Letter to the shareholders
Dear shareholders, employees, and business associates of United Internet,
In the fiscal year 2021, we once again made significant investments in new customer contracts and the expansion of existing customer relationships – and thus in sustainable growth. All in all, the number of fee-based customer contracts was raised by 1.03 million to a current 26.68 million contracts. Of this total, 600,000 contracts were added in the Consumer Access segment and 330,000 contracts in the Business Applications segment. A further 100,000 contracts were added in the Consumer Applications segment as well as 920,000 ad-financed free accounts.
Consolidated sales grew strongly by 5.2% in the fiscal year 2021, from € 5,367.2 million to € 5,646.2 million.
Our EBITDA result also improved strongly from € 1,178.8 million in the previous year (without consideration of a write-off in 2020 of VDSL contingents still available with an EBITDA and EBIT effect in 2020 of € -129.9 million) to € 1,303.7 million in 2021, while EBIT rose from € 704.8 million to € 829.9 million. These key earnings figures include a (non-period) positive effect on earnings totaling € 39.4 million, attributable to the second half of 2020. On February 15, 2021, 1&1 accepted Telefónica Germany’s improved offer – following review by the EU Commission – for national roaming and thus also retroactively as of July 1, 2020 for the related MBA MVNO advance services. The new offer includes annually decreasing data prices again, similar to the pricing mechanisms in the first five years of the MBA MVNO agreement. EBITDA 2021 also includes a non-cash valuation effect from derivatives with a positive impact on earnings of € 4.9 million.
After correctly allocating the above mentioned price effects to their respective periods and adjusting for the valuation effect from derivatives, operating earnings developed as follows: operating EBITDA rose by 3.4% in the fiscal year 2021 from € 1,218.2 million in the previous year to € 1,259.4 million, and operating EBIT by 5.6% from € 744.2 million to € 785.6 million. These key earnings figures include initial costs for the construction of 1&1’s 5G network of € -37.9 million (prior year: € -13.9 million), as well as investments of IONOS totaling € -36.8 million for a product and sales drive focusing on its cloud business and further international expansion.
Earnings per share (EPS) increased from € 1.55 in the previous year to € 2.23. This EPS figure also includes the (non-period) positive effect on earnings (EPS effect: € +0.11) and the valuation effect from derivatives (EPS effect: € +0.02). These positive effects in 2021 are opposed by the write-off in 2020 of VDSL contingents still available (EPS effect: € -0.37) and impairment reversals of Tele Columbus (EPS effect: € +0.16). After correctly allocating the positive earnings effect and without consideration of the other aforementioned effects, operating EPS rose by 12.3% from € 1.87 to € 2.10, and operating EPS before PPA by 8.2% from € 2.32 to € 2.51.
Apart from these good operating results, further progress was also achieved with our planned mobile communications network during the reporting period. In addition to concluding the aforementioned national roaming agreement with Telefónica, we expanded our fiber-optic network, prepared a detailed antenna network plan, and found a strong partner for network construction in Rakuten – a pioneer and expert in the field of OpenRAN. In April 2020, Rakuten launched the world’s first fully virtualized OpenRAN in Japan. Rakuten has thus been able to gather extensive experience which perfectly complements our know-how in telecommunications networks, data centers, and cloud applications. Rakuten will be responsible for the installation of our active network equipment as well as for network performance. Together with Rakuten, we want to build Europe’s most innovative mobile communications network on the basis of the new OpenRAN technology. In addition to this partnership agreement, 1&1 signed an intercompany agreement with its affiliate 1&1 Versatel on December 9, 2021, which in particular will provide the access network (especially fiber-optic cables) and data centers for operating 1&1’s mobile network on a rental basis, and on the same date an agreement was concluded between 1&1 AG and Vantage Towers AG, one of Europe’s leading companies for radio tower infrastructure, which among other things includes the renting of Vantage antenna locations and the installation of 1&1’s 5G high-performance antennas by Vantage.
In addition to the progress made with our mobile communications network, the fiscal year 2021 was also dominated by measures for the expansion of our fixed network coverage. These include DSL and VDSL connections, but in future also an increasing number of fiber-optic household connections (fiber-to-the-home/FTTH). In this connection, 1&1 AG entered into an agreement with its affiliate 1&1 Versatel regarding the long-term purchase of FTTH and VDSL complete packages including voice and IPTV as of April 1, 2021. At the same time, 1&1 Versatel entered into an agreement with Deutsche Telekom on the use of its FTTH and VDSL household connections. These enable 1&1 Versatel to provide FTTH/VDSL complete packages for 1&1, as 1&1 Versatel’s nationwide fiber-optic transport network is largely connected to the local broadband networks of Deutsche Telekom. By signing this agreement, we have taken a further step toward our goal of providing an ever-growing number of households with guaranteed gigabit speeds.
Together with Morgan Stanley Infrastructure Partners, we are also supporting the implementation of Tele Columbus’s Fiber Champion strategy. In a first step, Kublai GmbH (a bidding company backed by Morgan Stanley) submitted a voluntary public takeover offer for Tele Columbus shares. Following the successful completion of the takeover bid, we contributed our Tele Columbus shares to Kublai in April 2021 and raised our stake in Kublai to 40%. After the closing of the transaction and the delisting of Tele Columbus, Kublai currently holds around 94.8% of Tele Columbus shares. In addition, 1&1 has signed a binding preliminary agreement with Tele Columbus to use the latter’s cable/fiber-optic network as a pre-service for its broadband products, thus enabling us to provide further target groups with fiber-optic as well as cable connections.
In early 2021, we strengthened our Business Applications segment with the acquisition of we22 AG, a company which develops software for the creation, maintenance, and hosting of websites. we22 is best-known for its white-label website builder CM4all. With over 25 language versions, CM4all has been an essential part of the product offering of over 50 hosting providers worldwide since 2000. Under its Web4Business brand, we22 also offers website creation and online marketing services for small businesses and freelancers in Germany. we22's products and services will also be made available to IONOS customers in the future. CM4all will continue to be offered as a white-label solution for other internet providers and business customers.
Last but not least, we increased our stakes in the subsidiaries IONOS and 1&1 during the reporting period: in the case of IONOS TopCo SE from 66.67% to 75.10% (in Q2 2021), and in the case of 1&1 AG from 75.10% to 76.97% (in Q2 2021) and then to 78.32% (in Q3 2021).
On the basis of the figures for 2021, the Management Board and Supervisory Board of United Internet AG will propose a dividend of € 0.50 per share for the fiscal year 2021 (prior year: € 0.50) at the (virtual) Annual Shareholders' Meeting on May 19, 2022. Based on around 187.7 million shares with dividend entitlement (as of December 31, 2021), the total dividend payment for fiscal year 2021 would amount to € 93.4 million. The dividend payout ratio would therefore be 23.8% of adjusted consolidated net income for 2021 after minority interests (€ 392.4 million) and thus lie – in view of the investments in 1&1’s mobile communications network – within the lower range targeted by the Group’s dividend policy.
With an ad-hoc announcement on December 9, 2021, we published our guidance for the fiscal year 2022. After completing the fiscal year 2021, we updated this guidance in March 2022 and now expect an increase in consolidated sales to approx. € 5.85 billion (prior year: € 5.646 billion). EBITDA 2022 is to remain unchanged on a par with 2021 (€ 1.259 billion), despite additional investments. The anticipated EBITDA result includes increased initial costs for 1&1’s 5G network rollout of approx. € 70 million (prior year: € 38 million), as well as approx. € 30 million for additional marketing activities of cloud service provider IONOS to raise brand awareness in its most important European markets. We are planning significantly higher capital expenditures (capex) in 2022, especially for the rollout of 1&1’s mobile communications network, as well as for the expansion of 1&1 Versatel’s fiber-optic network to provide coverage in additional expansion areas and connect 5G antennas. Capex is expected to be between € 800 million and € 1 billion (prior year: € 290 million).
We are well prepared for the next steps in our company’s development and 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 business associates for the trust they continue to place in United Internet AG.
Montabaur, March 2022
The Management Board
Ralph Dommermuth Martin Mildner
„Our aim is not only to build Europe’s most advanced mobile communications network, but also to reach our rollout targets sooner than stipulated by the Federal Network Agency. We will achieve this by mounting our gigabit antennas on the thousands of existing antenna masts belonging to radio tower companies. This not only saves us valuable time for complex site developments, but also helps protect the environment and conserve resources.“
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 gradually 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 the holding company 1&1 AG & Co. KGaA as United Internet AG and built the company into a leading European internet specialist.
CFO (since 2020)
Martin Mildner (born in 1970) has been a member of the Management Board of United Internet AG since October 1, 2020 and is responsible for Finance and Controlling, Risk Management/Internal Audit, Legal Affairs, Taxes, M&A, Investment Management, and Human Resources. Martin Mildner has many years of experience in the field of M&As, private equity, venture capital, legal affairs, and tax law. Prior to joining United Internet, he was employed by the Otto Group for 13 years, where as Group General Counsel and Group Vice President M&A he played a leading role in shaping the strategic realignment of the company portfolio. Martin Mildner also served on various supervisory boards and advisory boards of Otto Group companies, such as About You, OTTO, Hermes, and Project A Ventures.