freenet AG reports successful business year

Germany’s 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 strategic lines of business: mobile telephony, broadband, portal and hosting. At the end of 2007, the group had 11.69 mln customers across all business segments, of whom 6.48 mln are contract customers – a 11.6% increase vs. the end of 2006 (5.81 mln).

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 declined slightly from EUR 2.05 bln to EUR 1.86 bln (-9.3%).

Gross profit rose 25% compared with the previous year, to EUR 582.4 mln. EUR 146.1 mln of this was generated in the fourth quarter – a rise of 6.6% on the previous quarter and of 29.9% compared to Q4/2006.

freenet AG’s operating result rose powerfully, and the group fully met its stated earnings targets for 2007 (EBITDA EUR 250 mln; EBT EUR 160 mln): EBITDA rose to EUR 252.8 mln – up 71.9% compared to 2006. At EUR 56.5 mln, fourth-quarter EBITDA was more than twice the EUR 24.8 mln seen in 2006.
freenet increased its number of mobile telephony customers significantly, by nearly 12% from 5.1 mln at the beginning of the year to 5.7 mln as at December 31, 2007. This growth was driven both by the 2.99 mln contract customers and the 2.71 mln prepaid-customers, and reconfirms freenet’s market share. With revenues of EUR 1.18 bln, the mobile telephony segment continued to be the group’s biggest segment in 2007.

The number of DSL customers grew by 280,000 over the course of the year, reaching 1.28 mln by the end of December 2007. This was achieved despite interruptions and delays in Deutsche Telekom’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, freenet AG was forced to delete tens of thousand customers, who couldn’t be switched over a long period of time, from its orders in hand.

The portal segment 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.

The number of hosting customers in Germany and other European countries grew by 14.5% year on year to 1.20 mln, and the number of hosted domains increased to more than 3.5 mln.

Despite considerable legislative restrictions, the B2B Services operations managed to nearly match the high level of the previous year’s performance, generating revenues of EUR 134.9 mln.