INTERVIEW wITh RALPH DOMMERMUTH
Mr. Dommermuth, how would you judge the past fiscal year 2020?
2020 was undoubtedly an exceptional year for our company and for the economy as a whole, dominated as it was by the effects of the coronavirus pandemic. However, we coped well with the situation and in the past fiscal year continued to systematically pursue our goals and invest in the long-term success of our company.
The main focus was on preparations for the construction of our own 5G mobile network in the Access division. We drew up a detailed network plan, continued to expand our fiber-optic network, and drove forward our talks with potential partners for the network rollout. At the same time, we held detailed negotiations with the established network operators on the subject of national roaming, i.e., the shared use of third-party networks during the construction phase of our own network infrastructure. In February 2021, we received an offer from Telefónica – improved following a review by the EU Commission – and thus took an important step forward on our path to becoming a network operator.
There was also plenty of activity in our Applications division in 2020. As we continue to expand our portal brands GMX and WEB.DE into comprehensive communication and information platforms – also through the increased use of artificial intelligence – we initiated a further valuable acquisition for the brand portfolio of IONOS in the form of cloud website builder we22 and concluded the deal in early 2021.
Your aim is to build Germany’s most cutting-edge 5G network. What exactly does that mean? What will be the next steps?
As a new market player without technical legacy issues, we can deploy the latest technologies for the construction of our mobile network, without having to make any compromises. We will be the first network operator in Europe to fully virtualize our 5G network and build it on the basis of OpenRAN technology. Network intelligence will not be located at the antenna sites, as is usually the case, but controlled via decentralized data centers.
This approach based on edge technology will enable us to fully exploit the future potential of 5G, as well as offering other key advantages: for one thing, maintenance work can be carried out much more efficiently and, above all, we are not dependent on network equipment suppliers. This is because clearly defined interfaces allow us to collaborate simultaneously with various partners.
The next step for us is to convert Telefónica Germany’s national roaming offer into a final agreement, as this is the only way we can offer our customers nationwide coverage right from the start. At the same time, we will conclude our advanced negotiations with network equipment suppliers and site operators so that we can start construction work as quickly as possible.
Fiber is regarded as a key prerequisite for 5G and gigabit speeds in private households. The cooperation between 1&1 Versatel and Deutsche Telekom was recently intensified in this field. What are the benefits of this move?
Fiber is definitely the key to 5G. What’s more, direct fiber-optic connections will increasingly become the standard for high-speed communications – also in private households. Our subsidiary 1&1 Versatel gives us access to one of Germany’s largest fiber-optic networks, thus creating the ideal conditions for us to connect our future antenna sites.
1&1 Versatel also signed an agreement with Deutsche Telekom regarding the use of its FTTH and VDSL house connections. This agreement will also benefit the consumer business of 1&1 Drillisch, as at the same time 1&1 Drillisch concluded an agreement with 1&1 Versatel about procuring all broadband services from a single source.
This will allow 1&1 Drillisch to significantly expand its broadband offerings for consumers. In addition to VDSL, it will increasingly include FTTH (fiber-to-the-home) in the future – in other words fiber-optic connections for private households. In addition to our existing access to the FTTH connections of well-known city carriers, we can therefore market an additional 750,000 FTTH connections in the first stage. This number is expected to increase by an average of 2 million households per year in the coming years, enabling us to provide ever more households with guaranteed gigabit speeds.
To put it simply, the intensified cooperation with Deutsche Telekom has strengthened our position in the broadband market and represents an investment in our company’s long-term success.
Your company’s investments in the future also include 1&1’s sponsorship of Borussia Dortmund. And you added Mick Schumacher as a brand ambassador in early 2021. What exactly do these partnerships entail?
We will be the first network operator in Europe to build our 5G network fully virtualized based on OpenRAN technology.Both our partnership with Borussia Dortmund and our sponsoring of the Formula 1 Team Uralkali Haas F1 with Mick Schumacher go far beyond simply placing the 1&1 logo on the team jersey or racing car.
„We will be the first network operator in Europe to build our 5G network fully virtualized based on OpenRAN technology.“
RALPH DOMMERMUTH
As the exclusive telecommunications partner, we are actively contributing our technological expertise to these teams. Both sponsorships also feature an innovative social media concept to inspire customers and fans alike. The aim is to further increase awareness of the 1&1 brand and sustainably acquire new target groups.
You already mentioned that the coronavirus pandemic had a significant impact on the fiscal year 2020. What exactly were the effects on United Internet’s business?
As an internet specialist with approx. 65 million accounts, we have a stable business model that is largely immune to cyclical trends and puts us in a good position to face economic challenges. Nevertheless, the effects of Covid-19 also had a negative impact on our performance – albeit to a much lesser extent than for other sectors or companies.
The shortfall in international roaming revenue outside the EU caused by severe travel restrictions for our customers in the past year had a particularly negative impact on sales and earnings in the Consumer Access segment. There were also pandemic-related losses in the marketing business of our Consumer Applications due to a temporary downturn in advertising activity during the pandemic. However, as our business model is mainly based on electronic subscriptions with fixed monthly payments and contractually agreed terms, it proved to be extremely robust – even during the coronavirus pandemic.
What are your expectations for the fiscal year 2021?
For the fiscal year 2021, we expect an increase in sales to approx. € 5.5 billion. EBITDAis expected to improve to approx. € 1.22 billion. In addition to the anticipated negative impact on sales and earnings from the coronavirus pandemic on a par with the previous year of approx. € 25 million, this forecast also includes high investments in future topics. For example, 1&1 Drillisch plans initial costs for the 5G network rollout of approx. € 30 million in 2021 and IONOS an additional approx. € 40 million for a product and sales drive in its cloud business and for further international expansion.