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United Internet eyes city network buys


Germany’s United Internet is seeking to buy urban fiber-optic networks to expand the national grid of Versatel, which it bought last year, its chief executive told Reuters.

Ralph Dommermuth said he was also on the lookout for more acquisitions to bolster its business applications unit, which it may list separately on the stock exchange, following the acquisition of Poland’s biggest web hoster home.pl.

But he said deals in the near future would likely be under 100 million euros ($111 million), after a billion-euro buying spree that also included a stake in mobile rival Drillisch and ecommerce group Rocket Internet.

“We will keep adding acquisitions but it won’t revolutionize our business,” he said in a telephone interview on Thursday.

United Internet is Germany’s biggest DSL copper wire broadband provider after Deutsche Telekom. It also competes with a host of cable companies and mobile carriers to offer internet access and services to consumers and businesses.

It bought the 75 percent of Versatel it didn’t already own from KKR almost a year ago for about 586 million euros, its first move into ownership of a network, having previously rented bandwidth from rivals and resold it.

Versatel’s fiber network covers more than 200 German cities including 19 of the top 25. “We will keep buying city carriers to expand our network,” Dommermuth said.

He said United Internet planned to keep 100 percent of Versatel and could add its existing 1&1 web hosting customers to Versatel’s own corporate and wholesale clients, helped by additional connections to Deutsche Telekom’s fixed-line network.

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United Internet late on Wednesday raised its target for mobile internet customers after spending about 80 million euros on sales, marketing and smartphone subsidies to acquire more subscribers than expected in the first half.

Dommermuth said this business would continue to be core but would not be a focus for acquisitions.

In business applications such as web hosting and design, Dommermuth said United Internet would be hard pressed to grow to the scale it wanted organically, hence the idea to list shares in the business to fund future acquisitions.

He said United Internet wanted to keep ownership of the whole business if possible but would benefit from being able to issue new shares at multiples of around 15 for business applications compared with around 10 for United Internet.

“We would use new shares as acquisition currency,” Dommermuth said, adding he had been encouraged by the flotations of U.S. peers such as GoDaddy and Endurance.

($1 = 0.8979 euros)

(Editing by Greg Mahlich and David Holmes)(Reuters)


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