Release Date: November 12, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- 1&1 AG (WBO:DRI, Financial) reported a stable customer base with 16.35 million contracts, including an increase of 20,000 mobile internet contracts in Q3 2024.
- Service revenue grew by 2.5%, indicating a positive trend despite overall revenue decline.
- EBITDA in the access segment increased by 7.7% to EUR 630 million in the first nine months of 2024.
- The company is making significant progress in its mobile network rollout, with 22 out of 24 decentralized edge data centers completed.
- 1&1 AG (WBO:DRI) expects a stronger increase in mobile business in Q4 2024 compared to Q3 2024.
Negative Points
- Total revenue decreased by 0.5% to EUR 3.17 billion, with a significant 12.1% drop in other revenue from smartphones and routers.
- The company experienced a network outage in May, impacting net growth and leading to reduced migrations.
- Aggressive competition in the German market has negatively affected subscriber trends and growth.
- Cost of sales increased, leading to a drop in gross profit from EUR 889 million in 2023 to EUR 826 million in 2024.
- The company faces challenges in meeting its 2025 network deployment obligations, with ambitious targets for population coverage.
Q & A Highlights
Q: Could you help us understand the key driver for the expected EBITDA growth in Q4 and the competition outlook for 2025?
A: The main driver for EBITDA growth in Q4 is the result of net growth from the previous year and a focus on valuable customer contracts. Regarding competition, the environment remains aggressive, but we expect a positive development in net ads due to changes in our campaigns. The competitive landscape's aggressiveness in 2025 is uncertain, but we aim for a better situation with strategic changes.
Q: How should we think about your free cash flow evolution over the coming years, and what are the main moving parts?
A: We expect an increase in free cash flow next year due to lower payments to Deutsche Telekom and reduced CapEx. The cash CapEx for next year is expected to be below this year's guidance. The completion of our data centers will also reduce CapEx, positively impacting free cash flow.
Q: Can you discuss your ability to meet the 2025 network deployment milestone of 25% population coverage?
A: Meeting the 2025 milestone is ambitious, but we are working hard to achieve it. The outcome depends on the judgment from the Cologne Court. We are committed to fulfilling our obligations and are optimistic about reaching the target.
Q: What is the status of your negotiations regarding compensation for the network outage, and how does it impact your guidance?
A: We are in ongoing negotiations with partners for compensation related to the network outage. The compensation is included in our guidance, and we are optimistic about a positive outcome. However, if a solution is not reached, there is a risk to our guidance.
Q: Can you provide clarity on the launch of unlimited mobile tariffs and their impact on your commercial strategy?
A: We have introduced unlimited tariffs in our shop but have not launched major campaigns yet. The fourth quarter will help us understand customer behavior and decide on potential campaigns for next year. The Vodafone National Roaming Agreement supports these tariffs, allowing us to offer them commercially.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
