Those living in rural areas, travelling frequently by train, or often stuck in traffic tunnels know the problem: suddenly they find themselves in a dead spot.
Slow internet connections and poor cell phone reception can be found all over the country, especially beyond the metropolitan regions. This should be embarrassing for the country that forms the largest economy in the Eurozone. Many other EU countries are far ahead of the local standards. People coming from the neighboring countries, used to fast and freely accessible internet, are often astonished by the many white spots in the German network coverage.

1&1 lags behind in network expansion The responsible parties for a nationwide expansion are, among others, the mobile network providers. Telekom, Vodafone and Telefonica (o2) each operate their own mobile networks, and 1&1 is also involved in building its own radio masts. The company based in Montabaur had previously benefited from the merger of the two smaller providers E-Plus and o2: one of the competition law conditions for the merger was to cede network capacity to a competitor. 1&1 was then awarded the contract.

Of the 1,000 radio masts to be erected by the network newcomer by the end of 2022, only five existed as of the cut-off date. The Federal Network Agency then imposed a fine on 1&1 for not fulfilling its obligations. The Federal Network Agency has now also initiated a fine procedure against Deutsche Telekom, Vodafone and Telefonica as early as September, although this was only made public earlier this week.

Numerous dead spots with all providers As justification, the authority refers to the numerous dead spots still existing. As a reference, the coverage was tested with the so-called 4G network: at least 100 megabits per second must be guaranteed by at least one of the providers. According to the authority’s opinion, this is not the case in around 500 places, so the mobile network operators are now facing fines for „culpable non-timely complete fulfillment of the service obligations“.

What sounds pompous at first glance should hardly hurt the network providers in the end. First of all, it is not yet certain whether fines will ultimately be due – and if so, these are likely to be manageable, according to industry experts. It is rather a somewhat more forceful reminder from the Federal Network Agency to the operators to engage more significantly in terms of network expansion and nationwide coverage.

Deutsche Telekom stock quote as high as since May The Deutsche Telekom stock hardly reacted to the reports of the impending fines. Rather, the price has been moving sideways around the mark of 21.50 euros since the beginning of November, thus being up about 7 percent on a monthly basis. It is also the highest price level since the end of May, triggered by a rally even before the announcement of the latest quarterly statement.

Investors and analysts pleased with Telekom’s all-in-one package The fact that the Telekom had to record a 5 percent drop in revenue in the summer quarter from July to the end of September is mainly due to burdensome currency effects. If these are deducted, the Bonn-based company achieved a revenue increase of 0.7 percent compared to the same period of the previous year. The surplus was also significantly higher than the previous year’s result of just under 1.6 billion euros with just under 1.9 billion euros. To the delight of investors, the group also raised its own annual forecast slightly in the course of the Q3 balance sheet presentation, so that the rally that had been started a week earlier could continue uninterrupted.

Analysts also rated the Telekom stock as a clear buy last week: On Monday, US investment bank Goldman Sachs raised the target price from 27.20 to 28.40 euros and at the same time confirmed the buy recommendation. Also on Monday, Berenberg Bank also unchangedly recommended buying the Telekom stock with a target price of 28 euros. The two latest analyses are thus in the middle of the target price range, which currently ranges from 26 euros (Barclays) to 31 euros (JP Morgan).