The negotiations between Telefónica and 1 & 1 Drillisch, which may be groundbreaking for Germany’s mobile communications industry, are on the home straight. Telefónica (O2) submitted an offer to its competitor to use its mobile network, as the Munich-based company announced on Friday. Negotiations have long been made about “national roaming” and 1 & 1 Drillisch has now “submitted a competitive final offer that is appropriate for both parties”. With “national roaming”, mobile phone users can connect to a third-party network where their own network operator does not have their own antennas.
Without roaming, many customers would be left dead
1 & 1 Drillisch had bought its own mobile spectrum for the new 5G standard in 2019, but, unlike the competition, had not yet used the frequencies. Before starting the expensive construction of their own mobile phone masts, the newcomer wants to be certain that he will also have access to another network during a transition period.
Without the roaming offer, hardly any customers would opt for Drillisch, because they would only have reception via the initially few Drillisch antennas and would otherwise be in a dead zone. The Federal Network Agency was also aware of this, so the frequency auctioneer obliged the three long-established network operators Deutsche Telekom, Vodafone and Telefónica to negotiate with 1 & 1 Drillisch about opening their networks.
Help for the newcomer
The network operator would get rent for the opening and he could use his expensive network better, but with the cooperation he would help the aspiring newcomer to enter the market and thus make a competitor strong – for the long-established network operators, consent to “national roaming” is a requirement double-edged sword.
The talks between 1 & 1 Drillisch with Telekom and Vodafone have not been successful so far, but negotiations with Telefónica went better. 1 & 1 Drillisch is already closely interwoven with Telefónica because the group is already using 2G, 3G and 4G network capacities from O2. Drillisch has so far been on the market as a so-called virtual network operator that does not operate its own networks. The company from the Hessian Maintal has not yet had this for 5G. That could change with “National Roaming”. Drillisch could also become a Telefónica tenant for this mobile radio standard. At the same time, the company would set up its own network.
Requirement for 5G network
Separately from the talks on “national roaming”, there was a dispute between the two groups over the prices for the network capacities currently used, which Telefónica had to rent to the competitor as a result of the E-Plus takeover in 2014. As can be seen from a communication from 1 & 1 Drillisch, the national roaming contract also includes a retroactive price adjustment for capacities that were used in the second half of 2020. The part of the price war for this period would be off the table with the signing of the contract. “1 & 1 Drillisch will check whether it is in the company’s interest to accept the new offer from Telefónica“announced the company.
The EU Commission, which is on board with this topic because of the Telefónica-E-Plus merger in 2014, has given the Munich-based company’s offer a positive rating. 1 & 1 Drillisch, in turn, announced that the conclusion of a contract would have a positive earnings effect of 30 million euros for the 2020 financial year. This is because the rental prices for 2020 were retrospectively lower than previously planned. “In addition, an essential prerequisite for the development of a high-performance 5G network planned by 1 & 1 Drillisch would arise,” said the company.