January 24, 2019 / 12:39 PM / 6 months ago

United Internet, 1&1 boards meet to decide on German 5G bid

FRANKFURT, Jan 24 (Reuters) - Billionaire Ralph Dommermuth’s two telecoms firms convened their boards on Thursday to decide whether to apply to participate in Germany’s 5G licence auction, potentially opening the way for a bid to become the country’s fourth network operator.

If Dommermuth does go for it, he could shake up what many view as a cosy oligopoly that has left Europe’s largest economy lagging on connectivity just as the United States, China and South Korea push more aggressively into 5G.

The boards of United Internet and its subsidiary 1&1 Drillisch were expected to complete their discussions at mid-afternoon, said a source familiar with the matter.

The companies plan to issue ad hoc statements on their final decision, which comes ahead of a Friday afternoon deadline for submissions.

Fifth-generation networks offer data speeds up to 100 times faster than existing 4G LTE networks, as well as ultra-low reaction times. The technology can support networked factories or self-driving cars.

Dommermuth, who is CEO of both companies, has built United Internet from scratch over the past 30 years, acquiring a fortune estimated at $5.2 billion and a reputation as a smart operator in a slow-moving industry.

Applying for a full network licence is a tough call, however, because 1&1 Drillisch already has a profitable business as a ‘virtual’ mobile operator and could see its margins squeezed by the costs of building its own network.

Shares in both companies have fallen by more than 40 percent over recent months on concerns that profits could be squeezed by a 5G operatorship. Sources and analysts say 1&1 might opt to lease rather than invest in building its own network to keep capital costs under control.

Unlike the existing operators - Deutsche Telekom, Vodafone and Telefonica Deutschland - 1&1 would need to file a detailed submission by Friday’s deadline that would explain how it would finance its plans to build a 5G network and which vendors it would work with to do so.

Reporting by Douglas Busvine; editing by Emelia Sithole-Matarise

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