freenet AG

euro adhoc: freenet AG
Financial Figures/Balance Sheet
Q3/2008 bears out freenet´s strategy with rising revenues, profits and customer numbers

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9-month report

14.11.2008

Q3/2008 bears out freenet´s strategy with rising revenues, profits and customer
numbers
•       Quarterly revenue soars past EUR1 billion in mobile telephony core
business for the first time
•       EBITDA Q3/2008 doubles to EUR133.5 million
•       Q1-Q3/2008: Group revenue reaches EUR1.80 billion; Group result at
EUR160.6 million
•       Customer count rises to 24.6 million; over 19 million customers in
mobile telephony alone 

Büdelsdorf, 14 November 2008 - freenet AG continues to grow in conjunction with the debitel Group, first consolidated in the balance sheet at 5th July 2008. The Group has underscored its corporate strategy geared toward mobile telephony and mobile Internet with facts. At EUR1.08 billion for Q3/2008, the Group´s quarterly revenues first clearly exceeded one billion euros; the new core business of mobile telephony alone contributed EUR1.01 billion to this figure. In Q3/2007, freenet had generated revenue of EUR400.3 million. B2B Services contributed EUR22.7 million, Webhosting EUR22.5 million, the portal business added EUR9.4 million, and the declining narrowband business EUR16.3 million to this successful performance. Thus, at Group level, total revenue for the first nine months of 2008 came to EUR1.80 billion, vs. EUR1.20 billion in the first nine months of 2007.

The acquisition of the debitel Group has resulted in the third-largest mobile telephony provider in Germany. With over 19 million mobile telephony customers, freenet AG services approx. 20 percent of the German mobile market, and dominates the segment of network-independent providers, where it commands 90 percent of the market. "We´ve managed to establish ourselves as a real alternative to the carriers and as a constant in the German telecommunications market," says freenet AG CEO Eckhard Spoerr, commenting on developments in 2008. "At the same time, our experience, expertise and market power related to the Web, portal and mobile business puts us in an excellent position for the emerging mobile Internet market." In a first step, freenet recently introduced its debitel-freenet Dashboard software, which provides fast, direct access to the key mobile applications on the very first level, ensuring maximum convenience and user-friendliness for mobile phone users. At the end of September, the company had 24.6 million customers in all, including nearly 1.8 million paying customers in the Webhosting and Portal segments, and 1.05 million DSL customers. Nearly half of all freenet customers are contract customers (11.84 million). The debitel purchase also boosted earnings considerably. Third-quarter gross profit came to EUR259.1 million - after EUR120.8 million in Q3/2007 and EUR129.6 million in the previous quarter. This yields gross profit of EUR512.9 million for the first nine months of the year, up from EUR382.7 million in 2007. Third-quarter EBITDA, at EUR133.5 million, nearly doubled year on year; for the first nine months of 2008, EBITA amounted to EUR278.8 million, after EUR209.2 million in 2007.

Earnings before taxes (EBT) were down from EUR42.9 million in Q3/2007 to EUR14.3 million; the decline is attributable mainly to a strong increase in depreciation and interest expenses resulting from the debitel purchase. For the first three quarters of 2008, EBT totalled EUR92.3 million, after EUR163.1 million in 2007. Meanwhile, the Group result rose substantially to EUR138.1 million in the third quarter, due to deferred tax revenues as a result of the first-time consolidation of debitel.

Mobile Telephony

In line with the company´s strategy, the acquisition of the debitel Group has taken the core line of business, mobile telephony, to a new dimension: freenet boosted its customer count in Germany to 19.28 million at the end of September 2008; debitel accounted for around 13.14 million, the old freenet-mobilcom contributed 6.14 million. 8.67 million of these are contract customers, 10.61 million are pre-paid customers; the third quarter also saw a rise in the average revenue per contract customer (ARPU), from EUR26.3 to EUR26.5.

The mobile telephony segment also showed an increase in revenue and profits. Following the consolidation of the debitel Group at the beginning of July, quarterly revenue exceeded the one-billion mark for the first time, rising to EUR1.01 billion for Q3/2008. For the first three quarters of 2008, total revenue in the segment amounted to EUR1.57 billion, up from EUR883.8 million for the comparable period in 2007.

Third-quarter gross profit in the segment increased to EUR218.6 million, which translates to a gross profit margin of 21.6 percent; the corresponding values for the first three quarters of 2008 were EUR375.0 million and 23.9 percent - after EUR208.5 million (23.6 percent) in the first nine months of 2007.

Despite these gratifying figures, freenet will have to keep stepping up its competitiveness in an increasingly difficult market; with this in mind, the company will do its utmost to exploit any and all synergies and cost-cutting potential in the months and quarters ahead. It also remains to be seen how the recession in Germany will affect people´s telecommunications behaviour. "Nevertheless, we will see an upward movement in sales of data tariffs in the fourth quarter," says Spoerr. "We believe there is still enormous future potential here."

Since the sale process for the DSL business has already been initiated, income and costs related to this segment have been factored out of the Group figures and are therefore not included in any of the above-mentioned figures. Third-quarter DSL revenues amounted to EUR76.2 million, resulting in gross profit of EUR25.7 million. From an economic viewpoint, i.e. without capitalising the costs of customer acquisition - the DSL business would have shown losses of EUR46.4 million for the first nine months of 2008, up from EUR-73.5 million year on year. The debitel purchase roughly doubled the number of employees in the Group, including temporary staff, to 7,713 at 30th September 2008. "The task in the months ahead," comments Eckhard Spoerr, "will be to systematically advance the restructuring of the "new" freenet AG. This includes harmonising the company´s different locations and sales networks as well as developing a new, balanced brand strategy; in doing so, we will leverage the strengths of our freenet, mobilcom, debitel brands, which are very well established in the market, as well as those of our very successful `no frills´ segment." The Group will also continue to work on the announced sale of its DSL business.

Q1-Q3/07           Q2/2008   Q3/2007
in EURm                        Q1-Q3/08 adjusted* Q3/2008  adjusted* adjusted*

Third-party revenue            1,800.7  1,202.6   1,079.2  357.7     400.3
Gross profit                   512.9    382.7     259.1    129.6     120.8
EBITDA                         278.8    209.2     133.5    67.8      67.4
EBIT                           131.7    155.8     51.5     32.7      46.0
EBT                            92.3     163.1     14.3     32.1      42.9
Group result from
continued operations           223.0    108.3     161.1    30.8      -4.7
Group result                   160.6    67.2      138.1    10.2      -22.7

in EURm                       Q1-Q3/08 Q1-Q3/07  Q3/2008   Q2/2008  Q3/2007

Revenue for the group**        1,800.7  1,202.6   1,079.2  357.7     400.3
1. Revenue mobile telephony    1,569.9  883.8     1,009.9  283.3     301.7
2. Revenue broadband           234.3    194.9     76.2     78.1      72.2
3. Revenue portal              36.3     40.8      9.4      14.2      12.4
4. Revenue hosting             65.4     58.0      22.5     22.0      19.5
5. Revenue B2B                 73.6     101.5     22.7     20.9      33.5
6. Revenue narrowband          60.7     121.4     16.3     19.6      33.9
Customers in million:
Total customers freenet group  24.56    11.81     24.56    10.96     11.81
Thereof contract customers     11.84    6.32      11.84    6.33      6.32
Mobile telephony customers     19.97    5.45      19.97    5.98      5.45
Thereof contract customers     8.67     2.90      8.67     3.09      2.90
Thereof prepaid customers      10.61    2.55      10.61    2.89      2.55
Thereof Netherlands (debitel)  0.69      -        0.69      -         -
narrowband customers
(internet+telephone)           1.74     3.42      1.74     2.09      3.42
DSL customers                  1.05     1.27      1.05     1.10      1.27
Paid service customers hosting 1.26     1.17      1.26     1.24      1.17
Paid service customers portal  0.53     0.51      0.53     0.54      0.51 

* The comparable figures were adjusted due to IFRS 5 (discontinued operations). ** 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 and effects from IFRS 5.

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
Börse Berlin / free trade
Börse Hamburg / free trade
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Börse Düsseldorf / free trade
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Börse München / free trade

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