- German operator could face penalty for missing 1,000 5G antenna target.
- 1&1 insists it remains on track to achieve longer‑term targets.
- Campaigning on first FWA service set to build in 2023.
Markus Huhn, Chief Financial Officer (CFO) of 1&1, indicated the German operator is not engaged in discussions to acquire Sky Deutschland from its US owner Comcast, despite recent rumours in German media.
Reports have suggested that 1&1 and its parent company United Internet, as well as German media group ProSiebenSat.1, are interested in buying Sky’s pay‑TV operations in Germany amid speculation that Comcast is weighing a disposal of its German business.
However, during an earnings call to discuss 1&1’s results for the three‑month period to 30 September 2022 (Q3 FY22), Huhn was quick to dismiss the reports.
“ Regarding Sky, we do not have any idea where this information comes from. From our side, we can say there are no ideas, no discussions. We don’t know what is the driver for [these] messages in the market. No idea. ”
Huhn (via VIQ FD Disclosure).
Bloomberg reported that Sky Deutschland would have an estimated value of about €1bn in any sale. François Godard, Senior Media and Telecoms Analysts at Enders Analysis, highlighted that, unlike its sister units in Italy and the UK, Sky Deutschland has “no telecoms operations”. “Maybe a German buyer could merge it with something else and get to scale”, he told the news agency. German news site DWDL noted that a Sky purchase could be a good fit for 1&1, bringing with it the opportunity to bundle television services with broadband and mobile service offerings, and increasing the pressure on rivals such as Telekom Deutschland (TDE).
5G Vantage point
Huhn also faced repeated questions about progress with the construction of 1&1’s 5G network, which is set to transition the provider into Germany’s fourth mobile network operator, joining the ranks of TDE, Telefónica Deutschland (O2), and Vodafone Germany.
In September 2022, 1&1 announced that its target to build 1,000 5G antenna sites by the end of 2022 would be delayed by around six months to mid‑2023 (Deutsche Telekomwatch, #113 and #118). The setback was attributed to problems with its “most significant partner in terms of volume, which has contractually committed to providing approximately two‑thirds of the 1,000 antenna sites by the end of 2022”.
Although 1&1 has not officially revealed which of its three passive infrastructure providers — American Tower subsidiary ATC Germany, German mobile infrastructure service provider GfTD, and Vodafone’s Vantage Towers — was to blame for the delay, the finger has been pointed at Vantage Towers after 1&1 sources told TelecomTV that Vantage Towers was its biggest partner.
Huhn indicated that 1&1 expects to incur a penalty for missing the 1,000‑antenna target, and is in discussions with Bundesnetzagentur (Federal Network Agency/BNetzA) over the matter. The CFO said the amount is not expected to have a major impact on core earnings.
Vivek Badrinath, Chief Executive (CEO) of Vantage Towers, did not directly address the delay in 1&1’s 5G network rollout during the passive infrastructure provider’s Q2 FY22–23 results presentation. However, he said Vantage is investing resources and working actively with 1&1. “It’s a new programme for everybody in the chain. We’re getting lots of things sorted out step by step”, he said. He further noted that Vantage “will further invest in the acceleration of the built‑to‑suit programme and the 1&1 rollout” in the second half of FY22–23.
One step at a time
1&1 has insisted that it remains on track to achieve the planned coverage rate of 50% of all households before the end of 2030. The operator has also previously said it intends to launch 5G fixed‑wireless access (FWA) services in certain areas before the end of 2022, with 5G mobile services to follow from summer 2023.
As only 120–150 antennas or antenna sites are expected to be available by the end of the year, Huhn said, “we will not have a big campaign on [the FWA] product” until the full 1,000 antenna sites are in place in 2023.
Meanwhile, Huhn said 1&1 started national roaming tests with O2 in the fourth quarter of 2022. This follows the signing in May 2021 of a new National Roaming Agreement (NRA) between 1&1 and O2, and associated revisions to the structure of their existing multibit access mobile virtual network operator (MVNO) arrangement signed by the pair at the time of O2’s acquisition of rival E‑Plus in 2014 (Telefónicawatch, #154 and passim).
The connection to national telecoms networks is then set to take place in the first quarter of 2023, followed by the connection to international networks and a national roaming test phase in the second quarter, and the operational start of the network’s four core data centres in the third quarter.
The next steps will see a nationwide marketing launch, the discontinuation of MVNO sales, and the start of the migration process for existing customers to 1&1’s own network.
Huhn noted that software and equipment for the four data centres provided by Rakuten Group — its general partner for the mobile network — accounts for the largest portion of capital expenditure (capex) in 2022. Capex is expected to amount to approximately €250m in FY22, down from previous estimates of €400m, owing to the “unexpected delays in the provision of antenna sites”.
1&1 currently has 15.65 million customers, of which 11.52 million are mobile contracts and 4.13 million are broadband lines. In the first nine months of FY22, revenue increased 1.7% to €2.95bn while service revenue rose 2.2% to €2.39bn. Consolidated earnings before interest, taxes, depreciation and amortisation (EBITDA) increased slightly by 0.5% to €549m. The cost impact on EBITDA associated with the 1&1 mobile network reached €26.8m, compared to €24.5m in the first nine months of FY21. The mobile network is expected to start generating revenue in the second half of FY23.
[Further reference: What’s up with… 1&1 and Vantage, Ofcom, BT — TelecomTV, 22 September 2022; Comcast considers selling German unit Sky Deutschland — Bloomberg, 27 October 2022; 1&1 unter den Interessenten für Sky Deutschland — DWDL, 3 November 2022; ProSiebenSat.1 interested in Sky TV operations in Germany — sources — Reuters, 9 November 2022; Q3 2022 1&1 AG earnings call — VIQ FD Disclosure, 10 November 2022.]
