 months. Well, we -- it is by no means certain that we would know this exactly by the time the reporting would come in for Q2. So then it might very well be possible there'd be a similar effect for Q2 and that the phasing would be delayed. Yes. Your second question was about the split of the net adds that is the activation of Drillisch and 1&1. Well, we do have a stable split. Both brands are developed, both have their advantages in their customer segment. And well, we haven't published, we haven't reported the exact split between 2 and we will continue to not publish this. Please understand.It would be like asking telecom about this exact split between [indiscernible]. I don't know magenta versus red or something and/or Bablu and Telefonica. We would be interested in knowing the split between Telefonica and Bablu. But I think nobody will publish these. And while the handset ratio you mentioned the figure for last quarter Drillisch 30% to 35%. We haven't changed our portfolio in any great way. We have a focus on the discount brand and hardware. We call -- the yourfone websites, you go to the yourfone website, you'll see hardware specialists, you see excellent hardware bundles. But we've got other brands for instance, smartmobil.de, they know other SIM card specialist. So contracts without handsets. So we've shifted our focus a little bit more towards handsets with one brand and less towards handsets more to SIM with another, but the split is roughly the same as last quarter as well.
The next question is by Mr. Wolfgang Specht from Bankhaus Lampe.
Now your customer growth ambitions in the second quarter 2019, is that mobile only or is that including DSL? My second question on the competitive environment. Can you tell us a little bit about how you feel with regards mobile and DSL. What the development has been in the first quarter and the second quarter as well? And thirdly on your idea to build up your own 5G network. Could you give us some idea on how long it might take after the end of the auction, how long you would take at the end of the auction before you'll be able to present us with a case for your own 5G network?
Thank you very much Mr. Specht for the questions. Customer growth for Q2, is a mix, its customer growth, its contract growth, in broadband, we see continuity rather than rapid growth. Growth in Q2 will also mostly come from mobile. But yes, thus this underscore customer growth and total competitive environment in mobile, I would say it's unchanged. It's still quite intensive -- quite intense. We don't see any specific moves by our competitors, no price points by our competitors, no prices that were drastically reduced. But on the other hand, we do see aggressive promotions offers where we tried to position ourselves and to keep up with the competition in order to address our customers and all -- in all areas. As regard to broadband, it's a little bit more moderate there.We had some price points or increased price points in the first quarter and we didn't see our competitors being very aggressive in broadband. Your last question was with regard to 5G and the business case. How long until the business case will be presented after the end of the auction? Well, that depends on the national roaming agreements and the negotiations about national roaming. The quicker will be -- we have -- we know, what the negotiations will bring or what the framework will be, the scope will be in which we're operating, the quicker will we be able to create a business case and present a business case for 5G, but a lot -- a lot of things also -- the other things also depend on national roaming that have a strong impact. So we cannot directly after the end of the auction or cannot prevent the business case immediately after the end of the auction, we'll just take some time.
Now let's come to the questions from the English speakers just one moment please. The next question is from Georgios Ierodiaconou of CPP.
Just a few clarifications. Firstly, regarding the service revenue guidance, I'd be interested to understand if your 4% guidance for the year, is based on the headline service revenue, which is now growing 3.5% for the one adjusted for the expense and for the effect of that change in composite speed which is now 4.8%. So I'm just interested to understand which of the 2 numbers you are using in your guidance for the year? My second question is again a clarification around just the previous question regarding national roaming and the timing of any plan. I was under the impression that you have a deadline until the end of September to trigger the MNO remedy of the package you have with Telefonica. Within that be the deadline or are you looking for a different national roaming agreement on that and therefore, it could take longer? And then again final question was again a clarification regarding the dispute that you mentioned earlier and the arbitration. Am I right in thinking that there are in fact 2 disputes, one, which impacted last year regarding some of the pricing levels? And then secondly, the end of the discount that you mentioned which started in January? Or is it just one case? I have been -- to understand whether it's 1 decision or 2 separate one?
Thank you for the question. First of all about the guidance service revenue 4% and 3.5% that we achieved in the first quarter and the 4% that we expect for the whole year, exclusive of the effect of the changed lots split or capacity split. So without these effects as we indicated in the balance sheet, press conference and the analyst conference, it would be 5%. But since we focus on the Telefonica contract with this council the first 12 months, the service revenues increase that we could book was correspondingly lower and this lower increase which we guided with about 4% was now 3.5% and that is comparable. So these are the reductions maybe from the or from the integration -- are when you have customers that in Telefonica, I'd say for a telephone contract. That's all contained. Next question was the MNO remedy, which initially -- or which -- the first is will end in September? Well, as long as the auction is still ongoing, it's suspended for the time of the auction. So it can well be -- that we will be in the auction until September, and then the timeframe is over. So all the time consumed by the auction will then be added afterwards.And the price adjustment proceedings are the arbitration proceedings, is this 1 or 2 cases. Is there a new one, that's the one that we reported on, which we initiated in the end of 2017, already. And the Arbitration Court will decide on that as quickly as possible, at least within the 3 months period after the auction. But this is referring to the same supplier, as the adjustment mechanism which in -- the slightly higher cost of EUR 17.5 million in the first quarter. So this is all intertwined, it's not an additional proceedings. But when an Arbitration Court decides, this will have an overall effect, so we expect a sustainably lower purchase price for certain advanced services, which then will would have had an effect on the first quarter, as well.
The next question we've received is from Maurice Patrick of Barclays.
This is Maurice here from Barclays. So thanks for taking the question. A couple from my side. The first one is, on the 3.5% service revenue growth and the 4.8% growth. Do you expect those to converge over time. I know, you said it's just a discount for 12 months. But I'm curious, if you expect the 3.5% to converge towards the 4.8% over the coming quarters? First question. Second question is on the fixed side, you were growing the base. But at a lower rate than before, you're seeing Telefonica striking a deal with Vodafone. Should the Liberty Global deal complete and no doubt will push higher on convergence if that happens and no doubt if the deal does complete Vodafone will push higher and harder on conversions as well. I just need your thoughts in terms of how actively you push convergence today and if you think your first [indiscernible] is going to change over the coming quarters?
Thank you, Maurice. Revenue growth 3.5% or versus 4.8% or 5% this difference or this effect will always be there in the next quarters because that's the reason we are winning over customers who in the course of time have a somewhat lower revenue in the package prize and in the quantify IFRS 15 this will be distributed equally among 12 of the 24 months even if the customer extends the contract afterwards does not terminate. We've -- then we will have the higher kind of revenue. But as long as we still focus very much on Telefonica and vice versa have a higher churn rate in the Vodafone network, we will not actively advertise and market these prices. We will -- and as long as that we will still have the price -- the difference. In fixed lower growth rate, well, yes, in the past 12 months we were able to win over 50,000 new customers with a high customer base of 4 million or 4.5 million customers, this is a low growth, but the overall market is rather stable, the churn rates are significantly lower and the fluctuation in the customer base is also significantly lower and the potential for new customers on the market cannot be compared to mobile because lines are just lazy. They don't want to terminate their old contracts it's -- there's a higher threshold to do that.On the one hand, of course, the cost of different offers don't differ too much, there's still some aggressiveness. But the main reason is that there is not much kind of attractiveness because you've got new devices because the new router is not much better or attractive than the old one and whether my router is 5 or 10 years old, there's not much of a difference and there's no competition due to bundled tariffs. So the whole package counts and with our product with DSL so with landline fixed line, broadband Internet and IPTV on the background, we do have a full range. And that comes to the last question with regard to convergence. We don't have a problem with that because of that at 1&1, we do have convergent product. We offer everything, we offer our mobile customers. That means we also offer landline customers mobile. And when we win over new customers, we would like to sell them whole package of course with Vodafone and Telefonica. Can that maybe have an impact on the market? Yes. Currently I think there's an offer of 1&1 Vodafone to just make it possible for the EU Commission. So we'll have to see. I think it's very important to see that this is not just a bilateral agreement, but if there's a wholesale remedy, this will be accessible to auto competitive.
Has your question been answered?
Yes. Thank you.
The next question is from Usman Ghazi of Berenberg.
I've got a few please on this -- on this price adjustment situation that Drillisch is facing. I mean the first question was you mentioned that you've seen a price increase on the wholesale cost. Could you indicate how big that price increase is. I mean is it 2x, 3x. I mean because the EUR 17.5 million impact just seems a big -- a big increase? So that was the first question. The second question was given that I mean, how are you calculating the EUR 17.5 million. I mean because for me at least sitting on the outside there seems to be a risk that if in the event the arbitration does not go in Drillisch's favor, then you basically don't recover the EUR 17.5 million per quarter that you're suffering from. And then on top you also lose the EUR 20 million to EUR 30 million that was previously indicated that might go your way if the arbitration is successful? And my final question was whatever prices or mechanism that is agreed upon in this arbitration is that automatically also then applying to the -- to a national roaming contract given -- in Q4, it was said that according to your understanding, the MBA contract becomes the national roaming contract?
Thank you, Usman. About your first question. How big is the effect of the price adjustment or the price adjustment mechanism? This led to an increase of certain services unless -- that's exactly the EUR 17.5 million, that you indicated. And I think the figure makes clear. Relatively speaking, I don't think we can talk about the details here because it's still a pending proceedings. We don't want to actually go into detail too much here. And how is this connected to the EUR 20 million or EUR 30 million, that we discussed last year. Well it's the same supplier in which we are in this arbitration, with whom we are in this arbitration. And this, as I said somehow intertwined because if a certain price is determined, it could be a lower price rather, I suppose this will be a low price of increased price. So in total, this -- there will be a retroactive adjustment. And is this somewhat connected to national roaming? I unfortunately have to restrain myself here. I cannot talk about the details about what we are negotiating or what we're talking about. This is just being under consideration by the arbitration. So I cannot really tell you anything about the effect this might have on the national roaming. We'll have to wait and see the decision of the arbitration first.
Could I have a follow-up please? So you mentioned that the outset that, there were some concrete mechanism and then there was some you called it a macro kind of mechanism that was being -- and that was up for debate in this arbitration, and that the concrete mechanism ended in 2018. And that has to be replaced now with something else. So my question was that given the whatever agreement that you have that obviously we on the outside, don't have privy to. I mean whatever agreement that you have, the -- is it clear to you that the broad outlines of that agreement imply that your purchase price should be falling. And this is the arbitration is just, has to decide on the extent of the price decrease. Is that the right reading of the situation?
Well, yes because in general in the course of time, data usage is extending severely. And to a degree that we need to have or we will have market corresponding attractive prices in the long run, this means that the prices will have to drop. Regarding the usage of the size of the packages offers, they will increase. And this is why we expect rather decreasing pricing. And not like we see in the first quarter increasing prices.
The next question is from Guy Peddy of Macquarie.
Just a quick 2 questions of clarity, if I may. Firstly, we discussed earlier Vodafone and Telefonica Deutschland wholesale cable TV access agreements. Is that a type of agreement that you would be interested in expecting yourself as well because Vodafone of [ EBIT ] say it was non-exclusive? And secondly, just a small question, just my understanding, on the potential rebates from your agreement or would you actually get a rebate for the second half of 2018 and for Q1 2019, based on any new contracts of any new pricing?
Thank you for the questions. Wholesale agreements between Vodafone and Telefonica of -- with Vodafone and Telefonica of us. As far as we're concerned not only we expected it, but it was discussed as a whole access by competitors to the cable network. So in principle this is very interesting for us as well, it would be interesting for us a trust, while it's bilateral for now. And we also see that as regards technology it's limited technology wise it doesn't have the full capacity, the full performance that the cable network can perform that it has reduced speed as far as we've read in the press. So this is something which is not suitable to be hard to do base our competition around in the next 2 years. If Vodafone markets gigabyte connections and the -- their partners only get some reduced speed, I mean this is not competition out on equal footing. Now your question regarding the expected price adjustments. Well, we began the proceedings at the end of 2017, and while the effect is small and the higher the customer basis and the more data -- the more data they use, the higher the effect will be at the end. So we do expect the certain impact for 2018 and the certain compensation. And well we've got a figure in the report for the first quarter of 2019.
The next question is from Polo Tang of UBS.
Polo Tang from UBS, just have 2 questions. The first one is really just to clarify the guidance because you're aiming for roughly EUR 800 million of EBITDA for this year. But if there is a worst case outcome from the price review, does this mean there's a EUR 70 million impact on a full year basis from higher wholesale costs mean the EBITDA effectively would be closer to EUR 730 million on a worst case. Similarly if we are -- if there are more optimistic scenarios in terms of the outcome of the price review to be looking at something because they have higher than EUR 800 million. So if you just could have clarify the price review and the context in terms of the guidance? My second question is really just about the competitive dynamics in terms of the mobile market. What's your view on the new phone offer from Freenet, obviously it's a prepaid product, but they're offering unlimited data for EUR 1 a day. So just wondering what your thoughts were in terms of that product and the impact on Drillisch specifically?
Thank you for your questions. Now on the EBITDA guidance, we said, we've got a certain expectation of the price adjustment proceedings and the arbitration, the assessors arbitration and we believe we've made a conservative estimate for last year, we haven't put anything into our reports and the EBITDA that we were reporting for QA, we haven't got anything in that either, but now we have given a number for Q1, which would have an impact due to price increase. And if the assessors want to set a lower price retroactively and well, this price might be better or worse than our expectations it could also have a positive impact, it doesn't necessarily have to be negative, it could be positive, it could be negative, we will only know once the assessor has made a decision, but we believe that currently we've got a solid conservative estimate and while the data packages is set at lower and consumer prices is not suitable or if end consumer prices decrease constantly then it's not adequate to have increasing prices towards us.Now the Freenet brand unlimited data, that was your next question. Well it's a very interesting offer for and consumer is highly flexible, they could book it through an app only, it's nicely done, it's a good idea. The big advantage is that this decreases distribution costs considerably. You don't have to finance a device and handset, no distribution, not the distribution costs will remain low. So I'm sure that this is an excellent offer and an attractive offer for certain niche. However, these are clients who are willing, well if you look at this months-by-months they are willing to pay EUR 30 a month for excessive data usage. So it's interesting for this niche. I'm not sure whether unlimited data is relevant for the regular client. There is a certain target group for unlimited data, this is why this product was created. We could offer it. At the end of the day, it will be a question of average usage, whether it's profitable or not, and whether it makes sense or not. I think the margin that you can expect especially for the first clients who grab up this offer is not very high. So it remains to be seen, in how far this will develop. We don't believe that it will be that huge and that significant an impact on competition.
Okay. So just to clarify, in terms of the guidance coming back to that. If there is no change in terms of wholesale pricing, the worst case is a EUR 70 million impact for the full year. So actually worst case, the guidance could be EUR 800 million minus EUR 70 million, or could have EUR 730 million. I appreciate that there there's a range of outcomes. But is that how we should think about the worst case?
Mathematically speaking, the worst case we show this resolve, but we have as the booked costs without having or without realizing any impact, whether this will continue at the lower level with -- at the current growth and the regular growth that we have with our existing clients at worst case, it would be realistic. But we are convinced, mathematically speaking, but we are convinced that the worst case will not happen.
This was the last question from the English room. I would now switch back to the German questions. We have a follow-up question by Mr. Ulrich Rathe from Jefferies.
Let me just come back to George's question because I didn't quite get the answer entirely and 100%. You said that the guidance -- if that the guidance was exclusive on the discount effect. So I'm not entirely sure what that means? So this means that the guidance is based on 4.8% in the first quarter, is it given on the basis of 3.5% in the first quarter. I'm not entirely sure what the word exclusive means. Just a clarification? And my second follow up question, the 170,000 mobile net adds and in Q1 190,000 perhaps in Q2 that indicates that year-over-year you will not be achieving what you achieved in 2018. Now if I remember the press conference of the fourth quarter, I remember that the 2019 might have similar customer growth as 2018. Now would you looking at Q1 and looking at Q2 on the expected results for Q2, would you still formulate it that way? Or would you want to change your expectations perhaps revise the wording of the press conference of Q4 a little bit?
The discount affects from the -- from our focus on Telefonica contracts which have a discount for the full 12 months for the customers. Let me be a bit more precise about this. We gave a guidance of 4%. Which was reported where we say, okay, we expect an increase of service revenue by 4%. And that is compared to the 3.5% in the first quarter. So it's not quite yet almost 4%, but another 4.8% that will be adjusted figure to adjusted for effects from this changed pass the split and this is in line with the figure that we gave at the press conference. If we were to adjust the figures by the effects, so adjusted roughly 5% was -- there was a figure for the total and this is in line with a 3.5% and the 4.8% and I hope that this has now become clearer. And the 170,000 mobile net adds in Q1 and 190,000 in Q2 and the total year. I can remember that during the press conference for the last month 2018, we said that it might be roughly about the same as 2018, might be a bit less. Now that we have a somewhat weaker Q1 and a positive trend in Q2, this might continue in the second half of the year. But if we consider that we've got an increased base with a stable churn ratio -- churn rate, then it probably would have more growth and we need more growth adds to compensate for that. Then we -- even if we have an increased distribution increase sales, the -- that would be slightly we do so. I cannot say that we're going to reach exactly the 970,000 in 2019. It's a bit early to say. But we do see a positive trend from Q1 to Q2.
The next question is by Mr. [indiscernible].
My first question is on the service revenue growth. Can you give us an insight into growth in 2018 in the respective quarters? And my second question is on the deal that Tele Columbus has announced, namely to sell their glass fiber network. Would that be an opportunity for you United Internet to purchase or to acquire this fiberglass network. Would that be interesting for United Internet to invest in that?
About the last question, whether it's interesting for United Internet. I can say -- I can hardly say that for 1&1 Drillisch. We don't have it on our agenda for 1&1 Drillisch. Maybe it's a good question for the call later about United Internet. Now that as revenue growth for 2018, that's a bit difficult to say. We don't have any -- values and figures of 2017. So we can compare 2019 to '18 maybe, but this is due to the fact that until the end of 2007, we didn't report in the contract to IFRS 15. So only IFRS 15. So that was somewhat different, the overall billing revenues were booked on the month where the invoice was given and the cost for hardware in the past were part of the expenses. So we don't have any like-for-like comparison here. So only now in 2019, we can have annual comparisons from now on.
Thank you. That was the last question from German room. Now we received one question from the English room. We've received a follow up question of Usman Ghazi of Berenberg.
The question was just again on -- should the EUR 17.5 million estimate that you made in Q1. What would have happened, if the unit costs had not changed. Had you not seen an increase in the unit costs. I'm just wondering what that EUR 17.5 million would have looked like? Would it have been a 0 impact, would it have been a lower impact?
Well the EUR 17.5 million is exactly the effect of the increase, is not more not less, it's just that amount.
So had -- if the arbitration gets you what you want which is lower unit costs, not the same, but lower unit costs then, I mean, then the impact is -- I mean we not only reverse out the EUR 17.5 million. I mean you will get the benefit of the EUR 17.5 million, but then you'll get an additional benefit because like you're saying, I mean the EUR 17.5 million is just reflecting the increase. And if there was no increase then presumably that number would be 0. But if there was a decrease in cost then you would get a benefit to EBITDA that's bigger than the EUR 17.5 million. Is that right?
Yes.
Thank you. As there are no further questions. I would hand back to you for some closing remarks.
At the end of this very interesting talk, I'd like to thank you and offer you -- you used to that today or the next 2 days. Of course, you can go on discussing your questions with us. Myself will be available for you with pleasure. And thank you very much. And I hope we'll see you soon.