1&1:5G Infrastracture: Difference between revisions

* More revenue and higher profits.

Despite getting those frequencies in 2019, it is critical that 1&1 gets the low-band frequency (800 Mhz) to be auctioned in 2024 in order to be able to offer seemless network experience to its users. This is because a network built on high -band frequencies is incapable of penetrating through walls<ref>http://www.d-long.com/eWebEditor/uploadfile/2019101622405834124458.pdf (page 64)</ref>. If 1&1 is unsuccessfull in the 2024 auction, it will have to lease it from Telefonica. However, as noted by its CEO Ralph Dommermuth during Q1 2022 earnings call, this woud be expensive. It will also reduce their competitive position<ref>https://www.webcast-eqs.com/register/1und120220512/en (Min 38-45)</ref>. However, there is a growing likelihood that the 800 MHz duration will be extended to 2033 while the 900 Mhz expiry date will be brought forward to 2025 from 2033. This means that the 900 MHz will be auctioned in 2024 instead of the 800 MHz<ref>https://www.telcotitans.com/deutsche-telekomwatch/dts-h%C3%B6ttges-to-fight-regulator-on-spectrum-auction-proposals/5732.article#:~:text=In%20September%2C%20the%20BNetzA%20proposed,to%20the%20end%20of%202025</ref>. But 1&1 said during Q2 2022 earnings call that it is open to any of the 700 MHz, 800 MHz or 900 MHz<ref>https://www.webcast-eqs.com/register/1und120220804/en (min 45-51)</ref>.

One of the important assets in 1&1's 5G construction is 1&1 Versatel, which is 100% owned by United Internet.1&1 Versatel owns one of the largest fibre networks in Germany. The network spans over 47,013 km and is available in 250 German cities, including 19 of the 25 largest cities. 1&1 will leverage this network as 5G backhaul<ref>https://www.united-internet.de/fileadmin/pdf-xml/praesentationen/2019/2019-06-27-5G_Rationale.pdf (page 11)</ref>.

Vantage Towers is Europe's largest tower company. It constructs, builds and rents out mobile towers or sites. Vantage Towers was formed in 2019 by Vodafone with the aim of using it to rent out its European mobile masts. It has operations in 10 markets in Europe and has around 82,000 sites.<ref>https://www.forex.com/en/market-analysis/latest-research/vantage-towers-ipo-background/</ref> In the year ended March 2022, it generated a profit of €251 million before tax and had gross assets of €10.5 billion.<ref>https://www.vodafone.com/news/corporate-and-financial/vodafone-enters-co-control-partnership-gip-and-kkr-vantage-towers</ref> Vantage Towers was IPOed in March 2021 at €12.1 billion euros valuation and an offer price of 24 euros. Its headquarters is in Düsseldorf, Germany. Vodafone has 81.7% stake in Vantage Towers. However, there is a joint venture deal that will see transfer of 40% of its stake to a Consortium by the first half of 2023. The deal will see Vantage Towers becomes less dependant on Vodafone, hence accelerating its growth potential.<ref>https://www.vodafone.com/news/corporate-and-financial/vodafone-enters-co-control-partnership-gip-and-kkr-vantage-towers</ref>

On December 9 2021, 1&1 Mobilfunk GmbH, a subsidiary of 1&1 AG, signed a long-term agreement with Vantage Towers. The agreement will give 1&1 AG access to up to 5,000 antennna sites belonging to Vantage Towers. The first sites were to be availed in 2022 with the aim of giving 1&1 access to at least 3,800 sites by 2025. The contract has a term of 20 years with the first contract expiring in 2040. However, 1&1 has an option to extend it until 2060.<ref>https://www.vantagetowers.com/sites/tower-co-v2/files/media/20211209-press-release-vt-final-eng.pdf</ref>

On February 24 2022, 1&1 announced that it was going to launch a complaint against Vantage Towers at the Federal Cartel Office for failing to meet its antenna sites obligations. The complaint is also against Vodafone who happens to be the majority shareholder of Vantage Towers with a 81 percent stake. According to 1&1, Vodafone is using its influence to get preferential treatment from Vantage Towers at the expense of 1&1. As at the end of 2022, 1&1 had only five 5G antenna sites, some provided by Vantage Towers. On the other hand, Vodafone had 1,600 5G antenna sites based on Vantage Towers infrastructure. Other than failing to meet its 2022 antenna site obligations, Vantage Towers and Vodafone has also told 1&1 that they won't be able to meet their obligations in the first quarters of 2023. This means that the 1&1's planned launch of 5G in Q3 2022 will be pushed to another date. 1&1 is also complaining that Vodafone is supporting the extension of low-band frequencies given to incumbent network operators Vodafone, Deutsche Telekom and Telefónica for further years without an auction. According to 1&1, this is wrong considering that its network is hardly built up and Vodafone is somehow to be blamed for the low-build out of Vantage Towers antenna sites.<ref>https://www.eqs-news.com/news/corporate/11-requests-the-federal-cartel-office-bundeskartellamt-to-review-the-hindrance-of-the-construction-of-the-fourth-german-mobile-network-slight-delays-in-network-launch-possible/1760247</ref> We believe that the immediate action taken by 1&1 had been carefully planned and that 1&1 wants to capitalise on the new capital structure at Vantage Towers. The capital structure makes Vantage Towers independent from its main shareholders. It also make third party customers more important than shareholders.<ref>https://www.bloomberg.com/news/articles/2023-01-31/activist-elliott-discloses-stake-in-germany-s-vantage-towers</ref><ref>https://www.kkr.com/sites/default/files/Pressemitteilung-Konsortium-angefu%CC%88hrt-von-GIP-und-KKR-schlie%C3%9Ft-strategi-che-Partnerschaft-mit-Vodafone-zur-Beteiligung-an-Vantage-Towers-AG.pdf </ref> 1&1 probably hopes to compel Vantage Towers to give them access to the next towers to be constructed at the expense of Vodafone. Given that 1&1 stands to be the fourth MNO in Germany and its good track record of leveraging regulatory bodies, we believe that 1&1 stands a chance to win the complaint.

On September 16 2022, 1&1 announced that it was not going to meet its obligation of 1,000 5G antenna sites by 2022 due to supply bottlenecks experienced by its major partner(Vantage Towers). Vantage Towers was supposed to provide around two-thirds of the 1,000 antenna sites by the end of 2022. 1&1 added that its other partners were performing as expected and that the delay was not expected to affect the planned launch of its 5G network in 2023. Additionally, the delay was not going to affect the fulfillment of its 50% network coverage by 2025. 1&1 hoped to close the gap with its other partners. However, the 1,000 5G sites was not going to be reached untill Summer 2023.<ref>http://88.217.133.43/link.php?isin=DE0005545503&typ=corporate&von=19970101&a=10&sprache=en&id=1654697</ref>

[[File:Rakuten Mobile.png|thumb|590x590px|https://global.rakuten.com/corp/investors/documents/results/]]

Rakuten is a Japanese multinational company with operations in more than 30 countries and regions. It has over 28,000 employees and operates more than 70 businesses which span retail, financial services, mobile carrier services, fintech, security, etc. In the financial year 2022, Rakuten achieved a revenue of 1.9 trillion yen, representing 14.6% year-on-year growth. It also recorded 39 million active users or growth of 11.2% year-on-year in Japan alone. However despite its massive revenue and size, the group continues to record operating losses, driven mainly by ongoing investments in the mobile division, which also still struggles to attract clients. In the year ended 2022, the group recorded operating losses of 325.6 billion yen, representing year-on-year growth of 44.71%. The good news is that the operating losses in Rakuten Mobile continues to contract sequentially after peaking in Q1 2022. In Q4 2022, Rakuten Mobile operating losses declined by 5.33% to $ 114.43 billion yen from $120.869 billion in Q3 2022. Rakuten Mobile also keeps seeing substantial growth in revenue. In Q4 2022, its revenue grew by 75.2% year-on-year to $114,430 million. The division now has 52,003 4G base stations, with 15% of  base stations left to be constructed. It aims to achieve 99%+ coverage before the end of 2023<ref name=":0">https://global.rakuten.com/corp/investors/documents/results/</ref>.  

Our major concern with Rakuten is that if its mobile division continues making losses, the group's financial position will be severely impacted. This will impact the construction of 1&1's network. Our asssesment is based on the current situation of its balance sheet and that of Bloomberg analysts. Due to the mobile losses and capex, Bloomberg Intelligence expected its non-financial segment cash burn to exceed 500 billion yen in 2022<ref>https://www.bloomberg.com/news/videos/2022-07-21/not-all-asia-telecom-bonds-are-safe-havens-in-stormy-2h-video</ref>. This could affect its credit rating, which is already on the downward trend. In December 2022, Rakuten's long-term credit rating was lowered to BB from BB+ by S&P Global Ratings<ref>https://www.bnnbloomberg.ca/japan-e-commerce-giant-rakuten-cut-further-into-junk-by-s-p-1.1862071</ref>. Bloomberg Intelligence Strategist Sharon Chen, believes that Rakuten needs to repair its balance sheet by Q4 2023 when $2.2 billion of bonds come due<ref>https://www.bloomberg.com/news/articles/2023-01-11/rakuten-more-than-doubles-bond-offering-s-size-to-450-million</ref>. However, we believe that even if the group were to go bankrupt, the business will be sold to another company or big investor who will see to it that the group's partnership obligations are honored.

Rakuten is a pioneer in OpenRAN technology. In August 2021, it entered into a partnership with 1&1 for the construction of German's fourth MNO 5G network based on Open RAN architecture. Rakuten will use its own playbook in Japan to implement this project. According to the contract, Rakuten will install 1&1's Open RAN equipment as well as oversee its performance. The contract notes, " 1&1 will have access to the Rakuten Communications Platform (RCP) stack of access, core, cloud and operations solutions as well as to its partner network. In this context, Rakuten will also provide its specially developed orchestration software so that the 1&1 network can be operated in a highly automated manner." <ref>http://88.217.133.43/link.php?isin=DE0005545503&typ=corporate&von=19970101&a=10&sprache=en&id=1468451</ref>

So far, the partnership between 1&1 and Rakuten is going on well as 1&1 CEO Ralph Dommermuth said during Q2 2022 earnings call, " Maybe I can start with our cooperation with Rakuten, which is going on very well. And I stated yesterday in a Supervisory Board Meeting, if it continued as is, that will be perfect. We really have the best possible partner there. And I and the whole team, are enthusiastic about it. Of course, it has to remain as as is now over the years, but what we've seen so far is really pleasing. Now concerning performance optimization, we didn't take a lot of time there. The test began in July, the friendly user test did. And I'd say we're three weeks into it now. And at the beginning, of course, we didn't have the values we have now. But within 2 to 3 weeks, the desired values did show and hasn't been a problem for us so far."<ref>https://quartr.com/companies/11-ag_12498</ref> Dommermuth's words were echoed by Azita Arvani, Rakuten's CEO of North America who noted that the test results are impressive<ref>https://www.investmentwiki.org/wiki/Assessment_of_Open_Ran#:~:text=Given%20that%20it,%5B37%5D.</ref>.

On April 2022, 1&1 Mobilfunk GmbH, a subsidiary of 1&1 AG signed a contract with ATC Germany. The contract is for the lease of ATC Germany antenna sites by 1&1 for efficient rollout of its network. ATC Germany will provide 1&1 with sites for construction of its own antennas. Each site will have a lease term of 20 years which can be extended by 1&1 multiple times<ref name=":1" />.

Orange is a telecommunications network provider that is present in 26 countries and had a revenue of 42.5 billion euros in 2021. As of June 2022, it  had 137,000 employees and 282 million customers<ref name=":5">https://www.eqs-news.com/news/corporate/11-ag-11-and-orange-conclude-agreement-on-worldwide-international-roaming/1699213</ref>. Its presence is majorly in Africa and Middle East where it is availabe in 18 countries. In Europe, it is only available in 8 Europe countries<ref>https://www.orange.com/en/orange-world#</ref>. Orange's 5G network is in the preparation, testing and deployment stage in most countries (other than in Spain where it has launched 5G in 1,222 towns and cities). In its home country, France( where it had a revenue of 18.09 billion euros in 2021), the company plans to launch advanced 5G network (for general public) from 2023<ref>https://www.rcrwireless.com/20220510/5g/orange-france-selects-ericsson-5g-converged-charging-solution

In November 2022, 1&1 and Orange signed a long-term agreement to provide 1&1 mobile network with  international roaming services<ref name=":5" />.

Eubanet GmbH is a German consulting and service company operating in the telecommunications industry. It acts as a link between site owners and network operators<ref name=":2">https://eubanet-de.translate.goog/?_x_tr_sl=de&_x_tr_tl=en&_x_tr_hl=en&_x_tr_pto=sc</ref>. The company has over 30 years experience conduscting site analysis and acquisitions for installation of radio masts and telecommunications facilities<ref name=":3">https://www.eqs-news.com/news/corporate/11-ag-11-concludes-contract-for-the-acquisition-of-up-to-7500-new-antenna-locations/1718771</ref>. Some of its clients include Vodafone, Telefonica, Nokia, Ericsson, Vanatage Towers, etc<ref name=":2" />. It employs 11-20 people and makes a revenue of $1 million to $5 million per year<ref>https://www.zoominfo.com/c/eubanet-gmbh/473903283</ref>.

In April 2022, 1&1 Mobilfunk GmbH, a subsidiary of 1&1 AG signed a contract for the construction of 1&1's antenna sites. GfTD will construct 500 antenna sites for 1&1 in the initial stages of the contract<ref name=":4" />.  

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