German newcomer braces for earnings hit - Mobile World Live

German newcomer braces for earnings hit

21 SEP 2020

Germany’s fledgling fourth operator and MVNO 1&1 Drillisch flagged an expected profit drop due to a substantial increase in wholesale charges from Telefonica Deutschland, as it raised the possibility of legal action.

In a statement, 1&1 Drillisch said its EBITDA forecast for 2020 had been cut by €83.5 million to €600 million with a continued “high decline in earnings” in future years should the new pricing policy be applied permanently.

It added it was in discussions with the European Commission over the issue and would “take every measure necessary” including a potential damages claim to safeguard what it believes are its rights over network access.

Telefonica Deutschland has provided the host network for 1&1 Drillisch’s MVNO since 2014. For the first five years of the deal, the latter received annually reducing unit costs on voice and data, alongside some free SMS and limited voice capabilities.

The agreement was extended for a further five years earlier this year, with updated charges valid from July removing the free facilities and ending sliding prices.

Telefonica Deutschland maintains the changes are in-line with contractual terms and said it cooperates with mandated cost reviews.

The two have been in heated discussions over pricing structures for the MVNO agreement several times, with independent experts called in to mediate.

Uneasy alliance
Telefonica Deutschland became the host network for 1&1 Drillisch’s MVNO as part of the regulated terms of its acquisition of market rival E-Plus in 2014.

Since striking the MVNO deal, 1&1 Drillisch has acquired its own spectrum assets to build a 5G network and is in parallel negotiations with Telefonica for national roaming facilities.

Telefonica Deutschland said it had made “competitive and reasonable national roaming offers” adding it “strongly rejects any allegations and indications by 1&1 Drillisch” that it would not fulfil its legal obligations.

Earlier this year, 1&1 Drillisch also cut its dividend as it attempted to raise money to fund the build of its 5G network.

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Chris Donkin

Chris joined the Mobile World Live team in November 2016 having previously worked at a number of UK media outlets including Trinity Mirror, The Press Association and UK telecoms publication Mobile News. After spending 10 years in journalism, he moved...

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