Letter to the shareholders

Dear shareholders, employees, and friends of United Internet,

In our fiscal year 2019, we made further significant investments in the acquisition of new customers and the expansion of existing customer relationships, and thus in sustainable growth. All in all, we raised the number of fee-based customer contracts by 890,000 to 24.75 million contracts. In our Consumer Access segment, we added 790,000 contracts, while 590,000 ad-financed free accounts and 10,000 pay accounts were added in the Consumer Applications segment. A further 90,000 contracts resulted from the Business Applications segment.

Consolidated sales grew by 1.8% in the fiscal year 2019, from € 5,102.9 million (like-for-like prior-year figure) to € 5,194.1 million. This at first glance only moderate growth was due in particular to fluctuations during the year in (low-margin) hardware sales (€ -41.9 million compared to previous year) in the Consumer Access segment. Sales were also influenced by a deliberate ad space reduction as part of our repositioning of the Consumer Applications segment (€ -8.4 million compared to previous year).

Consolidated earnings before interest, taxes, depreciation, and amortization (EBITDA) was positively influenced by the initial application of IFRS 16 (€ +87.0 million) in the fiscal year 2019. There was an opposing effect in particular from regulatory effects and additional costs (in total: € -97.5 million) for wholesale purchases in the Consumer Access segment after the time-limited adjustment mechanism of a wholesale agreement expired at the end of 2018. Contrary to original expectations, the expired arrangement could not be compensated for by a price reduction during the reporting period following arbitration proceedings.

In addition to these extra costs, our future investments (implemented as planned), such as the repositioning in the Consumer Applications segment and increased marketing expenses, especially in connection with the rebranding of the Business Applications segment, had an initial negative impact on earnings. EBITDA rose by 5.4% in the fiscal year 2019, from € 1,201.3 million to € 1,265.7 million (according to IFRS 16). The like-for-like development according to IFRS 15 amounted to -1.9%.

Due to the above mentioned burdens on earnings and one-offs, operating earnings before interest and taxes (EBIT) of € 791.7 million was down on the previous year (€ 811.0 million) and virtually unaffected by IFRS 16 accounting. We did not include a special item from trademark writeups on the “Strato” brand (EBIT effect: € +19.4 million) in this operating EBIT figure.

Earnings per share (EPS) rose from € 0.94 to € 2.13, or from € 1.46 to € 2.61 before PPA amortization. Without consideration of PPA amortization and impairment charges for Tele Columbus shares (EPS effect: € -1.02) in 2018, as well as impairment reversals for Tele Columbus shares (EPS effect: € +0.09), and trademark writeups for Strato (EPS effect: € +0.05) in 2019, operating EPS improved from € 1.96 to € 1.99.

In addition to our operating business, we successfully participated – via 1&1 Drillisch – in the 5G spectrum auction ending on June 12, 2019 and purchased two frequency blocks of 2 x 5 MHz in the 2 GHz band and five frequency blocks of 10 MHz in the 3.6 GHz band. The total auction price amounted to around € 1.07 billion. By acquiring these frequencies, we laid the foundation for a successful and permanent positioning of the 1&1 Drillisch Group as Germany’s fourth mobile network provider. 1&1 Drillisch intends to use this basis to establish a powerful mobile communications network.

While the 3.6 GHz spectrum is already available, the acquired frequency blocks in the 2 GHz band will only be usable from January 1, 2026. With this in mind, 1&1 Drillisch has leased two frequency blocks of 10 MHz each in the 2.6 GHz band from Telefónica, which will be available until December 31, 2025. This agreement is based on the commitments given by Telefónica as part of the EU’s clearance of its merger with E-Plus in 2014.

On September 5, 2019, 1&1 Drillisch also signed an agreement with the German Federal Ministry of Transport and Digital Infrastructure (BMVI) and the German Federal Ministry of Finance (BMF) regarding the construction of mobile communication sites in so-called “not-spots”. 1&1 Drillisch is thus helping to close existing supply gaps and improve the provision of mobile communications in rural regions by building hundreds of base stations. In return, 1&1 Drillisch benefits from an agreement allowing it to pay for the acquired 5G spectrum in installments. As a result, the license fees which were originally to be paid to the German government in 2019 and 2024 can now be spread over the period up to 2030. The credit line of originally € 2.8 billion arranged to finance the highest bids of the spectrum auction, among other things, was thus no longer required and “returned”. The agreement with the BMVI and BMF is in line with 1&1 Drillisch’s long-term financing strategy, which is geared toward paying the major share of expenses for the construction of its own mobile communications network from current revenue.

On December 30, 2019, 1&1 Drillisch finally exercised – as planned – the first prolongation option to extend the term of the MBA MVNO agreement with Telefónica Germany ending on June 30, 2020. As a result, the term of the agreement has now been extended until at least June 30, 2025. In combination with another prolongation option, 1&1 Drillisch has thus secured long-term access to the mobile communications network of Telefónica. In order to ensure continuous availability for its end customers during the build-up of its own nationwide network, negotiations are also being held in parallel regarding the conclusion of a national roaming agreement, based on the voluntary commitment of Telefónica Germany in connection with the EU clearance decision following the merger with E-Plus in 2014.

For the fiscal year 2019, the Management Board and Supervisory Board of United Internet AG will propose a dividend of € 0.50 per share (prior year: € 0.05) at the Annual Shareholders' Meeting 2020. On the basis of around 187.7 million shares with dividend entitlement (as of December 31, 2019), the total dividend payment for fiscal year 2019 would amount to € 93.9 million. The dividend payout ratio corresponds to 23.7% of adjusted consolidated net income for 2019 after minority interests (€ 396.4 million) and would thus lie – in view of the investments due to be made in the 5G mobile network of 1&1 Drillisch – within the lower range of our dividend policy.

Against the backdrop of uncertain macroeconomic conditions due to the growing spread of the coronavirus, we expect sales and EBITDA in the fiscal year 2020 to be approximately on a par with the previous year.

We are well prepared for the next steps in our company’s development and are upbeat about our future prospects. In view of the past year and the challenges that lie ahead, we would like to express our particular gratitude to all employees for their dedicated efforts as well as to our shareholders and customers for the trust they continue to place in United Internet AG.

Montabaur, March 2020

The Management Board

Ralph Dommermuth  Frank Krause

„By acquiring the 5G frequencies in 2019, we laid the foundation for a successful and permanent positioning of 1&1 Drillisch as Germany’s fourth mobile network provider.“


The Management Board


CEO (since 1988)

Ralph Dommermuth (born in 1963) laid the foundation for today’s United Internet AG with the formation of 1&1 EDV Marketing GmbH in 1988. He originally offered systemized marketing services for smaller software suppliers. He later developed additional marketing services for major clients, such as IBM, Compaq, and Deutsche Telekom. With the advent of the internet, Ralph Dommermuth subsequently phased out these marketing services for third parties and began developing the company’s own internet services and direct customer relationships. In 1998 the qualified banker took 1&1 to the stock exchange. It was the first IPO of an internet company in Germany. In 2000, Ralph Dommermuth restructured 1&1 as United Internet AG and built the company into a leading European internet specialist.

Frank Krause 

CFO (since 2015)

Frank Krause (born in 1965) has been a member of the Management Board of United Internet AG since June 1, 2015 and is responsible as CFO for Finance, Corporate Controlling & Accounting, Tax, Investment Management, Investor Relations, Legal, Corporate Governance, Compliance & Sustainability, Risk Management, Corporate Audit, HR Management, Facility Management, Procurement, and Corporate IT. In his role as CFO, Frank Krause implemented the new group-wide employee stock ownership plan (ESOP) and managed the M&A processes for the investment of Warburg Pincus in the Business Applications division, the takeover of competitor Strato, and the merger with Drillisch.