Preliminary Results for FY 2017 Christoph Vilanek, CEO and Joachim - - PowerPoint PPT Presentation

1 | Preliminary results for the financial year 2017 | 1 March 2018

Management Presentation Preliminary Results for FY 2017

1 March 2018 | Analyst and Investor Conference Call

Christoph Vilanek, CEO and Joachim Preisig, CFO

2 | Preliminary results for the financial year 2017 | 1 March 2018

Cautionary Statement

This presentation contains forward-looking statements which involve risks and uncertainties. The actual performance, results and timing of the business of freenet AG could differ materially from the expectations regarding performance, results and timing expressed in this presentation. All figures are based on preliminary calculations before final consolidation and completion of the audit. There may therefore be discrepancies to the final financial figures to be published on 22 March 2018. This presentation does not constitute an offer to sell or a solicitation to purchase any securities of freenet

• AG. Any such decision must not be made on the basis of the information provided in this presentation.

freenet AG does not undertake any obligation to publicly update or revise information provided during this presentation.

3 | Preliminary results for the financial year 2017 | 1 March 2018

2017 was managed under the new structure presented in April

Core Business

Mobile service providing ▪ mobilcom-debitel ▪ klarmobil ▪ Digital Lifestyle Services Retail and trade ▪ GRAVIS ▪ Motion TM Adjacent ▪ freenet.de ▪ freenet digital ▪ freenet Energy

TV and Media Business

Business to business services ▪ Radio broadcasting (UKW, DAB+) ▪ Network services ▪ Transport of public and private TV ▪ Midterm - addressable TV advertising Business to consumer ▪ Freenet TV / DVB-T2 subscribers ▪ waipu.tv / IPTV subscribers

DIGITAL LIFESTYLE PROVIDER

4 | Preliminary results for the financial year 2017 | 1 March 2018

▪ 2017 determined by stable performance of core mobile business, further growth in Digital Lifestyle services, the launch of both our new TV end consumer offerings ▪ Revenue increased by 4.3 per cent to 3.51 billion euros ▪ Despite significant Marketing and SAC investments EBITDA (excl. Sunrise) rose by 5.7 million euros to an all time high of 408.0 million euros ▪ Free cash flow is stated as 342.8 million euros, compared with 341.5 million euros in the previous year ▪ Sunrise contributed 133.2 million euros on EBITDA and 34.4 million euros in Free Cash Flow, net effect after interest was roughly 23 million euros

Group Mobile Communications TV and Media

New EBITDA-high despite significant investments in new business

▪ Growth in Customer Ownership continued by net 60,000 to 9.59 million ▪ In postpaid business, which is the valuable base for the mobile segment, number of customers could be grown net by 198.000 (+3.0%) to 6.71 million and ARPU was stable at 21.4 euros ▪ In terrestrial TV (freenet TV) roughly 1 million subscribers could be acquired after only 9 months ▪ waipu.tv became the IPTV market leader in only 9 months: At the end of 2017, the number of registered users was more than 464,000 (excl. 76,000 pre-registered users), and the number of subscribing customers was 102,000

5 | Preliminary results for the financial year 2017 | 1 March 2018

Core Business

Mobile service providing ▪ mobilcom-debitel ▪ klarmobil ▪ Digital Lifestyle Services Retail and trade ▪ GRAVIS ▪ Motion TM Adjacent ▪ freenet.de ▪ freenet digital ▪ freenet Energy

TV and Media Business

Business to business services ▪ Radio broadcasting (UKW, DAB+) ▪ Network services ▪ Transport of public and private TV ▪ Midterm - addressable TV advertising Business to consumer ▪ Freenet TV / DVB-T2 subscribers ▪ waipu.tv / IPTV subscribers

2017 was managed under the new structure presented in April

DIGITAL LIFESTYLE PROVIDER

6 | Preliminary results for the financial year 2017 | 1 March 2018

2017 mobile market environment without substantial changes

▪ Entire market shrinks in prepaid and thus postpaid is growing ▪ Telefónica struggling with network quality as well as cannibalization from 1&1 and freenet ▪ Vodafone with focus on convergent products as well as DT playing Magenta

Competition Tariff and Price Channels Hardware

▪ Data packages/included volumes continuously growing, roaming contributing its proportion ▪ Prices in discount segments and promotions under pressure but with limited impact on overall market; top premium end with stable prices and slowly increasing amounts ▪ Online marketers consolidate and loose volume to a large extend to price-comparison portals ▪ Retail very strong with key proposition in subsidized postpaid contract segment ▪ Limited innovation in Hardware with even growing share of the big three – Apple, Samsung, Huawei ▪ Accessories, watches, IOT growing from small scale

7 | Preliminary results for the financial year 2017 | 1 March 2018

High-value postpaid customer base keeps growing (+3.0% yoy)

Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017

[in million]

6.51 6.54 6.56 6.65 6.71

Postpaid No frills Customer Ownership

3.02 3.02 3.03 2.95 2.88 9.53 9.56 9.59 9.60 9.59

Key drivers ▪ Further growth in transaction share of all captive channels (shops, online, app, inbound and outbound) ▪ Sophisticated approach to renewal, tariff- and data-upgrades – transaction migrating more into digital ▪ Intensified cooperation with price comparison portals cutting out 3rd party ▪ Strong performance of Media Saturn also leading to prolongation of the exclusive partnership Expectation for 2018 – stable customer ownership with growing number of contract customers

8 | Preliminary results for the financial year 2017 | 1 March 2018

Strong Performance in ARPU across all segments – Stable outlook

2017 2016

[EUR/month]

21.4 21.4 21.4

Postpaid-ARPU continues to be stable at 21.4 euros compared with 21.2 euros in Q4 2016. Data revenue share at 35.0 per cent.

FY Postpaid Prepaid-ARPU stable at 3.1 euros in line with previous year. No-frills-ARPU higher at 2.8 euros / + 0.40 euros above FY 2016 (2.4 euros). 3.1 3.1

9 | Preliminary results for the financial year 2017 | 1 March 2018

[in EUR million]

Key drivers ▪ Multi-channel integration across all products ▪ Launch of DLS with klarmobil ▪ Improved targeting model to increase conversion rate ▪ Test of new services e.g. SvoD, Smart Frog, IOT or health ▪ Data access complemented with unlimited freenet worldwide WIFI access

Once again digital lifestyle services with significant growth

10 | Preliminary results for the financial year 2017 | 1 March 2018

Big steps in the further development of the digital transformation

Omni channel Strategy ▪ ‚Reserve in Store‘ and ‚Delivery in Store‘ concept ▪ Push of hardware only business ▪ Hybrid services (TV & mobile) ▪ Increasing ‚click & collect‘ business Customer Journey ▪ Implementation of a chatbot pilot ▪ Customer service self solving quota ~20% ▪ Customizing of mobile devices with preconfigurated apps, e.g. „Mein-md“, waipu.tv, etc. (in total 4.7 mio. apps in 2017) Technology ▪ Onlineshop (hybris) ▪ DVB T2 ▪ DAB+ ▪ Cloud based IPTV network

Technological Innovation (AI/BI)

11 | Preliminary results for the financial year 2017 | 1 March 2018

Core business expected to be flat in 2018

▪ Fast data/ LTE to be available for mobilcom-debitel tariffs (not only operator plans as so far) ▪ Further consolidation of online traffic with key portals e.g. price comparison or mediamarkt.de ▪ Even further growing data packages

Competition Sales DLS Operations

▪ Customer base in contract supposed to grow again ▪ No frills to stabilize ▪ Upselling opportunities with speed options and more-for-more ▪ New services to be launched or rolled out e.g. freenet.video, freenet WIFI flatrate ▪ But strategic focus on waipu.tv and freenet TV DVB-T2 and Sat, sacrificing short term EBITDA for recurring and sustainable revenues ▪ Expansion of AI initiatives across the entire group (chat bots, self learning customer service, BI) ▪ GRAVIS, freenet Energy and freenet digital with solid and acceptable results

Organization

▪ Split of key functions in captive and non-captive units to even better address specific needs and to exploit full potential in multi-channel opportunities ▪ Creation of competence-centers on group level for new technologies and digitalization

12 | Preliminary results for the financial year 2017 | 1 March 2018

2017 was managed under the new structure presented in April

Core Business

Mobile service providing ▪ mobilcom-debitel ▪ klarmobil ▪ Digital Lifestyle Services Retail and trade ▪ GRAVIS ▪ Motion TM Adjacent ▪ freenet.de ▪ freenet digital ▪ freenet Energy

TV and Media Business

Business to business services ▪ Radio broadcasting (UKW, DAB+) ▪ Network services ▪ Transport of public and private TV ▪ Midterm - addressable TV advertising Business to consumer ▪ Freenet TV / DVB-T2 subscribers ▪ waipu.tv / IPTV subscribers

DIGITAL LIFESTYLE PROVIDER

13 | Preliminary results for the financial year 2017 | 1 March 2018

Media Broadcast – successful transformation and performance 2017

▪ Technical switch from DVB-T to DVB-T2 with no relevant problems, technical service level >99.98% ▪ Kick-start with more than 100,000 customers activated in 24 hours well managed in tec-center and customer care ▪ Relationship with key retailers established - devices and voucher sales ▪ Steep learning curve from B2B to a partially B2C company ▪ Synergies with freenet group >10% subscribers generated in md-shops and customer base ▪ Application for 2nd and last nationwide digital radio (DAB+) multiplex – Media Broadcast not only as technical service provider but as 50% owner of the platform company ▪ Sustainable and stable B2B business ▪ 1 million subscribers acquired by the end of 2017 in B2C

14 | Preliminary results for the financial year 2017 | 1 March 2018

DVB-T2 launch plan was ambitious and without precedent

2017 financial forecast

▪ Average pay period 5 months ▪ Total revenues of 12-16 million euros

2018 early estimates

▪ Average pay period 10 months ▪ Total revenues of 35-50 million euros ▪ EBITDA per subscriber at 2.0 euros (without one-time upfront acquisition cost)

Estimate on hardware installations and paying subscribers

Capital market day, April 2017

31.03.2017 31.12.2018 31.12.2017 31.06.2017 ~ 160.000 > 1,000,000 > 800,000 > 500,000 1.2 – 1.5 > 2.5 1.7 – 2.2

Installed base in mio. Paying users

15 | Preliminary results for the financial year 2017 | 1 March 2018

Reality shows that Media Broadcast delivered on key parameters

Achievements in 2017

Installed base ▪ Well on target, respective one-time license payments lucrative Paying subscribers ▪ Conversion higher than expected ▪ Average pay period 5 months ▪ Total revenues ~18 million euros Challenges ▪ USB Stick did not sell large volumes ▪ Registered customers less than 50% Ambition for 2018 ▪ Growth in customer base and increase of upselling opportunity by incentivizing registration ▪ Further investment into marketing and brand connected to launch of freenet TV Sat HD service, which looks very accretive

31.12.2017 31.12.2018 31.12.2018 > 1,000,000 > 1,200,000 ~ 2.2 ~ 3.0 ~ 975,000

Guidance 2017 Guidance 2018

Hardware installs and paying subscribers

Installed base in mio. Paying users

16 | Preliminary results for the financial year 2017 | 1 March 2018

End of 2018: 80% of the households will be covered with DVB-T2

Fall 2018

44 locations 55 mio. inhabitants (68%)

29 March 2017 8 November 2017 25 April 2018

50 locations 59 mio. inhabitants (73%) 56 locations 61 mio. inhabitants (76%) 63 locations 65 mio. inhabitants (79%)

17 | Preliminary results for the financial year 2017 | 1 March 2018

freenet TV launches Sat service to address 47% of households

Launch ▪ Q2 with CI+ module ▪ Q3 third party set-top box ▪ Combined campaigns from April Challenge and ambition ▪ Initial marketing spending ▪ Lower margin than DVB-T2 ▪ Competition of HD+ and M7 ▪ HD-Penetration in Germany is only 15% today Product ▪ Identical selection of channels in HD ▪ Physically same CI+ module ▪ Same price as DVB-T2

18 | Preliminary results for the financial year 2017 | 1 March 2018

Combined freenet TV coverage is 100% in Germany

DVB-T2 Coverage 11/ 2018 63 locations – 59% (Outside antenna) TV Access in Germany end of 2016

Percent; Total > 100% due to multiple usage TNS Infratest - Digitalisierungsbericht 2016

Coverage = 100% Coverage = 47% SAT- Coverage

Cable 46% 5% 10% 47%

~18 mio. HH

IP DVB-T2 Satellite

19 | Preliminary results for the financial year 2017 | 1 March 2018

Media Broadcast prepares strategic move for its Radio business

Situation ▪ As of 2017 media broadcast is solely a technical service provider for analog and digital radio ▪ Consequently revenues are very constant with a regulated (low) margin ▪ Margins of the ancient analog radio business further jeopardised by regulation ▪ Digital Radio (DAB+) is a small business up to now, but with high growth rates in times of ongoing digitalization ▪ Compelling business model capitalizing 1st DAB+ multiplex Future – paradigm shift to extend revenue and profit pool ▪ UKW antenna equipment handed over to infrastructure investors ▪ Application to become service provider for 2nd digital radio (DAB+) multiplex exploiting synergies with existing 1st digital radio (DAB+) multiplex (final ruling Q3 2018) ▪ Foundation of a digital radio (DAB+) platform service provider “Antenne Deutschland” in a joint venture to deliver  Owned radio stations/programs  Full service outsourcing for other radio publishers  Marketing and advertising sales services Future proposition: Media Broadcast becomes shareholder in a Media Company to participate in all revenue sources of digital radio on top of its pure technical service

20 | Preliminary results for the financial year 2017 | 1 March 2018

Media Broadcast outlook 2018 comprising investments into sustainable revenue sources

▪ freenet TV as combination of terrestrial and satellite tap a total potential of more than 20 million households in Germany (current HD penetration on Sat around 15%) ▪ Subscriber base from DVB-T2 and Sat supposed to grow to more than 1.2 million paying customers end of 2018 ▪ Initial investment into Sat business (minimum guarantee, launch campaign, listing)

B2C

▪ Continuation of all network services in TV and Radio ▪ Build up of infrastructure for 2nd DAB+ multiplex as soon as final legal ruling ▪ Paradigm shift with 2nd DAB+ multiplex into a media service company participating in other digital revenue sources ▪ Growing EBITDA with first full year effects from B2C customers in 2018 ▪ Ongoing marketing spending for terrestrial-TV and Satellit-TV on lower level ▪ Tower rental cost, which are not part of EBITDA, stable in comparison to 2017 ▪ Further investments into digital services

B2B Financial KPIs

21 | Preliminary results for the financial year 2017 | 1 March 2018

2017 was managed under the new structure presented in April

Core Business

Mobile service providing ▪ mobilcom-debitel ▪ klarmobil ▪ Digital Lifestyle Services Retail and trade ▪ GRAVIS ▪ Motion TM Adjacent ▪ freenet.de ▪ freenet digital ▪ freenet Energy

TV and Media Business

Business to business services ▪ Radio broadcasting (UKW, DAB+) ▪ Network services ▪ Transport of public and private TV ▪ Midterm - addressable TV advertising Business to consumer ▪ freenet TV / DVB-T2 subscribers ▪ waipu.tv / IPTV subscribers

DIGITAL LIFESTYLE PROVIDER

22 | Preliminary results for the financial year 2017 | 1 March 2018

Customer Base Conversion Content Reach

▪ Free users/ registrations > 500,000, all with full data set including billing data ▪ More than 100,000 paying users and therefore market leader in pure play IPTV ▪ Free to pay conversion journeys developed, tested and constantly improved ▪ Loyalty and retention methodologies; increasing ARPU from 5.60€ to 6.10€ during 2017 ▪ Growing # of linear channels, transfer from youtube to TV, branded TV channels ▪ Transactional and subscription video on demand platform implemented and rolled out ▪ Full scale playing in Google Chromecast, Amazon fire, Android and IOS ▪ Access >95% of broadband households with local peering points

2017 achievements for an exponentially scalable future of waipu.tv

23 | Preliminary results for the financial year 2017 | 1 March 2018

Scalability Innovation Big Data

▪ Wholesale platform implemented allowing all means of partner/ sales models ▪ White label platform, allowing to sell the service to telco or cable operators ▪ T-Commerce tested with Amazon and 5 TV channels ▪ Realtime synchronized and deep targetted advertising across platforms

• incl. NPVR

▪ Realtime targetting based on multi-level usage data for ads, CRM, retention ▪ AI self-learning recommandation engine for a better customer experience

waipu.tv is the sole integrated hub for moving image entertainment

2017 achievements for an exponentially scalable future of waipu.tv

24 | Preliminary results for the financial year 2017 | 1 March 2018

Number of paying subscribers growing to 6 digit during 1st year

Full scalability now possible ▪ Established matrix to acquire, convert and upsell any new customer with positive lifetime contribution ▪ Volume/ size only driven by level of investment into SAC and marketing Key drivers of 2018 and future growth ▪ IPTV overall share growing ▪ Increase of broadband households ▪ Prompted brand recognition of waipu.tv (only 20% by end of 2017) ▪ Sales partners outside freenet group ▪ Extend access beyond chrome cast and amazon fire Market leader in Germany

31.03.2017 31.12.2018 31.12.2017 31.06.2017 ~ 160.000 > 1,000,000 > 800,000 > 500,000

Total user Paying users

~ 25,000 > 250,000 > 100,000 > 50,000 ~ 150,000 > 1 Mio. > 460,000 1) > 250,000

1) without 76,000 pre-registered users

25 | Preliminary results for the financial year 2017 | 1 March 2018

Stable Tariff-Structure leads to a constantly improving ARPU

waipu.tv Perfect

▪ Free-TV, New-TV and Pay-TV channels ▪ In-Home + mobile use ▪ HD quality ▪ Multi-Stream: 4 parallel streams ▪ 100h PVR memory & pause function ▪ EPG & personal recommendations

waipu.tv Free

▪ Free-TV (public channels) ▪ In-home use ▪ SD quality ▪ EPG & personal recommendations

waipu.tv Comfort Home

▪ Free-TV , New-TV ▪ In-Home + mobile use ▪ Streaming of private channels only in-home ▪ SD quality ▪ Multi-Stream: 2 parallel streams ▪ 25h PVR memory & pause function ▪ EPG & personal recommendations

1st half-year 2nd half-year

ARPU (€)

5.6 6.1

26 | Preliminary results for the financial year 2017 | 1 March 2018

Great usability, technical and customer service persuades customers

Technical service availability above 99.7% (last 6 months average) Aug 17 Sep 17 Oct 17 Nov 17 Dec 17 Jan 18 Total availability 99.7% 99.6% 99.7% 99.7% 99.7% 99.8% HD availability 98.5% 97.8% 98.1% 98.6% 99.0% 99.1% SD availability 99.8% 99.8% 99.8% 99.8% 99.8% 99.8% Key findings on user preferences Other operational KPIs ▪ 55% of all customer requests are handled within 1 hour, the average request is answered within 2h 13 min ▪ 78% of all requests are resolved with the first answer ▪ There is less than 1% of contacts via call center ▪ Multi-room option is considered a key differentiator ▪ NPVR usage drives loyalty (volume included was extended, top user > 500 hours) ▪ EPG editing becomes ultimate convenience feature ▪ Overall paying users have an persuading net promoter score (NPS) of 37

27 | Preliminary results for the financial year 2017 | 1 March 2018

Retention and upselling campaigns finally at extraordinary level ….

'Your NPVR will be deleted‘

29.2 %

Click-Conversion

Target group : free user Goal: convert to Comfort Opening-Rate: 36.1 % Click to Open-Rate: 8.6 %

3 out of 10 convert into comfort-package

Target group : Comfort Goal: convert to Perfect Opening-Rate: 49.1 % Click to Open-Rate: 26.3 %

Almost every second Customer converts into perfect package

45.4 %

Click-Conversion ‚Your trial period ends ...‘

28 | Preliminary results for the financial year 2017 | 1 March 2018

… and consequently a more open funnel will drive registration

In 2017 only negativ-option From Q1 2018 positiv-option

▪ So far any registration included a full scale collection of customer data including billing information (SEPA, paypal, CC). As a result conversion was high but breakup rate at introductory stage too. ▪ With all the learning along customer journey and based on deep business intelligence analyses the funnel will now be

• pened. No billing information

is requested to start, test and use the free product.

Registration Trial period Conversion to pay

29 | Preliminary results for the financial year 2017 | 1 March 2018

Linear and non linear-content constantly added

▪ New channels added within 2 weeks ▪ Svod and Tvod functionality with all kinds of DRM and billing available ▪ Limiting access to content enabled e.g. Gravis instore TV Channel only for Gravis employees ▪ This feature enables commercial, local, period limited services and

• pen a new source of revenues

▪ Key element to handle even more channel is the editing function on the EPG which applies all drag and drop, delete, add, move functions known from any other app

Stromberg

12:10 – 12:40

Stromberg

12:40 – 13:10

Strom…

12:40 – 13:1

Any content seamlessly integrated in EPG

For some of those channels Exaring also sources the advertising

• r gets a revenue share

30 | Preliminary results for the financial year 2017 | 1 March 2018

… as well as a constant flow of innovation and new features

TvoD cooperations Tipps 3.0 with unique search function Theme recorder on NPVR

1st quarter 2018 2nd and 3rd quarter 2018

waipu media library allows flexible and individual playout from any content supplier in live TV look and feel and for any device anywhere Tipps 3.0 is an AI based selve learning recommandation engine offering auto- matic content search based on historic data but also based on individual search parameters taken from the user Theme recorder is a NPVR that is automatically filled by a waipu algorithm based on individual preferences and

• usage. It creates a full theme based

library for the customers .

31 | Preliminary results for the financial year 2017 | 1 March 2018

Technical reach soon to be multiplied and “democratized”

Tablets: Fire, Android, Apple Web-Produkt Samsung TV-Cast Amazo echo and Google home WM-Edition “fastest Goal ”

Current limitation to Chrome Cast and Amazon fire limits access to 6-8 million (no official data available) potential users . Samsung TV sets younger than 2016, tablets, desktops will drive accessability to almost 100% and not limited to tec savy people or early adopters.

1st & 2nd quarter 2018 3rd & 4th quarter 2018

Apple TV

32 | Preliminary results for the financial year 2017 | 1 March 2018

Latest platform update enables new kinds of sales channels

Wholesale 2.0

• API based interfaces that enable almost any third party to bill waipu.tv and to

exchange contract relevant data (tarif packages, TvoD, cancellations, ...)

• As a result tarif-bundles are possible as well as stand alone subscriptions billed

by mobilcom-debitel or any other third party

• As well as white-label integration for operators in mobile, fixed line or cable

waipu.tv sales operations teams founded as well as a dedicated trainer and coach

• Immediate support on technical or system problems
• Training on the job and coaching live in the shops
• Best practice sharing

Instore promotion

• Instore demo-wall and package
• Instore TV solution

Additional revenue sources

• White label solution
• Instore TV

33 | Preliminary results for the financial year 2017 | 1 March 2018

Next generation T-commerce – a test of waipu.tv and

▪ Test period: Nov 2017 – Jan 2018 ▪ Participating media: ZDF, RTL, P7S1 ▪ Products: FMCG, electronics

34 | Preliminary results for the financial year 2017 | 1 March 2018

Results prove the concept and the extraordinary potential

Test setup ▪ 6 campaigns, 3 branches ▪ 4 channels ▪ Pre-requisite waipu.tv user via Amazon fire Data Sources ▪ Klick rates ▪ Tracking Data ▪ Online questionaire to n = 2.577 audience with minimum one campaign contact Activity Acceptance Impact on brands 37% tried the option 75% consider it state of the art 69% consider it innovative +10% brand recognition +28% brand recall + 31% ad recognition Average click rate 1%

35 | Preliminary results for the financial year 2017 | 1 March 2018

waipu.tv is first mover in a market with a huge profit pool

Subscription Up-Cross-Sell Brand Channel B2B T-commerce

▪ IPTV market share is considered to be 25-35% by 2025 with the equivalent of 20-25 mio. users ▪ ARPUs will be up from todays levels since they are way lower than todays cable or satellite ▪ NPVR, multiroom and mobile will drive spending ▪ Early results show the hunger for volume on NPVR ▪ SvoD and TvoD will seamlessly integrated on the platform ▪ Other services e.g. gaming might be added ▪ Entry barriers for new content offerings on cable and satellite drive users to IP ▪ Low technical set-up cost bring waipu.tv in first mover position benefiting from revenue share models and paid content channels ▪ Instore TV solutions as well as regional, timewise or audience wise restricted services ▪ White label solutions for other operators to scale the platform and increase penetration ▪ T-commerce and the access to the big screen is attractive for advertisers and E-Commerce ▪ Targetted advertising and promotion with a proper response channel on two devices

Financial KPIs

▪ Growing the customer base further in 2018 will lead to a negative EBITDA ▪ Break-even depending on growth-path, but case definately accretive

36 | Preliminary results for the financial year 2017 | 1 March 2018

Group highlights in FY 2017

▪ freenet AG increased its holding in EXARING AG to 50.01 per cent, thus becoming the majority shareholder ▪ freenet AG extended the very successful exclusive partnership of mobilcom-debitel with Media- Saturn Deutschland GmbH ahead of schedule for five further years (started 1 October 2017) ▪ freenet AG achieved long-term financing assurance by successfully replacing the bridge finance which had been in place since March 2016 by way of a syndicated five-year bank loan with a total volume of 710 million euros ▪ Due to the “Tower Deal” the investment in Sunrise contributes with an extraordinary high amount of 133.2 million euros to the EBITDA of freenet in 2017 (thereof “Tower Deal” 91.2 million euros) ▪ Guidance for 2017 reached, respectively outperformed

37 | Preliminary results for the financial year 2017 | 1 March 2018

2017 2016 Q4 2017 Q4 2016 Revenue 3,507.3 3,362.4 949.9 938.3 Gross profit 949.8 898.7 251.6 253.0 EBITDA 541.2 438.8 119.1 127.1

Depreciation and amortisation

• 148.2
• 124.3
• 44.0
• 35.0

Subsequent recognition from Sunrise PPA

• 20.0
• 15.7
• 5.2
• 5.1

EBIT 373.0 298.8 69.9 87.1

Interest result

• 50.3
• 54.9
• 13.0
• 13.4

EBT 322.7 244.0 56.9 73.7 Taxes on income

• 47.1
• 27.5
• 30.2
• 19.4

Group result 275.6 216.4 26.7 54.4 Earnings per share (EUR) 2.24 1.78 0.23 0.48

[in EUR million]

The increase in Group revenue by 4.3 per cent yoy is mainly attributable to higher TV revenues and higher hardware sales. EBITDA grows to 541.2 m€ (yoy +23.3 per cent) significantly influenced by the one-off from Sunrise due to the “Tower Deal” in Q3/2017. Group Result amounts to 275.6 m€; an increase of 59.2 m€ (yoy +27.3 per cent), which results in earnings per share of 2.24 €.

Financial statements1 – Income statement information

1) Preliminary figures

38 | Preliminary results for the financial year 2017 | 1 March 2018

[in EUR million]

Revenue Gross profit EBITDA

Group Mobile Communications TV and Media

FY 2017 FY 2016

898,7 949,8 438.8 541.2 +4.3% +5.7% +23.3% +2.3% 3,126.0 3,198.9 744.1 744.4 +0.0% 420.4 513.6 +22.2% 218.9 294.8 110.8 166.4 28.0 40.2 +34.7% +50.1% +43.5%

Group and segment key financial overview FY 20171

1) Preliminary figures

39 | Preliminary results for the financial year 2017 | 1 March 2018

▪ Balance sheet remains strong – Balance sheet total increased by 0.7 per cent (around 29.4 million euros) to 4.3 billion euros ▪ Net debt (financial debt less liquid assets) declines from 725.8 in 2016 to 510.0 in 2017 due to free cash flow generation and the increase in the Sunrise´s share price ▪ Debt ratio of 0.9x reflects the reduction of the net debt and is even lower than the targeted range of 1.0x to 2.5x (2016: 1.7x) ▪ Consequently the equity ratio increased to 33.9 per cent in 2017 (2016: 32.7 per cent)

Financial Statements1 - Balance sheet insight

1) Preliminary figures

40 | Preliminary results for the financial year 2017 | 1 March 2018

Financial statements1 – Cash flow information

1) Preliminary figures 2) Free cash flow is defined as cash flow from operating activities, minus investments in property, plant and equipment and intangible assets, plus proceeds from the disposal of property, plant and equipment and intangible assets.

[in EUR million]

Cash flow from

• perating

activities decreased in 2017 by 1.1 per cent to 385.4 m€ yoy. Due to payments made for the acquisitions in 2016 Cash flow from investing activities increased to -42.1 m€ in 2017. Cash flow from financing activities decreased mainly due to the cash in-/ outflows associated with the acquisitions as well as the repayment of the corporate bond in 2016. Overall increase of 1.3 m€ in free cash flow from 341.5 m€ to 342.8 m€ yoy.

2017 2016 Q4 2017 Q4 2016 Cash flow from operating activities 385.4 389.6 73.4 92.7 Cash flow from investing activities

• 42.1
• 862.4

0.9

• 14.5

thereof net capex

• 42.5
• 48.1

1.0

• 13.9

Cash flow from financing activities

• 338.6

521.2

• 85.2
• 20.5

Change in cash and cash equivalents 4.6 48.4

• 10.9

57.7 Free cash flow2 342.8 341.5 74.4 78.8

41 | Preliminary results for the financial year 2017 | 1 March 2018

Detailed Bridge from EBITDA to free cash flow

[in EUR million] FY 2016

438.8

• 3.8
• 40.0
• 48.1
• 36.5

+30.1 + 1.0 341.5

FY 2017e

>410

• 10
• 40
• 50

~310

541.2

• 25.6
• 30.1
• 42.5
• 133.2

34.4

• 1.4

342.8

1) Preliminary figures

Q1 – Q4 20171

EBITDA Change in net working capital Tax payments Capex Sunrise EBITDA (no cash) Sunrise dividends

• ther

Free cash flow

42 | Preliminary results for the financial year 2017 | 1 March 2018

freenet again met key financial targets for FY 20171

Group revenue Group EBITDA Free cash flow (FCF)2 Dividend payout

Results 2017

3,507.3 m€ 408.0 m€

(incl. Sunrise 541.2 m€)

308.4 m€

(incl. Sunrise 342.8 m€)

1.65 €/share5

Guidance 2017

> 410.0 m€3

(+ Sunrise)

~310.0 m€4

(+Sunrise)

50-75%

• f FCF incl. Sunrise

1) Preliminary figures 2) Free cash flow is defined as cash flow from operating activities, minus investments in property, plant and equipment and intangible assets, plus proceeds from the disposal of property, plant and equipment and intangible assets. 3) The expected EBITDA contribution of Sunrise Communications Group AG is not included in our guidance. 4) Dividend payment from Sunrise is not included in our guidance. 5) Dividend of 1.65 euros per dividend-bearing share for the financial year 2017 to be proposed by the Executive Board

43 | Preliminary results for the financial year 2017 | 1 March 2018

freenet again met or exceeded key KPI-targets for FY 2017

Mobile Communication waipu.tv freenet TV

Customer

• wnership

Postpaid ARPU Total User Paying User Paying User ARPU1 Results 2017

+60,000 21.4 € 464,0001 102,000 975,000 4.3 €

Guidance 2017

> 500,000 > 100,000 ~ 950,000 ~ 4.5 €

1) without 76,000 pre-registered users

44 | Preliminary results for the financial year 2017 | 1 March 2018

New financial guidance 2018 & perspective 2019

Group revenue5 Group EBITDA Free cash flow (FCF)1 Dividend payout

Perspective 2019 50-75%

• f FCF incl. Sunrise

Guidance 2018 410 - 430 m€3

(+ Sunrise)

290 - 310 m€4

(+Sunrise)

50-75%

• f FCF incl. Sunrise

Results 2017 (preliminary)

3,507.3 m€ 408.0 m€

(incl. Sunrise 541.2 m€)

308.4 m€

(incl. Sunrise 342.8 m€)

1.65 €/share4

Guidance 2017

> 410.0 m€2

(+ Sunrise)

~310.0 m€3

(+Sunrise)

50-75%

• f FCF incl. Sunrise

1) Free cash flow is defined as cash flow from operating activities, minus investments in property, plant and equipment and intangible assets, plus proceeds from the disposal of property, plant and equipment and intangible assets. 2) The expected EBITDA contribution of Sunrise Communications Group AG is not included in our guidance. 3) Dividend payment from Sunrise is not included in our guidance. 4) Dividend of 1.65 euros per dividend-bearing share for the financial year 2017 to be proposed by the Executive Board 5) Without effects from IFRS15

45 | Preliminary results for the financial year 2017 | 1 March 2018

New KPI guidance 2018 & perspective 2019

Mobile Communication waipu.tv freenet TV

Customer

• wnership

Postpaid ARPU Total User Paying User Paying User ARPU1

Perspective

2019 Guidance 2018

> 250,000 > 1,200,000

Results 2017

+60,000 21.4 € 464,0002 102,000 975,000 4.3 €

Guidance 2017

> 500,000 > 100,000 ~ 950,000 ~ 4.5 €

1) freenet TV ARPU is referring to number of freenet TV paying users 2) without 76,000 pre-registered users

46 | Preliminary results for the financial year 2017 | 1 March 2018

Q1 Q2 Q3 Q4

Free cash flow bridge and quarterly breakdown FY2018e

FY2018e

[in EUR million]

EBITDA Change in net working capital Tax payments Capex Free cash flow

Detailed Bridge from EBITDA to free cash flow (without Sunrise)

410 - 430

• 25
• 50
• 50

290 - 310

Quarterly breakdown

FY2018e

[in EUR million]

~50 ~75 ~85 ~90

47 | Preliminary results for the financial year 2017 | 1 March 2018

1. Distribution of one-time revenues over the contract period

a. Capitalisation of subscriber acquisition costs b. Reclassification of network operator commissions as reduction of COGS

2. Time congruent recognition of hardware revenues and costs

a. Split of bundle-revenues in a hardware and a service component

Excursus IFRS 15: Relevant requirements for freenet

48 | Preliminary results for the financial year 2017 | 1 March 2018

1. P&L: Reduction of revenues by approx. 700m€ in 2018

a. Revenue reduction by 700m€ due to reclassification of network operator commissions as reduction of COGS provided today‘s business structure remains unaltered b. EBITDA remains fairly stable due to amortisation of customer acquisition costs through gross profit (not depreciation) c. ARPU definition remains unaltered

2. B/S: Balance sheet extension by approx. 380m€ as of 01 January 2018

a. Balance sheet total increase by approx. 380m€ due to I. Capitalisation of customer acquisition costs II. Capitalisation of hardware costs

• III. Passivation of network operator commissions

3. C/S: Free cash flow not affected

Excursus IFRS 15: Impact on freenet financials

49 | Preliminary results for the financial year 2017 | 1 March 2018

freenet Group management

We are looking forward to your questions

Joachim Preisig, CFO Christoph Vilanek, CEO

▪ CFO of freenet AG since 2010

▪ CFO of debitel AG since 2006 ▪ CFO of T-Mobile / Head of Group Controlling at Deutsche Telekom AG since 2002 ▪ CFO at O2 since 1996

▪ CEO of freenet AG since 2009

▪ Management positions at debitel AG since 2005 ▪ Consultant for telecommunication with McKinsey&Company since 2001 ▪ Management positions in Direct Marketing and Media 1991-2001

50 | Preliminary results for the financial year 2017 | 1 March 2018

Hollerstrasse 126 Investor Relations 24782 Büdelsdorf +49 (0) 40 513 06 778 www.freenet-group.de investor.relations@freenet.ag

Thank you.

51 | Preliminary results for the financial year 2017 | 1 March 2018

Key indicators remain unchanged

[in EUR million]

Financial management and dividend policy

Results 2016 Prelims 2017 Target 2017/2018 Debt factor 1.7 0.9 1.0-2.5 Interest cover 8.0 10.8 >5 Equity ratio 32.7 33.9 >50%

Definition

• f

financial key indicators ▪ Debt factor: ratio of economic net debt of EBITDA ▪ Interest cover: ratio of EBITDA to net interest balance ▪ Equity ratio: ratio of equity to total assets ▪ Liquidity reserve: 100 million euros

Pay-out for FY 2015 Pay-out for FY 2016 Target 2017/2018 Dividend pay-out ratio 69.7% 60.0% 50-75% Dividend payment 1.55€/share 1.60€/share 1.65€/share2 Dividend yield1 6.3% 5.1% n.a.

1) At the date of payment 2) Dividend of 1.65 euros per dividend-bearing share for the financial year 2017 to be proposed by the Executive Board

52 | Preliminary results for the financial year 2017 | 1 March 2018

Shareholder structure

Major shareholders of freenet AG

* Including attributions according to German Securities Trading Act ** The free float according to Deutsche Börse AG amounts to 89.92%

As of 31 December 2017

53 | Preliminary results for the financial year 2017 | 1 March 2018

Overview over current financing and maturity structure

54.5 274.5 443.0 163.5 93.5 12.0 23.5 100.0 610.0

2018 2019 2020 2021 2022 2023 2024 2025 2026

Promissory notes Syndicated bank loan Issue Instrument Volume Maturity 2012 Promissory note 54.5 m€ 2019 2015 Promissory note 100 m€ 2020, 2022 2016 (March) Promissory note 560 m€ 2021, 2023, 2026 2016 (November) Promissory note 350 m€ 2020, 2022, 2024 2016 Syndicated bank loan 610 m€

(+100 m€)

2022

Average financing cost below 2.0 per cent p.a.

[in EUR million]