Return to: Discussions | Q3 2023 Earnings Report | Q3 2023 Earnings Call Notes |1&1:Quarterly Results/2023 Q2 |1&1:Quarterly Results | 1&1 | Earnings Season:2023 Q3 | Recent Developments
Results
- Management confirmed its guidance for 2023 and said it expects to end the year with 1,000 antenna sites and start growing the number of antenna sites by 2,000 annually starting from 2024..
“Despite further delivery failures at our main partner, deployment of radio masts are improving overall – the ramp-up gained momentum in the second half of the year as announced,” the report reads.
| Key Items
|
Q3 2023
|
Y/Y Growth
|
| Revenue
|
1.039 billion
|
4.07%
|
| Service revenue
|
834.3 million
|
3.7%
|
| EBITDA
|
159.1 million
|
-12%
|
| EPS
|
0.42
|
|
| Antenna sites
|
503
|
|
| Access contracts
|
16.11 million
|
2.9%
|
| mobile contracts
|
12.10 million
|
5.0%
|
| broadband contracts
|
4.01 million
|
2.9%
|
Summary of the earnings call
In the earnings call[1];
- CEO Ralph Dommermuth said the agreement already reached with Vodafone is binding and that no party can leave ongoing detailed discussions, but in case of disagreements, the Network Agency will act as the arbitrator.
- Dommermuth said that if the parallel MVNO operation is not authorized, they will have to migrate existing 5G customers to their own network, which has a small 5G footprint, but he doesn’t expect any major implications because although its competitors use 3.6GHz, some of their customers have weak 5G displayed on their devices due to the use of old antennas.
- He said that they are not thinking about consolidation since they see good business opportunities but they are open to collaborating with other operators in handling grey spots, especially in rural areas.
- Regarding the position statement by the Federal Cartel Office, Dommermuth said there is a lot of truth in it but they are open to any decision that will provide them with low-band frequency in the right capacity.
- He said that they have clear plans to add 2,000 antenna sites in 2024, though they target 3,000 antenna sites.
Management Guidance and Analysts Estimates
Management Guidance
- Management expects second half to be stronger than the first half. They project service revenue will grow by 4% in the second half versus 0.2% in first half [2]
| Key Items[3]
|
Q3 2023
|
2023
|
Y/Y Growth
|
| Antenna sites
|
more than 500
|
1,000
|
|
| New Customer Contracts
|
|
500,000
|
42.9%
|
| Service Revenue
|
|
€3.23 billion
|
~2%
|
| EBITDA
|
|
€655 million
|
-5.5%
|
| Access Segment Revenue
|
|
€775 million
|
4%
|
| 1&1 Mobile Network start-up costs
|
|
€ - 120 million
|
129%
|
| Cash Capex
|
|
€320 million
|
28%
|
Analysts Consensus Estimate
| Key Items[4]
|
Q3 2023
|
Y/Y Growth
|
2023
|
Y/Y Growth
|
| Revenue
|
EUR 1.013 billion
|
1.5%
|
EUR 4.04 billion
|
2.0%
|
| Service revenue
|
EUR 821.8 million
|
2.1%
|
EUR 3.22 billion
|
1.3%
|
| EBITDA
|
EUR 164 million
|
-9.3%
|
EUR 654.7 million
|
-5.6%
|
| EPS
|
EUR 0.44
|
-20.9%
|
EUR 1.74
|
-20%
|
| Access Contracts
|
16.09 billion
|
2.8%
|
16.25 billion
|
3.0%
|
| Mobile Internet contracts
|
12.07 billion
|
4.7%
|
12.23 billion
|
4.7%
|
| Broadband contracts
|
4.03 billion
|
-2.5%
|
4.02 billion
|
-2.0%
|
| Capex (Cash-Capex)
|
|
|
EUR -320.5 million
|
28.2%
|
| Free Cash Flow
|
|
|
EUR -42.2 million
|
-34.6%
|
| Net adds
|
|
|
|
|
| Access
|
440,714
|
|
466,655
|
|
| Mobile
|
545,276
|
|
545,227
|
|
| Broadband
|
-104,000
|
|
-82,143
|
|
Analysts Opinions
Current price target and ratings
| Firm
|
Price target
|
Rating
|
| Deutsche Bank[5]
|
17 euros
|
buy
|
| Goldman Sachs[6]
|
raised from 13.50 to 20.00 euros
|
buy
|
| UBS[7]
|
20.70 euros
|
buy
|
| DZ Bank[8]
|
raised from 14.50 to 18.20 euros
|
buy
|
| Berenberg[9]
|
lowered from 38 to 30 euros
|
buy
|
1&1 to post good Q3 results
- Analyst Keval Khiroya expects 1&1 service business to have accelerated (Nov 1)[5].
- Berenberg analyst Usman Ghazi expects (Sept.13) 1&1's sales growth in H2 to exceed expectations. He added that "its operating earnings estimates (Ebitda) are currently below consensus forecasts."[10]
Vodafone deal reduces need and cost for 1&1 to build own mobile network
- Goldman Sachs analyst, Andrew Lee, believes (Oct.2) that the contract with Vodafone is positive since it makes longer-term developments easier to predict. He expects 1&1's construction of its own network to progress slowly and on a less large scale[6].
- UBS analyst Polo Tang said (Sept 26.) that his conversations with european executives and regulatory authories from telecomunication sector established that 1&1 has cut back on plans to build its own network. He said this could give the stock a boost[11].
Extension of frequency usage rights reduces bidding wars and may make 1&1 scale down on it network buildup
- UBS analyst Polo Tang said (Sept.4) that the fact that the Federal Network Agency wants to extend the useful life of frequencies is positive for 1&1 since it means that the company "would now scale back its plans to build its own network."[12]
- DZ Bank analyst Karsten Oblinger (Sept.14) said the Federal Network Agency's planned waiver of the upcoming spectrum auction eliminates bidding wars[8].
1&1 is still undervalued
- Berenberg analyst Usman Ghazi said (Sept.13) 1&1's shares are still undervalued despite 40% recovery from their lows[9].
Competitor results
Telefonica Deutscheland
| Key Items[13]
|
Q3 2023
|
Y/Y Growth
|
Analysts estimate
|
| Total revenue
|
EUR 2.1 billion
|
2.2%
|
EUR 2.1 billion
|
| Mobile service revenue
|
EUR 1.52 billion
|
3.4%
|
EUR 1.5 billion
|
| mobile customer accesses
|
45 million
|
-4.3%
|
|
| Mobile postpaid net adds
|
396K
|
30%
|
|
| Mobile prepaid net disconnections
|
-22K
|
-62%
|
|
Deutsche Telecom German business
| Key Items[14]
|
Q3 2023
|
Y/Y Growth
|
Analysts estimate
|
| Total revenue
|
EUR 6.31 billion
|
2.7%
|
EUR 6.25 billion
|
| service revenue
|
|
2.4%
|
|
| branded contract customer additions
|
350,000
|
|
254,000
|
| broadband net additions
|
96,000
|
|
65,000
|
References
