Düsseldorf The fourth mobile network could soon emerge in Germany. Newcomers 1&1 Drillisch has cleared an important hurdle in order to become a competitor of Deutsche Telekom, Vodafone and to advance to Telefónica. In order to set up its own network, the company needs access to a competitor’s infrastructure. An improved offer for this is now available from Telefónica, announced 1 & 1 Drillisch on Friday evening by ad hoc announcement.
In this, the network operator guarantees newcomers improved conditions to use their network by 2030. The offer is to apply retrospectively for the 2020 financial year and have a positive effect on earnings of around 30 million euros, announced 1 & 1 Drillisch.
Building a cellular network takes many years and is expensive. Cell towers must be erected across the country. “We are ready to go and can set up the most modern mobile network in Europe right away,” the CEO of 1 & 1 Drillisch, Ralph Dommermuth, recently announced in an interview with the Handelsblatt. For the transition period until his own network is up and running, Dommermuth still needed an agreement to share the infrastructure of a competitor.
This missing piece of the puzzle should now be in place. After long negotiations, Dommermuth was able to reach a more economically attractive agreement for him. At the same time, he is also under pressure to act. “1 & 1 Drillisch can now accept this offer until February 19, after which it expires”, said Telefónica Germany boss Markus Haas.
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What is special about the Telefónica offer is the background against which it was created. As a condition for the takeover of the competitor E-Plus in 2014, the EU Commission obliged Telefónica to give a competitor access to the operator’s network.
The offer from 1 & 1 Drillisch was examined by the EU Commission and found to be appropriate. If Dommermuth rejects the contract, he could continue to negotiate with the network operators. The special situation via the EU Commission would, however, no longer apply.
Dommermuth is under time pressure. Two years ago, he bought frequencies for 5G mobile communications for around one billion euros. For this, the responsible Federal Network Agency had demanded that it supplies around 25 percent of the population with its mobile network by the end of 2022. Otherwise the authority can demand that he must return the frequencies. According to Handelsblatt information, the Dommermuth team assumes that the network expansion will have to start in summer 2021 so that the expansion target can be met.
If 1 & 1 Drillisch agrees to Telefónica’s offer, the next decisions are pending. The newcomer has to buy network equipment from manufacturers. The company has been negotiating with the European manufacturer for months Nokia as well as with ZTE from China. Due to safety concerns about suppliers from China, the federal government is planning strict requirements. That could make working with a company like ZTE difficult or even economically unattractive.
In addition, 1 & 1 Drillisch has to set up a functioning business model. The company currently has around ten million mobile phone customers and leases the Telefónica and Vodafone networks for them. If the company operates its own network, it saves rental expenses, but has significantly higher costs for setting up and operating its own infrastructure.
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