Outage slows customer migration to 1&1's new network

German operator 1&1 has faced more than a few setbacks in building the country's fourth network from scratch, relying on an open, virtualized radio access network (RAN). The most recent in its series of unfortunate events was a large-scale network outage in May, which 1&1 admitted has slowed down customer migration to a new network.

In the report accompanying its H1 2024 results, its parent company, United Internet, said the fault clearance process revealed that "central components were not sufficiently dimensioned for further network growth." While 1&1 added that this situation had since been rectified, it has delayed a planned capacity extension.

Only "a small number" of customers have been migrated to 1&1's own mobile network since the May outage, which the operator said will delay savings in the purchase of wholesale services. In its Q1 update issued in May, it said around 700,000 customers had been migrated to its own network as of March.

The outage, which was attributed to a faulty software update, affected around 500,000 customers, German newspaper der Spiegel reported at the time. While the initial problem had reportedly been dealt with on the same day it occurred, some customers also faced network problems in the following days.

During the Q&A session following the 1&1 earnings presentation for H1, United Internet CEO Ralph Dommermuth said the problem took longer than expected to resolve because of a data center failure. While the company has a second data center to provide redundancy in case of a problem, a file that was needed was no longer accessible. He added that the problem was overcome on the same day as the outage.

Migration slowdown

In the following days, Dommermuth said some issues persisted because of a 2G signaling issue. He said the company managed to overcome this together with Rakuten and Mavenir. 

As a result, 1&1 is carrying out more robust testing before two planned data centers are brought online and has paused migration of existing customers, which would be taking place at a pace of 50,000 a day, to avoid running out of capacity in case further problems arise.

United Internet acknowledged that the issue prompted a wave of customer terminations in addition to the slowdown in customer migration, but it did not provide firm numbers. Nevertheless, 1&1's overall mobile customer base grew to 12.36 million, up from 12.29 million at the end of March.

United Internet said the issue was partly why it adjusted its 2024 sales outlook last week to €6.4 billion (US$7 billion), down from €6.5 billion ($7.1 billion). This is because 1&1's contract growth will now be lower than expected, although "additional out-of-period expenses from subsequent billing for network expansion in 2022 and 2023" are also to blame, according to United Internet's H1 report.

United Internet's sales grew 2.8% in H1 2024 to €3.1 billion ($3.4 billion) year-over-year, up from €3 billion ($3.3 billion). Its EBITDA reached €662.3 million ($722.8 million), down slightly from €668.7 million ($729.8 million) last year, because of increased network rollout expenses at 1&1. For its part, 1&1 saw sales revenue grow 1.1% to €2 billion ($2.2 billion), while EBITDA fell 7.2% to €326.6 million (€356.4 million).

Meanwhile, 1&1 continues its mobile network rollout. The company now has a total of 1,781 antenna locations, up from 1,334 at the end of Q1, the latest report suggests. 1&1 says it is currently equipping these sites with gigabit-capable antennas and hooking them up to fiber networks. The number of antenna locations with basestations stands at 926, up from 530 in the last quarter. Of these, 546 are connected to fiber, up from 227 last quarter.

Last year, it said it expected to add 3,000 sites annually from 2024 onwards, but it seems it would have to speed up its rollout to get there. It should be noted 1&1 has blamed some of its problems on its partner Vantage Towers, a Vodafone subsidiary that rents space on masts to host mobile network equipment. 1&1 has alleged Vantage Towers had been slow to make sites available, calling it an obstruction by Vodafone. 

Dommermuth, meanwhile, also provided an update on a planned national roaming agreement with Vodafone, which is expected to be finalized this summer. He insisted on keeping this timeframe, saying it would take weeks at most for an agreement to be finalized.