MONTABAUR (dpa-AFX) - Telecommunications provider 1&1 has lowered its profit forecast due to unexpectedly high costs associated with using the Vodafone network. The United Internet subsidiary announced Friday evening in Montabaur that earnings before interest, taxes, depreciation, and amortization (EBITDA) for the current year are expected to fall by around eight percent to approximately €545 million. The previous target was about €571 million. The reason for the reduced profit outlook is higher-than-planned preliminary service costs for so-called national roaming with Vodafone. The news was poorly received on the stock market.
Shares of 1&1, listed on the SDax, lost up to 1.4 percent in early trading on Monday, though later pared some of those losses. The stock had recently been in strong demand--in part because parent company United Internet announced in May that it would increase its stake in 1&1 by around ten percentage points to 90 percent. 1&1 currently has a market valuation of just under €3.3 billion. United Internet shares, which are listed on the MDax, also lost ground on Monday, recently down about 0.6 percent.
United Internet shares have surged in recent weeks, primarily due to the strong performance of its subsidiary Ionos. The web hosting, domain, and cloud computing provider has been publicly traded since early 2023. Especially in recent months, Ionos shares have been in high demand. Since the end of 2024, the company's market value has climbed by nearly 80 percent to around €5.5 billion. United Internet's roughly 64 percent stake in Ionos is now worth about €3.5 billion. United Internet itself is valued at just under €4.7 billion.
Based on usage share, 1&1 now believes its assumptions about data growth on the Vodafone network for 2025 were too optimistic, meaning 1&1 will need to use a higher-than-planned percentage of the Vodafone network to serve its mobile customers, the company stated in explaining the current forecast reduction. The additional costs could only be partially offset by savings in other areas, it added.
The higher preliminary service costs for using the Vodafone network stem from the terms of the contract with the British company. The agreement is based on a so-called capacity model, under which 1&1 pays a fixed price per percentage point for the share of the Vodafone network used by its customers in Germany.
For its 2025 planning, 1&1 had made assumptions about monthly data growth on the Vodafone network, taking historical values into account. "Based on the usage share determined by Vodafone during billing, the company now believes its assumptions about data growth on the Vodafone network for the current year were too optimistic," the statement said.
As a result, 1&1 will need to use a higher-than-planned percentage of the Vodafone network to serve its mobile customers. "The additional costs can only be partially offset by savings in other areas." Therefore, the profit forecast for the segment involving mobile Internet usage and broadband connections in households was reduced by around €26 million to €810 million (previous year: €856 million).
In the mobile communications business, the company continues to expect a loss before interest, taxes, and depreciation (EBITDA) of around €265 million. This would mean that the operating loss will be about as high as last year. That figure includes about €100 million in expenses for customer migration and network prepayments, which will cease after all customers have migrated by 2026.
Unlike the targets for operating profit, forecasts for service revenue, contract portfolio, and investment volume were confirmed. For operating revenue, 1&1 still expects it to remain at last year's level of €3.3 billion. The investment volume (cash capex) is also expected to remain at around €450 million.
