1&1 AG
XETRA:1U1
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
11.6
19.44
|
| Price Target |
|
We'll email you a reminder when the closing price reaches EUR.
Choose the stock you wish to monitor with a price alert.
This alert will be permanently deleted.
1&1 AG
You don't have any saved screeners yet
Dear ladies and gentlemen, welcome to the 1&1 AG for the Q3 2021 Earnings Call. At our customer's request, this conference will be recorded. [Operator Instructions] May I now hand you over to Oliver Keil, who will lead you through this conference. Please, go ahead.
Good morning, ladies and gentlemen. On behalf of the Executive Board of 1&1 AG, I would like to welcome you to our 9 months conference call. During this conference call, our CFO, Markus Huhn, will present to you the results for the first 9 months of fiscal '21, followed by the guidance for the full year. Following the presentation, as usual, Markus then will be available to answer your questions. Thank you very much, and I would like now to hand over to Markus.
Thank you, Oliver. Good morning to all participants on the call. This is Markus Huhn speaking. I would like to lead you through the presentation for the Q3. I would like to start with Slide #6, which shows the contract pace as of end of September. Basically, we are satisfied with the performance in Q3. We have seen a strong growth in the mobile contracts with 490,000 new contracts. They are off 180,000 in Q3 compared with the 9 months in 2020, a strong increase as well, 490,000 contracts in 2021 versus 370,000 net adds in the 9 months in 2020. The contract value and the tariff mix of the new contracts are on a high and steady level as we have seen also in the first half year in 2021. Churn rate in the mobile business is in 2021 below the level in 2020, a satisfying development as well. Not heavy, we are with the slightly decrease of the minus 20,000 contracts in the fixed net lines in Q3 2021. We have increased the orders in Q3 versus Q2 but not in a range that would be necessary to realize a steady contract base. So of course, we see a still positive development in the VDSL lines in 2021, but it decrease in the ADS lines because of the focus on VDSL in our campaigns and lower demand from customer side in ADSL lines. Furthermore, we had a strong focus on mobile in our campaigns in the third quarter but positive in the fixed net area. The contract values and the churn is also on a very good level -- high level in contract values and a very low level in the churn rate and is on the same low level as we have seen also in 2020. On Slide #7, we come to revenue. We have generated revenue in total end of Q3 with EUR 2.902 billion. We have increased the total revenue about 3.1% in the first 9 months. Service revenue was 3.4%, and other revenue was 1.9%. ARPUs in both product areas are stable. Mobile business is more or less on the same level as in 2020. We have a slightly increase in the fixed net ARPUs because of a higher VDSL share. On Slide #8, we come to the EBITDA. There you will find the EBITDA by segment. In the Access segment, we have realized EUR 576.5 million as of end of September. Within this amount, we have a positive impact of EUR 39.4 million because of the already mentioned reduction of wholesale prices based on a national roaming agreement with Telefónica Deutschland. The EUR 39.4 million are for the period from July to December 2020, and the share for Q3 in 2020 from the EUR 39.4 million is EUR 19.2 million. Without this impact, the operating EBITDA for the 9 months is EUR 537.1 million in 2021. In 2020, we have to add the positive impact of the EUR 19.2 million on the EUR 465 million EBITDA, which results in an operating EBITDA of EUR 484.2 million, which is a growth of 10.9%. The EBITDA for the segment 5G was minus EUR 24.5 million compared with the year before with the minus EUR 8.4 million. The negative EBITDA is driven by the initial activities to prepare the network rollout for 5G network. On the next slide, we have the status of the 5G network rollout. So currently, we are still in negotiations with tower companies. Unfortunately, we have not been able to finalize the negotiations until -- of October, which was the plan. Our expectation is that we can sign the first agreement within November. It's a further delay but nothing to be concerned. Rakuten has already started all activities and is preparing to roll out of the network infrastructure at full speed. So the core network are currently being built up or expanded. We have also installed our test lab for the 5G network in Mainz. It's already installed and up and running. The test lab is including an end-to-end network chain from core to radio network. And this test lab will be used to develop and to test the first 5G products and services. So with the shortly choose lining of the tower company contracts, our Access radio network rollout on big scale will start immediately in Q4. And all necessary preparations, therefore, have been made, and the first antennas have been selected. Now we come to the financials for the first 9 months. On Slide #11, we see the P&L. I have already commented the revenues. So I would like to step into the cost of sales line. In the line cost of sales, we see a reduction from EUR 2.29 billion in 2020 to EUR 1.9895 billion in 2021. This reduction is also driven by the already mentioned EUR 39.4 million for applying the reduced prices for the national roaming agreement for the period from July to December 2020. Gross profit raised from EUR 784.7 million to EUR 912.6 million without the aforementioned EUR 39.4 million in 2021 and the EUR 19.2 million for the Q3 2020. The gross profit in 2021 would be EUR 873.2 million in 2021 and EUR 803.9 million in 2020, which is an increase in the operating gross profit of 8.6%. Sales and distribution costs grew up from EUR 331 million to EUR 348.9 million, mainly driven by spending for the sponsorship of Borussia Dortmund, which started in July 2020. The costs for administration are showing significant growth from EUR 73.3 million to EUR 95.5 million, which is a result of the higher spending in 5G activities in 2021. Other operating income and expenses are with plus EUR 14.6 million below 2020. Impairment losses dropped from minus EUR 55.8 million in 2020 to EUR 52.4 million in 2021. Financial results are on the same level as in the year before. Tax expenses are flowing to profit before taxes, which increased from EUR 341 million to EUR 430 million. And so we come to a consolidated result for the 9 months in 2021 of EUR 303.4 million. Next slide, balance sheet shows an increase in the balance sheet in total from EUR 6,690.3 million end of last year to EUR 6,954.3 million as of end of September 2021. There's an increase of EUR 264 million, and this increase is driven by 3 issues. The first issue is higher cash, which has been invested at United Internet in the amount of EUR 197 million and an increase in accrued expenses because of the payment for VDSL contingence in the amount of EUR 154.7 million, and we have a decrease of intangible assets with approximately EUR 100 million because of the depreciations in intangible assets. So we come to the EUR 264 million increase. The short-term liabilities decreased from EUR 574.5 million to EUR 556.8 million. Long-term liabilities are more or less on the same level as end of 2020 with the mentioned EUR 1,246.8 million, and the equity increased because of the positive result in the first 9 months. Next Slide 13 shows the cash flow. The net inflow from operating activities is with EUR 239.4 million, EUR 151.1 million below the net flow in the year before. The circumstance is driven by the increase of accrued expenses because of the payment for the VDSL contingent. Cash flow from investment activities with minus EUR 217.8 million is below the EUR 400.2 million in 2020 because of the EUR 165 million payment in 2020 relating to the prolongation of the MBA MVNO contract. Cash from financing activities are with minus EUR 17.8 million, more or less on the same level as in 2020. And the free cash flow rose from EUR 197.5 million in 2020 to EUR 218.8 million in 2021. On Slide #14, we have the EBITDA bridge, which shows the development from the EBITDA to the free cash flow. So we start with the EUR 512.6 million operating EBITDA. We have to add the out-of-period income of EUR 39.4 million. So we come to the EBITDA for the 9 months of EUR 552 million. We then have a reduction of EUR 31.8 million because of an increase in the contract assets and liabilities, then minus EUR 154.7 million increase of accrued expenses. The positive impact of EUR 10.7 million because of a decrease in payments receivable. The balance out of the working capital positions leads to a minus of EUR 53.4 million. Then we have to spend EUR 83.4 million for taxes, and spendings in CapEx was minus EUR 20.6 million, which leads in the result to a free cash flow of EUR 218.8 million. Now we come to the outlook for 2021. We confirm our outlook with service revenue of EUR 3.1 billion and EBITDA with EUR 670 million. In the EUR 670 million are EUR 30 million costs included for the initial activities in the 5G network. And on top, we have the EUR 39.4 million positive effect out of the price adjustment in the MBA MVNO wholesale services. So many thanks for your attention so far. Now I would like to hand over to the operator for the Q&A session.
[Operator Instructions] And the first question is from Maurice Patrick, Barclays.
So just maybe some more details, Markus, you can give on the reason for the towerco deal being delayed. I'm just curious as to whether or not it's just that the scope of the deal maybe is changing slightly or the perimeter is changing or pivoted price keeps falling. What are the kind of reasons why it hasn't been signed yet? And I think you said you still expect to conclude it in November. I guess, what's the level of confidence? I mean, you said in the report, I think, imminent was the word you used.
So yes, thank you for your question, Maurice. The reason for the delay in the tower companies is that we are negotiating now with 3 tower companies. We are discussing some issues regarding the cooperation of the 3 tower companies. Together, we will be responsible to, let's say, to orchestrate the 3 tower companies. So we are looking for 1 partner who will orchestrate the other tower companies, and the negotiations on that is more complex that we have expected. But we are quite sure that we will sign the first agreement shortly in the next weeks.
So that's helpful. And just to confirm, so you're talking to 3, and the idea is to pick 1, and that 1 will be the 1 that orchestrates the others?
Yes, that's the plan.
The next question is from Ulrich Rathe, Jefferies.
If you allow me 3, please. The first 1 is, could you comment on the margin specifically in the third quarter, a lot of your commentary was in the 9 months. But in the third quarter, the margin came in ahead of general market expectations. So is there anything particular about the cost phasing in there in the third quarter? The second question is the customer intake was again very strong as in the second quarter. Is this a competitive lull? Or do you see other drivers for the strong customer intake? And my third question, please, is Rakuten I think has delayed its own coverage targets in Japan due to the chip shortage. What impact, if any, do you see on your own plans there? What assurances have you had that this doesn't sort of show up in the Drillisch 1&1 network rollout?
Okay. Yes, to the first question regarding the margin, so the margin with the Asian is in the Q3 on the same level as we have seen in the first half year. So no big changes in the margin. So the increase in the EBITDA Q3 compared with Q2 is basically driven by new customers. On the cost side, we do not have any onetime effects. What we expect in the forecast for Q4 is that we have much higher spendings in marketing as we've seen in Q3 and Q2. That's the reason why we come to outlook of EUR 670 million because, in the fourth quarter, we will spend some more money in the marketing budget. The reason for the good customer intake in Q3 is basically driven by our bundled campaigns. Our impression is in Q3, for example, Telefónica had also a very good third quarter. And in our opinion, there is a high demand from a customer side, or it was a high demand from customer side in Q3. And we've been very successful with our bundle offers with Samsung smartphones as well as with the Apple smartphones. That's basically the reason for the strong increase in customer contracts in the third quarter. Regarding Rakuten, we -- at the moment, we do not have any information from them that there will be a delay in installing software or service in our core data centers. So at the moment, we are fully in plan with Rakuten, and we do not have any information from them that they have problems with ships or with other hardware that is not available at the moment. So in that area, we are full on plan.
The next question is from Jonas Blum, Warburg Research.
I got 2 follow-ups. Firstly, on the tower companies, Markus. Could you give us some indication on what's possible to cover the tower company's existing grid in terms of your current needs? And what's the potential you have to acquire via second-, third-party tower companies in sort of a greenfield approach. And could you also hint if there is a significant cost difference between those 2 approaches? That's the first one. And the second one, basically around your service revenue, EBITDA drop-through. It's quite dynamic in Q3. I was just wondering, is there any additional base taking place in terms of your MBA MVNO contract? Or is it just a favorable customer inflow effect? Because I mean, in my understanding, there should be also sort of offsetting effects from sorry data consumption given that you're just negotiating prices once a year. Isn't that correct?
Regarding the tower companies, as I mentioned earlier, we are negotiating with 3 tower companies. Our view is that it would be possible to get more than 50% of the antennas that we need for our network from the tower companies. And then, of course, less than 50% of new antennas has to be built up. Our plan is with one of the tower companies or with one partner to make a deal that they are also responsible to build up the new antennas that we need, which are not in the footprint of the existing tower companies. That's also a point or an issue which has a higher complexity in the negotiations than we have expected. Regarding the cost differences, we do not see big differences between the 3 offers. So I would say it's more or less in the same range that what we see so far. Regarding service revenue and the gross margin, we do not have any onetime effect, as I have mentioned earlier. What we have seen in Q3, we have, on the one hand side, an increase in the data usage, which leads to higher costs. But in Q3, we have also higher revenue with non-EU countries in the international roaming area, which compensates the higher increase in the data usage. So in result, it leads to that what I have also mentioned earlier that the margin situation in Q3 is quite comparable to Q2 and Q1, yes, whether we have the increase in the data usage. So it's a very stable development but not any one-offs.
The next question is from Joshua Mills, Exane.
A couple from me. The first is on the tower nonsense. I think you kind of said during the call that the reason that the CMD and the telco deal keeps being delayed is because you're getting more and more opportunities. I'd like to just understand whether that opportunity is improving more on the prices or the time to market. So the companies you're speaking to, are they offering you lower prices? Or are they offering you more sites because, obviously, there's benefits to both, but they make quite a big difference in terms of how we model the rollout. And the second question is maybe just to push a bit more on the kind of details you can provide us with when we do eventually get the CMD. Do you think that once you have the towerco deal, you'll be in a position to give very clear EBITDA and free cash flow guidance? Or are there any other uncertainties, which we should be thinking about?
Yes. Regarding your first question to the tower companies, what are the issues that we are negotiating, it's -- of course, it's -- we are talking about prices. We are talking about the footprint and the antennas that we can get for our network but also other things around liabilities. Yes, please understand that I can't give more details or colors on that what we are exactly talking about, but yes, at the end of the day, for us, it is important to get a good deal, that we not make a deal under pressure to have a, let's say, fast solution. In our opinion, we are on a very good way. We are in good negotiations and discussions, and we are quite sure to sign the first contract in a short time. Regarding the CMD are the topics that we would like to present-ate on the CMD. Of course, we would like to give more color on the architecture on the partner's landscape and on the structure of how do the partner deal with each together. That's one part that we would like to communicate and the other part, of course, are the financials to give impression or information about that would we have to invest within the next years to build out or to roll out the network to give an idea about the run rate for a network with 50% capacity with 50% pop coverage. And also to give an idea how we can refinance the investments due to savings out of spendings in national roaming and out of other business opportunities. So that's the plan so far. We are just in discussion how we would like to organize it and to bring all the information together.
I guess what I'm getting at is, for the last 3 or 4 years, the biggest debate and kind of the unknown on the analyst side is how your national roaming and previously the MBA MVNO contract works. So it sounds like a lot of the customer remarks will be revolving around the cost of building out the network and how many sites you need, et cetera, but that's actually quite a small part of your cost base. So really, what I'm getting at is do you think that you will be in a position having set the terms of the network rollout to give us an idea of how much you'll be paying on roaming in 3 to 4 months' time? Or is that something which we're still going to have to make our own assumptions on that.
We can give an indication, a list tentative how it will work, but we can't communicate all the details to that what we have to pay for national roaming, but we'll give an idea how it will work.
The next question is from Polo Tang, UBS.
Earlier, you talked about what was driving your mobile net adds. But if you take a step back, can you maybe talk more broadly about what you're seeing in terms of competitive dynamics for both the broadband market and also the mobile market? And also how confident are you that broadband net adds can improve from here? Second question is really just about spectrum. Is there any update on allocation of the 800 megahertz spectrum? And what is your latest thinking as to the range of potential outcomes? And what's the Plan B if you do not acquire low-band spectrum? And maybe just a quick third question. I've noticed that United Internet has further increased its stake in 1&1 by 1.3% to 78.3%. What do you think the rationale is for the increase? And are you concerned about reducing liquidity in 1&1? And can you remind us if there are any specific thresholds at which United Internet has to make a mandatory offer?
Yes, to your first question, regarding the broadband market, as I mentioned earlier, we are definitely not satisfied with the situation. What we see is, in the market, we do not have the feeling that there is a higher aggressivity or that we have some changes in the market on the competitor side. What we have seen, we have still high demand in VDSL lines. And what we see has changed compared with the year before. Last year, we had more customers who asked also for ADSL tariffs, and we have definitely a decrease in the demand for ADSL lines. Yes, our strategy is as we did it also in the last months. We will keep definitely the prices on the same level, so that we will not have any negative impact on the customer base because of 2 aggressive tariffs for new customers. We are changing the campaign again in Q4. And in the result, we do not expect that we will have a [ dramatical ] change in Q4. So we see also the situation that we will have a slightly decrease in the lines also in Q4 but definitely an increase in the cross orders compared with Q3. At the moment, we're also looking on that what will happen in the competitor landscape. And so in Q2, we've seen that the other competitors, for example, Vodafone and Telefónica had also weaker performance compared with Q1. So will -- yes, we'll have a view on what happened in Q3 on the competitor side. And then we have to decide how we will change the campaigns. Regarding the spectrum, we do not have a new situation. So there is no decision made on the question, is there an auction or not, or will it be will be a prolongation of the existing spectrum, or will we have an auction later in '28 or so. So at the moment, there is no final decision. Our point of view is that the German regulator, the Bundesnetzagentur, is still talking to the market and thinking about a solution. We made quite clear and that's also an issue, that we have communicated more times. We have a clear understanding that we need spectrum, low-band spectrum for our case. That's what we also mentioned in 2019 when we applied for the auction, and our expectation is that Bundesnetzagentur is in the responsibility to take care that we also will get access to low-band spectrum. And therefore, we do not see that we need a Plan B for the moment. We are quite sure that we will get a solution for this. Regarding the increase, share increase from United Internet. Please ask the guys in the next call of United Internet, say, they have to give you an answer on that because this is their decision. I can't give you any comment on this.
The next question is from Jakob Bluestone, Credit Suisse.
Jakob Bluestone here from Credit Suisse. So I just had one question, which is really around the motivation behind the increased marketing spend you're flagging for Q4. Is it just normal seasonality? Or is there sort of a more general pickup in commercial activity sort of post-lockdowns and as things return a little bit more to normal. So if you can maybe just help us understand what is it you're trying to achieve with this increased marketing?
Yes. It's more a seasonal effect though, Q4 is the strongest quarter in terms of marketing, marketing spend even. We have the cyber weeks now in November. We have the Christmas campaigns in December. So that's also a plan or forecast as we have also invested our marketing budget in the years before. So it's a seasonal effect.
Next question is from James Ratzer, New Street Research.
I have 2 questions, please. The first one, just regarding your overall service revenue growth, 4.3%. I think that's the highest you've recorded now for several years. So kind of a very strong result there. I was wondering if it's possible to just kind of run through what you're seeing the key drivers there for that improvement? How much is it now because there's an easier comparable from the pandemic last year? What kind of underlying changes you're seeing within pricing would help to just kind of understand the key moving parts there.And secondly, [indiscernible] earlier about tower negotiations. I think you said that you might only get 50% of your antennas from existing tower companies. I suppose I was just wondering why that was so low? I thought you'd be able to get a very high percentage from the existing tower companies. I mean, are you finding with your spectrum that tends to be higher frequency than the average MNO that you're going to have to locate your antennas in sites where there are no existing towers today. Would just love to hear your thoughts on that, please.
Yes, regarding the service revenue, we have 2 impacts, which leads to the 3.4% increase. One is an impact because of the number of new contracts that we have realized. And the second is that the -- compared with the year before, there is a bigger share out of contracts in the premium segment. And we have a bit higher ARPU in the net and the new contracts that we have realized in this year compared with the year before. So in the beginning of this year, we changed the offers or the tariffs a bit. So we are putting more [ SACs, ] for example, in the hardware and less SACs in price reductions. And at the end of the day, that leads to a bit higher ARPU in the new customer segment. But on the other side, as I mentioned earlier, it's also the impact of the high number of new customers. Yes, regarding the tower companies, though we expect a bit more than 50%, please understand that I can't give at the moment a clear indication which percentage exactly with the possible footprint from the antennas. Yes, maybe it will be a bit more than 50%, but something in that range. What is the reason for that? Of course, at the moment -- at the beginning, we are mainly building up the network in bigger cities and to get access on rooftops or colocation on rooftops, it's much more difficult than getting access to antennas in rural areas on the periphery of a city. My opinion, that's the main reason why there is not a bigger share of antennas or sites that we can rent or get from the tower companies. They are all working on the issue colocation on rooftops. But for the moment, we do not have a solution to get, in a very short time, access to rooftops.
That's clear. Markus. You mentioned, I think your initial target has been around 12,000 antenna sites. Is that likely to still be the kind of rough ballpark you end up in?
Yes. So we mentioned 12,000 to 13,000 antennas that we need for the 50% pop coverage.
The next question is from Martin Hammerschmidt, Citi.
I'd like to come back to the 800 megahertz question. So we hear in the press, obviously, that 1&1 might not need 800 megahertz spectrum. You guys made it pretty clear that you actually do. But if we just do a little bit of a thought exercise, so if the 800 megahertz frequencies INDs prolonged, with what conditions could you "live?" Would that be temporary 5G roaming on O2 until you have access to low-band spectrum or what other conditions would you need to accept a prolongation? And then my second question on the mobile net adds. I mean, you've talked about the reasons why they have been improving over the last couple of quarters. Just forward looking, do you think the 170,000, 180,000 quarterly run rate is sustainable into 2022? And in relation to that, how many of your customers currently have a 5G handset?
So regarding the 800 megahertz question that we mentioned could be a Plan B. But as I mentioned earlier, at the moment, we are not working on a Plan B. In our opinion, it's not a solution to have higher spendings on national roaming agreement because not having 800 megahertz spectrum, which is necessary to have a good indoor coverage. And that would we also mentioned to Bundesnetzagentur that was a part of our application for the auction 2019. We need this 800 megahertz of low-band spectrum to have a good indoor coverage that was part of the business case for the application in 2019. And therefore, as I mentioned earlier, we see the German regulator and the responsibility to take care that we will get excess the spectrum. And at the moment, we do not have any signals from Bundesnetzagentur that see it completely different. So we are working on that. We are in discussions. But at the moment, it's -- we are not able to give an idea when we can expect any final decision on that. It's not in our hand. Regarding the net adds in the mobile business, it's difficult to say is it a sustainable run rate to 180,000 net adds per quarter. At the moment, I would say we expect something in that range also for the next quarters. Of course, it depends on the market dynamics that we will see next years. But yes, at the moment, we are very optimistic to see such a run rate also in the next 2 quarters.
And on the 5G penetration? [indiscernible]
Sorry. Maybe I didn't get the 5G question. What was that?
Sure. So how many of your customers currently have a 5G handset and that was the question.
Okay. I can't exactly hone what's the share of the 5G handsets. I have to check it with Oliver. We have to do it later. Of course, I know the share of the handsets in net adds. It's 80% in the premium segment. But how many smartphones are 5G smartphones? We have to send it to you later.
The next question is from Amelia Danjoux, Morgan Stanley.
Just quickly on the network rollout plan. It's just that the time lines were the same as before, given the delay in the towerco negotiations? And also if the cost to roll out is expected to be the same, given the current things that we've seen around inflation and energy costs and supply chain issues? And then secondly, just a quick clarification on the towerco contract. So I just wanted to confirm, so you're negotiating with 3 towercos. So are you expecting to have 3 relationships, but then I guess 1 main relationship that will then orchestrate the ones with the other 2 companies just to kind of clarify that one.
The delay out of the negotiations will not have an impact on the expenses for the rollout. So there we do not see any changes. Regarding the tower companies, we will have 3 agreements directly between 1&1 and the tower companies. But 1 of the agreements will be, as you've mentioned, let's say, the main agreement, and this tower company will be in the responsibility to orchestrate the full process.
Perfect. And then sorry, just any impact from rising inflation in supply chain or energy costs on your network rollout, please?
Sorry, could you please repeat the last question regarding the energy?
Of course, yes. So we've obviously seen higher inflation in the market and issues around supply chain and higher energy costs. It was just that, that would have any impact on your network, that cost at all?
Of course. We see higher costs for energy because of the development of the energy prices at the moment. but it will not have a significant impact on the case. So of course, the question is also, will we stay on this high price level that we see at the moment in the energy prices. But also with these prices and in combination with the processes and the things that we can do to reduce the energy demand in the network, we do not see a significant risk or higher costs in our rollout plan due to this effect.
The next question is from Mr. Ghazi, Berenberg.
Markus, I just wanted to quickly check on one of the comments you made on the net adds coming in on device plans, where did you say that 80% of net adds in Q3 had actually come in on this device bundling campaign?
The 80%, Usman, our 80% share in the premium net adds in the discount net adds, the share is much lower. It's something around 10% to 15%.
Okay. Great. And then -- sorry, before I ask the other questions, could I just ask, would you be willing to share how many of the net adds, what percentage of the net adds are premium versus discount this quarter or not?
No, that's not a plan, Usman. We will keep -- or we will stay with our communication as we did it in the last years.
Okay. I've got just 2 follow-ups, please now. In the free cash flow bridge, this category which relates to receivables and liabilities of related companies could be -- we didn't see it kind of impacting 2020 to this extent in the ups and downs. I was just hoping if you could provide just a bit of color on what this is relating to if it's Versatel or something else? So that was the first kind of question. And then the second question, but just on the Rakuten kind of partnership that you have, there have been very specific views, obviously, since the agreement was signed. One of them had indicated that 1&1 will be looking to build out almost 300 far edge kind of data centers for core ones. And just my question was how quickly has Rakuten said that they will be able to build out this kind of core infrastructure with the far edge data centers? And are there any damning kind of permitting issues that need to be kept in mind in Germany when this is being done?
Yes. Regarding to your first question to the cash flow, as you have seen on Page 14 in the bridge, we had a very high cash flow in the second quarter. And we had to pay the EUR 200 million for the VDSL accounting, and so it's a very high cash flow besides the payment for the VDSL contingent, and the main reason is we had a delay in the invoices from 1&1 Versatel in the second quarter. So we had to pay more invoices to 1&1 Versatel in the third quarter. That's the reason for the minus EUR 70 million in the third quarter compared with the plus EUR 100 million in the second quarter. If you see the cash flow in total, it's quite comparable between 2020 and '21. So in 2020, we had the EUR 165 million payment to Telefónica for the MBA MVNO prolongation. In this year, we have the EUR 200 million payment for the VDSL contingent. And so for the total year, it's quite comparable. But if you have a look on the several quarters, you see that we have a positive impact in the receivables and liabilities of related companies in Q2, which is positive with the EUR 100 million and negative with EUR 70 million in Q3. If you summarize it for the total year, it's a quite clear picture. But between Q2 and Q3, we have any delays and changes. So regarding your second question to Rakuten. So I can't mention exactly that would we have agreed with Rakuten and when they have to build up the edge data centers. Of course, we have a clear negotiation and a clear understanding when Rakuten has to deliver all these services. At the moment, Rakuten is working on the core data centers and on the distribution data centers. So with the edge data centers, they can start after we've signed the tower companies deal. We see at the moment that they are in time. So the 4 data centers, the core data centers are, I would say, ready to start. So they are putting the servers in. They are installing the software. And in that area, we are definitely prepared to start with the rollout.
Next question is from Adam Fox-Rumley, HSBC.
I just have one for clarification on the tower companies. Does the orchestrator have to be the party doing the build-to-suit? Or are those separately considered parameters? I know it's a complicated set of negotiations. And then second question on football sponsorship. Your relationship with Borussia Dortmund is now a little over a year old. So I was wondering how you're thinking about the returns on that investment?
Yes, regarding your first question to the tower companies, we didn't made the final decision with one of the tower companies whether they will build up the new sites that we need or will they have a further partner who will be responsible to build up the sites. So both ways can be an option, but we didn't make a final decision on that. Regarding the relationship to Borussia Dortmund or the impact out of the sponsoring of Borussia Dortmund, what we see, we see definitely a positive impact on our brand indices and positive impacts in visits. We also started some social media campaigns with Borussia Dortmund, but they are, at the moment, are generating gross orders on a low level. So we are working on that to increase this channel or to increase the gross orders out of this channel. But at the moment, it's not easy to say how big is exactly the impact out of the spendings in Borussia Dortmund. Due to the fact that it is spending into the brand and not directly spending into a sales channel, it's difficult to measure exactly the impact out of it. In summary, we are satisfied with the spendings because with the development of the brand indices, but we are not able to mention exactly number of contracts that we've generated because of these investment.
The next question is from Andrew Lee, Goldman Sachs.
I suspect you probably won't be able to answer this one either, but just going to ask around the towercos because, obviously, it's a slight change in rhetoric from you guys in terms of how many telcos are going to support your buildout. Of the 3 telcos that you say you're in negotiation with at the moment, are those all owners of existing towers, or does that include a potential build-to-suit partner that's not currently in the market? And as a follow-up, if you can't answer just why the flat shift from originally being wanting 1 or maximum 2 towerco providers?
Yes. We are talking to existing tower companies. There is one further partner who can maybe help us to build new sites, but we are talking to existing partners or tower companies.
Any comment on why the slight shift in the number of towercos you're planning to use?
Please understand that we can't give you any indication on that at the moment.
So far, we have no further questions. I hand back to the speakers for some closing remarks.
Yes. Then I would say thank you very much on behalf of Markus and the 1&1 AG for the lively discussion as usual. We are here to take the questions in the coming days and looking forward for further discussions to explain our story to you in a proper way. Thank you very much. Stay healthy, everybody, and enjoy the next call of our mother company. Bye-bye.