Germany's 1&1 Drillisch has revised its EBITDA forecast for 2020 downwards to approximately EUR 600 million from a previous outlook of a flat result of EUR 683.5 million, due to a price increase under its wholesale MVNO agreement with Telefonica. Prices for voice and data services under the network access contract will increase from July and for the following years, according to 1&1 Drillisch. The company said it's considering taking legal action against Telefonica, as the latter is applying the price increase without adhering to the terms of their agreement. Telefonica denied the accusation.
The parties are negotiating a national roaming agreement and prices under the MBA MVNO from July 2020. The outcome of the negotiations will have an impact on the 5G network roll-out underway by 1&1 Drillisch, as the operator relies on access to Telefonica's network until it completes its own roll-out.
1&1 Drillisch has rejected the service prices claimed by Telefonica from 01 July. It called on Telefonica to comply with the commitments it gave when the European Commission approved the takeover of E-Plus, under which the MBA MVNO agreement was a condition. According to 1&1 Drillisch, provisions to determine the maximum prices per bitstream component were agreed for a five-year period from 01 July. The prices per unit (per gigabyte, voice minute and SMS) have to be determined within these maximum requirements based also on market trends and continue to be reduced annually to enable the offering of mobile tariffs in line with the market.
1&1 Drillisch said it will take the necessary measures to safeguard its rights, including possible claims for damages, and it is in talks with the European Commission. It is asking for an adjustment in the prices in a proceeding but Telefonica is blocking the appointment of an independent expert for the two price review proceedings initiated in January and July 2020 (Price Review 5 and 6). 1&1 Drillisch has filed a request for arbitration for the price review relating to January 2020 and is preparing the necessary steps for the price review in July.
Telefonica Germany said in a statement that it has sent invoices to 1&1 Drillisch in line with the contractual terms and conditions, and based on the average price of the benchmark period without a price increase. It added that it strongly rejects any allegations and indications by 1&1 Drillisch that the company is not fulfilling its legal obligations. 1&1 Drillisch has the contractual right to start price reviews, and Telefonica said it cooperates with ongoing price reviews.
Telefonica Germany confirmed its guidance for the fiscal year 2020 and midterm outlook while monitoring the situation due to the Covid-19 pandemic.
