Q2 2023 1&1 Earnings

Investments
, ,
1

This topic discusses the upcoming Q2 2023 1&1 Earnings. (Chart)
It will include our final assessment and decision before the earnings release, report on the results, and discuss the results including any potential changes to the position.

1&1 is the smallest position in the portfolio after a drastic value drop.

While 1&1 is very attractively valued based on their current business model, their future which depends on the construction of their own 5G network is unsure.

Therefore I am holding the position and am waiting for more insights into the state of their network construction, important frequency auctions, and the margin profile of the new business.

More insights inclusive @Aron’s assessment of 5G can be found here.

1&1 main business is very stable, which means the necessity to prepare for earnings is more limited compared to other companies. It is very important though to react quickly on important 5G network news as they will likely cause the stock to jump or drop sharply.

Given the small size of the position and the fact that 1&1 reports on the next day as Upwork our main focus should be on Upwork with just basic low hanging fruit preparations for 1&1 to be made. (1-2h time investment)

The work which we are doing specifically in preparation to the earnings can be found in the Wiki.

2

SI=0%, I=9

  • Revenue declined by 0.4% y/y to € 972.1 million versus analysts estimate of € 986.6 million(+1.1% y/y).

  • Service revenue was €795.7 million(+0.4% y/y) versus € 799.8 million expected by analysts.

  • EPS was € 0.49 versus analyst estimate of € 0.46.

  • There were 193 antenna sites at the end of June and 1&1 expects more than 500 antenna sites in Q3. They had guided for 400 antenna sites in Q3.

  • For the full year, 1,000 antenna sites are expected, down from 1,200 previously projected.

    “The annual target of 1,200 antenna sites will probably be reached at the beginning of 2024 due to further delivery delays at our main supplier,” the report noted.

  • Customer contracts were 15.96 million vs 15.97 estimate.

  • Mobile contracts were 11.91 million vs 11.926 million estimate.

  • Broadband contracts were 4.05 million vs 4.04 estimate.

  • 1&1 confirmed its forecast for 2023.

  • Despite the preliminary national agreement they signed with Vodafone yesterday, it seems they are not letting Vantage Towers off the hook yet.

    “If a penalty should be levied, we will accept our responsibility for the delay and also look into possible claims for damages against Vantage Towers,” the report said.

    https://imagepool.1und1.ag/v2/download/berichte/1und1-AG_H1-2023_EN.pdf

1 Like
3

Here are the main insights from the earnings call;

  • They expect service revenue to grow by 4% in H2(H1:+0.2%) because they had less aggressive offers in H1, expect price changes in H1 to have positive impact in H2, and expect decline in broadband contracts to stop in Q4.

  • I think the federal network agency will approve the MVNO model during the transition period because conditions for frequency allocation provides that transition can be MVNO if they are based on different technologies.

  • There is no obligations eg penalties owed to Telefonica for ending contract with them.

  • The costs that they pay Vodafone is about the same costs they pay Telefonica but it’s a better contract because there are no hidden costs and limitations.

  • The calculation basis for Vodafone network include operation costs, new spectrum costs, energy costs, etc.

    Full insights from the earnings call: 1&1:Quarterly Results/2023 Q2 - InvestmentWiki

1 Like