United Internet: Costs for Germany's Fourth Mobile Network Drag on Earnings
Strong Growth in Digital Infrastructure Business
Despite strong growth in its digital infrastructure business, United Internet AG has reported a decline in earnings due to the high costs of establishing Germany's fourth mobile network. According to the company's financial results for the first half of 2023, net income fell by 2.2% to EUR 190.7 million compared to the same period last year.
The company's mobile communications division, 1&1 AG, incurred significant expenses related to the rollout of its 5G network, leading to an operating loss of EUR 181.4 million. These costs include network expansion, marketing, and customer acquisition.
Continued Investment in Mobile Network
Despite the financial impact, United Internet remains committed to investing in its mobile network. The company plans to continue expanding its coverage and capacity to compete with established operators such as Deutsche Telekom, Vodafone, and Telefonica.
Positive Outlook for Digital Infrastructure
While the mobile business poses challenges, United Internet's digital infrastructure segment continues to perform well. The company reported a 6.4% increase in revenue to EUR 1.6 billion in the first half of 2023, driven by demand for data center services and fiber-optic connections.
The company's data center business, Ionos, saw a 15.8% increase in revenue, while its fiber network operator, Versatel, contributed to the growth with a 5.8% revenue increase. United Internet is optimistic about the continued growth potential in the digital infrastructure market.
Analysts' Views
Analysts have mixed views on United Internet's performance and future prospects. Some analysts believe that the company's investment in its mobile network will eventually pay off, while others are concerned about the high costs and competitive landscape in the German mobile market.
Overall, United Internet faces challenges in its mobile business but remains confident in the long-term growth potential of its digital infrastructure segment. The company's continued investment in both areas will shape its financial performance and market position in the coming years.
