Düsseldorf Telefónica Deutschland has long been considered a tragic case in the German mobile communications industry. Network quality and service were just as poor as the business figures. The most popular private label, O2, held its own thanks primarily to low prices and attractive bundle offers. But many customers and employees were frustrated and left alike. Only in the past two years has the trend started to turn around.
On Wednesday morning, CEO Markus Haas was able to announce several advances. Sales in the 2021 financial year rose by 3.1 percent to almost 7.77 billion euros; Telefónica Deutschland achieved a good 2.4 billion euros in adjusted earnings (Oibda). “Despite Corona, we put the power of our team on the road,” Haas told the Handelsblatt.
The number of customers with a fixed contract increased by 1.5 million – an increase of 46 percent compared to the previous year. The people of Munich have never achieved better values. At 1.3 billion euros, investments also reached a record high. They are expected to fall slightly this year. The dividend for 2021 should remain stable at 18 cents.
The outlook for the 2022 financial year is positive. Adjusted earnings are expected to grow in the single-digit percentage range despite “regulatory headwinds”.
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The numbers are a personal success for Haas, who in previous years had repeatedly suffered from the high dividend expectations of the Spanish parent company and majority owner Telefónica. Extensive investments in the network were not possible for so long. He stoically endured the complaints of customers despairing in the never-ending customer service queue. In the meantime, O2 is doing noticeably better in network tests, and the service is said to have improved.
Haas’ contract was just prematurely extended by three years, as announced on Monday. His remuneration is said to have increased by more than six percent in the course of this. In 2020, the manager received total remuneration of a good 2.1 million euros. Haas has been with the company since 1998. It was his first job after graduating from law school.
Business with corporate customers remains difficult for Telefónica. The competitors Deutsche Telekom and Vodafone share the market as far as possible among themselves, the market share for the German offshoot of the Spanish telecom group remained in the single digits.
Support from Dommermuth and 1&1
Mercedes-Benz, which was often presented as a reference customer, just said goodbye to Telekom. According to Handelsblatt information, the conversion of several thousand connections is currently ongoing. O2 was considered hated by the Stuttgart premium carmaker. Many employees complained about regular disconnections and slow internet. The entry of Telekom boss Tim Höttges into the Daimler supervisory board in the year before last should have additionally fueled the desire to change.
Haas regrets the departure, but emphasizes that satisfaction has recently increased again. The separate 5G campus networks at several Mercedes locations are also not affected by the changeover. Haas now wants to strengthen the sales team in the company segment. His goal: a “fair share” of one third of the business customer market. According to company circles, the value should currently be around twelve percent.
It remains unclear how high the share of the competitor 1&1 is in the recent successes of the Munich company. 1&1 boss Ralph Dommermuth, who does not have his own mobile communications infrastructure, had secured the right to be able to use up to 30 percent of Telefónica’s network capacity for his customers well into the 2030s. So you make phone calls and surf the web via the O2 network and also ensure increasing sales there.
Telefónica does not reveal how many of the new contract customers come from 1&1. Haas only emphasizes that the “lion’s share” goes back to its own brands. In the long term, the partnership should end anyway. Dommermuth is currently preparing to set up its own ultra-fast 5G mobile communications infrastructure. Telefónica assumes that the first 1&1 customers will switch to its new network in mid-2023.
For Haas, that seems to be a relief. He describes the relationship with Dommermuth as an exhausting marriage of convenience: “We are close partners and competitors at the same time.”
More: Germany boss Haas receives early contract extension