United Internet AG (OTCPK:UDIRF) Q3 2022 Results Conference Call November 10, 2022 5:30 AM ET
Company Participants
Stephan Gramkow – Co-Head of Investor Relations
Martin Mildner – Chief Financial Officer
Dominic Grossman – Co-Head of Investor Relations
Conference Call Participants
Jakob Bluestone – Credit Suisse
Stéphane Beyazian – ODDO BHF
Nizla Naizer – Deutsche Bank
Martin Hammerschmidt – Citi
Yemi Falana – Goldman Sachs
Usman Ghazi – Berenberg
Jerry Dellis – Jefferies
Josh Mills – BNP Paribas
Stephan Gramkow
Good morning, everybody, and welcome to our Q3 and 9 months 2022 results conference call. My name is Stephan Gramkow from Investor Relations. And here with me today are our CFO, Martin Mildner; and my colleague, Dominic Grossman.
Martin will first take you through the development of the first 9 months and the financials, and we are happy to answer any questions afterwards. So Martin, the floor is yours.
Martin Mildner
Thank you, Stephan. First of all, it’s a pleasure for me to welcome you, all of you to our 9 months results and investor webcast. And as always, before I will start with the details of our financial results, I’d like to highlight already at the beginning of this presentation that we look back to a very successful 9 months of the year 2022.
Given the difficult market conditions, with respect to the high inflation, the operation crisis, the ongoing supply chain issues, and last but not least, the overall current negative sentiment from our point of view in the global economy. Keeping all of the elements in mind, we see again that our United Internet Group has a more than robust and resilient business model, which gives us the opportunity to grow even under these difficult market conditions.
As well as before we go into each segment of our group, let me start on Slide 3 of our presentation with an overview of the most important KPIs of the United Internet Group as of 30th of September 2022, which means the figures for the first 9 months of our financial year.
First of all, we were able to increase our customer contract basis in the first 9 months by 430,000 contracts, which leads to a total number of 27.11 million customer contracts.
Our revenues for the first 9 months reached €4,384.3 million, which leads to an increase of 5.2% compared to the revenues of the first 9 months of 2021.
Our EBITDA, or the earnings before interest, tax, depreciation and amortization, for the first 9 months amounts to €983.3 million. And therefore, our EBITDA is 3.3% above the EBITDA for the first 9 months of 2021.
Our EBIT increased by 3.4% from €601.5 million to €622 million.
As you can see from the explanations below this table, our EBITDA as well as our EBIT are influenced by three main cost drivers. The first two drivers have been announced already in our first guidance for the year 2022 and last December of 2021. We are investing in the rollout of our open wire network not only through CapEx, but some of these investments are also OpEx related.
Furthermore, we announced that we are also investing in the brand awareness of IONOS. And last but not least, due to the Ukraine crisis, we, as more or less all other competitors and companies in Germany, are facing a strong increase of the electricity costs, where we had higher cost of €16.3 million in the first 9 months of this year.
Our EBT of €569.1 million, but also consequently our EPS, so our earnings per share, are influenced by two facts, which have been explained in one of the first bullet points below the table.
On the one hand, the financial results was influenced by subsequent valuation of financial derivatives which reduced our EBT by minus €7.1 million. And on the other hand, the negative results of the investment in Tele Columbus in the amount of minus €22.5 million were added for the full 9 months of this year, while the negative results of Tele Columbus in the first 9 months of last year were only added for 5 months, which was due to the fact that the investment was still to be accounted as an investment to be sold in the 1st month of 2021 due to our investment together with long Stanley infrastructure in Tele Columbus.
These described EBT effects also has impact, of course, on the EPS of €0.12 per share. This means that our EPS in the first 9 months of 2022 will be €1.59 per share and €8.9 per share is the key figure of operating EPS before our purchase price allocations taking into account, which is important for us, as you know, in our — sorry, how we are looking at EPS.
I would now switch over to our segment access and will start with Consumer Access, which is, as you probably know, related to the business of 1&1. In fact, that Markus Huhn, the CFO from 1&1 held his webcast already this morning before our webcast. I’d like to focus only on some key elements. Therefore, let us start with the development of our customer contracts, which you can see on Slide 4 for 1&1.
During the first 9 months, there were an increase of 330,000 mobile Internet contracts, coming from 11.19 million at the end of last year, up to 11.52 million contracts at the end of September this year. On the other hand, we saw a decrease of 110,000 broadband connections in the first 9 months of 2022, coming from 4.24 million at the end of last year. and now 4.13 million contracts at the end of September ’22.
As we already discussed in our analyst call for the first half of this year, we’d like to highlight again that the legal regulations in the telecommunications law in Germany in connection with the realized possibility for the customers to be able to terminate now the contracts after the first period, now already with a 1-month period instead as before of the full year period, we see a higher churn of minus 150,000 contracts in mobile and minus 80,000 contracts in broadband connections.
If you have a look on Page 5 of our presentation at the revenues of the segment, Consumer Access for the first 9 months of this year, we can consider that the most relevant service revenues increased by 2.2% to entirely €2.9336 billion and are, therefore, in line with the announced outlook of 1&1. The low margin hardware revenues increased in the first 9 months by 0.4% to €546.9 million.
On Slide 6, you can see that the EBITDA of Consumer Access increased in the first 9 months by 7.4% to €552 million. The EBITDA is already — as already explained, influenced by higher electricity costs of €0.7 million.
This results to an operative EBITDA margin of 18.8% in the first 9 months of this year compared to a margin of 17.8% in the first 9 months of last year.
I’d like to state again that the EBITDA also includes initial cost of €26.1 million for the rollout of the mobile network.
Page 7 shows the EBITDA of 1&1 separated into the two new reporting segments. So on the one hand, the segment Consumer Access and on the other hand, the new segment 1&1 Mobilfunknetz. In fact, that the mobile network segment includes so far only the initial cost for the 5G rollout in the amount of €26.1 million, the pure Consumer Access segment shows even a better operators EBITDA for the first 9 months of entirely €578.1 million, which represents an increase of 7.4% compared to last year.
I’m now coming to our segment Business Access, which is related to the business of Versatel.
On Slide 8, it has shown that the revenues were growing by 4.2% in the first 9 months of this year.
Coming to Slide 9, where you can see that the EBITDA on the segment Business Access was declining by 4.5% to €113.5 million with a 28.5% EBITDA margin. However, and as shown on Slide 9 is the EBITDA is impacted by higher electricity costs as well as some onetime migration cost in the total of roughly €3 million, but the EBITDA was also impacted with an amount of €7.3 million, which are linked to up-front costs on the Versatel side for the rollout of the mobile network of 1&1. So if you adjust these three cost positions, you will end up on an EBITDA growth rate of 4.1% compared to the first 9 months of last year.
I’d like to come now to the segment Applications. And we’ll start, as always, with the segment consumer applications, which we present, as you know, our Mail & Media business, especially with the strong brands, WEB.DE and GMX.
Within Consumer Applications, we count more than 42.55 million customer accounts. We are up approximately 40 million of free accounts and 2.52 million are paid accounts. Of this 42.55 million accounts, more than 28.1 million accounts are linked to mobile usage, which could increase in the first month by 400,000 accounts.
Also, the cloud store usage accounts could be increased by 500,000 accounts so that now more than 22.3 million accounts are linked to the cloud storage.
On Slide 12, you can see the development of the revenues of our segment consumer applications. Maybe as you remember from our first quarter results, we started really good into the first 3 months of 2022 with an increase of the revenues by 7.5%. But as you know, from mid of February onwards and during the entire second quarter of 2022, we saw a very high level of restraint in the advertising market, which was leading to a reduced revenue growth on the Mail & Media side of only 1.5% in the second quarter.
Now in the third quarter of 2022, we see some kind of recovery, especially in the advertising market and therefore, also some better performance in our business with a revenue growth of now 3% in the third quarter.
Over the entire first 9 months of 2022, this leads to a revenue growth of — in total 3.9% and a total revenue of €208 million compared to €200.1 million in the first 9 months of 2021. So I think even with this really bad environment, we are still having a good development on the revenue side.
Furthermore, you see it on the next page, the EBITDA was increasing by 3.9% from €80.5 million in 2021 to €80.3 million in 2022, which results to an EBITDA margin of 40.2%.
Within this EBITDA, we have also included higher electricity costs of €2.4 million, which are in this EBITDA included, as I said.
Let us now come to our last segment business, Applications, which represent the business of IONOS. On Page 14, you can see that IONOS increased its customer contracts in the first 9 months by 160,000 contracts. They have now 8.94 million contracts in total Nearly half of it comes from domestic business, so 4.34 million contract and a little bit more than the half is coming from a broad business. So from the international business, 4.6 million contracts.
If you then take a look on the revenue side of IONOS, we see a strong growth rate of 18.7% and total revenues of €919.7 million for the first 9 months of 2022.
As always, we’d like to note that this is — this high growth rate is also driven by our aftermarket business. The aftermarket business is an important part of the hosting and cloud business because every business of our customers is starting with the domain registration. But we always like to point out since years that on the one hand, the aftermarket business is compared to our core business, not as a subscription model with recurring revenues secured by a long-term contract, and on the other hand, the margin of the aftermarket business is different from the core business. But nevertheless, even without the strong growth of our aftermarket business, our core business, so mainly our hosting and cloud business, we’re able to increase its revenues by 7.7%.
With respect to the EBITDA of IONOS, we see also an increase of the EBITDA by 3.1% to €249.8 million in the first 9 months of this year compared to the first 9 months of last year, where the EBITDA was €242.2 million.
As I already highlighted earlier, this lower growth rate was intentionally driven mainly by the growth initiative of IONOS with respect to the brand awareness campaign as well as due to higher energy cost of €11.9 million in 2022. But even with this kind of additional growth initiatives and additional unexpected costs, IONOS still remains very attractive is a high EBITDA margin of 27.2%. And please be aware that these are the reported EBITDA margins, when you compare these margins with competitors, you have always to keep in mind that the competitors are reporting adjusted EBITDA margins, which we are not doing here.
On Slide 17, we summarized a few more KPIs as of 30th September of 2022. On this slide, you can see again on the upper table of our KPIs our group revenues, our EBITDA until the lower table, again, the development of our customer contracts.
Furthermore, and not mentioned so far, I’d like to drive your attention to the CapEx, which is 71% higher compared to the first 9 months of the last year 2021. This strong increase of our CapEx was already announced in 2021, where we anticipated a total CapEx in the range between €800 million and €1 billion for the entire year. At the end of September, we concretized that the CapEx will end up in the range of €700 million at the end of this year due to a shift of planned investments in the rollout of the mobile network from this year to the next and the following years.
Secondly, I’d like to mention our free cash flow in the first 9 months of this year, which is minus €38.4 million due to a phasing effect, which I already explained in the last analyst call for the earlier quarters. There was a cash payment of roughly €100 million made in the year 2022 in the first quarter, which is, from an economic point of view, allocated to the year 2021. If you allocate this payment not into the year ’22 but to ’21, our operators cash flow amounts to €58.8 million.
So last but not least, you can see on the lower table that we increased our bank liabilities from 1.7 — 12.6 at the end of December 2021 by 8.6% to a total net bank liabilities of €1,859.7 million as of the end of September ’22, which is mainly driven by repayments of due bank facilities, which did not refinance so far and our investments in the rollout of the mobile network.
Our equity ratio improved by 1.3 percentage points to a ratio of 52.2%.
On Page 18, we illustrated our free cash flow bridge from our EBITDA to the free cash flow after leasing and after the explained phasing effects of the payment, which was made in ’22 but has to be allocated to the year ’21. So on Page 19, we are coming now to our last topic before we happily answer your potential additional questions. So let us come to the outlook for the financial of the entire year ’22.
Even with a tough economic environment, which we’re all not only as companies, but also each individual have to face in ’22, we are still convinced that our guidance, which we gave already in December last year is still valid. And therefore, we are pleased to be able to confirm this guidance again, not only with respect to our guidance of the total revenues of our group of approximately €5.85 billion, but also with respect to the slightly increased expectation of our EBITDA for the entire year of approximately €1.720 billion.
It is really important to understand, and therefore, I’d like to highlight this again, our guidance on the EBITDA includes already our investments of 1&1 in Versatel in the amount of approximately €60 million for the rollout of the mobile network and the investments of IONOS in the amount of approximately €30 million for the brand awareness campaign. But it also includes the additional anticipated energy costs of approximately €20 million for the entire year ’22.
With respect to our CapEx guidance, I’d like to recall that we slightly concretized our CapEx to €700 million. mainly driven by the phasing shift of our planned investments into the network from ’22 to ’23 and the following year.
So thank you very much again for your time to join our 9-months call. And I’m now looking forward to your questions during our Q&A session. Dear operator, will you take over the lead again?
Question-and-Answer Session
Operator
[Operator Instructions] And your first question is from Jakob Bluestone from Credit Suisse.
Jakob Bluestone
I just wanted to stay on the topic of energy costs. Which you highlighted up €20 million this year. Most of that is IONOS. It may be something you’ll discuss more at the CMD. But at the current energy prices, can you give us a sort of rough feel for how big an increase in energy costs should we expect next week — sorry, next year?
And what sort of energy hedging do you have within IONOS?
Martin Mildner
Jakob, thank you very much for your questions. So I’m not quite sure what the cost will be for next week. I have to double check this. But next year, I would assume that we are still a little bit dependent on the decision of the government regarding the gas price brands in German.
And there are still some open issues, what kind of categories they will have and what kind of company we will be where we’re falling under the umbrella of different pockets they are discussing currently regarding the deduction of the energy prices.
But however, we hedged already more than 50% of our energy costs for the next year only for the entire group.
And within IONOS, especially because you’re referring to on there’s some kind of differences. For example, for the Strato Group, we hedged already 100% and for IONOS, more or less 50% for the remaining part. But in fact, as I said, the gas price will have — from our point of view, positive effect. So therefore, it’s really hard to say where we will end up.
But as I said, the hedging is quite good, and we are still looking forward to the decision of the government regarding the gas price.
Operator
Your next question comes from Stéphane Beyazian from ODDO BHF.
Stéphane Beyazian
I’ve got two regarding, if that’s possible. The first one, do you think you’ve reached the commercial traction that you wanted, which could allow you to cut a little bit on marketing in 2023 or you think that you’re doing well on revenue growth, and therefore, it would make sense to maintain the current level of marketing activity?
And my second question is, do you think there is any room in the market that IONOS to be I mean it’s different entities in different markets, obviously. But just in overall in the web hosting industry, there is a little bit of room to be raising some prices. Do you observe anything in the market regarding that?
Martin Mildner
Stéphane, also thanks for your question. Regarding your first question of the commercial traction of and the — how the marketing activities impact the business. As you know, that brand awareness activities or marketing and brand awareness do not have always a direct impact but a long-term impact. But you know that we started with the marketing campaign for IONOS first in the U.K. with [Ontaga].
And what we can see there already is that we really see a shift in — for example, in the Google Search that more people are looking for IONOS directly than for hosting or for web services or whatever.
And I will not tell you too much in front of the Capital Markets Day next week. But what we can really show is that this improvement release, of course, as you see, to good results on the revenue growth but also what we can see is that the brand campaigns are working and that we have really good results in advertising and searching through Google directly with IONOS and save us a lot of money if we will look for SEO and SEA, and therefore, we are quite happy.
The second part of the question mainly relates to the question, how long do we have to make this investment. I would say maybe we will stay with these kind of marketing activities also over a longer period. But what we have to see is that over the time, of course, the revenue is from our point of view, increasing in the increasing. And this will lead to a percentage and to a ratio which will decrease even if we stay with a number of marketing activities. And therefore, we see two things.
Maybe we will not invest so heavily in the marketing over the next years as we are doing it today. But even if we would do it, it will from a ratio perspective and decrease due to higher revenue. And therefore, we are really happy at the moment that we started testing activities in the brand awareness and that we see a lot of attraction.
And maybe just one more comment and this question will come, we announced that we will have €30 million at all in marketing activities and that we did not spend nearly half of it at this time, but the campaigns are really back-end loaded. And in the next weeks, we will ensure a lot of advertising in the television and in other campaigns. So therefore, we assume that we will spend also €30 million in this year for IONOS and the marketing activities, which we announced also.
And coming to your second question regarding whether there is room in the market for price increases. So IONOS always did some price increases compared to 1&1, for example, they are a little bit more there’s a little bit more room for them for increasing the prices. But we will do this really carefully, and we will see how this impacts the churn rates and also the activity of new customers. But of course, I would say, in this kind of market, there’s a little bit more room than, for example, in the telecommunication market.
Operator
And your next question comes from the line of Nizla Naizer from Deutsche Bank.
Nizla Naizer
I have a couple of questions. The first is on Versatel. Could you kindly remind us what the main drivers of growth are here? And how much of the annual CapEx is sort of allocated to Versatel in the outlook that you’ve given us? And the second question is going into next year, do you expect a change to your financing costs on the back of increasing rate color as to how to think about that would be great.
Martin Mildner
Thank you. Yes. Thanks a lot for your questions. Regarding — I will say there’s a second question because it’s a little bit easier and a little bit faster. You maybe remember that we took a facility last year in the amount of €750 million with a fixed rate of 0.69%.
I think this was really good move. And of course, the development of the interest rates, you can see not only in the U.S., but they are also increasing the European Union. And therefore, we have really to face also that there may be increasing interest rates over the next years also due to our investments.
But I think this is a little bit also the situation which everybody is facing. But currently, we are feeling really good with our current facility lines and we will, of course, also look for possibilities from the EU regarding facilities to financing 5G rollout, where you have maybe better conditions than proper loans. And therefore, of course, nobody can deny that the interest rates will increase over the years. Currently, I think we were lucky that we entered into the €750 million last year and which gives us some room.
And regarding your first question, I think the drivers for growth in Versatel is, from my point of view, one of the most hit champions in our group, yes. So Versatel has really now the chance due to also the agreement with 1&1 that they are now obliged to build up the network for 1&1 that they have to connect over the next year’s 12,000 antennas or antenna sites. And therefore, you really have a very good way to approach new customer groups because of so many homes passed and so new ways how you can reach homes.
But the interesting question is how you structure your sales process, yes? So you know that we are currently only looking for really big B2B customers, like a bank who likes to have 1,000 branches connected with fiber. And now we have really the possibility to go also to small SME customer to SoHo customers, but also to B2C customers. But our product on the Versatel side is, of course, not the right product for somebody who has only a flat in-housing association in a single house.
But we see really a good momentum there that we can reach them, that we connect these buildings, and we are now looking for possibilities through wholesale contracts and through other corporations to offer them also products which are not coming from Versatel but where Versatel is the company that connects the houses and then to have corporations, of course, with 1&1 also with other players, hopefully, where products can be offered to the customers, where the customer can make their own decision, what kind of product and service provider they will like to take. And for Versatel, this is really a chance to enter into this kind of wholesale market and additional investment possibilities to really to increase their footprint due to their possibilities now to have more home pass than before.
Nizla Naizer
Okay. And just a question on how much of the CapEx is sort of allocated to Versatel?
Martin Mildner
I missed this question. Sorry. I will start with the €801 billion because this was what we envisaged last year and what we will spend as a CapEx. And you can make an easy math, yes. So 1&1 was saying that they like to invest roughly €400 million into the rollout, and IONOS investing every year around €100 million.
Mail & Media is investing between €20 million and €30 million, something like this. And the normal investment of Versatel generally, and as we always said, €150 million.
And if you do the math between, you will come up with roughly €250 million of Versatel into new investments. This is, of course, for the rollout of the 5G network, it’s not only the connection of the antenna sets, but you know from 1&1 that Versatel also responsible to build up more than 450 edge data centers, the core data centers and the most of the investments are going into the rollout of the €250 million, but also for connecting additional customers in B2C clusters in, for example, in business parts. But you can say €250 million plus €150 million is allocated to Versatel.
And now due to the slightly phasing effect that we reduced the and the CapEx from €800 million to €1 billion to €1.7 billion approximately. I would assume that Versatel has a little bit more, maybe €200 million, in fact, that Versatel has some pre-investment to make even with the phasing effect on the 1&1 side.
Operator
Your next question comes from the line of Martin Hammerschmidt from Citi.
Martin Hammerschmidt
If I can come back to the Versatel margins maybe. So I think historically, there have been around 30%. And this 1&1 revenue sort of coming in gradually over the next few years. How should we think about the margin profile for the change in margin profile? Do those sort of [indiscernible] revenues come with higher margins than the current 30%?
Or should that be rather stable?
And then the second question based on the 1&1 stake, I think Mr. Dommermuth, I think, maybe a year ago was asked about potentially taking out the minorities. And he suggested that the share price was maybe a bit still too high. And it will be more interesting level at €18 now, it’s my guess, is quite below that at €14. So could you maybe share with us your latest thinking of how you think about sort of those minorities?
Martin Mildner
Martin, thanks a lot for your questions. Regarding the margin development of Versatel, of course, there is a slight decrease in the margin at the moment due to the high investments for the 1&1 rollout.
I would assume for the longer run, that we are going again back more into the margin region where we are coming from. But of course, the same as for 1&1. At the moment, you have clearly not only for the rollout cost for — on the CapEx side, but also on the OpEx side, so there’s a mix between both. So I would assume that the rollout leads in a phasing effect towards slightly lower margin than before. But over the years, it would, from my point of view, go again in the same region as before.
On the second question regarding the minority of 1&1, of course, this is always a question I hear in every call or meeting with investors and with analysts. We always said that the governance structure from 1&1 is important for us, and we are currently having 79% in 1&1.
And of course, it would be great to simplify our United Internet structure, but we always said that we have a lot of priorities in front of us. And we always said that the rollout of the 5G network is the highest priority.
And therefore, currently, we are not thinking about changing the shareholder position in the short run. But clearly, we always said that in the long run, we have to think about it, but it’s also depending on the shareholders, whether they like to sell or not for these kind of prices.
Of course, it’s better to acquire shares with a price of €14 than with the price of €20, but you always have to see the other side who’s willing to sell and currently we are really focusing on the 5G rollout, and you know that we have there a lot of things to do. And first things first, and then we will think about the governance structure.
Operator
And your next question comes from the line of Yemi Falana from Goldman Sachs.
Yemi Falana
The first one is on Versatel. So it appears that trends Versatel are somewhat suppressed by some delays in the 1&1 network rollout. So how do you think about the revenue growth ramp into next year? Is there a kind of per site revenue ramp that you could maybe give us some color on as we think about the 1&1 network rollout accelerating?
And then secondly, on the consumer application side, I think the strong growth that you delivered there was somewhat unexpected, and it somewhat odds the advertising weakness we’re beginning to see across Europe, proceeding amongst others. So what kind of run rate are you seeing as you’ve kind of entered the fourth quarter of this year? And do you expect any weakness into next year? Any color there would be really helpful?
Martin Mildner
Maybe starting with Versatel, of course, the effect of the phasing from the 1&1 network from this year into the next year will lead to the situation at Versatel that their revenue will not increase like we expected this year due to the postponing of the rollout or the phasing of the rollout, I would say, and of course, this will lead to a little bit higher revenue income than in the next year. But I would not say that this is the revenue ramp. It’s really a phasing effect.
And of course, the revenue growth will continue on the Versatel side more and more. But it’s not a question of weeks or months. It’s more steady going over months and years, I would say. But of course, currently, whether it’s facing a little bit of the situation that they expected revenues from 1&1, which are not coming due to the phasing effect. And then, of course, they would step in the next year.
On your second question on the consumer application side, I think this was the reason why we’ve shown in our presentation the development of every quarter, yes. So the first quarter was very good. Second quarter was a mess. The third quarter is now going a little bit up again. And it’s really hard to say what is our expectation for the fourth quarter, where I — we see the advertisers how they are booking.
So we are convinced that there is an increase in the activities. But whether this leads to 4%, 5%, 6%, 7% in consumer applications, it’s too early to estimate at the moment.
The good thing is in the e-commerce business, I think all of the warehouses are full. The e-commerce companies are more or less — also have a problem to get their warehouses a little bit more empty and therefore maybe have more need for advertising also. But we think at least that the development is getting better and that we’re going more up than down in the next quarter but also the quarters afterwards.
And of course, what’s happening in the next year, it is really difficult to answer. But what we are doing within consumer applications is clearly to work on new business models, how we can monetize more our databases and how we can getting more independent from the advertising business. And this is where we are working on. And this is where we see a lot of possibilities to improve, but of course, we do not see this already in this year. And hopefully, the development in the next year will be again better as this year.
But we also have to face that we had a really, really good year 2021 in the business.
And we are not shrinking our business. We are still increasing our business. So therefore, it is not the best situation, but keeping in mind that 2021 was really, really great. We still are happy about the development in 2022 even if we thought it could be much better.
Operator
And your next question comes from the line of Usman Ghazi from Berenberg.
Usman Ghazi
[indiscernible] questions, please. First question was just a clarification on the comment that was made earlier on the price tax proposed by the government where [indiscernible] would be started grow. I just want to understand is that [indiscernible] United [indiscernible] that’s an issue? Or is it that we don’t know best telephone companies in general will fall within the government framework — so that’s the first question.
And then the second question is on IONOS. I was wondering [indiscernible] of results they mentioned that within uneven demand patterns in just particularly in the U.K. — sorry in Europe, particularly in the U.K. and Germany, and that was resulting in the [indiscernible] revenue trend referring into Q4. I just wanted to just explore with you, are you seeing any such kind of macro-driven weakness in spending going into Q4.
Martin Mildner
Usman, it was really hard to understand. The line was not really good. So let me summarize what we understood. So the first question was when I heard it correctly. It was on the energy cap and Martin’s earlier comments on — that it’s not 100% clear in which pockets United Internet is falling, and which kind of obligations, restrictions are coming with these pockets, we might be able to use this energy cap.
So tell me if this is correct?
Usman Ghazi
Yes, specifically that is this — because of some of the other telecom peers, a lot are not saying this is uncertain, as in they’re including the full benefit. So I was wondering if you see this as a United Internet issue because part of your aspirations are telecoms and you’re not a network operator, which is why this could be an issue? Or is it something else?
Martin Mildner
Usman, I think the telecom is maybe anticipating that they are a big company and that they are falling in the pocket where they can get everything. We are also a big company, but we are not anticipating that we are allocated to big companies. So therefore, as long as the law is not in place, I think it’s for us not the right time to speak about anticipation, what kind of things could happen. So as soon as the law will be in place, we have a clear view on it where we — what we can achieve there. But so far, we are a little bit hesitant to speak about something which is not signed so far from the government side.
So therefore, please apologize not to give you a better answer, but we would not really like to anticipate this.
And then the second question, I think, was on — and correct me, was on IONOS and whether the current macro environment with regards to commerce and especially e-commerce is impacting IONOS’ business?
Usman Ghazi
Yes, and specifically, I just point in good as the results kind of mentioned that there was no uneven demand in Europe, particularly in the U.K. and Germany, which is causing some low visibility on variability to project revenue change into Q4 and was causing weakness.
Martin Mildner
Yes. Okay. Okay. So no, we are not seeing this because, I mean, we — our business is not set up — IONOS business is not set up in a way that we rely on revenue cuts for shops and even more for hosting packages, I mean, so this is why we are not that dependent on commerce.
It’s more a question of to be present to show what you are offering.
And this is why this is not linked to commerce, but more a question of becoming more efficient, and we are also aware that everyone tried to save some money. But then to digitalize your business is actually something which is a good idea. So this is why we are not that concerned, and we think that our businesses is really robust and not that much linked to the macro environment here.
Operator
Your next question comes from the line of Jerry Dellis from Jefferies.
Jerry Dellis
Yes. Really interested, please, in an update on the fiber expansion plan at Tele Columbus. We serve that Tele Columbus bonds are now yielding close to 20%. So it would be useful, please, if you could clarify what the funding plan is. How it might need to evolve and also your level of commitment to the project at this point?
Martin Mildner
As you know, Tele Columbus is not a company within our group. We only own 40%. So therefore, I have to be a little bit careful what I’m saying, but I can give you a clear view from us as a shareholder. So what Tele Columbus is looking for is the momentum in the market where they have a really good attraction to go to the home associations — to the housing associations to drive the housing associations for fiber and to turn cable into fiber or telephone lines into the fiber. We see a really, really good momentum there.
We see really good successful projects in Tele Columbus, and of course, we always said from the beginning that if we are partnering up with Morgan Stanley, that we are clearly engaged in this business that we are clearly believing in Tele Columbus, and therefore, there is no change at all in our strategy.
And as you know, from our announcements in 2022, where we announced the investment into Tele Columbus, we always said that there are two steps to funding the business. The first step was the capital increase into Tele Columbus in 2021, where Tele Columbus was able to reduce their leverage dramatically. And some money for expansion. I was also part of the capital increase. And we always said that we are committed, together with Morgan Stanley to do additional funding, and we announced €75 million, and this is still valid.
We did not change this. And we think that Tele Columbus makes good progress to be really successful, especially the housing associations and also to gain new housing associations, not only to switch the current approximately 2.4 million customers into fiber over the years but also to get new customers on board.
And therefore, I think as it’s always in infrastructure models, it’s a longer way. But we still clearly believe in this business, and there is no change since the investment together with Morgan Stanley.
Jerry Dellis
Could I just clarify what point in the project additional funding requirements might kick in.
Martin Mildner
Look, Tele Columbus has its own — it’s listed and has its own analyst call at least with lenders. And I think it’s clear that they have two bigger financial tranches which are becoming due in 2024 and 2026. And this is where we have to think about the refinancing, and we also think about additional capital, as I said, with the €75 million, and there is no change in this plan so far.
Operator
[Operator Instructions] And your question comes from the line of Josh Mills BNP Paribas.
Josh Mills
Two for me on M&A. So firstly, I think in August, we saw these reports of a potential interest in selling consumer applications, a €1.5 billion price tag at the time. Can you just update us on your thoughts around the consumer apps business, whether you see it as a core part of United or not, and if you were to say that where you might you look to redeploy proceeds?
And then secondly, on the 1&1 side and the network build, now clearly, there’s been some disappointing delays here and net add momentum remains slightly weaker than we’d expected. In the event that you were to consider merging this business with a competitor in the market, do you think the regulator would allow that kind of deal to go through, given that you were created a remedy taker initially? And in that scenario, how would you see the opportunity for that to strengthen your network proposition and 5G rollout targets, et cetera?
Martin Mildner
So difficult questions from the BNP Paribas. Just kidding. Regarding your first question, how we receive Mail & Media the consumer application business. I can only repeat what I said before, and what Mr. Dommermuth also said in the half year results.
First of all, we think that there is such a huge potential in the business which we are so far did not monetize. So I said this earlier in this call also, we think that this is more or less a unique asset. If you’re looking, what kind of databases you are owning in this asset. Yes, we have more than 40 million active e-mail accounts. And if you know — and if you look at your personal e-mail accounts, you know what kind of information are inside of these e-mail accounts.
And maybe this information is more information than Google ever will get from you.
But we did not find a way how to monetize it. And why we did not find a way so far because I think we were not enough focus on this business because it’s always our smallest business, it’s always a business which is refinancing their business itself, and it does not hurt. It does not make problems, but we didn’t — we were not concentrated enough to really to focus on this business. And this is what we said last year, we’d like to change, and we made a project together with a consulting firm, what kind of growth initiative they can imagine and what we can imagine. And it is clear that there is potential in this company and in this business.
And the main question is who should leverage this initiative and are we the best owner or are others the best owners, and it is already our obligation as a Board member always to think about all alternatives. Should we invest in the company? Are we the best owner should somebody else invest into the company? And as we said, we made some cohorts last year, this year — or this year to see whether there is some, whether there are some investors who could be interested. But in fact, also like, we clearly decided that we will stop this process.
We do not like leagues and we do not like to be approaching this way. And so far, we are clearly focusing ourselves to see how we will go on with this business. So therefore, from the M&A perspective, we do not see any movement in this business so far. And therefore, there are no really news. And therefore, also the question regarding the proceeds is not the question we are asking ourselves at the moment.
On the question of the 1&1 network building and the delay in the question of a merger with a competitor, I think we stepped in as a fourth network operator through the European Union.
And we think that from a market perspective, it is good to have four operators in the market, and this is the same view as the new commission will have. So therefore, we are not thinking about any merger with any competitor at the moment.
Operator
Thank you. There are no further questions at this time. I will now hand back to Stephan Gramkow for closing remarks.
Stephan Gramkow
Thank you, Sharon. Thank you all, everyone, for attending today’s call. Please do not hesitate to contact Dominic or myself or for any follow-up questions. Have a nice day. Stay safe and goodbye. Thanks.
Operator
Thank you. This concludes today content. Thanks participating. You may now disconnect.
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