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Dear, ladies and gentlemen, welcome to the conference call of United Internet AG. At our customers' request, this conference will be recorded. [Operator Instructions]May I now hand you over to Dominic Grossman, who will lead you through this conference. Please go ahead.
Well, thank you, operator. Good morning, everybody, and welcome to our Q1 2021 analyst and investor conference call. My name is Dominic Grossman. And here with me today, I have our CFO, Martin Mildner; and my colleague, Stephan Gramkow. Martin Mildner will first take you through our Q1 presentation, and we are happy to answer any questions afterwards.Martin, please go ahead.
Yes. Dear Dominic, thank you very much for the introduction. Dear investors, banks and analysts, also from my side, a warm welcome. As Dominic said, my name is Martin Mildner, and I am the CFO of United Internet from -- started at the 1st of October last year, and I now am within the company for more than 6 months. So I'm more than happy to have the chance to present to you our 3 months results for the first quarter of the year 2021.And as a general and overall summary, let me state at the beginning that we think that the entire United Internet Group started quite good into the year 2021. Before I will show you in detail the results of every of our 4 business lines, I'd like to give you, first, an overall perspective of the results of our group.And I'd like to start on Slide 2, where you can see that we were able to increase our customer contracts by 280,000 in the first 3 months coming from a customer base at the end of last year of 25.93 million. Furthermore, compared to the first 3 months in 2020, we were able to increase our revenues from EUR 1,329.4 million to EUR 1,392.2 million, which results to a revenue growth of 4.7%.With respect to our EBITDA for the first 3 months, please let me explain upfront 2 main and, from my point of view, quite important facts with respect to the earnings of 1&1 Drillisch AG. As you probably already heard from Mr. Huhn, the CFO of 1&1 Drillisch in his earnings call some minutes ago, the first 3 months earnings of 1&1 Drillisch are based on the binding conditions of the offer from Telefónica, which Telefónica offered to 1&1 Drillisch in February this year in connection with the national roaming agreement. That means, on the one hand that the revised conditions from Telefónica are already reflected in the figures of 1&1 Drillisch for the first 3 months in 2021. On the other hand, that means as well that this binding commitment of Telefónica to refund an amount of EUR 34.4 million is also reflected in our accounts. But as you probably remember from our ad hoc announcement from February this year, these EUR 34.4 million are linked from an economical perspective to the business year 2020.Only due to accounting requirements, this EUR 34.4 million have to be assigned not to the income of the financial statements in the fiscal year 2020 but to the fiscal year 2021. The reason for this assignment to this year 2021 is based on the fact that the binding commitment from Telefónica was only given after the end of the fiscal year 2020.But however, to give you a more transparent view on the financial situation of our operational business, we even did not put these EUR 34.4 million on top to income or to our earnings of our financial accounts in 2021. Rather, we show in our accounts only the operational EBITDA, operational EBIT and EBT. So that means that these operational KPIs will not include the additional EUR 34.4 million. Therefore, as you can see on Page 2, our EBITDA for the first 3 months amounts to EUR 346.5 million, but our operational EBITDA amounts to EUR 312.1 million. Compared to the first 3 months of the year 2020, this results in an increase of 3.8% compared to the operational EBITDA in the first 3 quarters of 2020. The operational EBIT was growing from EUR 148.2 million in the first quarter in 2020 to EUR 196.2 million in the first 3 quarters in 2021. This compares to a growth rate of 6.5%.If you ignore the EUR 34.4 million, our operational EPS, earnings per share, increased from EUR 0.47 per share to EUR 0.58 per share. The operational EPS before the purchase price allocation increased from EUR 0.59 to EUR 0.68 per share.As you can see on the lower page, our operational EBITDA and EBIT are including for the first 3 months of 2021 not only the initial costs for the 5G network in the amount of minus EUR 7.2 million but also an announcement on our on-top investment strategy in IONOS to build the basis for an increase of a sustainable revenue growth of IONOS for the next upcoming years. For the announced EUR 40 million for the entire year, IONOS spent EUR 10.1 million in the first 3 quarters into their cloud business as well into their internationalization.So after giving you an overview about the group results, please allow me to give you also an overview about our segments. And as always, we like to start with our segment Access and therewith the segment Consumer Access, which represent the business of 1&1 Drillisch AG. On Slide 4, you can see that the customer contracts were growing in the first 3 months by 140,000 contracts. The growth was purely related to the mobile Internet contracts, whereby the number of the broadband connections have been unchanged. We are now counting nearly 15 million customer contracts. 10.66 million is coming from the mobile, and 4.31 million are coming from the broadband connections.So Slide 5 shows you that the revenue in the first 3 months of 2021 amounts to EUR 965.9 million, and it was growing by 3.4% compared to the first month -- first 3 months in 2020. If you split the revenue and service revenues and other revenues, you will see that the service revenues were growing by 1.9%, while the other revenues were growing by 9.6%, mainly driven by the hardware revenues.On Slide 6, you will recognize the impact of the out-of-period effect in the amount of EUR 34.4 million, which I already explained earlier in detail. Without this out-of-period effect, the operational EBITDA of the segment Consumer Access was increasing by 2.2% compared to the first 3 months in 2020.I also already explained that the initial cost of EUR 7.2 million for the 5G network building preparation are included in the operational EBITDA for the first 3 months in 2021.Our segment Business Access, which represents 1&1 Versatel business, started quite good into the year 2021. As you can see on Page 8, compared to the first 3 months in 2020, 1&1 Versatel were able to increase its revenues from EUR 118.7 million to EUR 128.3 million in the first 3 months in 2021. This represents revenue growth of 8.1%. The same good start into the year 2021 applies to the EBITDA of 1&1 Versatel, which increased in the first 3 months to EUR 38 million coming from EUR 35.2 million in the first 3 months in 2020. This represents an increase of 8.5%.I'm now coming to the segment Applications, and I'd like to start with the Business Applications. IONOS, which represents Business Applications, were able to increase its customer contracts by 110,000 contracts. And IONOS holds now 8.56 million contracts, nearly half of it domestic and the other half abroad. This customer growth was also reflected in the increasing revenues of IONOS.As you can see on Page 11, IONOS were able to increase its revenues in the first 3 months in 2021 by 8.1% compared to the revenues in the first quarter of 2020. We are convinced that the announced on-top investments are already showing its first signs of success. On the other hand, the on-top investments will have, as also announced already in our ad hoc announcement in February, some impact on the earnings due to the additional EUR 10.1 million spent in the first 3 months in 2021 into the cloud business and into the internationalization of IONOS. Therefore, the EBITDA of IONOS for the first quarter in 2021, we are growing to EUR 97.2 million, which is a growth rate of 3.0% compared to the first quarter in 2020. However, the EBITDA margin is still on a very attractive level of more than 30% given this additional investment strategy.So I'd like to come now to our segment Consumer Applications. As you know, Consumer Applications represent mainly the e-mail related business of GMX and WEB.DE but also mail.com and other businesses. As you can see on Page 13, Consumer Applications accounts now nearly 42 million accounts. And these -- and they were able to increase the number of free accounts in the first quarter of 2021 by 150,000 accounts and the more relevant number of pay accounts by 30,000 accounts. We think it is also remarkable that already 27.2 million of these 42 million accounts are using our services with their mobile devices, and 21 million out of these 42 million accounts are using our cloud storage services.On Page 14, you will see that also Consumer Applications started good into the year 2021. They were able to increase their revenues from EUR 60.8 million in the first 3 months in 2020 to now EUR 65.3 million in the first 3 months in 2021. This is equal to a revenue growth of 7.4%. Coming to Page 15. The EBITDA in the first 3 months of 2021 increased from EUR 23,300 to EUR 25,900 (sic) [ EUR 23.3 million to EUR 25.9 million ], which equates to an increase of 11.2%, again, compared to the first 3 months in 2020.So on Page 16, we summarized again the key financial KPIs. As I already explained them as of 31st March of 2021, you will see what I said, the group revenues, the EBITDA and the operative EBITDA. You see also the CapEx and free cash flow. If you look at the free cash flow, you will see that there's a change of minus EUR 52.4 million, which is mainly related to 2 payments which are coming from last year into this year, and therefore, the free cash flow is a little bit lower than -- compared to the 3 months in 2020.On the lower end, you will see again the fee-based customer contracts and the ad-financed free accounts. And in addition, you see the net bank liabilities, which decreased a little bit by EUR 21.4 million. And you see that the equity ratio of our group increased by 1.3 percentage points from 53.2% to 54.5%.So at the end, I'd like to give you again an overview about our outlook for the entire year 2021. And if you go to Page 18, you will see that we'd like to confirm our full year guidance, which we gave you already on the 15th of February 2021, which means that we are still thinking that our revenues will be over the entire year in an amount of EUR 5.5 billion. And our EBITDA will amount to EUR 1.22 billion compared to last year with EUR 1.048 billion. Like you have to see that within this EUR 1.048 billion, there was the write-off of EUR 130 million due to the contract with telephone -- with telecom. And in this EBITDA, we also included EUR 30 million for the startup costs for the building of the 5G network implementation. And also, we announced EUR 40 million additional investment into the business of IONOS with respect to the cloud business and the further internationalization.And what I said before, not included in this entire outlook 2021 for the EBITDA is not the EUR 34.4 million positive effect for the non-period payment from Telefónica for this year, which is related to the last year.So I think, Dominic, this is all what I have to give as an overview. And I'd like now to hand over to you for the Q&A session.
Yes. Thanks, Martin. Many thanks for your explanation. Now we would like to start the Q&A session. The first question, please.
[Operator Instructions] And the first question we've received is from Joshua Mills with Exane.
Just a couple from me. The first is on Versatel. So obviously, a good start to the year. You're not changing guidance. And I guess maybe the very strong growth you've seen in Q1 is a bit exceptional and might not continue through the year. Could you just give us an idea of how you expect growth to phase through 2021 and, in particular, why Q1 has been such a strong quarter for Versatel?And the second one is just quick update on your latest thoughts around the timing of B2B applications IPO. Has anything changed there? And how happy are you with the rebrand and internationalization so far?
Yes. Thank you very much for your question. Regarding the question regarding 1&1 Versatel, you're absolutely correct that we are staying currently with our guidance even if the revenue growth and also the EBITDA growth rate is really attractive. But you have also to see that we are still in the pandemic situation, where the Versatel is having more income from voice transfer. So therefore, what we are still looking a little bit to see whether this business will stay in the same term or whether -- as soon as the people are going back to their office, whether these additional voice income will decrease again. So therefore, this was a decision, as you already said, to stay with our outlook at the moment also for Versatel even if the business so far is really good.Regarding your second question of the IPO of the Business Application segment of IONOS, as we said in our ad hoc announcement in February, we are looking for an IPO during the next 2 years. And this is unchanged so far.
The next question is from Jakob Bluestone of Crédit Suisse.
I was just hoping to deep dive a little bit more on the Business Application side and particularly around the EUR 10 million that you've spent so far on the product sales offensive for cloud business and internationalization. I guess 2 questions on that. Firstly, can you just sort of help us understand, is that what's actually driving the strong customer growth that we saw during the quarter? Or have we yet to see any impact either in terms of KPIs or revenues from that investment?And then just secondly, can you just sort of help us understand what is it you've actually been investing in so far and what is there left to be done with the residual amount of that sort of investment budget? Just to help us understand what's the money being spent on.
Jakob, Dominic speaking. So many thanks for your question. So for Business Applications, the nice customer growth of 110,000 additions that we have seen was driven from our core business in hosting the domain, Webhosting and, in addition, also good growth in cloud business. And I think the investments we did so far with the EUR 10 million are not reflected in these figures at the moment.It's more what we have seen last year with the higher marketing spending for rebranding. And this led us also to a good development in Q1. And I think the first initiative we have started was investments in cloud and more marketing and to show these products a bit more in different campaigns. And I think this will have effects later on in the year.
And if I can just ask one follow-up, when you talk about internationalization, where is it you're actually focusing? And I guess that's basically focusing outside of Germany. Is that how we should understand that? Or...
It's across all the countries where we are today. And I think in many countries, we can do much more than before. It's not that we add additional countries at the moment.
The next question is from Yemi Falana of Goldman Sachs.
Firstly, just starting on the sustainability of Versatel trend. I know you've had questions on this previously. But just if possible, could you quantify the absolute size of the tailwind that you saw from voice-related work-from-home benefit in the first quarter? Just to kind of give us a better picture of how that might progress through the year and going forward.And then secondly, on Consumer Applications, you've highlighted in the presentation that you've got strong uptake of both mobile usage and cloud storage within your consumer account base. Could you give us a picture on the kind of uptake or the uptick in profitability or kind of ARPU effectively that upselling to mobile usage and cloud storage provides?
Thank you for your questions. I think that regarding the first question, the voice-related income, as I already said, the question is a little bit how the development will be with respect to back-to-the-office initiatives from companies and how many companies are still working from home. And therefore, this is also, from an overall perspective, not really foreseeable. And so therefore, as we said, currently, we are assuming that there will be a decrease in the voice-related income, but you never know how the situation will be in the next month from the company's perspective how they will work.And If you read the newspapers, you will clearly see a trend to working more from home from everywhere. So therefore, it could be that the voice-related income will be stable. But it could also be that it will be -- there will be again a decrease. So this is, as we said, the reason why we are not changing our guidance at the moment even for Versatel. In fact, that we are really carefully looking on the development over the next months.Regarding your second question regarding the ARPU with respect to the Consumer Applications business of mail and media, so from GMX and WEB.DE, so as you see from -- if you're using our services, you will see that we are going more and more into a smart inbox solution, where we try to up-sell services to our customers. And this would then lead also in a higher ARPU. And we are really working hard on increasing the ARPU.At the moment, we are really seeing good signs. But also there, we are a little bit seeing for the next months how this will develop and how satisfied the customers are with these additional services. So far, we are really happy about the development of this business. But even here, we are, as I said, looking for the next months how this will develop.
The next question is from Maurice Patrick of Barclays.
Just a couple for me, please. Just a follow-up on a previous question around the Business Applications and the relative growth in Germany and abroad. So of the revenue growth you're seeing, is it broadly similar in Germany versus other markets? Maybe a bit of color in terms of which market is seeing the strongest growth would be very helpful.And then just a second unrelated question. When we start thinking about the 5G network build and the CapEx that sits outside 1&1 Drillisch, from my understanding, there will be an element of core network build and data centers, backhaul, backbone, investment required. Have you quantified how much that's likely to be? And the sort of magnitude and timing of that would be helpful.
Maurice, thank you for your questions. Starting with the first one regarding Business Applications and the growth rates from abroad and domestic business, I think it is a little bit more related to the domestic business at the moment. But this is also due to really our strong and good work with respect to our relationship to governments and to authorities which are now seeing the need for turning their off-line business into also online services. And what we are really facing is that especially these governmental authorities are looking for more European-based hosting and cloud business companies. And therefore, IONOS is really a key driver for these kind of businesses.And if you're looking, for example, for school homepages and school learning platforms, we are looking there really for some kind of improvement that the authorities are really seeing the need for implementing this and that they are really looking also for European players. And this was a big advantage for IONOS at the moment in Germany. So therefore, from what we are seeing is that the growth is a little bit more in Germany than abroad. But it's, I would say, it's 60-40 but not 90-10, like this.Regarding your second question regarding the 5G network building, the CapEx, the investments in the core network and the timing, I think Mr. Huhn and Oliver Keil already mentioned in the earnings call of Drillisch that it is a little bit too early at the moment to announce figures regarding the relation between CapEx, OpEx and the timing perspective that we are really looking for a Capital Markets Day as soon as we finished all of our negotiations with vendors and also with the national roaming agreement and to give you really a deep dive into our strategy for the 5G network building. And as I said, this will be in the third quarter of 2020 -- 2021, sorry, and most probably after the announcement of the half year results.
The next question is from James Ratzer, New Street Research.
I had a more strategic question, please, about the deployment of future capital at United Internet and where you see the most attractive opportunities at the moment. I mean on our numbers, it looks like you can easily be able to cover the cost of a potential network build in Germany and still see United Internet deleveraging organically, and then you're going to free up more capital potentially with the IONOS IPO.So just interested to get your kind of thoughts on how you think about future deployment of capital over the medium term, what areas are you seeing most attractive? I mean do you think the market is valuing Drillisch fairly at the moment? Is that an area you'd be interested in deploying more capital in future? Any comments around that more generally would be really helpful.
Thank you for this question from the strategic perspective. And I think If you're looking at the entire United Internet Group, you can go for segment by segment and you would see a lot of deployment of further growth initiatives. Of course, you mentioned the IONOS IPO. Of course, this is the most obvious one. But you can also look into the Versatel business or into the mail and media business. Everywhere, you see a lot of potential for the future to leverage the hidden value of these kind of segment.For Versatel, for example, you know exactly that the infrastructure business is, at the moment, really a hot topic for all of the infrastructure investment fund. And I think there is a lot of potential also if you look for the road in Germany to expand the broadband to fiber, yes. And this was also our strategy with respect to our investment together with Morgan Stanley and Tele Columbus, that we see a lot of potential in these kind of investments not only from the infrastructure side but also, of course, from the 1&1 Drillisch side to really to be able to attract more customers also from the broadband side, FTTH or with wholesale contracts.And as you know from our announcement, and I think it was in December last year that 1&1 Drillisch was entering into a wholesale contract with Tele Columbus. This is where we are seeing really high synergies, where we see a lot of potential areas to increase or to leverage our value. And so therefore, there are a lot of initiatives I can think about in the future. And we are really carefully studying this.But therefore, I think the question to -- of the deployment of the further capital, this is really related to IONOS and also to 1&1 Versatel at the moment, beside of the -- clearly, of the 5G network building, but this is clearly one of our main initiatives at the moment.
Yes. Martin, I mean you then -- I mean you're thinking more about investing organically within the business. I suppose just wondering also where future returns to shareholders would stack up in your view of deployment of future capital.
I don't know whether I really get your question. Could you specify it?
Well, I'm trying to find out it looks like even including the investments you're making in Versatel and Drillisch and IONOS, that your business should still be very free cash flow generative. So I'm just trying to understand about how you see the business using future free cash flow. Is this something you would engage in more M&A? Would you look at buying out the Drillisch minorities? Would you look about maybe increasing returns to shareholders? So just trying to kind of think about how you weigh out those different priorities. But maybe it's something for the Capital Markets Day instead of the Q2 results.
Yes. First of all, I think from our dividend policy, there's no change at all on the United Internet level, yes. So there is no need to think about a change in this policy, which is always in a way that we are saying 20% to 30% of our revenues are for the dividend. But I think if you look at our group, and I already mentioned that we have currently really 2 big things in front of us. The first one is, of course, the 5G rollout. And the other one is the IONOS path to the IPO.And we really always said that we like to concentrate on these both initiatives and then to see afterwards how things will go out and also regarding the question whether we'd like to buy back shares from 1&1 Drillisch. This is something where we have really clearly said, currently, we are focusing on the operational part of the 5G network and not on structural perspectives.
The next question is from Ulrich Rathe, Jefferies.
Three questions, please. The first one is how do you single out the EUR 10 million growth investments from whatever else you're spending on. The reason I'm asking is we have at least 4 quarters now, we are sort of singling out marketing and advertising in Business Applications. I'm not entirely sure what any of these numbers sort of -- how they actually separated out from as an identifiable bucket compared to everything else.Second question is, could you comment on the debt that is currently sitting in Business Applications? Obviously, you have a partner in there with an equity stake, so the leverage of that unit matters for valuation. And comment in that context also whether these growth initiatives mean that debt could rise, that leverage in Business Applications could rise. Or how should we think about that? And my last question is, in the release, I haven't found a reiteration of that outlook that IONOS would exceed EUR 1 billion in revenues. That might just be because it's self-evident with the good results you reported in the first quarter. But as far as I can tell as an explicit reiteration, could you comment on that, please?
Ulrich, maybe let me start with the third question because this is the easiest one. The outlook was not -- or the guidance in February was not really related to IONOS. We only said that they will make revenue probably of more than EUR 1 billion, but this was not a guidance. But we are still facing the situation that we think that EUR 1 billion is reachable and even maybe a little bit more than that.Regarding your second question regarding our partner, of course, Warburg Pincus is looking at some point of time for the exit they invested already in 2017 into the -- into IONOS. And at some point of time, they need an exit. And as I said before already, I think an IPO could be a really good exit strategy for Warburg and gives us also a good strategy to increase the valuation of IONOS, where we are still facing the situation that with a nonlisted company, the value is sometimes not really crystallized.And therefore, I think that we are still on the way that the IPO is for both parties, for Warburg and for United Internet, a good way to give them an exit and also for us to have consolidation of valuation of IONOS.On your first question, it was related to the EUR 10.1 million regarding the market and advertising. I think, Dominic, will you take over this part?
Yes, sure. So out of the EUR 10.1 million investment we had in Q1, the majority is marketing. But at the same as the former question asked, it's internationalization that we do more in these countries not only marketing or to enlarge shops we have there and to make some product placements, all that stuff.
Okay. Can I just please follow up? The second question was specifically on the debt and the debt -- the leverage in Business Applications, not on the rationale of the IPO.
Okay. Sorry then, I misunderstood you. At the moment, the debt is with EUR 1.25 billion on our accounts. And at the time of the IPO, we have to see whether we will stay with the debt or whether we have recapitalization. But at the moment, we did not discuss this with Warburg and also neither with the bank or somebody what will be the outcome.But if you look at the leverage overall from a company perspective, it's a fair leverage even under-listed umbrella. So therefore, whether this step is coming from United Internet or whether we will recapitalize it, this is, from my point of view, not really necessary to decide at the moment. But from the ratio perspective, from the leverage perspective, I think we are clearly in a ballpark which would be a fairly good leverage under an IPO.
Okay. Dominic, can I just follow up on your answer. How exactly is the EUR 10 million split out? What makes the EUR 10 million in identifiable number that you can highlight in the report as a special factor?
Yes. Frankly speaking, we break the EUR 10 million out to give you an indication how much we spend. So it's not -- for competitive reasons, it's not possible to give you a split here how much we spend here and there. So as I said, the majority is marketing, pure marketing. And then the rest is for special placements, as I said, to enlarge online shops a bit here and there, make it more mature for certain countries and, yes, some placement of the shops. That's it.
The next question is from Martin Jungfleisch, Kepler Cheuvreux.
I have 2, please. First one is on Business Applications. As far as I understood, most of the companies -- most of the customers you gained in 2020 came in an ARPU below the group average. Can you share how successful you've been in upselling the acquired customers so far and maybe provide us a split how much growth has been driven by the new customers and how much growth has been driven by up and cross-selling in the first quarter?And then on Consumer Applications, revenue and EBITDA growth was quite strong in Q1. Is this a good indication that the segment should now return to growth this year after 3 years of EBITDA declines? And should we extrapolate these growth rates forward into Q2 and Q3?
Martin, this is Dominic speaking. To your first question, as I said in the former question already, so the products we sold was domains, webspace, means normally a very classic journey of a customer. So they start with entry offer, with a domain and the webspace. And later on, we have to do the up and cross-selling of these customers. In addition, we had some cloud stuff. I think here, we have much, much higher ARPUs. But the majority, as Martin has explained, so with a much higher growth rate in Germany than abroad, the 70,000 new customers domestic, it's quite clear. And with the different initiatives we have seen here in Germany from the government, with school cloud and all that stuff, it's more coming out of that direction in terms of cloud. So there is less up and cross-selling but more on the other end with the core business, domain and web hosting.
Okay. So you would expect more growth to come from your expansion later on?
Yes. Like always. Martin, could you repeat the second question again for us?
Yes. Just on -- I mean, on Consumer Applications, I mean, obviously, Q1 was very strong. And then the question was just this is a good indication that this segment should now return to sustainable EBITDA growth for the next quarters or years, I mean, as we have seen last couple of years with straight EBITDA declines from 2018 to 2020.
Yes. So yes, the first quarter was quite strong. And actually, this was driven by the existing customers we have there because you know that [ stationary ] shops are closed for the moment here in Germany. So they tried to be online and make some more online advertising, of that advertising was shifted from TV to online and without a media break, so bringing them via banner advertising directly into online shop and for the good business.And on the other hand, sectors like travel and transportation, they are still missing due to the restrictions we have here in Germany. And if I look at the next quarters, I think it will be similar, on the one hand, that we will see more online advertising. And next quarter, we will also see a certain basis effect to the year before, where we had a strong impact from corona. And hopefully, by the end of the year, the latest -- all the travel and transportation will come back and will contribute to our revenues and earnings.
The next question is from Usman Ghazi, Berenberg.
Got a few questions, please. First question was just on IONOS in Germany specifically. You mentioned a few times now how the company is benefiting from demand from public sector bodies and from schools, et cetera, to digitize. And I just wanted to understand, is that brand positioning to the public sector bodies, is that specific to IONOS in Germany? Or is that also relevant for some of your other operations outside of Germany? That was the first question.The second question was just going to be the Business Applications IPO. Could you remind us what -- I mean you mentioned that within 2 years, at some point, you would look to IPO. But in terms of what is left to do to prepare the business for an IPO, could you just remind us what is left for you to tick off to take a decision here?And then finally, just looking to Versatel, do you see anything in the new telecoms law that is being drafted in Germany? There's some reports that it has been finalized now. Do you see anything in that law that could improve the growth rate potential at Versatel?
Yes. Usman, thank you for your questions. Your first question regarding IONOS and the demand from the public sector and whether this is only applicable to Germany or also to other countries, the basis from IONOS is in every country more or less the same. So therefore, it is, I would say, applicable in every country, and it's not especially related to the German country or to the German government or to the authorities in Germany. But maybe in Germany, the government and the authorities were some steps behind other countries, yes. This would be my assumption that there's a lot of homework we saw now in Germany coming really fast from the pandemic situation, that there was some need to improve the business or the basis from the schools and so on. But from my point of view, this is really applicable to every country.Regarding your second question of the IPO within the next 2 years and what kind of things we have to do, I think I would differentiate it between the technical issues and the more strategic points. On the technical side, we said that we'd like to be IPO ready within this year. And technical IPO means that all of the things have to be prepared that you can push the button for an IPO.From the strategic side, we already said in earlier calls that we like to see a little bit more improvement on the growth rate on the revenue side. And as long as this is only, I would say, [ the story ] then really verifying it by -- also by numbers, that we really like to show the numbers already. And this was the reason why we said that maybe in 2021, it's not the best time for an IPO, but rather than in 2022 or 2023. But after the full year figures of 2021, where we hopefully can show already the improvement on the revenue growth, this, from our point of view and from a strategic perspective, is the reason why we said that we like to do the IPO not in this year but in the upcoming year.
And just on that point, I mean, is 8% a good enough number here? Or would you like to see it even higher in terms of the growth rate?
Could you repeat this, please?
So the Q1 growth rate of 8% that you've done in Business Applications, I mean, is that a good enough number in your opinion? Or would you like to see that growth rate at a higher level?
You always -- there are 2 main answers to this question. Of course, 8.1% is a good rate, but we always said that we'd like to have a high single-digit number from a growth rate. But if I'm talking about the growth rate, I'm really talking more about the long-term perspective over the next 3, 4 years. And there, I think we like to have even a little bit higher growth rate than today.But the second answer to this question is really also where is the growth rate coming from. And what we said is that we'd like to have clearly to increase our cloud business and that the growth rate is also coming more from the cloud business. So therefore, it's also a question of the mix and not only about the entire number, yes? So therefore, 8.1% is really good. Maybe it's not at the end. But it's really, from my point of view, more also how -- where the growth rates are coming from and not only what is the number in the entire business.
Usman, Dominic speaking. Maybe to your last question regarding the new German telecommunication law and the impact for Versatel, so frankly speaking, I don't think that we will see a huge impact here for Versatel. So out of my understanding, it's much more important for 1&1 Drillisch because then they will get access to these tenants in the future and can offer their products. And with the 50s and partially, yes, it's beneficial for these customers because it's not only the speed, it's also the service. And as you know, here we have a very good brand awareness in Germany. And also, we've won some service awards. And this is partially for the one of our customer more important than the speed and the bundle and the low price.
And the last question is from Simon Bentlage of Hauck & Aufhäuser.
Yes. I would just like to get back on B2B Applications revenue growth and the marketing spend. You said that in the Q1 growth rate, your investments are not yet reflected. So I'm wondering what are kind of the lead times you're expecting these investments then to translate into revenue growth. Is this something that should unfold over the next quarter or rather in the second half of the year?
Simon, Dominic again. Yes, as I said already, so it's something we have started in February, so it can't be fully included in Q1. And as you know, already last year, we did a lot with higher marketing budget. And the only thing we want to underpin here, what is underpinned here was that we think that the impact out of these investments should come later on. So it's not only momentum, what we have seen in Q1 for Business Applications, so the hope is that it's more sustainable and maybe we'll see a certain acceleration but not only next quarters, more long term.
As there are no further questions, I would like to turn it back to you.
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