Despite ongoing challenges at its mobile subsidiary 1&1, United Internet has posted a surprisingly robust quarterly result.
On Monday, the internet conglomerate also slightly raised its full-year revenue target. Ionos, the cloud provider also owned by United Internet, revised its profit outlook upward following a double-digit percentage increase at the start of the year.
In response, Ionos shares surged by nearly twelve percent at times on the stock market, reaching a record high of €36.70. United Internet and 1&1 shares also rose significantly in a generally strong market, with prices climbing to €23.38 and €16.60 respectively--their highest levels in about a year.
UNITED INTERNET AND IONOS WITH OPTIMISTIC OUTLOOKS
The parent company, United Internet, increased its customer base by 150,000 in the first quarter, and revenue grew by 4.2 percent to €1.631 billion. However, operating profit stagnated at €342.6 million, weighed down by higher costs associated with building a dedicated mobile network for its subsidiary 1&1. Still, this figure exceeded market expectations, emphasized DZ Bank analyst Karsten Oblinger. However, he questioned why the profit outlook remained unchanged, even though Ionos had raised its own target.
The web hosting and cloud firm expects its operating profit to rise by 15 percent to €520 million in 2025, buoyed by strong online advertising business. Previously, Ionos had forecast €510 million. In the first quarter, this metric jumped nearly 24 percent to €131 million, while revenue grew by almost a fifth to €446.3 million.
NETWORK EXPANSION CONTINUES TO CHALLENGE 1&1
The mobile operator 1&1 once again lagged behind its parent and sister company. The trend of declining customer contracts continued in the first quarter, with numbers down by 40,000. Around a year ago, a multi-day network outage triggered a wave of cancellations. At the same time, costs for building its own mobile towers are rising. As a result, operating profit shrank by 14.5 percent to €155.9 million in the first quarter.
Nevertheless, 1&1 still expects stable contract numbers and service revenues for the full year, at levels similar to last year. Operating profit is projected to decrease by about 3.4 percent to €571 million. A bright spot for the company was the recent decision by Germany's Federal Cartel Office to issue a warning to Vodafone, after its mobile tower subsidiary Vantage Towers was accused of hindering 1&1 in building its own network.
(Reporting by Hakan Ersen, editing by Ralf Banser. For inquiries, please contact our editorial team at berlin.newsroom@thomsonreuters.com (for politics and economy) or frankfurt.newsroom@thomsonreuters.com (for companies and markets).
