United Internet boss Ralph Dommermuth
Photo: Boris Roessler / picture alliance / dpa
The dispute over the costs of using Telefónica Deutschland's (O2) cellular network by competitor 1 & 1 Drillisch is intensifying.
1 & 1 and its parent company United Internet accuse the subsidiary of the Spanish group Telefónica of having increased the costs for the use of the mobile network considerably from July before the conclusion of the ongoing negotiations.
Telefóncia Deutschland rejects the accusation and sees the price increase covered by contracts and agreements.
Since 1 & 1 and the
parent company United Internet, led
by
Ralph Dommermuth
(56), apparently did not expect this, both companies had to lower the forecast for the operating result for the current year on Saturday.
They also see the risk of further declines in profits in the coming years.
The shares of United Internet and 1 & 1 Drillisch went steeply downhill on Monday to start trading.
United Internet, listed in the MDax, fell 23 percent.
The papers of the 1 & 1 Drillisch included in the small value segment SDax collapsed by 28 percent.
Telefonica Deutschland, on the other hand, was able to increase initially, but then also fell by more than 3 percent.
For Ulrich Rathe from the analysis company Jefferies, the price dispute means "an incalculable risk" for the business model of 1 & 1 Drillisch.
Nevertheless, 1 & 1 Drillisch and Telefónica Deutschland are still in constructive negotiations, so that the latter could have acted more tactically, he wrote in a study on Monday.
He therefore stuck to his recommendation to keep the shares of United Internet and 1 & 1 Drillisch and did not change the price target.
Goldman Sachs analyst Andrew Lee, however, fears a year-long decline in earnings for United Internet and 1 & 1 Drillisch in view of the price pressure and lowered the price target for the two stocks.
Surprising or not?
Dispute over contracts
Telefónica and 1 & 1 Drillisch have been arguing for a long time about the prices for the provision of mobile communications capacity.
Telefónica Deutschland has to offer this as an edition of the merger with E-Plus.
"1 & 1 Drillisch considers the wholesale prices demanded by Telefónica from July 1, 2020 to be not in accordance with the voluntary commitments of Telefónica under the approval decision of the EU Commission to merge with E-Plus," said the company's announcement from the weekend and what manager magazine reported.
In addition, according to United Internet, the prices are not within the framework of the so-called MBA MVNO contract (Mobile Bitstream Access - Mobile Virtual Network Operator) with Telefónica.
The first five-year extension phase has been running here since July, even if there is still no agreement on prices.
The Montabaur-based company United Internet considers the wholesale prices invoiced for July and August to be inappropriate and wants to take action.
1 & 1 is also in exchange with the EU Commission.
In Munich, where Telefónica Germany is based, you see it differently.
The prices billed to 1 & 1 in July and August were based on the existing contract for the use of the mobile network.
"This contract was extended by 1 & 1 Drillisch in December 2019," said Telefónica Deutschland on Sunday upon request.
Therefore 1 & 1 has known this for a long time.
Telefónica Deutschland announced in this connection that the outlook for 2020 and medium-term planning are in place.
Just like 1 & 1 Drillisch, Telefónica Deutschland reserves the right to take measures to safeguard its rights.
Just like the provision of services, the invoicing is not easy to suspend just because both parties are negotiating a longer-term use within the framework of a so-called national roaming agreement.
Within this, the use of the cellular network is to be regulated until 1 & 1 has set up a powerful 5G network itself.
Consequences for 5G expansion
The outcome of the ongoing negotiations also has an impact on the development of a 5G network planned by 1 & 1 Drillisch, United Internet said.
Deutsche Telekom, Vodafone, Telefónica and 1 & 1 Drillisch have put billions on the table for corresponding frequencies of the 5G network.
Cooperation between competitors is required for expansion, but that was the last issue.
In contrast to its competitors, United Internet subsidiary 1 & 1 Drillisch does not yet have its own mobile network.
Since some 1 & 1 frequency blocks will only be available in a few years, the company will rent some from Telefónica until then.
It is not foreseeable whether and under what conditions an agreement will be reached, announced United Internet.
Telefonica Deutschland stated that with regard to pricing, 1 & 1 still has the contractually agreed option of having commercial conditions checked by an independent expert in a price revision procedure.
In the first procedure, the Telefónica pricing was confirmed by an independent expert appointed by both parties at the end of 2019
Further review procedures initiated by 1 & 1 Drillisch have not yet been completed, two procedures were withdrawn by 1 & 1 Drillisch in April 2020, according to Telefonica Germany.
Just like 1 & 1 Drillisch, Telefonica Deutschland reserves the right to take measures to safeguard their rights.
United Internet and its subsidiary 1 & 1 lowered their forecasts because of the price increase.
United Internet, for example, expects earnings before interest, taxes, depreciation and amortization (Ebitda) to decline to 1.18 billion euros in the current year - around 86 million euros less than before.
So far, the company had expected an Ebitda of around 1.266 billion euros, which is the same as last year.
"In addition, there will also be significant declines in earnings in the following years if the prices demanded by Telefónica are applicable over the long term."
For the subsidiary 1 & 1 Drillisch, the Ebitda forecast for 2020 was reduced to around 600 million euros as a precaution.
So far, a value of 683.5 million euros has been promised at the previous year's level.
Here, too, there is a risk of further falling results in the following years, should Telefónica Deutschland prevail with the asking price.
ak / dpa-afx
