United Internet AG

XETRA:UTDI

Earnings Call Transcript 2021-Q3

[Operator]

Dear, ladies and gentlemen, welcome to the Q3 2021 Earnings Call of United Internet AG. At our customer's request, this conference will be recorded. [Operator Instructions] After the presentation, there will be an opportunity to ask questions. [Operator Instructions] May I now hand you over to Stephan Gramkow, who will start the meeting today. Please go ahead.

[Stephan Gramkow, Investor Relations Officer]

Thank you, operator. Good morning, everybody, and welcome to our Q3 and 9 months 2021 Results Conference Call. My name is Stephan Gramkow from Investor Relations. And here with me today are our CFO, Martin Mildner; and my colleague, Dominic Grossman. Martin Mildner will first take you through the development of the first 9 months 2021 and the financials, and we are happy to answer any questions afterwards. So Martin, the floor is yours.

[Martin Mildner, Group CFO & member of Management Board]

Stephan and Dominic, thank you very much. It's also a pleasure for me to welcome all of you to our 9 months results analyst and investor webcast. So as always, before I will start with the details of our financial results, I'd like to highlight already at the beginning of this presentation that we look back to a very successful first 9 months of the year 2021 and that we are able to confirm our increased guidance from August this year, not only with respect to our revenue expectations, but also with regard to the expected EBITDA. And as always, before I will go into each segment of our group, let me start on Slide 2 of our presentation with an overview of the most important KPIs of the United Internet group as of 30th of September 2021, which means the figures for the first 9 months of our fiscal year. So first, we were able to increase our customer contract basis in the first 9 months by 760,000 contracts, which leads to a total number of 26.41 million customer contracts. Our revenues for the first 9 months reached EUR 4,176 million (sic) [ EUR 4.167 billion ], which leads to an increase of 4.6% compared to the first 9 months of 2020. So our EBITDA for the first 9 months amounts to EUR 949.5 million (sic) [ EUR 994.5 million ] and therefore, our EBITDA is growing by 10.9% above the EBITDA for the first 9 months of 2020. As you probably remember from our last half year analyst and investor call, our EBITDA 2021 is positively influenced by an amount of EUR 39.4 million, which we received in the first half of 2021 from Telefónica Deutschland due to the final agreement with Telefónica and 1&1 in connection with the entering into a national roaming agreement. The payment of these EUR 39.4 million from Telefónica is economically not linked to this year 2021, but rather to the second half of the year 2020 where 1&1 received an invoice from Telefónica, which was not in line with the terms and conditions of the MBA MVNO contract. Therefore, the payment of EUR 39.4 million represents a recompensation for the excessive billing in 2020 from Telefónica towards 1&1. To be able to compare the operative earnings in the first 9 months of 2021 with the first 9 months of last year, we decided to make both periods comparable and to show also an operative EBITDA in our slides, which we will report also in our quarterly report. To come to the operative EBITDA, first, we, on one hand, excluded or better eliminated the EUR 39.4 million from the EBITDA 2021, so that the operative EBITDA of EUR 949 million (sic) will be reduced by these EUR 39.4 million, so that our operative EBITDA is EUR 955.1 million. On the other hand, we allocated these EUR 39.4 million in amount of EUR 19.2 million to the third quarter of 2020 and the remaining amount of EUR 20.2 million to the fourth quarter in 2020. That means that we show an operative EBITDA, which is now EUR 19.2 million higher than originally reported in the first 9 months of 2020. Therefore, we increased our reported EBITDA for the 9 months in 2020 from EUR 896.4 million by EUR 19.2 million and ends up with a comparable EBITDA of EUR 915.6 million in 2020. For comparable reasons, we will do the same, as I said, in the fourth quarter of the year 2020, where we will increase the reported EBITDA by the remaining EUR 20.2 million. So as a summary, that means that after these kind of reallocations, our operative EBITDA for the first 9 months in this year is EUR 955.1 million compared to an operative EBITDA of EUR 915.6 million in the first 9 months in 2020, and this will then represent an operative revenue growth of 4.3%. Consequently, we did this kind of reallocation also with respect to our EBIT and the EPS. Without the reallocation, our EBIT increased by 18.9% from EUR 541.6 million to EUR 634.9 million. With the reallocation, our operative EBIT still increased by 7.8% and amounts to EUR 604.5 million. Without the reallocation of our EPS, so the earnings per share increased by 35.3% to EUR 1.80 per share. With the reallocation, our operative EPS still increased by 22.5% to EUR 1.69 per share. The operative EPS before PPA amounts to EUR 1.98 per share, which represents an increase by 14.5% compared to EUR 1.73 per share in the first 9 months of 2020. We also like to highlight that our EBITDA and our EBIT includes not only EUR 24.5 million initial costs in connection with the rollout for the 5G network on the 1&1 side, but also the gross investment since the total amount of EUR 24.8 million in IONOS for the investment initiatives in the cloud business as well as the internationalization strategy. Both investments are still fully in line with our ad hoc announcement in March 2021, where we stated that 1&1 will spend in total EUR 30 million in 2021 for initial costs for the 5G rollout and that IONOS will spend additional EUR 40 million for the cloud business as well as the internationalization strategy in 2021. Last but not least, on our group level, we like to highlight, and you see this on the lower end of Slide 2, we'd like to highlight for the first 9 months of 2021 that we increased not only our stake in IONOS from 66.67% to 75.10% in the second quarter of 2021, but we also increased our stake in 1&1 AG in 2 steps. First, in the second quarter of 2021 from 75.10% to 67.97% (sic) [ 76.97% ]; and secondly, from 67.97% to 87.32% in the third quarter of 2021. The fact that both companies are already fully consolidated in our group accounts, these acquisitions will not lead to any increase of our revenues or our earnings. I will come back to this point later on again. I will now switch over to our segment Access, and we'll start on Slide 3 with Consumer Access, which is, as you probably know, related to the business of our group company 1&1. The fact that Markus Huhn from 1&1 had his webcast already this morning, and you asked already a lot of detailed questions, I'd like to focus only on some key elements. On Page 4, you can see that during the first 9 months, there were an increase of 440,000 mobile internet contracts coming from 10.52 million at the end of 2020, up to 11.01 million contracts at the end of September 2021. On the other hand, we saw a small decrease of 50,000 broadband connection contracts in the first 9 months of 2021 coming from 4.31 million at the end of 2020 and 4.26 million contracts at the end of September 2021. If you look -- if you have a look on Page 5 of our presentation at the revenues of the segment Consumer Access, for the first 9 months in 2021, we can consider that the most relevant service revenues increased by 3.5% to a total number of EUR 2,353.8 million. And therefore, these are in line with the announced outlook of 1&1. The low-margin hardware revenues from 1&1 increased in the first 9 months by 1.8% to a total number of EUR 544.7 million. On Slide 6, you can see that the EBITDA of Consumer Access increased in the first 9 months by 20.6% to EUR 535.3 million (sic) [ EUR 553.3 million ]. But we have to recognize here again that the EBITDA is, as already explained, influenced by the payment of Telefónica in the amount of EUR 39.4 million. If we reallocate an amount of EUR 19.2 million of the payment to the first 9 months of 2020, the operative EBITDA of the first 9 months of 2021 were grown by 7.6% from EUR 477.8 million in 2020 to EUR 513.9 million in 2021. This results to an operative EBITDA margin of 17.8% in the first 9 months of this year compared to a margin of 17.1% in the first 9 months of 2020. I'd like to state again that the EBITDA also includes initial cost of EUR 24.5 million for the 5G rollout. Page 7 shows the EBITDA of 1&1 separated into the 2 new reporting segments. On the one hand, the segment Access and on the other hand, the new segment, 5G. The fact that the 5G segment includes so far only the initial costs for the 5G rollout in the amount of EUR 24.5 million, the pure Access segment shows even a better operative EBITDA for the first 9 months of EUR 583.4 million (sic) [ EUR 538.4 million ], which represents an increase of 10.7% compared to last year. So I'm now coming on Slide 8 to the segment Business Access, which is related to the business of our group company, Versatel. The core business areas, which are B2B and wholesale, are growing by 4.4% in the first 9 months. I'd like to mention here that you know that we are rebuilding a little bit the business of Versatel and that we are now really concentrating on the recurring revenue services from the B2B segment and from the wholesale segment. And therefore, you have to recognize that especially in the third quarter of 2021, you cannot compare apples with apples. And therefore, you see a slow decrease in the revenues, but this is really driven by the reorganization of the businesses from Versatel. And if you compare both things without or with eliminating these kind of services, which are not anymore within Versatel, but for example, with 1&1, there's even a growth rate which is higher than 4.4%. On Slide 9, you see the EBITDA of the segment Business Access, which was growing by 3.9% to EUR 118.8 million with a 31% EBITDA margin. Then we are now coming to the segment, Applications, and we will start with the segment Consumer Applications, which represents our [ MediMedia ] business, especially with the strong brands, WEB.DE and GMX. Within Consumer Applications, we count more than 41.74 million customer accounts, whereof approximately 39 million are free accounts and 2.45 million are pay accounts. Of these 41.7 million accounts, more than 27.5 million accounts are linked to mobile usage, which could increase in the first month by 800,000 accounts. Also, the cloud storage usage accounts could be increased by 800,000 accounts so that now more than 21.5 million accounts are linked to the cloud storage.We are really proud that the revenues of [ MediMedia ] increased by 10.6% to EUR 200.1 million in the first 9 months of 2021. Furthermore, with respect to the EBITDA, we see even a stronger performance of [ MediMedia ], the EBITDA was increasing by 20.1% from EUR 96.5 million in 2020 to EUR 38.5 million in 2021, which results in a super strong EBITDA margin of 41.7%. Let us now come to our last segment, Business Applications, which represent the business of IONOS. On Page 14, you can see that IONOS increased its customer contracts in the first 9 months by 240,000 contracts. We have now 8.69 million contracts in total, nearly half of it comes from domestic business, so 4.21 million contracts and a little bit more than the half is coming from abroad business, 4.48 million contracts. If you first take a look on the revenues, we see a strong growth rate of 9.6% and total revenues of EUR 747.9 million (sic) [ EUR 774.9 million ] for the first 9 months in 2021. With respect to the EBITDA of IONOS, we see an increase of the EBITDA by 4.9% to a total number of EUR 242.2 million in the first 9 months compared to the first 9 months of 2020, where the EBITDA was EUR 245.6 million (sic) [ EUR 254.6 million ]. As I already said, this decrease was intentionally driven mainly by the growth initiatives of IONOS with respect to the cloud business as well as the internationalization. Even with this kind of additional growth initiative, IONOS still remains with a very high and attractive EBITDA margin of above 31%. So after finalizing the overview about our group companies, I summarize on Slide 17 again a few more KPIs as of 30 September, 2021. On Slide 17, you can see again our KPIs for our group revenues, our EBITDA and the development of our customer contracts. Furthermore, and what I've not mentioned so far, I'd like to drive your attention to the CapEx, which is EUR 135 million -- no sorry, EUR 153 million lower compared to the first 9 months of the last year 2020. This is mainly influenced by the prepayment of approximately EUR 165 million in connection with the prolongation of the MBA MVNO contract with Telefónica. This prepayment is a onetime payment agreed under the MBA contract, and the payment is linked to a period of 5 years. Secondly, I'd like to mention our free cash flow in the first 9 months of 2021, which is EUR 31.2 million lower than the first 9 months in 2020. However, this is a little bit misleading. First of all, we have a really strong cash flow from the operational business, which is with [ EUR 796.7 million ], more than EUR 100 million higher than in the first 9 months of 2020. This represents an increase of more than 15%. With respect to the change in the working capital and other items, we have to see that these changes include a onetime payment of more than EUR 200 million. This onetime payment comes in line with a new contract with the Deutsche Telekom AG for the contingent contract for VDSL and FTTH and is, as you know, not only a payment for 1 year, but a prepayment for several years. On our CapEx side, you see a decrease of EUR 153 million, as I said, in our CapEx. Here, you have to remember that we invested last year, as I said, EUR 156 million in connection with the renewal of the MBA contract. If you will eliminate this payment, our investments in the first 9 months of 2021 are even slightly higher than in 2020. Last but not least, you can see that we increased our bank liabilities from EUR 1,343.8 million (sic) [ EUR 1,334.8 million ] at the end of December 2020 by EUR 576 million to a total net bank liabilities of EUR 1,902 million as of the end of September 2021. This increase is driven by several factors. First of all, on the one hand, we repaid in the first 9 months of 2021 a term loan in the amount of EUR 20 million. On the other hand, we entered in the third quarter of 2021 into a so-called [Foreign Language] in the amount of EUR 750 million. As I already mentioned in our last analyst call, we saw a really strong interest in the [Foreign Language] by the debt investors. Our book was already after 2 days more than 4x oversubscribed. At the end of the day, we decided to take a EUR 750 million [Foreign Language] with very favorable conditions with an average fixed interest rate of less than 0.8% for mostly 4-, 5- and 6-year durations. Furthermore, you know that we invested heavily in the first 9 months of 2021 in several group companies like our investments in Tele Columbus, together with Morgan Stanley, roughly EUR 230 million; the acquisition of a further stake of 8.4% in IONOS, roughly EUR 310 million on an enterprise valuation of EUR 5 billion; the acquisition of a total stake of 3.2% in 1&1, which was roughly EUR 148 million; and last but not least, buyback of shares in United Internet in the amount of roughly EUR 19 million. Moreover, we also invested in the group company of IONOS V22 in the amount of approximately EUR 20 million. As I stated earlier, especially the investments or the acquisition of the additional shares in IONOS 1&1, but also the buyback of our own shares are not reflected on the so-called active side of our balance sheet. These kind of acquisitions in companies which are already fully consolidated in our accounts but also the buyback of our shares will only be reflected in a decrease of the capital reserve and thus it leads to a decrease of the equity ratio, which is now 3.2 percent points lower than at the end of December 2020. So we are now coming to our outlook on Slide 19. For the financial year of the -- for the financials of the entire year of 2021, as you know, we increased in August 2021 our initial guidance from March 2021. We are also today still convinced that the renewed guidance from August is still today valid. And therefore, we are pleased to be able to confirm this guidance again, not only with respect to our guidance of the total revenue of our group of approximately EUR 5.6 billion, but also with respect to the EBITDA of approximately EUR 1.25 billion. I'd like to highlight again that the EUR 39.4 million coming from the Telefónica payment are not included in this guided EBITDA, so that the EBITDA will be even higher if you will not eliminate this payment for the figures of 2021. However, the mentioned investment of 1&1 in the amount of EUR 30 million for the 5G rollout, as well as we mentioned investments of IONOS in the amount of EUR 40 million for the growth initiatives are, of course, included in this guidance. So thank you very much again for your time to join our 9-months call, and I'm now looking forward to your questions during our Q&A session. Dear operator, will you take over the lead again?

[Operator]

And we will now begin the question-and-answer session. [Operator Instructions] The first question we received is from Maurice Patrick, Barclays.

[Maurice Graham Patrick, Managing Director]

Just a couple for me, please. The first one, Martin, maybe if you can provide a bit of context on the press release from a few days ago where Mr. Dommermuth indicated he was considering increasing the stake in United Internet to 51%. The press releases cites investments being needed for the coming years and a desire to strengthen his position as anchor shareholder. Maybe you could elaborate a little bit on behalf of Mr. Dommermuth on why he needs to strengthen that position? And sort of just a very sort of brief second question is, could you please split the EUR 200 million CapEx that you spent so far year-to-date, like how much is inside Versatel, for example, how much is inside Business Applications, how much is being spent on fiber data centers? That would be helpful.

[Martin Mildner, Group CFO & member of Management Board]

We thank you very much for your questions. Let me start with the question regarding the announcement of Mr. Dommermuth. So first of all, you know that we have to separate a little bit the levels of the shareholder level and the company level. And in fact, that this is an announcement of Mr. Dommermuth himself as a shareholder of the company, I can only really give you some thoughts on my side as a Board member of United Internet. But to be really clear, you have 2 different levels here. And of course, we announced the ad hoc announcement, but this is really due to the situation that Mr. Dommermuth is not only the shareholder but also a Board member of United Internet. And therefore, his knowledge is also the knowledge of company. And therefore, it was our obligation to announce this press release even is not a clear takeover bid from Mr. Dommermuth. If you read the announcement carefully and exactly, you see that this is only the announcement that he is intending to do it. But there are some conditions, like the market environment, like the financing commitments and so on, as a condition on his announcement of an official takeover bit of these 70 million shares for the share price of EUR 35 million. So your question was why he's doing it? I think from my point of view, from a company perspective, this is a strong sign of the shareholders actually believing in the strategy, that he's believing in the company. And therefore, of course, we have to give an official announcement in the course of this bid. But my view is, from a company perspective, that he gives a clear sign that he's believing in the growth story of the company and of the segment -- of each segment, I would say. And with respect to the investments in the ad hoc announcement, we clearly said that there will be investments more or less in every segment. You know that there's a strong investment in the 5G rollout, which is not only to 1&1, but also linked to Versatel, who is also taking a big part in the rollout of the 5G network. We also have some ideas with respect to IONOS, as you probably know, and you also heard from our ad hoc announcement in March this year that we like to plan an IPO, which was now also in the German press really clear. And therefore, I think from my point of view, this is a really strong commitment of Mr. Dommermuth. On the CapEx side, I would hand over to Stephan to give you some more insight on this.

[Stephan Gramkow, Investor Relations Officer]

Maurice, regarding the CapEx. And as you know, the -- what we show in the segmental reporting, so that's the IFRS 16 CapEx. Just looking at the book CapEx, which is under IFRS 15, so the EUR 200 million you asked about. So maybe a split here. So a little bit more than EUR 100 million is CapEx we spend for Versatel. And this is for new fiber, but also -- so new fiber lines, but also increasing the capacity of existing fiber lines. But most of that, a little bit more than EUR 100 million is really growth driven. So to give you a bit more color. So roughly 20% is normally what we see as maintenance CapEx. And this is not only for this EUR 200 million, so this is also true if you look at full year, but also looking at it at the last years. Then another more -- a little bit more than EUR 60 million is IONOS. So this is mainly platform investments and investments in data centers. EUR 220 million at 1&1 and roughly -- sorry, roughly EUR 10 million within the portal business. So that's all together then the EUR 200 million you have mentioned.

[Operator]

The next question is from Polo Tang, UBS.

[Polo Tang, MD & Head of Telecom Research]

So first question is really just about use of cash. Can you explain why United Internet decided to suspend its EUR 160 million share buyback earlier this year? And how do you think about use of cash going forward? So are you more inclined to, for example, further increase your stake in 1&1? Or are you open to revisiting additional shareholder returns? And maybe linked to that question, what do you see is the optimal level of leverage in the group? And then maybe if I just circle back to the tender offer or potential tender offer. Mr. Dommermuth, obviously has indicated he wanted to increase his shareholding to 51%. But in practice, does a 51% stake give Mr. Dommermuth any additional powers that he currently doesn't have already?

[Martin Mildner, Group CFO & member of Management Board]

So Polo, thank you very much also for your questions. Let me start with the question regarding the use of our cash. I think the decision to stop the buyback program was really driven by the fact that we saw not really a high amount of shares was given to us during this program from the investor side and we then decided to stop it, and we are also thinking about whether we reopen this at a later stage. But so far, there is no decision or no further discussions about this topic. On the question of 1&1, I already said in the last webcast, and there, our mind is not changing, that we saw momentum in the share price of 1&1 and that we acquired some shares first over the counter through the stock exchange. And secondly, from one investor. And -- but there's still no intention to go for more shares, to go for a higher stake to have a delisting or a squeeze out or whatever. We clearly said, and this is still valid, we like to focus on the rollout of the 5G and the governance structure will follow. But currently, it is clear that our clear goal is to concentrate on the 5G rollout. With respect to the level of the leverage, we have so far a very good level of leverage during the last years. Even with the increase of the net debt, we are still below a leverage of 2.0. Currently, I think it's 1.8 from the bank point of view, so even a little bit lower if you look from the last 12 months of 2020 compared. And therefore, this is a good leverage. But clearly, if we have to invest into the 5G network, this will definitely maybe increase a little bit. But even there, we are still of the opinion that this will not impact the company dramatically. On the question of the 51% stake of Mr. Dommermuth and whether this will lead to additional rights of Mr. Dommermuth. You are totally correct, Polo, that this will not lead to additional rights of Mr. Dommermuth. But from my point of view and as I said, I'm not a shareholder, I'm the Board member, I think to have 51% is always clearer as to have 46% and depending on majorities or not coming investors in the Annual Board meeting. So therefore, 51% gives you a clear view that you have always the majority. But as Mr. Dommermuth also said in recent press releases, there's no intention at all to take the company private or to increase the stake even higher.

[Operator]

Our next question is from Joshua Mills, Exane.

[Joshua Andrew Mills, Research Analyst]

A couple of questions from my side on IONOS. So we've seen the recent press reports that you're planning or were thinking about an IPO as early as, you said, next year. There's been a lot of discussion about an IPO of that business, I think, since 2015 or '16. So what's changed now that you think makes the circumstances more appropriate for doing an IPO of the IONOS business? That's the first question. And then the second question, just on the results themselves. We've obviously seen some margin compression this year as you accelerate the sales attack and put more money into marketing. What do you think the realistic EBITDA margin is that you can get to in IONOS and how quickly do you think you can get there? Do you think that that's a 2022 margin improvement story? Or will you need to keep spending more for longer?

[Martin Mildner, Group CFO & member of Management Board]

Also thank you from my side for your questions. Let me start with a question regarding the IPO. You are totally correct that the IPO was always in the mind of United Internet. And in 2016, we decided not to do an IPO, but to take Warburg Pincus on board and to give the company a little bit more time to growth under a private umbrella. And if you see the development from, I would say, 2015 to today, this is a great development. And the business of IONOS is really strong and stable. And you know that Warburg Pincus is a private equity investor. And we have to think at one point of time about the exit strategy. And what I always said is I think that the IPO is a really good way for Warburg Pincus to turn the investment into a cash back. And from the United Internet side, I think the IPO is an excellent way to be able to have a company bringing on the stock exchange with really solid and strong revenues and earnings. And this gives us also flexibilities in the long run on the United Internet side to be able also to think about structuring the group in a different way at some point of time. I think this is really important. And you know that with a listed company, also from our point of view, this is a more -- a better way to think about also a different structure. But from the business perspective, and this is the most important topic, we think that IONOS is really now able to go to the public market to -- as I said, to have the right revenues, the right and strong earnings. And therefore, IPO is, from our point of view, the right next step for IONOS. And whether this will take place in 2022 or 2023, we did not say so far when we are planning it. But what we always said is that we like to be IPO-ready in 2022. And therefore, this is exactly in line with our ad hoc announcement in March and also what we always said in our analyst and investor conferences that to be ready for an IPO, you have to prepare a lot of things. And one of the things is also to look at the right banks who could assist you with respect to the preparation of an IPO. And therefore, from our view, we are really on track. And I said that we'd like to be IPO-ready at the end of this year. And I think that we, as I said, are on the right track and in the time line, which we anticipated. On your question regarding the EBITDA margin improvement, I think this is a really complicated question because if you look at peers, I do not see a lot of peers or I don't know whether there is 1 peer who has these kind of strong EBITDA margins. And what I reported today is that we -- even with a high additional investment in these growth initiatives, our EBITDA margin is still above 30 which we always said and what we always like to reach. From my point of view, with respect to the strong business of IONOS, this EBITDA margin will increase over the years again to high numbers. But on the other hand, if you're talking with investors, if you're talking with analysts, they are always asking why are you not spending more on the revenue growth and taking a hit on the EBITDA margin? So therefore, this is really, as I said, a complicated question, and you can see it always from 2 different sides. And we think that with these kind of investments, with a really good growth rate of nearly 10% for the first 9 months, we are really super satisfied about it and we still see a really good and attractive margin. So therefore, this is what we are anticipating also for the future. But clearly, the business can be driven in a way that you can also increase the margin over the time again. But the clear question is what the market is looking for. Is it looking for growth? Or is it looking for margin? And the answer is always, they like to see both. And therefore, we really have to think carefully about where we -- how we like to drive the business. And currently, we always said that we like to have a margin, which is always with a 3 in front of it. But whether it's 31% or 36%, I think currently, we are focusing in this corridor more on the growth rates on the revenue side than on the EBITDA side.

[Operator]

Then we go to the last question. It is from Jakob Bluestone, Credit Suisse.

[Jakob Bluestone, Research Analyst]

I had a few fairly brief questions. Firstly, just on IONOS. Can you maybe comment on the sensitivity to energy price inflation? And perhaps, I don't know if you're able to give us a sense of how big energy costs are for that type of business? Secondly, on the Consumer Apps business, you've obviously got very strong margins. I'm just interested if you're able to comment on the sustainability of those margins? And then just finally, a slightly specific question. If Mr. Dommermuth does proceed with his offer of EUR 35 per share for 17 million shares, is there some point where the Board would have to give a recommendation?

[Martin Mildner, Group CFO & member of Management Board]

Jakob, thank you very much. Let me start with your last question with the offer of EUR 35 per share and our statement from the company. So from the German law perspective, of course, we have to give a statement on this, but only if there is an official announcement for takeover from Mr. Dommermuth, a private takeover. And therefore, please apologize that I cannot say anything up front to it and that you have to wait for this. As soon as the announcement is there, we have to give our view on this. But so far, I think I cannot comment on this. Regarding the [ MediMedia ] strong margin and the question of the stability of these margins, I think they always had really strong margins. But what we really see that there is some kind of effect that if you have a good, good revenue growth that at some point of time, the revenues is falling down directly into the EBITDA, and then you have really strong EBITDAs. But even without strong growth rates in the past, especially in the last year, you see that they still have a really good and attractive margin. So therefore, of course, we have a really high margin at the moment, but I would not doubt that the stability of the strong margins even there, if you do not have or if you would not have strong revenue increases. And let me see, do you know the margin of the last year? I look at Stephan. Yes. And the last year was 40%. So therefore, even this is pretty strong. So therefore, I do not see any risk. With respect to your last or your first question regarding the energy prices of IONOS and the sensitivity, I think Stephan can give you a better view on this.

[Stephan Gramkow, Investor Relations Officer]

Maybe some rough numbers. So our energy cost has increased by around 10%. And we talk about an annual effect of between EUR 1 million and EUR 2 million for -- so talking about 2021.

[Operator]

The next question is from Ulrich Rathe, Jefferies.

[Ulrich Rathe, Senior European Telecommunications Analyst]

Two questions. One is on IONOS again. When you talk about the margin investments, you talk about cloud and internationalization. The cloud, I understand. What exactly are you spending on when you talk about internationalization? Can you just underpin this a little bit with what sort of cost categories there actually are and how that actually drives growth? And then also on IONOS, the subscriber, I mean, you mentioned the revenue growth, which is fantastic. The subscriber intake is a bit more unremarkable. It's going a bit sideways, I would say. How do you see that unfolding? I mean, last year, you probably had a bit of tailwind from brick-and-mortar shops that were forced to go online as fast as possible during the pandemic, and that petered out. But is there a way to grow the subscribers faster than what the current run rate? And my second question is with regards to Versatel. I mean, one of the big uncertainties for United ex Drillisch is the CapEx outlook there, given that it -- Versatel will have to spend part of the money for the network. Is there any -- without sort of laying out what the Drillisch budgets are, can you talk about the CapEx outlook for Versatel for 2022? That would be helpful.

[Martin Mildner, Group CFO & member of Management Board]

Let me start with the more easy question on Versatel, the CapEx outlook for 2022. So in 2021, there is no CapEx outlook for Versatel because there is no CapEx on their side. There are some minor OpEx investments in Versatel, but I would say that these are not really high. On the CapEx side, of course, for 2022 and also onwards, we always said that we'd like to give you a bigger, broader picture in a total view as soon as we have the entire picture. And Markus Huhn explained earlier in the 1&1 webcast that they are still in negotiations, especially with the tower cost. And therefore, as long as we do not have the entire picture, we really not like to give you already some indications. But to have really the entire picture from the Versatel perspective, from the 1&1 perspective and then, of course, consolidated also from the UI perspective. But what I can say is that the 1&1 plan for the 5G rollout was always structured in a way as if they would invest entirely. So in our plan, there was at no time an idea 1&1 has not to invest and who is investing, it doesn't care to us. It was always more coming from the UI perspective to have an overall picture and really to now separate the 2 different companies and keeping really in mind also that we, as United Internet, are clearly aware that we have also 2 shareholder classes, yes. So there's 1 shareholder class in the United Internet and that there's also shareholders in 1&1 and that we always have to make sure that the agreement between 1&1 and Versatel are purely on arm's length conditions and if whether 1&1 would be a third party, yes. So therefore, please apologize that I cannot give you a clearer figure answer on 2022. But that we have in clearly in mind that this is -- that this has always to be an entire picture from the UI perspective, not only from 1&1 or from Versatel. On your questions regarding IONOS. The first question, if I recollected correctly, was where we are investing in the cloud initiatives and also in the internationalization. So first, internationalization means for us that we try to open new markets like, for example, in the eastern part of Europe, where we try to really to focus us on driving these companies not in, for example, Romania, but for example, from Poland or from Germany, and to increase our stake in these companies. But internationalization means also that we strengthen our current presence, for example, in the U.S. or in Mexico or where we are in this world yes. So therefore, it is really to strengthen our footprint outside of Germany. In the cloud business, I think this is really more from a structural perspective. Of course, we are coming from a hosting company. But you clearly know that even the hosting business is not a hosting business as it was maybe 5 years ago. And therefore, what we are really trying to achieve within our initiatives on the cloud side is that we attract new customers but also current customers to go more the cloud business, which means for us, especially that you have this public cloud where you do not have dedicated servers anymore, but your storage, your data's in a cloud where you are able to have a website and that you have then also the possibility to have upside and cross-selling effects that you're starting with your website that you are then using storage volume from IONOS in the cloud environment, but cloud means also that we have good success also with public authorities. What we saw also during the pandemic crisis is that there's a big need from authorities, from schools to go into the digital world and to have a school platform. And you know that we are running together with the [ HasoPlatnar ] Institute for I think, 9 of 16 states in Germany this good platform. And this is also cloud business, and this is where we are investing and that we are really having better products, that we have good services, that we have stable servers with really high speed and with a good reaction time, yes. So therefore, you cannot say directly where I'm investing and this is a combination of different things where the need is to go more digital. And last but not least, your question regarding the subscriber basis. Of course, you are totally right, and you see this with all of our competitors that there was some tailwind from the pandemic in the last year. But nevertheless, we were really able to increase still our customer bases also in this year. And therefore, this is something where we are really proud about it. And of course, it could be always better, but at least it is not a decrease, and we see that our customers have some kind of stickiness and that they are really coming also from upselling, cross-selling and that the churn is going better and that our products are really working, yeah? So therefore, we think compared to last year, of course, you can always grow faster. But as I said, we are still better than the last year. And therefore, this is, from our point of view, a really good sign that our products are working.

[Operator]

The next question is from Adam Fox-Rumley, HSBC.

[Adam M. Fox-Rumley]

I have 2, please. Firstly, on Versatel. I was wondering if you could say a little bit more about the apples-with-apples comparison that you referenced in your prepared comments. It would be helpful just to know exactly what it is that you're calling kind of in and out of there? And then secondly, just to build on that prior question on the growth investments in IONOS. You've obviously called out that explicit extra spend this year, but your reported numbers come after that. So when you look forward to 2022, and in light of your comments about investment driving growth and that kind of thing, do you think that you will carry on calling out an explicit investment? Or do we just need to kind of look forward that, that money is going to carry on to be spent in order to drive that growth?

[Martin Mildner, Group CFO & member of Management Board]

Also, thank you from my side for your questions. I will take over the question of Versatel to Stephan, but let me answer first your question regarding IONOS. I would say that if you remember what I said maybe 1 year ago, that we are looking with respect to the growth initiatives of IONOS -- or 9 months ago with the growth initiatives of IONOS, that we are looking more in the long run to have an increase of probably, at some point of time, 10% over the years from the revenue perspective and that we are now really close to this 10% already in this year, that this shows that we are really on a good track, that they do a really, really good job on the management side. And if I have a little bit more of the outlook for the future, I think it turns really out that our products are working and this is where we're coming back what I said earlier. We really see a good momentum that this drives to more revenues, that the customers have more stickiness, that they will have less churn. And this will all reflect then in good revenue growth, which are maybe also at some point of time even higher than 10%. But what I really clearly see is that we can turn back also from the earnings side to better EBITDA margins over the time. Yes. So therefore, our plans are clearly not in a way that the margins are still in this region of 30%, but that we are able to increase the margins also over the time. But again, and I said this before, it's really depending also a little bit what the market likes to see, whether they like to see even stronger growth on the revenue side, or whether they accept that IONOS is really a stable and mature company, where you do not need hyper scale growth above 20%, 30%, and that they are accepting to have less revenue growth, but really high margins. So therefore, this is also something which we are really discussing internally what is the best way and -- but as always, this is also a little bit what the market is expecting. So on the Versatel side, I think, Stephan, could you answer the question?

[Stephan Gramkow, Investor Relations Officer]

Sure. Thanks. So Adam, on your Versatel question, as Martin already explained, we changed the business model a little bit in Q4 last year, focusing now on recurring revenues. So what they have taken out is a little bit of their project business, but also providing IT equipment to their customers, which is -- for them was a low-margin business. And if you take that out last year, but also this year, so that would bring top line revenues from 4.4% in the 9 months to 7%. And just looking at the third quarter, that would have been 5% or to be accurate, 4.9% instead of minus 0.6%. And it will -- in Q4, it will be apples-to-apples again because it was already out end of last year, so which means that it normalizes from next quarter onwards.

[Operator]

The next question is from Usman Ghazi, Berenberg.

[Usman Ghazi, Analyst]

I've got 2 or 3, please. So the first one is just picking up, Martin, around a comment you made initially when we're talking about 1&1. You said the 5G investment kind of plan comes first and then the governance will come as well after that. So just, I mean, could you give some color as to what you meant by kind of improving the governance or changing the governance, et cetera, at 1&1? So that was the first question. And apologies if I misread that. And so that was the first one. The second question, again, is just going to IONOS. I mean it's clear that your existing base, I mean, your up-selling is working much better now than it did 3, 4 years ago. The public cloud clearly is a growing part of the revenue pie, and that's probably growing at a stronger growth rate than the blended growth rate. So I mean, are we in a situation now where the 10% or that is being delivered now, I mean, the drivers are in place for that to continue to creep higher? Or is it a situation where you would expect that this is kind of a high point and that growth is really between 5% and 10% rather than we should expect it to be hovering at around 10%? So that was the second question. And then just going to Versatel. I know in the last quarter, you had mentioned that you would entertain discussions with infra partners, and I was just wondering if there was any update or additional thoughts you had on that front.

[Martin Mildner, Group CFO & member of Management Board]

Usman, thank you very much for your really good questions. So maybe let me be more precise, and you did not misunderstood it. But what I said is, of course, on the 1&1 side, we like to concentrate also on the rollout of the 5G investment or the rollout of the 5G network, and then we will concentrate on the governance. Of course, you always -- not only you, but all investors are asking us what is your long-term view on the governance of 1&1. And what I think what we have to do is, at some point of time, we have to see whether we should have 2 listed companies with United Internet and 1&1, or whether we have to think about a different governance structure on the 1&1 side. But we did not discuss this so far. We did not discuss any ideas so far. And I can imagine that there could be a lot of solutions or a lot of things. It could be ongoing like it is today. It could be that we take over 100% in 1&1. It could be that we think about a merger. There are several ideas, and I heard all of the ideas from the investor side. But we did not discuss these ideas so far, yes. And therefore, what I'd like to say with the sentence is only we know that we have to concentrate first on the figures, and the figures are really relating on the 5G network. And secondly, if these figures are as we like to have them, and then we will think about the structure. But first, we really concentrate that we will deliver what we like to deliver to the shareholders, to us as United Internet. And then we will think about the governance. So therefore, it's not a misunderstanding, but it's only the steps I would describe, which we will do in the next months and years, but we really have to concentrate on the 5G network and not on the governance. This is my view on it. On your IONOS question, I think, is the 10% the highest point. I think I mentioned earlier that I do not think that there is the end of the horizon to see, yes. But we are not really in a guidance, and I cannot give you any clearer number. But what I'd like to stress again, and I said this before, we have a really strong and good development in IONOS, and we are much, much better than we expected at the beginning of the year. And we see clear momentum that this is linked not only to the outside environment, but really to the basis of our customers, to the stickiness of our customers, to the loyalty of our customers. And this is always referring or this could only take place if you have the right products in place, if you have good products, if the customers are believing in the product and that they are thinking that these products are the right products for them. And there, I can say we see the right momentum. We see the right development. And therefore, I would say we are really proud that we already are close to the 10% growth rate. And hopefully, this will be not the end of the horizon. Last but not least, your question regarding Versatel, I would hand over again.

[Stephan Gramkow, Investor Relations Officer]

Okay. Then I -- maybe could you rephrase your question again regarding Versatel because I will not say anything wrong and not for your question then.

[Usman Ghazi, Analyst]

Sure. Yes. I think in the last quarter, we were discussing that infrastructure funds were willing to take a minority stake, yes.

[Stephan Gramkow, Investor Relations Officer]

Usman, thank you. I think Mr. Dommermuth said this. I said this in some investor and analyst conferences. We always link this to the now announced joint venture of Deutsche Telekom. And we also see a clear good development in the infrastructure business in Germany. We see a good development in the new government from Germany, which is now coming with the new correlation. And therefore, infrastructure will be really a hot topic. And in fact, that Versatel is a part of this infrastructure business, is a big part to be the backbone for the fiber network and for the transportation network to be able to transfer all the data from our antennas from 1&1 to the data warehouses and so on. I think we have to think about the development of Versatel. And if you connect the antennas, from the building to the network, there are so much potential synergies that you can really go to the home passes, which are on the way of the fiber line, that we would be stupid not to think about it. But it's clearly too early to say what we like to do and then what kind of ranges we like to do it, whether we like to do it by ourselves, whether we like to do it with a partner. If we like to do it with a partner, you can think about several possibilities. Will you deconsolidate it, which was the main aim for IONOS and for Deutsche Telekom, will you consolidate it still? What kind of investments do you have? All these questions really have to investigate, have to be considered. But it's too early to give you any more flavor on this. But what I clearly can say that Versatel is in an environment, which is really a hot topic and where we like to be a part of it, and Versatel is one of the market leaders in this segment. So therefore, we would be, as I said, stupid if we do not think about it.

[Operator]

The next question is from Nizla Naizer, Deutsche Bank.

[Fathima-Nizla Naizer]

I have one final question from my end. In the event that there is an IPO of IONOS, would United Internet also want to monetize a part of their stake and convert that stake into cash on the basis that you would need maybe additional liquidity to spend on 5G network rollout? Or is this not the case? Would you continue to be sort of an important shareholder in IONOS without needing to sell any of your stake in the company? Just trying to understand how you would connect that to your liquidity requirements going forward.

[Martin Mildner, Group CFO & member of Management Board]

Nizla, thank you very much for your great question. And for -- this is something where we thought a lot about it, yes. So first of all, I can repeat what I said earlier in the half year's result or Mr. Dommermuth also said this, why we acquired 8.4% and IONOS to have 75.1%. First of all, I think that the main aim was to be really in a good position to drive the IPO in the direction how we like to have the IPO, and this is not from a governance perspective. This is more from a how much shares we like to have and what is the possible free float we will need, yes. And our expectations are clearly that there will be not more than 25% free float needed in the market with a transaction volume which is probably above EUR 1 billion. And if you have this situation, I think this is a good, good situation then to think about from the United Internet perspective, whether we like to stay with the 75.1% or whether we like to give also some shares into the IPO from our side to have a return on our side. But currently, I would say we do not need any money from the IPO. Our plan is more to stay in the company, to stay really as a long-term invested shareholder in the company. And if it's needed that we will give some shares in the IPO, in fact, that this gives a better IPO or a better structure, then we will think about it. But currently, we clearly stated that we like IONOS. We like the business. We believe in the business, and we'd like to stay long-term invested in the company. And if you're looking only from a cash perspective, so not from a balance sheet perspective, but from a cash perspective, you know that we still have a shareholder loan of roughly EUR 1.3 billion given to IONOS from United Internet. And even there, we can think about a recapitalization and a repayment of the EUR 1.3 billion, then we would have a better cash position. But even this is currently not planned. So our view is really, we like to see what structure is then necessary or helpful for the IPO, and then we will make our decisions. But so far, to make the IPO from a cash perspective for United is not really the intention from our side to run the IPO. The intention is really to give Warburg the possibility to make their exit and to give the company the possibility to be on the stock exchange and have acquisition power, I would say.

[Operator]

There are no further questions at this time. So I would like to hand back to you for some closing remarks.

[Stephan Gramkow, Investor Relations Officer]

Thank you, operator, and thank you, everyone, for attending our today's call, also on the behalf of Martin and Dominic. Please do not hesitate to get in touch with Dominic or myself for any follow-up questions. Have a nice day, stay safe and goodbye.

[Operator]

Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect.