1&1 guides 2025 EBITDA below market expectations and capex above market expectations
- 1&1 is guiding 2025 EBITDA to decline 3.4% to €571 million, below market expectations due to one-time payment to Telefonica when their contract expires and service revenue at the previous year’s level (2024: €3,303.1 million).
- 1&1 said the contract with Vodafone doesn’t provide for such one-off payments and the switch won’t affect EBIT since the impact on EBITDA is offset by an equal amount of depreciation.
- Despite expecting a further slight increase in cancellations as a result of customer migration, it expects contract base to remain stable.
- It’s guiding cash capex in the amount of €450 million (2024: €290.6 million), above market expectations.
- 1&1 shed 8% following the announcement.
Assessment
I think the market is overreacting to the guidance, probably the cash capex. In Q2 2024, 1&1 guided capex in the amount of 360 million for 2025. However, this excluded the 100-150 million capex savings from selling passive infrastructure to a partner. Therefore, the 450 million being guided could signal that a partner to buy the passive infrastructure has not been found.
They could also be reacting to the accounting change as a result of the end of Telefonica contract.
Otherwise, the core business is stable. Analysts were guiding revenue of €4 billion, which is unchanged from last year and EBITDA of 652 million.