3. Subsequent Events
Acquisition of we22
The United Internet subsidiary 1&1 IONOS acquired the Cologne-based company we22 AG on February 1, 2021. we22 develops software for the creation, maintenance and hosting of websites. The German Federal Cartel Office has already approved the takeover of we22 AG.
we22 was founded in 1999 by Robert Schovenberg and Cornel Schnietz as Content Management AG. Today, we22 employs more than 140 people at its sites in Cologne, Berlin and Erfurt. The company became known for its white-label website builder CM4all, which has been used to create and operate more than 5 million websites to date. With over 25 language versions, CM4all has been an essential part of the product offering of over 50 hosting providers worldwide since 2000. Under its Web4Business brand, we22 also offers website creation and online marketing services to small businesses in Germany.
we22's products and services are also to be made available to IONOS customers in the future. Moreover, CM4all will continue to be offered as a white-label solution for other internet providers and business customers.
The management of we22, alongside the founders and Steffen Heym, will continue to steer the development of the company as a wholly-owned subsidiary of 1&1 IONOS.
Telefónica offer for national roaming and MBA MVNO services for 1&1 Drillisch; review by EU Commission completed
Drillisch Online GmbH, a wholly-owned subsidiary of 1&1 Drillisch AG and indirect subsidiary of United Internet AG, and Telefónica Germany GmbH & Co. OHG (“Telefónica”) have been holding negotiations for some time regarding the conclusion of a national roaming agreement based on the voluntary commitments of Telefónica as part of the European Commission’s clearance of its merger with E-Plus. The European Commission is responsible for monitoring Telefónica’s compliance with these voluntary commitments.
In October 2020, Telefónica then submitted its final offer (in its opinion) to 1&1 Drillisch regarding the terms and prices for national roaming. The prices were to be applied retroactively as of July 2020, also for the existing MBA MVNO agreement. Whereas Telefónica had invoiced consistently high advance service prices for the MBA MVNO agreement since July 2020, the Telefónica offer was based on the pricing mechanisms of the first five years of the MBA MVNO agreement. In particular, the offer again included annually decreasing data prices, which were lower than the fixed prices charged at the time by Telefónica.
On conclusion of its review, the EU Commission announced its assessment on February 5, 2021 that the Telefónica offer submitted in October 2020 did not comply with the voluntary commitments as part of the EU’s clearance and that Telefónica would have to submit an improved offer.
As a result, Telefónica submitted an improved offer to 1&1 Drillisch on the same day. 1&1 Drillisch had until February 19, 2021 to accept the improved offer.
Improved offer from Telefónica for national roaming accepted
On February 15, 2021, the Management Board and Supervisory Board of 1&1 Drillisch decided to accept Telefónica’s offer – improved following review by the EU Commission – for national roaming and the related MBA MVNO advance services. The terms and conditions offered by Telefónica that will apply retroactively from July 2020 are based once again on the pricing mechanisms of the first five years of the MBA MVNO agreement. In particular, annually decreasing data prices are to be included again, which are lower than the fixed prices currently charged by Telefónica.
The conclusion of an agreement, which Telefónica’s offer expects by approx. mid-May 2021, would have a positive earnings effect for 1&1 Drillisch, and thus also for United Internet, of € 34.4 million in the fiscal year 2020, which would be booked as income relating to other periods in the fiscal year 2021. In addition, this would constitute an essential prerequisite for 1&1 Drillisch’s planned rollout of a high-performance 5G network.
New combined VDSL/FTTH agreement with Deutsche Telekom
On February 15, 2021, United Internet announced that its subsidiary 1&1 Drillisch AG planned to expand its fiber-optic offering and would in future receive VDSL and FTTH advance services (fiber to the home/FTTH) from its affiliate 1&1 Versatel. For this purpose, 1&1 Drillisch has entered into an agreement with 1&1 Versatel on the long-term purchase of FTTH and VDSL complete packages including Voice and IPTV effective from April 1, 2021.
At the same time, 1&1 Versatel has entered into an agreement with Deutsche Telekom on the use of Deutsche Telekom’s FTTH and VDSL connections for households. These enable 1&1 Versatel to provide FTTH/VDSL complete packages for 1&1 Drillisch, as 1&1 Versatel’s nationwide transport network is largely connected to the local broadband networks of Deutsche Telekom.
In addition to the existing access to FTTH connections of well-known city carriers, 1&1 Versatel thus gets initial access to approx. 750,000 additional FTTH connections. The number of marketable FTTH connections of Deutsche Telekom is expected to increase by an average of 2 million households per year in the coming years.
FTTH connections for private households enable bandwidths of up to 1 Gbit/s. Households not yet equipped with FTTH will be supplied with VDSL connections (up to 250 Mbit/s).
Given the advantages of the new combined VDSL/FTTH agreement, the existing purely VDSL advance service agreement between 1&1 Drillisch and Deutsche Telekom will be prematurely terminated by mutual agreement of the parties. As the premature termination of the agreement and the swift conclusion of the new agreement had already been sufficiently specified as at the reporting date, the 1&1 Drillisch subgroup wrote off deferred expenses (amounting to € 129.9 million) in the fiscal year 2020 due to a revised estimate of the remaining term of the agreement. The one-off write-off has no cash effect and will be clearly exceeded by the positive effects from the expanded cooperation with Deutsche Telekom in the long-run.
The new FTTH/VDSL agreement with Deutsche Telekom is subject to approval by the Federal Network Agency (“Bundesnetzagentur”) as the competent regulatory authority.
There were no other significant events subsequent to the end of the reporting period on December 31, 2020 which had a material effect on the financial position and performance or the accounting and reporting of the parent company or the Group.
Information on the economic position of the Group and Company at the time of preparing this Management Report are provided in chapter 4.3 “Forecast report”.