«We have continued to expand our position in the contract business, while also seeing further growth in terms of volume.»
Wilke Stroman, CEO Deutschland
We have continued to expand our position in the contract business, while also seeing further growth in terms of volume. As in the previous year, we increased the online business volume by another 6.3 per cent from 600,000 to 638,000 mobile phone contracts. With respect to our online business, it is worth highlighting the excellent performance of our Mobile Virtual Network Operator (MVNO) HIGH. At the beginning of January 2023, we "celebrated" our 100,000th customer. In our indirect B2B business, we achieved a growth of 8.1 per cent and concluded 453,000 mobile contracts – compared to 419,000 mobile contracts in the previous year – and we are, therefore, back to the level of 2020.
What we lost during the pandemic years was personal contact, which I missed despite the technological advances such as video calling. It was therefore all the more satisfying that we were able to make up for the missed Christmas parties of 2020 and 2021 in the spring of 2022, and even hold a festive event with Jan Delay as the star guest. Fortunately, the Christmas party of 2022 went ahead as planned, allowing us to celebrate with 450 employees and industry partners at the beautiful Wolkenburg venue in Cologne.
In 2022, we strengthened our management team considerably by hiring Mathias Sieg, responsible for Digital & IT Infrastructure and Sascha Hancke, responsible for Commerce and Purchasing. The management team has been complete since August and is working flat out on plans for further growth of the German business. In the second half of the year, we launched an efficiency programme to cushion the expected cost increases in all areas. The first results have already had an impact in Q4 2022 and we will continue the programme in 2023. After the start of the war in Ukraine, consumer sentiment in Germany deteriorated significantly. With rising inflation, especially in the second half of 2022, our contribution margins per contract have fallen – fortunately, we have not only been able to maintain our volume, but even increase it.
With sales of CHF 696 million (previous year: CHF 659 million) and EBIT of CHF 35.6 million, we are very satisfied overall and roughly on par with the previous year, which as we all know was also the best year for mobilezone in Germany. In euro, the increase in net sales 2022 was as much as 13.5 per cent and EBIT also increased by 5.8 per cent. In the first half of 2022, we were right on track with an EBIT of CHF 20.3 million. In the second half of the year, competition was very intense and we were not quite able to maintain the gross margins of the first half. However, we were able to increase our volume slightly in the second half of the year and as a result have strengthened our market position. The EBIT margin decreased to 5.1 per cent (previous year: 5.5 per cent) due to fierce competition in the second half of the year.
The inflation rate in Germany increased to a record level in the 2022 fiscal year. What impact did this have on your business? And what is your expectation for 2023?
The inflation rate is a daily topic in the media and it has affected people – the higher energy costs, in particular, reduce disposable household income. We are noticing that some customers are more reluctant to make purchasing decisions and are tending to buy less. More specifically, customers currently prefer to buy the latest smartphone generation but not necessarily the top model, or they keep their devices for longer on average, which leads to slightly lower contribution margins. There is also a trend towards SIM-only products. We hope that the worst is over and that with the start of the warmer season, consumer sentiment will improve again.
Overall, the business model in Germany is comparable to that in Switzerland, but with a stronger focus on the online business. With Sparhandy and Deinhandy, we dominate the online business in Germany. In contrast to Switzerland, we do not have our own physical shops in Germany. We have office and storage space in Bochum as well as offices in Cologne and Münster, and we also have a presence in Berlin. We also have partners who run both physical and online retail shops in Germany. These cannot handle their customers' mobile phone contracts directly with the network operators, but need an intermediary to do so. We are the leading interface between specialist dealers and the telecoms industry in Germany. In this area alone, we will make about 500,000 contract deals this year. The rest comes from our online business, which should take us to around 1.2 million contracts in Germany in 2023.
In the 2022 first half-year report, you mentioned the migration of Sparhandy and Deinhandy to a new shop technology. To what extent has this migration already paid off financially?
The switch-over will take place in the Q1 2023 for Deinhandy and the Q2 for Sparhandy. This will allow us to make technical enhancements to the platform more quickly. We want to use the new technical platform to focus on marketing accessories in the shopping cart, which promises additional contribution margins. This area has been very manageable so far. In terms of costs, the maintenance and further development of the new platform is significantly more efficient than it was the case with the previous two platforms. We expect our investment in the new technology to generate overall savings in the short and longer term.
Markus Bernhard has already mentioned that the MVNO business has very high margins. How is the the German business HIGH doing?
We are very happy with the performance of HIGH. Back in August, we expected a net customer growth of 10,000 customers in the second half of the year, bringing our total customer base to 90,000. Thanks to very high volumes in Q4, we were able to increase the customer base to almost 100,000 by the end of 2022. In terms of margins, there is even more potential in the coming years. Accordingly, our focus is currently on improving our market position quickly and substantially.
We want to double our customer base as quickly as possible and we will start marketing HIGH through all our sales channels. We will expand the distribution of HIGH throughout the year and introduce it into B2B trade. The growth path we have taken will, therefore, continue in the coming years. Our next goal is to reach 200,000 HIGH customers. The doubling of our customer base, we would like to achieve by the end of 2024.
You also want to take a step in the area of sustainability with HIGH and develop the mobilezone Group’s first "green" mobile subscription. Can you elaborate some more on this?
We are still at the very beginning of the development process. Our idea is to launch a "green" mobile phone product on the market, which will offset the carbon footprint generated by the use of a mobile subscription, while remaining as local as possible. We are currently in the conceptual phase and do not anticipate launching the product before the summer of 2023.
We see a lot of additional potential for mobilezone handel in the context of the ongoing market consolidation. In Q1 2023 we have gained two major new partners who will support our growth. We have also introduced a dealer management system tailored to the needs of mobilezone handel. This makes it easy to manage the partners, both in the administrative and marketing areas.
Towards the end of the year, mobilezone acquired SIGA, a long-standing stationary partner. What were your considerations for the acquisition?
The strategic alignment of SIGA strengthens our business with Deutsche Telekom. SIGA operates its own sales outlets for telecommunications services at eleven US Army bases in Germany and it represents a highly valuable addition to mobilezone. Immediate synergies can be leveraged through this merger.
powwow will become mobilezone. What were the reasons for the name change? How did the employees react to the name change?
We rebranded our indirect B2B business to mobilezone handel two years ago and the rebranding of the powwow organisation was the next logical step. We are proud to be part of mobilezone, which is why the name change is a positive development for the employees as well. In general, using a unified name for all German companies will make it easier to hire employees as part of employer branding, allowing us to take full advantage of the power of the parent company in the future.
The next few weeks and months will be all about launching Sparhandy and Deinhandy on the new platform. In the second half of the year, HIGH and Handystar will follow. This mammoth project, which has absorbed many resources over the past three years, is now in its final phase and will greatly facilitate our work in the future. For many employees, the migration of the portals and processes will be a priority this year. We also want to continue growing this year. The growth of HIGH and of our accessories business is a top priority, which will help us increase our margins.
From mid-2024, you will manage the mobilezone Group together with Roger Wassmer. What are you looking forward to?
Roger Wassmer, Andreas Fecker, our CFO, and I have been working together for almost four years. I am looking forward to working closely with them and taking on additional responsibility to drive the mobilezone Group forward. Markus Bernhard will continue to support us in his new role as operational delegate of the Board of Directors.