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Edited Transcript of UTDI.DE earnings conference call or presentation 28-Mar-19 1:30pm GMT

Full Year 2018 United Internet AG Earnings Call

Frankfurt am Main Apr 9, 2019 (Thomson StreetEvents) -- Edited Transcript of United Internet AG earnings conference call or presentation Thursday, March 28, 2019 at 1:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Frank Krause

United Internet AG - CFO & Member of the Management Board

* Ralph Dommermuth

United Internet AG - Founder, CEO & Member of the Management Board

* Stephan Gramkow

United Internet AG - IR Officer

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Conference Call Participants

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* Fathima-Nizla Naizer

Deutsche Bank AG, Research Division - Research Analyst

* Frank Rothauge

* Martin Jungfleisch

Kepler Cheuvreux, Research Division - Junior Equity Research Analyst

* Stephen Paul Malcolm

Redburn (Europe) Limited, Research Division - Research Analyst

* Ulrich Rathe

Jefferies LLC, Research Division - Senior European Telecommunications Analyst

* Usman Ghazi

Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst

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Presentation

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Stephan Gramkow, United Internet AG - IR Officer [1]

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Welcome ladies and gentlemen to our analyst and investor conference. We are terribly sorry about the delay. And welcome to everybody who joined us via telephone conference or webcast. Mr. Dommermuth and Mr. Krause will walk you through the business figures for 2018 first of all, and then they will shed the light on 2019. And at the end of the presentation, the ball will be in your court, and you can ask your questions.

Having said that, Ralph Dommermuth, the floor is yours.

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Ralph Dommermuth, United Internet AG - Founder, CEO & Member of the Management Board [2]

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Thank you very much, Mr. Gramkow. Ladies and gentlemen, those of you who haven't been with us before, I'd like to welcome as well to our analyst and investors conference. First of all, I will give you some insight into 2018 for United Internet, then I will give an outlook for 2019, and then Mr. Krause will give you some detailed insights into the figures. In my presentation, I will not dig deep as regard to Internet Access. I've done that in the previous event, the 1&1 Drillisch. This time around, I will rather focus on the big picture and walk you through the various segments.

First of all, let's take a look at the KPIs. We had 1.28 million new contracts, 250,000 coming from World4You and 1,030,000 from organic growth. Sales went up to EUR 5.1 billion. And the growth pro forma, both Strato and Drillisch, we took them over in 2017, and if we had included them in 2017 for the full year, then the growth would have been 10.5%; EBITDA, 22.6%, EUR 2.1 million, Strato and Drillisch, 20.5%; EBIT, 15.2%.

EBIT per share '18 lower than in '17, this is due to the increasing number of minorities, and Mr. Krause will say more about that later on. And then we've got the earnings per share before purchase price allocation. Here, we've got a growth of 6% from EUR 2.34 to EUR 2.48. Included in our figures are the changeover to IFRS 15 that has generated a positive effect of EUR 283.2 million on the revenue side by bringing forward hardware revenues. In terms of EBITDA, we had a positive effect of EUR 286.9 for the same reason. Then on the other side, on the downside, as we have discussed before, we used more smartphones last year, and that had a negative effect of EUR 268.1 million. When we had our integration process, we invested EUR 41.7 million and our dividend proposal for United Internet is also depending on the 5G spectrum auction as with 1&1 Drillisch. If we don't get the frequencies, then we will increase the dividend from EUR 0.85 to EUR 0.90. If we acquire 5G frequencies, we will suggest the minimum dividend to the AGM, which would be EUR 0.05 per share.

We had 2 business areas, Internet Access and Internet Applications. Most of you will be very familiar with this slide. We've got our assets in the center, our team, our sales strength, we've got 60 million accounts that we operate, the data centers that we run and our fiber network. These assets are combined with other networks for the last mile, for example. We combine that with internal devices, such as DSL routers and smartphones to create Internet Access products. And we also combine them with content that we buy or standardized software on top of our own applications.

We offer all of that both for consumers and corporate customers. We've got several brands on the Access side. Our main brand is 1&1. This is our premium brand, and we also have several discount brands stemming from the takeover of Drillisch. That's just yourfone or smartmobile.

On the B2B business, for our business customers, we've got 1&1 Versatel. On the Applications side, the consumer business is driven by the brand GMX, WEB. DE and mail.com, and United Internet Media is used to market the applications because most of them are advertisement finance.

Then on the Business Applications side, our main brand is 1&1 IONOS, and you can also see several brands there that we have acquired abroad: Arsys in Spain; World4You in Austria; Fasthosts in England; and another brand in Poland; and Strato, they operate their business in Germany and the Netherlands first and foremost; and then Sedo and United Internet domains from further acquisitions. We've got several partner companies with which we cooperate closely, and we also hold the shares in these companies, always slightly above 25% and just below 50%. And then we also have participations in Tele Columbus and Rocket Internet. So that would be United Internet at a glance.

Now let us get started with the Access area and our consumer business. The business of 1&1 Drillisch. As I've already said, we have a good network quality. We take turns with Deutsche Telekom when it comes to winning the connect award. We use the 1&1 Versatel network. We combine that network with Deutsche Telekom and city carriers' network in order to produce fiber to the curb and fiber to the home.

On the mobile side, we use advanced services by Telefónica and Vodafone. When we get Telefónica advanced services, we have commitments from Telefónica. When there was the merger with E-Plus, and we also have several brands, 1&1 is our main brand though.

Now consumer business, 970,000 new contracts last year. First and foremost, from the mobile Internet area, we've got 9.2 million contracts there and 4.34 million broadband connections.

Revenues went up 30% to EUR 3.629 billion, and EUR 270 million thereof can be attributed to IFRS 15. It's a 13.3% increase pro forma, and if we remove Drillisch, then we have a growth of 4.6%. EBITDA, up 32.9% to EUR 719 million. Once again, we have the positive IFRS 15 effect, and we have a negative effect coming from the use of smartphones. We have distributed more smartphones that we buy initially and that are then paid back or refinanced over the course of the contract, 24 months. And then we had a one-off investment of EUR 25.1 million for the Drillisch integration. The EBITDA margin went up 19.8%. Pro forma, including Drillisch for 12 months, that's an increase of 12.3%.

Now the Business Access. This business 1&1 Versatel offers fiber-optic networks, and we connect companies and authorities to that network. We have 47,000 kilometers of network available in many German cities, and some 14,000 buildings are directly connected to this network.

Let's shine a light on sales. Business Access, up 4%, EUR 465.9 million. Now if you remove the mass market business from the first 4 months in 2017 because 1&1 Versatel in consumer business before that we have transferred to 1&1 Telecommunication where it belongs to then like for like, without the mass market business, we have a growth of 13.9%. 13.9% growth in sales in the B2B business. I believe, this is a very good value. The same situation for the EBITDA at first glance, 10.9% less, EUR 72.6 million, and a small share, EUR 1.6 million results from the IFRS 15 changeover. We've got an EBITDA margin of 15.6%, and once again, if you remove the mass market business from the first 4 months of 2017 that wasn't available in 2018, then the EBITDA has grown more massively, namely by 27.9%.

Now over to the Application business. On the Consumer side, I believe you're all familiar with that slide by now, we are developing from an e-mail provider to a provider for communication and identity management. Thanks to various applications, our customers can get free of charge or customers have to pay for these services as well.

Now we have a good market position in Germany. We've got 31.2 million active users in Germany. We are very strong when it comes to private e-mailing, and we also are well positioned when it comes to cloud storage. As regard to content, we have a large reach, and the same is true for secure mailing, the e-mail or eIDAS. Now with our mailing service, we set ourselves apart thanks to data protection and thanks to our cloud options, and everything is marketed through United Internet Media.

Now the number of accounts, good increase, up 1.3 million. Now we've got 39.25 million active accounts and 37 million thereof are free accounts, and 2.25 million accounts are paid accounts, monthly subscriptions. Mobile usage increased to 222.7 million active user. They're using our mobile apps and our mobile home page, and 18.5 million use our cloud storage facilities.

Sales, a decline, we planned for that, and we have announced that. We will do without EUR 20 million per year lower -- at load on the portal, more intelligent monetization, thanks to data-driven business model. We are currently developing things now. The first test's underway. Everything seems to be reasonable. However, as a result, sales went down last year, 3.5% less, roughly EUR 17 million and -- EUR 10 million and EUR 17 million come from the reduction of advertising space.

We would have EUR 17 million plus otherwise.

EBITDA is similar situation, 9% less than before, EUR 112 million. EUR 200,000 from the IFRS 15 changeover, and we had a negative effect of EUR 15.9 million from the planned reduction in advertising space. The EBITDA margin is 41.1% now.

Now Business Applications. We develop ourselves from a Web hosting provider, storage facilities and domains towards a provider of e-business solutions. Our target group are first and foremost small and medium-sized companies. We offer them everything they need to be successful online and we also offer them solutions that they need for that back office for their office's email solutions and business applications.

In Europe, we are the leading provider. We are represented in 12 countries. We've got a good market position in large European countries. And next to Europe, we are also active in Northern America. We've got a broad product portfolio, domains, DIY homepages, agency products, cloud servers, e-shops, all the way to infrastructure as a service, and we have a whole lot of additional tools. Products are developed either in-house or together with partners, with whom we have signed a long-term commitment. Last year, we added 300,000 new customers, 250,000 thereof stem from the World4You takeover. In total, we have 8.06 million customers, most of them, 4.24 million are based abroad.

Here, you can see that sales have developed very well last year, up 10.5%, EUR 841.8 million now. Very small amount can be attributed to IFRS 15. Once again, pro forma calculation, including Strato, the growth was 5.9%.

Now the EBITDA grew stronger, up 17.4%. We now have EUR 290.4 million. IFRS 15 effects, once again, on the one side. On the other side, we have one-offs from the Strato integration and from the rebranding of 1&1 Internet towards 1&1 IONOS.

EBITDA margin, 34.5%, up 2% from the last year. And the pro forma situation is 13.7% up, including Strato for 12 months in the previous year. I believe this is a very nice development on the EBITDA side, and this development is set to last.

Now let us take a look at the future. We believe that we can continue our profitable growth strategy. 1&1 Drillisch, 4% growth, just so larger sales chunk. In overall group of companies, we assume 4% growth to EUR 5.34 billion. EBITDA will grow 8% to EUR 1.3 billion. That means we have a stronger growth there than on the sale side. And in the new year, we will comply with IFRS 16, and the IFRS 16 effects will amount to roughly EUR 50 million, meaning a 12% growth, but let us stick to like-to-like figures, and that would be 8% more. Including -- included in 8% are EUR 30 million one-offs for integration projects on the Consumer Access side, and on the Business Application side, that amount is lower than in the previous year. But I believe this is still a figure worth mentioning because I believe it reduces the result by well, exactly, EUR 30 million. Thank you very much for listening. Now over to you, Mr. Krause. He will give you financial figures for 2018.

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Frank Krause, United Internet AG - CFO & Member of the Management Board [3]

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Thank you very much, Mr. Dommermuth. And welcome everybody on my part as well. I would like to tell you about the financial -- key financial figures in detail for 2018. So let's begin with a short recap on the most important financial KPIs and customer accounts.

Our customer contracts have increased by 1.28 million contracts. So 250,000 contracts from the World4You acquisition, which is the leading hosting provider in Austria. We took over a few months ago, 131,000 host from organic growth.

79,000 are Consumer Access and 900,000 mobile and 70,000 broadband. The other 60,000 more organically grown contracts are in applications, 50,000 in Business Application, 10,000 contracts in Consumer Applications. Now sales and EBITDA have been reported. It has now increased by some 22%. We adjust this for -- by 2017 for the -- all of -- all-year effects by Strato and Drillisch, get a pro forma result of some 10%. And in the reported EBIT, you now see the increased PPA that is the write-off toward the purchase price allocations can be seen in those figures. The EPS, Mr. Dommer mentioned in there very briefly, is now after taking into consideration for the full year relevant minority shares over the 33% of Warburg Pincus in the Business Application segment and the 27% investment of minority shareholders in 1&1 Drillisch, which first took a full year effect in 2018.

Now let's take a look at the balance sheet, and let's begin with the asset side and let's look at the most important changes of 2018 and that's compare the 31st December 2018 after the new -- the middle column, which is the opening balance sheet as per IFRS 15. So if you look at property, plant and equipment and you see a difference here that depreciation due to the included PPA write-offs are above the investments.

The increase in goodwill can be seen due to the fact, well, that we took over World4You and the delta in the financial assets is due to the decreased book values of Tele Columbus and Rocket Internet as we've briefly mentioned earlier.

The accounts receivable show the increased expand -- or the expansion of business, and with contract assets, you see the increased [fees] of hardware.

The increase in the next line and we have inventories, the prepaid expenses and other assets comes from the fact that payments were made for the contingent model that we've got with Deutsche Telecom. We've got increased inventories, again, due to the business model and the increase in use of -- increased use of hardware. So at the end of the year, we've used purchasing advantages and tax assets and -- which diluted delta with the tax receivables in other places -- or tax liabilities. And cash and cash equivalents and this also is used due to the increased use of hardware.

Now let's come to the liabilities side. Let's begin with equity. The increase is due to the proper results minus dividends and the share buyback at Drillisch. And net indebtedness that you see and the tax shield of EUR 1.881 billion is a leverage of some 1.6x EBITDA in 2018, and the increase is also reflected by the topics that you already have heard about, the increase of hardware and the World4You acquisition.

Now liabilities due to, well, trade accounts payable also due to the expansion of business as well as increase of some deadline which moved into the next year.

The other positions on the liabilities side. There aren't any big changes. It might be worth mentioning the increase in other liabilities, and in accordance with IFRS 15, future client payments obligations were put into the balance sheet for the first time. And finally, let's take a look at the free cash flow and in operating fashion, we ended the year with EUR 350 million. The reduction as opposed to the previous year where we were last year is due to the increased hardware business and the onetime increase in working capital positions, for instance, with inventories as we've just seen, and so this is in plan or this is entirely in line with what we had given the guidance for. And this brings me to the end of my presentation. And we are very willing to answer questions and to enter to a lively discussion with you. Thank you very much. Before we come into the question-and-answer session, please wait for until we get the microphone and state your name for the people on the phone and the webcast. So somebody in the first line, Mr. Jungfleisch.

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Questions and Answers

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Martin Jungfleisch, Kepler Cheuvreux, Research Division - Junior Equity Research Analyst [1]

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Right. Martin Jungfleisch. I've got a few questions on business -- on the Business Applications segment. Q4 was fairly weak. If you look at the sales and EBITDA, and you lost 10,000 clients. Was this only due to the platform consolidation and TV advertising? Or were there other factors as well? And secondly, for 2019, the outlook. What's your preference, a [few] expansion or customer increase and something on the potential IPO because it was said sometime -- are there any key figure that you would like to achieve to start the IPO process, for instance, I don't know, organic growth or I don't know, customer figures? Those are my questions.

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Ralph Dommermuth, United Internet AG - Founder, CEO & Member of the Management Board [2]

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Let's start with the first question. You said that customer growth in Q4 slowed down a bit. And yes, you've given the answer yourself. So we have the rebranding as for as the end of fourth quarter, and thus, we -- in the previous months, we reduced our marketing spending. So the churn of course happens at the -- on the same rate as before, but the growth activation is -- goes down. So this was expected. And so now after -- now that the rebranding is complete, we'll see the opposite trend.

Would you like to do the others?

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Frank Krause, United Internet AG - CFO & Member of the Management Board [3]

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I can do the others, sure. Yes. You asked about our -- well, what about 2019 customer growth or [ARPU] expansion. In Business Applications, I'd say we continue to focus on our profitability, integration platform. So we finished completely rebranding. That is well the headline and in which we're going to do 2019. You asked about the IPO considerations that we are -- yes, we are considering an IPO together with Warburg Pincus, but there's no concrete time line. But yesterday, at the supervisory meeting, I learned that there has been some readiness exercise to see what they have to do, financially speaking. So we are working on it, we're dealing with it, but it's not something that's going to be happening -- to happen anytime very soon.

Next question.

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Fathima-Nizla Naizer, Deutsche Bank AG, Research Division - Research Analyst [4]

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Nizla Naizer, Deutsche Bank. I think this is linked to the Drillisch conversation as well. Drillisch has said that they have EUR 2.8 billion of consortium debt arranged and also mentioned that United would be willing to finance certain amount as well. Just wanted to understand what is your financial flexibility. How much are you willing to spend as the parent? And in terms of an intercompany loan or something of the sort to add to that EUR 2.8 billion? That's question one. And question two, are -- is there anything else interesting out there for United? You have stake in Tele Columbus, would that limit any other investment opportunity outside of this 5G spectrum conversation? And some color on your thought for that future direction for United would be great.

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Ralph Dommermuth, United Internet AG - Founder, CEO & Member of the Management Board [5]

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Let me start at the end. We are not looking at any larger acquisitions. Tele Columbus currently is not a topic for -- I mean, never say never, obviously. But there are no current considerations concerning Tele Columbus. So we don't have any plans for any larger investments, rather -- other than 5G. You asked about the role of the financial -- or the flexibility, how much would we be willing to finance the company. I cannot tell you because otherwise our competition would go to the Federal Network Agency. We've been -- we weren't thinking right with -- well, I mean EUR 2.8 billion of an intercompany loan. We thought we'd have to disclose that. Our lawyers said so, but then -- and we did that, and then no, it wasn't -- it was collusive action. We weren't allowed to do it because then everybody could read what we were doing. So we mustn't make any mistake because we are in the middle of this auction. So we -- but let me give you just a feeling of how -- and then we don't want to get into too much debt and to indebt ourselves too much, but we are not afraid of getting into debt in the first place just because -- I mean, especially since interest rates are so low at the moment. So we have some headroom that we -- headroom in the United Internet, but -- and we also can expand our lines within United Internet, just as we can widen them in 1&1 Drillisch. And if you think about what if and what if and what if, we could -- for instance, our hosting business. The debt that we have in United Internet is debt that the hosting business has because when Warburg Pincus made an investment, and we went into debt on the hosting business I think EUR 1.6 billion internal debt that we are providing to hosting. And we could have -- we could finance that in the nonrecourse, and this is something that Warburg Pincus is focusing -- interest has -- have been [lowered], and we agreed on fixed interest rates at the time, and Warburg said we've got great offers and we could finance that more cheaply externally. We said, no, we don't want to finance it more cheaply externally because it's business, it's because we're taking the loan at a cheap rate internally and that we're passing on to hosting. But if we wanted to -- well, it's an arbiter's seal, and we could end that, and we definitely could open up our margin. We've got headroom in United Internet. We could add loans. We could have loans in 1&1 Drillisch, and we still wouldn't get -- move outside of the government's framework that we've got with the banks. So we've got some air, and if that wasn't enough, then we could have outside financing for the hosting business. But I cannot tell you what all this is because like I said, I've got the discussion whether this wasn't a -- please don't take this as us wanting to put all of this in the -- into the frequencies. This is not the statement that we want to put this -- all of this into the frequencies.

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Ulrich Rathe, Jefferies LLC, Research Division - Senior European Telecommunications Analyst [6]

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Ulrich, Jefferies. I've got 3.5 questions I think. The first one is for Mr. Krause. I think in the fourth quarter, there was a big contribution margin in other. If I understood it correctly, this was revaluation of ventures. Could you explain on that and shed some more light on that what exactly that was? And how it came about? And what the timing was? Second question, Versatel. Versatel was very strong in the fourth quarter, if you look at the quarterly progression through the year. Could you comment on that? Is that causality? Is that causing -- well, how is that going to continue in the next year? Or was this a one-off if you look at the quarters? The last question on Versatel as well but slightly different. As I understand it, the advantages that you see in Layer 2, Layer 2 conversions that you're passing those on to Drillisch. Are you passing on those advantages to Drillisch? Or is something of the profit staying, enough margin staying with Versatel? And in connection with that, this is the half question that I have, how far have you come with the conversion of Layer 2, that is, how many have been converted?

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Frank Krause, United Internet AG - CFO & Member of the Management Board [7]

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If that was the last one, let me continue. So if I may start with the last, yes, let me charge ahead, okay. Your microphone is on as well. So anyway, let me charge ahead. There is an accounting between 1&1 Telecommunication 1&1 Versatel, which leaves the margin to 1&1 -- to 1&1 Telecommunications, but still 1&1 Telecom -- Drillisch purchases more cheaply with 1&1 Drillisch than with Telecom or Telefónica. So it's a good deal for both sides because part of the benefit stays with one company and part of the benefit stays with -- goes to the other company. At Layer 3 level -- on Layer 3, we've got less than 1 million clients. This will always stay that way over the next few years because we have a certain Layer 3 contingent that we want. And we made payments for that at the beginning. And if I now consider my payment to be made, then Layer 3 is cheaper than producing Layer 2 ourselves. And since we've already made the down payment, there's no reason to reduce it. So we'll always keep it at a minimum level of 3% of the telecom video cell expansion. So this is our minimum level where we're going to stay for in -- over the next years until this Layer 3 contingent contract is running. In Layer 2, we've got more clients. I think 1.3 million Layer 2 clients, and there will be strong growth, while Layer 3 will -- well, it's more profitable to keep Layer 3 at that level due to the down payment that we did at the beginning. And once the contract has ended and once the contingent contract ends, then it will make sense to think about moving the clients to Layer 2 or prolonging them at Layer 3 or -- well, we haven't decided that yet because we've got years to go until then. Okay, so let me answer this -- the other 2 questions. Your first question Mr. Rathe was -- there was a revenue in other.

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Ulrich Rathe, Jefferies LLC, Research Division - Senior European Telecommunications Analyst [8]

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Yes, that's correct.

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Frank Krause, United Internet AG - CFO & Member of the Management Board [9]

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In one venture -- joint venture we had a put option where the criteria to exert the put option came to pass, and so we have to use -- to evaluate such a put option in the balance sheet, which we did. And your question, second question was about the increase of -- at Versatel in Q4. Let me give you 2 answers on that. First of all, we've looked at it. There is a continuous margin and weak results increase and improvement at Versatel over the year and over the quarters because as we've discussed before in last quarter last year, a number of projects were undertaken, such as digitalization, network infrastructure, all these things that produced a lot and incurred a lot of cost that didn't happen. So we said we're going to see a continuous development of the margin and of the results, but as in the past years, Versatel also have their own project business. They had a seasonal business, and that also plays a part, and that plays a role. And so the contribution margin that you saw in Q4 is not going to continue like that, but well, if you adjusted for the seasonal business and the margin business, you will see a continued positive development.

Any other questions? Mr. Rothauge, third row from the -- from the end -- from the back.

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Frank Rothauge, [10]

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Frank Rothauge . Could you tell us a little bit, in the fourth quarter in Business Applications, we see a slowing down of growth. You said something very quickly about rebranding and I cannot really bring -- connect that. What -- is it due to the sales and the results in the fourth quarter in Business Applications? Because it does differ a bit from the good performance of the other quarters.

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Unidentified Company Representative, [11]

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And the comment I made earlier was about customer growth in Q4, with sales growth and with sales, we've EFS 15 (sic) [IFRS 15] effect, which contributes through the entire year. You've had a certain seasonal effect, in particular, in the domain business, where you've got annual recurring renewals. And in accordance with IFRS 15, if you have them, they will lead to a sales lead and that too happened in the, well, previous quarters and that happened in Q3 not Q4. So it's nothing from operating business. It's on the one hand, you've got the seasonal renewal effect that you see in IFRS 15 and that was a first effect. And the first comment I made due to the rebranding that we have a certain slowing down of this effect, and that was due to -- that was on customer increases. But why do we have fewer customers after our rebranding? You usually do that to get more clients, but of course, we get our clients on the Internet. We had a totally new design on the Internet, and it takes a while for -- to have optimized testing and the funnel that it gets through the same conversion rates that we had before. Now we have gotten there. We've got the same conversion rates that we had before, and now it's about making them better. But at the beginning, we had a decrease, but we'd expected that. And so our people worked on it and kept working on it. And due to the fact that we've got these pages in many countries and for many products, it's a lot and lots of adjustments that you have to make in a short time.

Steve Malcolm.

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Stephen Paul Malcolm, Redburn (Europe) Limited, Research Division - Research Analyst [12]

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Just one question. Can I just come back to Ulrich's question on the Versatel or the Business Access margin in the fourth quarter? I appreciate it's lumpy, but it was up like 60% in the third quarter. Can you just give us a little more color toward that? And was there any internal component to that? Did that contribute at all to Drillisch's -- 1&1 Drillisch's slightly weak fourth quarter in terms of margin? Or is that an external lumpy source of revenue and margin?

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Frank Krause, United Internet AG - CFO & Member of the Management Board [13]

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Versatel Q4, as I said earlier, apart from the regular operating improvement, we've -- you've got projects, some project sales in Q4 that were calculated before and that made a contribution. And project sales don't develop constantly. They have a certain seasonal effect, and that's the reason why we had Q4 as we had Q4.

Yes.

Any other questions? Mr. Jungfleisch, again?

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Martin Jungfleisch, Kepler Cheuvreux, Research Division - Junior Equity Research Analyst [14]

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Right. I've got 2 more questions. On Consumer Applications, which was a little weaker, if you compare it to the previous year, what do you think -- or how do you consider growth to be -- sales growth to be this year? Is business sustainable if you go to the margins as well? And perhaps you could give us a few details on the AWIN alliance? And how is that -- and how that is doing at the moment?

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Frank Krause, United Internet AG - CFO & Member of the Management Board [15]

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Do you know how the AWIN alliance is doing? So let's begin with sustainability of this business. We believe that the consumer business could be developed -- it could develop in a better way than we're seeing today, and that is due to the new EU Data Protection Directive, and that allows you to give you -- well, if it's by opt-in, if a customer agrees that, then you are permitted to work with their data. So if the customer agrees, if you allow us, we were permitted -- we'll be permitted to analyze your e-mail traffic. Google does that in America. There was a very strict German data protection, but now with the new EU Data Protection Directive, if you get the opt-in, if the customer agrees, then we can analyze your e-mail, where you've purchased, where you're going on vacation, what your phone bill is, what your utility provider is. And on this basis, we can make suggestions. And we hope to [monitorize] customers in a new way, of course, always within what is permitted without passing on data to anybody else. But we have to build that first, and we have to test it and have to see in how far our customers accept it. And one simple building block would be, I don't know, tracking, order tracking. Let's say, you purchased something online, you get e-mail saying your package is on the way, and it's here and it's there, now it's going to be delivered soon. Let's say you have one window where you can see all your online purchases and you can see the status of these purchases without having to read individual e-mails as a service to you, so you don't have to read those e-mails so you can look at all your purchases in one window. So from all the data that you permit us to have, we can analyze your data to make you more loyal or to, well, monitorize . And this allows us to make suggestions to clients for new purchases of what they could purchase to upgrade to make the business better. So we see great potential in that to tap new sales potential, but it's going to take them until we finish programming it, until we've tested it, until we've achieved customer acceptance. So I don't want to sell it and say yes, we've got -- so we're going to -- everything is going to double in value. No, it's going to be a slow process. We're getting there, but I think -- I'm convinced that the business is going to be even more sustainable than it is today. And we're optimistic that once this business works well, we can afford to develop in that direction to invest in that direction in order to see which way is the best for the German market and whether we actually do get opt-ins and whether everybody keeps us at arm's length or whether the time's already come. And I think this must -- is probably good segue to the Log-in-Allianz. The Log-in-Allianz would be creating a secured environment where people just give this opt-in just once, and then any -- all the companies brought together in this alliance, and they can move safely and only those data that they have agreed on is used and that's look in the [Sedunku]. 65 companies I think by now. 60 I think, 60 companies have joined this Log-in-Allianz. And the last question you had...

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Martin Jungfleisch, Kepler Cheuvreux, Research Division - Junior Equity Research Analyst [16]

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This gives you -- or this led to sales reduction?

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Frank Krause, United Internet AG - CFO & Member of the Management Board [17]

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Yes, this is correct, and we expected that. We also said that last year, we said, we are expecting a deduction in sales -- reduction in sales, some EUR 17 million in sales and EUR 15.9 million in EBITDA. So this is within the ballpark that we've given and that we deliberately took into account in order to get this transfer and this rebuilding started.

Any other questions? Ms. Usman -- Mr. Usman Ghazi.

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Usman Ghazi, Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst [18]

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I'm from Berenberg. I have 2 questions, please. Firstly, on the CapEx in Applications. I believe that there were some CapEx regarding ProfitBricks that wasn't able to be spent in 2018. I mean is that getting pushed out to 2019? Or are there any other special projects in Applications that we should be thinking about when it comes to thinking about Capex in 2019 for Applications? And then the second question, which is going back to this potential IPO of the Webhosting business. I mean, I guess one of the rationales for a more separate organizational structure was that the Telecom's business was becoming too big and that the brand was overpowering the Applications business. I guess that becomes an even bigger issue if we go down this network build route for Drillisch. So why -- I guess, why is there not more of an urgency perhaps to engage in an IPO process for the Applications business?

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Ralph Dommermuth, United Internet AG - Founder, CEO & Member of the Management Board [19]

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Our target is to separate the hosting business. We have already separated it from an organizational point of view. The rebranding to 1&1 IONOS is just an intermediate step. After a certain while, we will cross out 1&1, and the company will only be called IONOS, and this is all then a name of the domain already that we advertised for and where we want to get the traffic on. This is an intermediate step. Afterwards, at the end, the company is fully independent, separated as regard to the name and the organization. We want to do that anyway, independent of the IPO. The business will be separated from the Telecommunications business. We want to build up a core competency there, and the target group will not think about inexpensive phones and expensive flat rate spend. One will be the Consumer business and one is the Telecommunication business and the other is the Application business and the B2B business. And exactly as with WEB. DE and GMX and mail.com, we have separate brands and then we will also have separate brand, after transition phase, IONOS. We have planned that anyway, independent of the IPO. Why don't we try harder and have a faster IPO? Obviously, yes, we could have an IPO tomorrow. That wouldn't be a problem. But I believe such an IPO needs to bring us forward as an IPO. You can't have an IPO for the sake of an IPO, it must make sense at the end of the day. We want to have a currency that we want to use to buy other hosters when they don't want to have cash or United Internet shares because it's too telecoms-focused. They may want to have rather hosting share, and in that case, it may make sense, but we don't have such a project coming up. And this is why we, first of all, want to make sure that the company is IPO-ready. First of all, we want to substantially improve the figures as well. And this is why we have the platform consolidation up and running behind the scenes, and that will take a while. And once we are done with everything, and once the rebranding is completed, well, this is just an intermediate step for now, then the window will open. And if it makes sense, we will go for the IPO. This is our objective, and this is what we agreed with Warburg Pincus in a contract, but we need to do that at the moment in time that is suitable for our company and 1&1 IONOS or IONOS later on. It all must makes sense. Then CapEx in the business Applications segment from the ProfitBricks segment, we looked at the competition and the Pro segment differentiates us. It's a server business. And the CapEx that we have planned there that we see there, it directly correlates with the customer growth and the rebranding activities and -- well, led to a shift in the focus. We continue to do the work there, but that will now rather happen in 2019.

Are there any further questions at this time?

Apparently, this is not the case. Now it's time for me to thank all of you for the discussion. We would appreciate if you could stay for a snack and if you are bound for home, then have a safe trip home. Thank you.