- In its earnings call, 1&1 said the increased 2024 capex guidance by 80 million is due to the shifting of some payment meant for Rakuten from 2026 to 2024- Rakuten needed to upgrade their stock which had stayed in their hands for long due to delayed network rollout.
- 1&1 is guiding for 360 million euros capex in 2025 (excluding the passive infrastructure worth 100-150 million euros).
- 1&1 said if they don’t get a partner to purchase the passive infrastructure, they will retain it through debt financing (they pointed out that financing terms are getting better).
- The company said that the network outage in May was caused by a failure of one of its data centers (and failure of redundancy measures to kick in) and not Open RAN network, adding that they stopped customer migration to ensure that everything was running smoothly first.
- 1&1 said they now have 546 active antenna sites (Q1 2024: 227).
- They reiterated the same commentary they have had on the Vodafone deal such as pointing out that the contract should start latest October.
Assessment
The construction of 1&1 network progressed well during the quarter. If they continue at the same pace, they are likely to hit their target of 3,000 antenna sites at the end of the year.
I particularly liked that the network outage was not caused by Open RAN as that would lower the credibility of the new technology. I think that issue could happen to any other network out there and as such, 1&1 shares doesn’t deserve to be punished for it.
The capex issue as a result of phasing of Rakuten stock is not out of the ordinary. They are simply paying for it earlier than planned. For the passive infrastructure, they want to sell it and rent it- a process that won’t make much difference other than increase their cash positioning at the moment.
I also liked that there have been no changes with the scheduling of the Vodafone contract despite the delayed migration of customers.