United Internet AG (UTDI) Earnings Call Transcript & Summary

[Interpreted] Ladies and gentlemen, welcome to all of you here from Montabaur. I hope you're all fine, and we are happy to have you all here for our 6 months 2020 webcast. I'm Dominic Grossman of the Investor Relations department. Today, we've got Ralph Dommermuth here and Frank Krause and members of the Board. And Stephan Gramkow is also with us. We would like to start straight away with our presentation. Mr. Dommermuth will walk you through the operating development of the first half of the year, and he will also shine a light on the second half of 2020. Then Mr. Krause will share the financial information with you after our presentation. As usual, you will have the opportunity to ask all of your questions in our Q&A session. Having said that, over to you -- over to Mr. Dommermuth.

[Interpreted] Ladies and gentlemen, welcome to our 6-month conference. I will, first of all, walk you through the company development. Most of you, I believe, will be familiar with our business. We've got Internet access and Internet applications to business field. We have a motivated team of roughly 9,500 employees. We have got -- found sales strength. We've got 64 million accounts in 12 countries, and we operate 10 data centers. In data -- in Germany, we have a powerful network infrastructure, adding up to 49,500 kilometers. We run services for both companies and customers. This is why we break down assets and applications into consumer and business and Consumer Applications and Business Applications. Our main brand on access side is 1&1. We also have brands from the Drillisch takeover in the discount segment. In the application business, we offer our consumer product, GMX, WEB.DE and mail.com. The advertising space is marketed through United Internet Media. Corporate customers in the applications area rely on IONOS by 1&1. The -- then we have further brands starting from acquisitions, home.pl, Arsys, STRATO, Sedo, InterNetX, to name just a few. we also hold investments in partner companies within [ the cooperators ] closely. They're always above 25% and below 50%. We hold 29.9% in the publicly listed Tele Columbus AG. Let us get started with Internet Access H1 figures for 2020. Consumer Access, we offer fixed-line services here. We are the largest alternative German DSL provider next to Telekom. We've got an outstanding network quality. Once again, this year, we have one connect fixed-line test. The last mile is organized through VDSL vectoring. We produce that on a Layer 2 basis, relying on the regional network of Deutsche Telekom, meaning our layered infrastructure is connected with transition points of Deutsche Telekom. we also have a Layer 3 business wherever we don't have any transition points. We also offer fiber-to-the-home via city carriers, meaning we cooperate with NetCologne, for example, and we use the fiber optic connections there and connect them with our transport network. We also have ADSL connections in our portfolio connections with up to 16 MBit. Well, we don't produce these connections ourselves. We rather buy them as advanced service. This business is going down, and we are not interested in any manufacturing [ players ]. Now over to the mobile business segment. We have Germany's leading MVNO operator. We address the market through our main brand, 1&1. We have co-brands, GMX and WEB.DE, with our portal brands. And we also have discount brands here from the Drillisch takeover with which we operate in the low-price segment. our advanced services are procured from Telefónica and Vodafone. Now Consumer Access. In the first half of this year, we added 240,000 contracts, up to 14.57 million contracts in the second quarter. 140,000 contracts were added alone. The growth is supported by the business with mobile Internet access, and the broadband connections are more or less stagnating. Revenues first, EBIT next. Revenues went up by 4.1% to EUR 1.867 billion. The service revenues went up, and this is the important [ set ] because we have higher margins there. The service revenues went up by 3.1%, and that also includes a EUR 4.6 million decline in revenues, resulting from the corona pandemic. We are missing international roaming turnover here. The low-margin hardware revenues went up by 8.6%. But as I said, this is a low-margin business, and that doesn't substantially contribute to adding value. Now if you adjust everything for pandemic effect, then revenues went up by 4.4%. Now the EBITDA figures for Consumer Access, minus 2.7%. That results from special effects, minus EUR 13.7 million compared to the previous year, higher cost for subscriber line charges. We have a new regulation in place here, and we also have a tax message regulation here. These were costs incurred through the EU in May last year. Last year, that price was EUR 1 million. This year, the price is EUR 13.7 million. Now to build our 5G network, we incurred cost of EUR 5.6 million. Last year, in June, we participated in a frequency auction, and now we are preparing the production of the network. And these costs were EUR 5.6 million compared to EUR 1.9 million. Drillisch integration has made a lot of progress. The costs were EUR 400,000, while in the prior year, the costs were EUR 2.3 million. We have had additional cost of EUR 10.2 million from temporary change in behavior caused by the coronavirus pandemic. Our customers use the telephone more often for telephone calls. and especially for mobile phone calls, we have to buy advanced services, and this is why we have these higher costs. EBITDA margin, only 17.7% compared to the previous year of 19%. If you adjust the figure for the aforementioned effects, then the EBITDA would have gone up by 4.5%. Over to the second segment, Business Internet Access. We operate one of Germany's largest fiber-optic networks. We offer project businesses all over Germany, and we also offer local and medium-sized solutions for medium-sized companies. our network has grown by 1,800 kilometers. Now we operate 49,495 kilometers. We are active in 250 cities, among them, 19 out of the 25 largest cities. And we connect our network with transition point of Telekom for VDSL vectoring. Companies and authorities can also get a direct connection to our fiber-optic network, and that allows services exceeding 1 gigabit [ by far ]. Now revenues in that segment were up by 3.1%. The figure now is EUR 241.5 million. However, in the first half this year, we generated EUR 8.2 million less than in 2019. That is due to services that have to be rendered in connection with 1&1 Drillisch. Then as there was revenue increase of EUR 3.1 million because of a stronger telephony business due to the coronavirus pandemic, very often, we don't offer flat rates to companies but bill by the minute. And this is why we generated an additional EUR 3.1 million. I will give you a feel for the development of our landline network. In the second quarter, we had a voice peak that was 105% above the peak we observed before the corona pandemic. And in the Internet, we had the peak of 54% compared to pre-pandemic values. Our network, it could cope with everything well. And in this period of time, we have won the connect landline test, but it was a considerable performance behind that of our team. Now if you just take a look at the core business, the B2B and wholesale without the services for 1&1 Drillisch, they are gone now but they were still in place in 2019, then our business in the core has grown by 6.8%. If you subtract the additional money from the telephony side- so if you subtract the pandemic effect, in other words, then the figure is 5.4%. EBITDA grew by 6.7%. once again, we had effects from the expiry of services for 1&1 Drillisch. We've got EUR 3 million here, and we had another effect from the stronger telephony business, and that contributed to the result, EUR 900,000. The EBITDA margin is 31%. If you take a look at a like-for-like basis, then the business has grown by 12% or 9.9% without the pandemic effect of a stronger telephony business. Then take me to the application side of our operations. Let me get started with the consumer side here first. We used to be an e-mail provider. And now we want to provide center communication and identity management services. You see various applications here: communication, organization, cloud storage, online office, De-Mail. This is everything that we offer to our customers. We have a good market position. In particular, in Germany, we've got 33 million active user accounts in Germany, and that corresponds to a market share of more than 50% when it comes to privately used e-mails. in other areas, we also have a very powerful position. for example, when it comes to secure e-mails, when it comes to cloud storage or when it comes to the content reach and also in the era of ID management, we are doing well. Contracts, Consumer Applications. Good growth. 920,000 new free accounts in the end of the year. Now the figure is 38.51 million accounts. And 50,000 new paid accounts were added, 40,000 in the second quarter, 25.8 million users using our mobile app -- our mobile web application, and we have 20.1 million cloud storage users in our company. Now Consumer Applications revenues up 0.3%. They're up 0.9% on the paid account side and the portal marketing business, which is our core business, even though we had minus EUR 4.2 million due to the restrained behavior of our advertising customers. Well, this is a low-margin business. You can see that on the side -- on the left side, we had a decline of 24.1% in third-party marketing. The core business, without the pandemic effect, has grown by 4.5%. Now EBITDA, minus 0.6%. And that can be traced back to the effect of the pandemic, all in all EUR 3.4 million. The EBITDA margin is now 39.3% instead of 39.6% in the prior year. The EBITDA is comparable. Without the pandemic effect, it's slightly better at 6.6%. Last but not least, the Business Applications area. We are developing ourselves to a e-business solutions provider. We want to support our customers around all the business that is made online. We offer a lot of tools to our customers here. In Europe, we are leading. We are active in 12 countries. In Germany, Spain, Poland, Austria, we are #1. In the U.K. and France, we are the #2 company. In the U.S. and Canada and Mexico, we are also active. Most of our products are developed in-house and are offered through our data centers. 170,000 new contracts were signed in H1, 110,000 thereof in the second quarter. We have 4.3 million contracts abroad and 3.98 million domestic contracts. Revenues went up by 6.4% to EUR 471.6 million. This is due to the customer growth and up- and cross-selling efforts. And this is also due that our domain parking business developed better than initially planned. Now this is the EBITDA slide, up 13.1% to EUR 167.8 million. We reduced our marketing expenses here though. last year, we had high marketing expenses also because of the rebranding efforts. In the past, the company was called 1&1 Internet, and now it's called IONOS by 1&1. If you subtract the marketing expenses, then the EBITDA growth would have been 6.7%. The EBITDA margin now is 35.6%, a nice growth compared to the previous year. Now here, we've got the major KPIs on one slide. For the very first time, we have more than 25 million customer contracts in the group, 25.2 million to be precise. Revenues went up by 4%. EBITDA went down by minus 1.5%. The same is true for the EBIT, minus 1.4%. The operative result per share has grown by 8.9%. And if you subtract the purchasing price allocations, then the growth is 7.9%, and we have a net result of EUR 1.23 per share. Now compared to the previous period, we had to factor in the following effects. Last year, we had extraordinary income from the sale of virtual mind shares that amounted to EUR 21.5 million. This year, we had additional expenses of EUR 13.7 million resulting from regulation effects. Minus EUR 5.6 million initial 5G costs compared to minus EUR 1.9 million. Then the integration of Drillisch has been less costly, only EUR 400,000 compared to EUR 2.3 million. And all in all, we have profit dances due to the coronavirus pandemic of EUR 12.2 million. And adjusted EBITDA would have gone up by 3.6% and the EBIT would have grown by 11.4%. I will give you an outlook for the current year now. We expect that we will add 4% to our revenues. The runway that we've got currently will be maintained, and the EBITDA will be on the previous year's level, meaning in the first half of the year, we had an EBIT decline of 1.5%, and we want to catch up in the second half of the year. And at the end of the year, we want to end up more or less on the value of the previous year, give or take. The question is how will the effect of the coronavirus pandemic of our business be. Our business is a subscriber business, if you neglect the advertising marketing. And I believe that we will make our way through the crisis well because the products that we offer are still needed by both consumers and companies. Everybody needs a cell phone. everybody needs an Internet connection or a website or cloud storage or fiber optic connection as a company. I believe that we are on the right track to deliver on that guidance. This much from my side, and I will hand over to Mr. Krause now, who will walk you through the detailed figures.

[Interpreted] Thank you very much, Mr. Dommermuth. I also would like to welcome you cordially to our analyst conference for the first quarter. As always, I would like to give you an overview of the main changes in our balance sheet as per IFRS. In total, our balance sheet [ total ] has hardly changed, and it's still at some EUR 9.1 billion. A possible look at the asset side of the balance sheet. With property plants and intangible assets, we see hardly any change at all because investments and depreciations are at a similar level. Then we've got goodwill and financial assets have remained unchanged. However, accounts receivable have slightly increased as per the deadline. The increase with contract assets is due to investments in the generation acquisition and generation of customers and customer loyalty. With inventories and deferred expenses, we see an increase due to having hardware available. We have a strong hardware business, which also includes -- which also causes the increase in other assets. Cash and cash equivalent has now returned to its regular level, a usual level of EUR 54 million. After the year before, we had a higher value here due to the Rocket [ pressing ] and the Rocket development. Let's come to the liability side. Let's start with equity. And equity from EUR 4.8 billion, we have a solid equity ratio of 52.3%. Liabilities to banks of EUR 1.514 billion are in line with the leverage as per the 30th of June 2020 of 1.28 as per EBITDA -- compared to EBITDA. The other liabilities positions are almost unchanged as of the 30th of June 2020 at the end of last year. other liabilities actually increased towards the end of the year by the 5G frequencies. We now have another increase due to new long-term rental agreements. And finally, let's look at the corporate key figures as an overview. Customer contracts of 910,000 in the last 12 months. Consumer Access contributed 650,000, Business Applications to 10,000, and Consumer Applications was 50,000 contracts each. In Consumer Applications -- in the computer application segment, the contract numbers in Consumer Applications increased in the second quarter- increased by 40,000. Revenues and EBITDA were already explained to you by Mr. Dommermuth. And he also explained why the numbers shown here by minus 0.5% and minus 1.4% of EBIT and EBITDA are quite positive if we adjust for the special effects. we should also mention the increase in operative earnings per share and the strong free cash flow of EUR 211 million in accordance with the IFRS 15 in the first half of the year. Thank you very much for your attention, and now we are very happy to answer any questions you might have.

Yes. Thank you very much, Mr. Dommermuth, Mr. Krause. Let's start with the Q&A session and the first questions, please.

[Interpreted] [Operator Instructions] The first question is by Martin Jungfleisch of Kepler Cheuvreux.

[Interpreted] I've got 2 questions, both on Business Applications segment. Net adds in Q2 were very strong. Could you give us a -- some insight on the average revenue and the [ acreage ] by the customers. Is this roughly on the same level as the existing basis or is this higher? Or are you hoping to upscale further? And marketing revenue -- marketing expenditure was slightly decreased. Do you know what margins -- or can you tell us what drove the margins in the first half and in Q2? And was there any special effects, such as, I don't know, COVID-19 depending savings? And my second question also is about Business Applications. There was the news that IONOS, [ Beschler ] and Megaport were building a school cloud for [indiscernible]. Is there -- do you have any insight on the contribution to revenue? Or is that nothing to talk about yet?

[Interpreted] Let me answer the questions. First of all, as you just said, we've got the strong customer growth in Business Applications, 60,000 net add in the first quarter, 110,000 in the second quarter after we had 90,000 in the total of the last year. So it's very strong. But -- and I think we've have that before when we talk to you beforehand, we do have some introductory plans so low customer likely [ result ] -- well, we've got a lot of start-up plans. So I wouldn't simply continue these. So that will be my statement on that. And your question on the marketing expenditures. Well, it is a seasonal business. We have to see what makes sense, when it makes sense and what the seasonal business is like. So even if you look at the consensus, the deviation, if you look at the lower marketing expenses in Q2, it's definitely not the level that we wish to maintain in the future. So there will be other seasonal effects and fluctuations. So we'll look at this when we get there. And further, your question regarding the [ Beschler ] contract, it's a bit early to say anything about that. So we are happy that we've reached the status that we have.

[Interpreted] The next question is by Simon Bentlage, Hauck & Aufhuser Privatbankiers. [Technical Difficulty] So far, we haven't heard any question. Hello? Now we can hear you.

[Interpreted] Okay. So let me repeat. I have 2 questions. One is about the Business Application segment. My question is customer growth in the past 2 months of Q3 and what you're expecting for the second half of the year. My second question is about the -- your investment at Tele Columbus. There were some report that an investment bank might be interested and [ lighting ] or looking at possibilities. So what is your opinion on these investments? Is it strategically important? And what your opinion might be on such an asset deal as has been talked about?

[Interpreted] Thank you very much, Mr. Bentlage. Well, we cannot say too much yet about the third quarter yet. But if I look at the first indications and if I look at July as a month, of course, we know the numbers for July, we are in a similar level as we saw in the second quarter, I'd say. As regards to Tele Columbus, Tele Columbus is in a process where they're finding a strategy. The capital markets knows it. We know it. And we are waiting until they've ended this process and see what happens. And then we'll see whether it's going to have any impact on us and whether it changes the situation that we have today with Tele Columbus.

[Interpreted] All right. Any -- and if I may follow up, is there any direction that you would prefer with Tele Columbus? Or are you completely open and flexible?

[Interpreted] I think on the whole -- sorry if I give you somewhat trite answer. But -- well, we always think about how can we increase the company's value, and we've got medium-term and long-term strategies in doing so. And I think in principle, we like to keep investing and -- to invest in customers, but it also has to make sense for us economically, has to be good business and that we have an actual opportunity. Which actual setup this will be, we're open in principle. Currently, Tele Columbus is having this process of finding their strategy. We'll have to see -- wait and see how their process ends of that precedent, and then we'll have to look at what's open. But in total, on the whole, we're optimistic, and I cannot tell you any more at the moment because I simply don't know anything else at the moment.

[Interpreted] The next question is by Mr. Ulrich Rathe of Jefferies.

[Interpreted] Yes. I have a question on the Business Applications. We've- let me -- what is the reason for this combination of marketing costs being so low and customer contracts have increased? So if it wasn't extraordinary quarter, we got a cost for whatever reason, what would you say what is the margin in this business? I mean you can drive growth by margin and vice versa. So if I may ask the first question, the Versatel business, I'm not quite sure about this project business. And project in the second quarter, was it intact? Or was there -- was it hampered by the coronavirus pandemic?

[Interpreted] Right. So if you -- IRUs in the project business, there have been no project business. No IRUs, so normal business, regular business. We're expanding our network. We are renting out our network. And of course, in the second quarter, we've lost speed because in distribution, we were able -- we're not able to take as many -- make so many calls as we wanted and to have as many customer visit as we wanted. And our expansion didn't -- building up the network didn't go as fast as we wanted. So if it happened up to us, EBITDA and sales would have increased more strongly than what we see. Part -- well, we had some conditions that we had were posed on us in the second quarter that weren't optimal for our business. But the businesses, as we've described, there are now special factors with regard to either income or cost. So this is already a regular business.

[Interpreted] Mr. Rathe, Let me talk -- answer your question with regards to the business segment, why marketing and, in particular, in the first half year was lower than in the previous year on the first quarter of this year. I think it's quite simple and quite easy to be answered. We've spoken about being engaged in a rebranding process, and the rebranding process has informed the process last year. We always said we are very careful in order -- so as not to impede on the brand value of 1&1. We don't want to turn ourselves into start-up. This explains the difference. Last year, in the first half of 2019, we had EUR 13.7 million for rebranding and then EUR 3.5 million for rebranding this year, and this happened in the first quarter of this year. So rebranding didn't cause any particular expenditures in the second quarter. And if you take that delta, and this explains the difference between the results in EBITDA in the first quarter and in the second quarter.

[Interpreted] And the sustainable margin?

[Interpreted] Well, our margin is reported -- our reported margin is 35.6% in the first half. Last year was 34.5%. So depending on what moves marketing, I'd say it's roughly around 34%, 35%. And we always said, the margin is not our main focus. Our objective has always been to make progress in -- as regards to sales and trying to keep the margin at its level. And I think this has worked out quite well in the past few years.

[Interpreted] The next question is by Christian Fangmann of HSBC.

[Interpreted] Yes, I also have a question on IONOS. I would have expected more churn to happen by small businesses having coronavirus pandemic-related problems. If I look at the markets in Germany and net adds, well, demand is good as regards to new customers, at least. So is IPO going to happen? I think it's going to happen earlier as planned. Or is that, okay, let's -- we're comfortable with what we -- with the growth of 100,000. And we want to increase sales to then generate an IPO story afterwards. So what's your idea -- what's your take on this entire subject? And the last question, Versatel, it was quite good in Q2. Q1 was a bit weaker, the [ digital maturity ] of the project, if you like. But what do you expect for the second half for this phasing? Q4, there's some projects will have been caught up. Or will that happen in Q3?

[Interpreted] Yes. Thank you. All right. First of all, your question on business applications. You said that you would have expected more churn with small businesses. I had expected that myself, and we are very careful. I always pointed out in our calls that I had a weekly corona update call with CFOs. And the attrition -- the rate of attrition was always something we discussed. And we had early warning indicators to see whether we could see a trend. That was not the case. And I think this is due to the fact that -- well, the products that we offer with IONOS, that is the lifeblood of what these small companies need and that this is the last thing they will cut if they get into troubles, and those would be the -- this would be something that they cut only when they're really -- when they're their bankrupt. I'm still very careful. I won't be too optimistic, so we'll have to wait and see whether this trend continues. But so far, I don't see any early warning indicators. Don't see any flashing red light. So I think the second half is also going to be quite stable. With regard to net adds, we're happy that we've reached a level that we're happy with. The second half is -- I'm sorry, the second quarter had startup plans and coronavirus effect. But we're going to look at it and see what -- with the continuing rebranding, we're trying to get there because, as you said quite rightly, of course -- well, after the -- you asked about the timing for the IPO, and we said we're not -- once the rebranding is done, we believe that you have to wait a few quarters where you can show that the rebranding well [Audio Gap] record. So we'll see when the right time is. Due to this entire coronavirus situation, everything has delayed a bit. And we're not in any hurry. I know you would love it. The sooner the better, but we want to have a business where we can say now it's going to be a great IPO story and not before. And as regards to Versatel, you said -- well, I have a good second quarter. Yes, we find that -- and we thought that too, we'll be focused on Versatel's core business, maybe wholesale and B2B. And then in the first quarter, we had 8.6%, and just before coronavirus effect, 5.6%. In the second quarter, for the first time, we had a double-digit growth, namely 10.1%. Okay. Again, a slight corona effect to be seen here. But as regard the question, what about the future, I would be -- I would love to keep the double digit.

[Interpreted] Now we don't have any German questions. We've got English questions. The next question comes from Joshua Mills from Exane.

Two questions from me. First is on B2B applications. So clearly, a much stronger-than-expected EBITDA number for the quarter. If I look at the CapEx of B2B applications, it looks like it's just more than doubled quarter-on-quarter in Q2. So I think there's about EUR 35 million of CapEx in there. What's driving that CapEx increase? Is there more investments in different business areas? Or has there been any change in the way in which you allocate cost between the OpEx and CapEx lines? Just like some clarity on that. And then secondly, just around the network build in fixed line and your ambitions there. I think at the AGM recently, Deutsche Telekom talked about the need for full fiber to the home in Germany by 2030. In the past, you've talked about co-investing using your Versatel network. Has there been any more discussions there either with Deutsche Telekom or actually with Telefónica Deutschland, which is also starting to discuss doing a fiber-to-the-home joint venture?

[Interpreted] Yes. Let me answer your business application question and your CapEx question. This is a question we already looked into earlier today. The CapEx that you have mentioned from the report and that is based on IFRS 16, we've got the activations there of rental object, for example. And we will highlight how the situation is according to IFRS 15. I will come back to that. We will fill you in on that. I understand your question. This may be a bit misleading. Now on the expansion, fiber-to-the-home, we don't have any negotiations with Telekom or Telefónica. Telekom has announced that they are open for co-investments. We shows that we are interested, but there were no negotiations or meetings so far. Regarding Telefónica plans, I don't know them. I only know them from the newspapers.

Maybe if I could just follow up on that first point. So has the actual cash costs related to the B2B applications business gone up this year on the CapEx side? Or is this purely an accounting issue?

[Interpreted] Yes, it's an accounting issue. In -- well, it's rather an accounting issue. We have a very stable cash flow-wise.

[Interpreted] The next question comes from Usman Ghazi from Berenberg.

I just got 2 questions, please. The first question was on Versatel. I was hoping if you could give us an indication when you are building out the network, what kind of return on capital are you targeting internally on these projects? It would just be helpful, given, obviously, the free cash flow is negative because you're building the capital employed in this business. But if you taking longer term, it would be helpful for us to understand what kind of returns are being made on the capital that's being invested? The second question I had was the debt levels that are allocated to the web-hosting business or the Business Applications segment, if you could just provide us an update of how much of the group debt is actually sitting within the Business Applications segment.

[Interpreted] Regarding Versatel, the beauty of the fiber optic business is that we can calculate very well. And there are different projects, different topics, but the big picture is that the payback is 5 to 6 years. And that is also part of our calculations, obviously, that we keep. Now on debt, Business Applications. You're referring most likely that a vendor loan was given when [ Robert Pink ] has joined us. And after the further acquisition of STRATO, that was increased. And continuously -- well, that is not needed for the development of the business. We will reduce it. And currently, it's slightly below EUR 1.5 billion.

[Interpreted] Next, we have Nizla Naizer from Deutsche Bank.

Great. A couple of questions from my end. Focusing on business applications, could you tell us what sort of add-ons customers are taking to the basic sort of subscription they're signing on to? And just some color on what's really interesting to your current new customers would be great. Secondly, you mentioned that you had some introductory offers in Q2 that helped the customer acquisition. Are you planning to stop these in Q3? And how are we to think about the net additions in Q3 if those are stopped? Some color there would be great. And in terms of geography as well, which markets within Business Applications are doing very well during this period and stand out? And then on Consumer Applications, could you tell us if the advertising market is recovering based on what you're seeing in Q3? And are advertisers coming back to your portal? So we could potentially see some growth in the second half in this business as well. Lastly, on your full year guidance for EBITDA, could you summarize what are the incremental costs in the second half that will still be a drag? So that we have some color on how to model what the second half should look like.

[Interpreted] Let me get started with guidance and EBITDA. As we have shown, H1, as reported, is minus 1.5% compared to the previous year. You always have to actually bear in mind what Mr. Dommermuth has said during his presentation. We said for the full year, we will be flat compared to the previous year. That means EUR 21.7 million from the virtual minds divestment will be covered, plus the special effect that we have mentioned, the effect from the regulatory issues for the whole year, the additional expenses for 5G compared to the previous year. And of course, also the COVID-19 effect. All of that is part of the calculations. And of course, we are aware of the regulatory effects, and we can handle the other operational topics well. However, we don't have a crystal ball with us. So COVID-19 is a bit uncertain. This must as an indication regarding H2 and the full year. Then Consumer Applications, the advertising market, will it rebound? Or has it already rebounded? Well, to a large extent, yes. Relatively quickly. And in segment, actually, we felt the impact the fastest because a lot of advertising companies in the segments that were mostly [ fazed ] by COVID-19. Travel, transportation, automotive, they basically stopped or reduced their advertising activities from one day to the next. We have also seen areas doing more than before, banking, online shopping, food deliveries. They all advertise more, but that couldn't compensate for the losses. You can see that looking at the effect we have shown. But essentially, that helped compensate a bit at least. And in the other segments, we see that advertising customers now do come back, and we hope that we read again a normal level and that we can keep it. Now Business Applications, another question of yours. Now what was taken by our customers? Well, I tried to highlight it earlier on, the starter plans were very popular these days, domains, website. And we also discussed that earlier today. And also the [ CFO ] of the segment, we have a very good situation across the entire product portfolio. And currently, we keep our offers the way they are, and we see a good input here. But I still believe that Q3 regarding the customer inflow on net adds will be lower than Q2. Oh, yes. And then there was another question regarding the geographies. Pretty simple. All countries are doing well. Germany is strong. But I believe if you take a look at our entire customer numbers, then you see that they break down 50-50 to Germany and abroad. We see that our strategy works out fine basically in all countries currently.

[Interpreted] The next question comes from Polo Tang from UBS.

I've got actually 2 questions. The first one is, can you confirm what your current stake is in 1&1 Drillisch? I think the last update we had was about a year ago,where you declared a 75.1% stake. So I'm just trying to understand if this has increased or not. my second question is really about your buyback program. You posed it last quarter, but given that you've now reconfirmed guidance, what are your thoughts around restarting the program?

The first question was whether our stake in 1&1 Drillisch can be confirmed, 75.1%. Yes, this is the current status. We still hold 75.1% in Drillisch. And the second question -- okay, the buyback program. Well, we have paused the buyback program, and we believe there is no need to restart it. Actually, while the market is -- as it is today is a bit of park, and there's still some COVID-19 risk. So I'd rather say we are careful here.

[Interpreted] There are no further questions, so I will hand back over to Dominic Grossman.

[Interpreted] Thank you very much for your interest today. Stephan and myself, we will be available to you after the telephone conference. Have a nice day and stay healthy. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]