freenet AG

euro adhoc: freenet AG
quarterly or semiannual financial statement
freenet AG reports operating result (EBITDA) of EUR69 million for Q1/2008

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3-month report

08.05.2008

freenet AG reports operating result (EBITDA) of EUR69 million for Q1/2008
•       Revenue at 442.3 million euros in Q1/2008
•       5.82 million mobile telephony customers - numbers of prepaid and
contract customers rise
•       Number of customers in Web-hosting and paid services rises compared with
previous quarter 

Büdelsdorf, 09 May 2008 - During the first three months of 2008, freenet AG generated an operating result (EBITDA) of 69.0 million euros - a 5.3 percent improvement on Q1/2007 and 22.1 percent higher than the previous quarter. The mobile telephony segment contributed 47.4 million euros to the total, hosting accounted for 9.4 million euros, while the fixed-line/Internet segment including all holdings generated 12.2 million euros. However, EBIT, along with earnings before and after taxes, fell due to a surge in depreciations/amortisations resulting from the obligatory capitalisation of parts of customer acquisition costs. As a result, EBIT is down to 26.2 million euros - a 6.8 percent drop compared with the previous quarter and down 48.4 percent vs. Q1/2007. Of this, mobile telephony contributed 25.7 million euros, hosting 7.2 million euros and the fixed-line business, which includes broad and narrowband, the portal business, B2B services and the holding activities, accounted for -6.7 million euros. Earnings before taxes (EBT) amounted to 24.5 million euros, 12.5 percent below the previous quarter. Group net income for the first quarter of 2008 was 12.3 million euros. Only limited comparisons are possible with 2007 - in which group net income after taxes for the whole year totalled just 16.5 million euros - as the income taxes reported under IFRS in 2007 were influenced by numerous special items. Mobile telephony The number of mobile telephony customers grew to 5.82 million at the end of March 2008 - a year-on-year increase of nearly 700,000 customers or 13.6 percent, and of around 120,000 vs. the previous quarter. This growth was fuelled both by contract customers (which now total 3.03 million) and prepaid customers (2.79 million), and made it possible for the company to maintain its market share in the mobile telephony segment. However freenet, too, is affected by the drop in calling charges across the market, and the success of discount providers. Accordingly, freenet registered a slight decline in mobile telephony revenue for Q1/2008, which amounted to 276.7 million euros, vs. 279.0 million euros in Q1/2007. Broadband The latent asset-stripping scenario associated with freenet had a negative impact on new customer acquisition: distribution partners were lost who - understandably considering freenet´s uncertain future at the time - sought to cooperate with other companies when planning the year ahead. freenet also parted ways with some distribution partners as part of a quality campaign triggered by increasing complaints, across the market and mainly about multi-level marketing schemes which seek to win new customers for various telecoms companies, often with disreputable methods. Further, the first quarter of 2008 was marred by ongoing cancellations of customer relationships because of Deutsche Telekom AG´s problems and delays in processing and switching customers in 2007. This resulted in a considerable `backlog´ of DSL customers wanting to switch - which freenet actively brought down by several tens of thousands to a normal level, as part of its comprehensive quality campaign. Accordingly, the number of freenet DSL customers was down in Q1/2008, declining by around 90,000 vs. the previous quarter to 1.19 million. Despite numerous inactive or rather non-switchable customers, freenet improved its revenue and gross earnings in this segment. Turnover rose to 80.0 million euros, up 38.1 percent compared with Q1/2007 and 3.4 percent above the previous quarter. Gross profits increased by nearly 12.2 percent year on year to 19.6 million euros; compared with the previous quarter, this represents growth of 31.5 percent. The gross margin was 24.5 percent. Other segments freenet AG added more customers in the hosting and portal segments than during the previous quarter; the number of Web hosting customers grew from 1.20 million in the previous quarter to 1.23 million in Q1/2008, and the number of customers in portal paid services grew from 540,000 in the previous quarter to 570,000, meaning that freenet added roughly 60,000 contract customers in these areas. Turnover from portal operations dropped to 12.7 million euros, a 15.9 percent year-on-year decline and nearly 20 percent vs. the previous quarter. freenet AG´s portal operations, which with its e-commerce/advertising business is one of the two mainstays of the business, laboured under declining ad bookings, mainly due to restrained advertising by banks, probably because of the financial crisis. Internal cost allocations were also down as a result of the subdued DSL business in Q1/2008. Meanwhile, paid services - the second mainstay of earnings in the segment - continue to do very well, with revenue on a steady rise since Q1/2007. Still, they proved unable to compensate for the reduced turnover from E-Commerce/Advertising. At the end of the first quarter, freenet AG had 11.36 million customers across all segments.

Important KPI's of freenet group Accounting method: IAS/IFRS

in EURm                                           Q1 2008 Q4 2007 Q1 2007
Third-party revenue                               442.3   473.9   452.4
Gross profit                                      144.3   146.1   141.9
EBITDA                                            69.0    56.5    65.5
EBIT                                              26.2    28.2    50.9
EBT                                               24.5    28.0    55.8
Group result                                      12.3    -50.6   49.9
Third-party revenue for the group *               442.3   473.9   452.4
1. Revenue mobile telephony                       276.7   301.0   279.0
2. Revenue broadband                              80.0    77.4    57.9
3. Revenue portal                                 12.7    15.9    15.1
4. Revenue hosting                                20.9    21.4    18.8
5. Revenue B2B                                    29.9    33.4    38.5
6. Revenue narrowband                             24.8    27.8    47.5
Total customer freenet group in million           11.36   11.68   12.68
Thereof contract customers in million             6.41    6.48    6.12
Mobile telephony customers in million             5.82    5.70    5.12
Thereof contract customers in million             3.03    2.99    2.80
Thereof prepaid customers in million              2.79    2.71    2.32
narrowband customers (internet+teleph) in million 2.56    2.96    4.79
DSL customers in million                          1.19    1.28    1.17
Paid service customers hosting in million         1.23    1.20    1.12
Paid service customers portal in million          0.57    0.54    0.47 

* Netting between segments is the reason behind the difference between the figures shown for sales in the individual segments and the corresponding figures for the overall group.

end of announcement                               euro adhoc
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Further inquiry note:

freenet AG
Andreas Neumann
IR-Manager
Tel.: +49 (0)40 51306-778
E-Mail: ir@freenet.ag

Branche: Online
ISIN: DE000A0EAMM0
WKN: A0EAMM
Index: Midcap Market Index, TecDAX, CDAX, HDAX, Prime All Share,
Technologie All Share
Börsen: Börse Frankfurt / regulated dealing/prime standard
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