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Federal Network Agency loses its appeal over the 2018 auction ruling, says it will promptly restart 5G frequency allocation
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The Federal Administrative Court rejected the Federal Network Agency’s appeals against Cologne Administrative Court’s judgments of August 26, 2024.
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The Cologne Administrative Court declared last year that the 2018 5G decision regarding the allocation conditions and auction rules were unlawful and ordered the Federal Network Agency to issue a new decision.
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Following today’s ruling, the Federal Network Agency said it will promptly restart the 5G frequency (2 GHz and 3.6 GHz) allocation.
“The Federal Network Agency will promptly restart the 5G frequency allocation process to ensure legal clarity and planning certainty for companies as quickly as possible,” says Klaus Müller , President of the Federal Network Agency.
“Both the 5G frequency allocation decision and the existing frequency allocations to companies remain valid as long as they are not revoked or amended by the Federal Network Agency.”
"The rules for allocating frequencies in the 2 GHz and 3.6 GHz bands are to be reconsidered. The process will be objective, transparent, and non-discriminatory. "
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The Federal Network Agency pointed out that network expansion in Germany is expected to remain rapid.
“The Federal Network Agency expects the mobile networks in Germany to continue to be expanded rapidly.”
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According to dpa, the Federal Network Agency could simply rewrite the 2018 auction requirements freely and independently and still reach the same outcome as before, meaning the 2019 auction would not need to be repeated.
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It could also retroactively establish different rules, requiring the auction to be held again though many industry observers believe a new auction is unlikely.
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Freenet’s CEO, Rickmann von Platen welcomed the decision, saying measures to protect competition (probably referring service provider obligation which the 2019 auction lacked) to must be implemented during the re-awarding process.
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1&1 shares shed 2.3% following the report and ended up at -1.4% while United Internet shares shed 1%.
Preliminary Assessment
Overall, I think today’s decision is good news for 1&1 since stiff conditions for the 2019 auction were also part of the complaints in the Cologne Administrative Court’s judgment. As such, the 1,000 antenna sites target for 2022 and the 25% coverage obligation for the end of 2025 under the 2018 5G decision are now terminated (as confirmed by 1&1 investor relations-Notion).
Shares may be reacting to the Federal Network Agency’s statement that network expansion in Germany is expected to remain rapid, which some investors could interpret as increased pressure on 1&1 to accelerate its rollout. In addition, the wording that the ‘5G frequency allocation decision and the existing allocations remain valid’ may be contributing to the pressure, as some investors might assume that the conditions tied to the 2019 allocations are still fully in force
The written justification from the Federal Administrative Court (which is not out yet) should give us more insights on the Federal Network Agency’s next course of action. As such, I do not recommend making any changes to the portfolio position at this time.