Letter to the shareholders

Dear shareholders, employees, and business associates of United Internet,

In the fiscal year 2022, United Internet 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 730,000 to a current 27.46 million contracts. Of this total, 350,000 contracts were added in the Consumer Access segment (+600,000 operating growth less -250,000 contracts due to the German Telecommunications Act effect) and 260,000 contracts in the Business Applications segment. A further 120,000 contracts were added in the Consumer Applications segment. Ad-financed free accounts rose by 40,000 to 40.31 million.

Consolidated sales grew by 4.8% in the fiscal year 2022, from € 5,646.2 million in the previous year to € 5,915.1 million.

Prior-year earnings were impacted by a (non-period) positive effect of € +39.4 million. Without consideration of this earnings effect and additionally adjusted for preparation costs for the IONOS IPO (€ -3.0 million in 2021 and € -8.8 million in 2022), as well as non-cash valuation effects from derivatives (€ +4.9 million in 2021 and € -0.5 million in 2022), the Group’s key earnings figures for 2022 developed as follows: EBITDA rose by 0.7%, from € 1,262.4 million in the previous year to € 1,271.8 million, and EBIT by 0.3% from € 788.6 million to € 790.7 million.

These earnings figures include a planned increase in expenses of € -13.8 million (€ -37.9 million in 2021 and € -51.7 million in 2022) for the construction of 1&1’s mobile communications network as well as € -32.4 million for additional marketing activities of IONOS to raise brand awareness in its most important European markets . Earnings also include increased electricity costs of € -22.4 million.

Earnings per share (EPS) fell from € 2.11 in the previous year to € 2.00 (again adjusted for the non-period positive effect on earnings in 2021, the IPO costs of IONOS, and the valuation effects from derivatives in 2021 and 2022). This decline in EPS was mainly due to a year-on-year decrease in the financial result, which was impacted in part by the subsequent measurement of financial derivatives (EPS effect: € -0.03; prior year: € +0.02), as well as – with regard to the result from associated companies – the prorated negative result of Kublai GmbH, which was only partially included in the comparative figures for 2021 as the takeover of Tele Columbus AG was only completed during the course of the previous year (EPS effect: € -0.19; prior year: € -0.13).

In addition to our operating growth, the fiscal year 2022 was marked in particular by the construction of our mobile communications network based on the innovative OpenRAN technology. Important milestones were already reached: after the friendly user test in summer delivered the anticipated high performance figures, we launched operations of Europe’s first OpenRAN on schedule in December 2022 with the service “1&1 5G at Home”, a product positioned as an alternative to conventional DSL, cable internet, or fiber-optic house connections.

Mobile services are scheduled to be activated in the third quarter of 2023. At this point, Telefónica will provide us with the national roaming service which it is developing in parallel. This will enable us to also offer our customers nationwide reception during the network rollout phase. We will also be able to provide our customers with reliable mobile services during trips abroad. This is ensured by a long-term partnership agreement with Orange for the provision of international roaming services which we signed in November 2022.

More than 500 regional edge data centers for the 1&1 OpenRAN are being built across Germany in the immediate vicinity of our antenna locations – connected via fiber-optic cables and equipped with gigabit antennas. And this is precisely where the future lies: because only such a completely cloud-based network architecture with regional data centers enables the short transmission paths that are essential for real-time applications. At the same time, clearly defined and standardized interfaces allow flexible cooperation with the best and most secure manufacturers on the market. This makes us the only German network operator not dependent on dominant network equipment suppliers such as Huawei.

The successful product launch demonstrated that our OpenRAN is fully operational. And we made encouraging progress with the expansion of our decentralized data centers and fiber-optic connections over the past few months. The task now is to increase the number of antenna locations.

After our most important rollout partner for antenna locations in terms of volume unexpectedly informed us in September 2022 that it would not be able to fulfill its contractual obligations on schedule, we restructured the rollout process and tightened up our agreements. In addition to ATC, Vantage Towers, and GfTD, we also signed an agreement with Eubanet in December 2022 for the acquisition of up to 7,500 antenna locations. Together with our four rollout partners, we will do everything in our power to also drive the rollout of our passive network infrastructure as quickly as possible. After restructuring the rollout plan for our radio tower infrastructure, we now expect to have around 1,200 antenna locations by year-end. We continue to keep our sights firmly on the target of covering a quarter of German households by the end of 2025 and half of them by the end of 2030.

We also laid important foundations for broadband in 2022 and significantly expanded our fiber-optic offering. For example, we now also have access to Deutsche Telekom’s fiber-optic home connections for active marketing. To this end, 1&1 will receive all broadband upstream services from a single source – its sister company 1&1 Versatel – whose nationwide transport network is already largely connected to Deutsche Telekom’s regional broadband networks.

In addition, we worked hard on preparations for the planned initial public offering (IPO) of our Group subsidiary IONOS Group SE in the fiscal year 2022 and made considerable progress in this regard. As a result, we were able to announce concrete plans for the IPO of IONOS on January 17, 2023 as part of an “intention to float” (ITF) and completed the IPO on February 8, 2023. The shares of IONOS Group SE have since been listed on the regulated market of the Frankfurt Stock Exchange (Prime Standard) under ISIN: DE000A3E00M1, WKN: A3E00M, ticker symbol: IOS. Following the IPO of IONOS Group SE, United Internet holds 63.8% and Warburg Pincus 21.2% of IONOS shares. A further 15.0% of shares are in free float.

On the basis of the figures for 2022, the Management Board and Supervisory Board of United Internet AG will propose to pay a dividend of € 0.50 per share for the fiscal year 2022 (prior year: also € 0.50) at the Annual Shareholders' Meeting on May 17, 2023. Based on around 172.8 million shares with dividend entitlement at present , the total dividend payment for fiscal year 2022 would amount to approx. € 86 .4 million. The dividend payout ratio corresponds to approx. 23% of adjusted consolidated net income for 2022 after minority interests (€ 374.1 million) and thus lies within the range of our dividend policy.

For the fiscal year 2023, we expect sales to increase to approx. € 6.2 billion (2022: € 5.915 billion). EBITDA is likely to be on a par with the previous year (2022: € 1.272 billion) . This includes approx. € -120 million ( 2022 : € -52 million) for the rollout of 1&1’s mobile network. Due in particular to the network rollout and the expansion of the fiber-optic network to connect the radio antennas and provide coverage in additional expansion areas, capital expenditures (excluding possible M&A transactions) are expected to increase to approx. € 800 million ( 2022 : € 681 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 2023

The Management Board

Ralph Dommermuth   Martin Mildner