United Internet AG (UTDI) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the telephone conference of United Internet AG. This conference will be recorded. [Operator Instructions] Now we will have to start the conference. Thank you, [ Ms. Andres ]. Ladies and gentlemen, welcome to our Investors and Analysts Conference. Ralph Dommermuth and Martin Mildner will take you through the fiscal year 2021 and the highlights and give you a forecast on the business year in 2022. After the presentation, the Board will be available for you to ask questions. And I'd like to hand over to Mr. Dommermuth.

Well, thank you [indiscernible]. Good afternoon, ladies and gentlemen. Welcome to our analyst conference on the 2021 fiscal year. I'll start by presenting the company development to you and giving you an outlook on 2022. And after that, Mr. Mildner will give you the results for the fiscal year 2021 in detail. At the beginning of the presentation, you can see the segments that our business is broken down into. We distinguish between access and applications segments and breaking this down again into consumer and business segments. In the sense, you can see our assets, about 10,000 employees are high revenue our high operational excellence with 67 million accounts that we operate in 17 countries by now. We operate 10 data centers in Europe and the U.S. and in Germany. We have a powerful network infrastructure with a length of 52,000 kilometers and access to the mobile network capacity of Telefonica. On the next page, you can see the various brands that we address the most important brand in consumer business is one and one. Then we have discount market brands through our cooperation with Drillisch in the business, segment, we have 1&1 Versatel. In applications, we have the major mail services, GMX WEB.DE.com, marketed by United Internet Media. For businesses, our main brand is IONOS. And then in Germany, we have additional brands such as STRATO, United Domains, Sedo, InterNetX and we22, as well as brands abroad, such as World4You in Austria, Arsys in Spain; home.pl in Poland and fasthosts in the U.K. In this core business, there are some minority holdings. Those are companies that we cooperate with. And where we usually hold in excess of 50% to 25% of an interest and less than 50%. Let's get started with the fiscal year 2021. Our business and the consumer access area is broken down into landline business and mobile phone for landline business. We work with 1&1 brand, which is stock listed. We have 4.24 million broadband connections. We offer VDSL FTTH complete packages focus being on voice and IPTV via 1&1 versatile. The last mile being provided by Deutsche Telekom and City Carrier. We have a good network, and we keep swapping places as the top brands with Telecom as rated by Connect in the last few years. And in 2021, one we were #2 again. In 2020, we're #1. For mobile business, we have 11.19 million connections. We have a main brand 1&1 and then core brands such as GMX and WEB.DE and then discount brands with our partners. Of course, we have a high customer satisfaction in this business. Over the last few years, we've been -- well, last year, we're proud to take -- to come in first in terms of customer satisfaction. And this is not only reflected by the Connect survey, but also by other surveys that we have very happy customers. Overall, in the Consumer Access business, we were able to increase the number of our customer contracts by EUR 600,000 to EUR 15.43 million. The growth is driven by the mobile Internet contracts with an additional 670,000 contracts. And with broadband connections, ADSL, DSL, FTTH, we had a slight decrease of 70,000 contracts. Revenue increased by 3.3%. The service revenue, i.e., the value business increased by 3.6% to EUR 3.1 billion to EUR 8 billion. And the other business is usually driven by hardware, which we subsidized initially and then recovered these subsidies over the contract period. The EBITDA increased by 18.8%, but we have to see that we have a positive effect through a retrospective price adjustment, which was installed in 2021 but applied to 2020. So it's out of period really. And if you take this into consideration, our operative result increased by 5.3% to [ EUR 674.6 million ]. The next side shows a breakdown again of the results of the Consumer Access business because in 1&1 as a stock listed company, we make a distinction between access and 5G access refers to our current business and 5G refers to the buildup of the 5G network. The latter is still being with a negative results. So it caused EUR 37.9 billion in 2021. That is initial cost for the network buildup. The operative business increased by 8.9% with access. You can see that this develops very healthily and that we manage to increase our profits faster than our revenue. Now let's speak about business access via 1&1 Versatel. As I said, they have a fiber optic network with length of 52,000 kilometers. We're active in 250 German cities, including the 19 of the largest 25 cities, and we have we had 21,000 directly connected locations, those being public authorities or companies that are directly connected to the network and then we also connect handover points of Deutsche Telekom or city utility in order to -- for them to handle the last mile. For Business Access, we were able to increase revenues by 4.3% to EUR 514 million last year. Last year, again, we largely dispensed with one-off revenue so-called RUs. And this is something that we want to dispense with unless the customer insists on are doing so. And if we adjust for this, then we would have had a growth of 6.1%. EBITDA increasing faster than revenue by 7.1% to EUR 160.5 million. There was a one-off charge last year with the transition of VDSL wholesale contract and the extension of the FTTH component with Deutsche Telekom and this had a negative impact on the results. So if we adjust for that, we're still -- we wind up at [ 7.1% ]. So let's move on to the Applications business. For consumer applications, our e-mail services are being developed to become command centers for communication information and identity management. I'm sure this no news for you. We are putting more and more applications around e-mail, cloud storage, online offers De-Mail, we have a good market position, particularly in Germany. That's our strongest market where we are active with WEB.DE. In Germany alone, we have 35.2 million active accounts, which gives us a 50% market share for private e-mails. You can see a table below, indicating that we address different markets or different applications that we offer. And we usually have a very good market position in Germany for all of those. On the next page, you can see our accounts overall. That's EUR 42.8 million i.e., more than EUR 35.2 million that we have in Germany because we have international accounts as well, and we see a good growth potential there as well going forward. And these are broken down into free accounts where we added 120,000 and pay accounts plus 100,000. So altogether 1,020,000 accounts to now EUR 40 million -- 42.79 million accounts. We want customers to use our clients on a mobile app. We have 27.7 million mobile users and also the number of cloud storage has increased $21.8 million of our users store photos, videos, documents in the cloud with us. Revenues have developed very favorably, plus 10.8% to EUR 279.1 million last year. The EBITDA increased even more to EUR 122.5 million, but there was a EUR 4.9 million noncash valuation effect from derivatives. And if we adjust for that, we arrived at an operative EBITDA of 16.8%, which I think is a nice value -- and with the increase of 10.8 million worth of turnover, we show here that we are developing very favorably. Now business applications, we have been developing from web hoster to service provider of e-business solutions for years now. You can see the various applications on the graph that we offer to our customers in order to increase their success in the Internet or their back office quality. So this is something that refers to midsize and larger customers offering capacity in our data centers that they can use them. We have a good market position. IONOS, that's the company we do this, by and large, is the leading provider in Europe, active in 17 countries. In Germany, Spain, Poland and Austria, we're #1. In the U.K. and France, we are #2. If we look at the customer contracts, we were able to add 330,000 new contracts, 130,000 abroad to 4.52 million now and 200,000 in Germany to 4.17 million, even though the graph on the side says, next to it says 4.26. I'd say that's the correct figure because as the 4.26 and the 4.52 it gives 8.78. So please bear with us, sorry about this. We have 4.26 domestic contracts and 4.52 million abroad. Revenue increased by 12% to EUR 1.06 billion, driven by customer growth, as indicated before, but also by up and cross-selling and also by the strong growth of Sedo, our subsidiary that we use for doing trading and platform parking, the so-called aftermarket business, and we had a strong growth that we observed there. With the EBITDA, we had a slightly negative development. At the beginning of the year, we indicated that -- we are planning to increase our investments in the cloud business. So those were EUR 36.8 million that we spent last year compared to prior year for cloud business and further internationalization. On the next slide, you can see an overview of last year bottom line about 1 million new customer contracts. Revenue growth of 5.2%, operative EBITDA increased by 3.4% to 1.959 -- EUR 1,259 million. And that includes 39 -- EUR 37.9 million initial cost for the non-mobile network and EUR 36.8 million IONOS product sales offensive. The EBITDA slightly higher than EBITDA -- operated EBITDA and the operative growth of the EBIT 5.6%. So this is in line with our forecast. And I think we're well established for the next few years. We're in an investment phase, as I said already, we invest a lot of money, but we can increasingly see that we're making progress here, and we're really well on track with our plans. By the end -- to conclude, I'd like to give you an outlook on 2022. As I said before, business as well is good. We started the new year well. This allows us to give you more concrete figures. We see EUR 5.85 billion for the year as a target we had previously anticipated EUR 5.8 billion. EBITDA about on the level of last year. That's due to the fact that we'll have higher start-up costs for the 1&1 mobile network. We expect EUR 70 million cost compared to the EUR 37.9 million last year. And with IONOS, we want to invest, additionally, into marketing. It was called 1&1 internet in the past. We renamed it now, and we want to make sure that the brand awareness in the most important European markets increases. What's new this year is that we have increased CapEx expenditures, about EUR 800 million to EUR 1 billion. This is particularly driven by the construction of the 1&1 mobile network business, and it's driven by 1&1 Versatel, where we want to extend the fiber optic network to additional cover areas largely business parks. And then we want to connect the 5G antennas to the network and all this has been built and invested as well as the various data centers that we need for the mobile network. Well, thank you very much for your attention, and I would like to give the floor to my colleague, Mr. Mildner, who will give the figures in detail to you.

Thank you, Mr. Dommermuth. Ladies and gentlemen, analysts and investors. I'd like to welcome you to this webcast of the fiscal year 2021 of United Internet. And Mr. Dommermuth would have given you the main figures as now. We are going to show you the 4 segments development on a consolidated basis. With respect to our free cash flow and our financial figures. I'd like to start with a brief summary of what Mr. Dommermuth has already told you. On group level, the customer contracts -- of the consolidated group in 2021 were increased by more than [ EUR 1 million ] to up to EUR 26.8 million contracts. And in addition, our ad finance free accounts were increased by 920,000 accounts. And that ends up at the end of December '21 for over -- to over EUR 40 million -- EUR [ 40.23 ] million. Our revenues in the group, as Mr. Dommermuth has just said, were increased by 5.2% to EUR 5.646 billion. The EBITDA is, in 2021, EUR 1.3 billion. Mr. Dommermuth has already mentioned that EBITDA in 2021 and in 2020 was affected by one-off special effects and by off-period payments. In particular, for the better comparability, we have got the imported EBITDA, and we also show the operative EBITDA, which reduced occurred these facts and allocated them to the respective years 2021. For better comparability, unconsolidated, it was increased by 34.9% as I said, and this also considers. If the special effects are considered, the comparative operative EBITDA was grown by 3.4% to EUR 1.259 million. And the same applies for the following KPIs. EBIT was EUR 829 million, which is an unconsolidated increase of 44%. The operative EBIT as Mr. Dommermuth has said, increased by 5.6%. Our EBIT is that means the profit per share of United Internet is EUR 2.23, which is an increase of 43.9%. The operative EPS was EUR 2.10 in compared to EUR 1.87 in the year before. The other important figure is the operative EPS before PPA purchase price allocation to our shares, the EPS in the business year 2021 was at EUR 2.51 per share. On the next chart, you can see the -- that's chart 32, the free cash flow of 2021. In the overview, you have seen the bridge. Our free cash flow, at the end of the year 2021, after IFRS 16, is EUR 600.8 million or EUR 495 million according to IFRS 15, when after the leasing payments have allocated to the cash flow. IFRS 15 free cash flow after leasing payments of the fiscal year 2021 -- 2020 was at EUR 336 million, so roughly about EUR 100 million, yes. On Page 42, we have given you the gap from the EBITDA to the free cash flow, which I would like to highlight a little bit on the CapEx that you see here which is the invest was in 2021, EUR 286.8 million compared to the CapEx of the year before in the fiscal year was EUR 447 million. We need to consider that here in the CapEx of the year before, 2021, there was a one-off payment of EUR 165 million to Telefonica Deutschland, for the extension of the MBA MVNO contract. If you reduce this and make it comparable CapEx in this year in 2021 with EUR 7 million above the year of 2020. In addition, the free cash flow of 2021 was also affected by a one-off payment of EUR 213.4 million, which, in the second quarter, was paid to Deutsche Telekom again for the renewal of the FTTH contract. This is a one-off payment, which doesn't affect the results of United Internet. This is an active accrual position and that means it is in down payments and spread out over the couple of years of the FTTH contract over the coming years. Also, still, it has an effect on the free cash flow of 2021. The working capital compared to the year before has been improved by EUR 134.6 million increasing the cash flow, which is mainly due to a legal change in the telecommunication law, Mr. [indiscernible] has mentioned this in the previous conference, which means now that telecommunication companies are from January 21 cannot pay the gross invoice, but the VAT will be subject to the reverse charge proceedings and paid to the financial offices and taxes. And as this is always in the month afterwards, we have EUR 100 million higher passive VAT tax now, which is deferred at this point in time and that affects -- takes this respective effect. I will now move to Chart 33. Looking at our balance sheet positions as of December 2021 for United Internet. And I'd like to start with the assets. And I'd like to mention here that on Page 23, for a better overview, the short-term and long-term assets have been summarized. If you look at that in the balance sheet, you see that separation between short term and long term. The immaterial assets have only changed a little bit, which add to EUR 3.439 billion. The takeover by -- takeover '22, for example, have increased by EUR 3.627 billion. The increase of the assets is an increase of the assets and the reduction on the assets up for sale. The increase by EUR 99.5 million to now EUR 443 million to the end of the year was done by the transfer in the first half of the year by purchasing Tele Columbus AG, the FAS funding principle say that our 29.9% participation due to the Morgan Stanley takeover offer had to be rebooked to nonmaterial assets up for sale. This was done in 2020. And as you can see at the bottom, in 2021, this asset was taken out of the booking. And in other finance, again, booked to the financial assets, but that is not done at EUR 124 million, but it is higher because at Tele Columbus AG, we do not only get our 29.9% share. But in addition, also our share in the takeover in the transfer of n Kublai GmbH increasing now to 40% and n Kublai GmbH now after the takeover holds about 49.8% of the Columbus AG. We have 40% of n Kublai and Morgan Stanley the other 60%. At the same time, you may remember, at n Kublai AG has increased their capital share by EUR 475 million to refund Tele Columbus and for further funding of the operative business and 40% of that has been taken over by us, and that corresponds to our share in n Kublai GmbH and that means our balance asset in n Kublai GmbH is now in the fiscal year 2024 at EUR 344 million. Moving on in the positions of liabilities is roughly the same. It has increased to EUR 825.7 million corresponding to our customer growth. In the growth of stores going to 288 -- [ 589 ]. And to the FTTH customers paid for German telecom at the height of EUR 213 million, that increase the occurred. Positions here, income tax and claims and other assets are mainly unchanged and ending up at EUR 197.3 million for the end of the year. Assets held for sale and cash and equivalents is EUR 110 million, slightly dropped by EUR 20 million compared to the year before. Now I'll move to Chart 44, looking at the debt and equity. First of all, we look at our equity development. The equity has increased from [ EUR 4.911 million by about [ EUR 11 million to EUR 4.923 billion ]. At the same time, it needs to be considered that the equity view quota has increased by EUR 440 million compared opposite to the equity quota at the end of the 2 year, 21 as at 50.9%. The equity ratio is mainly due to 2 major transfers in 2021, which based on the capital of United Internet AG and by that compared proportionally to the balance sheet sum. The United Internet have changed the share in the IONOS Group to 75.1% by now. And for that on assessment basis of EUR 5 million enterprise value, which is an accretive value of EUR 3.7 million purchase price of EUR 310 million as a sales partly. In addition, United Internet in 2021 has changed their shares at [ 1&1 AG ] from 75% to 3.22% to a total of 78.32% and for that United Internet paid about EUR 76 million. As in IONOS Group and [ 1&1 AG ] have already been covered in our consolidated annual statement. This means that this is not an increase of the values on the active side, on the asset side, but only by a reduction of the capital reserve with a respective drop of the equity ratio. The liabilities to banks have developed from 1.466 to, at the end, to EUR 1.822 billion in the end of 2021, respectively, the net bank debt have increased from EUR 1.33 billion to EUR 1.712 billion. Due to the good result, our leverage is still below 1.5% of the EBITDA. The increase of the liabilities was due to a credit taken of EUR 750 million in 2021 with periods of 3 to 6 years with an average interest of only 0.79%. At the same time, in [ '20 ], the credits came due of EUR 200 million, and they have been paid back as scheduled at the end of the year, the non-used credit framework was about EUR 850 million due to the change of the others that you balance situation on the balance sheet as the time is already proceeding, I don't want to go into the details as these are all in line with the development of our operative work. If you have a question, we're happy to answer these in the Q&A session after the presentation, and that leads me to the end of my presentation here. And I hand over back to Mr. Dommermuth.

Well, thank you, Mr. Mildner. So let's continue with the Q&A session.

[Operator Instructions] The first question is from [indiscernible].

I have three questions. First of all, concerning IONOS and its strength. Can you say something about its strong growth in the cloud business and the other business sections, then the prospects for IONOS have probably doubled a bit due to the current environment. Would the shareholders be willing to dispense with some of the share dividend payments? And then a question, do you have visibility for 2022? How much CapEx you can spend? And can we hear a qualitative statement on the CapEx beyond 2022?

Well, let's get started with the IONOS growth in quarter 4, we can't give you any further breakdown because the various business segments, cloud or hosting productivity and aftermarket are not published separately. Concerning the IPO prospects, at the beginning of last year, we said that in the spring of '22, we want to be ready for an IPO to then go for the IPO at some appropriate time in 2022 or '23. This still continues to be a plan. We are ready. We could go public on short notice. The preparatory work has made good progress, but right now, I think this is not advisable due to the general capital market situation. There are no new considerations. So -- and we haven't spoken about any other option yet. We expect that we will be able to go public sometime this year or next year. Concerning the situation with Versatel, we said that we see about EUR 800 million to EUR 1 billion this year. Then we said with 1&1, we see about EUR 400 million. So -- well IONOS and other companies need money for software and hardware so that you can expect about EUR 400 million for Versatel. Mr. Mildner nod his head, so that's good. And then next year, this CapEx might increase. It depends on the development of new business products and the development speed of the 1&1network, but we wouldn't want to make a final decision at this point yet. Thank you very much.

The next question is by Ulrich Rathe, Jefferies.

My first question is the inflation, operating data centers are very energy-consuming, especially companies in countries where energy costs are low. So we've got a big flow in this direction. How did you calculate that in your guidance? We're not sure what's going to happen next. And I'd be interested to know the assumptions that you have taken for your calculations. The second question is a bit on the guidance of the turnover was pushed up a little? What was the main driver for that? And then coming back to the first question of [ Mr. Bloom]. If you can't detail what happened at IONOS in the third quarter, the Sedo business is very volatile. Apparently, it was in the past, and you pointed out that this was strong in the last quarter. Could you give us a percentage perhaps roughly to that aspect so that we have an impression of what's going on in the business that is carrying on quarter-by-quarter.

Yes, let me start with the first two questions. Yes, inflation is a topic for us, it's on the agenda. But the point is that energy and power costs, electricity and fuel costs that we have for company cars, altogether, at least at this point in time, do not play a major role of EUR 40 million altogether per year. And these EUR 40 million are going to grow our MBA payments, for example, that we purchased with Telefonica or connecting networks with telecoms and city carriers. There is a fixed price, which is independent of the energy costs. In our own mobile network, that's just going to have an effect on us. Here, EUR 40 million are not under the suffice in the future. And of course, that has to be considered in our planning. The turnover guidance has been increased because in the past year, we came out a little bit better than we had forecast in December, or we saw in December. In December, we gave a forecast based on the figures known until then. December altogether turned out better than planned. And there is the new year that started a bit better than before as well. So that allowed us to improve the turnover forecast or outlook, concerning the Sedo business, I'd like to ask Mr. Mildner to comment on that.

Yes, Sedo business is the following the fourth quarter of IONOS. Of course, that was a very good quarter. It was a kind of a year-end rally, but looking at the whole year, and you can take that from the business report, which is list as Sedo from the 12% growth, they participated with 5.2%. So that in normal business, we had 6.8% growth, which is exactly what we had planned for the long run in a number of discussions. We have pointed out that we are looking at a long-term nearly 2-digit growth, and we are moving towards that. Of course, Sedo business volatile -- more volatile business than the subscriber business of IONOS. On the other hand, we have to say that, that business in the long term is always going to be a part of the IONOS Group and that is why we are happy it is going well as it is, and we are observing that very clearly and closely because it is so volatile. But for the last year, for example, we are positive. And for the coming year, we see no change on the horizon.

There are no further questions for the moment in the German channel. So I'll move to the English channel. Now just a second, please. And the first question of the English channel is from Joshua Mills, BNP Paribas Exane.

Two for me. One is I'd just be interested to know United Internet's thoughts about the advantage of keeping 1&1 listed as a separate entity. What is the advantage for that? I see that you've taken the company up by another just over 3% in the last year. A lot of the business is now being done for the network build, both in the Versatel level and at the 1&1 level. when you bought out or did the reverse takeover of 1&1. I think you gave a 3-year commitment to keep it listed, which has now expired. So just your latest thoughts about whether you consider buying in the minorities with the share price at this level, that would be helpful. And then secondly, a question to Mr. Dommermuth. Just before Christmas, we saw you increased your stake in United Internet by another 8%. I'd just be interested if you'd share with us as other investors, why now? What's your rationale and what opportunities do you think for United Internet Group aren't being appreciated by the market?

Yes. Well, thank you very much for the question. Last year, we were offered a package of 1&1 shares, and we purchased it. And I think we would do the same in the future if we find the price to be attractive then I'd always plead in favor of going for the package because I believe that 1&1 is undervalued today and has many opportunities and that's why it certainly makes sense to look in detail at appropriate offers, but we do not plan to become active in the sense of delisting. We're quite happy with the capital market access of 1&1 and it allows us to take additional steps that were not concretely planning now, but there is more flexibility then and we wouldn't want to forego this option right now. But you're right, we are no longer tied. We're no longer committed. We could take this step. The takeover by Drillisch no longer commit us to any contractual agreements one way or the other. We're free to act. We can purchase or sell as many shares as we like. Then you asked about my private purchase last year. That was driven by the fact that I think that United Internet is favorably valued. I think everybody who buys a share believe that. Otherwise, they wouldn't do it. And that was an idea that I've had for a while because our share has long been below its historic peak. And so that made me consider this purchase, particularly because of the financing, the interest situation was very favorable. And so that painted a good picture to me. And I could go back to holding more than 50% like it was at the beginning of the -- when the company was first established, maybe that was also, to an extent, an emotional thing. But the main reason is, I believe that the share is well -- favorably quoted. I think it's a good long-term investment as we will see over the next few years, and I still enjoy this work and I find it's a nice thing to say that I own more than 50% of the company. So those were the motivations.

The next question is from Stéphane Beyazian, ODDO BHF.

A couple of questions, if I can. The first one is on the marketing spending at IONOS. Can you just help me understand if the EUR 30 million for 2022 is coming on top of the EUR 40 million and so that your marketing budget will overall increase by EUR 70 million versus the 2020 level, and we should be assuming that this will continue also in the coming years or whether these are still sort of one-off marketing spending. And in addition to that, if we look at the contract added in 2022 -- in 2021, sorry, it's not totally different to the levels in 2020. So can you share some color on how effective you think the marketing spending is? Because it seems to me that perhaps the accelerated revenue growth is more coming from Sedo than perhaps directly the web hosting division. And finally, I have the third one, if I can, regarding IONOS. I was just wondering if following the collapse of the U.S. Web Host's valuation, do you have any appetite for a tie-up with another large player in the web industry, which may help you to get a global scale and some synergies, whether that you have any interest for such a transaction?

Let me start with marketing budgets of IONOS. Last year, we invested, but not only into marketing. We said that we wanted to invest into the cloud section. I'll have to look at the wording here just a minute, please. I can't seem to find it, I had it somewhere. Here it is. Product and sales offensive in the cloud business and further instancing. That was about further internationalization, sorry. And in that, we have extended our work in the Eastern European countries, and we took smaller steps there. And the idea was to invest in the cloud business as such and the product development. We have hired lots of new developers, and we have a broader portfolio as of today, and we're going to broaden that further. And this investment, as such, in the product and the sales of IONOS, this was EUR [ 36.8 million ], and this is why there can't be on a one-to-one basis be applied to the marketing business. But the marketing -- it is part of the marketing, but the marketing budget is a smaller one. And the budget is not only EUR 40 million, IONOS has a 3-figure marketing budget, and that is increased by EUR 30 million now in order to allow -- to put more work into the branding. We want to increase the awareness of IONOS in the target group of the businesses, the freelance workers in our most important markets. And then you asked on the activity of the marketing at IONOS, we are quite positive here in this respect. We are progressing well, and we can see that in the customer growth of 330,000 contracts in 2021. That is a good growth. From my recalling, it is more than over the growth -- more than the growth in 2020. And you also asked whether there is a certain appetite to take over another bigger player. We have no considerations in that respect at the moment. We are concentrating on our business offering, optimization opportunities and expansion to us, and we would rather stay focused on that management-wise. Of course, that does mean that if there is an opportunity where you might take a look at it, but at the moment, there is nothing to announce in this respect. Thank you.

The next question is from Jakob Bluestone, Credit Suisse.

I actually had a follow-up actually from that last question previously. I guess my question is just -- I mean, you mentioned on the potential IPO of IONOS current state of equity markets. And I just wanted to understand how committed are you to actually doing an IPO versus looking at alternatives, so maybe something in private markets is something given the derating of some of the peers. Just sort of interested are you very focused on this path? Or would you consider other models?

No, we're 100% committed to the IPO. That is the agreement that we've made with [indiscernible]. That's the agreement we have with management. And as you know, we're planning not to decrease our shares in the context of the IPO. We still want to remain committed and invested. And if you think of alternatives, what could they be? Should private business sell their share to other private equity companies? That's not in our interest at all. So we're still planning to go public and are quite optimistic that this will happen sometime in the periods envisage that goes from the beginning of 2022 to the end of '23. It's only through the first 2 months of a 2-year time span, so we're quite optimistic that this will make sense and will happen.

The next question is from Polo Tang, UBS.

So my first question is for Mr. Dommermuth. So there's been a lot of talk about 4 to 3 mobile consolidation in other European markets, but do you believe that 4 to 3 mobile consolidation could happen again in the German market in the longer term? And would you be open to selling 1&1 in the longer term? Or as ownership of 1&1 strategic? My second question is really just about share buybacks. You've mentioned earlier about United Internet being a good longer-term investment and how it's undervalued. You obviously had EUR 160 million share buyback program that you announced in August 2021, but it was then suspended in September. So just given the current levels of the United Internet share price, would you consider reinstating the buyback? And my third question is really just about working capital. So there was EUR 134 million drag or outflow in 2021 in terms of working capital, but how should we think about working capital for 2022?

Let me start with the 4 to 3 scenario -- a possible 3 to 4 scenario. In Germany, you're not going to be surprised if I don't see this, I am fighting for 4 suppliers in Germany. That's why we have been trying for years to build up the fourth network. And that is effort that we'll be making for many years, may be right or wrong. We think that with our virtualized open run, we have an excellent network, very future-oriented low cost in operation and which will buy edge computing be allowing real-time application with big opportunities. And as of today, we are very competitive already. We have talked about the last year of [ 667 ] new mobile customers, and we think that we'll be more competitive with our own network. That is why I don't have any plans to sell 1&1. If that were the case, we wouldn't need to make that effort. Looking at the share buyback last year, in the third quarter, we had the share buyback and we bought back by the stock market that is allowed by our provisions and very few shares were offered. And in September, we could do that stake buy package and that was a privileged opportunity for us to -- it wasn't a direct United Internet reinvest, but part business. Our biggest part of the business where we could invest and where we were offered a larger block and that made sense for us to quicker get to our target. Maybe I can answer the third question on the working capital. I think that was increased by -- compared to 2020. That's a structural change due to the Telecommunication Act, which was changed where the VAT has to be paid by us now. And by that payment, which is always 1 month after when it was occurred, that is a structural effect now, and that's going to level out over the years. Only compared to the year before. This is visible now because what would have happened otherwise, we would have invoiced 100% to our providers. And with that, the working capital would be part in that -- reduced by that. And now we wouldn't have to put it on the balance sheet. What happened now? It is not paid to the per rider. This is about EUR 120 million. And this EUR 120 million are on our balance sheet at the end of the year and are really paid on the 10th of the following months, that is in January. This wouldn't have happened. Last year, it would have been paid directly in December and now it is only paid in January, not this way. For one time we have to speak in comparison to the next year, but then in the following year, that's just going to level off, and it's not going to be visible anymore.

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

I had a couple of follow-ups, please. Firstly, in your presentation, you mentioned that CapEx was basically flat year-on-year when you were adjusting out the exceptional. But I think that Versatel started doing some work for IONOS. So with that -- was that incremental CapEx spend at Versatel this year? Or was it just a reallocation of spend there? Secondly, also on CapEx. I wonder if you could say a little bit more about what the moving parts might be that would cause you to spend EUR 800 million rather than EUR 1 billion. How you'd like to address that? And then finally, just on IONOS you mentioned a little bit about your targets for increased marketing spend. Just if you can say anything more about how you'd like to measure that and the success of that. I know that I'm now seeing [indiscernible] on the TV in the U.K.

I'll start with that question and Mr. Mildner will then answer the first two questions. We measure brand awareness. We have regular surveys among our target groups. Then we have other effects, direct orders, but with branding campaigns, that is not a big thing, less than with measures that are directly targeted at driving sales, but it also happens, we can see that as well. And we can also see that we have better trend of brand values. We have better effects in churn. So the main KPI is brand awareness and as subsidiary effects are additional contracts, add more contracts lose fewer contracts and was becoming more important to show in the struggle for talent that this is a renowned company that is well known because that also plays a role in HR recruitment that people would like to talk about their employer in their social environment and can be proud of being with a well-known company. Well, then I would like to answer the other two questions. The first one, referring to the CapEx and whether with Versatel in the CapEx of 2021, there are incremental costs for the 5G buildup. Well, the CapEx that we showed with about EUR 290 million compared to last year is around about flat, a little bit more than in 2020. If you adjust for the Telefonica payment and the MVNO contract, but there are no actual cash out costs, and that is something that has to do with the 5G buildup. So Versatel has ordered these services and will get them, but this will only be effective in 2022 and subsequent years. So CapEx 2021 is really comparable to prior years. There are no unusual or extraordinary CapEx payments for the buildup. The second question was what are the drivers for being either EUR 800 million or EUR 1 billion worth of investments in our ad hoc information in mid-December? We said that we can't indicate rough value or an exact value. Because back in December already, we had problems with supplies and questions surrounding availability of chips -- of computer chips. What about the supply chains? And I'd say this will continue this year due to the Ukrainian crisis -- or Ukrainian war. So this question will be quite up-to-date. So I'd say this is why we indicated EUR 800 million to EUR 1 billion, but we will try to get all the orders we placed for '22 in '22. And so we stick to our statement from December that we will have investments ranging from EUR 800 million to EUR 1 billion. But right now, it doesn't look like this will have an effect on our buildup plan that we have.

The next question is from Usman Ghazi, Berenberg.

I just have two kind of clarification on earlier questions and then add two of my own, please. So just on IONOS, am I right that it was said that the growth in recurring revenues was close to 6.8%. And then Sedo is what's pushing the growth to double digit and that -- because you don't see the Sedo performance as being kind of a one-off, you do think that IONOS, in total, can continue to -- is well on its way to kind of continuing to grow in double digit territory. So that was kind of my first kind of question and clarification. The second clarification was just on the CapEx for 2023. I don't know if I heard correctly, but was it said that CapEx for 2023 will be higher than 2022? I don't know if that comment was being made for Versatel or for the group as a whole. So if I could just get a clarification there, please? Then my kind of -- the kind of two questions I had on my own were just on IONOS. I think in the last quarter, it was mentioned that ideally, you would like to have IONOS with EBITDA margin at beginning with the 3. Now with the marketing for this year, that margin will be slightly below 30%. But is -- I mean do you have a view on what good baseline margin should be at this company going forward? Or will it always be a trade-off between growth and margin? My final question was just on payments. I mean for GoDaddy had at the Capital Markets Day very recently, payments after the acquisition of [ Point ] was -- is something that they are talking of as an opportunity for hosting companies. I mean this is an area where 1&1 -- or where IONOS is -- it seems like they're not as active. And therefore, I just wanted to get your view on payments as an opportunity for IONOS going forward.

Well, as far as the growth of IONOS is concerned, that was your first question. You're quite right. We had 6.8% without Sedo business in last year, and we want to increase that growth rate this year and on the path to a double-digit growth, that is quite right. The margin in the next years is going to grow. We want to have that marketing budget should not be increased every year because I think that's a good thing about the branding budget that you can keep that on level if you don't increase your footprint. And by that, from the same equal branding budget, we will be able to deliver better margins. But I think altogether, we're going to see a better margin situation altogether because in the cloud business, we are deficitary as of today. We are investing strongly there, using a lot in order to do new developments to extend our product range and, of course, our business plans foresee that this section of the business will be profitable at one point in time. And then altogether, we are going to see margins that are beyond 30% in terms of EBITDA. So we are planning medium-term increases here.

Okay. I'll take over the more strategic questions in the end, whether we are looking at payments of opportunity companies. We do Mr. Dommermuth has explained this earlier. Of course, we are looking at many, many different products and product extensions for our customers. And of course, payments is something that everybody talks about. And of course, we will probably not be a payment service provider in the sense that we do become a financial company, but what can be considered is all the topics around embedded banking where, with partners, we would offer reasonable products and product features, especially in e-commerce, in the web range, that is something that we will look into details, which I could -- look at Shopify, we'll look at, and we are close to that. And as of day, we have good payment solutions on offer, which we already have, but our product range here, of course, is going to be in line with the market. We are observing that very closely. The other question that was open was the CapEx '23 being higher than the CapEx 2022. We normally don't give a long-term forecast and goals. We concentrate on the current year usually. And in that respect, I wouldn't like to give you a concrete answer to 2023 now. We said that we assume that the CapEx spending on the Versatel side will probably be a bit higher because we are in the buildup phase, but we don't publish precise and concrete figures as yet.

There are no further questions. I would like to give the floor back for final words.

Well, thank you very much, ladies and gentlemen. We would like to thank you for your participation, for your questions. Thanks to the Board members for their answers of further questions, contact myself and Mr. Usman. Otherwise, stay safe and see you next time. Goodbye.