freenet AG

euro adhoc: freenet AG
Financial Figures/Balance Sheet
freenet AG reports a successful business year in 2007

@@start.t1@@--------------------------------------------------------------------------------   Disclosure announcement transmitted by euro adhoc. The issuer is responsible   for the content of this announcement. --------------------------------------------------------------------------------@@end@@

annual report


freenet AG reports a successful business year in 2007

@@start.t2@@•            Earning targets for 2007 fully met

•            Operating result increased strongly: EBITDA EUR252.8 million; EBT
EUR163.7 million

•            Customer growth in all strategic lines of business

•            Number of contract customers rises to 6.48 million - of 11.69 million
total customers@@end@@

freenet AG, Büdelsdorf, 3rd March 2008 - freenet AG fully met its earnings targets for 2007 and takes a positive view of the past financial year. By restructuring its business into the mobile telephony, broadband, portal, hosting, B2B and narrowband segments, freenet has introduced greater individual manageability and transparency for these lines of business, which are all at different stages in their lifecycles.

freenet AG grew its customer base in the four strategically important lines of business: mobile telephony, broadband, portal and hosting. At the end of 2007, the group had 11.69 million customers across all business segments, of whom 6.48 million are contract customers - a 11.6 percent increase vs. the end of 2006 (5.81 million).

freenet´s business has traditionally been dominated by the highly profitable narrowband business, which has been in decline for several years and has to be compensated for by growth in other areas. The group´s revenues for 2007 has declined slightly year on year, from EUR2.05 billion to EUR1.86 billion (-9.3 percent). Of this, EUR473.9 million was generated in the fourth quarter - a 10.6 percent decline compared with Q4/2006, but slightly above the level of the prior quarter. In this context, it should be noted that the way in which customer acquisition costs have been accounted for has changed, largely since the start of 2007. As a result, there are lower revenues to report, while at the same time gross profits and in particular EBITDAs increased. Therefore, only limited direct comparisons with last year´s figures are possible.

Gross profit rose by 25.0 percent compared with the previous year, to EUR582.4 million. EUR146.1 million of this was generated in the fourth quarter - a rise of 6.6 percent on the previous quarter and of 29.9 percent compared to Q4/2006. The strong decline in gross profits in the narrowband segment was fully compensated for by increased gross profits in other lines of business.

freenet AG´s operating result rose powerfully, and the group fully met its stated earnings targets for 2007 (EBITDA EUR250 million; EBT EUR160 million): EBITDA rose to EUR252.8 million - an increase of 71.9 percent compared to 2006 (EUR147.0 million). At EUR56.5 million, fourth-quarter EBITDA was more than twice the EUR24.8 million seen in 2006. freenet improved its earnings before taxes (EBT) by 39.2 percent to EUR163.7 million, within its target corridor for 2007. freenet achieved this result despite high expenditure on marketing and consulting in connection with the review of freenet´s strategic options in the second half of 2007. Fourth-quarter EBT amounted to EUR28.0 million, a more than 50 percent increase vs. Q4/2006 and roughly on par with the previous quarter (EUR28.6 million).

segments: freenet increased its number of mobile telephony customers significantly, by nearly 12 percent from 5.1 million at the beginning of the year to 5.7 million as at December 31, 2007; 260,000 were acquired during the fourth quarter. This growth was driven both by the 2.99 million contract customers and the 2.71 million prepaid-customers, and reconfirms freenet´s market share. With revenues of EUR1.18 billion, the mobile telephony segment continued to be the group´s biggest segment in 2007, accounting for EUR301.0 million of its fourth-quarter revenue.

The number of DSL customers grew by 280,000 over the course of the year, reaching over 1.28 million by the end of December 2007. This growth enabled freenet AG to maintain its market share of approx. 7 percent as planned. This was achieved despite interruptions and delays in Deutsche Telekom AG´s processing and switch-over procedures, especially in the 2nd half of the year, which significantly impeded freenet´s growth and also led to a not insignificant number of cancellations by new customers. As a result of this, freenet AG was forced to delete several ten thousand customers, who couldn´t be switched over a long period of time, from its orders in hand. Revenues improved by 39.6 percent from EUR195.1 million in 2006 to EUR272.3 million at year-end 2007, and the segment has become freenet´s second-largest revenue source by now. Fourth-quarter revenues for the segment were EUR77.4 million, a 43.8 percent year-on-year increase and a 7.2 percent or EUR5.2 million rise on the previous quarter.

The portal segment at freenet AG bundles the group´s e-commerce, advertising and paid services and has 540,000 customers with contracts for its digital services -  80,000 more than at the end of 2006. Revenues amounted to EUR56.7 million, of which EUR15.9 million were generated in the fourth quarter.

The number of Hosting customers in Germany and the other European countries grew by 14.5 percent year on year to 1.20 million, and the number of hosted domains increased to more than 3.5 million. Revenues for 2007 increased by 15.1 percent to EUR79.4 million. Fourth-quarter revenues came to EUR21.4 million, an 18.4 percent rise on Q4/2006.

Despite considerable legislative restrictions, the B2B Services operations managed to nearly match the high level of the previous year´s performance, generating revenues of EUR134.9 million. Meanwhile, gross profits improved year on year, rising from EUR28.4 million to EUR31.2 million.

The narrowband segment is comprised of the by-call, pre-selection and Internet narrowband access, all of which are in decline and are increasingly being supplanted by DSL telephony, mobile telephony and DSL. The number of active narrowband Internet customers dropped by about 900,000 over the course of 2007, and the number of fixed-line callers diminished by 1.2 million. As at 31st December 2007, a total 2.96 million customers used one of the above listed narrowband services offered by freenet. Revenues showed a startling collapse from EUR281.7 million in 2006 to EUR149.3 million in 2007. The fourth quarter saw revenues of EUR27.8 million, after EUR59.5 million in Q4/2006 and EUR33.9 million in Q3/2007. Gross profit, formerly strong, also dropped in 2007, and amounted to EUR88.9 million after EUR145.4 million in 2006, a 38.9 percent fall. Further declines are expected for this segment.

In 2007, group result was diminished by depreciation on deferred taxes in the amount of EUR74.5 million, which included a reduction of the tax rate as part of the corporate tax reform. This did not result in an actual outflow of cash or cash equivalents. Group result, there this effect is reflected, was reduced to EUR16.5 million in 2007.

After paying out total dividend of EUR576 million (EUR5.50 special dividend and EUR0.50 dividend per share) to its shareholders last summer, freenet AG´s cash and cash equivalents have diminished to minus EUR38 million. The number of employees in the group increased to 3,838 including temporary staff. The new hires primarily serve to strengthen freenet´s sales and customer support operations, thereby forming a strong basis for future growth.

Key financials of the freenet Group Accounting method: IAS/IFRS

@@start.t3@@in EURm                                                      GJ 2007  GJ 2006  Q4/07    Q3/07    Q4/06
Third-party revenue                                 1,863.3  2,054.8  473.9    470.0    530.2
Gross profit                                              582.4      465.8      146.1    137.1    112.5
EBITDA                                                        252.8      147.0      56.5      60.3      24.8
EBIT                                                          156.6      103.1      28.2      31.7      13.7
EBT                                                            163.7      117.6      28.0      28.6      18.5
Group result                                              16.5        257.0      -50.6    -22.7    181.3
Net cash                                                  -38.0      534.0      -38.0    -4.3      534.0
Third-party revenue for the group *         1,863.3  2,054.8  473.9    470.0    530.2
1. Revenue mobile telephony                      1,184.8  1,331.7  301.0    301.7    348.7
2. Revenue broadband                                 272.3      195.1      77.4      72.2      53.8
3. Revenue portal                                      56.7        63.5        15.9      12.4      20.5
4. Revenue hosting                                    79.4        69.0        21.4      19.5      18.1
5. Revenue B2B                                          134.9      141.4      33.4      33.5      37.8
6. Revenue narrowband                                149.3      281.7      27.8      33.9      59.5
Group gross profit*                                  582.4      465.8      146.1    137.1    112.5
1. Gross profit mobile telephony              289.5      191.0      81.0      67.2      44.5
2. Gross profit broadband                         67.6        2.2         14.9      16.0      0.9
3. Gross profit portal                              40.7        50.7        11.3      8.4        16.1
4. Gross profit hosting                            65.5        54.5        15.6      15.7      14.2
5. Gross profit B2B                                  31.2        28.4        6.9        9.7        7.2
6. Gross profit narrowband                        88.9        145.4      16.7      20.3      33.3
Total customer freenet group in million  11.69      12.68      11.69    11.81    12.68
Thereof contract customers in million      6.48        5.81        6.48      6.32      5.81
Mobile telephony customers in million      5.70        5.10        5.70      5.45      5.10
Thereof contract customers in million      2.99        2.75        3.00      2.90      2.75
Thereof prepaid customers in million        2.71        2.35        2.71      2.55      2.35
Narrowband customers(internet+teleph)      2.96        5.07        2.96      3.42      5.07
in million
DSL customers in million                          1.28        1.00        1.28      1.27      1.00
Paid service customers Hosting in million 1.20        1.05        1.20      1.17      1.05
Paid service customers portal in million 0.54        0.46        0.54      0.51      0.46@@end@@

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

@@start.t4@@end of announcement                                                 euro adhoc

ots Originaltext: freenet AG
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Further inquiry note:
Andreas Neumann
Tel.: +49 (0)40 51306 778

Branche: Online
ISIN:      DE000A0EAMM0
WKN:        A0EAMM
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              Börse München / free trade

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