1&1 Drillisch cuts FY outlook after Telefonica raises network access prices

22 Sep 2020

German telecoms operator 1&1 Drillisch has announced that it has reduced its EBITDA forecast for 2020 from approximately EUR683.5 million (USD806 million) to around EUR600 million, due to an increase in the cost of its network access deal with Telefonica Deutschland. According to 1&1 Drillisch, the price rise from 1 July 2020 following the end of the of the initial five-year Mobile Bitstream Access (MBA) MVNO agreement phase, and the future discontinuation of the annual price degression will result in substantially increasing additional costs annually, in particular due to the expected annual growth in data. It adds that in the next few years, there will be a high decline in earnings should the prices requested by Telefonica continue to be applied permanently.

The MBA MVNO agreement between 1&1 Drillisch and Telefonica serves to implement the latter’s commitments under the EC’s approval decision for the merger with E-Plus in 2014. Alongside discussing the prices under the MBA MVNO deal as from July 2020, the parties are negotiating a national roaming agreement. Despite the ongoing negotiations, however, 1&1 Drillisch says Telefonica has sent MBA MVNO invoices for July and August 2020 with the advance service prices that Telefonica considers to be applicable without making this subject to agreement in the negotiations. The outcome of the ongoing negotiations has also impacted on 1&1 Drillisch’s planned 5G network rollout, as national roaming will be required for a multi-year transitional period, but it is not foreseeable whether an agreement will be reached and under what conditions.

1&1 Drillisch considers the advance service prices claimed by Telefonica from 1 July 2020 onwards to not comply with the commitments of Telefonica under the EC’s approval decision on the merger with E-Plus, as well as the MBA MVNO agreement. As such, the operator says it is in talks with the EC on this issue and will take the measures necessary to safeguard its rights, including possible claims for damages.

Germany, 1&1 Drillisch, Telefonica Deutschland Holding