Drillisch signs deals with D.Telekom, Telefonica Deutschland to advance 5G rollout

BERLIN: German independent telecoms firm 1&1 Drillisch said on Monday it had agreed to expand its fibre-optic partnership with Deutsche Telekom and accepted an improved national roaming offer from Telefonica Deutschland.

The deals advance Drillisch's plans to roll out a fourth 5G network in Germany, the subsidiary of United Internet said, and sent its shares and those of its parent sharply higher in early trading.

Drillisch said that if concluded, the roaming agreement with Telefonica would retrospectively add 34 million euros ($41 million) to its 2020 earnings, which it would book in its 2021 fiscal year.

"In addition, an agreement on national roaming would constitute an essential prerequisite for 1&1 Drillisch's envisaged rollout of a high-performance 5G network," Drillisch said in a news release.

National roaming access to Telefonica's network would buy time for Drillisch to build out its own standalone network - a process that will take years to complete.

In the meantime, it will be able to continue to tap into the German network run by Telefonica, effectively extending European Union merger remedies dating back to 2014 for up to 10 more years.

"The agreement with 1&1 Drillisch creates long-term planning certainty, and will contribute significantly to revenue and earnings," Telefonica Deutschland's Chief Executive Markus Haas said. "We confirm our mid-term forecasts."

Commenting on its 2020 results, Drillisch confirmed its guidance for core earnings of 600 million euros, although after taking a write-off on unused internet connections the figure would turn out at 470 million euros.

Service revenues increased by 2.6% to 3.02 billion euros.

Giving an outlook for 2021, Drillisch said it expected service revenue to rise to 3.1 billion euros and forecast earnings before interest, taxation, depreciation and amortization (EBITDA) of 650 million euros.

United Internet, in which CEO Ralph Dommermuth owns a 42% stake, reported EBITDA of 1.05 billion euros last year after the write-off related to Drillisch's internet connections.

Sales rose to 5.36 billion euros in 2020 from 5.19 billion the year before. United Internet forecast sales of 5.5 billion euros and EBITDA of 1.22 billion euros this year.

Drillisch shares traded 5% higher after the news and United Internet was up 1.4%, with both giving back some initial gains. Telefonica Deutschland, a unit of Spain's Telefonica, added 0.8%.