German telecoms companies United Internet and Drillisch have entered into an agreement to merge the former’s mobile and fixed network business, which is bundled in 1&1 Telecommunication, with the latter’s mobile communications business. Under the Business Combination Agreement, United Internet’s 1&1 Telecommunication unit will be acquired by Drillisch under the umbrella of United Internet. The move is aimed at creating a strong fourth player in the German telecoms market alongside the three major full-service providers Telekom Deutschland, Vodafone Germany and Telefonica Deutschland. Following the successful implementation of two capital increases, United Internet will be Drillisch’s new majority shareholder with a share of around 72.7% plus those shares tendered into a tender offer, although Drillisch is to remain an independent listed company. Subject to merger control approval, the entire transaction is expected to be completed at the end of 2017.
1&1 Telecommunication (including 1&1 Versatel’s retail business) and Drillisch together have more than twelve million customer contracts and had combined sales of over EUR3.2 billion (USD3.5 billion) in 2016. The integration is expected to create annual synergies of around EUR150 million by 2020, rising to EUR250 million annually by 2025, resulting from joint purchasing of hardware and services, more efficient use of Drillisch’s available network capacity, the expansion of the 1&1 product portfolio to include future technologies, and the availability of a larger product portfolio in Drillisch’s stores. The synergies will partially be enabled by Drillisch’s existing exclusive access to Telefonica Deutschland’s mobile network.
‘With the merger of 1&1 Telecommunication and Drillisch, we are creating a powerful telecoms provider under the umbrella of United Internet. 1&1 possesses a strong brand, an enormous customer base and immense distribution capability,’ commented Ralph Dommermuth, CEO of United Internet, adding: ‘Drillisch is a fast-growing mobile telecoms provider with an attractive product portfolio. Together, we can offer our customers the complete range of products with full access to the network technologies of today and tomorrow from a single source: high speed DSL, mobile internet and the associated services.’