Movement in the German Hosting Market - United Internet Acquires Strato

At the end of the year, the German web hosting market is experiencing significant movement. As announced on Thursday, 15th December 2016, United Internet AG is acquiring the internet service provider Strato from Deutsche Telekom for approximately 600 million euros. United Internet is well-known for its strong brands such as 1&1, web.de, and GMX.

The Telekom subsidiary Strato, with over 4 million hosted domains and more than 1 million customers, has been the second-largest provider in the European web hosting market, following United Internet. Telekom acquired Strato back in 2009 for 275 million euros from freenet AG. Through the sale to United Internet, Telekom is set to receive around 600 million euros. Of this amount, 566 million euros will be paid immediately, with an additional 34 million euros to be paid at a later date based on the achievement of certain performance targets.

The German internet conglomerate United Internet, based in Montabaur, is able to further strengthen its position in both the international and especially the German web hosting market through this acquisition. The company already owns several established web hosting providers such as 1&1, united-domains, and InternetX.

This acquisition marks further consolidation in the hosting market. It is becoming increasingly challenging for small businesses to compete against the mergers of industry giants. Earlier this month, the British web hosting company Host Europe Group was acquired by the US domain and web hosting company GoDaddy. The German subsidiary Host Europe made waves in the German web hosting market a few years ago with the acquisition of Domain Factory. Both Telekom and United Internet were interested in acquiring Host Europe Group, but they could not match the 1.69 billion euro offer from the US corporation. Nevertheless, it remains to be seen what other developments will unfold in the market next year.

The acquisition of Strato by United Internet is currently subject to approval by the Federal Cartel Office. However, the purchase is expected to be completed by mid-2017 at the latest.