Annual Report 2019 Overview of Key Financials¹ Group

ANNUAL REPORT 2019 OVERVIEW OF KEY FINANCIALS¹ GROUP

OPERATIONS

2018 Q4 / 2018 In EUR millions/as indicated 2019 restated2 Q4 / 2019 Q3 / 2019 restated2 Revenue 2,932.5 2,897.5 802.5 741.0 794.2 Gross profit 896.2 903.7 230.1 219.4 235.1 EBITDA 426.8 441.2 101.0 110.3 113.3 EBIT 270.0 312.0 59.7 72.1 81.4 EBT 238.1 234.0 48.7 66.2 71.4 Consolidated profit 184.7 212.2 15.5 57.6 64.1 Earnings per share in EUR3 1.49 1.74 0.11 0.46 0.52 Dividend per share in EUR 1.654 1.65 — — —

BALANCE SHEET

In EUR millions/as indicated 31.12.2019 31.12.2018 31.12.2019 30.09.2019 31.12.2018 Total equity and liabilities 4,839.6 4,634.7 4,839.6 4,894.5 4,634.7 Equity 1,321.6 1,280.8 1,321.6 1,281.0 1,280.8 Equity ratio in % 27.3 27.6 27.3 26.2 27.6

FINANCES AND INVESTMENTS

2018 Q4 / 2018 In EUR millions 2019 restated2 Q4 / 2019 Q3 / 2019 restated2 Free cash flow 249.0 263.8 49.8 72.4 53.7 Depreciation, amortisation and impairment 156.8 129.2 41.3 38.3 31.9 Net investments5 (CAPEX) 40.6 43.3 13.6 11.4 9.7 Net debt 2,031.1 1,856.8 2,031.1 2,102.5 1,856.8 Adjusted net debt 1,078.0 904.3 1,078.0 1,151.1 904.3

SHARE as indicated 31.12.2019 31.12.2018 31.12.2019 30.09.2019 31.12.2018 Closing price Xetra in EUR 20.44 16.95 20.44 18.89 16.95 Number of issued shares in ’000s 128,061 128,061 128,061 128,061 128,061 Market capitalisation in EUR millions 2,617.6 2,170.6 2,617.6 2,419.1 2,170.6

EMPLOYEES

31.12.2019 31.12.2018 31.12.2019 30.09.2019 31.12.2018 Employees 4,238 4,183 4,238 4,222 4,183

1 Unless indicated otherwise, key financials are defined in the section “Corporate management” of the Group management report. 2 Th e comparative figures were adjusted due to the refocusing of the internal corporate management system effective from 2019 and the associated redefinition of various performance measures. 3 Basic and diluted. 4 The dividend will be paid subject to a resolution at the Annual General Meeting. 5 In vestments in property, plant and equipment and intangible assets, less the proceeds from the disposal of intangible assets and property, plant and equipment. 6 At the end of the period.

MOBILE COMMUNICATIONS SEGMENT

CUSTOMER FIGURES6

In millions 2019 2018 Q4 / 2019 Q3 / 2019 Q4 / 2018 Postpaid 6.903 6.896 6.903 6.866 6.896 Net change postpaid 0.007 0.185 0.037 0.032 0.027 freenet FUNK 0.034 — 0.034 0.031 — Net change freenet FUNK 0.034 — 0.004 0.010 —

OPERATIONS

2018 Q4 / 2018 In EUR millions 2019 restated2 Q4 / 2019 Q3 / 2019 restated2 Revenue 2,658.9 2,606.7 730.2 672.7 714.3 Gross profit 691.8 718.5 174.0 169.3 178.5 EBITDA 367.3 366.0 85.4 94.9 84.4

MONTHLY AVERAGE REVENUE PER USER (ARPU)

In EUR 2019 2018 Q4 / 2019 Q3 / 2019 Q4 / 2018 Postpaid ARPU without hardware 18.7 19.0 18.5 18.8 18.9

TV AND MEDIA SEGMENT

CUSTOMER FIGURES 6

In ’000s 2019 2018 Q4 / 2019 Q3 / 2019 Q4 / 2018 freenet TV subscribers (RGU) 1,021.1 1,014.2 1,021.1 1,036.6 1,014.2 Net change freenet TV subscribers (RGU) 6.9 112.2 - 15.5 - 0.9 112.8 waipu.tv subscribers 408.3 251.8 408.3 365.8 251.8 Net change waipu.tv subscribers 156.5 149.5 42.5 33.9 49.4

OPERATIONS

In EUR millions 2019 2018 Q4 / 2019 Q3 / 2019 Q4 / 2018 Revenue 253.9 282.6 66.1 63.8 71.3 Gross profit 166.2 147.4 45.8 40.6 46.7 EBITDA 73.5 86.3 20.9 19.4 32.8 SELECTED KEY FINANCIALS

2,932.5 EUR millions REVENUES EMPLOYEES

426.8 EUR millions EBITDA

4,238 Overview of key financials

249.0 EUR millions FREE CASH FLOW

8,367,000 SUBSCRIBERS FREENET.DE AG TURNS 20

On 3 December 2019 we celebrated the 20th anniversary of the stock exchange listing of freenet.de AG. This listing laid the foundations for today’s freenet Group. What was once freenet.de, a small web portal that harnessed the stock market boom on the “Neuer Markt” or New Market to become a listed company just a month after it was formally founded, has evolved into a large, diversified corporation over the past two decades. At the time of its listing, the business model of freenet.de AG consisted of features such as call-by-call internet, where customers paid based on their internet use. In 2003, freenet.de AG acquired the fixed network business of mobilcom AG in Büdelsdorf. The company introduced its first DSL services in the same year and offered internet telephony via DSL with freenet iPhone as far back as 2004. The merger of mobilcom AG and freenet.de AG eventually resulted in the creation of freenet AG or the freenet Group in 2007.

Today, the company’s core business consists of the provision of mobile services supplemented by a diverse range of digital lifestyle products and services. In addition to mobile phone accessories and home entertainment (e.g. music and video offerings), this most recently also includes two innovative TV products in freenet TV und waipu.tv. Although the DSL business, with its own infrastructure and call-by-call internet, has since been discontinued, the freenet.de portal still exists. 02

CONTENTS

20 YEARS OF THE FREENET GROUP 04

I was lucky to find freenet! 06 One of the company’s first-ever employees 07 From DUG TELECOM to freenet 08 Nothing ventured, nothing gained! 09 Media Broadcast – always in reception mode 10

TO OUR SHAREHOLDERS 11

View of the freenet Group 12 E ight Questions for the Executive Board 22 Report of the Supervisory Board 26 The freenet share 31 Sustainable action 35 Investor relations contact 36

A 360-degree view of 365 days in mobile communications, TV and media, and digital lifestyle

freenet AG | Annual Report 2019 03

GROUP MANAGEMENT REPORT 37

Business model and organisation 38 Corporate strategy and goals 41 Corporate management 42 Report on economic position 48 Report on opportunities and risks 58 Report on expected developments 71 Report on post-balance sheet date events 73 Non-financial statement 74 Corporate governance 90

CONSOLIDATED FINANCIAL STATEMENTS 105

Consolidated income statement 106 Consolidated statement of comprehensive income 107 Consolidated balance sheet 108 Consolidated statement of changes in equity 110 Consolidated statement of cash flows 114 Notes to the consolidated financial statements 116 Responsibility statement 208 Independent Auditor’s Report 209

FURTHER INFORMATION 217

Independent Practitioner’s Report 218 GRI Index and main memberships 220 Multi-year overview and quarterly figures 2019 225 Glossary 227 Financial calendar 230 Imprint and contact 231

Annual Report 2019 | freenet AG 04 20 years of the freenet Group | A review

A R E V I E W 20 YEARS OF THE FREENET GROUP

SOME THOUGHTS ON FREENET’S 20TH BIRTHDAY

Panta rhei – everything flows! Greek philosopher Heraclitus believed that the nature of existence is subject to constant, dynamic change. He illustrated his oft-quoted formula for continuous changes in material and form with the image of a river, teaching us that “no man ever steps in the same river twice” because there is always new and different water flowing.

Roughly two-and-a-half thousand years since it was first formulated, Heraclitus’s revelation remains as relevant as ever. If anything, we now experience our world as a place of down- right dramatic change at a similarly frantic pace more than ever before. This state of permanent flux also applies to freenet. Although we celebrated our 20th birthday in 2019, we are now barely recognisable as the start-up company that successfully listed its shares almost as soon as it was founded as an integrated DSL internet provider in 1999. Today, as the largest network-independent telecommunications provider in Germany, we serve the market for mobile voice and data services, digital lifestyle products and linear television via antenna and IPTV – our comparatively young business areas in the TV and Media segment – with around two dozen brands and corresponding subsidiaries.

freenet AG | Annual Report 2019 20 years of the freenet Group | A review 05

Another way in which freenet has changed is that it has ■ … encouraging management to make coherent strategic matured over the past two decades, with all the hallmarks decisions to safeguard future growth and the future of usually seen in human development. Our company is stable, our locations; structured, self-assured in the truest sense of the word, and ■ … consistently supporting and encouraging all our has clear, ambitious targets for its continued development. In employees at every level of our hierarchy, combined with particular, the growth of the past 20 years has been strongly ongoing learning with a “fail-fast” approach and contin- shaped by extrinsic factors – by acquisitions large and small, uous improvement at every workplace; together with changes in ownership and management. To ■ … scope, flexibility and responsibilities for every individ- stick with Heraclitus’s metaphor, the river has been fed by ual employee in order to facilitate entrepreneurial action significant new streams along the way that have enabled it and creativity; to grow, gain momentum and strike out in new directions. ■ … a unique corporate culture driven by a desire for success and a bold outlook for the future, transparency and com- As a result, freenet is now a company that rightly defines munication, colleagues working for one another rather itself as a Group – with nine offices across Germany. Encom- than alongside or even against one another; passing both cities such as Hamburg, Berlin, Munich and ■ … sustainable action in terms of our social and environ- Stuttgart as well as the more rural locations of Büdelsdorf mental responsibility as a company. and the Brandenburg district of Oberkrämer, the company is epitomised by its geographic diversity. There is a similarly Reading the following genuine statements from some of varied array of working styles within the Group. Our teams our employees in different business units and at different in Swabia and Bavaria operate differently than our Rhine- stages of life, we appear to have succeeded in striking a good lander’s at Media Broadcast in Cologne and at the Düssel- balance between management requirements, factors and dorf data centre, while Berliners contrast considerably with success in recent years. the staff at our head office in Schleswig-Holstein. As well as resulting in divergent mentalities, this also means most However, we also know that any human activity is always of our more than 4,000-strong workforce are at completely accompanied by mistakes; our ultimate responsibility as an different stages in their personal lives and careers. employer is to draw the right conclusions from these mistakes and work tirelessly to optimise our processes, products and Leading a Group like this one in an efficient and skilful way services. We promise that we will continue to strive to do is a critical task and a constant challenge for our company this in the years and decades to come. – day after day, year after year. This has never been more apparent than in the current environment, where globalisa- After all, as another Ancient Greek philosopher once realised: tion, artificial intelligence and digitalisation as well as social, “The gods have not, of course, revealed all things to mortals climate and demographic change are primarily perceived as from the beginning; but rather, seeking over the course of threats, and where people across the world are turning to time, they discover what is better.” supposed “leaders” who promise simple solutions but ultimately fail to deliver. After all, there are no simple solutions either in politics and society or in the economy.

Even here at freenet, we cannot foresee the effects that trends such as artificial intelligence and digitalisation will eventually have on working processes, customer relationships, employees and hierarchy levels in the future. However, we can do our best to adapt our structures, staff and management to respond to the latest developments and prepare for “GOOD future changes. To do this, we are creating conditions within our company that will allow us to successfully keep up with COMPANIES the big players and leave our mark over the next 20 years. We are doing this by… D R I V E CHANGE.” Christoph Vilanek

Annual Report 2019 | freenet AG 06 20 years of the freenet Group | A review

I WAS LUCKY TO FIND FREENET!

I began working as a trainee at freenet AG last autumn imme- I want to aim high here, I’m very ambitious – and confident, diately after graduating from university, and within a few because freenet offers career advancement opportunities weeks I realised that I was lucky to find freenet! The process for its employees, which mean that even internal staff can management trainee programme consists of ten modules end up at the Executive Board level. and is very well thought out, professional and ba lanced, and I am supervised and supported by a team leader from What impresses me most is the communication within the Logistics who acts as my personal mentor. What’s more, I company: it is genuinely a top priority. It starts with the have already been given my own project – to draft a we lcome informal corporate culture, which really helps new joiners handbook for the Logistics department at our Büdelsdorf to quickly overcome any fears and inhibitions they may have site. The fact that all the previous trainees have stayed at when they arrive. Employees always consult each other the company also speaks volumes for the training. directly if any questions or problems arise, talk to each other a lot, give each other feedback – they even offercr iticism when called for, although they always remain focused on facts and goals. You feel so embedded within the company, almost as if you are an integral part of a living thing. And this harmonious coexistence does not stop at the Executive “ T H E Board level – far from it!

EXECUTIVE Christoph’s blog allows me to keep up with the latest B O A R D I S developments as well as the future targets and plans of the company and management, and even ask him questions TANGIBLE.” directly if required. I always read all the open articles. The Executive Board and its ideas and strategies are tangible for Carolin Eisner me, which means I can really identify with “my company”.

Carolin Eisner joined freenet AG’s process management trainee programme in October 2019 at the age of 22, immediately after completing her studies at Kiel University (CAU).

freenet AG | Annual Report 2019 20 years of the freenet Group | A review 07

ONE OF THE COMPANY’S FIRST-EVER EMPLOYEES “ I T ’ S G R E A T I have been with freenet for more than 20 years including a period of parental leave. Like our Chief Technology Officer THAT LEADER Stephan Esch, I was one of the company’s first employees in 1999, when I worked as an online editor for our then-web SHIP IS ON catalogue as freenet.de was being founded and listed on the stock exchange. THE AGENDA!” Michaela Šarman-Lein Of course, a great deal has changed over the years, but some fundamental elements of our very special corporate culture Michaela Šarman-Lein is the Team Leader of are still the same. The work was – and still is – never boring Fleet Management at freenet AG. The fleet comprises around 1,200 vehicles and has and no day is the same. There has always been plenty of required continuous standardisation in recent scope for personal creativity and rapid decision-making, years in the wake of several acquisitions, a high degree of flexibility and a great deal of trust. In all investments and sales of parts of my years at the company, there has hardly ever been a the business. moment where my superiors gave me specific instructions on how to organise my workday. That’s very important for me personally; I have a high level of intrinsic motivation and see myself as a dedicated person providing a service for all our employees.

On the other hand, our corporate processes have become much more structured over the last decade – mainly as a result of systematically digitising as many of our processes as possible. At the same time, however, transparency, communication between management and employees and the corresponding necessary structures have all grown. For me, these are important aspects, and it’s great that leadership today is high on the agenda at freenet. After all, while I think rules and structures are fantastic, I also want to understand the reasons and goals behind them.

I am always particularly impressed that members of the Executive Board still greet us by name whenever we pass each other in the hallway on a normal working day and that there is often time for a short chat. That makes me feel like a person rather than a worker bee!

Annual Report 2019 | freenet AG 08 20 years of the freenet Group | A review

In my opinion, the unique character and lasting success of our group is down to several factors. Firstly, it now co mbines the best of many worlds, with the “original” freenet at the Hamburg site retaining a real start-up mentality that has since been perfectly supplemented by debitel and its structures as a subsidiary of a global corporation. Each of these diverse acquisitions was accompanied by a necessary shift in perspective – you must put yourself in the acquired company’s shoes. Today, this approach still brings a great deal of openness, acceptance, willingness to learn and communication to the Group.

Above all, however, it has always forced freenet to reinvent and redefine itself to some extent. Fortunately, we have a senior management team that takes clear decisions with care and sensitivity before implementing these decisions with both pragmatism and consistency, and without letting them be debated for months on end by project groups. After all, our competitive environment is changing rapidly, and we simply cannot allow ourselves to stagnate.

In this respect, I also very much welcomed the decision to enlarge the Executive Board two years ago. By spreading the burden of responsibility for day-to-day business onto several pairs of shoulders, management has created the scope required to look at the bigger picture. Put simply, a CEO who steps back slightly sees more – and across greater distances and longer periods! FROM DUG TELECOM TO FREENET “THE COMPANY HAS BECOME I have been working in this sector since 1998 and helped to build a mobile communications retail chain that was subse- MATURE WITH quently bought out by what was then debitel in 2006/2007. This is just one example of how freenet has continually EACH PURCHASE.” grown in the two decades since it was founded, not least Thomas Woitella thanks to various acquisitions and investments. As the person responsible for reselling products who regularly visits all our locations, what I can say is that the company has also become more mature with each purchase!

Thomas Woitella (42) trained as a mason before moving into the mobile communications sector in 1998, where he helped to build the DUG Telecom retail chain. He is now responsible for the Resell Products division within the freenet Group. freenet AG | Annual Report 2019 20 years of the freenet Group | A review 09

“ I R E A L LY APPRECIATE A REVIEW NOTHING OUR LEARN VENTURED, ING AND NOTHING NO - BL A M E GAINED! CULTURE.” Celina Werner

I found my way to the company via a four-week internship Celina Werner successfully completed her at mobilcom-debitel, and a few weeks ago I successfully office manager training at mobilcom-debitel in completed my third year of training as an office manager at February 2020. She currently works at the the Büdelsdorf office. Büdelsdorf site in hardware management – traditionally a key business and currently a I have only positive things to report about my three years as particularly sensitive one that involves pur- an apprentice; the training really was fantastic. I spent time chasing and selling smartphones, tablets and in many different departments, from reception, HR and the accessories. travel centre to accounting and payroll, to name just a few examples. I and the other apprentices were given responsibility from the start; my colleagues had so much confidence in me that I was even able to carry out complex tasks. I now work in hardware management – an interesting environment I really appreciate the specific learning and no-blame culture given the fierce competition between manufacturers and at freenet, in keeping with the motto: “Nothing ventured, the current international trade frictions. nothing gained”. We need and want to think and act like entrepreneurs to be successful amid the intense co mpetition in our sector. That includes having the freedom to make mistakes, learning from them and improving pr ocesses as much as possible, but also to swiftly abandoning things that aren’t working rather than spending forever trying to optimise them.

Our Büdelsdorf site promotes cooperation between colleagues simply because of its architectural style – with open-plan offices and mostly glass walls that ensure maximum transparency. That sense of community extends well beyond our productivity. Management offers an array of additional activities to encourage us to share experiences during both our leisure time and office hours. For example, this includes company sports activities and financial support for fitness classes, Büdelsdorf health days and active weeks themed around issues such as healthy eating, restful sleep and ergonomic working. mobilcom-debitel is an attractive employer all round!

Annual Report 2019 | freenet AG 10 20 years of the freenet Group | A review

“FREENET IS MEDIA BRINGING BROADCAST – NEW DRIVE TO ALWAYS IN O U R RECEPTION BUSINESS.” Alfred Lobenstein MODE Alfred Lobenstein (56) joined the precursor to Media Broadcast GmbH (Deutsche Bundespost Telekom) as a qualified telecommunications engineer in 1991 and has held After completing my studies in 1991, I joined Deutsche a wide variety of roles – most recently Key Bundespost Telekom and became a civil servant. At that Account Manager for the RTL Deutschland time, the work there was very official in nature due to the media group, QVC and Deutsche Telekom. company’s affiliation with Deutsche Post – and each individual’s personal commitment was heavily regulated by hierarchies and responsibilities that even went so far as to stipulate the ink colour to be used for signatures. I quickly had my “wings clipped” when, full of youthful enthusi- asm, I tried to organise meetings between departments ZDF studios, before moving on to sales with support for or with customers independently – without first involving commercial stations such as RTL and Vox with respect to my superiors. DVB-T – with globally coordinated satellite transmissions of major international events as one of the highlights. However, my areas of responsibility were always extremely varied and interesting and became ever larger as the years As a company, we have certainly experienced many differ- and decades passed. For example, they initially included ent organisational, ownership and name changes. Before we mobile network planning (the now ancient “C” network), were acquired by freenet, we were part of French group TDF then the digitalisation of the modulation and replacement for nine years – a time dominated by financialco ntrolling distribution networks for ARD’s regional studios and the and endless reporting. However, this did not alter our exceptional technological expertise and market standing; Media Broadcast is an extremely competent company with significant external appeal and a strong connection with our B2B customers, the broadcasters.

In 2016, freenet brought a fresh mindset, a different drive and highly cooperative colleagues to the company. You can ask them for help with projects at any time, and you genuinely get it. The informal corporate culture is honest and authentic rather than artificial. It encourages direct interaction, discourages hierarchical thinking and is fast becoming second nature for us. And with freenet TV, we are working together to offer end customers a very good, uncomplicated TV product with great quality and technical coverage. Everything feels good!

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To our shareholders To our shareholders also forged new partnerships with major media companies media major with partnerships new forged also EXARING significant. particularly in was May Deutschland Telefónica with in partnership by waipu.tv” –powered TV 2019. during of “O launch The product waipu.tv its for tions - collabora new AG into entered also important EXARING 365 DAYS AG AT EXARING 18 ing boxes such as those offered by Sony, by Philips offered Sharp. or as those ing such boxes televisions stream and Android-based on used be also can Version 4onwards) of July, since May. start Since the (for TV Apple on via available app during has 2019 been and TVs of smart owners and available to buyers directly also was waipu.tv In addition, televisions their smartphones. on or AUTO and BILD ComputerBild content BILD, from best the to stream allowing customers in April, waipu.tv on channel own its launched BILD example, For Amazon. and TV Apple year, the during as well as manufacturers hardware and f reenet AG

Annual Report 2019 wa Deutschland launched – launched Deutschland Telefónica with partnership sales The powered by waipu.tv by powered TRAJECTORY IN 2019IN TRAJECTORY GROWTH ITS ON WAIPU.TV CONTINUES ipu.tv 2 -

waipu.tv’s programme portfolio also grew further during the grew also further portfolio programme waipu.tv’s customers. private for IPTV an attractive members association’s the offer to aim able the of being with Association) Communication Breitband für Bundesverband purchasing BREKO,of the the group of a opment provider band broad with collaboration asales began also EXARING and Thiel Sophia of channels TV the integrated waipu.tv time, same At the environments. TV commercials in high-calibre video their to book nity qu of programmatic the introduced also EXARING three Burda channels. Burda three and stations TV Bavarian Turkish 30 around local channels, of apackage EdgeSport, magazine channel sports Bronco, including review, Western year additions with under arter, giving advertising customers the opportu the arter, customers giving advertising co nnected TV products and services during the first first the during services and products TV nnected To ou kommunikation e.V. O r 2TV 2TV co sh Ne in llaboration model between EXARING and EXARING between model llaboration

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erman Federal Broadband Broadband Federal erman View of thefreenet Group ma pr cha rketing oduct oduct nnel nnel - - - those fromand Chinese Google manufacturer Xiaomi. as such smartphones niche also but TVs, smart and laptops tablets, accessories, as well as various Samsung, and Apple market leaders from again smartphones once on was focus 2019 financial the year, During here. the role an important have played on terms, highly deals”, competitive all offered “Sunday and deals” “price now, years the four almost For and are distributed via generally mobilcom-debitel services and products These umbrella. Lifestyle Digital the under together grouped are and – Group freenet pillar the of third revenue entertain of areas in the services and products devices, segments, Media and TV and Communications to Mobile the In addition To ou STEADY CONTRIBUTIONS MAKING PORTFOLIO DIGITAL LIFESTYLE DIGITAL LIFESTYLE CUSTOMERS DIGITALISING OUR GRAVIS’s shops and online channels. online channels. and shops GRAVIS’s r sh ar me eho nt/infotainment and security represent the the represent security and nt/infotainment ld 189.9 WITH MILLION the previous year in 2019. in year previous the lifestyle business outperformed digital the years, previous in As REVENUE OF OF REVENUE D e r L s S PRODUCTS S

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y previous the in up 2019 from revenue with segment cations Communi Mobile the to revenue in significant contribution a made business digital lifestyle the years, in previous As online. available only are that otherwise products fee-based various on counts dis offers that online services and apps selected for kiosk a of as part product digital Ojom freenet’s for opportunities marketing to test quarter first in the apilot project launched also freenet and Mobilcom-debitel emporiaTOUCHsmart. citizens at senior the aimed called clamshell smartphone a Linz-based quarter. produces The company first ria in the empo with into entered also a partnership mobilcom-debitel e collaboration in the Group’s test shops. Ojom is an online Ojom shops. test Group’s in the collaboration ar atar 189.9 million euros. Annual Report 2019

freenet AG 19 - - -

To our shareholders To our shareholders 20 shops, this online repair platform is Germany’s leading is Germany’s this online repair platform shops, work 2019. 1,000 than in Clickrepair with March more With reaching an agreement chainstores, own of by its offered management service and insurance the strengthen to partnership into another entered also mobilcom-debitel dealers. for financial risk and commitment storage maintenance. This shop’s eliminates of the care takes the Fachhandel Moon while company logo, own including their webshop afully receive equipped package Prime to the ers of 2019. half second Subscrib in the partners retail for shop communications an online mobile TM introduced Motion subsidiary freenet from Fachhandel Moon In addition, joint by regular is reinforced intensive This support ers. retail in specialist with consultation week each recorded service of-sale Facebook as well as display afree system point-TV as a digital half of 2019,instore first added we the During Euronics. and Supernova with those particularly via collaborations, provided primarily is this support specific, in this becoming area are requirements the As year. financial past over the dealers for marketingand support sales hard tocompany improve steadily worked has also its The mobilcom-debitel. main brand pillar freenet’s for sales important another provide partners contract independent online channels, and shops own Group’s to the In addition working groups. groups. working f SALES AND SERVICE STRENGTHENED reenet AG

Annual Report 2019 in creasingly se courses for the 60+ generation 60+ the for courses training smartphone 1,000 around held D O #DIGITAL DABEI rvices rvices ay of n the occasion of the International International the of occasion n the - - - O lder mail. by and numbers premium-rate and providers party third- on ablock of sale, point at the service setup 60-minute a of 9.99 included that euros starting fee amonthly with In using and WhatsApp. activating and books copying address smartphones, up their setting on customers advised stores sl 2019. the Under 1October on Persons Day oftional Older Interna to the 524 mark shops –at its generation 60+ –the audience target Ager” “Best at the aimed workshops smartphone 1,000 around hosted also mobilcom-debitel of staff. to a member an enquiry direct or of seconds matter in a products and tariffs on questions answer can ing tool TensorFlow the with machine learn trained bot designed Aspecially channel. support as an additional to customers available has been Messenger 2019,Since June WhatsApp review. year during under the customers end for service direct its enhanced also klarmobil subsidiary Discount problems. repair complex centres event incated of more the dedi via Clickrepair’s or repairs on-site while-you-wait with either shops, mobilcom-debitel’s at offered of services range first-class the from benefit can users internet-savvy that means deal The smartphones. and mobile for marketplace

P ogan “Digital dabei” (“Going digital”), staff at the brand’s brand’s the at staff digital”), (“Going dabei” “Digital ogan ers addition, customers were offered their own Gold Gold own their offered were customers addition, ons, mobilcom-debitel To ou r sh ar eho

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View of thefreenet Group in voicing ta riff - - - customer-focused responses to complaints. to complaints. customer-focused responses its ans k “friendly Institute highlightedThe brand’s the winner. test as score the quality same the with place, second Qu Institute Service for German by the conducted In a test To ou FOCUS ON SATISFACTION CUSTOMER now appropriate tariff and smartphone recommendations recommendations smartphone and tariff appropriate ality, mobilcom-debitel shops achieved a very strong strong avery achieved shops ality, mobilcom-debitel wers to mobile communications questions”, as well to mobile wers l edge r sh ar a l staff”, ble eho ld e r s

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smartphones or tablets with touch events or gestures such gestures or events touch with tablets or smartphones on deleted emails be can example, For use. mobile or tablet intuitive desktop, –for more is and simpler to thus operate and used being browser and to device the adapts version email beta new the approach, design aresponsive With in Germany. email services established most of the making it one packages, of fee-based as part and service as afree both decades, two around for users to available has been year. of the “freenet.de” start at the email freenet the overhauled fundamentally we when aim our also was Ensuring satisfaction optimal customer improved the loading speed of the email interface. email interface. of the speed loading the improved significantly technology while state-of-the-art look, modern afresher, to design received delete”. more The as “swipe Annual Report 2019

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To our shareholders To our shareholders 22 and Ingo Arnold, Chief Financial Officer (CFO), on the 2019 financial year Interview with Christoph Vilanek, Chief Executive Officer (CEO) of freenet AG, freenet AG W E I V R E T N I BOARD EXECUTIVE THE FOR QUESTIONS EIGHT

Annual Report 2019 Ch Vilanek, Christoph PRODUCTS. COMMUNICATIONS OUR MOBILE WITH JUST NOT POWER IMPROVED SELLING ELECTRONICS STORES’ FROM THE WE WILL BENEFIT TERM, LONG THE IN ief Executive Officer (CEO) Officer Executive ief To ou r of these freenet equity investments company CECONOMY. both have How holding MediaMarkt/Saturn’s and per affected particularly was year financial 01 tele by the turbulence surroun sh ar formed as of the year-end? co eho mmu ld e r freenet Group’s 2019 Group’s freenet If you read the papers, the s n

Sunrise for cable operator UPC seemed seemed UPC operator cable for Sunrise by offered price purchase the in this case, as particularly initial expectations, your acquisition lives up to every not all, After it really sense? make economic does tion: acquisi every for do you question same the havelight you to of this, ask yourself In in years. recent independently much very operating been had Sunrise ments, invest financial purely freenet’s of one As investments. equity two our between to differentiate However, it is important issues. of these in both energy and time of deal have we agood invested of course, And, portrayed. has that been impression I N | e ications provider Sunrise Sunrise provider ications G ight Questionsfor the O AR NO LD:

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past year.past has also made huge waves over the product communications mobile new tions” from “Germany’s most exciting tariff” were some some were exciting tariff” most “Germany’s from tions” fully digital tariff.” tariff.” digital fully this with job an Felix incredible ager Bommer, have done man product and Stephan Esch Officer Technology Chief by our led team, The basis. aday-to-day on tariff cel the to can option to digital usage the inexpensive very and flexible completely the and process ordering the – from respect in every innovation afundamental marks FUNK freenet Indeed, press. trade the from reactions of the 02 pr our –particularly products communication mobile via our power selling improved stores’ electronics the from benefit want will we to and islong payingterm, already off.the In commissions and as promotions such of issues agement rigid man more quarters, and months few past the Over Board. Supervisory via the of action courses new important to introduce influence our used we organisation, within the quarrelling decision- the and on go into detail more wishing to Without products. mobilcom-debitel’s main brand our for channel distribution an important and selling power considerable with brands strong are very Saturn and Markt Media start; the from investment as astrategic investment scrapped.” was asimilar deal the took and view Eventually, of Sunrise. share major those other the and shareholders our responsibility a particular felt also we takeover, planned the opposed why vehemently we reasons main of the in view. this one our While was inflated vastly in the industry” and “a revolution in mobile communica in “arevolution mobile and industry” in the down”, market upside “aseismic shift phone mobile the To ou C C H H oducts and services in the TV and Media segment.” Media and TV in the services and oducts RI RI S S r T T sh OPH OPH ar VI V eho operating business. One business. operating That brings us to freenet’s ILA LA ld NE NE e r K K s : “Again, we saw our CECONOMY CECONOMY “Again, our saw we :

“Yes – freenet FUNK. “Turning FUNK. –freenet “Yes | e ight Questionsfor the E ho mak xecutiv lders lders ing - - - - - e Board 04 03 ove formance by saying have we that formance or, accomplished in some 6.903 million customers. This development is due not least least isnot due million This development 6.903 customers. year aslight with to the increase ultimately ended ment seg customer postpaid however,ing this, important our - year.the half of first Notwithstand in the growth customer slightthe dip in us to offset helped FUNK freenet of 2019. end at the Nevertheless, users 34,000 active around were counted separately. were There they so customers, postpaid long-standing system of fit to our difficult into a day-to-daywere on basis figures that the also meant the cancel option to The marketing efforts. and sales our this were with we initiallywith tariff, cautious territory 1.65 euros per share.” per euros 1.65 financial 2018 that’s year – million the for euros of 211.2 receiving a dividend strategy, profitability-driven and ity AG’s qualfreenet from to profit able also were shareholders our year.19.0 years, previous in in previous euros the As s Communications Mobile in the customers to postpaid able million of this 6.903 figure is attribut mentioned, already As of December. end as of the areas segments and ness million to all across rose 8.367 busi FUNK including freenet of subscribers pleasing number is the that is particularly at 249.0 flow cash free thingfor thatOne millioneuros. financial which year – the true for is also anticipated range into the fell exactly At 426.8 EBITDA millioneuros. euros, at billion 2.93 year as forecast previous to the compared remained Revenue decade. past year the for every like – just did we annual our targets slightly exceeded cases, Platen.” von of Antonius Rickmann Fromme and divisions Board Executive by the done to excellent work the as it has in the press? I I N N e gment. Postpaid ARPU is also stable at 18.7 euros, after after euros, at 18.7 is stable also ARPU Postpaid gment. G G O O rall for 2019. for rall AR AR NO NO LD: LD: well received by customers as been innovation your Has “ “ stable performance performance stable This once again suggests As we were entering completely uncharted uncharted entering were we completely As That’s right. We can summarise our per our summarise We can right. That’s Annual Report 2019

freenet AG po stpaid stpaid st ta able able riff 23 - - - - -

To our shareholders EIGHT QUESTIONS FOR THE EXECUTIVE FOR THE QUESTIONS EIGHT BOARD To our shareholders has also contributed to this success. this to contributed also has figures? customer to 06 05 o here. freenet TV, our full-HD product with a platform oper aplatform with product full-HD our TV, freenet here. 24 side broadcast vehicles.” out of using fleet own centre our in Cologne broadcasting WDR to the stadiums the from matches of 178 Bundesliga signal atotal for enabling TV us to the continue transmitting seasons, two another for extended also was Sportschau ARD with an collaboration initialfor The four-year period. MagentaSport with partnership atechnology agreed cast Broad InSeptember, Media TV. freenet for partnerships and services products, its expanded also Company The time. first the for in Germany background reachingare millions now citizens of fellow amigrant with Turkish 30 of around package we Our means channels zon. Ama and TV Apple least, not but last Philips and, Sharp and Sony, Samsung, manufacturers hardware as well as Burda, and as Springer such companies media year major with the during partnerships into new entered more May. EXARING since base customer to own their by waipu.tv” –powered TV marketing “O has been which Telefónicawith Deutschland, collaboration sales is here the breakthrough important larly particu One developments. spectacular absolutely some higher AG EXARING 2019. for set we subsidiary Our targets ing the exceed significantly market, growth IPTV attractive in the in television linear terrestrial traditional limited for potential that thewith weThis are is figure given happy a solid users. revenue-generating active, means –that RGUs 1,021,000 contributes Broadcast, Media subsidiary byated freenet freenet AG I C N f the end of December, with the service also contributing also service the with of December, end f the H G Germany. Meanwhile waipu.tv is performing very well very is performing waipu.tv Germany. Meanwhile RI registered 408,000 paying subscribers for waipu.tv as waipu.tv for paying subscribers 408,000 registered O S AR T r evenues.” OPH NO

VI LD: Annual Report 2019 LA refinement of the product product the of refinement continuous the Surely contribute segment Media How much did and the TV “ NE Again, it’s important to differentiate important it’s Again, K : “Yes, and there have also been have been also there and “Yes, To ou 2 ------r 07 within the company? the within an tests top in on comparison out again came once ual brands individ of our several promotions, and all activities of our of aresult As via UMTS. Internet the to surf them allowed only previously contracts whose of all charge for customers free LTE the network year activated also we of half the ond sec in the initiatives, individual many other withstanding Germany. across Not stores 420 around electronics and partners retail Expert’s to include network potential sales summer, last the SE expanding Expert with ship agreement a partner reached mobilcom-debitel example, for ment, - seg Communications Mobile Inthe small. big and ments c ad also citizens. klarmobil However, senior for discount brand our specifically created also was tariffs of range A Persons. Day to International of Older mark 1 October on shops 525 of its in audience around target Ager” “Best at the aimed workshops smartphone 1,000 around hosted also mobilcom- initiative, digital”) (“Going dabei” “Digital ing to help smartphones, and mobile for marketplace leading Germany, across is this theshops online repair platform p chain stores enteringown by of into by its a offered vices ser management service and insurance the strengthened mobilcom-debitel example, For success in years. our recent after laurels area our in of services on the rest we did Nor our subsidiaries! We are working continuously on improve on continuously We working are subsidiaries! our C sh hannel.” a H rtnership with Clickrepair. With more than 1,000 work Clickrepair. with 1,000 than more With rtnership d ding WhatsApp Messenger as a quick and direct direct as aquick and Messenger ding WhatsApp RI ar customer surveys. customer fu S eho T rther enhanced its direct service for end customers, customers, end for service direct its enhanced rther significantly extend their lifecycle. As part of the of part As their lifecycle. extend significantly OPH ld VI e r LA s exciting developments developments exciting Are there any other

NE | e K ight Questionsfor the : “Of course –in all at areas all course and of “Of E xecutiv su e Board de pport pport bitel bitel ------

plans and goals here for 2020? for here goals and plans your are year. What financial current euros) to remain stable.” to 435 million flow euros) cash 235(at free and 255to (at EBITDA 415 expect we Overall, in this segment. growth will again drive once project IPTV cial year. waipu.tv The 2020 during the finan further base this customer to expand We expect customers. TV revenue-generating 1.43 million around with shape are we in good segment, Media and TV as in 2019. growth Inthe are anticipating and moderate base customer postpaid valuable particularly the expanding on to want we continue focusing Communications, In Mobile continuity. and by stability marked been has generally which in years, recent seen performance overall to the sustain financialin yearthat, able 2020, be we will are confident 08 To ou I N G O AR r sh NO ar LD: eho

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| e ight Questionsfor the Chief Financial Officer (CFO) Officer Financial Chief Arnold, Ingo AND MEDIA SEGMENT. TV THE IN PRODUCTS ESPECIALLY OUR WITH THEMSLIGHTLY – OF SOME EXCEEDING THE EVEN YEAR, FOR TARGETS OUR ALL WE HAVE ACHIEVED E mi xecutiv

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freenet AG 25

To our shareholders To our shareholders 26 planning including financial planning, the course of business, business, of the course planning, planning including financial corporate direction, strategic company’s the about informed to remain continually Board Supervisory the This allowed members. Board Executive other as well as the tive Board - Execu chairman of the the and Board Supervisory of the chairman the between exchanged regularly was information Moreover, issues. current and developments business about informed members Board Supervisory kept the Board tive Execu the too, meetings, of the Outside Board. Executive by the provided reports written and oral in-depth the on company based of the management in its Board Executive the advised and We supervised of procedure. rules the and of association to assigned it by law, duties articles the the all fulfilled Board Supervisory the period, reporting In the freenet AG DEAR SHAREHOLDERS, TO THE ANNUAL GENERAL MEETING BOARD SUPERVISORY THE OF REPORT Chairman of the Supervisory Board Supervisory of the Chairman Thoma, Helmut Prof. Dr

Annual Report 2019 - To ou meetings on 11 March 2019, 1 April 2019 and 23 October 2019, March October 23 2019 11 and on 1April meetings company. the additional for three We held consequences resulting the and intensivelyated developments current on deliber we meetings, In all in-person AG. Group nications Commu by Sunrise Schweiz acquisition of UPC cancelled toultimatelythe finance intended been had increase ital cap The cent interest. per 25 anearly AG holds freenet in the which AG, AG freenet on Group Communications Sunrise at increase capital planned of a effects possible in 2019 a discussion of was the activities of our A focus investees. group’s the and companies of group company,of the performance the and financing as well assituation the of operations results and position financial the situation, competitive and market the performance, business current company’s the was Board full Supervisory of the meetings of the subject The in writing. passed and voted on was resolution One conferences. telephone three with along held were meetings 2019 financial In the year, regular in-person four discussion. and review an extensive after approval their issued Board Supervisory of the members the of procedure, rules the or of association law, articles the with dance the in accor Board Supervisory of the approval the required taken to measures be or decisions where Incases in detail. and thoroughly Board Executive the with these discussed company and the for all of decisions material importance in stage at an early and directly involved was Board visory Super The group. the company and of the position the and SUPERVISORY BOARD FULL BY THE CONSIDERED ISSUES r sh ar eho ld e r s

Report of the S upervisor y Board - - - - - ness areas. ness key in the busi developments current about Board visory full to Super the reported 2019,Board May Executive the 16 on Meeting General Annual the after meeting In the 2019. for Board tive Execu of the members with agreed targets the regarding 2019 in 17 writing on April aresolution adopted also Board Supervisory The years. five another for Stephan Esch ber mem Board Executive of appointment the extended Board Supervisory The term. Board of an Executive extension the 2019, 16 May on was item covered at this another meeting Meeting General Annual the for to preparing In addition ininterest EX Su the committee, steering by the preparation After committee. audit of the recommendation the on WPG by Mazars conducted review of the results the with agreed Board Supervisory The requirements. legal the ance with in compli in all material respects prepared not was ment state non-financial in the information the that conclude him to lead any would which issues identify again not did auditor the obtained, evidence the and out carried cedures s the with Hamburg, WPG), (Mazars beratungsgesellschaft Steuer KG &Co. Wirtschaftsprüfungsgesellschaft GmbH by year, Mazars previous the conducted this was review As in 2018. as at December statement 31 non-financial of the review the discussed also Board Supervisory The adopted. thereby were annualstatements financial The statements. financial consolidated and annual the by approving dation recommen audit committee’s the followed and findings auditors’ to the objections no raised Board Supervisory the examination, own its completing After WPG). GmbH (PwC am Main Frankfurt Wirtschaftsprüfungsgesellschaft, GmbH auditor, of the tatives PricewaterhouseCoopers represen with together standards reporting financial amended of effects the and audit statements financial annualthe of findings the We 2018. discussed December as at 31statements financial consolidated annual and the discussion was of the 2019, 20 March on main subject the held attendance personal requiring meeting first At the AG. freenet for relevance its and situation AG current the Group Communications at Sunrise in exclusively we which 2019, discussed by each telephone, To ou u pport of the audit committee. Based on the review pro review the on Based committee. audit of the pport pervisory Board also approved a capital increase at increase acapital approved also Board pervisory ARING AG as a result of which freenet AG’s equity AG freenet of which as a result ARING r sh EXARING AG rose to AG cent. 59 approximately rose per EXARING ar eho ld e r s

Report of the S upervisor y Board ------cerning this matter are the subject of the separate separate of the cerning subject are this the matter 2019. con details as at 31 The December cial statements finan of discussing consolidated annual and the purpose 2020, March mainly 25 the on for held was meeting Board Supervisory a financial year 2019toend, an had come After Code. Governance Corporate German the with of Conformity Declaration annual the of submission the on resolution a passed also It Board. Executive 2020 the by financial presented year planning the the for approval with noted and discussed Board 2019, Supervisory the 3December on meeting In its investees. significant the on reported also Board Executive The segment. Media and TV the core and ofbusiness the situation prospects and current the reviewed and concerns strategic fundamental over talked Board 2019, Supervisory 24 the September On on participation in EXARING AG’s cash capital increase. AG’s capital cash in EXARING participation on resolution the AG prepared and interest in EXARING the on deliberated also members The AG. Group Communications in AG in CECONOMY Sunrise investment and equity the of performance the on was focus The issues. strategic discussed and once In 2019, met committee steering the Statement. Governance Corporate in the in greater detail are described committees individual of the composition the and practices working the duties, general The in case. each meeting subsequent in the committees of the work the about Board full to Supervisory the report chairs committee The to make committees. to decisions the authority its has transferred Board by law, Supervisory the permitted scope the Within Board. full Supervisory by the handled to be resolutions for and issues on information pare pre They up five committees. has set Board Supervisory The (SARS-CoV-2)coronavirus pandemic Company. the on current the of effects the and Meeting, General Annual to the proposed 27 2020, resolutions May including the on held to be Meeting General Annual the for agenda the were topics Further this financialin for year report. 2019” “Auditstatements financial annual consolidated and of the STEERING COMMITTEE COMMITTEES BOARD SUPERVISORY THE OF WORK Annual Report 2019

freenet AG se ction ction 27 - - -

To our shareholders To our shareholders contract. The committee also established whether and to and whether also established committee The contract. his negotiations regarding employment conducted and Esch of Stephan appointment the to extend resolution Board sory Supervi the prepared committee The conference. phone by tele conducted inings 2019, meetings including two meet three held committee personnel of the members The 28 were also presented to the committee. to the presented also were management fraud and risk management system, control internal of the status The Internal Audit. in and Compliance responsible managers the from directly reports obtained tee year. previous of the commit The experiences the on based WPG of Mazars appointment the Board Supervisory to the againonce recommended it statement, 2019 non-financial of the review the For in writing. approval one granted and auditor by the provided services non-audit pre-approved of generally auditor, catalogue by the anew vided adopted pro services non-audit the with dealt also committee The WPG. by Mazars conducted statement non-financial of the review the for ing support provid was committee in topic the further One ing issues. account current auditor, discussed regularly committee the Together the with statements. management quarterly and half-yearly report report, annual intensively the with dealt members committee’s The attendance. requiring personal in meetings four auditors the with them areas discussed and key latest audit the addressed regularly committee audit The a for Board Supervisory to the these cial proposed year and 2019 finan the for agreed targets the for parameters new set 2018reached, were for members Board Executive of the remuneration variable the for parameters the extent what freenet AG AUDIT COMMITTEE AUDIT PERSONNEL COMMITTEE r esolution.

Annual Report 2019 ------To ou have to be convened inhave 2019. convened to be not did committee mediation the years, previous in the As this For purpose, ments. state financial annual the of auditing the support and guide to was main work committee’s audit emphasis ofThe the Board and its committees is disclosed below. is disclosed committees its and Board Supervisory of the meetings in the members of individual fewer. or attendance The meetings of half in the ipated just Super of the member no aresult, As ent. pres all with members meetings held always committees its and Board Supervisory the attend, not did member Board Supervisory one which meeting Board full Supervisory one from Apart cent. per over 99 was committees its and Board Supervisory of the members of the rate attendance The convene in not did 2019. committee nomination The ■ ■ ■ ■ MEDIATION COMMITTEE MEDIATION ATTENDANCE AT MEETINGS DISCLOSURE ON INDIVIDUAL MEMBERS’ NOMINATION COMMITTEE

and the agreements with the auditor. the with agreements the and of appropriation the for proposal the statements, re … … … auditor, the of dence … t a he audit of the financial statements, and statements, financial of the audit he nd the implementation of the audit assignment, audit the of implementation the nd

the committee dealt with identifying the key the areas for identifying with dealt committee the independence auditor’s the monitored committee the the committee obtained the statement of indepen statement the obtained committee the the committee prepared the Supervisory Board’s Board’s Supervisory the prepared committee the solutions on the annual and consolidated financial consolidated annual and the on solutions r sh ar eho ld e r s

Report of the vi S sory Board partic Board sory upervisor y Board pr ofits ofits - - - - Gerhard HuckGerhard Bente Brandt Claudia Anderleit Vice Chairman Knut Mackeprang disclosed to the Supervisory Board. Supervisory to the disclosed were informed be must Meeting General Annual the which about and Board Supervisory to the disclosed be must and members Board Supervisory or involvinginterest Executive of might that constitute circumstances other conflicts No to available minutes him. this regarding made issue were meeting or documentation Board Supervisory information, written or oral Likewise, no this for reason. participate not did members Board Supervisory in all which the meeting 2019, only the October 23 on conference telephone of the true also This was AG. Group Communications at Sunrise increase capital a for plans associated the AG and Group Communications by Sunrise switzerland acquisition of UPC concerning the issues involved deliberations the that extent 2019 to the 1April after meetings Board Supervisory in the participate not did Accordingly, Kraemer Thorsten request. this at his issue own regarding documents or information in any receive any or consultations take part not did Kraemer Thorsten of interest, to avoid conflict any risk of apossible Inorder Switzerland. acquisition of UPC its with nection AG in at time that con Group Communications by Sunrise planned increase capital the AG regarding freenet of stance exclusively related of interest the to This potential conflict AG. Group Communications in Sunrise investment indirect 2019 resulting his from 1April on Board full Supervisory the then and to the chairman to first of interest potential conflict a disclosed Kraemer Thorsten member Board Supervisory Robert Weidinger Marc Tüngler Thomas Reimann Fränzi Kühne Thorsten Kraemer Sabine Christiansen Theo-Benneke Bretsch Chairman Prof. DrHelmutThoma To ou r sh ar eho ld e r s

Report of the F ull ull N me in umber S upervisory Board Board upervisory 7 7 7 7 7 7 7 7 6 7 7 7

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freenet AG nsolidated Ex Ja ecutive ecutive au nuary nuary ee ditor 100 100 100 100 100 % 29 - -

To our shareholders To our shareholders disposal of the audit committee and the Supervisory Board Board Supervisory the and committee audit of the disposal the were at and audits keythe of the findings on reported They statements. financial annual consolidated and the on deliberations committee’s the and Board’s Supervisory m Board Supervisory 2020 at the and February 25 on mittee com audit in the discussed and on reported was audit The 30 not prepared, in all material respects, in compliance with in all material respects, prepared, not were statement non-financial in disclosures the the that believehimcause to whichanywould issues identified not he had that auditor the concluded statement, non-financial 2019. the reviewing After of 3December resolution Board Supervisory the on based awarded was ance engagement limited assur The Hamburg. WPG, by Mazars reviewed was Initiative (GRI) Reporting Global of the standards the with in accordance and report management group the AG and freenet of report management the of part as Board Executive by the prepared 2019 was which to 311 January December financial the year from for statement non-financial The auditor.the Board Supervisory 2020, the March 25 on eeting with it discussed and profits retained net of appropriation the for proposal Board’s Executive the examined also At its adopted. thus were statements annual financial2020. The March25 on meeting at its statements financial idated re committee’s audit the followed Board Supervisory The auditor.the by conducted audit of the result the approved and tions objec no raised Board Supervisory the report, management Group the and report management the statements, financial annualexamination consolidated and the of final own of its result a As information. and questions supplementary for freenet AG FOR THE 2019 FINANCIAL YEAR STATEMENTREVIEW OF THE NON-FINANCIAL eeting on 25 March 2020. The auditors took part in the part took auditors 2020. March The 25 on eeting commendation and approved the annual and consol and annual the approved and commendation m

| a nnual R epor t 2019 - - - - To our shareholders composition of the Supervisory Board. Supervisory the of composition financialIn year 2019, theno changes in were there committee. audit by the recommendation corresponding a following auditor of the results the with agreed Board Supervisory 2020. The February 25 on meeting committee audit in the results and procedures engagement limited assurance the on reported auditor The engagement). assurance (limited framework GRI of the requirements the and requirements legal the Chairman of the Supervisory Board Supervisory the of Chairman Thoma Prof. Helmut Dr Board Supervisory the For 2020 March 25 Büdelsdorf, work. good and commitment personal their for companies Group at all the employees as to the as well Board Executive of the members to the appreciation and thanks like its would to express Board Supervisory The 2019. January 1 year, previous the effective in Financial Chief Officer appointed been had Ingo Arnold EXECUTIVE BOARD BOARD SUPERVISORY EXECUTIVE BOARD TOCHANGES THE SUPERVISORY BOARD AND

| t of the r epor S uper visory Boardvisory in 90 100 110 120 130 140 F year. of the start the cent from 25.5 per around up points, at 13,249 stood 2019,as at DAX 31 the December However, since international financialloss the crisis in 2008. largest the year with the thatmaking in 2018, ative effect neg an extremely had DAX in cent the downturn per 18 The since 2013. markets stock year the for successful most the in 2019. encouraging was Itwas market performance stock Brexit, about uncertainty China and and USA the between dispute trade the fears, as recession such factors Despite ■ ■ ■ To ou CAPITAL ENVIRONMENT MARKET FREENET AND THE CAPITAL MARKETS THE FREENET SHARE FREENET THE igure 1: 1: igure

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| freenet AG 31 -

To our shareholders To our shareholders f and TecDAX indices. TecDAX and MDAX benchmark of that the than to better or comparable thus was months over twelve performance share price The 31 cent. by rise around share price per In 2019, its saw freenet 32 price of the analysts was 20.63 euros (2018: 24.58 euros). 24.58 20.63 (2018: was euros analysts of the price 2019, target average at 31 the December As analysts). four (2018: “sell” said analysts five other The analysts). eleven (2018: to investors “hold” advised six while others shares, freenet’s for analysts) four (2018: recommendation a “buy” mixed during 2019. of 2019, issued end At the six analysts AG rather were freenet on recommendations Analysts’ year 52). (2018: previous the with compared an increase representing share, freenet the on recommendations and comments 72 around year, the published During analysts AG inyear 2019. financial freenet of performance current the regarding recommendations and studies published larly A total of 17 19) (2018: regu international firms investment euros. 20.44 at year the out closed and improved share performance our price year progressed, the As share. per to euros amounting 1.65 Meeting General Annual by the approved payment dividend 2019 as a result of the in a time for mid-May interrupted was 2019. trend upward by mid-May The performance positive AG to shares register enabling freenet reversed, then trend 2019. This short-term in negative mid-January 14.96 euros year at the for to to low only their decline euros, 15.59 year, of the beginning atAt the quoted were shares our ANALYSTS’ RECOMMENDATIONS SHARE PERFORMANCE FREENET reenet AG

Annual Report 2019 - F Warburg UBS Redburn Newstreet Research LBBW Kepler Cheuvreux Jefferies Independent Research HSBC Hauck &Aufhäuser Goldman Sachs Exane BNPParibas DZ Bank Commerzbank Berenberg Barclays Bankhaus Lampe Target prices inEUR Ø As per December igure 2: Current recommendations for the freenet share freenet the for recommendations Current igure 2: Buy To ou Hold r sh ar Sell eho ld e r s

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The freenet share . . . . . de/investor-relations. freenet-group. www. at published financial been year have 2019 the for Trading (WpHG) Securities Act German the of21 Section to pursuant notifications voting rights other and AG’s aforementioned The definition). Börse Deutsche according cent (free float to per three than totaleach less interest in freenet institutional whose retail investors or remaining 77.55 The AG. of freenet by held cent was per 7.56 held which shares issued cent of the Inc., per Rock manager, asset largest Black 2019, world’s by the followed interest at year-end largest Storch von the bach AG held Floss firm management asset German cent, per At 14.89 accounting cent (2018: approximately for 57 per shares, issued of the most again held investors Institutional 77,000 year: shareholders). cent (previous per 30.0 nearly year-on-year of a increase 99,000 shareholders, 2019, AG around at 31 had freenet December As 2020up again in financial the year. stepped will be communications market community. Capital financial by the positively tor team Relations received and Inves the and Board Executive of the of view point the from financialmet wassituation general the and issues strategic of picture complete 2019 an of even providing more goal The year 380). (2018: 420 during the times nearly investors with interacted we In total, business. Group’s freenet of the ment develop the on reports extensive provided Board Executive whichthein of financial reporting publication following the In conference. as well as by telephone shows road and ences at international confer meetings inplace face-to-face exchange took of information This transparent investors. with meetings numerous teamRelations again held once the and Board In financial year 2019,Executive the company. the about mation infor current and comprehensive with provided regularly are stakeholders as well interested as all other employees partners, business banks, financial analysts, investors, tional t team Relations Investor aim the to and ensure utive Board Exec The communications. market transparent and honest all on above focus AG’s investor activities relations freenet To ou DISTRIBUTION GEOGRAPHICAL AND STRUCTURE SHAREHOLDER CHANGES IN SHAREHOLDER STRUCTURE IN SHAREHOLDER CHANGES AND ROADSHOWSCONFERENCES h at current and potential shareholders, retail and institu and retail shareholders, potential and at current ad dition, conference calls and webcasts were organised organised were webcasts and calls conference dition, r sh ar eho ld e r s

The freenet share 57 p Inv er cent).er estor estor ------free float Other shareholders/ . in 2019 31 December F (MAR). Regulation Abuse Market of the 19 in accordance Art. with actions unchanged. unchanged. co largely distribution percentage The strategies. investment specialised pursued or index- and/or returns-oriented were remaining groups investor The approach. investment value- a followed institutions financial all invested cent) year. of per previous in (54 half the case Over the was – as financial pure were investments tutional investors by insti held of shares blocks the date, reporting of the As (4 cent). countries other per from cent) financial (1 and per investors of Europe rest the from G is from by accounted institutional for investors ing portion remain The cent. at 8per of Europe rest the from investors by institutional followed of financial group investors, largest make second up the Canada and USA the cial from investors institutional finan cent, At 16 per shareholders. are private half other the are institutional investors, half of these About cent). per cent 66 (2018: per 66 ashare with of around tors inves of freenet group regional largest the again represents 2019, Germany in December out an analysis on carried Based In the 2019 financial In the trans year, managers’ no were there (Wertpapierhandelsgesetz–WpHG). Thefree float according toDeutscheBörseAG amountsto. percent. incl.attributions according totheGermanSecuritiesTrading Act igure 3:igure r rresponded to the previous year’s ratio and thus remains thus and ratio year’s previous to the rresponded eat Britain and Ireland (5 per cent), private shareholders cent), shareholders (5 private per Ireland and eat Britain S ha reholder structure of freenet AG on freenet of structure reholder Annual Report 2019

freenet AG BlackRock Inc . von Storch AG Flossbach . or iented iented 33 . - - - - -

To our shareholders To our shareholders f in s F 34 of the dividends. dividends. the of taxation to an implicit therefore subsequent – and sale on to aprofit lead thus and shares of the costs purchase able tax the reduce distributions the in this case authorities, tax German of the opinion In the event of asale. in the ing tax 3 AG after shares acquiredfreenet who investors Domestic coming in the financial years. case will the continue to be this that AG assumes freenet surcharge. solidarity and tax of withholding deduction without made will be ment pay the so account, deposit tax-specific the from made AG will be of freenet distribution dividend upcoming The dividend the Tax of treatment surcharge. solidarity the and tax of withholding deduction any without out again paid was dividend the that This means Tax (Körperschaftsteuergesetz). Act Corporation German the27 of account accordancesection in deposit with cific tax-spe the from made was distribution The cial institutions. finan and banks custodian respective by way of the Main, am Frankfurt AG, Banking Clearstream 2019 through May on 21 shareholders the to was distributed dividend The flow. cash cent of free per of 80.1 to ratio apayout corresponds 2018 financialeligible year. no-par-value the share for This per euros of 1.65 to pay a dividend a resolution AG adopted of freenet Meeting 2019, 16 May General On Annual the investors according toshareholder identiﬁcation. Source: Retail investors according toshare register;institutional andﬁnancial rest of Europe Financial investors . UK andIreland Financial investors . rest of Europe Retail investors . DIVIDEND AND EARNINGS PER SHARE PER EARNINGS AND DIVIDEND USA andCanada Financial investors . reenet AG tructure of freenet AG on 31 December 2019 AG 31 on December freenet of tructure igure 4: Geographical distribution of the shareholder shareholder the of distribution Geographical 4: igure 1 D

ecember 2008 will realise a profit subject withhold to will subject realise aprofit 2008 ecember

Annual Report 2019 rest of theworld Financial investors .

retail investorsretail German . investors institutional German . - - - - -

(diluted) inthousands shares outstanding Weighted average numberof (basic) inthousands shares outstanding Weighted average numberof Diluted pershare earnings Basic pershare earnings In EURasindicated Table 1: outstanding. of weighted shares average is the (1.74 share euros). per earnings basis calculating the for The year previous in than the year lower were 2019 reporting in basic/diluted euros the share of 1.49 The per earnings euros for the next two calendar years. calendar two next the for euros 2020 by 31.0 million 2021 in in March due November and tranches note loan promissory corresponding of the volume nominal 2019. outstanding the in November This reduced 15.0 million 2019 16.0 in million euros and March euros to dates amounting payment interest at regular ments repay voluntary made freenet repayment. for due were note loans promissory existing of the In 2019, tranches no 2024. until runs November now loan bank 2019.syndicated November The in option extension first freenet agreed. also were loan the to extend options one-year 2023; two until November conditions and terms 2016 originally same in March at signed loan the bank the extended AG successfully had freenet In 2018, EARLY REPAYMENT OF PROMISSORY NOTE LOANS NOTE PROMISSORY OF EARLY REPAYMENT YEARS BY FIVE EXTENDED LOAN AGAIN BANK SYNDICATED FINANCING ACTIVITIES FINANCING E arnings per share per arnings To ou r sh ar eho ld e 2,1 128,011 128,011 128,011 128,011 r s 2019

.91.74 1.74 1.49 1.49 |

The freenet share ex ercised the the ercised sy ndicated ndicated 2018 - bution to public institutions and thus to thus institutions to society. and public bution contri value monetary make adirect payments tax In turn, dividends. receive interest and and performance Group’s freenet the about tinually informed comprehensively and are kept con providers Capital ways. success inny’s varied compa are in involved and the performance on based ated remuner by ensuring are appropriately that they employees our for value us to measurable deliver This enables ciples. prin economic on focused are primarily actions company’s the stakeholders, all for these value measurable and able success reli prerequisite is delivering for the economic As society. and institutions public employees), and suppliers customers, providers, (e.g. service banks), and partners lysts i divided broadly be can These key of our tions stakeholders. expecta and needs specific the on isof this based dialogue nature and frequency The governance. into corporate our this to and incorporate company at stage an the early for changing and requirements trends new us to identify enables This dialogue aspirit of trust. built on stakeholders ious W key sustainability. culture success and the to and pany’s its com of our is part action Responsible responsibilities. its addressing when stakeholders its of interests and ments require different the on this focuses with and associated roles various the and impact external is of its aware Group c accepting on focus anarrow just than sibility more means respon corporate AG, of freenet Board Executive the For To ou SUSTAINABLE ACTION nto the groups of capital providers (e.g. shareholders, ana shareholders, (e.g. providers capital of groups nto the ommercial and thus economic responsibility. The freenet freenet responsibility. The economic thus and ommercial e also maintain an ongoing long-term dialogue with var with maintaine also an dialogue long-term ongoing r sh ar eholde r s

| ainable action s ust ------euros (2018: 211.2 million euros) to capital distributed 211.2 was (2018: euros of 211.2 million dividend unchanged euros) An paid. were of 30.6 million taxes 29.5 and (2018: expenses) euros million 219.7 million (personnel euros) to employees made were million (2018: of euros 236.5 euros) payments made, were totalling million 43.3 (2018: 40.6 euros millionInvestments million of 2,932.5 revenue ated 2,897.5 (2018: euros million). 2019gener Group financial the year, During freenet the Antonius Fromme Rickmann v.Antonius Fromme Rickmann Platen Esch Arnold Stephan Vilanek Ingo Christoph Board Executive The culture. corporate Group’s freenet the of an integral part forms action This that sustainable means year.financial 2019 up during the stepped was agency ratings ty-focused sustainabili with dialogue and introduced was Index GRI a statement, non-financial Group’s freenet to the applied was Standard GRI the in reporting, sustainability rability compa and transparency for To increasing demand meet million euros)40.8 satisfied. were million (2018: euros of 48.0 interest payables and providers Annual Report 2019

| reenet AG f 35 - - -

To our shareholders To our shareholders 36 index.html. at www.freenet-group.de/investor/ website our on Group freenet the about information detailed further find can of the members interested other and Shareholders [email protected] Email: (0)40 +49 Fax: (0)40 +49 Phone: in or writing: by phone questions team Relations Investor is additional to available The answer f RELATIONS CONTACT INVESTOR reenet AG

Annual Report 2019

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Sector Official trading: 128,061,016euros/ Share capital/number of shares: Index memberships: Class of shares: WKN share freenet the Table on Information 2: code: Symbol/Reuters instrument

/ :

ISIN: To ou r sh ar eho ld e r s Düsseldorf, Hanover, Munich B dard: Frankfurt OTC market: Regulated Market/Prime Stan- A0Z2ZZ/DE000A0Z2ZZ5 128,061,016 shares Technology Share All Share,tions (SXKP),Prime All Index, CDAX, HDAX, STOXX MDAX, TecDAX, Midcap Market No-par-value registered munication DAXsubsector Wireless Com- DAXsector Telecommunication, FNTN/FNTGn.DE Europe 600T ordinar

erlin, Hambur |

Investor relations contact shares y elecommunica- g, Stuttgart, GROUP MANAGE- MENT REPORT Group management report

GROUP MANAGEMENT REPORT 37

GROUP MANAGEMENT REPORT BUSINESS MODEL AND ORGANISATION

■ Digital lifestyle provider with a customer base of approximately 8.4 million subscribers

■ Long-term customer contracts with constant value added generate stability and predictability Group management report

■ IPTV as growth driver

OVERVIEW OF THE FREENET GROUP The freenet Group conducts its core business activities in two operating segments, Mobile Communications and TV As a digital lifestyle provider, the freenet Group offers its and Media; both are described below. In addition, the Other/ approximately 8.4 million subscribers innovative products Holding segment comprises other activities, which are only for life on the go. The Group’s operating activities are lim- of minor importance for the purpose of assessing the compa- ited mainly to private customers and to the German market. ny’s net assets, financial position and results of operations. freenet AG, the parent company of the freenet Group, is a The segments are divided by product and not by customer listed German public limited company (Aktiengesellschaft – segment or geographical areas in line with the structure of AG) with its registered office in Büdelsdorf and administra- the internal management system. tive headquarters in Hamburg. The company’s financial year is the calendar year (1 January to 31 December). Effective 1 January 2019, the entities The Cloud Networks Germany GmbH, Munich, and The Cloud Networks Nordic As of 31 December 2019, there were five Executive Board AB, Stockholm, Sweden, were included in the Mobile departments: Communications segment. The freenet Group also divested its majority interest (51 per cent) in Troisdorf-based MOTION TM Vertriebs GmbH in December 2019. The shares Executive Board Member Department were sold back to the previous shareholders. The main Group Christoph Vilanek Chief Executive Officer (CEO) companies as of 31 December 2019, measured in terms of Ingo Arnold Chief Financial Officer (CFO) their contribution to the financial performance indicators Stephan Esch Chief Technical Officer (CTO) of the Group, are set out as follows: Chief Customer Experience Antonius Fromme Officer (CCE) Chief Commercial Officer Rickmann v. Platen (CCO)

freenet AG | annual Report 2019 Group management report | Business model and organisation 39

Figure 5: Material Group companies of freenet AG as of 31 December 2019

freenet AG

freenet.de mobilcom-debitel mobilcom-debitel freenet Cityline Sunrise Communi- EXARING AG GmbH GmbH Logistik GmbH GmbH cations Group AG . .

SUBSIDIARIES SUBSIDIARIES Group management report

Gravis The Cloud freenet Daten- callmobile mobilcom-debitel klarmobil Media Broadcast Computervertriebs- Networks kommunikations freenet digital GmbH Shop GmbH GmbH GmbH gesellschaft mbH Germany GmbH GmbH GmbH

MOBILE COMMUNICATIONS SEGMENT risk. Instead, the Group mainly applies a reselling model in which mobile customer data is not transferred to the net- The freenet Group’s core business is mobile communica- work operator, but instead remains with the freenet Group tions. Its products and services include mobile telecommu- (service provider model). This creates a direct relationship nications and mobile internet products, services and hard- with customers, enabling the freenet Group to also provide ware. This portfolio is also being expanded to encompass a all downstream customer services (e.g. customer manage- diverse range of digital lifestyle products and services. For ment, billing, marketing, etc.) and to also offer the possibil- the freenet Group these include mobile phone accessories, ity of generating further business from customers through home entertainment (music and video offerings) and all ser- cross-selling and up-selling. vices, applications and devices that are connected to the internet or controllable by a mobile end device (e.g. smart Another unique selling proposition of the freenet Group on home or WiFi services). the German market is the fact that its mobile tariff portfolio includes the original tariffs of the three German network In providing mobile communications services, the freenet operators – Telekom, Vodafone and Telefónica Deutsch- Group follows a business model unique in Germany without land – as well as its own tariffs. The tariffs are marketed a mobile network of its own. Unlike mobile network opera- using a multi-brand strategy, i.e. including its own discount tors (MNOs), the Group is able to do business without oper- and premium brands, allowing the freenet Group to meet ating an expensive and capital-intensive mobile network. the needs of nearly every customer group. These tariffs are Compared to other competitors, the freenet Group does not sold both online and/or offline via an extensive network of acquire any (network) capacity (mobile virtual network oper- branches depending on the brand strategy. Under its main ator or MVNO model) from an MNO, thus avoiding resale brand mobilcom-debitel, the freenet Group operates both

Annual Report 2019 | freenet AG 40 Group management report | Business model and organisation

an online shop and a chain of high-street branches consist- The business model of EXARING AG is also based on the ing of more than 560 stores. mobilcom-debitel also holds transmission of TV content from public and private broad- exclusive marketing rights for mobile communication ser- casters. The company broadcasts and sells video content vices on the Telekom and Vodafone networks in more than via internet-based technology (IPTV) with an innovative 430 electronics stores operated by Media-Saturn-Deutsch- app and exclusive access to a modern fibre-optic network land GmbH (Media Markt and Saturn). in Germany stretching over 13,000 km. The IPTV product is purchased and marketed to private users in a subscription model via the freenet Group’s distribution channels, TV AND MEDIA SEGMENT among others. EXARING AG supplements its business with private customers with an offering for business users includ- The freenet Group has been active in the TV and Media seg- ing addressable TV and web-to-TV services. ment via Media Broadcast GmbH (Cologne) and a majority holding in EXARING AG (Munich) since 2016. Media Broad- Fast, stable transmission to smartphones, tablets, laptops or cast GmbH designs, sets up and operates multimedia broad- home televisions combined with exceptional picture quality cast infrastructure for TV and radio based on digital trans- and an intuitive user interface has enabled waipu.tv to gain a mitter technology. Media Broadcast GmbH, and thus the notable position in the growing German IPTV market within freenet Group, is the sole provider of digital antenna TV just a few years. The TV and Media segment’s pr oducts (DVB-T2 HD) in the German market. The Group distributes round out the Mobile Communications segment’s digital TV content from public and private broadcasters to private lifestyle products and services. The freenet Group’s busi- Group management report end customers via the freenet TV brand. ness model and value chain can be summarised as follows:

Figure 6: Customer-focused value creation and business model

Multichannel Customer Precursor Packaging Customer distribution management

Telecommunications Pricing Own sales channels Customer billing Deutsche Telekom, Vodafone, mobilcom-debitel, GRAVIS, Telefónica, United Internet Marketing Online Customer service

Hardware Branding Third-party sales Customer development manufacturers channels Apple, Samsung, Huawai, etc. Partner management Specialist retailers, consumer Customer retention electronics stores, franchises Digital lifestyle Artiﬁcial intelligence Apps, services, hardware CRM Energy suppliers

TV/Radio programs

Own infrastructure Antennas, networks

freenet AG | Annual Report 2019 Group management report | Corporate strategy and goals 41

GROUP MANAGEMENT REPORT CORPORATE STRATEGY AND GOALS

The freenet Group’s vision is “Always the Right Choice”. FOCUS ON LONG-TERM CUSTOMER Service quality and lasting customer satisfaction and loyalty RELATIONSHIPS IN THE TV AND MEDIA are therefore vitally important. As service quality is consid- SEGMENT ered to be a strategic asset in the freenet Group, the com- Group management report pany has spent years intensifying its focus on improving the To ensure further value-oriented organic growth, the Group customer experience and established a separate Executive transferred its existing sales strength, service orientation and Board department for these activities in 2018. long-standing experience in subscription business to the relatively new TV and Media segment. Marketing the subscription services – freenet TV and waipu.tv – also serves the purpose CUSTOMER EXPERIENCE IS MORE THAN JUST of establishing profitable long-term customer relationships. MEETING CUSTOMER EXPECTATIONS The resulting business potential will primarily be put to strategic use by means of direct customer contact to ensure the The goal is to improve customer experience by sustainably steady and stable development of the freenet Group’s operat- designing and linking various individual customer-facing ini- ing business. The IPTV product waipu.tv is a key growth driver tiatives. The freenet Group believes that interacting with in the corporate strategy. As an aggregation platform for linear customers responsibly and taking into account their individ- and non-linear TV content with an extensive selection of user ual needs provide a basis for long-term commercial success. functionality and a high degree of flexibility in the integration This is particularly true of the Mobile Communications seg- of new content, waipu.tv has the potential to generate user ment, which continues to be the major driver of the freenet growth through the growing popularity of IPTV. Group’s business and where the strategic focus is on establishing profitable long-term relationships with postpaid cus- Long-term customer contracts that make consistent value tomers (customers with 24-month contracts). As a result, contributions (almost free of seasonal effects) and the con- maintaining market share in the saturated German mobile tinued pursuit of the asset-light strategy are the basis for the communications market is a priority. Active customer expe- freenet Group’s stable business performance and reliable rience management, a consistent multi-brand strategy and forward planning of revenue, EBITDA and free cash flows. tight integration with the multi-channel distribution network In addition to organic growth, the freenet Group continu- contribute to this effort. The objective is to increase cus- ously monitors the market for acquisitions, investments and tomer loyalty, optimise the quality of the customer base and other collaborations to expand its digital lifestyle portfolio subsequently ensure stabilisation of monthly revenue per and reinforce its market position. These efforts are primarily customer to ultimately also unlock the strategically import- focused on the Group’s home market of Germany. ant potential of up-selling and cross-selling. When implementing its corporate strategy, the freenet Group takes into account the different needs and expectations of all freenet-specific stakeholders, including employees, shareholders and lenders. Overall, the strategic focus of the Group is based on sustainable and responsible action and management. Likewise, all stakeholders can benefit from the performance of the freenet Group based on its value-oriented and profitable operations.

Annual Report 2019 | freenet AG 42 Group management report | Corporate management

GROUP MANAGEMENT REPORT CORPORATE MANAGEMENT

To implement the operations and strategic objectives of FINANCIAL PERFORMANCE INDICATORS the Group, a standardised and reliable management system is used at the highest Group level and in the freenet In order to measure the short-, medium- and long-term Group’s individual companies. Performance is measured success of our strategic alignment and its operational imple- using both financial and non-financial performance indi- mentation, the freenet Group uses the following financial cators. If a need for adjustment is identified in the future, performance indicators: the management of the freenet Group reserves the right to Group management report adjust the ma nagement system accordingly. ■ Revenue ■ EBITDA The performance indicators used for corporate management ■ Free cash flow purposes also regularly represent alternative performance ■ Postpaid ARPU measures (APMs) that are not governed by the IFRSs. Please note that these do not replace historical financial results, The financial performance indicator free cash flow is not assets or liabilities of the company or other performance used for management purposes at the segment level; it is indicators defined by the company or IFRS figures, and there- used exclusively at the Group level. Postpaid ARPU is only fore should not be viewed in isolation and should be consid- used in the Mobile Communications segment. The financial ered to be additional information. Even though management performance indicators EBITDA, free cash flow, postpaid and investors commonly use APMs for assessing the current ARPU, and adjusted EBITDA, which is calculated for informa- operating performance and the company’s debt situation, tional purposes, are also alternative performance measures. these are only meaningful to a limited extent when used as a sole analysis tool. In addition, even though they might REVENUE use similar or even identical designations, the listed APMs Revenue is equivalent to the value of our operating ac tivities are not necessarily equivalent to the APMs used by other and is therefore a key measure of the company’s success. companies because of different calculation methods used. Revenue in the core business of mobile communications depends on the sale of products and services related to Financial and non-financial performance indicators as well mobile communications and the mobile internet. It is in as other key figures and indicators of the company's success the strategic interest of the Executive Board to develop are explained below. additional revenue sources that complement the Mobile Communications segment. This includes, among other things, business activities in the digital lifestyle business as well as the establishment and expansion of the TV business. The success of the sales efforts is primarily reflected in the future revenue performance of the companies.

1 In contrast to the previous year, the information on APMs is no longer presented in a separate section, but integrated in the section “Corporate management”.

freenet AG | Annual Report 2019 Group management report | Corporate management 43

EBITDA FREE CASH FLOW EBITDA reflects the short-term operating performance Free cash flow as a Group-wide liquidity-based indica- of a company and is generally regarded as a key finan- tor is an important supplement to the earnings-oriented cial performance indicator for assessing corporate trends performance assessment of the freenet Group and is of over past periods and companies within the same market equal importance for equity and debt investors. Free cash segment. Since EBITDA focuses on operating efficiency, this flow is a key measure of the freenet Group’s ability to grow performance indicator also enables comparability irrespec- from its own resources, to ensure stable dividend payments, tive of the different capital costs and the different structure to meet all operating payment obligations of the freenet of capital expenditures caused by the respective business Group, and thus serves as a measure for assessing potential model. Accordingly, EBITDA is also used for valuation pur- payments of principal. poses in connection with company acquisitions and sales. Free cash flow, and in particular net working capital, are EBITDA also includes special factors, giving a holistic view managed operationally by the Treasury department based of income and expenses. However, comparability with pre- on established controlling structures. In addition to the vious years is only possible to a limited extent as a result. In continuous optimisation of payment terms for liabilities order to increase transparency, the freenet Group reports and receivables, the control measures also include efficient EBITDA (adjusted EBITDA), adjusted for one-time effects for receivables management, including factoring. information purposes. One-time effects can represent both expenses and income. They relate to significant non-recur- Redefined at the beginning of financial year 2019, free cash Group management report ring, one-time and/or regulatory effects (e.g. restructuring flow shows even more clearly the amount of cash generated expenses) which, based on the Executive Board’s assess- that can be used to pay dividends or repay borrowings, for ment, could distort the transparent presentation of the example. Accordingly, interest paid, interest received and freenet Group’s operating results. Adjusted EBITDA thus proceeds from the cash repayment of financial assets under supplements management-relevant EBITDA as an additional leases are included in cash flows from operating activities, information indicator. and cash repayments of lease liabilities are included in the calculation of free cash flow. No one-time effects were taken into account for the 2019 financial year. In contrast, one-time effects from the sale of Table 4: Calculation of free cash flow analogue radio were eliminated in the 2018 financial year. 1.1.2019– 1.1.2018– In EUR ’000s 31.12.2019 31.12.2018 Table 3: Calculation of EBITDA and Adjusted EBITDA Cash flows from operating activities 364,232 328,870 1.1.2019 – 1.1.2018 – In EUR ’000s 31.12.2019 31.12.2018 Payments to acquire property, plant and equipment EBIT 269,954 311,988 and intangible assets -45,155 -57,193 Depreciation, amortisation and Proceeds from disposal of impairment 156,841 129,196 intangible assets and property, EBITDA1 426,795 441,184 plant and equipment 4,553 13,850 One-time effects from sale of Cash repayments of lease analogue radio 0 -39,082 liabilities -74,603 -21,754 Adjusted EBITDA 426,795 402,102 Free cash flow 249,027 263,773

1 EBITDA corresponds to EBITDA exclusive of Sunrise shown in the previous year.

Annual Report 2019 | freenet AG 44 Group management report | Corporate management

POSTPAID ARPU The freenet Group’s TV business addresses a further seg- Postpaid ARPU is the monthly average revenue per customer ment, which strengthens and expands the company’s stra- in the Mobile Communications segment, generated by sell- tegic positioning as a digital lifestyle provider. The devel- ing 24-month contracts. For the freenet Group as a whole, opment in revenue-generating freenet TV subscriber (RGU) the postpaid ARPU serves as an indicator of the willingness numbers as well as waipu.tv subscribers is used as a key of customers to pay corresponding monthly fees for mobile measure for success in establishing the segment and thus communications services. Consequently, postpaid ARPU is for market penetration with both TV products. an indicator of the quality of the customer base. Therefore, securing and improving quality is in the strategic interest Taken together, the two segment-related performance indi- of management. Changes in the market and competitive cators postpaid customer base and TV customer base reflect situation in Germany can have a significant impact on the the value-added subscription customer base of the freenet development of postpaid ARPU. Regulatory requirements Group. The performance indicators provide a more trans- can also influence the level of postpaid ARPU. parent view of the strategic focus of the freenet Group and at the same time, reflect the perception of the relevant Postpaid ARPU is calculated without factoring in the hard- customer groups on the capital market. ware revenue included in the basic fee (subsidy portion). The freenet Group thus creates transparency with regard to the ability to reconcile revenue from services and the OTHER KEY INDICATORS AND MEASURES development of postpaid ARPU and customer numbers. FOR THE COMPANY’S SUCCESS Group management report The revenue generated from the sale of mobile devices via the mobile phone upgrade option are still not included in To manage the Group, the freenet Group uses financial and the calculation. non-financial performance indicators, as well as other key figures and measures indicating the company’s success. These comprise: NON-FINANCIAL PERFORMANCE INDICATORS ■ Product brands, new products, partnerships and sales activities The development of the freenet Group’s operating perfor- ■ Research and development mance is closely linked to the development of subscriber ■ Employees numbers. Customer acquisition and retention are therefore ■ EBIT and financial result, and essential for the freenet Group. The strategically relevant ■ Gross profit and gross profit margin customer groups vary depending on the operating segment. The postpaid customer base serves as a performance indi- The other key figures EBIT, financial result and gross profit cator for the Mobile Communication segment, and the rev- and gross profit margin are also alternative performance enue-generating TV customer base serves as a performance measures. indicator for the TV and Media segment. PRODUCT BRANDS, NEW PRODUCTS, PARTNERSHIPS The measurement of the valuable postpaid customers, which AND SALES ACTIVITIES comprises strategically important customers with two-year In the reporting period, the freenet Group again launched a contracts, is particularly useful for medium- and long-term number of new products, entered into new partnerships and corporate management. In conjunction with postpaid ARPU, developed additional sales channels with the aim of securing this control parameter, which is relevant exclusively in the its primary business and creating new potential at the same Mobile Communications segment, represents a key indicator time. The most important of these new products, partner- of the medium- and long-term earnings and liquidity poten- ships and sales activities, is presented in the figure below. tial of the mobile communications business.

freenet AG | Annual Report 2019 Group management report | Corporate management 45

Figure 7: Significant product brands, new products, partnerships and sales activities

waipu.tv Samsung and waipu.tv embark on a strategic partnership waipu.tv Partnership with Telefónica Deutschland “O2 TV – powered by waipu.tv” mobilcom-debitel freenet FUNK launched mobilcom-debitel Partnership agreement with Expert SE (about 420 specialist stores)

RESEARCH AND DEVELOPMENT EBIT AND FINANCIAL RESULT freenet AG does not have its own research and development EBIT is defined as earnings before financial result and income department. In view of the rapid technological progress taxes. Since the 2019 financial year, the items profit or loss of being made in telecommunications, however, the company equity-accounted investments, interest and similar income, is closely monitoring and analysing all significant innova- interest and similar expenses and other net finance costs tions. The primary aim of these efforts is to reinforce the have been reported in a separate subtotal called financial Group’s long-term competitive positioning in this dynamic result. market environment. Most of the development work being undertaken at the freenet Group forms part of IT, st rategic GROSS PROFIT AND GROSS PROFIT MARGIN and product development projects. In the financial year and Gross profit is defined as the balance of revenue and cost Group management report in the previous year, the income statement was not affected of materials. The gross profit margin represents the ratio significantly by research and development costs. Within between gross profit and revenue. the framework of IT-, strategy- and product dev elopment projects, the freenet Group made total cash-effective Table 5: Calculation of gross profit investments of 20.3 million euros in 2019 (2018: 18.1 million euros). 1.1.2019 – 1.1.2018 – In EUR ‘000s/as indicated 31.12.2019 31.12.2018 Revenue 2,932,544 2,897,466 EMPLOYEES At year end, the freenet Group employed 4,238 people at Cost of materials -2,036,334 -1,993,739 9 locations as well as in mobilcom debitel shops and GRAVIS Gross profit 896,210 903,727 stores. Each year, the Group makes more than 100 train- Gross profit margin (in %) 30.6 31.2 ing positions available on vocational training and work/ study (“dual study”) courses; these are broken down into a total of twelve training courses at more than 150 training locations. At the end of 2019, the number of apprentices FINANCIAL MANAGEMENT in the freenet Group was 336 (2018: 325). Ensuring that employees maintain their skills and continue to develop CASH, LIQUIDITY AND CAPITAL STRUCTURE their expertise in view of current market and technological MANAGEMENT developments is essential for the future business success The management of the company’s strategy and operations of the freenet Group. is bolstered by well-established financial management activities. These essentially comprise cash and liquidity manage- Detailed information about employee issues can be found ment along with capital structure management, and are han- in the non-financial statement on pages 43 – 63. dled centrally by the Treasury department, in some cases in cooperation with Financial Control and Accounting.

Cash and liquidity management guarantees that the freenet Group can meet its payment obligations at any time. To this end, cash flows from operating activities as well as financial transactions are monitored continually and integrated into a rolling cash flow plan. Group companies can also tap into

Annual Report 2019 | freenet AG 46 Group management report | Corporate management

the intragroup cash pooling system to utilise surplus cash Table 7: Net debt and adjusted net debt from other units to cover their own liquidity requirements without outside borrowing. 31.12.2018 In EUR ’000s 31.12.2019 restated Long-term borrowings 1,428,009 1,699,424 Capital structure management shapes the capital structure of the freenet Group and of the subsidiaries. Two alternative Short-term borrowings 265,610 23,476 performance measures – equity ratio and debt ratio – are Net lease liabilities 471,176 260,201 an integral part of structuring the Group’s capital. In addi- Liquid assets -133,692 -126,332 tion, an adjusted debt ratio is also reported for informational Net debt 2,031,103 1,856,769 purposes. This provides a less conservative perspective on Market value of Sunrise and the freenet Group’s debt by including the market values of CECONOMY1 -953,151 -952,498 equity investments in the debt structure. In terms of the Adjusted net debt 1,077,952 904,271 equity ratio, the freenet Group’s management considers a 1 The market value of Sunrise is calculated by multiplying the closing price of the Sunrise share on the Swiss Stock Exchange by the number of shares held lower limit of 25.0 per cent to be appropriate along with a by the freenet Group (11,051,578) as of the relevant reference date. Swiss target debt ratio capped at 3.0. francs are translated into euros using an officially defined reference date rate based on Bloomberg data. The market value of Ceconomy is calculated by multiplying the closing price of Ceconomy’s ordinary shares on the Frankfurt stock exchange by the number of shares held by the freenet Group The equity ratio and (adjusted) debt ratio are alterna- (32,633,555) as of the relevant reference date. tive performance measures. The equity ratio represents the relationship between equity and total assets. As at Due to the initial application of IFRS 16 Leases, the compara- Group management report 31 December 2019 it amounted to 27.3 per cent, thus bility of both the debt ratio and the adjusted debt ratio as of exceeding the target of 25.0 per cent. year-end 2019 with those of 2018 is limited. This limitation is mainly attributable to financial obligations under operat- Table 6: Equity ratio ing leases that have been recognised since the beginning of the financial year and are now part of net debt. As a result, In EUR ’000s/as indicated 31.12.2019 31.12.2018 the debt ratio as of 31 December 2019 was 4.8, which is Equity 1,321,601 1,280,753 above the medium-term target value of no more than 3. 0. Total equity and liabilities 4,839,597 4,634,652 The year-on-year increase (2018: 4.2) is due to higher net Equity ratio (in %) 27.3 27.6 lease liabilities (operating leases recognised as liabilities), which were up 211.0 million euros. The adjusted debt ratio as of 31 December 2019 is 2.5, and is above the prior-year figure for the same reasons (2018: 2.0). The debt ratio is calculated as the ratio between net borrowings and EBITDA generated in the last twelve months. Table 8: Key figures of capital structure management This is also applicable to the adjusted debt ratio; however, in this case, net debt adjusted for the market value of equity Target 31.12.2019 31.12.2018 investments is used as the basis for calculating the ratio. Equity ratio (in %) > 25.0 27.3 27.6 Debt ratio ≤ 3.0 4.8 4.2 Adjusted debt ratio n. d. 2.5 2.0

freenet AG | Annual Report 2019 Group management report | Corporate management 47

DIVIDEND POLICY Figure 8: Dividend per share 2011-20191

Dividend payments result in an outflow of liquidity from the In EUR company and therefore influence the control parameters relating to the capital structure. Accordingly, the dividend . policy is a key component of the freenet Group’s financial management activities. The Group pursues a policy of con- . sistent dividend payments aligned with the operational per- . formance of the company. . In line with this approach, the Executive Board intends to propose to the Annual General Me eting on 27 May 2020 . that 1.65 euros per no-par-value share again be paid out for the 2019 financial year. The distribution would there- . fore total 211.2 million euros (2018: 211.2 million euros). The dividend yield of freenet’s shares based on the closing . price on the last trading day in 2019 would be 8.07 per cent (2018: 8.98 per cent). . Group management report Ensuring that freenet shareholders receive an appropriate e . share of the company’s profits is particularly important to The dividend will be paid out subject to the resolution of the Annual the freenet Group’s management. The Executive Board has General Meeting. therefore decided to continue to align the dividend policy with the relatively constant liquidity-oriented free cash flow indicator in the future. As a reliable and stable point of reference for estimating the expected dividend, free cash flow is integral to forecasting and managing the company’s performance. In the interest of continuing to regularly pay dividends, management has thus defined a long-term, stable distribution rate of 80 per cent of freely available funds as the minimum dividend to be distributed to freenet shareholders. The minimum dividend represents the Executive Board’s commitment to the goal of a shareholder-friendly dividend policy based on a reliable dividend coupled with a comparatively high return. Moreover, the Executive Board has not ruled out the possibility of either paying an additional dividend or buying back shares to provide shareholders with the opportunity to participate in the distribution of the free cash flow remaining after deduction of themi nimum dividend.

Annual Report 2019 | freenet AG 48 Group management report | Report on economic position

GROUP MANAGEMENT REPORT REPORT ON ECONOMIC POSITION

■ World economic output growing at a low level

■ Stable revenue in the German mobile communications sector Group management report

■ Further increase in the number of German households with an IPTV connection

MACROECONOMIC ENVIRONMENT SECTOR-SPECIFIC DEVELOPMENT

In 2019, both the global economy and the German economy MOBILE COMMUNICATIONS MARKET remained on a growth trajectory. The upturn has now con- According to calculations by the German Association of Pro- tinued for ten years but has recently lost some of its pace. viders of Telecommunications and Value-Added Services In the context of increasing uncertainty and growing con- (VATM), in 2019 the overall market for telecommunications flicts as well as regulatory changes, Germany’s economic services grew by 0.5 billion euros compared with 2018 and output was unable to match the level of growth seen in reached 58.4 billion euros. Private customers accounted for previous years. The German government assumes a 1.0 per around two thirds of total revenue in Germany. While the cent increase in the country’s price-adjusted gross domes- telecommunications market grew by 0.9 per cent overall, tic product (GDP) for the past year. The unemployment rate the Mobile Communications segment picked up by around is expected to decline to 4.9 per cent, with a further rise in 2.0 per cent to 25.6 billion euros. As at the end of 2019, the number of people employed to 45.2 million. As at the approx. 140.8 million SIM cards were registered in Ger- end of 2019, the economic trend in Germany remained pos- man mobile communications networks. This represents an itive but there is now an increased level of risk, particularly increase in the number of activated SIM cards of 3.8 million in relation to foreign trade. International trade conflicts, the or 2.8 per cent. This growth is mainly attributable to the United Kingdom’s withdrawal from the European Union and installation of SIM cards in machines (Internet of Things/ the headwind in the automotive industry had an especially machine-to-machine communication). Measured in terms negative impact on economic growth. of the total number of SIM cards, this growth was spread more or less evenly between the three network operators The development of the ifo Institute for Economic Research’s Deutsche Telekom, Vodafone and Telefónica Deutschland. business climate index illustrates the trend outlined above. At 97.1 points, the average index level for 2019 reached its The distribution of revenue-based market share among the lowest point since 2012. While this figure improved slightly five largest providers of mobile communications services in in the second half of the year, it fell short of its long-term Germany was likewise relatively constant. VATM predicts a average. market share for the freenet Group of around 10.2 per cent, with stable revenue by comparison with the previous year.

freenet AG | Annual Report 2019 Group management report | Report on economic position 49

Figure 9: Mobile revenue by network operator and In addition, legislative changes affecting the telecommunica- service provider1 tions sector came into effect in the European Economic Area: since 15 May 2019, the pricing of end-customer charges in or EUR for foreign calls and text messages – i.e. so-called intra-EU communication – has been regulated. For Germany, this . (. billion) Further providers relates to voice calls and text messages made from a Ger- man network to a foreign network in another member state . (. billion) . (. billion) & Drillisch Telekom (e.g. France). Price caps have been introduced for the var- Deutschland . (. billion) ious types of connection and are generally lower than the freenet prices which were previously realised. This had a direct neg- = ative impact on mobile communications companies’ reve- . EUR billion nue in 2019. . (. billion) Vodafone The coverage requirements for widespread availability of . (. billion) mobile broadband (4G) on the basis of the 2015 frequency Telefónica O auction were another topic of discussion in the past year.

1 Estimate for , including interconnection, wholesale and terminal equipment Deutsche Telekom and Vodafone achieved an average level Source: DIALOG CONSULT VATM analyses and forecasts. of nationwide coverage in excess of 98 per cent, with a minimum speed of 50 Mbit per antenna sector. Telefónica Group management report The 25.6 billion euros in revenue which are anticipated for Deutschland reached a level of 84.3 per cent. Widespread 2019 comprise connection charges, revenue from major availability of high-speed mobile data continues to gain in and business customers, as well as device sales. Sales of importance, particularly in view of the growing volume of high-quality smartphones in particular continue to be seen data use in 2019. With an overall mobile data volume of as a revenue driver. For 2019, the German Federal Asso- 4.2 billion gigabytes, demand for data volume increased by ciation for Information Technology, Telecommunications over 62 per cent in 2018 and reached a new peak level. How- and New Media (Bitkom) expects another record year with ever, this trend was not reflected in the network technology around 11.9 billion euros in revenue. This would represent used. 57.5 million cards, or 40.8 per cent of the cards acti- an 11 per cent increase by comparison with 2018. However, vated, were able to use a 4G/5G network. This means that at 22.4 million devices, the number of smartphones sold almost 60 per cent of mobile phone cards in Germany used a would be virtually stable year-on-year (2018: 22.6 million). 2nd or 3rd generation mobile communications network. For its part, by the end of 2019 the freenet Group had migrated Like the overall economy, in the past year the telecommuni- virtually all of its customers to the faster 4G network. cations sector was affected by international trade conflicts as well as regulatory interference. The US government’s In view of the growing volume of data consumption, 5G tech- threat to blacklist the Chinese technology group Huawei so nology will have a key role to play in future digitalisation pro- that American companies would require a licence to do busi- cesses. The Federal Network Agency (BNetzA) auctioned off ness with Huawei also prompted uncertainty in Germany. In the necessary frequency bands in Germany in the first half particular, there was speculation that Huawei mobile com- of 2019. The auction ended on 12 June and raised 6.55 bil- munications devices would no longer receive the necessary lion euros. In addition to the well-known network operators, software updates and that the development of a 5G network Drillisch Netz AG acquired portions of the frequency blocks. using Chinese infrastructure technology might only be pos- 1&1 Drillisch was previously active in the German market sible to a limited extent. as a virtual network operator (MVNO) and now intends to establish its own (5G) network. This would mean an increase in the number of network operators from three to four, offering customers a greater choice of networks. In the second half of the year, the network operators launched their initial 5G test regions and marketed their first tariffs as well as 5G-compatible mobile devices.

Annual Report 2019 | freenet AG 50 Group management report | Report on economic position

All in all, service providers (such as the freenet Group) have Cable and satellite remained the dominant broadcast tech- a positive view of the parameters for the auction. In essence, nologies in Germany: almost 44.7 per cent of households they guarantee improved access to current (4G or older) and used cable (2018: 45.1 per cent), while 44.8 per cent (2018: future technologies (5G and beyond) in the period up to 45.0 per cent) opted for satellite. Antenna TV’s market share 2040. Moreover, network operators are required to negoti- fell slightly compared to the previous year; around 6.0 per ate with service providers on access to mobile communica- cent (2018: 6.4 per cent) used the DVB-T2 HD broadcast tions technologies in a non-discriminatory manner. In case format. The sole provider of this broadcasting technology of unsuccessful negotiations, the Federal Network Agency in Germany is the Media Broadcast Group, a wholly owned will act as a “referee” to prevent any discrimination and subsidiary of the freenet Group. ensure access to the technology. The award terms for the 5G frequencies thus exceed those for 4G and offer service Figure 11: Distribution and development of providers increased regulatory certainty. broadcasting method paths 2008 to 20191

in % TV/VIDEO MARKET Overall revenue in the German TV market was stable. At around 5.7 billion euros, this was close to the previous year’s 60 level (+0.8 per cent). Consumption of traditional, linear tele- 50 vision continues to dominate in the video market. The aver- 40 age daily amount of time spent watching TV in Germany in 30 Group management report 2019 was 211 minutes. This represented a minimal decrease 20 on the previous year of around six minutes. In the period 10 from 2010 to 2017, the amount of time spent in front of the 0 TV was still slightly in excess of 220 minutes. Nonetheless, 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 consumption of linear television remains the most popular Kabel-TV Satellit IPTV DVB-T leisure pursuit in Germany. Around 94 per cent of Germans 1 Total >100% due to multiple reception. cite television as their preferred activity. Source: Kantar

Figure 10: Average daily television viewing time in IPTV was the only broadcasting technology which increased Germany from 2010 to 2019 (in minutes) its percentage market share, lifting it from 8.4 per cent of the market to 8.6 per cent. IPTV is marketed by EXARING In minutes AG (a subsidiary of the freenet Group) under the product name waipu.tv. The network operators such as Deutsche Telekom and Vodafone are likewise increasingly focusing on IPTV products with their products Magenta TV and GIGA TV. Since May 2019, under its “O2TV powered by waipu.tv” brand Telefónica Deutschland has offered EXARING AG’s IPTV product via a sales partnership. Another relevant provider which offers German IPTV services is Zattoo.

Details: 3 years and older; TV scope, German-speaking TV panel; Monday to Sunday, 3 to 3 o’clock, all channels

freenet AG | Annual Report 2019 Group management report | Report on economic position 51

SIGNIFICANT EVENTS DURING THE FREENET AG REJECTS TAKEOVER OF UPC SWITZERLAND FINANCIAL YEAR ENDED BY SUNRISE COMMUNICATIONS GROUP AG In relation to Sunrise’s proposed takeover of UPC Switzer- REPOSITIONING OF MOBILCOM-DEBITEL: SERVICE land, in August 2019 freenet AG, the company’s largest AND ADVICE OFFERING AT HEART OF shareholder, issued a press release in which it came out COMMUNICATION ACTIVITIES against a potential takeover, providing a detailed state- In March 2019, the freenet Group launched a large-scale ment of grounds for this move. In December 2019 it was marketing campaign in order to reposition its main brand announced that the discussions over the planned takeover mobilcom-debitel. With a new TV spot, a new visual iden- between Sunrise and Liberty Global, the parent company of tity, extensive digital activities and a strong point-of-sale UPC Switzerland, would not proceed any further. (PoS) presence, mobilcom-debitel is now giving even greater weight to its advice and service offering, thus underlining its customer focus. COURSE OF BUSINESS

SAMSUNG AND WAIPU.TV EMBARK ON STRATEGIC MOBILE COMMUNICATIONS PARTNERSHIP Postpaid customers Samsung and waipu.tv announced a strategic partnership Customer-centric tariffs and services as well as a focus in April 2019. Purchasers of Samsung TVs manufactured on valuable postpaid customers with a two-year contract in 2019 or later can watch waipu.tv for six months free of remain the main pillars of the freenet Group’s core mobile Group management report charge. communications business. In the past financial year, the key priority was a further increase in the level of quality in EXARING AG AND TELEFÓNICA DEUTSCHLAND this strategically critical customer group, both in terms of ANNOUNCE STRATEGIC SALES PARTNERSHIP – O2 TV acquiring new customers and also managing existing cus- POWERED BY WAIPU.TV tomers. At the start of the year, a quality-focused restruc- EXARING AG and Telefónica Deutschland signed a long- turing process was implemented within the tariff portfolio. term strategic cooperation agreement in the field of inno- In the first six months of the year, this initially resulted in vative IPTV in April 2019. Since May 2019 a sales partner- a slight decline in the number of customers in the Group’s ship has provided over 50 million O2 customers with access postpaid customer base. The fact that the freenet Group to the market’s leading platform for network-independent can nonetheless report a moderate increase in its customer IPTV, with the product “O2 TV powered by waipu.tv”. base in this customer segment by comparison with the previous year (6.896 million), with 6.903 million users as at the FREENET FUNK: FREENET LAUNCHES ITS FIRST end of 2019, reflects various measures which were imple- EXCLUSIVELY DIGITAL MOBILE PHONE TARIFF mented in virtually all of the Group’s sales and communica- In May 2019, the freenet Group began to market its innovations channels and evidently met the needs of its customers. tive freenet FUNK tariff. With this exclusively digital mobile phone tariff, freenet has introduced a completely new tariff The postpaid customer base as at 31 December 2019 did model to the German mobile communications sector and not include approximately 34,000 freenet FUNK custom- can thus be considered a pioneer. ers. This mobile communications product was introduced in May 2019. MOBILCOM-DEBITEL AND EXPERT SE LAUNCH PARTNERSHIP Table 9: Postpaid customers mobilcom-debitel and expert SE agreed to a sales collaboration in July 2019. freenet has thus gained another Change In millions 31.12.2019 31.12.2018 in % strong specialist retail partner with this dealer network for Postpaid customers 6.903 6.896 0.1 consumer electronics, information technology, telecommunications, entertainment and electric domestic appliances

Annual Report 2019 | freenet AG 52 Group management report | Report on economic position

Postpaid ARPU and revenue from services TV AND MEDIA The Group’s strategic focus on valuable customer relation- The freenet Group continued to focus on the expansion of ships is also reflected in the stable development of post- its TV segment – as another important pillar of its business paid ARPU excluding hardware. As at the end of December activities – in the 2019 reporting year. For both freenet TV 2019, this amounted to 18.7 euros (2018: 19.0 euros). For and waipu.tv, it enhanced its offering and the level of qual- the current reporting year, related postpaid service revenue ity from a technical point of view and in terms of content. totals 1,540.9 million euros and was likewise stable despite The number of customers at the end of the 2019 financial the impact of regulation (intra-EU communication) (2018: year once again demonstrates the effectiveness of the mea- 1,555.4 million euros). sures implemented.

Revenue from services in the no-frills/prepaid segment was Table 12: TV customers approximately 134.3 million euros for 2019. As a result, the most strategically important customer group accounts for Change In thousands 31.12.2019 31.12.2018 in % around 92.0 per cent of service revenues in the Mobile Com- freenet TV munications segment. subscribers (RGU) 1,021.1 1,014.2 0.7 waipu.tv Table 10: Postpaid ARPU and revenue from services subscribers 408.3 251.8 62.2 In EUR/revenue from services

Group management report in EUR millions 2019 2018 Postpaid ARPU 18.7 19.0 The number of revenue-generating freenet TV users rose by Revenue from services, postpaid 1,540.9 1,555.4 around 6,900 over the course of the year to 1.021 million Revenue from services, no-frills/ freenet TV subscribers (RGU) today. prepaid 134.3 142.0 The development of waipu.tv’s customer figures was also highly encouraging. The 2019 forecast anticipated 350,000 subscribers by the end of the year, This goal was already DIGITAL LIFESTYLE surpassed in August. By the end of 2019, 408,300 cus- Devices, products and services in the areas of entertain- tomers had opted for one of the IPTV product’s subscrip- ment, security, smart home and e-health have completion options. The number of subscription customers thus mented our offering in the Mobile Communications segment increased by 156,500 in 2019. This represents a growth rate for several years. During the past financial year, numerous of 62.2 per cent compared with the prior-year period. From new products and services were once again added to our the Executive Board’s point of view, this is a notable achieve- portfolio in order to drive organic growth in this area. In ment, also bearing in mind the fact that the Group only 2019, the freenet Group generated revenue of 189.9 mil- launched its sales collaboration with Telefónica Deutsch- lion euros with the marketing of its digital lifestyle prod- land in May. ucts. This represents a year-on-year increase of 5.6 per cent (2018: 179.8 million euros). These results confirm the strategic focus of the freenet Group and provide a good starting point for the coming Table 11: Digital lifestyle revenue (organic) months and years.

In EUR millions 2019 2018 Digital lifestyle revenue (organic) 189.9 179.8

freenet AG | Annual Report 2019 Group management report | Report on economic position 53

COMPARISON OF FORECAST AND ACTUAL postpaid customers with two-year contracts increased from BUSINESS PERFORMANCE 6.896 million customers in December 2018 to 6.903 million customers. freenet therefore achieved the goal of moder- In the TV and Media segment, revenue declined by 28.7 mil- ately increasing the number of postpaid customers. Post- lion euros on account of the sale of the analogue radio busi- paid ARPU excluding hardware remained stable during the ness, but this deficit was balanced out by an increase in year under review at 18.7 euros (2018: 19.0 euros). low-margin hardware sales in the Mobile Communications segment. On the whole, consolidated revenue stood at In terms of the non-financial performance indicators for the 2,932.5 million euros, remaining stable as against the prior TV and Media segment, the waipu.tv IPTV product contin- year (2018: 2,897.5 million euros). This figure also met the ued its positive performance and far exceeded the paying forecast target. customer target of over 0.350 million for the 2019 financial year, with around 0.408 million subscribers as of the EBITDA in the 2019 financial year amounted to 426.8 million reporting date. The number of revenue-generating freenet euros and fell within the target range of 420 to 440 million TV users developed as expected and, at around 1.021 mil- euros. This figure includes an effect of 43.3 million euros, lion customers, continued to top the target of more than increasing EBITDA arising from the mandatory initial appli- 1.000 million customers. cation of IFRS 16 (Leases). Free cash flow of 249.0 million euros was also within the forecast range of 240 to The audited figures for the past financial year therefore met 260 million euros. The number of strategically important the forecast in full. Group management report

Table 13: Comparison of forecast and actual business performance 2019

Forecast for finan- Confirmation of cial year 2019 forecast in quar- In EUR millions/as indicated 2018 (yoy change) terly reporting 2019 Financial performance indicators Revenue 2,897.5 stable stable 2,932.5 EBITDA 441.3 420 -440 420-440 426.8 Free cash flow 263.8 240 -260 240-260 249.0 Postpaid ARPU without hardware (in EUR) 19.0 stable stable 18.7 Non-financial performance indicators Postpaid customers (in millions) 6.896 moderate increase moderate increase 6.903 freenet TV subscribers (RGU) (in millions) 1.014 > 1.000 > 1.000 1.021 waipu.tv subscribers (in millions) 0.252 > 0.350 > 0.350 0.408

Annual Report 2019 | freenet AG 54 Group management report | Report on economic position

EXECUTIVE BOARD’S EVALUATION OF 2,658.9 million euros, primarily as a result of an increase in BUSINESS PERFORMANCE revenue from low-margin hardware. Revenue in the TV and Media segment declined by 28.7 million euros year-on-year All in all, it is the Executive Board’s position that the freenet to 253.9 million euros. This was mainly due to the sale of the Group has again performed well in a highly competitive analogue radio business in the previous year. and saturated market environment. From the point of view of management, it is particularly gratifying that the num- Gross profit in the reporting period amounted to 896.2 mil- ber of subscribers rose across all business areas and seg- lion euros, which is slightly down on the prior year (903.7 mil- ments as at the end of December. Although the number of lion euros). The gross profit margin fell by 0.6 percentage highly profitable postpaid mobile communications custom- points to 30.6 per cent, chiefly due to the increase in the ers initially declined in the first half of 2019 due to a quali- hardware business mentioned previously. In contrast, the ty-related restructuring of the tariff mix and adjustments to initial application of IFRS 16 had a positive effect. product management, this trend turned around in the third quarter and the year closed out as originally expected with Other operating income decreased by 33.4 million euros moderate growth in the customer base. This performance compared with the prior-year period to 67.3 million euros. once again illustrates the strong competitive positioning of This decline is attributable mainly to the prior-year effect the freenet Group in the fiercely competitive premium seg- resulting from the sale of analogue radio infrastructure total- ment, and the effectiveness of the measures implemented ling 40.4 million euros. in particular. Moreover, freenet FUNK was Germany’s first Group management report fully digital tariff, an innovation in the German mobile com- Other own work capitalised relates to internally generated munications market. software for IT projects and, at 20.3 million euros, is slightly higher than the previous-year figure (18.1 million euros). Management was also satisfied overall with the performance of the TV and Media segment. freenet TV’s performance was Personnel expenses grew by 16.8 million euros, from solid in view of the limited additional potential for co nventional 219.7 million euros in the previous year to 236.5 million linear antenna-based television in Germany. waipu.tv in turn euros in the current reporting period. This trend is largely exceeded the customer targets set for 2019, thus taking a due to the increase in the average number of Group employ- prominent position in the high-growth IPTV market. ees, primarily on account of the acquisition of The Cloud Group with effect from 1 January 2019, as well as pay All told, the freenet Group’s Executive Board considers the increases and a share price-driven increase in expenses from past financial year to have been a positive one: The targets employee incentive programmes. set at the start of the year for key performance indicators were again met despite the challenges. Other operating expenses decreased by 41.2 million euros compared with 2018 to 320.5 million euros. The reduction is mainly attributable to the new accounting standard IFRS NET ASSETS, FINANCIAL POSITION AND 16 (Leases), according to which operating lease expenses RESULTS OF OPERATIONS recognised in the past are not a component of other operating expenses, but based on the accounting requirements REVENUE AND RESULTS OF OPERATIONS must be disclosed under depreciation charge and interest Consolidated revenue increased by 35.1 million euros in expense. Expenses for marketing as well as loss allowances 2018 to 2,932.5 million euros in the 2019 financial year. and defaults on receivables were also down. Other oper- In the Mobile Communications segment, the number of ating expenses largely comprise administrative expenses strategically important postpaid customers with a two-year (e.g. incidental costs of the shops/stores and administra- contract (6.903 million customers at the end of Decem- tion buildings), legal/consultancy fees and billing expenses. ber 2019 compared with 6.896 million customers at the end of December 2018) and the postpaid ARPU excluding hardware (2019: 18.7 euros, 2018: 19.0 euros) continued to hold steady. Mobile Communications revenue reported for the 2019 financial year increased by 52.3 million euros to

freenet AG | Annual Report 2019 Group management report | Report on economic position 55

Due to the effects explained above,EBITDA amounted to This has resulted in consolidated earnings before taxes 426.8 million euros (previous year: 441.2 million euros). This (EBT) of 238.1 million euros in 2019 – representing an figure includes a positive effect of 43.3 million euros from increase of 4.1 million euros compared with the previous the mandatory initial application of IFRS 16. The Mobile year (234.0 million euros). Communications segment contributed 367.3 million euros to EBITDA (previous year: 366.0 million euros), the TV & Income taxes expenses rose by 31.5 million euros com- Media segment 73.5 million euros (previous year: 86.3 mil- pared with 2018 to 53.3 million euros. Current tax expenses lion euros) and the Other/Holding segment –14.0 million fell by 4.1 million euros compared with the previous year, to euros (previous year: –11.1 million euros). 25.4 million euros. Expenses of 28.0 million euros (p revious year: income) from deferred taxes has also been netted in Depreciation, amortisation and impairment increased by this position (previous year: 7.7 million euros). The reduc- 27.6 million euros year-on-year to 156.8 million euros. On tion in deferred taxes is essentially attributable to temporary the one hand, 43.1 million euros were added due to depreci- differences between the carrying amount of assets under ation of lease assets under IFRS 16. On the other hand, the IFRSs and tax law. sale of the analogue radio business in the previous year led to a reduction in depreciation of property, plant and equip- As a result, consolidated profit after tax decreased by ment in the 2019 financial year. 27.4 million euros, from 212.2 million euros in the previous year to 184.7 million euros in 2018. The financial result improved by 46.1 million euros year- Group management report on-year to –31.9 million euros. This change was primarily due to the one-off effect of the initial recognition of shares in CECONOMY (–47.1 million euros) in the previous year.

Table 14: Key performance indicators for the Group

In EUR ’000s 2019 20181 Change Revenue 2,932,544 2,897,466 35,078 Gross profit 896,210 903,727 -7,517 EBITDA1 426,795 441,184 -14,389 EBIT1 269,954 311,988 -42,034 Financial result1 -31,876 -77,986 46,110 EBT 238,078 234,002 4,076 Consolidated profit 184,732 212,163 -27,431

1 Due to a change in the definition, the previous year’s figures were restated.

Annual Report 2019 | freenet AG 56 Group management report | Report on economic position

NET ASSETS AND FINANCIAL POSITION 2018 in the amount of 211.2 million euros and the change Total assets/total equity and liabilities amounted to in the fair value of the interest in CECONOMY re cognised 4,839.6 million euros as at 31 December 2019, an increase through other comprehensive income (73.1 million euros). of 204.9 million euros, or 4.4 per cent compared with the Amounting to 27.3 per cent at the end of December 2019, previous year. the equity ratio matched the year-end 2018 level (27.6 per cent). The significant increase in total assets was attributable primarily to the switch to IFRS 16 at the beginning of the 2019 In connection with the transition to IFRS 16, lease liabilities financial year. As a result, contractual relationships previ- are recognised separately under non-current and current ously recorded as operating leases are reported for the first liabilities for the first time and were shown in the amount time under “Lease assets” and disclosed in the amount of of 553.3 million euros as at 31 December 2019. This item 452.0 million euros as at the end of December 2019. In this now also includes the liabilities relating to the master lease connection, a master lease agreement totalling 248.1 mil- agreement classified as a finance lease, which were recorded lion euros classified as a finance lease until 31 December under other financial liabilities (237.2 million euros) and 2018 was also reclassified from property, plant and equip- trade accounts payable (23.0 million euros) as at 31 Decem- ment to lease assets as at 1 January 2019, which explains ber 2018. the majority of the 255.0 million euro decrease in property, plant and equipment. Borrowings, still the largest item within current and non-current liabilities, decreased by 29.3 million euros to Group management report The increase of 153.5 million euros in other financial assets 1,693.6 million euros, primarily due to the early repayment to 314.7 million euros is attributable on the one hand to the of a portion of two promissory note loans from 2016 in the receivables from finance leases reported on the balance nominal amount of 31.0 million euros. sheet in connection with IFRS 16 in the amount of 82.1 million euros and on the other to the change in the fair value of Trade accounts payable decreased by 57.9 million euros to the interests in CECONOMY recognised through other com- 465.2 million euros. In addition to the effect from the transi- prehensive income in the amount of 74.4 million euros (car- tion to IFRS 16, this was mainly attributable to lower liabili- rying amount as at 31 December 2019: 178.8 million euros). ties to network operators as of the reporting date.

Intangible assets declined by 23.5 million euros to The decrease in other liabilities and deferrals by 501.9 million euros due predominantly to amortisation 42.7 million euros to 509.6 million euros is primarily due charges on the exclusive distribution right with Media-Sat- to the decrease in deferred income relating to bonuses and urn Deutschland GmbH. premium rights received from network operators.

Liquid assets are reported at 133.7 million euros as of 31 December 2019 (31 December 2018: 126.3 million euros). The Group’s net cash inflow from operating activities of 364.2 million euros in 2019 contrasted with a net cash outflow from investing activities of 38.8 million euros and a net cash outflow from financing activities of 318.0 million euros.

On the equity and liabilities side, equity increased by 40.8 million euros to 1,321.6 million euros (31 December 2018: 1,280.8 million euros). The change is primarily attributable to the consolidated profit for the year generated in 2019 (184.7 million euros), the dividend paid for financial year

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Table 15: Selected balance sheet figures of the Group

Assets Equity and liabilities

In EUR millions 31.12.2019 In EUR millions 31.12.2019 Non-current assets 4,154.3 Equity 1,321.6 Current assets 685.3 Non-current and current liabilities 3,518.0 Total assets 4,839.6 Total equity and liabilities 4,839.6

In EUR millions 31.12.2018 In EUR millions 31.12.2018 Non-current assets 3,885.1 Equity 1,280.8 Current assets 749.6 Non-current and current liabilities 3,353.9 Total assets 4,634.7 Total equity and liabilities 4,634.7

CASH FLOWS In financial year 2019, thecash flows from investing activ- Group management report Cash flows from operating activities increased by ities developed from -333.1 million euros in the previous 35.4 million euros year-on-year to 364.2 million euros. year to -38.8 million euros. This was primarily due to the pay- EBITDA declined by 14.4 million euros compared with the ments made in the previous year for the acquisition of the previous year. Besides a year-on-year decrease of 25.2 mil- shares in CECONOMY in the amount of 277.4 million euros lion euros in the adjustment for non-cash income from and prepayments for the acquisition of The Cloud Group in the disposal of non-current assets (previous year: sale of the amount of 12.4 million euros. analogue radio infrastructure), cash flows from operating activities were also positively impacted by the reduction of The cash outflows for investments in intangible fixed assets 21.6 million euros in contract acquisition costs recognised and in property, plant and equipment, netted out against the as assets (mainly sales commissions paid) and the proceeds cash inflows from such assets, decreased in 2019 by 2.7 mil- of 14.9 million euros from the payment of lease receivables lion euros compared with the previous year from 43.3 mil- reported for the first time in connection with IFRS 16. In lion euros to 40.6 million euros. The cash investments were addition, freenet AG received a dividend payment that was financed entirely out of the company’s retained earnings. 4.6 million euros higher (41.5 million euros) as a result of the dividend of 4.20 CHF per share decided at the Annual Cash flows from financing activities changed from General Meeting of Sunrise on 10 April 2019. The 10.5 mil- -192.3 million euros in the prior-year period to -318.0 million euro increase in the rise in net working capital and the lion euros. The change is mainly the result of the prior-year higher interest payments in connection with the new lease inflows from the bridge loan for the acquisition of the shares accounting had the opposite effect. in CECONOMY and from raising a promissory note loan in the amount of 376.3 million euros. In addition, two pri- or-year effects attributable to the repayment of the bridge loan raised (277.8 million euros) and the repayment of a promissory note loan (54.5 million euros) had the opposite effect. Repayments of borrowings in the amount of 31.0 million euros in financial year 2019 relate to the early repayment of a portion of two promissory note loan from 2016. Cash payments for the principal portion of lease liabilities amounted to 74.6 million euros in the past year. In the previous year (21.8 million euros), this item only included the master lease agreement classified as a finance lease; now it also includes payments relating to operating leases.

Annual Report 2019 | freenet AG 58 Group management report | Report on opportunities and risks

An unchanged dividend of 211.2 million euros was distrib- Table 16: Key cash flow indicators of the Group uted in May 2019. 2018* In EUR millions 2019 restated Change Free cash flow of 249.0 million euros was generated in finan- Cash flows from operating cial year 2019 as a result of the aforementioned effects, rep- activities 364.2 328.9 35.4 resenting a decrease of 14.7 million euros compared to the Cash flows from investing previous year (263.8 million euros). activities -38.8 -333.1 294.3 Cash flows from financing activities -318.0 -192.3 -125.8 Change in cash funds 7.4 -196.5 203.8 Free cash flow 249.0 263.8 -14.7

* Due to a change in the definition of free cash flow, the previous year’s figures were restated. Group management report GROUP MANAGEMENT REPORT REPORT ON OPPORTUNITIES AND RISKS

REPORT ON AND ASSESSMENT OF that is performed by the Executive Board, the responsible OPPORTUNITIES managers in the individual business units, and the relevant decision-makers in a process of permanent communication. In order to manage and monitor ongoing business activities, the Executive Board has established an extensive monthly freenet AG and its subsidiaries strive to offer their cus- reporting system that covers both financial and non-financial tomers high-quality and attractively priced products com- performance indicators. In regular meetings with all of the bined with excellent customer service. In addition, the com- relevant business units, the Executive Board ensures that all pany is focused on expanding the TV and Media segment. members are informed in a timely manner about operational Together with its subsidiary Media Broadcast GmbH and developments. At these meetings, not only current themes, its majority holding EXARING AG, freenet AG’s terrestrial but also future internal and external developments, mea- and Internet-based television business offers the company sures and potential opportunities are discussed. The iden- the opportunity to diversify and tap new growth potential. tification, analysis and communication of opportunities, as Continuous expansion of the associated product portfolio well as their exploitation, is a corporate (management) task offers opportunities to increase user numbers in the TV and

freenet AG | Annual Report 2019 Group management report | Report on opportunities and risks 59

Media segment. Important new partnerships of EXARING Internal opportunities for freenet AG could emerge in par- are further steps towards a steady increase in market pen- ticular from: etration of waipu.tv. ■ assessing and implementing strategic options in mobile freenet AG sees external opportunities particularly in the communications, digital lifestyle, and TV and media, following market trends: ■ continuously strengthening the brands klarmobil, freenetmobile and callmobile in the steadily growing ■ Increasing willingness of customers to pay for mobile discount market, with the aim of participating even more communication devices actively in their growth, ■ Continuation of the trend towards mobile Internet and ■ continuously strengthening business relationships with data use via smartphones, tablets and laptops suppliers to stabilise existing and develop new and ■ Trend towards the networking of products in both a pri- improved condition models, vate and commercial context ■ enhancing our selling power by expanding existing ■ Changes in the way multimedia content is consumed and sales channels and opening up new ones both online a continued trend towards customised TV programmes and offline (omni-channel) and utilising existing and new via streaming services sales collaborations and partnerships, ■ Increasing demand for bundled products (e.g. mobile ■ improving sales performance with even more custom- communications and TV) ised sales pitches to customers, ■ potential from combining customer groups from the indi- Group management report The possible entry of another network operator as a result of vidual segments (cross-selling), the 5G auction could increase competition between mobile ■ marketing additional products, including Digital Lifestyle network operators (MNOs) and bolster the service provider and TV and Media products, in conjunction with vertical model as a result of the requirement to engage in technolo- growth in the product portfolio as a whole, gy-neutral negotiations with competitors. For freenet AG, ■ developing freenet’s own innovative products, this could increase both margins and free cash flow. We ■ maintaining a local presence with our shops and stores believe that the short-term effects on the projected finan- as well as our solid service focus at all customer touch cial performance indicators will be minimal. points, ■ consolidating and consistently enhancing IT applications In addition to the further development of the TV and Media and IT systems to further improve customer satisfaction, segment, the effects of the increase in mobile, networked e.g. by expanding digital self-service options and the internet and data usage, and the associated trend towards intelligent use of contemporary communications media, higher-priced products could lead to a stronger increase ■ continuously improving processes and quality to ensure in customer numbers than expected, although this is not a sustainable rise in productivity – including the increas- regarded as very likely to occur. ing digitalisation of business processes and corporate management, All this could have a positive effect on the expected devel- ■ prioritising the empowerment and development of our opment of the financial performance indicators revenue, employees to boost staff loyalty and increase the attrac- EBITDA and free cash flow. tiveness of the workplace.

The assessment and implementation of strategic options in mobile communications, digital lifestyle and TV, the marketing of additional or new, innovative products and the enhancement of our own selling power could have a positive effect on the development of the underlying financial performance indicators and hence exceed our expectations. A stronger selling power and customer satisfaction could, as it were, lead to a more positive trend in customer figures than had been forecast. The likelihood of this happening is regarded as rather low.

Annual Report 2019 | freenet AG 60 Group management report | Report on opportunities and risks

Some technical innovations and strong partnerships in Both external and internal opportunities were identified. all business areas as well as new products such as FUNK, These basically remained at the same level since the pre- which can only be booked via the App, will continue to create vious year, and could lead to even more positive business opportunities for further market penetration in the future. performance. The effects of the opportunities shown on the If the brands perform better than expected in discount mar- forecast financial and non-financial performance indicators, kets, this could lead to higher revenue, earnings contribu- and therefore on the development of freenet AG as a whole, tions and free cash flow than forecast. are collectively rated as low.

The strategic collaboration of mobile communications ser- Management therefore expects business to develop as vices and digital lifestyle applications was accelerated fur- described in the report on expected developments. ther. This Group-level orientation of business activities will be pursued consistently in the future as well, as the trend towards the digitalisation and interconnection of products RISK MANAGEMENT SYSTEM and services will continue. Against this backdrop, we continue to see growth opportunities, potential synergies and An effective risk management system is considered essen- opportunities for new strategic partnerships in this area. tial for safeguarding the continued existence of freenet AG as a going concern in the long term. freenet AG’s risk man- If the measures and efficiency improvements for a lasting agement system is applied solely to risks, not opportunities. reduction in cost structures resulting from the continuous This should ensure that any risks to the company’s future Group management report improvement of processes and quality turn out to be more development are identified at an early stage by all executives positive than expected, this might have a more positive than of the Group and communicated in a systematic, transpar- forecast impact in the years to come on the level of material ent manner to the responsible decision-makers in the com- overheads and personnel expenses, and hence on EBITDA pany. The timely communication of risks to the responsible and free cash flow. decision-makers is designed to ensure that appropriate steps are taken to deal with the identified risks, thereby averting In addition to strengthening the long-standing successful damage to our company, our employees and our customers. partnership in mobile communications, the strategic investment of freenet AG in CECONOMY offers further opportu- To this end, the freenet AG Executive Board has set up within nities through synergy effects due to a number of shared the Group an early warning, monitoring and management business processes. For all segments, this could also result in system that also integrates the subsidiaries. The systems opportunities for more intensive cooperation or, for exam- and methods of the risk management system are an integral ple, in the development of further business areas. part of the overall organisation of freenet AG’s structure and processes. As part of the statutory audit assignment for the The continued positive performance of Sunrise could have annual and consolidated financial statements, the system is a positive effect on the results of the Group’s operations. examined by the auditor to determine whether it is suitable to identify at an early stage any developments that endanger the company’s continued existence as a going concern.

freenet AG | Annual Report 2019 Group management report | Report on opportunities and risks 61

Figure 12: Process and structural organisation of freenet AG’s risk management system

The Executive Board’s requirements regarding the risk management system (i.e. risk strategy, risk culture, risk guidelines)

Process organisation of the risk management system Risk analysis and Risk management Risk communication Risk monitoring Risk identiﬁcation risk assessment

Process-independent monitoring

Structural organisation Supervisory Board of freenet AG Audit committee

Executive Board of freenet AG

Group controlling Risk management system Group auditing department Planning and Review of operability, Risk reporting: controlling processes Market and competition risks appropriateness and eﬀectiveness Technical infrastructure Group management report Operations Tax risks Group auditor Financial risks Audit of the early Operational risk management Legal risks risk warning system

At least once every six months, the individual business units The risks within freenet AG are assessed in accordance with of freenet AG (including its subsidiaries) identify or update the net principle, by which the risk is observed in conjunc- existing and new risks that exceed a defined materiality tion with the impact of any risk mitigation measures imple- threshold in formalised risk reports (risk identification). The mented. The criteria "probability of occurrence” and "antic- risk reports describe the specific risks and consider the prob- ipated extent of damage” are used to assess the risks. In ability of their occurrence, as well as their implications for the process, risks with a low (<50 per cent), medium (50 to the company, on the basis of standardised criteria (risk anal- 75 per cent), and high (>75 per cent) probability of occur- ysis and assessment). rence are systematically categorised and differentiated from each other. With regard to the extent of the anticipated damage arising from a risk, distinctions are drawn between immaterial (<1.0 million euros), low (1.0 to 2.5 million euros), medium (2.5 to 10.0 million euros) and high (>10.0 million euros) anticipated damage. The combination of the probability of occurrence and the extent of the anticipated damage results in the classification of the risks’ significance as “immaterial”, “low”, “medium”, "high” and “material”. These risk categories are shown in the following illustration.

Annual Report 2019 | freenet AG 62 Group management report | Report on opportunities and risks

Figure 13: Risk matrix at freenet AG The methods and systems of risk management are continuously being examined, enhanced and adjusted. In the process, freenet AG’s internal auditing department plays a sup- Expected extent porting role, with the regular audits of the risk reports being of damage high material the main focus. The internal control system (ICS) of freenet AG also provides further support for the risk management high medium system. Formally documented controls are used to counter medium internal risks. The Supervisory Board, in particular freenet low AG’s audit committee, monitors the effectiveness of the low risk management system and the internal control system immaterial immaterial from the standpoint of German stock corporation law. The

low medium high Supervisory Board is involved by means of regular reporting and, if necessary, an up-to-date report by the Executive Probability of occurrence Board (process-independent risk monitoring).

In addition to the risk management system, the Executive Board has established an extensive monthly reporting sys- Based on the results of the risk analysis and assessment that tem that covers both the financial and non-financial perfor- were communicated, various alternatives for action are car- mance indicators in the Group for the purpose of managing Group management report ried out as part of the company’s general management, in and monitoring its ongoing business activities. In regular order to be able to react appropriately to the identified risks meetings with all of the relevant business units and sub- (risk control and risk monitoring). The individual risk reports sidiaries, the Executive Board ensures that all members are are consolidated into a Group risk report and forwarded informed in a timely manner about operational develop- to the Executive Board. Between the standard reporting ments. Current topics and future measures are also dis- times, too, risks are recorded, analysed, evaluated and con- cussed at these meetings (part of risk communication). trolled immediately after their identification and, if they are of sufficient magnitude, reported immediately to the Execu- tive Board and the Supervisory Board (risk communication). REPORT ON AND ASSESSMENT OF RISKS

In its guidelines, which are continuously being extended and This section presents risks that could influence freenet AG’s improved, the Executive Board has defined the significant net assets, financial position or results of operations. The risk categories for the Group, prepared a strategy for deal- risks are categorised as market risks, IT risks, tax risks, finan- ing with these risk categories, and documented the alloca- cial risks, strategic risks and operating risks. tion of tasks and areas of responsibility within the risk management system in the Group. These guidelines are familiar The Mobile Communications segment is the most signifi- to all employees and serve to enhance their risk awareness cant segment in the freenet Group in terms of both reve- (part of risk communication). nue and earnings. This is also the source of the main market risks in this particular field; they are therefore detailed in the following primarily in relation to this segment. The assessment of risk for the other categories basically applies for all segments. Material differences between the segments in relation to the risk assessment are specified as such separately.

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MARKET RISKS The network operator risks, either individually or in combi- Highly competitive markets nations, could affect the forecast earnings metrics and free The telecommunications markets continue to be character- cash flow more negatively than anticipated. ised by intense competition. This can lead to shortfalls in revenue, loss of market share and pressure on margins in Distribution the respective business areas and/or can make it more dif- As a countermeasure with regard to the loss of distribution ficult to gain market share. partners, freenet AG enters into long-term contracts with its main distribution partners and offers them attractive incen- Vigorous competition could also lead to higher costs for tive systems (e.g. airtime models). An additional opportu- acquiring new customers, accompanied by falling reve- nity to maintain or expand existing distribution channels nue and a significant willingness of customers to switch lies in the consistent examination of new retail, distribu- providers. As a result, the forecast revenue-based key tion and collaboration partnerships and in the acquisition of performance indicators, earnings indicators and free cash additional franchise partners. The risk of losing distribution flow could develop in a slightly more negative fashion than channels has been classified as immaterial by freenet AG. previously expected. In order to prevail against its competitors, freenet AG must continue to design its products Laws and regulation and services attractively, market them successfully and Legislative changes, interventions by regulators or even carry out customer lo yalty activities. In addition, freenet landmark judicial decisions may have repercussions for the AG must respond flexibly to the development of the com- tariff structure and for the possibility of collecting receiv- Group management report petition’s business and anticipate new customer require- ables from customers. This might have a negative impact on ments. This involves a medium risk for the achievement of the forecast revenue and on the amount of free cash flow. the company’s goals. The effects of individual decisions or legislative changes might not be significant in themselves, with the result that Network operators the associated risk can be classified as low overall. freenet Bonus payments and commissions of the network opera- AG counters this risk by regularly monitoring regulatory tors form part of the revenue of freenet AG. Reducing these developments and following the outcomes of legal judge- network operator premiums may increase capital commitments. ment and marketing risk. This aspect constitutes a low risk for freenet AG. freenet AG is trying to minimise the risk by The new and increasingly complex legislation on data pro- negotiating flexible purchasing terms and by continuously tection, in particular the General Data Protection Regula- monitoring target attainment for premium payments and tion (GDPR), which came into force in 2018, imposes new, renegotiating as and when necessary. more far-reaching requirements for the handling of personal data, among other things. This could result in business pro- The margins in mobile service provider business are very cesses within freenet AG no longer being able to be exe- much determined by the network operators and their cuted as in the past and/or high fines being imposed on the defined tariff models. This imposes certain restrictions company. The risk has been classified as low by freenet AG. within the tariff models, for instance by way of restrictions faced by users wishing to change tariffs. Nevertheless, pur- Risks in TV and media chasing models are constantly being reviewed to ensure that In connection with the Media Broadcast Group, the com- the Group is able to react as flexibly as possible to market pany is facing the risk that customer demand for the freenet effects. The risk has been classified as low by freenet AG. TV product, and therefore also revenue and free cash flow, might be weaker than originally anticipated. The company The network operators are increasingly marketing their has begun closely monitoring customer performance in products themselves and forcing the mobile communica- order to implement countermeasures, if necessary. This tions service providers out of the market (“shift to direct”). represents a medium risk for freenet AG overall. Also, due to their business structure, the network operators are sometimes able to offer better rates than the mobile communications service providers. This, in turn, can lead to a loss of distribution channels and customers. This aspect represents a low risk for freenet AG overall.

Annual Report 2019 | freenet AG 64 Group management report | Report on opportunities and risks

The majority interest in EXARING AG could trigger the risk TAX RISKS that costs, particularly in the field of content (TV stations) Loss carryforwards and acquisitions (distribution partners/marketing partners), If, within five years, over 50 per cent of the shares or vot- might turn out to be higher than originally anticipated or that ing rights in the company came to be held directly or indi- it might not be possible to meet the target number of cus- rectly by a single shareholder or by several shareholders with tomers. This would have a negative impact on EBITDA and parallel interests (harmful acquisition of shares), any nega- free cash flow. EXARING AG has also established a moni- tive income (corporation and trade tax loss carryforwards) toring procedure to track customer performance in order of the company not settled or deducted by the time of the to take operational management measures, if necessary. harmful acquisition could be lost in accordance with sec- freenet AG classifies this risk as medium. tion 8c of the German Corporation Tax Act (Körperschaft- steuergesetz–KStG). IT RISKS System failures/errors The company has no influence on the occurrence of this The operational availability and efficiency of the technical risk, as the elimination of any negative income (corporation infrastructure, including the company’s data centres and bill- and trade tax loss carryforwards) not settled or deducted ing systems, are of material importance for the company’s by the time of the harmful acquisition is brought about by successful operation and continued existence as a going con- measures and transactions at shareholder level. Against this cern. There is a low risk that network failures or service prob- backdrop, it cannot be ruled out that as a result of a sale or lems as a result of system errors or failures resulting from additional purchase of shares by the company’s sharehold- Group management report the absence of opportunities for providing customer support ers; more than 50 per cent of the shares could be united might lead to losses of customers, or that the TV and Media under a single shareholder. The same medium risk exists segment might be affected by problems in the broadcasting if more than 50 per cent of the shares or voting rights are of TV and radio signals. Apart from the decline in revenue first united through other measures under a single share- that results from a loss of customers, a system breakdown holder or several shareholders with parallel interests. The means that freenet AG might not be able to provide any legal consequences described above apply mutatis mutandis. services and is therefore unable to generate any revenue or make any positive contribution to the anticipated earnings Other tax risks or free cash flow. Technical early warning systems are used In the case of assessment periods that have not been audited to prevent such breakdowns and risks of failure. Continuous conclusively, there might in principle be changes that result maintenance and updates keep the security precautions up in subsequent tax payments or changes in the loss carryfor- to date at all times. Backups are created at short intervals. wards if the tax authorities, within the framework of external tax audits, come to different interpretations of tax regula- Data theft and hacker attack tions or different assessments of the respective underlying Successful attacks carried out by malware or cyberat- circumstances. The same applies for types of official charges tacks might, in a worst case scenario, result in the theft of which in part have yet to be audited, in particular because customer data. Sensitive (customer) data could be stolen they are usually not subject to external tax audits. or published as a result of inadequate security measures regarding the allocation of employee privileges, among oth- The risk of different interpretations and assessments of cir- ers. A hacker attack on the freenet TV database, on the cumstances applies in particular to corporate restructuring other hand, might result in harmful data manipulation which, processes under company law. It cannot therefore be ruled under extreme circumstances, might result in the failure of out entirely that as a result of contributions of assets, other the TV boxes. Extensive security mechanisms have been conversion processes, new capital injections and changes implemented in order to prevent this. The risk has been in the shareholding structure, the corporate income and classified as low overall by freenet AG. trade tax carryforwards declared by the corporations of freenet AG and hitherto ascertained separately by the tax authorities might be reduced or discontinued. All in all, this is regarded as a low risk.

freenet AG | Annual Report 2019 Group management report | Report on opportunities and risks 65

FINANCIAL RISKS There are regularly trade accounts receivable due from the The objective of financial risk management is to limit risks mobile network operators in the Mobile Communications by means of the company’s ongoing operating and financing segment, and there are regularly trade accounts receiv- activities. In this area, the company is essentially subject to able in the TV and Media segment due from public and pri- the risks described below with respect to its financial instru- vate providers of TV and radio programmes. The concept of ments, financial assets and financial liabilities. collecting these receivables is also constantly monitored. However, past experience has shown that the risk of bad Bad debt losses debt losses in this respect is extremely low. A risk of bad debt losses is the unexpected loss of funds or revenue as a result of the partial or complete default on There are factoring agreements in place between the Group receivables owed. There is a low default risk with regard to and two banks on the sale of receivables from the mobile the trade accounts receivable reported in the balance sheet upgrade option. The relevant risks (in particular the risk of and other assets. bad debt losses) and opportunities are transferred to the banks under this arrangement. Although of minor signifi- The assessment of the risk of default on trade accounts cance, the late payment risk completely remains with the receivable in the freenet Group is focused primarily on trade freenet Group. accounts receivable owed by end customers. Here, particular attention is devoted to the credit standing of custom- Impairment of assets ers and sales partners in the Group’s large-scale business In freenet AG’s consolidated balance sheet, both goodwill Group management report activities. For important contract customer sectors, credit and intangible assets such as customer relationships, trade- assessments are carried out for the customers before the mark rights and usage rights are reported in their intrinsic contract is signed. In the ongoing contractual relationship, amounts. There is a medium risk that significant impair- the implementation of a swift and regular reminder and debt ments might occur in the future. Possible triggering events collection process involving a number of debt collection are identified in the course of impairment tests. companies in the benchmarking area, together with long- term debt collection monitoring and high-spender moni- freenet AG’s assets are checked both regularly and on an toring, are essential measures for minimising default risk ad-hoc basis otherwise as and when appropriate if there are in the freenet Group. An ongoing reminder and debt col- potential indicators of lasting impairment. Such an indica- lection process is likewise used for receivables owed by tor may be changes in the economic or regulatory environ- dealers and franchise partners. Credit limits are also estab- ment. Any resultant impairment is not cash-effective, and lished and monitored. Commercial credit insurance, more- therefore does not have any impact on free cash flow. Rev- over, safeguards us against significant default risks vis-à-vis enue and EBITDA are also not affected (no impact on the major customers (dealers and distributors). The risks associ- financial performance indicators). ated with uninsured dealers and distributors are restricted by an internal limit system — generally, customers with a Liquidity poor credit standing must pay cash in advance or the com- The Group’s general liquidity risk, which is classified as a mercial relationship will not materialise. Finally, the appro- medium risk, resides in the possibility that the company priate recognition of loss allowances takes the risks of bad might potentially be unable to meet its financial obligations, debt losses into account. for example the repayment of borrowings, the payment of purchasing obligations or the obligations under leases.

Extensive financial planning instruments are used throughout the Group to monitor and control liquidity. The Group also controls its liquidity risk by holding appropriate bank balances and credit lines at banks, and by monitoring continuously the forecast and actual cash flows. The need for and investment of liquid assets in the Group is controlled centrally on the basis of several existing internal Group cash pooling agreements in which the significant companies in the freenet Group participate.

Annual Report 2019 | freenet AG 66 Group management report | Report on opportunities and risks

The Group uses a variety of financial instruments to reduce Capital risk general liquidity risk. The liabilities due to banks shown The Group’s capital risk management is related to the equity under borrowings relate to the promissory note loans as shown in the consolidated balance sheet and to ratios entered into in May 2015, February 2016, October 2016 derived therefrom. The foremost objective of the Group’s and December 2018 (recognised at 1,083.6 million euros, capital risk management is to ensure compliance with the including interest accruals, as of 31 December 2019) as well financial covenants specified in the loan agreements. The as the loan tranche in the syndicated facility agreement main financial covenants are defined in relation to the of November 2018 for a total of 610.0 million euros (rec- Group’s equity (equity ratio) and debt (debt ratio). If the ognised at 609.9 million euros, including interest accruals, macroeconomic conditions were to deteriorate, this might as of 31 December 2019). The second tranche of 300.0 mil- under certain circumstances lead to a situation where the lion euros (previous year: 300 million euros) – in the form of freenet Group can no longer deliver on its agreements with a revolving credit line – had not been drawn as of 31 Decem- the financing banks. There is a medium risk of the financ- ber 2019, as was the case in the previous year. ing banks declaring the loans due and payable. freenet AG minimises the risk by monitoring the financial ratios con- The credit agreements that were entered into entail another tinuously. liquidity risk because the restrictions agreed therein (“undertakings” and “covenants”) restrict freenet AG’s financial and Interest rate risk operational leeway. These impose restrictions on the com- As regards variable-interest borrowings, freenet AG is sub- pany, for example regarding changes in the Group’s business ject to interest rate risks related largely to the EURIBOR. Group management report operations, the implementation of internal Group measures The company counters these medium risks by having a mix to change its structure under company law, the provision of fixed- and variable-interest borrowings. Although the of collateral, and any acquisitions or disposals of assets, interest rate risks are not explicitly hedged, the cash hold- especially equity interests. Within narrow limits, the com- ings (which are invested mainly at variable interest rates) pany may borrow outside of the loan agreements in order serve as a natural hedge and accordingly mitigate inter- to finance future strategic investments, for example. In view est rate risks arising from the variable-interest borrowings. of the aforementioned liquidity reserves, however, freenet AG classifies the existing risk of a constraint of financial Funds are usually invested as call money or time deposits leeway as low. at commercial banks with high credit ratings.

A medium liquidity risk arises from the fact that banks no The company continuously monitors the various opportu- longer service credit or factoring lines that have not been nities available for investing the liquid assets on the basis firmly committed (as is the case, for example, with the fac- of the day-to-day liquidity planning at its disposal, as well toring agreements for the sale of mobile phone option as the various options available for scheduling borrowings. receivables) and that therefore, possible liquidity cushions Changes in market interest rates could have an impact on are no longer available. net interest expense from originally variable-interest financial instruments and are included in the calculation process There is also a medium liquidity risk for the event that the for earnings-related sensitivities. The risk has been classi- company’s Annual General Meeting adopts a dividend that fied as low by freenet AG. is higher than originally envisaged in liquidity planning. This would result in a higher outflow of liquidity directly after the Annual General Meeting, and might have a negative impact on the company’s ability to act with regard to investments or acquisitions.

freenet AG | Annual Report 2019 Group management report | Report on opportunities and risks 67

Other financial risks Equity investments Other financial risks might occur in the form of foreign cur- freenet AG holds several equity investments, including a rency and exchange rate risks. The company is only exposed 24.56 per cent interest in Sunrise. It is possible that the busi- to foreign currency risks to a limited extent; this is the rea- ness of Sunrise might perform worse than originally antic- son why the management report does not detail these risks ipated; this in turn might have a negative impact on the separately. With regard to the exchange rate risks, it must results of operations (but not on EBITDA) and the cash flow be borne in mind that the company holds an interest of of freenet AG. The risk has been classified as low by freenet. 24.56 per cent in the share capital of Sunrise. Sunrise uses the Swiss franc (CHF) as the reporting currency for prepar- Business outsourcing of the customer service of ing its consolidated financial statements. The exchange rate mobilcom-debitel to Capita Customer Services between the euro and Swiss franc has an impact on deter- (Germany) GmbH, Berlin mining both elements of the position of our consolidated Since March 2017, Capita has been handling the entire cus- income statement “Profit or loss of equity-accounted invest- tomer service of mobilcom-debitel as a strategic partner in ments”, namely the share in the current profit or loss of Sun- particular. If the operations are unexpectedly discontinued rise and also the write-downs resulting from the shadow pur- by Capita, there is the risk of additional costs as a result of chase price allocation regarding Sunrise. Accordingly, this the need to implement the retransfer of the activities con- exchange rate has an influence on the results of operations tractually agreed for such a case or for the external provider of the freenet Group; however, it does not affect EBITDA to be changed at short notice. The risk has been classified and is considered to be low at present. as low by freenet AG. Group management report

STRATEGIC RISKS OPERATING RISKS Acquisition of companies Service prices for customers in default freenet AG has acquired companies in the past. There is a Across the entire sector, consumer protection agencies have medium risk that the operating activities of these compa- taken legal action against network operators and service nies will not develop as expected. This development would providers in relation to the nature and extent of charges have a negative impact on the forecast earnings and free imposed on customers in default of payment. In this con- cash flow. The management report contains regular moni- nection, legal action relating to “cease and desist” and where toring of the investment development with the aim of initi- appropriate payment has been initiated against freenet AG ating countermeasures immediately if there are any devia- by consumer protection agencies regarding the imposition tions from the original plan. of service charges for customers in default of payment. The resulting risk of a decline in revenue or a possible payment has materialised to some extent and is further classified by freenet AG as medium.

Annual Report 2019 | freenet AG 68 Group management report | Report on opportunities and risks

OVERVIEW OF THE RISK SITUATION

The risks for freenet AG outlined above are summarised below.

Probability Expected Risks of occurrence extent of damage Risk Tendency Market risks Highly competitive markets medium medium medium ∑ Network operator Bonuses and commissions low medium low π Premiums and margins low low low ∑ Shift to direct medium low low ∏ Distribution low immaterial immaterial ∑ Laws and regulation low medium low ∑ Customer demand for TV and media medium medium medium ∑

IT risks

Group management report System malfunctions/errors low medium low ∑ Data theft and hacker attack low medium low ∑

Tax risks Loss carryforwards low high medium ∑ Other tax risks low medium low ∑

Financial Risk Bad debt losses low low low ∑ Impairment of the assets low high medium ∑ Liquidity General liquidity risk low high medium ∑ Constraint of financial leeway low medium low ∑ Mobile phone upgrade option factoring low high medium ∑ Dividend payment low high medium ∑ Capital risk management low high medium ∑ Interest rate risk medium medium medium ∑ Other financial risks low medium low ∑

Strategic risks Acquisition of companies medium medium medium ∑ Equity investments low medium low ∑ Outsourcing of customer service business low medium low ∑

Operational risks Service prices for customers in default medium medium medium ∑

∏ Classification in higher risk class compared to previous report ∑ Classification in same risk class compared to previous report or newly registered risk π Classification in lower risk class compared to previous report

freenet AG | Annual Report 2019 Group management report | Report on opportunities and risks 69

Thanks to the risk management process that has been imple- The business units involved in the accounting process anal- mented and the monthly reporting system, the Executive yse these controls and measures continuously with regard to Board has a good overall view of the risk position presented new legal requirements and other standards to be observed, here. Market, IT, tax, financial, strategic as well as opera- and develop internal standards and trainings for the respon- tional risks were identified as of 31 December 2019. These sible employees based on the above. risks remain virtually unchanged compared with the previous year as far as their probability of occurrence or their In freenet AG’s accounting process, the accounting for the impact are concerned. single-entity financial statements of freenet AG’s subsidiaries is generally centralised in accounting systems manufac- Their potential effects on the general future development of tured by SAP (SAP FI). Uniform accounting and measurement freenet AG and its financial and non-financial performance methods for the group according to IFRSs are stipulated in indicators continue to be classified as low overall by man- a group accounting manual to keep the scope of discretion agement. Management is therefore expecting that the pos- in the measurement, recognition and presentation of con- itive trend forecast will not be compromised significantly solidated financial statement items to a minimum. The SAP as a result of the aforementioned risks. All in all, it can be EC-CS module is used at the highest group level to consol- assumed that the risks have no impact on the continued idate the single-entity financial statements into consoli- existence of freenet AG. dated financial statements. The individual disclosures in the Group management report and the notes to the consolidated financial statements are each generated from standardised Group management report DESCRIPTION OF THE MATERIAL reporting packages and institutionalised coordination pro- CHARACTERISTICS OF THE INTERNAL cesses as part of the internal control and reporting system. CONTROL AND RISK MANAGEMENT SYSTEM The Group consolidation unit is responsible for consolida- RELEVANT FOR THE CONSOLIDATED tion. As a rule, the processes established for accounting in FINANCIAL REPORTING PROCESS (SECTION the freenet Group aim at mostly automated generation and 315 (4) HGB) control of all material data. freenet AG’s internal control system (ICS) is conceptually The objective of the controls implemented in the ICS for aligned with the internationally recognised framework of the the accounting process is to guarantee that the financial Committee of Sponsoring Organisations of the Treadway statements conform to standards and to ensure that the Commission (COSO). It comprises all guidelines, processes accounting is accurate and effective. Approval processes and measures aimed at guaranteeing the effectiveness, effi- for issuing access rights protect the IT systems used in the ciency and accuracy of the accounting and compliance with accounting process from unauthorised access. Internal con- the applicable legal regulations. trols ensure the correct function of the interface between SAP-FI and the consolidation system SAP EC-CS, as well as Process-integrated and process-independent monitor- the reconciliations of the standardised reporting packages ing measures comprise the core elements of freenet AG's of the subsidiaries right through to the consolidated finan- internal monitoring system. freenet AG’s accounting pro- cial statements of freenet AG. The automated monitoring cess includes automated IT process controls; standardised, measures integrated into processes are supplemented by manual control actions in business processes, including the manual plausibility checks of the relevant interim results and dual-control principle; and automatic security measures spot checks by management or Controlling, among others. integrated into workflows (separation of functions, access restrictions). The effectiveness of the ICS is assured through process-independent monitoring. As a process-independent, internal monitoring body, freenet AG’s Group Internal Audit unit conducts regular order-based, risk-oriented audits and, where necessary, ad hoc audits to verify the functionality and effectiveness of the ICS by way of spot checks and initiates measures when necessary in cooperation with management.

Annual Report 2019 | freenet AG 70 Group management report | Report on opportunities and risks

The auditor of freenet AG’s consolidated financial state- The risk management system is linked to the internal control ments also regularly audits the effectiveness of the ICS for system and covers not only operational risk management, accounting purposes and in doing so, in particular checks but also the systematic early identification, control and mon- the interface and reconciliations between the single-entity itoring of risks throughout the Group. For further explana- financial statements (SAP FI) and the consolidation tool (SAP tory notes about the risk management system, please refer EC-CS) using a risk-based audit approach. to the "Risk management system” section of the report.

Figure 14: Key features of the internal control system of freenet AG

Process-integrated Management Process-independent monitoring measures monitoring measures

Organisational Internal auditing monitoring measures department Risk Internal i.e.: reporting, target management management deﬁnition, controlling system system Group management report

Reviews Audit comittee

Processes

freenet AG | Annual Report 2019 Group management report | Report on expected developments 71

GROUP MANAGEMENT REPORT REPORT ON EXPECTED DEVELOPMENTS

MARKET/INDUSTRY OUTLOOK because of the introduction of 5G network coverage – this would represent a year-on-year increase of 3 per cent. In Group management report MACROECONOMIC ENVIRONMENT Germany, Bitkom assumes that the device business will grow Experts at the International Monetary Fund (IMF) originally by 2.5 per cent to 12.8 billion euros in 2020. expected global economic growth of 3.3 per cent for calendar year 2020 (as at January 2020). This assumption was TV/VIDEO MARKET revised downward to 0.1 per cent at the end of February Back in 2006, Bill Gates predicted the certain death of TV 2020 as a result of the coronavirus. The growth amounting within five years. Compared to the telecommunications sec- to 1.1 per cent forecast by the IMF for the German econ- tor, where voice calls have now been relegated to flat-rate omy (as at January 2020) is currently estimated at only 0.4 charging and texting has been relegated to apps, televi- per cent by German economists on account of the corona- sion will remain at the centre of media consumption over virus. Positive signals continue to emanate from domes- the medium-term. According to Statista, total revenues in tic demand, according to Germany’s federal government. the German television market will remain stable in 2020 and probably exceed the prior-year figure slightly (+0.2 per TELECOMMUNICATIONS MARKET cent). Initial extrapolations indicate that average daily linear As spending on telecommunications services appears to be television consumption in Germany will remain unchanged a component of general German consumer spending that is year-on-year in 2020 (2019: 211 minutes). Experts at PwC relatively resilient to economic influences, the slight upward predict changes for linear television in terms of broadcast- revision to the federal government’s forecast is unlikely to ing methods, however. Different developments and trends have a significant impact on the sector. This is an assump- are expected for the two broadcasting methods that have so tion shared by the experts at Bitkom, who forecast mod- far had the highest reach: cable (around 16.0 million house- erate revenue growth of 0.4 per cent for 2020. For MNOs, holds) and satellite (around 18.0 million households). While however, the ongoing discussions around the expansion of satellite is expected to be on a steady to slightly positive tra- the 5G network and the related investment uncertainties jectory, it is assumed that cable will show a negative aver- could act as a brake on growth. Furthermore, the auction- age annual growth rate of 1.5 per cent over the period to ing of 5G spectrum could result in another network oper- 2023. This would represent a decrease of around 1.0 million ator entering the market, increasing competition among cable connections over the next four years. The main driv- MNOs. In combination with the requirement to engage in ers of this trend are the ongoing expansion of IPTV and the negotiations on a technology-neutral basis and the prohi- relatively high cable charges in Germany. IPTV is projected bition on discrimination, this could strengthen the service to maintain the positive trajectory seen in recent years. provider model. The new mobile communications standard The number of revenue-generating users of DVB-T2 HD is also holds out the promise of sales growth for smartphone expected remain stable. manufacturers and, indirectly, for mobile providers too. US market research company Gartner expects worldwide sales of smartphones to reach over 1.571 billion in 2020 mainly

Annual Report 2019 | freenet AG 72 Group management report | Report on expected developments

STABLE OUTLOOK FOR THE FREENET GROUP EBITDA AND FREE CASH FLOW ALSO FORECAST TO BUSINESS MODEL REMAIN STABLE The market outlook does not provide any grounds for sig- At 426.8 million euros in the reporting period, EBITDA nificantly changing the foundation of our business. In addi- was within the forecast range of 420 to 440 million euros. tion, the ongoing uncertainty in Europe about the effects of Despite the elimination of MOTION TM’s revenue, EBITDA Brexit has no direct impact on the freenet Group, as almost for financial year 2020 is also expected to remain largely all of the Group’s business activities are located in Germany. unchanged within a range of 415 to 435 million euros. Besides the aforementioned effects, no further regulatory The following assumptions are crucial to the derivation of effects that might impact the freenet Group’s operating our financial and non-financial performance indicator fore- profitability are anticipated. casts: At 249.0 million euros in the reporting period, free cash ■ Private consumer spending will continue to bolster Ger- flow was likewise in line with expectations and in the mid- man economic growth in 2020 dle of the forecast range of 240 to 260 million euros. Linked ■ The amended legislation governing the price regulation to the revenue and EBITDA performance forecast for 2020, of international calls and charges that came into force free cash flow is expected to be between 235 and 255 mil- on 15 May 2019 will have a negative impact on revenue lion euros. This would represent free cash flow per share of from services in the Mobile Communications segment between 1.84 euros and 1.99 euros, and therefore underpin in the first quarter of 2020 and proportionately in the the aim to maintain a predictable and stable dividend policy Group management report second quarter of 2020 (for further information on the dividend policy, please see ■ The expected shift in the market for TV broadcasting the section entitled “Financial management”). methods, with IPTV capturing a larger market share in Germany, will create growth potential for the TV and SUBSCRIBER BASE (EXCLUDING FREENET FUNK) Media segment AND POSTPAID ARPU The subscriber base (excluding freenet FUNK) climbed to around 8.332 million customers in the reporting period. COMPANY FORECAST FOR 2020 Within this subscriber base, the number of postpaid customers in the Mobile Communications segment increased REVENUE EXPECTED TO REMAIN STABLE WITHOUT moderately to 6.903 million, while postpaid ARPU remained MOTION TM stable at 18.7 euros despite regulatory effects. Moderate Revenue for financial year 2019 was in line with expecta- growth in the postpaid customer base and a stable trend in tions at 2,932.5 million euros. This includes hardware rev- postpaid ARPU are expected again in financial year 2020. enue of 323.5 million euros from the subsidiary MOTION TM, which was sold and deconsolidated at the end of 2019. In the TV and Media segment, it is assumed that there will On an adjusted basis, revenue for 2019 would be 2,609.1 be solid growth in waipu.tv subscribers (2019: 0.408 million) million euros. Taking this into account, revenue for finan- and a stable trend in freenet TV subscribers (RGU) (2019: cial year 2020 is expected to remain stable despite subse- 1.021 million). The assumption that the number of freenet quent effects of the price regulation of international calls TV subscribers (RGU) will remain unchanged does not take and charges, which will have a particular impact on the into account the effects of any product price changes during amount of service revenue generated in the Mobile Com- the year. munications segment.

freenet AG | Annual Report 2019 Group management report | Report on post-balance sheet date events 73

OVERALL ASSESSMENT BY THE EXECUTIVE In the TV and Media segment, the freenet Group ended the BOARD OF THE FREENET GROUP’S EXPECTED financial year with around 1.43 million revenuege nerating DEVELOPMENT TV customers. We expect to expand this customer base further during the 2020 financial year. Management believes The freenet Group’s management is confident that, in that the IPTV product waipu.tv will continue to drive growth financial year 2020, it will be able to sustain the overall in this segment. With an innovative approach that sets it performance seen in recent years, which has generally been apart from other Internet-based TV offerings, this product is marked by stability and continuity. In the Mobile Communi- already a relevant player in the market. The Group expects to cations segment, it aims to maintain the focus on expand- expand this market position again in financial year 2020 with ing the base of particularly valuable postpaid customers. In the help of product enhancements and new partnerships. this context, measures aimed at increasing loyalty should reduce churn and align the freenet Group’s (business) activities even more consistently with the needs and wishes of the individual customer. Going forward, the Group also intends to build on the innovativeness demonstrated with the fully digital freenet FUNK tariff in 2019. Group management report

GROUP MANAGEMENT REPORT REPORT ON POST- BALANCE SHEET DATE EVENTS

No events of major significance for the freenet Group have occurred after the balance sheet date.

Annual Report 2019 | freenet AG 74 Group management report | non-financial statement

GROUP MANAGEMENT REPORT NON-FINANCIAL STATEMENT *

ABOUT THIS REPORT Table 17: Material issues assigned to CSR RUG aspects and GRI standards BUSINESS MODEL The freenet Group’s operating activities are limited mainly to Aspect of the Corresponding GRI Material issues CSR-RUG standards private customers and to the German market. Mobile com- GRI-103, GRI-401, munications and the mobile Internet are the key elements of Group management report GRI-403, GRI-404 the business. Operating as a service provider without its own Employees Employee matters and GRI-405 network infrastructure, the company sells mobile communi- Social matters/ cations tariffs and options throughout Germany. This port- Respect for human GRI-103 and Digital responsibility rights GRI-418 folio is also being expanded to encompass a diverse range Social matters/ of digital lifestyle products and services. In 2016, the Group Environmental GRI-103 and developed another segment, TV and Media, by acquiring the Customer matters matters GRI-417 Media Broadcast Group and a majority interest in EXARING GRI-103, GRI-302, AG. As Germany’s largest service provider in the radio and Corporate environ- Environmental GRI-305 and media sector, the Media Broadcast Group designs, sets up mental protection matters GRI-307 and operates multimedia broadcasting platforms for TV and Anti-corruption and GRI-103 and Anti-corruption bribery matters GRI-205 radio based on state-of-the-art digital transmitter technology. Respect for human rights/environ GRI-103 and An extensive description of the business model is set out in the Supply chain mental matters GRI-414 section “Business model and organisation” on pages 38 – 40 of the Group management report. A materiality review should be conducted at regular inter- MATERIALITY ANALYSIS vals as part of the aforementioned process. Irrespective of In 2017, we initially identified potential sustainability issues this, internal stakeholders are asked annually whether their based on a sector/peer review and on the basis of the materi- assessment of materiality has changed fundamentally (e.g. ality assessment of the Global e-Sustainability Initiative (GeSI) due to acquisitions). In addition, the selection and internal for the information and communication technology sector. The assessment of material issues is regularly compared with material issues were subsequently determined in a two-stage the expectations of external stakeholders (including inves- procedure comprising individual interviews and a materiality tors, sustainability/financial analysts or customers) in an workshop. Key factors for the assessment were the relevance active dialogue. of the issues for understanding the business performance, earnings and position, as well as the impact of the activities on the aspects specified in the law.

* indicates auditable and non-auditable information that is not normally part of the management report as well as information typically included in the management report, the statutory inclusion of which in the substantive audit is not required and which therefore is not audited.

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NON-FINANCIAL RISKS MATERIAL ISSUES The risk analysis carried out in the context of the non-financial statement is based on the Group-wide risk management EMPLOYEES system (RMS) of the freenet Group. The risks recognised The success of the freenet Group, which operates in the there were analysed to establish whether they match the fast-paced and highly competitive mobile communications issues and aspects of the non-financial statement. For risks and digital lifestyle market, depends largely on the perfor- from the RMS that relate to issues covered by the CSR-RUG, mance and commitment of our employees who effectively a risk assessment has been carried out in line with the assess- put their expertise and skills to use for the company’s ben- ment for the Group risk report (please refer to the Report efit. The Group has launched a number of different mea- on opportunities and risks). Measured in terms of the legal sures and programmes in support of these efforts, and addi- materiality criteria for reporting non-financial risks1, and tionally prioritises the occupational health and safety of after the implementation of risk-mitigation measures, none its employees. The aim is to achieve a harmonious, secure, of the identified risks is of a material nature as defined in the healthy and performance-oriented working environment RMS established Group-wide and the CSR-RUG. that reflects the diversity of our society and avoids all types of discrimination – for instance on the basis of gender, age, GENERAL INFORMATION nationality, religion or sexual orientation. Doing business sustainably and responsibly is part of freenet’s corporate culture as well as the driver of our suc- Group Human Resources, whose managers report directly cess and the foundation for our future. Our day-to-day busi- to the CEO, is responsible for designing and implementing Group management report ness puts economic principles first, because financial suc- these measures. The human resources development and cess is a fundamental requirement for making a reliable and recruiting department is an in-house centre of excellence measurable contribution to all freenet Group stakeholders. in the freenet Group for companywide issues and questions The identified issues reflect the current specific understand- of strategy involving personnel recruitment and developing of the freenet Group regarding sustainability. As of this ment. The freenet Group’s human resources strategy was year, they are reported in accordance with the “Core” option updated in 2018 and has four main areas of focus: (1) organ- of the Global Reporting Initiative (GRI) standards. isational development, (2) appeal as an employer, (3) leadership and (4) the new world of work. Strategy is reviewed The disclosures included in the non-financial statement quarterly in strategy workshops, and the results are com- relate to the period from 1 January 2019 to 31 December municated directly to the CEO or the applicable Executive 2019 and apply to both freenet AG and the Group. Unless Board division. otherwise noted, the statement covers all fully consolidated companies included in the consolidated financial We promote organisational development by developing statements. In view of the business-specific structure of plans for effecting change in the Group that actively sup- the TV and Media segment and the Media Broadcast Group port senior management during change processes, address assigned to that segment, the presentation of material topics diversity (age, gender, culture) issues, and put in place a sometimes includes separate information on this company. modern working environment and practices. We will further improve our appeal as an employer by focusing on attracting Responsibility for the content of the various sustainabil- employees in a challenging market that favours applicants. ity aspects lies with the respective departments, with cen- Measures intended to ensure employee loyalty are a key tral coordination done by the Finance department of the priority. Based on the results of the 2018 employee survey, Executive Board. The Supervisory Board of freenet AG staff development and training are major action items. Good has reviewed the content of the non-financial statement. leadership was defined as another material factor in our suc- The Supervisory Board was supported by Mazars GmbH & cess. For this reason, ensuring we have highly qualified and Co. KG Wirtschaftsprüfungsgesellschaft Steuerberatungs- skilled senior managers is one of the freenet Group’s top gesellschaft (independent auditor) in the form of a limited goals. Since 2015, we have continually offered and expanded assurance engagement. This engagement was conducted management training courses in a programme called “We based on the International Standard on Assurance Engage- Take the Lead” (“Wir gehen in Führung”). New senior man- ments ISAE 3000 (revised). agers are chosen based on their capabilities and receive support from a multi-stage onboarding process. By focusing

1 The following distinction is made in the freenet Group regarding probability of occurrence: low (< 50 per cent), medium (50 – 75 per cent) and high (> 75 per cent). The categories “very probable” or “very high” are not distinguished; the category “high” has therefore been used for the purposes of non-financial risk reporting.

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on the new world of work, we aim to analyse digital trans- Figure 15: Employees by gender and age2 formation issues and new working methods. In addition to new agile methods, collaboration and networking are pro- moted to further shake up the silo mentality in particular in the freenet Group. < years Diversity Diversity is a major factor in the history and success of the freenet Group. The workforce currently comprises employ- , – ees of 62 different nationalities, who speak a variety of lan- years guages, come from a range of cultural backgrounds, and all treat each other with respect. Diversity is anchored in our guiding principles as a key value underlying cooperation and leadership in the Group (“We utilise our diversity”). Every > years day, diversity comes alive in our company through various programmes, management tools/courses, trainings, and the hiring process. Gender diversity is particularly important Men Women in this regard. The freenet Group is subject to the German This key figure was collected for the first time. Act on Equal Participation of Women and Men in Executive Group management report Positions (Gesetz für die gleichberechtigte Teilhabe von Executives setting examples in their conduct, a Code of Frauen und Männern an Führungspositionen). In accordance Conduct and attentive cooperation – supported by Human with this law, the freenet Group has set a target/quota of Resources – serve to ensure that the freenet Group does not ensuring that 30 per cent of first-level and extended senior discriminate with regard to remuneration, gender, religion managers will be women by 31 December 2021 (please refer or nationality. As in previous years, there were no cases of to “Corporate Governance Statement”).3 discrimination in the Group to be addressed in 2019.

In October 2019, the freenet Group took part in the second Employee attraction and retention Female Future Force Day in Berlin to introduce the co mpany Strengthening staff retention and attracting qualified as an attractive employer to female job applicants. The employees are key factors for the freenet Group’s success freenet WOMEN’s DAY initiative, which focused on di versity at all nine sites. The most important indicators for mea- and women in leadership positions, had previously been held suring the appeal of the freenet Group as an employer in-house in March 2019. This was a resounding success, so are employee turnover5 and external new hires. A total additional events were planned. We held an event entitled of 595 employees (2018: 632) were additionally hired or #Networking Confidently – The Women of the freenet Group recruited in 20196. In 2019, employee turnover in the Group (#Souverän Netzwerken – Frauen der freenet Group) in was down year on year, standing at 11.9 per cent (2018: November. The Stuttgart site organised a workshop called 13.7 per cent). The rate at the mobilcom-debitel shops and “Self-confident Equals” (Selbstbewusst auf Augenhöhe), GRAVIS stores was 30.8 per cent (2018: 30.0 per cent) on and another workshop will be held in Berlin in January account of the high rate of employee turnover common in 2020. Of the Group’s salaried employees, 29.8 per cent are the retail business. In the coming years, we will aim to stabi- women, a further improvement over the previous year (2018: lise or slightly reduce both figures. A Group-wide exit survey 28.9 per cent).4 was designed for this purpose and launched in August 2019 (excluding Media Broadcast). This specific type of survey has already been conducted at GRAVIS Vertriebsgesellschaft mbH and mobilcom-debitel Shop GmbH since 2014 and has provided important insights and enabled countermeasures to be taken.

3 Disclosures on the diversity plan for the Supervisory Board and Executive Board are provided in the Corporate Governance Statement. 4 This key figure has only been collected since the 2018 financial year. 5 Number of employees (salaried employees) who leave the organisation voluntarily or due to dismissal, retirement, or death (exits) as compared to the average number of employees [(Exits * 100)/Ø Number of employees]. 6 This key figure has only been collected since the 2018 financial year.

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Table 18: New hires and employee turnover7 The freenet Group also regularly performs Group-wide employee surveys to gauge the loyalty and satisfaction of Number 2019 2018 all employees and derive specific actions if necessary. After completion of the 2018 survey focused on the topic of lead- Total Men Women Total ership in addition to general questions of satisfaction at New hires at the work, smaller, focus group-specific questionnaires empha- freenet Group 281 162 119 632 sising various issues are planned in 2020. Other import- thereof <30 years 92 49 43 n/a ant projects aimed at positioning the Group as an attrac- thereof 30–50 years 171 101 70 n/a tive employer both inside and outside the company in 2019 thereof >50 years 18 12 6 n/a were as follows: New hires at Shops/Stores 314 248 66 n/a ■ The 2018/2019 trainee group worked on a project to thereof <30 years 220 169 51 n/a answer the question “What makes us an attractive thereof 30–50 years 91 76 15 n/a employer?” and planned a new promotional film from thereof >50 years 3 3 0 n/a the company’s point of view. The clip is expected to be Employee turnover produced and released in spring 2020. at the freenet Group ■ In order to more effectively and specifically reach poten- in % 11.9 12.0 11.9 13.7 tial sales representatives, target group campaigns were thereof <30 years 21.6 23.2 19.5 n/a launched starting in September 2019. The application Group management report thereof 30–50 years 11.0 11.0 11.0 n/a process was streamlined and simplified with a landing thereof >50 years 10.1 10.5 8.5 n/a site designed and implemented in-house that provides Employee turnover at the option of submitting a one-click application. Shops/Stores in % 30.8 31.0 30.2 30.0 ■ The Group also added new and supplemented existing thereof <30 years 45.9 44.5 49.6 n/a means of communication and collaboration. In addi- thereof 30–50 years 20.8 21.8 17.8 n/a tion to “Ask Christoph” (“Frag Christoph”), a forum thereof >50 years 10.8 15.2 0.0 n/a where any employee can ask the CEO questions anony- 7 These key figures have only been collected in such detail since the mously and have them answered promptly and person- 2019 financial year. ally on the intranet, we introduced a town-hall format in which the CEO gives an update on current issues in the freenet Group in a 45-minute live video once a quarter. This gives employees the opportunity to ask questions interactively which are then answered on an ad-hoc basis. The short-form “Information in 30 Minutes” (“Wis- sen in 30 Minuten”) channel continued regular coverage of relevant issues in the departments by employees for employees. Employees can participate or watch a recording afterwards to obtain insight into the many different areas of operation and issues in the Group.

Above and beyond these efforts, the freenet Group allows employees to share in the company’s profits as part of variable remuneration. Besides the company pension plan with an employer contribution, employees of the freenet Group have also been offered the opportunity to obtain disability insurance requiring a less extensive medical examination since 2016. Moreover, site-specific benefits are also provided

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(e.g. discounts on wellness services, massages or meal sub- and developing and coaching employees have been incorpo- sidies). Last but not least, flexible working time models prorated into new management trainings and added to the con- mote work-life balance. No distinction is made between full- tinuing education catalogue. time and part-time employment in granting most benefits. Depending on the service level, they are pro-rated based A total of 715 qualification activities were held for employ- on employment status, or based on the part-time wage or ees in 2019 in the form of specialist, method and skills train- full-time salary amount. ing (2018: 439). Of these, 26 per cent were delivered digitally (2018: 21.0 per cent). A separate training unit is responsi- Training and continued professional development ble for providing continuing education to employees of the (CPD) mobilcom-debitel shops and GRAVIS stores due to their spe- The world of work is changing. The pace of change in the cific requirements and customer-facing business. In 2019, this telecommunications market and increasing digitalisation organisational unit organised a total of 132 events includ- pose new challenges and requirements for employees, and ing product, sales and systems training and Welcome Camps make reinforcing and advancing their skills essential. Ensur- (2018: 119). In addition, 53 digital qualification activities ing employees develop their capabilities according to their were carried out, with each employee completing an aver- individual needs is a key factor in ensuring the freenet Group age of 22 e-learning courses (2018: 17). keeps up with progress and remains fit for the future. Besides ensuring that employees develop their potential, the A company-wide competency model8 was established to multifaceted training options provided by the freenet Group Group management report effectively develop employee skills. It serves as a guide in are another important component in ensuring a sufficient selecting and designing measures to accomplish this goal. supply of young talent. In the field of vocational training Based on the aforementioned competency model, binding and studies combining theory and practise (“dual studies”), performance reviews are held annually by managers with more than 100 training places are made available every year. their employees regardless of gender or management level. These consist of a total of 20 training courses at more than In addition to evaluating the employee’s competencies, 150 training locations. The trainees receive support from another priority in the review is identifying individual areas focused onboarding, trainee camps and in-house courses. of focus and development activities. In 2019, the participa- Successful college and university graduates can participate tion rate stood at around 96.1 per cent, exceeding the pri- in the freenet Group’s companywide, one-year specialist or-year figure (2018: 90.6 per cent)9. trainee programme. During this programme, trainees take a deep dive into a department of the freenet Group, receiving In 2018, the digital campus portal Weiterentwicklung@ onboarding during orientation, participating in knowledge freenet was created to also provide implementation sup- transfer and learning methodologies, and receiving support port to senior management. The portal offers a selection for their own personal development. In 2019, eleven partici- of various training options that can be either completed in pants successfully completed this programme. The number the classroom or digitally (webinar or e-learning course). of students participating in “dual studies” was 32 (2018: 27), In the 2019 reporting period, new digital options such as and we had 336 trainees (2018: 325). game-based learning solutions and the freenet eLibrary were tested. We aim to expand the available training and information offerings in 2020. The freenet Group’s objective here is to encourage employees to learn independently. Further- more, additional qualifications for senior management were drafted as a result of the findings of the 2018 employee survey. Issues such as remote leadership, managing managers,

8 The competency model, which was established back in 2016, focuses on cooperation and collaboration, developing an effective persona, entrepreneurial thought and action, driving change, and authentic leadership. The latter only applies to senior managers. 9 This key figure has only been collected since the 2018 financial year.

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Moreover, the following specific programmes and measures Occupational health and safety were carried out in 2019: Occupational health and safety are mainly the responsibility of individual human resources departments at the sites. ■ A repeat of the “freenet entrepreneur” programme to The goal of these activities is to create and guarantee a safe promote high-performing and high-potential employ- working environment for all employees. Occupational safety ees with the aim of establishing employees as entrepre- committees have been established across the Group com- neurs within the company. A hackathon was held as part panies as prescribed by law to ensure safety and security at of the programme for the first time. Eight participants work. The respective committee is made up of the employer worked on solutions to a problem assigned by the Exec- or an employer representative, two Works Council members, utive Board using agile methods. the occupational health physician, a workplace safety spe- ■ Various development activities to promote agile working cialist and a security officer. The members have a duty of methods throughout the Group. In addition to continued care to employees based on legal requirements. They pro- professional development options on the agile method- vide managers at every site with occupational safety training ology, such as design thinking, 70 per cent of IT employ- (e.g. what to do in an evacuation, use of portable devices). ees were trained in specific agile topics. The occupational safety committees are supported by third- ■ Operation of a development centre to develop the party healthcare and safety technology service providers. capabilities of selected regional managers at mobil- They meet four times a year, monitor and analyse measures com-debitel Shop GmbH to meet requirements and implemented in relation to the physical and mental health goals. Each participant received extensive feedback and and safety of the company’s workforce, and develop con- Group management report a personal development plan. cepts for continuous improvement in these fields. Among the courses held regularly are first-aid and fire safety training. Table 19: Key figures on training and continued Since 2018, management have also been offered special train- professional development (CPD) ing courses on dealing with employee illness and absence and leading healthy teams as part of the Group’s human resources Unit 2019 2018 2017 development efforts. The latter aim to enable senior manag- Implementation of ers to ensure not only a safe, but also a healthy, workplace. annual performance reviews % 96.1 90.6 n. a. 10 In 2019, health-focused days and target group-specific ini- Qualification tiatives were again held at many sites to promote the health activities within the Group Number 715 439 403 of our workforce overall. These well-attended events con- thereof in a digital centrated on the prevention of disease. In cooperation with format % 26 21 n. a. selected partners, we offered back exercises and yoga, blood Qualification sugar and vital sign measurement, playful balance and move- activities at Shops/ ment checks, and general information relating to health, Stores Number 185 157 96 exercise, nutrition and sleep. The Group’s health manage- thereof in a digital ment efforts are supported by occupational health examina- format % 28.6 24.2 41.7 tions. In this context, we offer employees a G37 eye exam, thereof e-learnings per employee Number 22 17 16 flu vaccinations and an ergonomics review. In addition, the Vocational trainees Number 336 325 322 members of the occupational safety committees conduct site walk-throughs to identify possible ways to improve working thereof dual students Number 32 27 23 conditions. Moreover, persons responsible for the various locations can access a separate section of the intranet con- 10 This key figure has only been collected since the 2018 financial year. cerning the subject of health, with current health tips. Peo- ple responsible in this area meet at regular intervals across sites and organise issue-specific workshops when necessary. The absentee rate11 , which is reported to the Executive Board monthly, was again low in 2019, standing at 4.6 per cent (2018: 4.8 per cent; 2017: 4.7 per cent).

11 Share of labour capacity lost because of health issues [(Sick days per calendar day * 100) / calendar days].

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Safety at work is particularly relevant at Media Broadcast DIGITAL RESPONSIBILITY due to its specific activities. Approximately 142 of the total The freenet Group is aware that consumers and companies of 650 employees are involved with the maintenance and in Germany are concerned about the increasing volume of possible repair of transmission masts and antennas, some reporting on cyberattacks and data abuse. A transparent of which are several hundred metres high. Accordingly, pre- and secure method of handling the sensitive personal data cautions have been taken to comply with the stringent safety provided to the company in the context of its telecommu- requirements to protect workers in these particular areas: nications services is becoming more and more important. These employees are individually equipped with protective Regulation and the high degree of digitalisation of business gear and safety equipment that always complies with the processes in the telecommunications sector brought this currently applicable occupational safety and accident pre- particular issue into focus in the past. vention regulations and European standards (Regulation (EU) 2016/425, Directive 2014/34/EU, Directive 85/374/EEC). In Led by the Chief Technical Officer (CTO), the freenet Group’s addition, the employees are subject to regular check-ups car- IT department provides all of the IT services required for the ried out by occupational doctors and, once every year, take Group’s business operations. One of the five fundamental part in the prescribed climbing and rescue exercises. Every principles of the freenet Group’s IT strategy is data protec- three years, they attend follow-up seminars concerning the tion and security. The freenet Group’s IT department works subjects of fall protection and rescue measures. The sharp according to well-established information security guide- drop in the rate of accidents occurring at work and on the lines. A security organisation with defined roles and a ded- way to/from work at Media Broadcast is the result of, among icated security incident management process are based on Group management report other things, a lower number of weather-related falls on slip- these guidelines. Security incidents are initially visualised pery surfaces. This year, the rate is below that of the Group12. by a dashboard, then analysed by a core security team and In 2019 there were no deaths in the Group due to work-re- finally coordinated by security incident managers. The key lated injuries and no severe work-related injuries. roles within the security organisation are assumed by the Security Board as a decision-making body, the IT Security Table 20: Occupational injuries and commuting Coordinator, who centrally coordinates all security mea- accidents sures, and decentralised security officers in each individual IT department. Several initiatives to improve data security Per 1,000 employees 2019 2018 2017 were implemented in 2019. For instance, a technical solu- Group 23.6 31.4 25.3 tion was introduced for analysing network traffic for security thereof industrial accidents incidents and a process was established to eliminate identi- (accident reports/notes) 15.2 19.5 13.3 fied irregularities, depending on their criticality. thereof commuting accidents 8.4 11.9 12.0 Media Broadcast Group 14.8 41.3 35.0 Moreover, a partnership was agreed with a third party on thereof industrial accidents security incident management. This partner will provide (accident reports/notes) 6.6 24.5 19.0 support for incident response (e.g. crisis management, com- thereof commuting accidents 8.2 16.8 16.0 munications, preservation of evidence) in the event of a cyber attack and conduct the necessary forensic analyses. Of course, the freenet Group IT department has a regularly updated crisis and emergency plan and a recovery plan for the Company’s IT infrastructure and software applications to keep potential failures or restrictions to a minimum.

Security patch management is part of normal IT operations in all IT functions. In this way, the freenet Group is able to respond quickly and in an appropriate manner to changes in threat scenarios. The entire IT system landscape as well as the security level in the Group’s own data centre meet the legal requirements and correspond to the current state

12 Frequency of accidents per 1,000 full-time employees [((occupational injuries + commuting accidents) * 1,000)/Number of full time employees].

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of the art. Cologne-based Media Broadcast Group, which is All employees are required to comply with both data protec- part of the freenet Group, has also been certified according tion requirements and the freenet Group’s regularly updated to ISO 27001 since 2013. This certification therefore extends confidentiality instructions. All major company departments to the freenet data centre in Düsseldorf13. maintain a list of all data processing activities that is regularly reviewed to ensure that it is up to date. In addition, To check the data security concepts which are applied, exter- for the processing of customer data, regular analysis of the nal security experts regularly carry out penetration tests level of protection are carried out to identify appropriate of the exposed IT systems on behalf of the Internal Audit measures. When service providers are appointed by the department. The reliability and security of our infrastruc- freenet Group IT department, they are bound by both our ture and processes are also regularly subjected to routine customers’ data protection requirements when processing testing by regulators focusing on different areas. In 2019, orders as well as statutory data security requirements. If for example, a spot test was conducted by the Federal Com- customer data are used for analysis purposes or for prod- missioner for Data Protection and Freedom of Information uct design purposes, an approval process ensures in each (BfDI), which did not result in any material objections. case that such data are adequately pseudonymised or anony- mised. In view of the company’s nearly 8.3 million customers IT Management and the management levels of the freenet with fixed-term contracts and more than 4,000 employees, Group consider data security a central task. The Executive freenet received only a very small number of data protec- Board and Supervisory Board or the latter’s committees tion complaints in 2019. Most of these were queries regard- are regularly informed of the relevant developments and ing the fulfilment of obligations under Art. 15 of the GDPR. Group management report requirements in the field of data protection. The requirements of the EU General Data Protection Regulation (GDPR) Beyond its own operational IT security processes, Media that has been effective since May 2018 have been imple- Broadcast is very much and continuously involved with mented across the Group and appropriate guidelines and KRITIS – a joint initiative of the Federal Office of Civil Pro- processes have been defined and introduced. All issues and tection and Disaster Assistance (Bundesamt für Bevölker- projects which are relevant for data protection purposes ungsschutz und Katastrophenhilfe) and also of the Federal are agreed beforehand with the data protection officer of Office for Information Security (Bundesamt für Sicherheit in the Group. For all IT measures relating to employee data, der Informationstechnik) to protect critical infrastructure: the IT control committee of the works council is consulted. This initiative defines sectors which make a society vulnera- Our customers should experience a high degree of transpar- ble; these also include the field of media and culture. Media ency with regard to the processing of their personal data. Broadcast takes its mission of keeping broadcast systems The freenet Group guarantees this by providing comprehen- crisis-proof very seriously, given that this has implications sive information on this topic on the “Data protection” sec- for the whole of society, and in 2019 assumed the chairman- tion of its websites. This content is regularly evaluated, tak- ship of the “Media and Culture” industry working group. It ing account of customer enquiries from the Customer Care therefore works on developing and implementing security Center for improved comprehensibility. In addition, every standards as well as providing advice and support to public customer can request information regarding the data stored and private broadcasters to ensure that this part of the crit- about them and exercise their right to correct or erase this ical infrastructure functions properly. Currently, its industry data. This enables customers to decide what should happen standard on IT security is in the review and approval process. with their data. freenet’s customer-facing website makes it also possible for all customers to inspect their own stored CUSTOMER MATTERS data and permissions granted as well as change them as In a largely saturated and highly competitive mobile com- necessary. munications market such as in Germany, the maintenance and quality of relationships with customers play an increasingly important role. The freenet Group therefore places customers at the centre of all of our activities and orients the strategy and organisation of the company toward meeting

13 The certification is applicable for the entire value chain of the Media Broadcast Group and also for the data centre services “Housing and Hosting” for external business customers rendered by freenet Datenkommunikations GmbH.

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their individual needs. In 2018 the Executive Board was The customer satisfaction analyses implemented by the expanded to add a Chief Customer Experience Officer (CCE) freenet Group allow us to measure customer satisfaction who focuses on all activities from attracting new customers across the entire customer life cycle at all service touch- through maintaining relationships with existing customers points. This method generates information about satisfac- to winning back former customers, as well as reinforcing tion, expectations and potential for improving the customer the customer-focused corporate culture. Implementation experience. In addition to continually updating the customer of these goals is entrusted to a new organisational unit that experience, achieving long-term customer loyalty is a key primarily concentrates on customer experience. The goal is aspect of the results derived from this analysis. At the heart to consistently align the brands with the requirements and of the customer satisfaction analysis are satisfaction targets expectations of customers through life cycle management: that follow a specified system of indicators and targets and sustainably designing and linking various individual cus- provide insight into the service quality and follow-up co ntact tomer-facing initiatives. The freenet Group believes that rates for specific processes. responsible interactions with customers provide a basis for long-term commercial success. This also includes treating Moreover, in 2019 two customer experience managers were customer data as confidential and complying with data pro- hired to assist with further development of existing protection regulations. It goes without saying that the freenet cesses and developing new business models. Group also strictly adheres to consumer protection rules. Customers enjoy wide-ranging transparency regarding our Customer satisfaction by way of service quality prices and services in accordance with the applicable laws. Service quality is considered to be a strategic asset in Group management report the freenet Group, because meeting customer expecta- The strategy of putting customers first aims to improve cus- tions improves loyalty and enables us to unlock cross-sell- tomer satisfaction and follows three main principles: ing and up-selling potential. The freenet Group’s service plan includes customer service by phone, a comprehensive ■ Customer satisfaction by way of service quality range of digital contact opportunities for customers and the ■ Customer satisfaction by enhancing digital dialogue integration of the shops. Our range of customer services is ■ Customer satisfaction by way of clear brand position- being constantly developed and expanded at all customer ing and a sustainable and inclusive product portfolio touch points. In 2019 this effort included a variety of tests of a mobile phone repair service in the mobilcom-debitel A key element required for a customer-oriented approach is shops with various partners. In the interest of remaining a comprehensive analysis of the core drivers for contact with viable and competitive in the future with regard to offer- customer service. The results of the analysis will be used ing phone-based customer service, the freenet Group out- both to proactively avoid potential annoyances during the sourced customer service completely to an external com- customer experience as well as to systematically improve pany in March 2017 – namely Capita. The Customer Service service quality with regard to speed and problem solving. Management (CSM) department is tasked with cooperat- In 2019 the following measures were implemented in this ing with this partner and documenting changes that could regard: affect the customer experience. A comprehensive management structure and ongoing analysis of customer contacts ■ Systematic contact analysis across all service touch- guarantee that agreed performance indicators are met and points service quality is continually improved, for instance thanks ■ Incorporation of various third-party market research to proactive communication with customers regarding deliv- studies ery delays by our hardware partners. This service approach ■ Implementation of updated customer satisfaction also transfers to the TV and Media segment. Media Broad- analyses for all of the freenet Group’s mobile commu- cast’s entire value chain is certified in accordance with ISO nications brands (since the third quarter of 2019) 9001. This certification is the basis for and the central element of our consistently high service quality and resulting customer satisfaction.

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Customer satisfaction by enhancing digital dialogue portfolio above and beyond the existing partnership with Since 2018, the freenet Group has focused on strategically Fairphone B.V. In conjunction with Fairphone, the freenet enhancing its digital dialogue with customers to boost cus- Group has been meeting the rising demand for an envi- tomer satisfaction. In 2019 these activities included upgrad- ronmentally friendly and economical alternative to popular ing the “mein mobilcom-debitel.de” and “mein klarmobil. smartphone brands for several years now. With regard to de” self-service portals, stepping up email dialogue and sales of the Fairphone in Germany, mobilcom-debitel cur- establishing new digital communications channels such rently has the largest market share with approximately 19 as WhatsApp and chatbots. Introducing these new chan- per cent (2018 and 2017: approximately 15 per cent). nels goes hand-in-hand with phasing out legacy methods of communication such as faxing or limiting the number of The freenet Group also offers a differentiated portfolio of invoices sent by post to a minimum (see also “Consumption other digital lifestyle products. This range also includes of resources”). The expansion of service functions in 2019 products which meet the market trend and customer included launching an online mailbox at mobilcom-debitel requirements derived from these trends for product solu- by which important legal information could be made avail- tions covering aspects such as environmental protection, able to customers easily and reliably while following the law data protection and protection of minors. In terms of pro- and conserving resources. Based on customer acceptance, tecting data and devices, these include a comprehensive we are rolling out this option to further mobile communi- range of security software (e.g. Kaspersky Internet Secu- cations markets in 2020. In addition, customers were given rity, Kaspersky Password Manager and Kaspersky Safe Kids) the opportunity to use the self-service portals to easily can- and participation in initiatives such as “trustedDialog” and Group management report cel certain options or services online, block third-party pro- “E-Mail Made in Germany”. The latter initiatives are intended viders and initiate termination of their mobile communica- to guarantee our freenet.de e-mail customers a high level tions contracts. of security and data protection for their daily e-mail communications. In terms of protecting minors, the Group is Sustainable and inclusive product solutions an active member of the German Mobile Communications The freenet Group is continually developing its portfolio of Provider Code of Conduct for the Protection of Minors in customer-focused mobile tariffs and mobile services based Mobile Communications (Verhaltenskodex der Mobilfunk- on systematic market and customer analyses. Close rela- anbieter in Deutschland zum Jugendschutz im Mobilfunk) tionships with the three German network operators enable and JusProg e.V., a non-profit association that aims to bet- the freenet Group to structure a product portfolio ranging ter protect children and youth on the Internet. from the discount to the premium market. This brand and portfolio approach enables the company to serve many cus- Regarding choice and development, there is no explicit focus tomer segments and meet a wide variety of customer needs. on sustainability criteria, which means that a concept in The company also offers an attractive tariff portfolio for the narrower sense of the term is not available at present. mobile communications and TV for low-income customers and enables customers with poorer creditworthiness to participate in digital life via a special deposit model14.

In 2019 the growing senior segment was identified as a strategic target group. The “Digitally engaged” (“Digital dabei!”) initiative aims to make it easier for older people to participate in the digital world through services and consulting. As part of this initiative, a special set of tariffs for seniors was added to our portfolio of services, smartphone classes were offered nationwide and the partnership with Empo- ria, a hardware manufacturer specialising in smartphones for seniors, was stepped up. This collaboration allows the freenet Group to add special smartphone solutions to the

14 The deposit model is for customers who failed the credit assessment for subscription-based offerings. The deposit is staggered in 50/100/200/400 euros. Paying the deposit enables the respective customer to use mobile services within their selected tariff. Moreover, the customer benefits from the bundle with a subsidised handset.

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CORPORATE ENVIRONMENTAL PROTECTION The Group Facility department, which is part of Human The freenet Group’s business activities generate carbon Resources, is responsible for managing energy in the Group. emissions and influence the availability of resources. In the The Media Broadcast Group additionally maintains an area of mobile communications, energy and resource con- energy management system aligned with the requirements sumption is limited mainly to the administrative sites, the of DIN EN ISO 50001 and has a management representative vehicle fleet and the more than 560 shops and stores due dedicated to energy issues due to the company’s significant to the service provider model. The Group’s largest user of energy consumption. Energy management is part of an inte- energy is the Media Broadcast Group as an operator of TV grated management system used to ma nage and monitor and radio infrastructure. For supplying its broadcasting and quality, occupational safety, security and data protection as transmission technology, it consumes energy at approxi- well as environmental protection. A DIN EN ISO 14001-certi mately 932 transmitter sites and radio towers, thus account- fiedenvironmental management system (EMS) was intro- ing for 81 per cent of the freenet Group’s total electricity duced to manage the latter. This highlights the particular consumption. importance of protecting the environment for Media Broad- cast’s business model in respect of contracting partners, For a medium-sized company, the optimum use of resources service providers and customers. The EMS is based on the and efficient utilisation of energy are important for eco- 2016 guidelines defining its importance, goals, activities and nomic success in a competitive environment dominated by their implementation, and audits. Furthermore, it stipulates large corporations. The freenet Group also explicitly sup- that only certified suppliers and waste disposal companies ports political and societal expectations and initiatives in may be hired, e.g. to demolish or dismantle transmission Group management report the area of climate protection. From the freenet Group’s per- systems, so as to provide employees and customers with spective, these include significant factors such as reducing maximum safety and security. In addition, activities such fuel and electricity consumption (especially at the Media as transmission system and antenna servicing involve haz- Broadcast Group) to lower carbon emissions that can be ardous materials to some extent, which entails a particular influenced directly. The company applies energy efficiency duty to provide information and notify employees of this improvement recommendations arising from regular stat- issue. Media Broadcast is required to instruct all employees utory energy audits conducted as per Sections 8 to 8d of on this topic annually and provide evidence it has done so. the Act on Energy Services and Other Energy Efficiency Measures (Gesetz über Energiedienstleistungen und andere A legal register is maintained to regularly evaluate the Media Energieeffizienzmaßnahmen – EDL-G) in accordance with Broadcast Group’s compliance with environmental stan- DIN EN 16247-1, taking into account cost-benefit consider- dards. This is used to document the results of internal and ations. The latest audit took place in December 2019. The external audits and systematically monitor the implementa- Group has not developed a specific companywide carbon tion of their recommendations. To date, no monetary fines strategy aligned with quantitative parameters due to a gen- or non-monetary sanctions have been issued to the com- eral lack of relevance to the Group’s activities. pany for non-compliance with environmental protection laws or regulations.

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Energy consumption and carbon emissions freenet Group invested in installing the infrastructure for The strategic decision to change over to the new HD stan- our own electrical vehicle charging stations at the Büdels- dard DVB-T2 in the TV business continues to contribute dorf site. The goal is to promote the use of electric vehicles toward the greater energy efficiency that is our goal. The and therefore to make business transport more sustainable. new transmitters broadcast more highly compressed signals, In addition to the two existing charging stations, we added which optimises frequency utilisation and sharply reduces four more with two charging points each. The freenet Group energy consumption. The same applies to radio transmis- plans to expand charging station infrastructure at the Ham- sions. Replacing the UKW standard with the more energy- burg site in 2020 and examine the option of installing it at efficient digital DAB+ transmission standard decreased elec- other selected company sites in Germany. This enables the tricity usage steeply year on year (-18.7 per cent). Compared freenet Group to fulfil its societal responsibility to contrib- with the 2015 benchmark, the overall electricity consump- ute to reducing carbon emissions in transportation and to tion of the Media Broadcast Group has declined by approx- be prepared for the growing electrification of the auto mar- imately 46.6 per cent, and the associated carbon emissions ket. The existing Car Policy was supplemented with an eCar have declined by approximately 52 per cent. There are lim- Policy to efficiently integrate electric vehicles into the com- itations to implementing energy savings in the field of broad- pany’s vehicle fleet. When purchasing electric vehicles and casting and transmission technology, however. Contracting plug-in hybrid vehicles, the freenet Group performs a driver and using frequencies is subject to a regulatory framework profile analysis in advance to approve such purchases on the governing infrastructure design and expansion. Media basis of not only financial, but also environmental factors. Broadcast is therefore required to adhere to the standards The company additionally intends to increase the share of Group management report set by third parties. electric vehicles in the vehicle fleet that can be used for business trips, including between sites. In addition, the Media In the remainder of the Group, the data centre and the com- Broadcast Group conducts ongoing mileage monitoring of pany vehicle fleet of the freenet Group represent the main its company cars to identify possibilities for consolidation. areas for reducing carbon emissions. Accordingly, the data The fleet size was thus again reduced and totalled 312 vehi- centre of the Group in Düsseldorf is supplied exclusively by cles by the end of 2019 (2018: 350). renewable energy (2019: 5.4 GWh; 2018: 5.4 GWh). We also aim to ensure that our fleet of company vehicles uses as little fuel as possible and produces minimal emissions. In 2019 the

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Table 21: Energy consumption and carbon emissions

2018 2017 2015 Unit as specified 2019 (restated) (restated) (base year) 15 Group Fuel consumption 16 GWh 27.3 31.9 34.2 32.6 thereof carbon emissions (Scope 1) tCO2eq 17 6,504.5 7,677.0 8,170.1 7,994.9 Electricity consumption 18 GWh 76.6 90.5 114.4 134.0 thereof carbon emissions (Scope 2 location-based) 19 tCO2eq 36,292.1 42,897.9 55,578.5 70,638.2 thereof share from renewable energies 20 % 42.14 41.53 39.00 34.88 Energy consumption GWh 103.9 122.4 148.5 166.7 thereof carbon emissions tCO2eq 42,796.6 50,575.0 63,748.6 78,633.1

This includes: Media Broadcast Group Fuel consumption GWh 4.0 5.5 6.0 7.2 thereof carbon emissions (Scope 1) tCO2eq 988.4 1,365.8 1,475.6 1,755.5 Electricity consumption GWh 62.1 76.3 99.6 116.2

Group management report thereof carbon emissions (Scope 2 location-based) tCO2eq 29,413.8 36,176.8 48,386.3 61,216.1 Energy consumption GWh 66.1 81.8 105.6 123.3 thereof carbon emissions tCO2eq 30,402.2 37,542.6 49,862.0 62,971.6 tCO2eq / CO2 intensity million revenue 14.6 17.5 18.2 25.2

15 The year 2015 is set as the base year, as this is the first year for which retrograde, consolidated reporting of energy consumption and carbon emissions has been done. 16 Fuel consumption comprises consumption in the form of diesel and petrol for the fleet of company cars. Other indirectly procured fuels have not been included because no valid consumption figures were available due to the billing cycle, e.g. of facility managers, and extensive estimates would have been necessary. The conversion factors of the British Ministry for the Environment, Food and Rural Affairs (DEFRA) have been used for converting fuel consumption in GWh and carbon emissions. 17 CO2eq = CO2, CH4 and N2O. 18 Electricity consumption calculated on the basis of appropriate estimates and extrapolations. 19 Calculated by basically taking into account the German electricity mix for electricity consumption plus an explicit green electricity contract. 20 The CO2 emissions factor from the Federal Environmental Office (Umweltbundesamt) is used for converting electricity consumption into CO2 emissions.

Consumption of resources The freenet Group concentrates primarily on digital commu- The “FLIP4NEW” programme conducted by the GRAVIS and nication among employees as well as in dialogue with cus- mobilcom-debitel subsidiaries in partnership with exter- tomers and business partners. It thus makes a contribution nal provider Flip4 GmbH represents another contribution towards reducing paper consumption and making efficient towards ensuring an efficient use of resources and reducing use of resources in administration. This starts with the dig- electric waste. The aim is to purchase old devices – in partic- ital networking of sales channels and extends right through ular smartphones, tablets and CPUs – to extend the lifecycle to avoiding the printing and posting of millions of invoices of the devices by selling them on and by recovering spare every month. In November and December 2019, a total of parts. Devices which are no longer usable are accepted by around 0.5 million additional contracts were proactively the recycle it GmbH, which is certified in the areas of envi- switched to online billing. At the main mobile communica- ronmental and data protection. tions brand mobilcom-debitel, this improved the share of digitally delivered invoices to 77.7 per cent (2018: 74.9 per To avoid electronic waste, the freenet Group is also work- cent). At the discount brands, the share remained stable at ing hard to improve the return rate in its own shops as well 95.5 per cent (2018: 95.7 per cent). Overall therefore, nearly as the proportion of so-called “A products” – devices which 81.4 per cent of all invoices were transmitted digitally (2018: can be sold immediately. In light of this, devices have been 78.8 per cent). For 2020 we anticipate the resulting savings foil-coated before being shipped to customers since 2017. to amount to around 5.0 million hardcopy invoices. The resulting and sustained positive effects of this were

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evident for the third successive year in 2019, as the return Legal departments. The CCO reports directly to the CFO of rate and proportion of A products remained high. The return the freenet Group and advises the CFO as the person with rate was 3.4 per cent (2018: 1.7 per cent) and the propor- overarching responsibility for compliance with the law and tion of A products was 85.5 per cent (2018: 84.2 per cent). for monitoring compliance risks in the implementation of the In relation to end users, the percentage of A products in relevant legal requirements. In addition, the CCO reports to 2019 was also stable at 93.8 per cent (2018: 92.2 per cent). the Supervisory Board’s audit committee and informs the Supervisory Board immediately if risks arise that may endan- Table 22: Key figures on resource consumption ger the continued existence of the freenet Group. in % 2019 2018 2017 Management of corruption risks is based on several Online invoice 81.4 78.8 77.7 approaches, which are characterised by prevention, iden- thereof mobilcom-debitel 77.7 74.9 74.2 tification and reaction in each case. The Group’s efforts in thereof klarmobil 95.5 95.7 95.7 this area focus on specific employee information for pre- Return rate, shops 3.4 1.7 1.5 vention purposes. Customised training, one-on-one discussions and generally binding guidelines provide the com- Proportion of A product, shops 85.5 84.2 85.8 pany’s employees with a stable framework with which they Proportion of A product, end customers 93.8 92.2 95.0 can align themselves. The corporate culture we embody promotes the continual exchange of information among employees and between employees and senior managers Group management report regarding the legal risks associated with their activities. ANTI-CORRUPTION In this context, the gift, purchasing and signature guide- The freenet Group is committed to all applicable laws and lines have a vital role to play. While the gift guidelines are standards as well as the underlying ethical principles: It is designed to prevent the undue influence of both internal and also aware of the harmful effects of economic crimes and external business dealings, the signature guidelines ensure therefore strongly condemns corruption in particular and that only selected individuals can enter into transactions takes a strong stance against it. In accordance with German and, in the case of important declarations of intent, autho- law, the freenet Group does not differentiate between cor- rised representatives from different departments and divi- ruption in commercial transactions or among public officials sions are always required to act as co-signatories. In addi- on the one hand and facilitation payments on the other. In tion, the purchasing policy ensures that the best suppliers the case of criminal offences, the company naturally pursues are objectively procured using clear procedural parame- a zero tolerance policy. The Executive Board underlines the ters and by requiring the specialist department undertaking company’s strict attitude towards combating corruption by the procurement to involve the Purchasing department as way of a tone from the top, which is also communicated to a neutral party in significant transactions. In addition, the all areas of the organisation by downstream managers. The Compliance unit offers a hotline which enables it to always works councils of the freenet Group also support all guide- provide legal and content-specific advice in order to enable lines that serve to combat corruption. Compliance is a strong possible uncertainties in daily work to be resolved quickly. element of the corporate culture, and is expressed by the actions and support of all parts of the company. A multiple-channel approach is also used for identifying any legal infringements. The gift guideline requires all employ- As a typical economic crime, corruption occurs particularly ees to submit a report every quarter to the Compliance unit where the briber can have an impact on large cash flows for via their superiors with regard to all gifts worth more than their own benefit with comparatively small means. In the 20 euros given and received, so that gifts, invitations and freenet Group, this risk therefore exists in the context of benefits can be checked in order to establish whether they high-revenue contract partners, both on the customer and are correct and legally proper. In the freenet Group, receiv- supplier side, for example. In order to be able to successfully ing and giving gifts is only permitted if the possibility that a combat this risk, the company has implemented a compli- business decision has been influenced can be unequivocally ance management system (CMS), which has created uniform ruled out. Possible violations of regulations are followed standards for compliance matters such as combating corrup- up by the Internal Audit and Central Fraud Management tion. Compliance measures are the central responsibility of departments in particular. Finally, all employees and fran- the Chief Compliance Officer (CCO) and are implemented chisees can report suspicious incidents to the Compliance and monitored for compliance in close and constructive col- unit around the clock via a whistleblower system – including laboration with the Internal Audit, Human Resources and anonymously if desired. In addition to the intranet, email and

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telephone, there is also an interface on the point of sale sys- Cooperation with the mobile network operators, device/ tem for this purpose. The whistleblower committee reviews accessory manufacturers and service providers in customer incoming tip-offs and conducts additional investigations support are handled by purchasing units created specifi- where appropriate. The composition and working practices cally for that purpose. All other suppliers are handled cen- of the Whistleblowing Committee are explained in more trally by a further purchasing unit (indirect purchasing). detail in the section "Corporate Governance Statement". The Media Broadcast Group has its own separate purchasing department. Since the long-standing CMS was established, no confirmed instance of corruption has become known in the freenet The freenet Group’s ability to exert influence on the major Group. The anti-corruption measures intended by the com- suppliers listed above with regard to sustainability aspects pany’s management have been implemented and are reg- is comparatively limited when considering the national and, ularly reviewed to bring them into line with new forensic in particular, international overall market and the Group’s findings or changes to the law. positioning in the value chain. Nevertheless, the freenet Group is aware of its ecological responsibility and its respon- SUPPLY CHAIN sibility for human rights. The objective is therefore to hold As a result of the supply chain’s importance to the freenet the cooperating manufacturers and network operators Group’s business model, we require our suppliers, ser- accountable for using their influence on the value chain to vice providers and other business partners to make a clear ensure fair working conditions and to exclude conflict min- commitment to sustainable action. The entire procurement erals in the production of telecommunications hardware Group management report organisation is consolidated in the Partner Relationships and accessories. Executive Board division. Our constantly developing base of suppliers for mobile communications services comprises Since 2018, this has been done by way of the freenet Group’s around 1,500 suppliers from various countries. The follow- own Supplier Code of Conduct, which defines minimum ing main suppliers account for more than 90 percent of the standards in the areas of human rights, social standards, purchasing volume in terms of value in this area: environmental protection, safety and security, health, and compliance, and is publicly available on the freenet Group’s ■ the three mobile network operators Deutsche Telekom, website. The code of conduct is generally included in all new Vodafone and Telefónica (costs of mobile communica- procurement agreements and processes. Alternatively, we tions services as well as mobile devices), require our strategic suppliers to declare that their stan- ■ device/accessory manufacturers such as Apple, Hu awei dards at least correspond to those of the freenet Group. or Samsung (costs of purchasing mobile devices) as well In the event of violations, the freenet Group reserves the as right to appropriately address the issue depending on the ■ service providers in (outsourced) customer support such severity of the violation. This includes, but is not limited to, as Capita. requesting immediate remediation of the violation, asserting claims for damages or terminating the respective contract. If suppliers or their employees wish to report a possible violation of applicable law or our standards, our code of conduct provides for direct contact for business partners to our Compliance department, which also initiates investigations.

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To date, we have not conducted a costly and time-intensive Media Broadcast’s purchasing policy focuses to a greater systematic review of all suppliers to ensure compliance with extent on the aspects of environmental protection and standards. Around 98.7 per cent of suppliers in indirect sales particularly energy efficiency, as the subsidiary consumes and 100 per cent of merchandise suppliers commissioned in a large amount of electricity. Accordingly, assuming that calendar year 2019 are domiciled in Germany or another EU all other criteria are equivalent, the company should prefer member state. At Media Broadcast, this figure is 99.6 per suppliers who adequately take into account environmental cent of the goods and services supplied based on the pur- protection and energy efficiency. Media Broadcast’sva rious chasing volume in euros22. These suppliers are subject to General Purchasing Terms and Conditions contain standard the same legal regulations as the freenet Group itself, which clauses requiring new suppliers to conform to social stan- is why we do not anticipate a significant negative societal dards such as tolerance and equal opportunity as well as impact from these business relationships. fundamentally oppose discrimination, harassment and coer- cion of any kind. These purchasing terms also stipulate an Sustainability aspects are incorporated into the freenet obligation to adhere to international, national and local legal Group’s purchasing policy as decision-making parameters to regulations regarding corruption and bribery. reinforce this self-imposed responsibility. As a Group-wide framework, the purchasing policy is intended to encourage responsible employees to take sustainability criteria into account when making purchasing decisions. To this end, information about sustainability as well as the finan- Group management report cial situation of relevant new suppliers will be obtained in advance and taken into account from the second quarter of 2020 onward.

22 This key figure was collected for the first time.

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GROUP MANAGEMENT REPORT CORPORATE GOVERNANCE

In this section, the Executive Board and Supervisory Board CORPORATE GOVERNANCE STATEMENT IN report on the Corporate Governance in the freenet Group ACCORDANCE WITH SECTIONS 289F, 315D in accordance with clause 3.10 of the German Corporate HGB* Governance Code. The chapter also contains the Corporate Governance Statement in accordance with sections 289f, In the Corporate Governance Statement in accordance with 315d HGB, as well as the information relating to sections sections 289f, 315d HGB, freenet AG displays its current 289a (1), 315a (1) HGB. Declaration of Conformity in accordance with section 161 of Group management report the German Stock Corporation Act (AktG) and explains the freenet AG and its management and supervisory bodies are relevant disclosures about corporate management practices committed to the principles of good and responsible cor- that are applied over and above the statutory provisions. In porate governance. They identify with the objectives of the addition, the working practices of the Executive and Super- German Corporate Governance Code and with the princi- visory Boards are described and the composition and work- ples of transparent, responsible management and control ing practices of the Supervisory Board’s committees are dis- of the company aimed at enhancing its value. The Executive closed. Also to be found in the following is the information Board and the Supervisory Board, together with all manag- regarding the percentage of women in the Executive Board ers and employees in the freenet Group, are committed to and in the two management tiers below the level of the pursuing these goals. Executive Board, as well as information regarding compliance with minimum percentages of women on the Supervi- In its meeting on 3 December 2019, the Supervisory Board sory Board. And finally, details are provided on the reasons considered the regulations of the German Corporate Gover- why the company does not adopt a diversity plan for the nance Code as amended on 7 February 2017 and, together Executive Board and Supervisory Board. with Executive Board, issued the annual Declaration of Con- formity with regard to the German Corporate Governance freenet AG made the following Corporate Governance State- Code. The Supervisory Board and Executive Board have essen- ment in accordance with sections 289f, 315d HGB, which tially continued the deviations stated and the reasons for is simultaneously a part of its management report for the them from previous years. The Declaration of Conformity financial year 2019. dated 3 December 2019 is included in the following Cor- porate Governance Statement and has been made permanently accessible on the company’s website under https:// www.freenet-group.de/investor-relations/corporate-governance/index.html.

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STATEMENT IN ACCORDANCE WITH 4. No age limit has been set for members of the Execu- SECTION 161 AKTG tive Board and the Supervisory Board. It is not evident Since submitting the last Declaration of Conformity on 4 why qualified individuals with relevant professional and December 2018, freenet AG has complied with the recom- other experience should not be considered as candi- mendations of the German Corporate Governance Code dates solely on the grounds of their age. (Code clauses (“Code”) as amended on 7 February 2017 with the follow- 5.1.2 sentence 8 and 5.4.1 sentence 2) ing exceptions and will continue to comply with the recom- 5. The Supervisory Board does not specify any concrete mendations of the Code as amended on 7 February 2017, targets for its composition, as defined in Code clauses unless stated otherwise by the company in the following. 5.4.1 (2) and 5.4.2 sentence 1. It therefore also does not draw up a profile of skills for the entire board. It 1. Th e company has taken out D&O insurance for its board can therefore not follow the recommendations made in members. No deductible has been stipulated for Super- Code clause 5.4.1 (4). When proposing new members for visory Board members because it is not evident that election, the Supervisory Board has so far been guided this would represent an advantage for the company. It solely by their suitability. The Supervisory Board is con- is taken for granted that all Supervisory Board mem- vinced that this has proven to be effective. It therefore bers carry out their duties responsibly. In order to treat sees no need to change the practice. (Code clauses 5.4.1 all Supervisory Board members equally, moreover, any (2), (4) and 5.4.2 sentence 1) deductible would have to be set at a uniform level, even 6. Clause 5.4.6 (2) of the Code recommends linking though the members’ personal financial backgrounds performance-related remuneration for Supervisory Group management report vary. A deductible would therefore constitute different Board members to the sustained performance of the burdens for the individual Supervisory Board members. company. The Supervisory Board’s variable remunera- As their responsibilities are the same, this does not seem tion is set according to the dividend for the past finan- appropriate. (Code clause 3.8 (3)) cial year, in line with section 11 (5) of the company’s 2. The company has a strong commitment to transpar- articles of association. This form of variable remuner- ent reporting. This also applies to the remuneration of ation has proven its worth in the past. Furthermore, the Executive Board members, the separate compo- the company’s dividend policy as communicated to nents of which are disclosed and discussed individually financial markets, which is based on free cash flow, is in the remuneration report. Nonetheless, the Executive linked to the company’s sustained performance. Link- Board and Supervisory Board have decided not to use ing variable remuneration to this dividend strategy the model tables in the remuneration report to present therefore also serves the company’s sustained perfor- the Executive Board’s remuneration. Although the ser- mance. For this reason, there is no intention of changing vice contracts with the Executive Board members pro- the Supervisory Board’s variable remuneration. (Code vide for caps, there is a risk that the disclosure of max- clause 5.4.6 (2)) imum amounts for share-based payment components creates an impression which is inconsistent with the RELEVANT DISCLOSURES ON CORPORATE actual assumptions for the performance of the share GOVERNMENT PRACTICES price. (Code clause 4.2.5 sentence 5 and 6) freenet AG has a compliance system that is continuously 3. When appointing new members to the Executive Board, expanded and enhanced. The freenet Group’s Chief Compli- the Supervisory Board so far has appointed those can- ance Officer (CCO) reports directly to the Executive Board. didates to the Executive Board who were best suited He helps the Executive Board to highlight the legal require- in particular because of their knowledge and skills ments that are relevant for freenet AG and to implement acquired in the course of their many years of service them accordingly within the freenet Group, as well as to in the company. In contrast, the criteria for the com- adapt the compliance system to changing requirements. position of the Executive Board mentioned in clause The CCO also reports regularly to the Supervisory Board’s 5.1.2 (1) of the Code were not the focus of the Super- audit committee. The Chief Compliance Officer informs the visory Board’s attention when previous appointments Supervisory Board whenever risks arise which endanger the were made and will remain subordinate with respect continued existence of the freenet Group. to future appointments from the Supervisory Board’s point of view. (Code clause 5.1.2 (1))

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The freenet Group is fully committed to upholding the pre- A centralised fraud management unit has also been set up. In vailing laws and statutes. For the freenet Group, compliance addition to its coordinating function for the individual spe- means that statutory provisions are adhered to, the Group’s cialist anit-fraud departments in the freenet Group, this unit own rules and in-house guidelines are observed and criminal is responsible in particular for the introduction and improve- acts are prevented. The company does everything it can to ment of effective preventive measures and processes for ensure that compliance violations, such as fraud, corruption, preventing damage to the freenet Group caused by fraud, anti-competition practices and data privacy violations do not and for investigating fraud. arise in the first place. As soon as misconduct and infringements of compliance become evident, these are brought to The significance of data protection has increased continu- light and tackled decisively. ously in recent years. The freenet Group is aware of its special responsibility with regard to the handling of the per- The freenet Group’s managers set a good example in uphold- sonal data of customers, suppliers, contractual partners ing compliance and ensure that any significant steps taken and employees, especially given the General Data Protec- within their own fields of responsibility are in accordance tion Regulation (GDPR) and special regulations applying to with the respective statutory provisions and its own val- the telecommunications sector. It is therefore important ues and rules. to protect this data against unauthorised access. For this reason, the Group uses modern security technologies and The compliance organisation can be approached by any con- regularly draws the attention of its employees to this sub- tact person for advice on individual issues. ject in order to continuously improve the overall security Group management report level and to meet the challenges posed by growing threats. The Compliance unit has developed a whistleblower tool and implemented it within the freenet Group. It enables WORKING PRACTICES OF THE EXECUTIVE BOARD whistleblowers to give tip-offs anonymously as soon as AND SUPERVISORY BOARD infringements of compliance come to their attention. freenet AG’s Executive Board and Supervisory Board work together in a close and trusting manner in their manage- All tip-offs are investigated promptly as part of a transpar- ment and supervision of the company. ent and accountable process in which the interests of the whistleblower, the persons affected and the company are It is the duty of the Executive Board, as the parent compa- taken into account. ny’s management body, to serve the interests of the company. It currently consists of five members. The Executive The aim is to enable the company to take systematic and Board’s work is governed by its rules of procedure. The mem- appropriate action immediately when compliance is violated bers of the Executive Board are jointly responsible for corpo- and thereby to avert economic or reputational damage to rate management as a whole. In other respects, each Exec- the freenet Group and the affected stakeholders. In order to utive Board member is responsible for their own sphere of ensure the proper, swift handling of tip-offs in accordance business. The Executive Board members work together in with the whistleblower process, the freenet Group has set a spirit of cooperation and inform one another about facts up a whistleblower committee. Permanent members of the and developments in their respective spheres of business at whistleblower committee are the Chief Compliance Officer regular Executive Board meetings. In addition, the Executive as well as the responsible head of Internal Auditing and the Board members attend regular meetings of the specialist head of Fraud Management. The whistleblower committee departments. The Supervisory Board determines the areas is responsible for the operational implementation of the of responsibility of the individual members of the Manage- whistleblower process. ment Board in a schedule of responsibilities.

The Supervisory Board is convened at least twice in each calendar half-year. It generally makes its decisions at meetings requiring personal attendance, but also by way of telephone conferences or by written communications. The Supervisory Board regularly advises the Executive Board when the latter is making its decisions about the company’s management and also supervises its management activities. In so doing, the Executive Board includes the Supervi- sory Board in all decisions of a fundamental nature relating

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to the company’s management and reports regularly about Personnel committee the business performance, the corporate planning, the stra- The personnel committee prepares the Supervisory Board’s tegic development and the situation of the company. The personnel decisions. It submits to the Supervisory Board Supervisory Board in turn conducts a detailed examination proposals for decisions on the Executive Board’s remunera- of all deviations of business performance from the plans tion, the remuneration system and regular review of that sys- and targets and discusses these with the Executive Board. tem. The committee makes decisions in place of the Super- It also conducts detailed checks on business transactions visory Board – but subject to mandatory responsibilities of of significance for the company on the basis of Executive the Supervisory Board – on Executive Board members’ busi- Board reports, discusses them and makes decisions as and ness that is relevant for personnel. when required. Outside of the meetings, too, the Supervi- sory Board members were informed by the Executive Board Members: Prof. Dr Helmut Thoma (chairman), Sabine about current business developments. Christiansen, Claudia Anderleit, Knut Mackeprang

COMPOSITION AND WORKING PRACTICES OF Audit committee COMMITTEES The audit committee concerns itself with the monitoring of The Executive Board has not constituted any committees. the accounting process, the effectiveness of the internal control system, the risk management system and the internal The Supervisory Board has set up five committees. These auditing system, and the auditing of financial statements, in committees prepare the topics and resolutions of the Super- the latter case especially with regard to the choice of audi- Group management report visory Board which are due to be discussed by the full Board tor and their independence and the additional services ren- and in some individual areas are authorised to make deci- dered by the auditor, the awarding of the audit engagement sions in place of the full Board. The committees carry out to the auditor, the determination of key audit matters and their work in meetings requiring personal attendance. In the fee agreement. It is also responsible for approving the exceptional cases, however, the meetings can also be con- permissible non-audit services to be rendered by the audi- ducted by telephone. The committees discuss the items tor. It also concerns itself with compliance-related issues. on their agendas and make decisions concerning these if required. The committee chairpersons report on the sub- Members: Robert Weidinger (chairman), Marc Tüngler, Bente ject matter of the committee meetings to the full Supervi- Brandt, Thomas Reimann sory Board. With the exception of the nomination committee, all committees comprise equal numbers of shareholder Mediation committee representatives and employee representatives. The mediation committee is constituted in accordance with section 27 (3) of the German Co-Determination Act (Mitbes- Steering committee timmungsgesetz–MitbestG) so that it can perform the task The steering committee discusses focal topics and prepares described in section 31 (3) sentence 1 MitbestG. Supervisory Board resolutions. It can take the place of the Supervisory Board, with the required approval of the Execu- Members: Prof. Dr Helmut Thoma (chairman), Fränzi Kühne, tive Board in accordance with the latter’s rules of procedure, Knut Mackeprang, Theo-Benneke Bretsch in deciding on measures and transactions of the Executive Board, insofar as the matter in question cannot be deferred Nomination committee and it is not possible for the Supervisory Board to make an The nomination committee has the task of suggesting suit- appropriate decision within the time available. able candidates to the Supervisory Board for proposal to the Annual General Meeting in the run-up to new elections. Members: Prof. Dr Helmut Thoma (chairman), Thorsten Kraemer, Gerhard Huck, Knut Mackeprang Members: Prof. Dr Helmut Thoma (chairman), Marc Tüngler, Sabine Christiansen

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DEFINED TARGETS FOR THE PERCENTAGE OF WOMEN DISCLOSURES ON THE DIVERSITY PLAN FOR THE ON THE EXECUTIVE BOARD AND ON THE TWO SUPERVISORY BOARD AND EXECUTIVE BOARD MANAGEMENT TIERS BELOW THE EXECUTIVE The company has not adopted a diversity plan which defines BOARD; DISCLOSURES ON COMPLIANCE WITH the criteria for the composition of the Executive Board and MINIMUM PERCENTAGES OF WOMEN ON THE the Supervisory Board with regard to aspects such as age, SUPERVISORY BOARD gender, education or career background. The Supervisory Board and Executive Board have each defined the following targets for the period until 31 Decem- With regard to its own composition, the Supervisory Board ber 2021 with regard to the percentage of women on the has complied with the legal requirements regarding gen- Executive Board and on the two management tiers below der diversity. It has so far always rejected the further rec- the Executive Board: ommendations of the German Corporate Governance Code regarding the composition of supervisory boards, and has explained the differences in its Declarations of Conformity Target for in % 31 December 2021 with the German Corporate Governance Code. In the case Executive Board 0 of proposed candidates for election to the Supervisory Board, the Supervisory Board is convinced that it should Management tier 1 (direct reports) 30 focus exclusively on the suitability of the candidates. In Management tier 2 (direct reports) 30 addition, there is no current requirement for considerations regarding the future composition of the Supervisory Board. Group management report The targets to be achieved in the last reference period by 30 June 2017 for the percentage of women on the Executive After increasing the number of Executive Board members, Board and on the two management tiers below the Execu- the Supervisory Board aims to achieve continuity in 2018 tive Board as defined by the Supervisory Board and Execu- with regard to the composition of the Executive Board, and tive Board were achieved as follows: wishes to avoid potential uncertainty among its members. Such uncertainty might arise if the Supervisory Board sets up a general diversity plan for the composition of the Target for Actual as of in % 30 June 2017 30 June Executive Board without a specific reason. The Supervi- Executive Board 0 0 sory Board currently sees no need for a diversity plan and would like to take a wait-and-see attitude regarding further Management tier 1 (direct reports) 25 40 developments. Management tier 2 (direct reports) 27.5 33.3 LEGAL GROUP STRUCTURE AND TAKEOVER- RELEVANT DISCLOSURES IN ACCORDANCE WITH SECTIONS 289A (1), 315A (1) HGB In the period under review, the percentages of men and women on the Supervisory Board complied with the legal COMPOSITION OF SUBSCRIBED CAPITAL requirement of a minimum percentage of 30 per cent. The subscribed capital (share capital) of freenet AG amounts to 128,061,016 euros. It is divided up into the same number of no-par-value registered shares. Each share entitles its owner to one vote at the Annual General Meeting.

RESTRICTION ON SHARE TRANSFER OR VOTING RIGHTS The Executive Board is not aware of any restrictions affecting the voting rights or the transferring of shares.

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EQUITY INTERESTS EXCEEDING 10 PER CENT In addition, on 12 May 2016, the Annual General Meeting OF THE VOTING RIGHTS adopted a resolution regarding a conditional capital increase As of 31 December 2019, and on the basis of the existing involving up to a total of 12,800,000.00 euros, consisting notifications of voting rights, Flossbach von Storch AG, of 12,800,000 new no-par-value registered ordinary shares Cologne, holds an equity interest of 14.89 per cent of the (Conditional Capital 2016). The purpose of the conditional voting rights in freenet AG indirectly via Flossbach von capital increase is to enable registered no-par value shares Storch Invest S.A., Luxembourg, in accordance with sections to be granted to the holders or creditors of convertible and/ 21 et seq. WpHG. or bonds with warrants, which are issued on the basis of the authorisation as adopted by the Annual General Meeting SHARES WITH SPECIAL RIGHTS AND of 12 May 2016 under agenda item 10, letter A) and which POWERS OF CONTROL provides a conversion or option right in relation to the reg- There are no shares with special rights that confer po wers istered no-par-value shares of the company or which estab- of control. lishes a conversion or option obligation in relation to these shares. The Executive Board has been authorised to deter- TYPE OF VOTING RIGHTS CONTROL WHEN mine the further details for carrying out a conditional cap- EMPLOYEES HOLD AN INTEREST IN SHARE CAPITAL ital increase. If employees have an interest in the company’s capital as shareholders, they cannot derive any special rights from this. POWERS OF THE EXECUTIVE BOARD TO BUY BACK SHARES Group management report APPOINTMENT AND DISMISSAL OF THE MEMBERS OF Pursuant to the resolution of the Annual General Meeting THE EXECUTIVE BOARD, CHANGES IN THE ARTICLES of 12 May 2016, the Executive Board was authorised, until OF ASSOCIATION 11 May 2021, to acquire its own shares equivalent to up to The appointment and dismissal of the members of freenet 10 per cent of the current share capital or – if lower – 10 per AG’s Executive Board shall be governed by sections 84 and cent of the share capital existing at the time at which the 85 AktG and section 31 MitbestG in conjunction with sec- authorisation is exercised. This authorisation can be exer- tion 5 (1) of the articles of association. The relevant provi- cised by the company, by its subsidiaries, or by third par- sions governing changes to the articles of association are ties for the account of the company or for the account of its sections 133 and 179 AktG and section 16 of freenet AG’s subsidiaries. Acquisition of such shares shall be carried out articles of association. at the discretion of the Executive Board through the stock market, by way of a public offer of purchase, through a public POWERS OF THE EXECUTIVE BOARD TO ISSUE invitation to submit offers for sale, by issuing tender rights SHARES to shareholders or by using equity derivatives (put or call The Executive Board, with the approval of the Annual Gen- options or a combination of the two). There is also the pos- eral Meeting, has been authorised by a resolution of the sibility of purchasing the company’s own shares in accor- Annual General Meeting of 17 May 2018 to increase the dance with sections 71 et seq. AktG. share capital by issuing new shares against contributions in cash or in kind on one or more occasions, up to a maxi- CHANGE OF CONTROL mum of 12,800,000.00 euros until 3 June 2023 (Authorised A change of control might have an impact on the repay- Capital 2018). ment claims resulting from the syndicated loan agreement between the freenet Group and a syndicate of banks as The Executive Board, with the approval of the Annual Gen- well as the promissory note loan issued by freenet AG. In eral Meeting, has also been authorised by a resolution of such a case, these loans might be called either in part or in the Annual General Meeting of 12 May 2016 to increase the their entirety without freenet being able to influence such share capital by issuing new shares against contributions a move. Such a change of control, irrespective of whether in cash or in kind up to a maximum of 12,800,000.00 euros it precedes the takeover offer, might exist in the event of until 1 June 2021 (Authorised Capital 2016). the acquisition of more than 50 per cent of the voting rights in freenet AG or if one or more persons acting in concert have the right to determine the majority of members of the

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Supervisory Board of freenet AG. In such a case, freenet financial year, depending on the balance in the respective would be exposed to the risk that subsequent financing for LTIP account. The amount of these payments is dependent settling the repayment claims might not be agreed or might on various factors, including the relevant share price at the only be agreed to subject to less favourable conditions. time of the payout.

COMPENSATION AGREEMENT OF THE COMPANY When the employment contract was extended (with Mr There are no compensation agreements in place between the Vilanek, granted on 4 April 2018, and with Mr Esch, granted company and members of the Executive Board or employ- on 19 March 2019) and the appointment to the Executive ees to cover the case of a takeover bid. Board made (for both Mr von Platen and Mr Fromme with effect from 1 June 2018; for Mr Arnold with effect from 1 Jan- uary 2019), supplemental agreements to the employment REMUNERATION REPORT OF THE EXECUTIVE contracts granting a new LTIP (“LTIP Programme 3”) were BOARD AND SUPERVISORY BOARD entered into with the aforementioned members of the Exec- utive Board. In LTIP Programme 3, the years 2019 to 2023 EXECUTIVE BOARD REMUNERATION IN have been defined as target attainment years for Mr Vilanek, ACCORDANCE WITH HGB 2018 (on a pro rata basis from the appointment date) until The remuneration paid to the members of the Executive 2021 (on a pro rata basis) for Mr von Platen and Mr Fromme, Board consists of an annual fixed salary, annual variable ben- 2019 to 2021 for Mr Arnold, and 2020 to 2024 for Mr Esch. efits, and benefits with a long-term incentive effect. There Group management report are also pension commitments. The annual variable bene- In LTIP Programme 3, an LTIP account is also maintained for fits each result from an annual target agreement in which each member of the Executive Board. In each financial year, regularly determined figures indicating the freenet Group’s depending on the extent to which defined targets for the significant financial and non-financial performance indica- financial year in question have been attained, credit entries tors are defined as individual targets. are made in the accounts in the form of phantom shares. Then, within a predetermined period of time, cash payouts On 26 February 2014, agreements concerning the contracts less taxes and charges can be made for each financial year, of employment that grant benefits with a long-term incen- depending on the balance in the respective LTIP account. The tive effect (LTIP Programme 2) were entered into with the amount of these payments is dependent on various factors, members of the Executive Board. In LTIP Programme 2, the including the relevant share price at the time of the payout. years 2014 to 2018 have been defined as target attainment years for Mr Vilanek, and 2015 to 2019 for Mr Preisig and The remuneration for the members of the company’s Exec- Mr Esch. utive Board was comprised as follows in the reporting year and in the previous year. The following tables show the ben- In LTIP Programme 2, an LTIP account is maintained for efits of the Executive Board in accordance with section 314 each member of the Executive Board. In each financial (1) No. 6a HGB in conjunction with GAS 17. These figures year, depending on the extent to which defined targets for include the benefits granted in the course of the financial the financial year in question have been attained, credit or year. In accordance with section 314 (1) no. 6a HGB, changes debit entries are made in the accounts in the form of phan- in the value of the LTIP programmes that were not caused tom shares. Then, within a predetermined period of time, by a change in the exercise conditions are not disclosed. cash payouts less taxes and charges can be made for each

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Table 23: Executive Board remuneration for financial year 2019 according toH GB

Benefits granted with long-term Total Variable cash Total cash incentive benefits acc. to In EUR ’000s Fixed benefits benefits benefits component HGB Christoph Vilanek 1,015 688 1,703 0 1,703 Ingo Arnold 510 287 797 606 1,403 Stephan Esch 494 229 723 785 1,508 Rickmann v. Platen 510 287 797 0 797 Antonius Fromme 509 287 796 0 796 Total 3,038 1,778 4,816 1,391 6,207

Table 24: Executive Board remuneration for financial year 2018 according toH GB

Benefits granted with long-term Total Variable cash Total cash incentive benefits acc. to In EUR ’000s Fixed benefits benefits benefits component HGB Group management report Christoph Vilanek 765 572 1,337 1,776 3,113 Joachim Preisig 544 457 1,001 0 1,001 Stephan Esch 494 229 723 0 723 Rickmann v. Platen1 298 167 465 432 897 Antonius Fromme1 297 167 464 432 896 Total 2,398 1,592 3,990 2,640 6,630

1 Benefits in each case for the period from appointment as a member of the Executive Board, i. e. from 1.6.2018 to 31.12.2018

In financial year 2019, the Executive Board benefits in In financial 2019, the current Executive Board members accordance with section 314 (1) no. 6a HGB amounted to received cash payments of 5,421 thousand euros under 6,207 thousand euros (previous year: 6,630 thousand euros). LTIP Programme 2 and no cash payments under LTIP Pro- For 2019, this includes benefits with a long-term incentive gramme 3. No cash payments were made under either LTIP effect from the grant of LTIP Programme 3 in the amount of programme in financial year 2018. 1,391 thousand euros (2018: 2,640 thousand euros). As at 31 December 2019, the provision recognised for LTIP In addition to the above Executive Board benefits, Mr Preisig Programme 2 according to HGB for Mr Vilanek amounted to had been granted severance payments totalling 1,010 thou- 0 thousand euros (previous year: 4,366 thousand euros) and sand euros on 31 December 2018 due to the premature Mr Esch to 1,967 thousand euros (previous year: 1,372 thou- termination of his Executive Board activities, of which sand euros). The provision recognised for the LTIP pro- 930 thousand euros had been for fixed benefits and vari- gramme according to HGB for former Executive Board mem- able cash benefits for financial year 2019 and 80 thousand ber Mr Preisig amounted to 2,678 thousand euros (previous euros for the tranche relating to financial year 2019 to com- year: 1,781 thousand euros). pensate for the end of his claim to remuneration through LTIP Programme 2. The severance payments of 1,010 thousand euros were paid in cash in January 2019.

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As at 31 December 2019, the provision for LTIP Programme Current service costs of 884 thousand euros (previous year: 3 according to HGB amounted to 1,305 thousand euros (pre- 863 thousand euros) were recognised in total in personnel vious year: 518 thousand euros) for Mr Vilanek, 419 thou- expenses for the members of the Executive Board as a result sand euros (previous year: 0 thousand euros) for Mr Arnold, of the pension commitments. In 2019, Mr Vilanek accounted 227 thousand euros (previous year: 0 thousand euros) for Mr for 371 thousand euros (previous year: 319 thousand euros) Esch, 485 thousand euros (previous year: 235) for Mr von of this amount, Mr Esch for 213 thousand euros (previous Platen and 485 thousand euros (previous year: 235 thou- year: 183 thousand euros), Mr von Platen for 100 thousand sand euros) for Mr Fromme. euros (previous year: 58 thousand euros), Mr Fromme for 100 thousand euros (previous year: 58 thousand euros), Mr In November 2004, Mr Esch was granted an indirect pen- Arnold for 100 thousand euros (previous year: 0 euros) and sion commitment. In the financial year 2009, Mr Vilanek was Mr Preisig for 0 euros (previous year: 245 thousand euros). granted an indirect pension commitment on the occasion of his appointment as chairman of the Executive Board as of In 2019, personnel expenses recognised for Mr Esch in rela- 1 May 2009. freenet AG had taken on the pension commit- tion to pension commitments included past service costs of ment granted to Mr Preisig from the former debitel AG as 222 thousand euros. In the previous year, no past service of 1 September 2008. In February 2014, adjustments were costs related to the pension commitments were recognised made to all three Executive Board members’ pension com- for the members of the Executive Board. mitments. For further details, see the section “Remunera- tion arrangements in the event of a termination of employ- No loans were extended to any of the Executive Board mem- Group management report ment”. Mr von Platen, Mr Fromme and Mr Arnold were each bers and no guarantees or other warranties were provided granted defined contribution benefits on the occasion of for the Executive Board members. their appointment as members of the Executive Board (on 1 June 2018 for Mr von Platen and Mr Fromme and on 1 Jan- EXECUTIVE BOARD REMUNERATION IN uary 2019 for Mr Arnold), with the pension benefits being ACCORDANCE WITH THE GCGC reinsured by a life insurance policy. Within the meaning of clause 4.2.5 of the German Cor porate Governance Code (DCGC), we hereby make the following As of 31 December 2019, the obligation under commer- disclosures about the benefits granted to the members of cial law for Mr Vilanek amounted to 4,620 thousand euros the Executive Board for financial year 2019 and the pre- (previous year: 3,620 thousand euros), and the obliga- vious year, and about the benefits paid to the members tion for Mr Esch came to 4,052 thousand euros (previ- of the Executive Board in the financial year 2019 and the ous year: 3,127 thousand euros). The obligation amount previous year. for Messrs Preisig, Spoerr, Krieger and Berger, as former Executive Board members, totalled 11,304 thousand euros as at 31 December 2019 (previous year: 10,083 thousand euros). Due to the nature of the selected commitment, there are no obligations under German commercial law for Messrs v. Platen, Fromme and Arnold.

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Table 25: Benefits granted to theE xecutive Board for financial year 2019 in accordance with the GCGC

Christoph Ingo Stephan Rickmann Antonius In EUR ’000s Vilanek Arnold Esch v. Platen Fromme Total Fixed remuneration 1,000 500 480 500 500 2,980 Fringe benefits 15 10 14 10 9 58 Total 1,015 510 494 510 509 3,038

One-year variable remuneration 600 250 200 250 250 1,550 Multi-year variable remuneration LTIP Programme 2 207 0 217 0 0 424 LTIP Programme 3 355 203 0 140 140 838 Total 1,162 453 417 390 390 2,812

Pension expense Current service cost 468 100 272 100 100 1,040 Past service cost 0 0 222 0 0 222 Total 468 100 494 100 100 1,262

Total remuneration 2,645 1,063 1,405 1,000 999 7,112 Group management report

Table 26: Benefits granted to theE xecutive Board for financial year 2018 in accordance with the GCGC

Christoph Joachim Stephan Rickmann Antonius In EUR ’000s Vilanek Preisig Esch v. Platen Fromme Total Fixed remuneration 750 530 480 292 292 2,344 Fringe benefits 15 14 14 6 5 54 Total 765 544 494 298 297 2,398

One-year variable remuneration 500 400 200 146 146 1,392 Multi-year variable remuneration LTIP Programme 2 741 408 272 0 0 1,421 LTIP Programme 3 0 0 0 99 99 198 Total 1,241 808 472 245 245 3,011

Pension expense Current service cost 463 328 270 58 58 1,177 Total remuneration 2,469 1,680 1,236 601 600 6,586

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Table 27: Benefits received by theE xecutive Board in financial year 2019 in accordance with the GCGC

One-year variable remuneration 688 287 229 287 287 1,778 Multi-year variable remuneration LTIP Programme 2 5,421 0 0 0 0 5,421 LTIP Programme 3 0 0 0 0 0 0 Total 6,109 287 229 287 287 7,199

Pension expense Current service cost 468 100 272 100 100 1,040 Past service cost 0 0 222 0 0 222 Total 468 100 494 100 100 1,262

Group management report Total remuneration 7,592 897 1,217 897 896 11,499

Table 28: Benefits received by theE xecutive Board in financial year 2018 in accordance with the GCGC

One-year variable remuneration 572 457 229 167 167 1,592 Multi-year variable remuneration LTIP Programme 2 0 0 0 0 0 0 LTIP Programme 3 0 0 0 0 0 0 Total 572 457 229 167 167 1,592

Pension expense Current service cost 463 328 270 58 58 1,177 Total remuneration 1,800 1,329 993 523 522 5,167

REMUNERATION ARRANGEMENTS IN THE EVENT OF Arrangements for the former Executive Board members A TERMINATION OF EMPLOYMENT Eckhard Spoerr, Axel Krieger and Eric Berger: The remuneration arrangements in the event of premature termination of employment contracts and pension plans ■ Upon reaching the age of 60, the above-mentioned mem- are as follows: bers of the Executive Board shall receive a retirement pension amounting to 2.5 per cent of their last annual fixed salary for each year commenced on the Executive Board of the company or its legal predecessor freenet.de AG, to a maximum of one-third of the last annual fixed salary (guaranteed pension).

freenet AG | Annual Report 2019 Group management report | Corporate governance 101

■ Surviving dependant pension for the spouse or life com- A five-year target agreement was signed. If the service con- panion and orphan’s pension for any children until the tract ends prematurely due to termination, cancellation or end of schooling or vocational training, terminating at otherwise, or his appointment to the position is revoked, the latest when they reach the age of 27, to a maximum Mr Vilanek is entitled to the payout of the long-term incen- total amount of the guaranteed pension. tive account at the time of termination, provided it shows a positive balance. Provided that the termination of the ser- Arrangements for former Executive Board member Joachim vice contract on the part of the company is not for good Preisig: cause pursuant to section 626 BGB, or that the revocation of his appointment to the position is not connected to the ■ Upon reaching the age of 60, Mr Preisig shall receive a termination of the service contract on the part of the com- retirement pension amounting to 2.5 per cent of his last pany, for which there is good cause under section 626 BGB, annual fixed salary for each year commenced on the Exec- or if the contract is terminated by the member of the Execu- utive Board of the company or the former debitel AG, to tive Board, or if the service contract terminates prematurely a maximum of one-third of the last annual fixed salary due to permanent incapacity to serve, or due to the death (guaranteed pension). of the member of the Executive Board, or if the service con- ■ Surviving dependant pension for the spouse or life com- tract is terminated prematurely by mutual consent, provided panion and orphan’s pension for any children until the that the cancellation is not made in order to avoid a termi- end of schooling or vocational training, terminating at nation of the service contract by the company, for which the latest when they reach the age of 27, to a maximum an important reason pursuant to section 626 BGB exists, Group management report total amount of the guaranteed pension. the number of phantom shares in the long-term incentive ■ Upon reaching the age of 60, Mr Preisig shall receive a account is added to the number of phantom shares result- pension from the Debitel pension fund which is calcu- ing from the achievement of the target agreement for the lated according to legal requirements; the guaranteed current financial year. pension is thus calculated on a pro rata basis (monthly retirement pension commitment of 9,333.00 euros) in For Executive Board member Stephan Esch, the following line with the actual length of service. All claims of Mr arrangement applied from 1 January 2015 (agreement dated Preisig, his spouse or a domestic partner with rights as 26 February 2014) until 31 December 2019: beneficiary, and any surviving dependants from the debitel pension fund shall be offset against all aforemen- ■ Upon reaching the age of 60, Mr Esch shall receive a tioned claims arising from the contract of employment retirement pension amounting to 2.5 per cent of his last with freenet AG. annual fixed salary for each year commenced on the Executive Board of the company or its legal predeces- For Chief Executive Officer Christoph Vilanek, the following sor freenet.de AG, to a maximum of 40 per cent of the arrangement has applied since 1 January 2019: last annual fixed salary (guaranteed pension). ■ Surviving dependant pension for the spouse or life com- ■ Upon reaching the age of 60, Mr Vilanek shall receive a panion and orphan’s pension for any children until the retirement pension amounting to 2.7 per cent of his last end of schooling or vocational training, terminating at annual fixed salary for each contract year commenced the latest when they reach the age of 27, to a maximum on the Executive Board of the company, to a maximum total amount of the guaranteed pension. of 35 per cent of the last annual fixed salary (maximum ■ A five-year target agreement was signed. If the service pension). contract ends due to expiry of term, termination, can- ■ Surviving dependant pension for the spouse or life com- cellation or otherwise, or his appointment to the posi- panion and orphan’s pension for any children until the tion is revoked, Mr Esch is entitled to the payout of the end of their schooling or vocational training, terminat- long-term incentive account at the time of termination, ing at the latest when they reach the age of 25, to a max- provided it shows a positive balance. Provided that the imum total amount of the guaranteed pension or the termination of the service contract on the part of the value of pension entitlements accrued at the time of Mr company is not for good cause pursuant to section 626 of Vilanek’s death. the German Civil Code (Bürgerliches Gesetzbuch–BGB), or that the revocation of his appointment to the position is not connected to the termination of the service contract on the part of the company, for which there is good cause under section 626 BGB, the number of phantom

Annual Report 2019 | freenet AG 102 Group management report | Corporate governance

shares in the long-term incentive account is added to the 626 BGB exists, the number of phantom shares in the long- number of shares that result from the Group EBITDA for term incentive account is added to the number of phantom the current financial year. shares resulting from the achievement of the target agreement for the current financial year. For Executive Board member Antonius Fromme, the following arrangement has applied since 1 June 2018: For Executive Board member Ingo Arnold, the following arrangement has applied since 1 January 2019: A three-year target agreement was signed. If the service contract ends prematurely due to termination, cancellation or A three-year target agreement was signed. If the service otherwise, or his appointment to the position is revoked, contract ends prematurely due to termination, cancellation Mr Fromme is entitled to the payout of the long-term incen- or otherwise, or his appointment to the position is revoked, tive account at the time of termination, provided it shows a Mr Arnold is entitled to the payout of the long-term incen- positive balance. Provided that the termination of the service tive account at the time of termination, provided it shows a contract on the part of the company is not for good cause positive balance. Provided that the termination of the ser- pursuant to section 626 BGB, or that the revocation of his vice contract on the part of the company is not for good appointment to the position is not connected to the termi- cause pursuant to section 626 BGB, or that the revocation nation of the service contract on the part of the company, of his appointment to the position is not connected to the for which there is good cause under section 626 BGB, or if termination of the service contract on the part of the com- the contract is terminated by the member of the Executive pany, for which there is good cause under section 626 BGB, Group management report Board, or if the service contract terminates prematurely due or if the contract is terminated by the member of the Execu- to permanent incapacity to serve, or due to the death of the tive Board, or if the service contract terminates prematurely member of the Executive Board, or if the service contract is due to permanent incapacity to serve, or due to the death terminated prematurely by mutual consent, provided that of the member of the Executive Board, or if the service con- the cancellation is not made in order to avoid a termination tract is terminated prematurely by mutual consent, provided of the service contract by the company, for which an import- that the cancellation is not made in order to avoid a termi- ant reason pursuant to section 626 BGB exists, the number of nation of the service contract by the company, for which phantom shares in the long-term incentive account is added an important reason pursuant to section 626 BGB exists, to the number of phantom shares resulting from the achieve- the number of phantom shares in the long-term incentive ment of the target agreement for the current financial year. account is added to the number of phantom shares resulting from the achievement of the target agreement for the For Executive Board member Rickmann von Platen, the fol- current financial year. lowing arrangement has applied since 1 June 2018: There are no service contracts with any subsidiaries of A three-year target agreement was signed. If the service freenet AG. contract ends prematurely due to termination, cancellation or otherwise, or his appointment to the position is revoked, SUPERVISORY BOARD REMUNERATION Mr von Platen is entitled to the payout of the long-term The Supervisory Board’s remuneration is governed by the incentive account at the time of termination, provided it articles of association and consists of three components: shows a positive balance. Provided that the termination of the service contract on the part of the company is not for ■ Basic remuneration good cause pursuant to section 626 BGB, or that the revo- ■ Attendance fees cation of his appointment to the position is not connected ■ Performance-related remuneration to the termination of the service contract on the part of the company, for which there is good cause under section 626 The Supervisory Board’s members receive from the company BGB, or if the contract is terminated by the member of the fixed basic remuneration of 30,000 euros for each full finan- Executive Board, or if the service contract terminates pre- cial year of their Supervisory Board membership. maturely due to permanent incapacity to serve, or due to the death of the member of the Executive Board, or if the The chairperson of the Supervisory Board receives dou- service contract is terminated prematurely by mutual con- ble this amount, the vice chairperson one-and-a-half times sent, provided that the cancellation is not made in order this amount. to avoid a termination of the service contract by the company, for which an important reason pursuant to section

freenet AG | Annual Report 2019 Group management report | Corporate governance 103

In addition, every Supervisory Board member receives an For their activities during financial year 2019, the members attendance fee of 1,000 euros for each Supervisory Board of the company’s Supervisory Board received fixed remuner- meeting that he/she attends. Supervisory Board members ation of 405 thousand euros plus attendance fees amount- who are members of a Supervisory Board committee – with ing to 82 thousand euros. In addition, performance-related the exception of the committee constituted in accordance remuneration of 405 thousand euros was also expensed. with section 27 (3) of the German Co-determination Act The extent to which this performance-related remuneration (Mitbestimmungsgesetz) – receive an additional attendance will be paid out depends on the profit appropriation reso- fee of 1,000 euros for each meeting of the respective com- lution for the financial year 2019. The aggregate expenses mittee that they attend. The committee chairperson receives for Supervisory Board activities thus amounted to 892 thou- double this amount. sand euros.

In a voluntary restriction imposed on its own activities, the Furthermore, Supervisory Board members are reimbursed Supervisory Board has decided that no remuneration shall for expenses incurred in connection with the performance be payable for participation in telephone meetings of the of their official duties, as well as for value added tax. Supervisory Board or its committees or for participation by telephone in meetings requiring physical attendance. No loans were extended to any of the Supervisory Board members and no guarantees or other warranties were pro- After the end of each financial year, the Supervisory Board’s vided for the Supervisory Board members. members also receive variable, performance-related remu- Group management report neration in the amount of 500 euros for each 0.01 euro Individualised figures for the last two financial years are dividend in excess of 0.10 euros per no-par-value share in the shown in the following tables. Please note that rounding dif- company, which is distributed to shareholders for the finan- ferences may result from the format used for presenting sub- cial year ended. The amount of the remuneration is limited totals and sum totals; this is because the figures have been to the amount owed as fixed remuneration. The chairperson rounded to one position after the decimal point. of the Supervisory Board receives double this amount, the vice chairperson one-and-a-half times this amount.

Table 29: Remuneration for financial year 2019

Performance- Basic related In EUR ’000s remuneration Attendance fees remuneration Total Active members Prof. Dr Helmut Thoma 60.0 12.0 60.0 132.0 Knut Mackeprang 1 45.0 6.0 45.0 96.0 Claudia Anderleit 1 30.0 5.0 30.0 65.0 Thorsten Kraemer 30.0 5.0 30.0 65.0 Marc Tüngler 30.0 7.0 30.0 67.0 Robert Weidinger 30.0 13.0 30.0 73.0 Sabine Christiansen 30.0 5.0 30.0 65.0 Thomas Reimann 1 30.0 8.0 30.0 68.0 Fränzi Kühne 30.0 4.0 30.0 64.0 Theo-Benneke Bretsch 1 30.0 4.0 30.0 64.0 Bente Brandt 1 30.0 8.0 30.0 68.0 Gerhard Huck 1 30.0 5.0 30.0 65.0 Total 405.0 82.0 405.0 892.0

1 Employee representative in accordance with section 7 (1) clause 1 no. 1 Co-determination Act (Mitbestimmungsgesetz – MitbestG) of 4 May 1976.

Annual Report 2019 | freenet AG 104 Group management report | Corporate governance

Table 30: Remuneration for financial year 2018

Performance- Basic related In EUR ’000s remuneration Attendance fees remuneration Total Active members Prof. Dr Helmut Thoma 60.0 24.0 60.0 144.0 Knut Mackeprang 1 45.0 12.0 45.0 102.0 Claudia Anderleit 1 30.0 8.0 30.0 68.0 Thorsten Kraemer 30.0 8.0 30.0 68.0 Marc Tüngler 30.0 9.0 30.0 69.0 Robert Weidinger 30.0 14.0 30.0 74.0 Sabine Christiansen 30.0 7.0 30.0 67.0 Thomas Reimann 1 30.0 7.0 30.0 67.0 Fränzi Kühne 30.0 4.0 30.0 64.0 Theo-Benneke Bretsch 1 18.7 3.0 18.8 40.5 Bente Brandt 1 18.7 6.0 18.8 43.5 Gerhard Huck 1 18.7 5.0 18.8 42.5 371.1 107.0 371.4 849.5 Group management report Former members Ronny Minak 1 11.4 3.0 11.3 25.7 Michael Stephan 1 11.4 3.0 11.3 25.7 Gesine Thomas 1 11.4 2.0 11.3 24.7 34.2 8.0 33.9 76.1 Total 405.3 115.0 405.3 925.6

1 Employee representative in accordance with section 7 (1) clause 1 no. 1 Co-determination Act (Mitbestimmungsgesetz – MitbestG) of 4 May 1976.

freenet AG | Annual Report 2019 STATEMENTS FINANCIAL D CONSOL ATED ATED N Consolidated income statement Independent A Responsibility st Consolida Consolida Consolida Consolida F C otes tothec I ONSO N A ted statement offlows cash ted statement of changes inequity ted balance sheet ted statement of comprehensive income N onsolidated financialstatements uditor’ atement CIAL L s Report ID

S T

AT D

I- M

EN T

10 209 208 116 114 110 108 107 106 5

Consolidated financial statements Consolidated financial statements Weighted average (diluted) numberof inthousand shares outstanding Weighted average (basic) numberof inthousand shares outstanding Consolidated interests profit tonon-controlling attributable Earnings pershare inEUR (diluted) Consolidated profit toshareholders attributable of freenet AG Income taxes Profit orloss of equity-accounted investments Other operating expenses Earnings pershare inEUR (basic) Consolidated profit Earnings before taxes Financial result Other financial result EBIT2 Personnel expenses R 2 1 Cost of materials capitalised Other ownwork Other operating income In EUR'000s/as indicated 106 for the period from 1 January to from 31 December 2019 1January for period the Interest andsimilarexpenses Depreciation, andimpairment amortisation Interest andsimilarincome EBITDA1 f INCOME STATEMENT CONSOLIDATED

reenet AG

evenue EBI taxes. financial result and income and impairment, amortisation depreciation, taxes, interest, before earnings represents EBITDA Thereof from share of profit orloss Thereof from subsequent accounting from purchase price allocation Thereof onfinancialassetsand lossallowances contract Thereof onfinancialassetsand assets withoutlossallowances contract T represents earnings before financial result and income taxes. financial result and income before earnings T represents

Annual Report 2019 Conso lidat e d f

i n a n cial s t N at 14.2 14.1 ote 24 24 24 24 13 17 10 12 12 11 e 8 7 6 5 4 9 m en t s

- |

- - 281,017 31.12.2019 Consolidated income statement - 1.1.2019 – 34,595 19,966 39,482 2,932,544 2,036,334 - - - - 184,732 238,078 269,954 426,795 - - 128,011 128,011 190,899 320,499 236,450 156,841 31,876 - 14,629 20,258 67,276 53,346 56,699 6,167 9,573 1.49 1.49 621 - - - 314,987 - 31.12.2018 44,343 19,233 46,666 1.1.2018 – 1,993,739 2,897,466 - - - - 212,163 234,002 311,988 441,184 - - - - 128,011 128,011 223,138 361,653 219,700 129,196 100,704 77,986 25,110 10,975 21,839 47,218 56,042 18,106 1.74 1.74 164 Other shares of theprofit orloss of equity-accounted investments Change infair valueof investments inequity instruments statement infuture periods Other comprehensive income/to bereclassified totheincome non-controlling interestsnon-controlling Consolidated comprehensive total income to attributable of freenet AG Consolidated comprehensive total income toshareholders attributable Consolidated totalcomprehensive income Other comprehensive income accounting for pensionplansacc.toIAS 19(2011) Recognition of actuarialgainsandlossesarisingfrom the Income tax recognisedIncome tax inothercomprehensive income equity-accounted investments Currency translation differences from subsequent accounting for Currency translation differences statement infuture periods Other comprehensive income/not tobereclassified totheincome C In EUR'000s to from 31 December 2019 1January for period the Income tax recognisedIncome tax inothercomprehensive income Conso CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME STATEMENT CONSOLIDATED onsolidated profitonsolidated lidat e d f i n a n cial s t at e m en t s

Consolidated statement of comprehensive income N 17.1 17.1 ote 29 Annual Report 2019 31.12.2019 1.1.2019 – 250,570 184,732 - 256,737 65,838 63,920 - - 74,334 11,539 1,918 1,924 2,388 6,167 1,263 - 29 23

freenet AG 31.12.2018 - - 1.1.2018 – - 119,864 125,091 212,163 - 103,274 127,287 92,299 10,975 5,227 4,604 2,156 - - 769 688 809 107 65

Consolidated financial statements Consolidated financial statements Liquid assets Other financialassets Other receivables andotherassets Trade accounts receivable Current assets income tax Inventories Current assets Contract acquisition costs Other financialassets Other receivables andotherassets Trade accounts receivable Deferred assets income tax Equity-accounted investments Property, plantandequipment Goodwill Lease assets N Intangible assets Intangible In EUR'000s as of 31 December 2019 108 f ASSETS CONSOLIDATED BALANCE SHEET reenet AG on-current assets

Annual Report 2019 Conso lidat e d f i n a 15, 16,39 15, 16,39 n cial 15, 16 N 2.5 ote 22 21 21 21 23 20 19 21 21 21 18 17 s t at e m en t 31.12.2019 ,3,9 4,634,652 4,839,597 ,5,2 3,885,096 4,154,328 s 1,383,474

451,964 685,269 | 133,692 201,734 225,753 297,240 268,480 122,921 130,226 785,637 143,830 501,878

46,187 75,819 68,678 Consolidated balance sheet 2,084 31.12.2018 1,380,056 749,556 126,332 226,394 253,914 105,965 304,238 126,218 128,023 158,094 811,808 398,824 525,355 34,905 52,480 2,046 0 Other provisions Borrowings Current liabilities income tax Other financialliabilities Other liabilitiesanddeferrals Trade accounts payable Lease liabilities Current liabilities Other provisions Pension provisions Borrowings Other financialliabilities Other liabilitiesanddeferrals Lease liabilities Non-current liabilities Cumulative othercomprehensive income Non-controlling interestsNon-controlling inequity Capital reserve Capital Equity attributabletoshareholders of freenet AG Share capital E Consolidated profits netretained In EUR'000s EQUITY ANDEQUITY LIABILITIES Conso quity lidat e d f i n a n cial

s t at e m en t s

Consolidated balance sheet 2.5, 28 2.5, 28 N 24.3 24.5 24.2 24.1 24.4 ote 30 28 27 26 26 26 30 29 28 26 26 Annual Report 2019 31.12.2019 ,3,9 4,634,652 1,095,700 4,839,597 1,338,296 ,7,0 2,258,199 2,179,700 ,2,0 1,280,753 1,321,601 ,1,4 1,260,601 1,312,346 1,428,009 - 265,610 402,175 465,230 107,378 473,272 737,536 128,061 521,031 80,004 16,740 43,991 64,546 41,206 98,787 31,048 74,282 9,255

| freenet AG 31.12.2018 1,699,424 - 436,343 523,174 306,638 115,922 737,536 128,061 535,124 140,120 23,476 26,818 34,722 51,167 47,042 89,173 20,152 109 0 0

Consolidated financial statements Consolidated financial statements 1 comprehensive income As of 31.12.2018Consolidated total income Consolidated comprehensive total Subtotal: Consolidated profit Dividend payment As of 1.1.2018restated Reclassification and IFRS9at Sunrise Effects of thetransitiontoIFRS15 and IFRS9at freenet Effects of thetransitiontoIFRS15 for the period from 1 January to from 31 December 2018 1January for period the 110 For further details, please refer to our explanations in note 24, Equity. to explanations refer our please details, further For As of 1.1.2018asreported In EUR’000s f CONSOLIDATED STATEMENT CHANGESOF IN EQUITY STATEMENT CONSOLIDATED

reenet AG Figures are shown offset against income tax recognised in other comprehensive income. comprehensive other in recognised tax income against offset shown are Figures equity-accounted investments1 from subsequent accounting for Foreign currencytranslation Foreign currencytranslation1 and lossesacc.toIAS19(2011)1 Recognition of actuarialgains investments1 loss of equity-accounted Other shares of theprofit or ments inequity instruments1 Change infair valueof invest-

Annual Report 2019 Conso S hare capital Capital r Capital hare capital 2,6 737,536 128,061 2,6 737,536 128,061 2,6 737,536 128,061 lidat e 0 0 0 0 0 0 0 0 0 0 0 d f i n a n cial eserve s t at 0 0 0 0 0 0 0 0 0 0 0 e m en t s Revaluation

Consolidated statement of changes inequity reserve - 164 164 0 0 0 0 0 0 0 0 0 0 0 0

differences translation translation Currency Currency 943 255 255 688 688 0 0 0 0 0 0 0 0 0

differences from

investments subsequent subsequent accounting accounting translation translation for equity- acc - - Currency Currency - 11,956 11,956 ounted ounted 7,422 4,534 4,534 0 0 0 0 0 0 0 0 0 Change in fair Change infair investments instruments instruments - - - 125,512 in equity in equity 125,348 125,348 value of value of - - 164 164 0 0 0 0 0 0 0 0 0 Cumulative othercomprehensive income

in accordance Revaluation with IAS19 - - - 21,083 20,548 20,548 reserve reserve - - 535 535 0 0 0 0 0 0 0 0 0

of equity-account the profit or loss the profit orloss ther shares of Other shares of ed investments 29455141,260,601 535,124 12,954 21753241,368,545 523,204 12,157 21756431,431,774 586,433 12,157 9 2,3 103,274 223,138 797 797 0 0 0 2,3 223,138 223,138 0 0 0 0 0 0 -

Consolidated net Consolidated net retained profits - - 211,218 70,368 7,139 0 0 0 0 0 0

E to shareholders of to shareholders of quity attributable quity attributable freenet AG - - - 125,348 211,218 70,368 4,534 7,139 - 535 688 797 0

interests in interests in controlling controlling - - 0121,280,753 20,152 1171,399,672 31,127 1171,462,901 31,127 10,975 095212,163 10,975 equity N on- 0 0 0 0 0 0 0 0 0

- - - 125,348 211,218 92,299 70,368 E 4,534 7,139 - quity 535 688 797 0 1 comprehensive income As of 31.12.2018Consolidated total income Consolidated comprehensive total Subtotal: Consolidated profit Dividend payment As of 1.1.2018restated Reclassification and IFRS9at Sunrise Effects of thetransitiontoIFRS15 and IFRS9at freenet Effects of thetransitiontoIFRS15 As of 1.1.2018asreported In EUR’000s to from 31 December 2018 1January for period the CONSOLIDATED STATEMENT CHANGESOF IN EQUITY STATEMENT CONSOLIDATED Figures are shown offset against income tax recognised in other comprehensive income. comprehensive other in recognised tax income against offset shown are Figures equity-accounted investments1 from subsequent accounting for Foreign currencytranslation Foreign currencytranslation1 and lossesacc.toIAS19(2011)1 Recognition of actuarialgains investments1 loss of equity-accounted Other shares of theprofit or ments inequity instruments1 Change infair valueof invest- hare capital Capital reserve Capital Share capital 2,6 737,536 128,061 2,6 737,536 128,061 2,6 737,536 128,061 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Revaluation reserve - 164 164 0 0 0 0 0 0 0 0 0 0 0 0

differences translation translation Currency Currency 943 255 255 688 688 0 0 0 0 0 0 0 0 0

differences from

investments subsequent subsequent accounting accounting translation translation for equity- accounted accounted - - Currency Currency - 11,956 11,956 7,422 4,534 4,534 0 0 0 0 0 0 0 0 0

Conso Change in fair Change infair investments instruments instruments - lidat - - 125,512 in equity in equity 125,348 125,348 value of value of - - 164 164 e d 0 0 0 0 0 0 0 0 0 f Cumulative othercomprehensive income

i n a n in accordance cial Revaluation with IA - - - 21,083 20,548 20,548 reserve reserve s - - t S at 535 535 19 0 0 0 0 0 0 0 0 0 e

m of equity-account en the profit or loss the profit orloss O ed investments t ther shar s

Consolidated statement of changes inequity 29455141,260,601 535,124 12,954 1,368,545 523,204 12,157 1,431,774 586,433 12,157 es of es of 9 2,3 103,274 223,138 797 797 0 0 0 223,138 223,138 0 0 0 0 0 0 -

Consolidated net Consolidated net retained profits - - 211,218 70,368 7,139 0 0 0 0 0 0

E to shareholders of to shareholders of quity a freenet AG ttributable ttributable - - - 125,348 211,218 70,368 7,139 4,534 - 535 688 797 0

Annual Report 2019 interests in interests in contr - - 0121,280,753 20,152 1,399,672 31,127 1,462,901 31,127 10,975 212,163 10,975 equity olling olling N on- 0 0 0 0 0 0 0 0 0

freenet AG - - - 125,348 211,218 70,368 92,299 E 7,139 4,534 - quity 535 688 797 111 0

Consolidated financial statements Consolidated financial statements As of 1.1.2019asreported freenet Effects of thetransitiontoIFRS16, In EUR’000s for the period from 1 January to from 31 December 2019 1January for period the 112 As of 1.1.2019restated Dividend payment Deconsolidation of subsidiaries subsidiaries ofin connectionwiththesale Derecognition of optionliabilities Consolidated profit f income Consolidated comprehensive total Subtotal: As of 31.12.2019 1 CONSOLIDATED STATEMENT CHANGESOF IN EQUITY STATEMENT CONSOLIDATED

reenet AG Figures are shown offset against income tax recognised in other comprehensive income. comprehensive other in recognised tax income against offset shown are Figures ments inequity instruments1 Change infair valueof invest- investments1 loss of equity-accounted Other shares of theprofit or and lossesacc.toIAS19(2011)1 Recognition of actuarialgains Foreign currencytranslation1 equity-accounted investments1 from subseq Foreign currencytranslation

uent accounting for Annual Report 2019 Conso S hare capital Capital r Capital hare capital 2,6 737,536 128,061 2,6 737,536 128,061 2,6 737,536 128,061 lidat e 0 0 0 0 0 0 0 0 0 0 0 d f i n a n cial eserve s t at 0 0 0 0 0 0 0 0 0 0 0 e m en t s

differences translation translation |

Currency Currency Consolidated statement of changes inequity 943 943 966 23 23 0 0 0 0 0 0 0 0 0

differences from investments subsequent subsequent accounting accounting translation translation for equity- acc Currency Currency - - - ounted ounted 7,422 7,422 5,527 1,895 1,895 0 0 0 0 0 0 0 0 0

Change in fair Change infair

investments instruments - - - 125,512 125,512 in equity in equity 52,304 value of value of 73,208 73,208 0 0 0 0 0 0 0 0 0

Revaluation reserve Cumulative othercomprehensive income in accordance with IAS19 - - - 21,083 21,083 - - 29,127 8,044 8,044 0 0 0 0 0 0 0 0 0

of equity-accounted the profit or loss the profit orloss ther shares of Other shares of investments 12,954 12,954 - - 11,710 1,244 1,244 0 0 0 0 0 0 0 0 0

Consolidated net Consolidated net retained profits - 535,124 534,350 521,031 211,218 190,899 190,899 7,000 - 774 0 0 0 0 0 0

E to shareholders of to shareholders of quity attributable quity attributable 1,260,601 1,259,827 freenet AG - 1,312,346 211,218 256,737 190,899 - - 73,208 1,244 8,044 7,000 1,895 - 774 23 0

interests in interests in controlling controlling 20,152 20,152 - - - equity 9,255 4,730 6,167 6,167 N on- 0 0 0 0 0 0 0 0

1,321,601 1,280,753 1,279,979 - 211,218 184,732 250,570 - - - 73,208 E 4,730 1,244 8,044 7,000 1,895 - quity 774 23 1 As of 31.12.2019 income Consolidated comprehensive total Subtotal: Consolidated profit subsidiaries ofin connectionwiththesale Derecognition of optionliabilities Deconsolidation of subsidiaries Dividend payment As of 1.1.2019restated freenet Effects of thetransitiontoIFRS16, As of 1.1.2019asreported In EUR’000s to from 31 December 2019 1January for period the CONSOLIDATED STATEMENT CHANGESOF IN EQUITY STATEMENT CONSOLIDATED Figures are shown offset against income tax recognised in other comprehensive income. comprehensive other in recognised tax income against offset shown are Figures equity-accounted investments1 from subsequent accounting for Foreign currencytranslation Foreign currencytranslation1 and lossesacc.toIAS19(2011)1 Recognition of actuarialgains investments1 loss of equity-accounted Other shares of theprofit or ments inequity instruments1 Change infair valueof invest- hare capital Capital reserve Capital Share capital 2,6 737,536 128,061 737,536 737,536 128,061 128,061 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 differences translation translation Currency Currency 966 943 943 23 23 0 0 0 0 0 0 0 0 0

differences from investments subsequent subsequent accounting accounting translation translation for equity- accounted accounted Currency Currency - - - 7,422 7,422 5,527 1,895 1,895 0 0 0 0 0 0 0 0 0

Change in fair Change infair

investments instruments - - - 125,512 125,512 in equity in equity 52,304 value of value of 73,208 73,208 0 0 0 0 0 0 0 0 0

Conso Revaluation reserve Cumulative othercomprehensive income lidat in accordance with IA - - - 21,083 21,083 - - e 29,127 d 8,044 8,044 S f 19 i n 0 0 0 0 0 0 0 0 0

a n of equity-accounted cial the profit or loss the profit orloss O s ther shar investments t at e 12,954 12,954 - - 11,710 m 1,244 1,244 es of es of en 0 0 0 0 0 0 0 0 0 t

Consolidated statement of changes inequity Consolidated net Consolidated net retained profits - 534,350 535,124 521,031 211,218 190,899 190,899 7,000 - 774 0 0 0 0 0 0

E to shareholders of to shareholders of quity a 1,259,827 1,260,601 freenet AG ttributable ttributable - 1,312,346 211,218 256,737 190,899 - - 73,208 8,044 1,244 1,895 7,000 - 774 23 0

Annual Report 2019 interests in interests in contr 20,152 20,152 - - - equity 9,255 6,167 6,167 4,730 olling olling N on- 0 0 0 0 0 0 0 0

freenet AG 1,321,601 1,279,979 1,280,753 - 211,218 250,570 184,732 - - - 73,208 E 8,044 1,244 4,730 1,895 7,000 - quity 774 113 23

Consolidated financial statements Consolidated financial statements Restatements Earnings before interest andtaxes (EBIT) In EUR’000s 114 for the period from 1 January to from 31 December 2019 1January for period the Cash flows from operating activities Cash flows from investing activities Cash funds atend of period Cash funds atbeginning of period Net change funds incash f Cash flows fromactivities financing CONSOLIDATED STATEMENT FLOWS CASH OF STATEMENT CONSOLIDATED reenet AG Depreciation, andimpairmentof non-current amortisation assets Payments toacquire otherequity investments and intangible assets and intangible Payments toacquire property, plantandequipment Interest paid activities toinvesting notattributable orfinancing Increase capital innetworking Payments of otherfinancing costs investments Cash repayments of finance costs duetotheacquisition of otherequity of borrowings Cash repayments of finance costs duetotheprolongation Cash repayments of leaseliabilities Proceeds from newborrowings Proceeds from of otherequity sale investments Payments from deconsolidation of subsidiaries Proceeds/payments toacquire subsidiaries plant andequipment Proceeds from assetsandproperty, of disposal intangible Income from interest andotherfinancial result of contract acquisitionAmortisation costs Proceeds from repayment thecash of financialassetsunderleases Capitalisation of contractacquisitionCapitalisation costs Payments tocompany ownersandminorityshareholders Gain on disposal ofGain ondisposal non-current assets Payments intoequity of equity-accounted investments Dividends received from equity-accounted investments Cash repayments of borrowings Tax payments Gains on the sale ofGains onthesale subsidiaries

Annual Report 2019 Conso lidat e d f i n a n cial 19, 20,25,28, s t at e 29, 31 13, 18 m N 32.1 32.2 32.3 en ote 28 28 36 36 17 17 28 9 t s

Consolidated statement offlows cash 31.12.2019 1.1.2019 – - - - - 269,954 364,232 133,692 126,332 318,041 ------211,218 306,315 156,841 313,313 38,831 - - 14,940 74,603 31,000 45,155 48,012 30,554 49,376 41,462 7,360 4,553 2,408 1,220 1,108 3,052 - - - 363 173 66 0 0 0 0 0

31.12.2018 - - - 1.1.2018 – - - - - 311,988 328,870 126,332 322,816 196,484 192,251 333,103 ------r 332,302 211,218 277,746 336,622 129,196 376,303 321,973 estated - - 25,527 21,754 12,439 13,850 57,193 40,813 29,541 38,902 36,912 1,450 1,830 - 206 500 75 0 0 0 0 Cash repayments of leaseliabilities Proceeds from assetsandproperty, of disposal intangible plantandequipment 1 FCF In EUR’000s Composition of free ( flow cash In EUR’000s Composition of funds cash Payments toacquire property, plantandequipmentassets andintangible Cash flows from operating activities Liquid assets Conso

Free cash flow is an alternative performance measures that is defined in the “Corporate management” section of the Group management report. management Group the of section management” “Corporate the in defined is that measures performance alternative an is flow cash Free lidat e d f i n a n cial s t at e m en F t C s F

| )

1 Consolidated statement offlows cash Annual Report 2019 31.12.2019 31.12.2019 249,027 133,692 - - 364,232 133,692 74,603 45,155 4,553

| freenet AG 31.12.2018 31.12.2018 263,773 126,332 - - 328,870 126,332 13,850 21,754 57,193 115

Consolidated financial statements Consolidated financial statements 116 The consolidated financial statements are submitted to the Federal Gazette. Federal the to are submitted statements financial consolidated The statements. financial date consolidated as the sheet balance same as at the prepared have been They using accounting uniform policies. prepared were cial statements finan theconsolidated in included the companies of statements annualfinancial The fairvalue. at are shown financial assets that limitation the to certain basis – subject the on of cost historical prepared were statements financial consolidated The millions or million), (EUR of euros ’000s) as (EUR applicable. of euros in thousands stated are All amounts currency. functional the company’s euros, in prepared were statements financial consolidated The w 2019. company complied also as at 31 Union The European in the December as applicable (IFRIC) Committee pretations Inter Financial International Reporting of the interpretations the and (IASB) Accounting International Board Standards the promulgated by IFRSs the in accordancefinancial with for prepared year were 2019 statements financial consolidated The d and communications/mobile Internet mainly mobile on focuses and in Germany services multimedia and radio nications, telecommu provides Group The 7306. HRB under Court District Kiel with is and registered in 2005 founded company was Germany. The in Büdelsdorf, is headquartered (“freenet”), Group company of parent the the company”), AG (“the freenet 1.1 1 f FOR FINANCIAL 2019 YEAR STATEMENTS FINANCIAL CONSOLIDATED THE TO NOTES reenet AG i

i gital lifestyle. gital th the provisions of German commercial law to be applied in accordance with section 315e HGB. 315e in accordance section with applied commercial law to be provisions of German the th

BUSINESS ACTIVITY AND ACCOUNTING STANDARDS ACCOUNTING AND ACTIVITY BUSINESS GENERAL INFORMATION GENERAL

Annual Report 2019 Conso lidat e d f i n a n cial s t at e m en t s

| n otes totheconsolidated financialstatements - - - Various IAS 28 IFRIC 23 Uncertainty over Uncertainty Income Tax Treatments IFRIC 23 t right-of-use of the amount and asset carrying the Inmaterial to cases, this 16.C5(b) lease. in IFRS described tive approach FS1 Leases IFRS 16 IAS 19 asset and the lease liability in accordance with IAS 17 immediately before that date (IFRS 16.C8(b)). Consequently, the Consequently, 16.C8(b)). date that (IFRS 17 before immediately liability in lease accordance IAS the with and asset mi the of amount IASthe 17 in under lease finance as a classified was agreement lease a master 2018, at 31 December As 2018. as of 31 sheet December balance in the recognised were which leases provisions encumbered with for assets lease the netted of initial time at the application, and, 16.C10(b) IFRS under option of the use has made Group freenet The recognised. not were value is of low asset underlying the which for leases and In cent. per 2.5 cent 0.7 and per between varied used rates 2019, borrowing incremental the at 1January As are based. leases the whichrateson interest the determine cannot we as rates of interest, borrowing incremental maturity-specific by applying determined generally liability was right-of-use discounting lease of the of the The date at of the initial asset application. measurement the from excluded were costs initial direct 16.C10(d), IFRS by permitted As 2018. as at December 31 effect i. IFRS 16.C5(b), accordancein with approach retrospective modified the to apply elected Group freenet the initialOn application, assets. leased other and vehicles motor infrastructure, network Media and TV shop/store leases, leases, co- leases, Site identified: were lease of categories following The leases. finance and operating as classified were that arrangements of lessee measurement and recognition the on in particular impact requirements new the Group, freenet the In project. Group-wide of a 16 the course in of IFRS initially applying effects the analysed Group freenet The company. the on leases of existing impact the to assess reader the enable is to objective overriding The unchanged. remain virtually lessor at the of assets recognition the regarding regulations The for and assets leased low-value for permitted are expedients Practical leases. finance and leases operating between is made distinction No obligations. payment assumed liabilities right-of-use acquired and the the for for assets assets must lessee the all For leases, 16 relate lessee. to at the recognition by IFRS material introduced innovations The 2019.January 1 or after on starting periods for is effective Lease). This standard SIC-15 – Incentives) Leases SIC-27 and (Operating of a Form Legal of InvolvingTransactions the (Evaluating Substance the Contains aLease), an Arrangement whether 4(Determining IFRIC 17 interpretations as well as the IAS of leases recognition the regarding standard previous the 16 16 (Leases). replaces IFRS IFRS standard the issued 2016, IASB the In January ma 2019. infor following The 1January from applied to be required all accounting pronouncements has adopted Group The S Group: the on effects respective their 2019 and January 1 from mandatory is application whose (IFRIC) interpretations and (IAS/IFRS) standards modified or new the shows table following The solidated financial statements. Under the option in IFRS 16.5, short-term leases with a term of no more than twelve months twelve than more no of a with term short-term16.5, leases IFRS in option the Under statements. financial solidated Conso h tandard/Interpretation e lease liability at the date of initial application is therefore the carrying amount calculated when measuring the leased leased the measuring when calculated amount carrying liability date the ate the lease of initial is therefore application nimum lease obligation. In accordance with IFRS 16.C11, the freenet Group elected to also apply the modified retrospec modified the to apply also elected Group freenet the 16.C11, In accordance IFRS with nimum obligation. lease tion is provided on the new financial reporting standard IFRS 16 (Leases): IFRS standard financial reporting new the on istion provided lidat ac cordance with IFRS 16.C7, 2019 cordance IFRS the with in con financialbe restated for yearwill 2018 not information comparative e d (2015 Annual Improvements toIFRSs: Curtailment andSettlement Curtailment Amendment toIAS19:PlanAmendment, associates andjointventures Amendment toIAS28:Long-term interests in f

e. t e. i n he right-of-use assets and lease liabilities as at 31 December 2018 were measured using the leases in using leases the measured 2018 were liabilities right-of-use lease he and as at 31 December assets a

–2017 Cy n cial s l)–IR ,IR 1 A 2adIS2 01.01.19 cle) –IFRS3,11,IAS12and23 t at e m en t s

| n otes totheconsolidated financialstatements

E ffec 01.01.19 01.01.19 01.01.19 01.01.19 tive date Adopted by the Annual Report 2019 Commission 12.12.17 23.10.18 11.7Material effects 31.10.17 14.03.19 08.02.19 EU

sho rt-term leases. rt-term leases.

No material No material No material freenet AG pr re lo eviously eviously cognise E effects effects effects cation cation ffec None 117 ts - -

Consolidated financial statements Consolidated financial statements FS1 Insurance Contracts IFRS 17 IFRS 7 IFRS 9, Framework Conceptual In addition, IFRS 16 had the following material effects on the consolidated balance sheet as at 1 January 2019: January as at 1 balance sheet the consolidated on material following effects the 16 had IFRS In addition, 3 financial other liabilities (237.2 under bilities presented (23.0payable million millioneuros)accounts euros) trade as at and liathe time, same the dateAt the at of initial application. assets itemLease balance sheet new the to reclassified be were 2018 million as at 31 euros of 248.1 amount December in the equipment and plant as property, presented assets leased 118 shareholding of between 20 per cent and 50 per cent of the voting cent of the rights. per 50 cent and 20 per of between shareholding by accompanied a generally notcontrol, but influence has asignificant Group are all over the which entities Associates joint ventures. as them identified and joint arrangements its AG has reviewed freenet joint ventures. and joint operations in question: joint arrangement the resultingfrom obligations and rights the of form the on depending joint of arrangements, forms two defines 11 IFRS in note 37. HGB 315e accordance section with inmade disclosures the consult please AG’sstatements, financial in consolidated freenet list of all included companies a For Group. the by which all areas subsidiaries controlled companies include statements financial consolidated The 1.2 AmendmenttoIFRS3:Definition of aBusiness IAS 1,8 IFRS 3 S Group: the on effects 2019 in their financialrespective the year and mandatory yet notwas application whose (IFRIC) interpretations and (IAS/IFRS) standards modified or new the shows table following The AG. freenet of statements financial consolidated these on effect no or significant effect 2019 haveno January as at 1 applicable standards financial reporting other All f ■ ■ ■ ■ ■ ■ to the statement of cash flows, IFRS 16 did not have any effect on the amount of free cash flow. cash free of amount the on not have 16 did effect anyIFRS flows, of cash statement to the financial for year With regard 2019 by 43.3 millioneuros. reported EBITDA increased 16 therefore IFRS million euros. 368.1 liabilities and of 2019 equity will in result in an increase total assets/total 16 as at 1January to transition IFRS the Overall, reenet AG tandard/Interpretation

1 D Other provisions will decrease by 1.6 million euros due to lower provisions million contingent to for due losses lower by euros 1.6 provisions will decrease Other of line item370.5 amount separate the in a in millioneuropresented be time liabilitiesLease first will the for will by decline million profits) 0.8 euro (consolidatedEquity retained net in equity). 16sitioning recognised to IFRS tran of effect relating the to differences temporary for million taxes will (deferred by 0.2 euros rise assets tax Deferred leases. finance as classified subleases from of receivables million recognition will due the euros to 98.4 by increase financial assets Other of 269.3 amount in the million euros. assets, Lease line item, separate in a be recognised time first will the for leases as operating recognised previously Leases

ecember 2018 were reclassified to the new balance sheet item Lease liabilities as at 1 January 2019. itemLease liabilities January balance as sheet at 1 new the to reclassified 2018 were ecember BASIS OF CONSOLIDATION OF BASIS

Annual Report 2019 Benchmark Reform Amendments toIFRS9and7:Interest Rate for Financial Reporting Updating References totheConceptual Framework of Materiality Amendments toIAS1and8:Definition Conso lidat e d f i n

a n cial s t at e m en E ffec t s 01.01.21 01.01.20 01.01.20 01.01.20 01.01.20 tive date

| n otes totheconsolidated financialstatements Adopted by the Commission 15.01.20 29.11.19 29.11.19 Open Open EU

No material No material No material No material co E effects effects effects effects mplete mplete ffec None ts - - the Group. If the acquisition of a non-controlling interest results in a difference between the amount that is paid and the that paid and is amount the between in adifference results interest acquisition the If of anon-controlling Group. the of providers equity with are as transactions treated of control loss without interests non-controlling with Transactions amount. taking repurchase into changes accountthe and in possible any ratemethod interest using effective the cost at amortised measured date subsequently of exercise and expected the on amount repurchase estimated of the value r obligation financial liability the option relating the to In this case, is recognised. shareholders non-controlling to the able is which attribut equity shareholder, the non-controlling by the are retained risks and opportunities the If is recognised. obligation afinancial only option liability in relation the to cases, Insuch shareholders. non-controlling to the attributable equity Group’s sharethe of the in reduction in a corresponding this is reflected Group, freenet to the are transferred risks and opportunities the If are shares attributable. arising these risks from and opportunities how on depends options of the recognition companies, shares in Group further to tender shareholders non-controlling to are granted enable options When are incurred. they when as expenses are recognised Acquisition-related costs a company acquired in the interests non-controlling the basis an individual whether on decides Group acquisition,rate the corpo each For interests. of any minority extent of the irrespective value, fair at their separately 3.37 are disclosed by IFRS criterialiabilities recognition the contingentand liabilitiesmeet that assets, identifiable acquired company’s the All concerning acontingent liabilities consideration. and an agreement from result that assets of all recognised values fair the include acquisition the costs In addition, acquisition for issued purposes. and/or instruments incurred any acquired and equity liabilities the given, assets of the values fair sum of the by the of acquiring cost combination is abusiness determined The method. purchase Acquisition the on accounting is based sheet. balance the on separately are disclosed interests to non-controlling attributable Amounts criteria of control. of the more or to changes one have been there that are indications ifthere areassessment out AG carries freenet rights. minority enhanced or agreements voting Asituation rights as aresult of, of might control apply example, also for ant activities. import most company’s the to is direct able but voting cent of the rights per 50 than fewer company holds parent if the trol co of possibility the indicate that circumstances and any facts other ifapplicable, and, agreements, contractual other from rights of potential voting rights, however, impact is and given also existence to consideration the due exists, trol a situation of con whether to assess In order voting cent of the rights. per 50 than a share with of more associated normally power. level isof returns Control as a of result its the influence can and investment its returns from to variable is exposed over an investee, ifit has power entity to company to is has apply. ceased control another such said control The when time as of the are deconsolidated They Group. to the is transferred subsidiary over of control the possibility date the which on the from (full statements consolidation)effect financial with the time consolidated in first the for are included Companies 1.3 Sweden. Stockholm, AB, Nordic Networks Cloud The and Munich, GmbH, Germany Networks Cloud The entitiesGroup consisting the of Cloud The 2019to financialinclude In the year,expanded basiswas the of consolidation 2019.December ending on 31 period the for statements annualfinancial the (3) for HGB 264 section in specified will rules make exemption of the GmbH use Germany Networks Cloud The and GmbH Services TV Broadcast Media GmbH, G Shopping freenet GmbH, callmobile GmbH, klarmobil Vene GmbH, International GmbH, International Ojom tur GmbH, Medienagen Lorena iLove GmbH, digital GmbH, freenet GmbH, Energy freenet („GRAVIS“), mbH vertriebsgesellschaft IT für GmbH Stanniol GmbH, Shop mobilcom-debitel GmbH, Multimedia MobilCom tel GmbH, mobilcom-debi GmbH, Direkt freenet GmbH, directions new GmbH, 01050.com Datenkommunikations GmbH, freenet GmbH, Cityline freenet GmbH, freenet.de 01024 Telefond Conso e r m e recognised at fair value or on the basis of the percentage of net assets attributable to the acquiredcompany. to the attributable assets of net basis percentage of the the on or at value fair e recognised duces the equity attributable to the shareholders of freenet AG. The financial liability present The is initiallythe at measured AG. of freenet shareholders to the attributable equity the duces ntrol. The Group therefore also carries out an assessment to determine whether the prevailing situation the constitutes con whether to determine an assessment out carries also therefore Group The ntrol. bH, mobilcom-debitel Logistik GmbH, Taunus Beteiligungs GmbH, Media Broadcast GmbH, Media Broadcast Services Services Broadcast Media GmbH, Broadcast Media Taunus GmbH, GmbH, Logistik Beteiligungs mobilcom-debitel bH,

CONSOLIDATION PRINCIPLES lidat e d f i n a n cial s t at e m en t s

| n otes totheconsolidated financialstatements Annual Report 2019

PR , Gravis – Computer , Gravis

freenet AG st re ipulated sulting 119 ------

Consolidated financial statements Consolidated financial statements Investments in associates as well as joint ventures are disclosed in the consolidated financial statements using the equity equity using the statements financial consolidated in the as in well as joint ventures associates are disclosed Investments loss. or profit through immediately recognised shall over acquiree cost be of the value fair net in the liabilities contingentand liabilitiesacquisition Any excessthe at interestthe date.of assets, identifiable acquiree’s of the value fair net in interest the combination acquirer’s over business the of the cost excess of the as the is recognised Goodwill in equity. are recognised also interests of non-controlling disposal the upon occur which losses and equity. in Profits is recognised a difference such assets, net subsidiary’s of the amount share carrying in the corresponding 120 that are frequently discussed in the annual report. annual in the discussed frequently are that Group key financials the for figures bothare important 2019 in financialbecause the year.year added were disclosures These previous in the presented result operating to the euros), corresponding EBIT with thousand 311,988 year: previous euros; euros) (269,954 EBIT and thousand thousand 441,184 year: (426,795 previous subtotalstime euros; EBITDA for thousand first the for 2019 for shows statements financial consolidated in the income of comprehensive statement consolidated The 2019financial the year. for accounting policies applied new the 2018 financial year the and for applied accounting policies old the both explain sections following the In this regard, notes. of these accounting and standards, activity Business 1.1, to consistently refer year. note please applied previous to the changes, been the have Regarding ing generally policies account The statements. financial consolidated of these preparation the for applied accounting following were policies The 2 associates. and ventures joint for losses and profits elimination to the applies of intra-group same are eliminated. companies The consolidated the between liabilities and receivable accounts wellas trade as income and expenses revenue, losses, and profits Intra-group loss. or profit to equity from is reclassified income comprehensive in other recognised been previously had that loss or aprofit that This means liabilities. and assets related of the disposed directly company had parent as ifthe are recognised in relation that to income companycomprehensive other under shown all amounts addition, In loss. or in profit recognised over control acompany, is resulting difference loses the remaining and the Group at value fair share is the If remeasured venture. joint or associate the of behalf on payments made or obligations constructive or legal has incurred Group the that extent to only the recognised, for, are provided a liability and is losses to zero, additional is interest reduced Group’s the After losses. share of further its discontinues Group joint venture, the or associate in interest the ciate its a joint venture or exceeds or equals arising acquisition of an asso the from joint share ventures of and of associates losses separately. Group’s is the shown If not Goodwill associate. in the investment of the amount carrying the reduce received payments date of acquisition. Dividend of losses and profits share of the Group’s The Group. freenet to the company attributable respective at the inchanges equity of the proportion annually by the reduced or increased being investments of the amounts carrying the with method, f reenet AG

as sociates and joint ventures is recognised in the income statement as well as in other comprehensive income from the the from income as comprehensive well as in other statement income joint in ventures and the issociates recognised ACCOUNTING POLICIES

Annual Report 2019 Conso lidat e d f i n a n cial s t at e m en t s

| n otes totheconsolidated financialstatements re cognising - - ucts are delivered to the customer or the distributor. the or customer to the are delivered ucts insignificant amount. in insignificant this is revenue currently although in time, at apoint is recognised customers to end hardware delivering from revenue segment, Media and customer. to TV the Inthe is provided service at the which time at the is Revenue sector. recognised media and radio the in business users for solutions broadcast-related of service and operation the also by and fields T2 DVB- and TV IP in the customers to end of services rendering by the is generated segment Media and TV in revenue the The straight-line method. usingthe contract customer end associated the of term the average over loss or profit through likely recognised and value most their on item based as adeferred are recognised services purchased the customers, acquired newly the with ated gener revenue of future Group level the on also and base customer remaining Group’s in the acquiredcustomers newly the on commission depends of sales amount the whom for by dealers, provided services agency of particular case In the things. other among modifications, contract to due adjustments revenue timing and and recognition of revenue amount to the may changes respect with arise a result, As services. contractual different involving several arrangements multi-element with in connection particularly customer U of months).24 period over a services provision mobile overcommunications time of (e.g. satisfied obligations formance per hardware) mobile communications of and point delivery in time at a (e.g. satisfied obligations performance between is made Adistinction of asset. that control has obtained customer the once transferred to is have considered asset been An service (asset). promised or a good promised a transferring by satisfied obligation is performance the or as, when, identified obligation performance each for Finally, recognised be selling prices. must revenue basis relative stand-alone of the the on obligations performance separate to the allocated and determined be price) then must (the transaction obligations mance perfor those for agreed of consideration amount aggregate The contract. in the obligations performance the and customer the with the contract steps are identify to first the where model a multi-step on is based 15 IFRS under recognition Revenue w during period over as the revenue are recognised services communications by mobile generated charges The ing charges. roam and features connection and special for charges transmission) as well as data charges, nication of monthly consists revenue (voiceCommunications Mobile commu accessories. terminalsmobile and of sale the provision and charges one-off offer, on services communications of mobile range by the is generated segment Communications Mobile inRevenue the reporting): to refer note 3, please Segment segments, (for recognition revenue notes on of operating abreakdown Supplementary customers. corporate by for accounted remaining with the revenue customers, of end a large number from is revenue generated Group’s of the majority The activity. business normal of course in the services and of products sale the for received will or be, has that been, consideration of the value fair the s financial the consolidated in separately not yet but invoicedaccrued are rendered will the accrue company.to Services efit ben future that a economic probable it is reliably and sufficiently determined be can of revenue amount the that provided in full, rendered have been services the when is Revenue recognised period. ashort for services mainly provides Group The 2.1 Conso t n h atements. Revenue is disclosed net of value added tax, discounts granted and other price reductions. Revenue comprises comprises Revenue reductions. price other and granted discounts tax, added of value net is Revenue disclosed atements. ich the services are provided. Revenue from the sale of mobile terminals and accessories is recognised when the prod the when is recognised terminals accessories and of mobile sale the from Revenue are provided. services the ich der the new guidance, the amount of revenue recognised in many cases no longer matches the amount invoiced to amount the the matches longer no in many cases recognised of revenue amount the guidance, new the der

RECOGNITION OF REVENUE AND EXPENSES lidat e d f i n a n cial s t at e m en t s

| n otes totheconsolidated financialstatements Annual Report 2019

| freenet AG 121 ------

Consolidated financial statements Consolidated financial statements 31 December 2019, the remaining useful life of these trademarks was 134 months. 134 was 2019, trademarks remaining life31 of the these useful December date of sheet balance the On months. astraight-line on to 180 lives basis of 48 over anticipated their useful are amortised and their cost at historical carried are trademarks These terms. have definable hand, other the on trademarks, other The either. time of in terms considered life to had be useful limitation is in of no the to discernible of value relation and this asset reduction no if was chosen life useful indefinite The of impairment. are indications there annually whenever impairment or for but tested amortised thatnot life useful are with an indefinite are assets amount carrying asignificant with Trademarks 36. in accordance IAS with assets non-monetary for testing as well as note Impairment 16, goodwill and equipment, plant and property, assets, lease 15, assets, note Intangible refer to please breakdown, specific to the regard With gave that rise goodwill. the combination the to from a benefit to derive are which expected units generating cash of groups or units generating cash to those Itis allocated units. to generating cash is allocated goodwill thisFor purpose, cumulative impairment. original less cost at its is and measured of impairment, is an indication there whenever ayear once and at least impairment for is tested Goodwill 2.2 122 nine months. nine was 2019, recognised date rights of 31 remaining sheet life distribution balance the of the the December useful On (36 months). agreements underlying of the duration astraight-line on basis expected over the are amortised rights Distribution months. 228 and 108 2019, between of 31 relationships was remaining recognised the life customer December of the useful date sheet balance the On to 262 astraight-line of on 60 months. basis over aperiod relationships are amortised Customer using tostraight-line years seven the three method. likely of their lives of duration useful over the amortised costs development software Capitalised overheads. of relevant a team and development software of the costs personnel the example, for include, costs These demonstrated. be can bility feasi economic until and technical capitalised are not costs Development software”. generated “internally category in the assets as intangible are recognised the costs incurred, is greaterthe costs than benefit economic expected overall product’s the company,by thebe used if and can that product software to adefinable attributable are clearly costs the If incurred. year are in in the they which expensed are generally programs and/or in developing maintaining incurred software Costs to licences. ten for three years and software for years three is which generally lives, useful a straight-line on basis right-of-use and over are anticipated their amortised at and cost are shown assets software Licences, f reenet AG n y expenses incurred for services and fees during the production of the asset. They also contain an appropriate portion portion contain also an appropriate They asset. of the production during the fees and services for incurred y expenses

INTANGIBLE ASSETS

Annual Report 2019 Conso lidat e d f i n a n cial s t at e m en t s

| n otes totheconsolidated financialstatements co nstant nstant -

presented in the financial inresult. the presented is expense interest corresponding payment; lease of the portion principal by the liability is lease reduced the lease, of the end the to period the Over lease term. the to specific rate borrowing using incremental are measured the payments lease use), for available date is (the the made asset date commencement the which At on the incentives received. any lease less ce reasonably payments, index-based variable payments, lease by including fixed is determined value Present term. lease the over made to be required payments lease of the value present liability at the alease recognises as lessee Group the assets, other and vehicles motor infrastructure, network Media and TV shop/store leases, leases, co-location siteFor leases, leases. as are classified payments of series or a ASES payment a of time in for return period specified aparticular for right to an asset use 2.5.1 2.5 here. permitted are not of impairment as reversals to goodwill, This is applicable not cost. exceeding amortised not to afigure is reversed impairment asset’s the applies, longer no impairment for reason the If 36. year in accordance IAS with once a for impairment be tested must lives useful indefinite with assets intangible and Goodwill impaired. might be value (triggering events) circumstances asset’s changed the that indicate or if events out carried be must test impairment An value in use. the and sell, to less costs fairvalue, of asset’s higher the as is defined amount The amount. recoverable the exceeds amount carrying impaired ifthe considered are always assets Non-monetary 2.4 Leasehold improvements Telecommunications equipment andhardware IT equipment Motor vehicles Technical equipment andmachinery Buildings Asset lives: useful following the on based is generally equipment and plant of property, Depreciation applicable. where date adjusted and sheet as balance at each lives are reviewed economic useful and amounts residual carrying The immateriality. of grounds on disregarded were values any residual depreciation, of calculation the lives company. within the useful In expected assets’ to the correspond of assets depreciation the for lives assumed useful The impairments. ifapplicable, straight-line less at and, cost are measured depreciation equipment and plant Property, 2.3 T Conso he Group generally decides on a case-by-case basis whether assets are leased or purchased. Agreements that convey that the Agreements purchased. or are leased assets basis whether acase-by-case on decides generally Group he rtain extension options, exercise prices of purchase options and payments of penalties for terminating the lease early, terminating for lease the of penalties payments and options of purchase exercise prices options, extension rtain

LE IMPAIRMENT OF NON-MONETARY ASSETS PROPERTY, PLANT AND EQUIPMENT freenet as lessee as freenet lidat e d f i n a n cial s t at e m en t s

| n otes totheconsolidated financialstatements Annual Report 2019

10 to33 years |

3 to10 years 5 to15 years re 2to5 years freenet AG 3 to8 years U coverable coverable sef 6 years ul life 123

Consolidated financial statements Consolidated financial statements Total Right-of-use assets,other Right-of-use assets,motorvehicles Right-of-use infrastructure assets,network Right-of-use assets,co-location leases Right-of-use assets,shops/stores1 Total Other Motor vehicles infrastructureNetwork Co-location leases Shops Site leases is follows: as assets lease breakdown The liability, lease the using originally rate and interest but used. the right-of-use ratethe accountedadjusting are by also for achange from that result in an index-based asset modifications at date. that Lease is rate interest revised the and date term change in at of the the the amount same by the are adjusted right-of-use liability the lease the and changes, term asset lease the therefore and is exercised option an extension When concerned. asset leased life of the useful or, liability. lease lease in of the term the over normal the over ifshorter, Right-of-use the included are depreciated assets not date therefore and commencement the before at or lessee by the made payments any and lease asset the removing and in incurred to be costs by any costs, initial increased liability may and be lease direct of the amount the from all, of first is aright-of-use determined, Cost recognises also at cost. as lessee asset Group the lease, of the At commencement 124 in other operating expenses are significance. of minor expenses operating in other liabilities contained lease also in and the included not payments (0.3 million lease euros). variable assets The of low-value million relating to euros) leases relating (11.1 to short-term expense leases and expense include expenses operating Other In of right-of-use as follows: tion is down broken assets at 35.5 million 2019 in financial euros the year. are reported review,deprecia assets toyearthe under In lease Additions 1 R In f

reenet AG ight-of-use assets,site leases EU EU As of 31 December 2019, this item includes operating leases from subleasing of shop space to franchise partners in the amount of 32.8 million euros. million 32.8 of amount the in partners franchise to space shop of subleasing from leases operating includes item this 2019, 31 December of As R millions R millions

stor es

Annual Report 2019 Conso lidat e d f i n a n cial s t at e m en t s

| n otes totheconsolidated financialstatements 31.12.2019 452.0 110.5 237.2 12.7 10.7 79.8 1.1 sheet pursuantto O pening di 01.01.2019 smantling balanc I F 517.4 124.4 277.8 R 2019 70.7 17.6 12.6 83.4 S 10.5 21.1 30.6 1.6 16 5.4 1.0 2.1 e - were expensed as cost of materials or other operating expenses using the straight-line method over the duration of the lease. of the duration over using the straight-line the method expenses of materials operating as cost other or expensed were lessor) by the made account taking of incentive payments after net (possibly lease an with operating in connection made transferred. are asset leased the of ownership the with associated opportunities and risks significant all the whether on depending leases, finance or leases operating as either classified were into enters lessee as the Group the that Leases follows: as differed 2018 for methods measurement The recognised. liabilities currently of lease 431.9 millionthe to addition euros in outflows in result this cash would exercised, were exercised) to be certain reasonably not were they that concluded it was (because recognised currently not options extension event that In the amounted to 103.1 leases for million euros. In financial year 2019,outflows cash total Total More than5years Mor 1 year orless In liabilities: lease maturities of the of the breakdown following the liabilities We to lease provide on 17.2 amounted expense Interest period. million reporting in euros the less short-term leasesrecognised asotheroperating expenses plus finance leaseliabilities recognised as of 31December 2018 Discounted borrowingrate usingtheincremental asof thedate of initialapplicationof IFRS16 Oblig In 16: IFRS 2019 in accordance with liabilities as of 1January lease 17 recognised the with 2018 in accordance IAS with 31 December as of reported leases operating from reconciliation of future minimum the payments shows lease table following The Lease liabilitiesrecognised asof 2019 1January plus otheradjustments less low-valueleasesrecognised asotheroperating expenses Conso EU EU e than1year uptoandincluding5years R millions R millions ations under operating leases disclosed asof 31Decemberations underoperatingdisclosed 2018 leases lidat e d f i n a n cial s t at e m en t s

| n otes totheconsolidated financialstatements Annual Report 2019

31.12.2019 freenet AG Pa yments yments - 553.3 440.5 630.7 260.2 374.6 195.1 278.1 - 11.1 80.0 0.3 7.3 125

Consolidated financial statements Consolidated financial statements lease obligation. This is a master lease agreement with an infrastructure provider relating to the use of radio infrastructures infrastructures relating of radio use to the provider an infrastructure with agreement This is lease amaster obligation. lease theamount of minimum the in lease asfinance a was classified in financial agreement year lease Group 2016, master a cast Broad Media acquisition the with the of In connection financial in result. the recognised was instalments lease of the portion w Accordingly, lease. of the term liability arising lease life the the and the from useful normal of their ciated shorter over the are depre and minimum of payments, the value lease present the and asset leased of the value of fair lower at the ognised rec were leases finance under owner beneficial as the Group to the 17, attributable In accordance IAS with assets leased the 126 of 6.4 million euros is shown in other operating income in the 2019 in financial the income year. million operating in is other of 6.4 euros shown leases operating from income Lease partners. to franchise space shop of subleasing mainly from results and term lease the straight-lineon a loss or basis in profit isover recognised lessor is the Group the where leases operating from income Lease Unearned interest income F 2025 ff. 2024 2023 2022 2021 2020 In T is insignificant investment in amount. net of the measurement in the included not payments lease able i interest corresponding The segment. Media and in this contained item mainly of sitesables relate TV to in the subleases millioneuros). receiv 82.2 The 2019: (31December lease the in net investment equal the to at an amount financial assets I assets. other and vehicles motor space, shop segment, Media and of sites TV in the subleases under sor les is the Group freenet The unchanged. remain virtually lessor at the of assets recognition the regarding regulations The 2.5.2 2027. to until due run 31 areas, December other and locations radio (such masts) and and as towers f Receivables from finance leases n f al reenet AG uture (undiscounted) inflows cash h a come is presented in the financial result and amounted 2.0 to million amounted financialeuros in and financialresult in the year is2019.come presented relating Income vari to EU e future (undiscounted) cash inflows from finance leases are due as follows: as due are leases finance from inflows cash (undiscounted) future e s recognised and reduced by the repayment portion of the lease instalments that have already been paid. The interest The paid. have that been already instalments lease of the portion repayment by the reduced and s recognised ease transfers substantially all the risks and rewards, it is a finance lease. In this case, a receivable is recognised in other is recognised a receivable thiscase, In it islease. afinance rewards, and risks all the substantially transfers ease R millions

fr eenet as lessor as eenet

Annual Report 2019 Conso lidat e d f i n a n cial s t at e m en t s

| n otes totheconsolidated financialstatements 31.12.2019 88.8 82.2 - 18.8 11.9 12.3 13.8 15.3 16.7 6.6 ------t how determines Management to financial assets. manage the uses management that model business the and cial assets interest method. interest effective using the cost at measured amortised are subsequently they flows; cash contractual the to incollect order able receiv accounts trade holds Group The receivable. accounts trade as non-current are reported latter The date. sheet balance the after months twelve fall untildue not do which exceptionthose of the with assets, current as are classified They ness. of busi course ordinary in the provided services and goods for by customers owed are amounts Trade receivable accounts T months. original amaximum of three with term cial assets highly current liquid other finan and deposits demand comprising cash, equivalents cash consist and of cash Liquid assets Liquid assets categories: three following the in assets these classifies Group The 2.7.2 2.7.1 2.7 principles. Consolidation to refer note 1.3, please method, equity to the regard With accounting policies. Group’s the accordance with in prepared IFRSs accordancewith in statements financial consolidated venture’s or annual joint or basis associate’s of the the joint on ventures and in is associates recognised of investments amount carrying The 2.6 F 2025 ff. 2024 2023 2022 2021 2020 In follows: as due are leases operating non-cancellable from inflows cash (undiscounted) future The c financial and liabilities are financial assets of measurement, purposes entity. the For another for instrument equity or ity A fi ■ ■ ■ ■ The classification of financial assets and liabilities is based on the characteristics of the contractual cash flows of the the finan of flows cash thecontractual of the characteristics on and liabilities based is financialof assets classification The Conso h uture (undiscounted) inflows cash las

r ade accounts receivable accounts ade e financial assets and financial liabilities are classified upon financialinitial recognition. and liabilities are classified e financial assets EU Liabilities measured at amortised cost at amortised Liabilities measured income comprehensive other through at value fair measured Financial assets loss or profit through at value fair measured Financial assets cost at amortised measured assets Financial nancial instrument is any contract that simultaneously gives rise to a financial asset for one entity and a financial a and liabil entity one tofor gives rise afinancial asset simultaneously that is any contract nancial instrument

sified as follows: as sified R millions

FINANCIAL INSTRUMENTS IN AND SHARES JOINT VENTURES INTERESTS Fi classification and Definition lidat nancial assets measured at amortised cost e d f i n a n cial s t at e m en t s

| n otes totheconsolidated financialstatements Annual Report 2019

31.12.2019 freenet AG 16.2 0.4 0.7 1.3 2.9 4.6 6.3 127 - - - - -

Consolidated financial statements Consolidated financial statements Financial liabilities are based on contractual agreements regarding the payment of liquid assets or the rendering of other rendering the or of liquid assets payment the regarding agreements contractual Financial on liabilities are based 2.7.6 items. financial other and borrowings payable, accounts trade in the date are disclosed liabilities sheet balance as of the fina T The freenet Group carries trade accounts receivable held for trading purposes at fair value through profit or loss. These These loss. or profit through at value fair purposes trading for held receivable accounts trade carries Group freenet The receivable Trade accounts categories: two following the in assets these classifies Group The 2.7.3 i reported assets contract other collateral and trustees, from receivables receivables, lease includes This category standing. out amount principal the on payments exclusivelyconsisting interest and principal flows in result terms of cash contract the addition, In flows. cash the contractual of collecting purpose the for held are according to financial which assets model N 128 a managing for financial assets model business the on based is and initial financial on asset of is the tion recognition made classifica The (FVTOCI). income comprehensive other through fair value or at (FVTPL) loss or profit through at value fair either be recognised can expenses and income fairvalue, at measured are financial If assets at value. fair measured assets financialand cost amortised atmeasured financial assets categories: classification into are down broken two Financial assets loss. or profit through recognised being value changes with fair value in at measured not financialis asset if the amount initial the carrying decrease or increase costs acquisition. Transaction upon at value fair are measured Financial assets asset. the sell into or to buy an obligation enters Group whichdaythe on the i.e. date, trade the as at are recognised of financial assets sales and purchases Regular 2.7.5 financial assets. other in reported obligations pension non-current for as security serving securities and investments equity includes category This in this category. initial to upon recognition report chosen has irrevocably Group freenet the which purposes trading for held not are financial income comprehensive assets other through at value fair measured instruments equity Other O category: following the in assets these classifies Group The 2.7.4 arethis assigned category. to financial inassets other reported investments equity date, other reporting at the As income. comprehensive in changes inrecognise other value fair not to elected has Group the if loss or profit through at value fair instruments in equity company investments measures The O in note 33.6, Transfer factoring regarding of explanation financial to assets. refer the Please tution. option) to insti a credit sold upgrade (mobile phone arrangements multiple-element from receivable accounts trade include f n o reenet AG n he Group measures its non-derivative financial assets at amortised cost if the financial asset is held as part of a business ofa part as held financial is asset the if cost at amortised financial assets non-derivative its measures Group he on-derivative financial assets financial on-derivative th th d the characteristics of the contractual cash flows of the financial asset. the of flows cash contractual of the characteristics d the ther financial assets. ther ncial assets to a third party. A financial liability is recognised when freenet becomes the contracting party. The The party. the contracting becomes freenet when Afinancial liability tois recognised athird party. ncial assets er equity instruments instruments equity er instruments equity er

Me Li Fi Fi nancial assets measured at fair value through profit or loss loss or profit through value fair at measured assets nancial nancial assets measured at fair value through other comprehensive income income comprehensive other through value fair at measured assets nancial abilities measured at amortised cost asurement of financial instruments

Annual Report 2019 Conso lidat e d f i n a n cial s t at e m en t s

| n otes totheconsolidated financialstatements li fina abilities ncial - - - instruments that have experienced a significant increase in default risk since initial recognition as at the reporting date. The date. risk sincedefault in asignificant initialincrease reporting the as at recognition have that experienced instruments all 2includes Stage losses. credit of expected deduction before amount carrying the on based applied be must method est inter effective the i.e. amount, carrying gross the on based is Interest recognised as an expense. recognised be date must reporting the following months twelve next during the events default possible resulting from loss expected the items, these For acquired. originatedor when in 1 Stage are classified all instruments Ingeneral, allowances. loss to allocate approach athree-stage uses model loss credit expected The assets. to non-derivative Group by the is applied approach general The receivable. accounts trade on losses impairment against statement income to are the credited amounts derecognised in to relation previously ments pay Subsequent account. allowance the against is derecognised receivable the recoverable, is longer no receivable the that indicate assessments reasonable If by using account. is an allowance reduced receivables of the amount carrying The however, recognised. not was was and insignificant, identified loss impairment information). The benchmark receivables, lease the of remaining (e.g. maturity information forward-looking and current on based instead are but rates, default historical reflect not do rates loss expected the aresult, As past. in the receivables lease on have occurred defaults No financial year. of the end ing at the estimates as well as forward-look experience past Group’s the and basis losses of historical the on rates loss expected risk and default regarding assumptions on based are assets financial of Impairments items. these of initial the recognition upon recognised are assets contract and receivables lease receivable, accounts of all term anticipated over trade the losses credit expected Accordingly, losses. credit expected measure rules to by for impairment provided approach simplified the applies Group The 2.7.7 17. in accordance IAS with minimum of payments the value lease present Financialthe at shown liabilitieswere as follows: arising leases finance from 2018 differed for methods measurement The financial as shown be liabilities. can also Accordingly, financial instruments derivative flows. future cash basis the on of measured are financial instruments date. Derivative sheet balance the after months twelve in at least time liability to of the a point settlement right to have postpone unconditional not the does Group the that liabilities provided as Loan currentliabilities value. are classified settlement or financial Current their liabilities repayment at are recognised method. interest effective using the is amortised amount repayment the and cost historical between differences Any cost. amortised at financial liabilities recognised are Non-current amortisation. of result a as or liabilities derecognised are the when loss or profit through recognised are losses and Profits ratemethod. interest using effective cost the at amortised financial liabilities the measured are period, subsequent Inthe borrowing. with associated costs transaction the less received the consideration fair of value the at are shown cost financial initial liabilitiesat amortised measured recognition, Upon loss. or profit through at value fair sured mea be must income comprehensive other through at or fair value cost at amortised that are measured not Financial assets met: are following conditions the if cost at amortised measured be shall A financial asset ■ ■ ■ ■ A financial asset shall be measured at fair value through other comprehensive income if the following conditions are met: are following conditions the if income comprehensive other through fair value at measured be shall A financial asset Conso

and interest on the principal amount outstanding. amount principal the on interest and of payments solely that are flows dates cash to on specified rise give financial asset of the terms contractual the and flows cash tocollect order in financial assets is hold to objective whose model business within a held is financial asset The and interest on the principal amount outstanding. amount principal the on interest and of payments solely that are flows dates cash to on specified rise give financial asset of the terms contractual the and selling financialand assets flows cash contractual both collecting by achieved is objective whose model within business a held is financial asset The

Im lidat pairment of financial assets financial of pairment e d f i n a n cial s t at e m en t s

| n otes totheconsolidated financialstatements Annual Report 2019

co freenet AG ntractual ntractual pr pr incipal incipal 129 - - - -

Consolidated financial statements Consolidated financial statements before deduction of expected credit losses. Significant indications of impairment include the following: the include of impairment indications Significant losses. credit of expected deduction before amount carrying the on based be applied must method interest effective the i.e. amount, gross the on based recognised Interest is remaining the over instrument. the of losses term expected of value all present the reflect must allowance loss 130 VENTORIES be incurred. to sellingless costs price estimated the as is defined value realisable net date. The sheet balance the on value realisable net the and of cost lower at the Inventories are shown 2.8 liability simultaneously. the settle and asset basis to the or anet use on intends to settle Group ifthe and to treatment such entitlement is alegal ifthere only sheet balance in the amount as anet shown and liabilities and are netted Financial assets 2.7.10 loss. or original financialprofit of the in liability repayment is recognised financial new of a liability. original recognition financialthe from of the loss liability gainand or A repayment astreated the is existing of an liability,terms transaction the the changes contract in of substantial case or the in terms contract different substantially with instruments event of an exchange of debt Inthe has expired. or cancelled or settled is either contract stipulated the in obligation the when i.e. are repaid, these financial liabilitieswhen only derecognises Group freenet The 2.7.9 in note 33.6, comments to Transfer refer the please of financial assets. details, For party. thirda to transferred are asset the of ownership of rewards and risks the all of substantially and asset financial the or expire asset financialthe from flows cash the to rights the contractual when only afinancial asset derecognises Group freenet The 2.7.8 l of impairment recognition whether determine to are used method flow discounted cash as the such approaches surement mea other areprices marketno available, If cost. below fair value the decline in permanent or is asignificant impairment of indication objective An instruments. of equity case in the losses credit expected for are recognised allowances loss No banks. major various among equivalents cash and cash diversifying by reduced risk is 9. substantially in IFRS Default rules impairment to the subject are also equivalents cash and Cash following: the include of impairment tions indica Objective losses. credit of expected deduction after amount carrying the i.e. future, in the amount carrying net the on based calculated be must income interest the that so periods in subsequent adjusted be must recognised interest The remaining the for term. losses expected of the value present the on (Stage based is 3), measured also allowance loss the date reporting the as at of impairment indication objective is also there risk, default in toIf,increase asignificant in addition f ■ ■ ■ ■ ■ ■ o reenet AG

sses is necessary. is sses itworthiness of the debtor of the itworthiness cred the to relevant circumstances or technological regulatory financial, of economic, deterioration expected or Actual debtor same the of instruments of other quality credit the in deterioration Significant debtor the of performance expected and payments expected the in deterioration Significant An increased probability that the debtor will become bankrupt or will have to go through some other restructuring process restructuring other will or have some to bankrupt go through will become debtor the that probability increased An payments principal in or interest delinquency or as adefault such of contract Breach or debtor theissuer of difficulties financial Significant

IN Ne De De recognition of financial liabilities financial of recognition assets financial of recognition tting of financial instruments financial of tting

Annual Report 2019 Conso lidat e d f i n a n cial s t at e m en t s

| n otes totheconsolidated financialstatements - - - Contributions to defined contribution plans are recognised in the income statement in the year in which they occur. year whichthe they in in statement income the in plans are recognised contribution to defined Contributions to finance provisions incosts. is net addition shown of the portion interest the and expenses personnel under is shown cost service The loss. or in profit recognised are immediately costs service Past salaries. in development related the to commitments salary-linked wellas as of inflation development todue the adjustment pension in of risks terms further are There risk longevity. of biometric the is there benefits, pension for provide plans pension the If Pensions Company Act. German of the regulations to the are subject Pension commitments arise. in they which period the in income comprehensive in other are recognised plan assets from income actual and theoretical the between Differences arise. in they which period in the income comprehensive other in recognised are assumptions in actuarial changes and adjustments empirical from resulting losses and gains Actuarial salaries. and in anticipated pensions future increases date; it includes also sheet balance the on known rights vested acquired and pensions of the account only takes not This method unit method. credit using projected the arial expert actu yearindependent by an every calculated obligation is benefit defined of the value present The assets. plan of the value fairthe less date sheet balance the on obligation benefit defined of the value present actuarial to the is equivalent sheet balance in the provision shown 19. pension The in accordance IAS with measured and Pension provisions are recognised 2.11 UITY reserves. capital under in equity directly are recognised increases of capital costs taxes, current of applicable deduction the as equity. After shown are interests non-controlling and profits retained net consolidated reserves, revaluation reserves, capital shares, Ordinary 2.10 o recognised arein differences translation Any resulting currency closingdate method. intolated using modified euros the are euro trans the than other currency have that items companies afunctional of all Group sheet balance and earnings The statement. income the in recognised are differences translation currency shares),of these f accounting subsequent from differences translation Currency item, the under income of comprehensive statement idated the consol in are shown accountingequity-accounted investments the resulting for from differences translation Currency is using translated closing rate prevailing date.the allocation the price on purchase shadow the from reserves hidden closed dis the for established amount residual carrying The allocation. price purchase in shadow to relation the recognised down write- subsequent wellthe as Sunrise as of profit consolidated in in shares to the relation the translation currency for used exchangerate the average is this In connection, AG. freenet of companystatements financial consolidated associated in the as an included has been (referred to as “Sunrise”) following in Switzerland the Zurich, AG, Group Communications Sunrise s income in the closing are date, as recognised at liabilities the in and foreign currencies denominated assets lating monetary trans of process the from also and transactions, of such fulfilment the resulting from losses Gains and transaction. of the date prevailing using the exchange rates on the currency into functional are translated the transactions Foreign currency c The currency). (functional company operates in the which environment economic primary of the currency to the sponding corre currency the on based measured Group arecompany of each statements annual in financial the items included The 2.9 Conso o t o t atement. Minor volumes of foreign currency transactions were carried out in the financial inyear the 2019. out carried were transactions of foreign currency volumes Minor atement. r equity-accounted investments. In the event of the loss of significant influence on Sunrise (for example, through the sale the through example, Sunrise on (for of significant influence loss event of the Inthe investments. r equity-accounted her comprehensive income and disclosed as acumulativeequity. figure in disclosed and income comprehensive her nsolidated financial statements are prepared in euros, which is the reporting currency of freenet AG. freenet of currency which reporting the is euros, in prepared are statements financial nsolidated

PENSION PROVISIONS PENSION EQ TRANSACTIONS CURRENCY FOREIGN lidat e d f i n a n cial s t at e m en t s

| n otes totheconsolidated financialstatements Annual Report 2019

ob freenet AG ligations 131 ------

Consolidated financial statements Consolidated financial statements s basis the measuring as for the used have been cent p.a. per of 2.25 raise asalary cent and per Adiscount of 0.09 rate tions. deduc statutory less full-time salary monthly 2012) theoretical of the 1 October after signed cent agreements for per 83 In accordance with IAS 16, the costs expected for the obligation to and transmission remove installations dismantle obligation and the for expected costs the 16, In accordance IAS with in this is group low. included to obligations individual relating of resources of an outflow probability as aliability Aprovision ifthe is recognised also obligations. of these group basis the the on of determined is of resources of an outflow probability the of similar are anumber obligations, there If account. into t provisions usingmeasured The are made. be can obligation the of extent estimatethe of a reliable where and of assets flow ROVISIONS to will an out lead obligation of the likely it is more settlement that where not than events, as of aresult past arise which timing and/or of uncertain amount towards third obligations parties constructive or Provisions legal for are recognised 2.12 132 the extension of an Executive Board member’s employment contract and the appointment of new Executive Board members. Board Executive of new appointment the and contract employment member’s Board of an Executive extension the of occasion the on 3”) to as “Programme referred LTIPs new to signed grant were year, (hereinafter previous the In agreements Board. Executive of the members AG the with by freenet signed were 2”) “Programme to as referred LTIPs grant that (hereinafter of employment contracts concerning the agreements 2014, 26On February below: are described incentive programmes employee of these accounting policies The Group. in the wereplace in employees for (“LTIP programmes”) In financial year 2019,long-term incentive programmes significant three 2.13 assets. other and receivables the under is surplus shown the is the than higher assets plan of the value fair the If assets. plan corresponding of the values fair the with netted at full pay. have by leave granting of absence obligations been are reduced The obligations The term. long in the balanced are up to are accounts ensure set time that accounts Long-term work obligations. provisions pension for the for applicable assumptions provisions as those relatingusing obligations are for same measured The to accounts the long-term work assets. other and receivables the under is surplus shown the tions, obliga is the than higher assets plan of the value fair the If assets. plan corresponding of the values fair the with netted cent up to (or 85 per topped is normally salary net semi-retirement monthly employee’s the phase, semi-retirement the 55th employee’s the During birthday. before begin cannot phase semi-retirement The model. block in line the with 1996 –AltTZG) July of 23 Act (Semi-Retirement Altersteilzeitgesetz in the accordance with obligations are semi-retirement There costs. vacancy margins and negative with relate to tariffs mainly potential Provisionslosses for paid employees. to termination provisions benefits comprise basically Restructuring i transmission of the amount carrying to the byof an adjustment means and/or are value recognised discount rate, ment the settle in changes the words in other provision, of an existing measurement in the Changes arise. obligations at the which this time provisionis the at of likely; resources is recognised ifan outflow obligations of these value to cover present the 37, Inaccordance IAS with items. of these costs in the aprovision is therefore are included improvements leasehold f n reenet AG h e stallations and leasehold improvements (upper limit: recoverable amount; lower limit: zero). limit: lower amount; (upper recoverable limit: improvements leasehold and stallations e best possible estimate of the obligation as at the balance sheet date, taking the discounting of non-current obligations obligations discounting the of non-current taking date, sheet balance as at the obligation estimate of the possible e best mi-

re EMPLOYEE INCENTIVE PROGRAMMES P tirement obligations. No consideration has been given to any potential in this respect. The obligations have been have obligations been The given to any potential in has been this respect. consideration No obligations. tirement

Annual Report 2019 Conso lidat e d f i n a n cial s t at e m en t s

| n otes totheconsolidated financialstatements ob re ligations, ligations, cognised - - - -

ing by location (investor locations until 31 2026). until 2027; (investor June locations July 30 ing locations by location other by distinguish is term determined lease of the end the segment, Media and TV in the subleases of measuring purposes the For b may also there term, of acertain considerations). (due As exercised to to be operational certain are reasonably sion options all that exten it is assumed always shops/stores category, in the to measurement relevant term lease determining the When estimated. be also must life assets of such anticipated useful The combination. of abusiness acquiredas part were of acquisition time assets the ifthe at value fair determining involves for the estimates assets intangible and equipment and plant of property, measurement The statements. financial consolidated the on un any below, well as out as set estimatesassumptions andassociated The significant estimates. these from may differ amounts actual The estimates. and assumptions forward-looking on and used methods measurement and recognition the on depends statements financial the consolidated in operations of results position and financial assets, net of the presentation The 2.15 authorities. tax to paid the to be expected amounts the on provisions based recognises ate, appropri where and, matters, to interpretable respect with particularly returns, tax reviews regularly Management future. date near in or the sheet balance at the regulations applicable tax German the on based are calculated expenses tax Current future thisdue to influence. foreseeable the in will not reverse differences temporary the that ble it proba and is Group the by determined be can differences temporary of the timing reversal the of unless the recognised are associates in subsidiaries and with investments in connection differences liabilities tax arising temporary from Deferred date. sheet balance the on applicable taxes before of earnings forecast company’s the on based are futureprofits expected The utilised. be can whichthey against be will available profit futurethat taxable it that is probable extent to only the are recognised also carryforwards loss tax existing on assets tax Deferred utilised. be can assets tax deferred whichthe against be will available profits future that taxable it that is probable extent toonly the are recognised they this value, exceeds differences temporary deductible on assets tax of deferred amount the If exist. liabilitiestax deferred which for amount the at are recognised differences temporary deductible on assets tax Deferred liability is settled. tax deferred the or realised is asset tax deferred the when to apply date are that expected sheet balance at the enacted substantively or enacted laws tax and rates using tax measured are taxes Deferred carryforwards. loss tax on and amounts carrying their liabilities and and of assets bases tax the between differences all on temporary using liability method are the recognised taxes Deferred 2.14 in note 25, incentive to explanations programmes. Employee refer our please details, For expenses. personnel under is shown expense corresponding The are that likely shares phantom of the to value fair vest. the at provision is measured The payout. of the time at share the price relevant including the factors, various on is dependent payments these of amount The account. LTIP balancerespective financialthe each in year, for the on made depending be can charges and taxes less payouts of time, period within apredetermined Then, shares. of phantom form in the accounts the in made are entries debit or credit attained, been have financial the yearquestion for in objectives to defined which extent financial the in each year, on depending an LTIPIn LTIP beneficiary; account each is for maintained programmes, programmes”). incentive employee to as “Other referred (hereinafter incentive programmes employee further maintains two Group freenet the In addition, Conso e ab derlying risks of financial reporting as well as the impact that these estimates, assumptions and uncertainties might have uncertainties and assumptions estimates, these that wellimpact asthe as of financial reporting risks derlying uncertainties with regard to the chosen accounting policies, are of crucial importance for a correct understanding of the of the understanding a correct for are importance of crucial accounting policies, chosen to the regard with uncertainties

lanket extension to the lease based on forward-looking assumptions. assumptions. forward-looking on based lease tolanket the extension JUDGEMENTS, FORWARD-LOOKING ASSUMPTIONS AND ESTIMATION UNCERTAINTIES ESTIMATION AND ASSUMPTIONS FORWARD-LOOKING JUDGEMENTS, DEFERRED AND CURRENT INCOME TAXES lidat e d f i n a n cial s t at e m en t s

| n otes totheconsolidated financialstatements Annual Report 2019

| freenet AG 133 - - - -

Consolidated financial statements Consolidated financial statements previous year: 293.2 million 293.2 euros), to year: refer note 16. previous please 293.2 millioneuros; 2019: as of December amount 31 life useful an indefinite with (carrying assets of intangible impairments million euros) as 1,380.1 well as year: million previous euros; 1,383.5 2019: as of 31 amount December (carrying impairments relating to goodwill potential tests of the framework within the made assumptions forward-looking to the regard With in question. asset to the obtain similar necessary funds the term have over a to would pay to Group borrow the that of interest rate is rate the borrowing incremental The basis. aquarterly on liability is lease to discount the used rate borrowing incremental makes sure the that Treasury Group department The 134 involved in estimation apply: estimation in involved uncertainties and assumptions, forward-looking material following the judgements, arrangements, multiple-element For payable. become cancelled, be no l can which which with final commissions, probability the to assess experience basis the of on past areestimates made Group, the by offered products various commissions the for sales from services of purchased accrual to the regard With financial year. of the end at the estimates forward-looking and experience past its on based judgement its exercises Group the losses, impairment the calculating for factors input the selecting and assumptions these preparing In rates. loss expected risk and default regarding on assumptions based are financial assets on losses Impairment judgement. Group’s the on rely developments futureassumptions regarding underlying The methods. using actuarial is recognised determined value fair Their market. active whichis there an for shares listed not do include loss or profit through at value fair measured instruments equity other The scenarios. negative to of the this in CGU, case allocated especially assets to the regard with impairment in result not any this points); would percentage by 0.5 millionWACC19 (ifthe euros reduced to were be simultaneously by increase points) or by approximately 16 million WACC percentage by 0.5 (if the euros increased to were be simultaneously decrease to would sell costs less value fair the cent planning in period, the by 10 per increased or reduced to were be if EBIT that, and by approximately increase 9million WACC would ifthe euros and points, percentage by 0.5 topoints were decline by approximately 7million WACC decline ifthe to euros would percentage by sell 0.5 increased costs to were less be value fair the that CGU has established “Online” to the allocated assets the for tests impairment analysis the regarding A sensitivity scenarios. negative to of the this in CGU, case allocated especially assets to the regard with impairment in result not any this points); would percentage by million WACC 0.5 (if the euros by 206 reduced to were be simultaneously increase points) or million WACC percentage byby 0.5 approximately (if the 160 euros increased to were be simultaneously decrease to would sell costs less value fair the cent planning in period, the by 10 per increased or reduced to were be if EBIT that, and by approximately increase million WACC 105 ifthe would euros and points, percentage by 0.5 to were points decline by approximately million WACC 83 decline ifthe euros to would percentage by sell 0.5 increased costs to were less be value fair the that CGU has established “TV” to the allocated assets the for tests impairment analysis the regarding A sensitivity scenarios. negative of the in case to this CGU, allocated especially assets to in result the not regard any with this points); impairment would percentage by 0.5 million WACC (if the euros by reduced 1,131 increase points) to or were be percentage by simultaneously 0.5 increased to be million WACC (if the euros by approximately 886 were decrease to simultaneously would sell costs less value fair the period, cent planning in the by 10 per increased or reduced to were be ifEBIT that, and points, percentage by 0.5 towere decline million WACC ifthe euros by approximately increase 604 would and WACC points percentage by 0.5 increased to were be by approximately 472 decline million to would ifthe euros sell costs less value fair the that has established Communications” unit (CGU) generating cash to the “Mobile allocated assets the for tests impairment analysis the regarding A sensitivity f reenet AG

Annual Report 2019 Conso lidat e d f i n a n cial s t at e m en t s

| n otes totheconsolidated financialstatements de termined termined ong er er

utpeeeet arrangements: multiple-element the pension obligations, please refer to refer note 29. please obligations, pension the to pertaining analyses sensitivity to further regard With euros. thousand by 22,167 obligations unfunded and funded the of value present the increase discount would in rate the points 17,033 thousand percentage of 1.0 while a decrease euros, by reduced be would obligations unfunded and funded of the value present the points, percentage towere by 1.0 increase rate discount the that if the conclusion came to analysis sensitivity A expectancy. life beneficiary’s of the an assessment and income pensionable beneficiary’s of the future development of the assessment the trend, pension the count rate, of adis This estimation similar involves and the provisions pensions of the for obligations. measurement the for made have assumptions been forward-looking how note 29 describes similar provisions and to pension regard obligations, With 2019, to refer noteLTIP 25. as at 31 please December programme the provision for determining for the used model measurement in the made estimates and assumptions to the regard With ta negative-margin from to losses anticipated in relation contingent losses for provisions of recognition to the regard With companies. Group the representing lawyers by the basis assessment of the the on disputes are recognised Inparticular, provisions legal for estimates. on of provisions depend calculation and recognition The to accounting regard with for are made assumptions forward-looking and estimates material following judgements, The vouchers. arising product from (material) as those such cise rights of contractual exer the and modifications, contract losses, debt bad cancellation, termination, premature contract include events contract Such are accordinganticipated Group, occurrence. of weightedtheir to likelihood freenet the by influenced be cannot which events, future contract Uncertain assumptions. to certain is subject position contract net of the Measurement dates periods. or performance relevant the on depending term contract basis underlying over the rata apro on is reversed intion aportfolio) aggrega its (or after of acontract position contract resulting net The is price reallocated. transaction the price, transaction the exceeds component of acontract selling prices relative stand-alone the If components: intotaking contract account other calculated position is net contract the step, over months).next 24 the In services mobile communications of offers and sales (such as past hardware in the conducted transactions on based are estimated These selling relative prices. their individual and portfolios) in their aggregation after (or withincontracts obligations customer performance the step identifying is first The number the on decision the and exists uniformity of criteria whether (the assessment these in selecting apart plays Discretion characteristics. uniform with contracts of aggregated set as a is defined Aportfolio criteria. certain on based portfolios into them grouping and contracts customer individual the identifying involves obligations performance contractual Measuring ■ ■ ■ ■ ■ Conso

riffs, assumptions were made largely with respect to how long customers will remain in these tariffs in the future. the in tariffs will remain these in customers long how to with respect largely made were assumptions riffs, the carrying amount of “consideration payable to acustomer”. payable of “consideration amount carrying the to obtain in order sales in indirect services of brokerage value in equivalent estimates determining the and Judgements specifically operators, by network received of commissions bonuses and assessment the regarding Judgements future in the is of which expected reimbursement the costs, extension tract con items cost constitute incremental certain in assumptions determining whether forward-looking and Judgements isfinancing component asignificant there of whether Assessment periods specific for operators commission and of network bonuses and acquisition costs of contract period amortisation the for term contract future customer in expected assumptions determining the Forward-looking ■ ■ ■

reduce the cost of materials on a pro rata basis. of materials rata cost apro on the reduce and term contract customer underlying over the granted discounts considered be can thereof portions which of materials cost to and nature ofdue their the as adiscount, constitute an immediate reduction thereof portions which performance, upon components performance individual in as revenue separable recognised be must thereof which portions lidat e d f i n a n cial s t at e m en t s

| n otes totheconsolidated financialstatements Annual Report 2019

of portfolios). of portfolios). | im

freenet AG mediately th erefore erefore 135 - - - -

Consolidated financial statements Consolidated financial statements A sensitivity analysis carried out in relation to the deferred tax assets has established that the deferred tax assets would would assets tax deferred the that has established assets tax in deferred to relation out the analysis carried A sensitivity to refer note 18. please recognised, have been assets tax in to deferred relation no which carryforwards loss of the extent the also and carryforwards loss on taxes deferred recognised of the extent to the regard With market. telecommunications of the development the and trend macroeconomic the example, for about, assumptions involvingyears forward-looking financial subsequent four planning the for corporate on are based in carryforwards to relation loss assets tax deferred The determined. is definitively taxation in the which period in the taxes income deferred and the current on this willoriginally figure have anthe assumed, impact from differs transactions these for taxation definitive as the Insofar due. will become taxes income additional to to whether, extent, ifso what and basis as of estimates the on audits anticipated tax provisions for of the amount the determines Group The of business. course normal duringthe taxation definitive the to determine it which is for possible not are commercial transactions There 136 the allocation of resources to this segment and the measurement of its profitability. its of measurement the and to this segment resources of allocation the to affecting decisions regard with body main decision-making company’s by the regularly are reviewed results operating whose units Group from distinguished be must segments operating of internal by management, that means 8stipulates IFRS 3 1 in note explanations extensive to refer the 2019. please 16 (Leases) of IFRS Inthis as of 1January context, tial application thedue to ini 2018 impaired is significantly as of December 31 statements financial consolidated the with Comparability 2.17 Continuing of operations. part as statement income in the shown are assets of group the of measurement c been not had of assets group or assets if the out carried have been would which remeasurements or amortisation ciation, depre less amount carrying of lower the at are shown of assets group the or assets The satisfied. longer 5are no of IFRS T amortisation. or to depreciation subject longer no are assets the sale, for held assets rent non-cur and operations to discontinued of reclassification time At the use. by than further rather byrealised way of asale be can amount likely more to carrying ifit their is that sell generally costs less value fair and amount of carrying lower at the held-for-sale, 5 as are shown IFRS under are which classified sale, for held assets non-current and operations Discontinued 2.16 planning period. cent relevant in the by 10 per decrease to were or increase income tax corporation or income million trade ifthe euros 18.4 by approx. million decrease or euros 18.4 byincrease approx. f reenet AG l h .

assified as discontinued operations, and the recoverable amount at the time of reclassification. The adjustments to the to adjustments The of reclassification. time the at amount recoverable the and operations, as discontinued assified 1, Business activity and accounting standards, in the notes to the consolidated financial statements. financial consolidated to notes in the the accounting and standards, activity Business 1, e assets held for sale or the held-for-sale group of assets are reclassified to “Continuing operations” when the criteriathe when “Continuingoperations” to are reclassified held-for-sale of assets the group or sale for held e assets

LIMITED COMPARABILITY LIMITED NON- SEGMENT REPORTING

CURRENT ASSETS HELD FOR SALE Annual Report 2019 Conso lidat e d f i n a n cial s t at e m en t s

| n otes totheconsolidated financialstatements - - - ties. The EBITDA of – EBITDA The ties. – and activities operating 47.3segment, 47.1“Other/Holding” year: (previous the million2019 for for euros profit million euros)the to is attributable – year: previous (– million euros) 66.1 activities business other year: (62.5 and million previous euros; activities operating to in 2019 is attributable segment “Other/Holding” the for 65.3 million year: euros) million61.6 (previous reported euros of revenue segment The segments. operating to finance) allocated and be clearly resources cannot wellas as whichareas human as legal, such areas, in central Group within the of services AG (with rendering of freenet the activities holding the This mainly comprises activities. to operating in addition activities business other includes segment “Other/Holding” The nition and measurement in the consolidated balance sheet and the consolidated income statement, as was the case last year. last case the as was statement, income consolidated the and consolidated balance sheet in the measurement nition and recog the from differ not do income and expenses allocated of the measurement and recognition the reporting, of segment purposes For criteria commercial relevance. and basis the of selected on segments to the are allocated expenses and Income financial inyear the 2019: segments operating following in the active was Group The regions. geographical on based managed or is organised entirely business not in Germany, its almost operations business its performs Group the As the company.by offered services and products individual the between basis differences of company the the on the manages and organises Board Executive the body, main decision-making its As n forprices transfer The prices. as transfer internal areprices used market these services, internally for ket offered prices ■ ■ ■ The segments provide, or used to provide, services to the other operating segment. If there are equivalent external mar external are equivalent there If segment. operating other to the services to provide, used or provide, segments The of – amount in the activities business other million 15.9 euros) year: by million and (previous of euros 14.1 extent to the activities by accounted2019 operating for was Conso

o n-marketable services are generally based on the costs incurred (plus overhead surcharge). overhead (plus incurred costs the on based are generally services n-marketable Mobile Communications: Mobile Other/Holding: Media: and TV ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■

land in Germany land Telekom, Telefónica and Vodafone Deutsch Deutsche operators network communications mobile the from services) (voice data and services communications –marketing of mobile provider service communications as amobile Activities Rendering of sales services of sales Rendering services data and preselection) (call-by-call, voice services of narrowband Range customers corporate for services other and solutions IT solutions, of communication Development devices mobile displaying on and use and downloading for formats entertainment and digital products as well as customers end for websites), on space services marketing of of advertising payment the and shopping online of offer the comprise essentially (these services as e-commerce/advertising such services of portal Rendering IPTV of field in the mainly users, to end of services, Rendering sectors media and radio in the clients ness busi for marketing solutions and of broadcast-related service operation, installation, management, Planning, project of DVB-T2 field in the users to end of services Rendering as well as digital TV) Internet landline, communications, mobile of Sunrise: (areas activities of activity Sunrise services of sales Rendering lifestyle digital and communications data mobile for services as well as additional devices communications ofSale/distribution mobile tariffs operator network range of wellas as a tariffs and services network-independent own company’s of the arange operators, network into entered these with agreements operator network the on Based lidat e d

f 0. i 8 million euros). Of the figure of 46.0 million euros (previous year: gross for 45.8 year: millioneuros)(previous 46.0 million euros 8 million of figure reported euros). the Of n a

14 n cial .0 million euros (previous year: – year: .0 million (previous euros

1. s 3 million euros (previous year: – year: 3 million (previous euros t at e m en t s

| n

28 otes totheconsolidated financialstatements .1 million euros (previous year: – year: million.1 (previous euros

11 .0 million euros) reported for the “Other/Holding” segment for segment “Other/Holding” the for .0 million euros) reported

1. 3 million euros) is attributable to the other business activi business 3 million other to euros) the is attributable

26 .9 million euros). Annual Report 2019

0. 9 million euros;

freenet AG va rious rious 137 - - - - -

Consolidated financial statements Consolidated financial statements Segment EBITDA

Total cost of materials Depreciation, andimpairment amortisation Personnel expenses Other operating income Other own work capitalised Other ownwork Total revenue Cost of materials, third party Net investments cash

of freenet AG Consolidated profit toshareholders attributable Consolidated profit Income taxes Financial result EBIT Overhead1 Other operating expenses non-controlling interestsnon-controlling Consolidated profit to attributable Segment gross profit Inter-segment cost of materials S customers. individual on is dependent not Accordingly, Group the customers. private on primarily in focuses that mass-market business engages Group freenet The is available. not services or products individual on based breakdown extensive Amore in Revenue. is note 4, shown third with parties earned of revenue services or products by individual A breakdown 138 1 revenueThird-party In Inter-segment revenue f reenet AG egment report for the period from 1 January to from 31 1January for2019 period the December egment report EU The overhead costs as the difference between gross profit and EBITDA include the items other operating income, other own work capitalised, personnel expenses, expenses, personnel capitalised, work own ot other income, operating other items the include EBITDA and profit gross between difference the as costs overhead The Thereof inter-segment allocation assets andcontract assets Thereof onfinancial withoutlossallowances and contractassets Thereof onfinancialassets lossallowances her operating expenses and share of profit or loss of equity-accounted investments. equity-accounted of loss or profit of share and expenses operating her R ’000s

Annual Report 2019

Conso lidat C ommunications ommunications e - d - 1,948,932 ,4,8 4,5 47,312 244,452 2,640,780 - f 1,967,164 ,5,2 5,8 61,571 253,887 2,658,922 - - - 324,500 6,5 73,537 367,258 9,5 6,8 46,032 166,189 691,758 - - i 218,634 257,052 136,658 386 3363,470 13,306 23,826 - n Mobile 18,232 38,418 60710,996 13,193 56,017 18,142 7,328 a n cial

s TV and Media andMedia TV t at - - e - - - - - 72,698 92,652 m 15,000 47,236 47,931 60,616 87,698 4,899 ,3 14,259 9,435 - - en 987 695 t

| n O ther otes totheconsolidated financialstatements - - - / - - - - H 14,704 0027,769 14,000 60,032 61611,009 26,156 11,009 26,525 39,176 34,067 15,539 olding 2,166 3,503 - - 546 3 34,067 835 369

E intersegment intersegment limina revenue and - - - - 1862,932,544 41,836 41,836 tion of tion of ,6 896,210 7,769 7,769 ,4 67,276 3,240 costs 0 426,795 0 2,932,544 0 0 0 20,258 0

190,899

40,602 184,732 269,954 - - 2,036,334 - 2,036,334 - - - - 469,415 - - - 156,841 281,017 320,499 236,450 - 53,346 31,876 39,482 6,167 Total 0 0

Segment EBITDA Total cost of materials Depreciation, andimpairment amortisation Other operating income Personnel expenses capitalised Other ownwork Cost of materials, third party Total revenue Net investments cash of freenet AG Consolidated profit toshareholders attributable Consolidated profit Income taxes non-controlling interestsnon-controlling Consolidated profit to attributable Financial result EBIT Overhead1 Other operating expenses Segment gross profit Inter-segment cost of materials 1 revenueThird-party In S Inter-segment revenue Conso

egment report for the period from 1 January to from 31 1January for2018 period the December (restated)egment report EU The overhead costs as the difference between gross profit and EBITDA include the items other operating income, other own work capitalised, personnel expenses, expenses, personnel capitalised, work own ot other income, operating other items the include EBITDA and profit gross between difference the as costs overhead The assets andcontract assets Thereof onfinancial withoutlossallowances Thereof inter-segment allocation and contractassets Thereof onfinancialassets lossallowances her operating expenses and share of profit or loss of equity-accounted investments. equity-accounted of loss or profit of share and expenses operating her R ’000s lidat e d f i n a n cial

s t at e m en t s

| C n ommunications ommunications otes totheconsolidated financialstatements - - 1,868,578 ,7,0 7,9 51,364 274,595 2,571,507 - 1,888,167 ,0,6 8,5 65,330 282,553 2,606,668 - - - 352,500 6,0 86,296 366,001 1,0 4,3 45,790 147,430 718,501 - - 243,037 288,782 122,848 022 7655,446 17,625 20,272 - Mobile 19,589 45,745 00751,750 50,017 35,161 6,607 9,113

TV and Media andMedia TV - - - 110,135 - - - - 135,123 61,134 24,988 55,494 55,996 63,599 6,711 ,5 13,966 7,958 - 657 502

O ther - - - / - - - - H 15,026 6937,994 11,113 56,903 - - 95049,091 19,540 94613,020 29,476 13,020 29,895 33,253 olding ,1 49,091 4,514 2,044 3,963 2,282 - 419

Annual Report 2019 E intersegment intersegment limina revenue and - - - - 7052,897,466 57,085 57,085 tion of tion of ,9 903,727 7,994 7,994 ,2 100,704 5,026 costs 0 441,184 0 2,897,466 0 0 0 18,106 0

223,138

212,163 311,988

| -

- freenet AG 1,993,739 - 1,993,739 - - - - 462,543 - - - - 129,196 314,987 361,653 219,700 43,343 10,975 21,839 77,986 46,666 Total 139 0 0

Consolidated financial statements Consolidated financial statements year: 2,572 million 1,697 million to from euros), revenue 2,572 year: euros) millionyear: 1,675 attributable (previous euros was totalling revenue million 2019 in 2,641 financial euros external the year segment’s Communications Mobile the Of reporting. 3, Segment under million out is set euros) 2,898 year: by segments of 2,933 revenue million of the A breakdown (previous euros 4 140 r of establishing process the with in connection services assembly own company’s as well as the projects sively to strategic exclu almost due software, communications of mobile mainly relates development to capitalised the work own other The 6 in note Leases. 2.5, statements to refer the please information, more For of company use cars. the for fees charging leases) (operating employees, from income and subleases from income activation), linked as not (insofar customer to new funds market development of expenses, charging-on the from income debits, reversing direct for charges dunning and mainly from charges of consists income income operating Other 5 to this disclosure. 15.121 in IFRS expedient the apply not million did 0.4 to tolion euros and euros 2022 Group 2023. The 867.9 relate periods: following to obligations the million to euros 2020, 343.1 millionperformance to 23.7 mil euros 2021, - million euros). outstanding The 1,220.5 year: million to (previous 1,235.1 euros amounts 15.120) (IFRS period reporting the of end at the settled partly only or settled not obligations to performance allocated price transaction of the total amount The 1 as at customers with contracts from liabilities to customers contract in net reported been previously had which ognised euros) was rec thousand 10,464 year: (previous euros In financial thousand year 2019, of amount the revenue in 35,000 c: 15.116 IFRS band 15.116 in accordance IFRS with are made disclosures following The from million 794 euros) year: to million revenue (previous 863 euros 142 million euros) year: prepaid), and by no-frills (previous million 1,555 euros year: million 134 and million euros)(of (previous euros is which 1,541 accounted by for postpaid, tled or partly settled in prior periods was recognised in the 2019 in financial the year. recognised was periods in prior settled partly or tled f expenses, and the directly attributable overheads. attributable directly the and expenses, personnel and consulting are which largely fees costs, individual attributable directly the comprise costs capitalised The reenet AG a

J dio infrastructure. dio anuary 2019. Revenue totalling 89 thousand euros (previous year: 46 thousand euros) from performance obligations set obligations euros) performance from thousand 46 year: 2019. (previous euros totallinganuary Revenue thousand 89 har OTHER OWN WORK CAPITALISED WORK OWN OTHER INCOME OPERATING OTHER REVENUE dware and 103 million euros (previous year: 80 million 80 euros) year: revenue. 103 to and million other (previous dware euros

Annual Report 2019 Conso lidat e d f i n a n cial s t at e m en t s

| n otes totheconsolidated financialstatements (p se revious rvices rvices no te - - - Total Social securityandpost-employment benefit costs Costs o defined contribution benefit plans (previous year: 14,413 thousand euros). thousand 14,413 year: (previous plans benefit contribution defined of as costs social insurance contribution employer’s the euros as thousand 15,604 of afigure include expenses Personnel euros), note also 29,sand see Pension similar provisions and obligations. thou 2,208 year: (previous plans benefit defined for euros thousand of 1,841 an expense comprise also expenses Personnel programmes. incentive Employee 25, and to 2.13 notes to comments refer our please incentive programmes, employee of the to an regard explanation With euros). by 635 thousand expenses of reduction year: (previous euros 24,359 IFRS thousand as per expenses personnel triggered incentive programmes employee Group’s The 2019. as of 31 December academy vocational of the students or 325) apprentices were year: 336 and (previous executives senior were 38) year: this(previous Of figure, 4,183). 35 year: (previous persons 4,238 financial year,employed Group the the of end 4,131). the At year: financial(previous in year the 2019 Group in the employed were persons of 4,200 average An Wa In follows: as down broken are expenses Personnel 8 other items. euros) thousand 13 year: 5,874 (previous euros year: euros)vious commission 9thousand to thousand and employee (pre euros thousand euros) 6,548 commission, relates 316,097 thousand to dealer year: (previous euros 306,506 thousand vast in the contract, underlying of the term over the using straight-line the method are amortised acquisition costs contract 15, IFRS Under of materials. cost in the euros) amortised were thousand 321,984 year: (previous euros thousand 313,054 2019 financial of Inthe acquisitionyear, 15.127: in accordance is disclosure IFRS following with costs made The contract partners. commissions sales premiums for and charges, communications mobile mainly comprises services of purchased cost The operations. prepaid from bundles and ucts prod computers/IT communications devices, mobile sold for prices cost of the consists largely goods of purchased cost The Total Costs of purchased services In as follows: down of materials cost breaks The 7 Conso

EU EU ges andsalaries R ’000s R ’000s majority of cases over a period of 24 months. Of the contract acquisition costs reported as at 31 December 2019, as at 31 December reported acquisition costs contract the Of of 24 months. over a period of cases majority f purchased goods COST OF MATERIALS OF COST PERSONNEL EXPENSES lidat e d f i n a n cial s t at e m en t s

| n otes totheconsolidated financialstatements Annual Report 2019 ,3,3 1,993,739 2,036,334 ,4,6 1,174,404 1,142,867 3,5 219,700 236,450 9,8 182,825 197,388 9,6 819,335 893,467 90236,875 39,062 2019 2019

freenet AG 2018 2018 141 to - - -

Consolidated financial statements Consolidated financial statements Inter Deprecia In impairments: and amortisation of depreciation, composition the out sets table following The 9 142 For information on interest from lease receivables, we refer to our comments in note 2.5.2, freenet as lessor. freenet in note 2.5.2, to comments refer we our receivables, lease from interest on information For in note 36. to comments refer we our TM"), to as "MOTION referred (hereinafter Troisdorf GmbH, Vertriebs acquisitionTM the from option of MOTION put of the measurement subsequent the interest from on information For In similar and items: Interest consist following income of the 11 financial assets. other and assets, other and receivables other receivable, accounts million trade 38.9 which concern euros 9, IFRS of under recognised tolosses impairment million 38.9 is euros attributable thisof 39.5 amount, Of million euros. assets andcontract financialon assets losses impairment included 2019expenses financial year,In the operating other postage. and billing, for outsourcing expenses receivables, on defaults and allowances loss for buildings),administration expenses and shops of the costs incidental (e.g. and rent expenses administration consulting and in fees, 2018), euros legal sand 117,381 thou with in euros 2019 compared thousand (108,247 consist mainly of marketing costs expenses operating Other 10 in note Leases. 2.5, statements to refer the please ment, equip and plant of property, in depreciation decrease of right-of-use the and depreciation the on assets information For Total Depreciation of property, plantandequipment assets of intangible Amortisation Interest from leasereceivables Total Interest income from refunds tax Interest from andsimilarincome banks,debtcollection f reenet AG

EU EU

est from thesubsequent measurement of theputoptionfrom theacquisition of MOTION TM R ’000s R ’000s OTHER OPERATING EXPENSES DEPRECIATION, AMORTISATION AND IMPAIRMENT INTEREST AND SIMILAR INCOME AND SIMILAR INTEREST tion of leaseassets

Annual Report 2019 Conso lidat e d f i n a n cial s t at e m en t s

| n otes totheconsolidated financialstatements 5,4 129,196 156,841 70,701 14371,036 58,160 31,483 54,657 9,573 2,035 1,155 6,257 2019 2019 126 2018 2018 164 92 72 0 0 0 - -

Total Deferred income from tax rate tax changes Deferred expense) income relating differences (previous tax tax year: totemporary on deferred assets tax Deferred expense) income duetowrite-up (previous tax (previouswrite-down) tax year: year: Tax income from previous years Inter Curr In taxes. deferred plus taxes, income outstanding and paid comprise taxes Income 13 (– yearprevious the in the of (“CECONOMY”) initialrecognition of shares in CECONOMY AG effect to one-off due the – to year: 0.6 financial (previous other million result amounts euros The in note Leases. 2.5, to comments refer we our leases, from interest on information For euros). thousand 6,158 year: (previous euros liabilities thousand discount unwinding of on 4,023 of the the amount in the relating euros)to expense interest the in thousand and 11,616 year: (previous euros leasing finance from thousand of 0 euros), interest in thousand the 6,238 year: (previous euros thousand of 4,018 similar and to interest expenses banks the cost) in amortised category: measurement 9 (IFRS method interest relating effective interest to the This item includes li tax income current discount euros) unwinding to on of the the is thousand mainly attributable 6,158 year: (previous euros 2019 thousand liabilities for discountof relating 4,023 on unwinding to of the amount the in the expense interest The Total Other Interest from finance leases Interest expense from payments andsimilarexpenses additional tax Interest expense from pension obligations Interest expense from theunwinding of discounts onliabilities Interest from leases In as follows: are comprised similar and Interest expenses 12 Conso abilities, other financial provisions. other liabilities abilities, and

EU EU 47.1 million euros).

relating losscarryforwards totax relating differences totemporary ent tax expense forent tax thefinancial year est tobanksandsimilarexpenses R ’000s R ’000s INTEREST AND SIMILAR EXPENSES AND FINANCE OTHER NET COSTS EXPENSES AND SIMILAR INTEREST INCOME TAXESINCOME lidat e d f i n a n cial s t at e m en t s

| n otes totheconsolidated financialstatements

47 .2 million.2 euros). This primarily change was Annual Report 2019 - - - 53,346 66956,042 56,699 - 8823,157 18,862 25,881 23234,396 17,167 32,372 ,2 2,053 1,329 - ,8 4,549 8,684 ,2 1,708 6,158 1,725 4,023 2019 2019 504 926 503 83 11,616 0

freenet AG - - 21,839 29,593 2018 2018 111 143 48 0 0 0

Consolidated financial statements Consolidated financial statements Other effects Tax income from previous years Current taxexpense Earnings per share inEUR (basic) Weighted average numberof shares outstanding Consolidated profit toshareholders attributable of freenet AG InEUR’000s Effectstax rate of changes Tax effecttax-free of income Tax effect of othernon-deductible expenses Tax effecttax additions onnon-deductible expenses duetotrade unrecognised deferred assetsonlosscarryforwards tax and Change indeferred assetsonlosscarryforwards tax Effectivetax rate in per cent the current tax expense of 53.3 million euros (previous year: 21.8 million euros) 21.8 reconciliation: following year: in is the shown of 53.3 million (previous euros expense tax current the this and amount between million euros). difference 71.1 The year: million (previous of euros 72.1 expense anticipated tax result inwould taxes income before to profit companies consolidated consolidated of the rate tax average the Applying liabilities. tax deferred and assets tax Deferred to refer note 18, please taxes, concerning deferred details further For 144 Conditional capital. Conditional note 24.7, under to comments refer our please purposes, information For utilisation capital. of conditional possible of the financial as a resultyear. during the share per may decrease basic future, earnings the In outstanding of shares number weighted average the by shareholders the to attributable profit by the dividing share are calculated per earnings Basic 14.1 14 cent). per 30.40 year: cent (previous per 30.30 rate in of financial using calculated tax year taxes 2019 were an average deferred The cent) applied. also were per 414.94 of 413.74 rate assessment year: tax cent (previous as well as trade an average per tax cent) in corporation to relation the 5.5 per year: cent (previous surcharge of 5.5 per Asolidarity taxes. income deferred and current the 2019 calculating for in financial cent)year applied was per 15.0 year: cent (previous of per 15.0 rate tax acorporation companies, Group the For amounting to years millionprevious 3.5 euros. for restatements include effects other the 2019, For 15. IFRS new an analysis on of the backdrop of asituation the against based assets of net treatment anew with in connection receivable accounts of trade purposes tax for derecognition to related the expense This non-recurring euros. thousand 2018 totalling 82,287 as at 1 January purposes tax income for group AG’s tax consolidated freenet for accounts tax the in expense non-recurring euros related to a thousand 25,015 of yearamount previous the in the in effects other The rate expense applyingthetax ofExpected tax 30.40 Earnings before taxes In EUR’000s/as indicated f reenet AG

EARNINGS PER SHARE EARNINGS BASIC EARNINGS PER SHARE PER EARNINGS BASIC

Annual Report 2019 Conso lidat % e (previous30.40 year: d f i n a n cial s t at % e m ) en t s

| n otes totheconsolidated financialstatements 2,1,1 128,011,016 128,011,016 9,9 223,138 190,899 - 3,7 234,002 238,078 - - 53,346 - - 2019 10,558 72,138 2135,931 12,153 42,358 23,508 1.49 2,620 ,7 25,015 3,772 22.41 - 2019 503 422 - - - 21,839 - 16,035 71,137 8,019 2018 2018 1.74 9.33 48 0 Earnings pershare inEUR (diluted) Weighted average numberof plusnumberof dilutive shares potentially shares outstanding Weighted average numberof shares outstanding Consolidated profit toshareholders attributable of freenet AG inEUR’000s Total Software Right-of-use assets Customer relationships Trademarks refer to our comments in note Leases. 2.5, to comments refer our we 0euros). 2018: to Inthis 452.0 2019 amounted context, (31 million December as at 31 euros assets Lease December 2019. as at 31 43.8 existed December year: million euros). assets intangible impaired 2019 (previous No as at 31 December million euros of 18.8 amount in resulted acarrying GmbH Deutschland Saturn Media right with exclusive distribution The million euros). 44.5 year: of 19.3 million (previous euros 67.8 million euros) 86.3 2018: rights including distribution 2019 (31 million as at December 31 are shown euros December of assets intangible further allocations, price purchase various the resulting from assets intangible to the addition In In EUR’000s allocations: price purchase from assets intangible of these amounts carrying the out sets table following The in financial year acquisition Group 2008. debitel of the of the occasion the on price allocation purchase arisingthe from relates trademarks to assets in intangible amount carrying significant most The note 39. under are shown equipment and plant property, and in assets intangible Movements 15 potential dilution effects. nor 2019, actual are atneither 31 there December As dilutive shares. by potentially increased outstanding shares of number weighted the average by shareholders the to attributable profit by dividing the share are calculated per earnings Diluted 14.2 Conso

DILUTED PER SHARE EARNINGS INTANGIBLE ASSETS, LEASE ASSETS, PROPERTY,INTANGIBLE ASSETS, LEASE PLANT AND EQUIPMENT AND ASSETS, G lidat OODWILL e d f i n a n cial s t at e m en t s

| n otes totheconsolidated financialstatements Annual Report 2019 2,1,1 128,011,016 128,011,016 2,1,1 128,011,016 128,011,016 31.12.2019 3,6 439,095 434,063 9,9 223,138 190,899 0,5 301,427 300,754 35650,546 87,046 43,536 87,828 1,945 2019 1.49

| freenet AG 31.12.2018 2018 1.74 145 76

Consolidated financial statements Consolidated financial statements Total Other TV Online Mobile Communications In EUR’000s below: to CGUs table in of is goodwill the shown allocation The 146 experience and future expectations in relation to the main earnings and value drivers. drivers. value in main to relation and earnings the future expectations and experience past from derived assumptions detailed on CGUs is based “Online” and Communications”, “TV” Planning “Mobile the for forecasts. flow cash the to extrapolate used were that rates growth are the also these assumptions; growth on based (from assumed 2023), phase have been discounts subsequent in the rates capitalisation to the regard With CGUs. the of structure risk specific the basis post-tax and WACC the of market data on The is in derived value fair measuring used 13. in hierarchy accordance IFRS value fair with to 3of the level are equivalent These terminal in value. the extrapolated were planning phases detailed including 2023. The up to and covering period by basis management the of the planning on approved determined were values fair The CGUs. “Online” and Communications”, “TV” “Mobile of the amount recoverable as the used to has been sell costs less fairvalue The segment. “Other/Holding” of the CGU is part “Online” CGU. The “Online” to the allocated euros) has been thousand 29,887 year: (previous euros of thousand 29,887 goodwill while segment, “TV” to the is identical 2 As of December 31 life. euros) useful an indefinite with asset as an intangible thousand 293,204 year: (previous euros sand thou of 293,204 amount in the atrademark and segment, Communications Mobile to the CGU, belongs which nications” Commu “Mobile euros)to the allocated was thousand 1,119,396 year: (previous euros thousand of 1,122,814 Goodwill 16 the “Other/Holding” segment. to allocated CGU has been “Other” the and segment, Media” and “TV to the allocated CGU has been Since “TV” 2016, the CGU. “TV” the under is which shown euros, thousand 225,934 of resulted in goodwill Group Broadcast acquisition of the occasion Media the of the on allocation price purchase The f reenet AG 0 19, goodwill of 226,621 thousand euros (previous year: 226,621 thousand euros) was allocated to the “TV” CGU which “TV” euros) to the 226,621 allocated was thousand year: (previous euros of 226,62119, thousand goodwill

IMPAIRMENT TESTING OF NON-MONETARY ASSETS IN ACCORDANCE WITH IAS 36 IAS WITH ACCORDANCE IN ASSETS NON-MONETARY OF TESTING IMPAIRMENT

Annual Report 2019 Conso lidat e d f i n a n cial s t at e m en t s

| n otes totheconsolidated financialstatements 31.12.2019 ,8,7 1,380,056 1,383,474 ,2,1 1,119,396 1,122,814 2,2 226,621 226,621 98729,887 29,887 ,5 4,152 4,152 31.12.2018 - - erability of the equity interest in the associated company Sunrise. There was no need for recognising for loss. an impairment need no was There company Sunrise. associated in interest the equity of the erability recov the to confirm possible it was basis of the this information, On sector. arewhich usual telecommunications in the of EBITDA application the also and estimates analyst were in main this sources respect The domain. public in the basis available of the information on 810.4 estimated million was year: euros). recoverability million The 780.5 (previous euros of 2019 amount in the as of 31 company Sunrise associated in December shares the of the amount total to carrying tion the in rela out carried to had be test impairment aseparate seq., et 28.40 IAS with in 36 conjunction In accordance IAS with 0). year: in(previous financial year Group 2019 in the recognised was assets of non-monetary impairment No segment. euros), “Other/Holding” to all the thousand is of which allocated 4,152 year: (previous euros thousand 4,152 ofvarious amount the CGUs in for goodwill other 2019 include as at December 31 statements financial consolidated The life. CGU useful an indefinite with Communications” “Mobile of the trademark to or the allocated goodwill in respective to relation the recognised has to impairment be no that CGUs confirmed “Online” and Communications”, “TV” in 2019 out in “Mobile to relation the carried test impairment The TV Communications Mobile CG planning: corporate the for assumptions basic the and assumptions growth (WACC), the discount rates the CGUs, to the allocated goodwill the shows table following The Online Conso U

lidat e d mil in goodwill Allocated f EU i lions n a R 1,124.8 n

226.6 cial 29.9 s t at e m WACC en in 5.22 4.58 6.05 t % s

| n Growth rate rate Growth otes totheconsolidated financialstatements in 1.00 0.50 0.25 %

– – – Key earnings/value drivers –

grammes. of theacquisition orloyalty pro- asaresult partners paid tosales for dealercommissions tobe costs for procuringhardware and loyalty. Ontheothersideare by newcustomersandcustomer contribution toearningsmade customersdominatetaining the The costs o opera mobilenetwork (particularly costs for purchased services retention. Theseare opposedby new customers,andcustomer tribution madetoearningsby earningsflows:the con- into two Gross pro with ther differentiateducts, inaccordance ated by theindividualendprod- Revenue andgrossprofits gener- with ther differentiateducts, inaccordance ated by theindividualendprod- Revenue andgrossprofits gener- tors). espec espec fit can bebrokenfit down f acquiring andre- tive markets. sales tive markets. sales Annual Report 2019 – – – – – planning Basic assumptionsfor corporate – – –

base inthepostpaidbusiness customer retention costs products contribution lifestyle of digital and EBITDA postpaidARPU Stable Moderat customerac Stable Increasing s dev Stable Steady EBITD profit Declining rev and EBITD Increasing revenue, grossprofit e increase incustomer A contributions elopment of revenues ales andearnings enue andgross A contributions

quisition and |

freenet AG mu ltiples ltiples 147 - -

Consolidated financial statements Consolidated financial statements Consolidated profittax after Income taxes Interest andsimilar expenses Depreciation, andimpairment amortisation EBITDA Gross profit Revenue In EUR’000s Total liabilities Current liabilities Non-current liabilities Total assets Current assets Non-current assets In EUR’000s Int Total Interests injointventures In EUR’000s 17 148 1 S 2019.31 December as statements of Sunrise relatesfinancial by published the consolidated to financial recent information most The TV. digital and Internet landline, mobile communications, of fields in the 3 million customers than more for accounts and in Switzerland provider telecommunications controlled non-government largest isSunrise the SSOCIATES asignificant influence. AG to is exert able freenet cent of voting per rights, 24.56 with and of Sunrise Board Administrative theon seats two wayBy of AG as an associate. freenet of statements financial consolidated in the isSunrise included 17.1 f INCOME STATEMENT BALANCE SHEET reenet AG ummarised Information as of 31 2019 December The closing rate as of 31.12.2019 was 0.9217 EUR/CHF. 0.9217 was 31.12.2019 of as rate closing The erests inassociates

Thereof tradeaccounts payable andotherliabilities Thereof long-term borrowings Thereof cash Thereof assets intangible

A EQUITY-ACCOUNTED INVESTMENTS

Annual Report 2019 1

Conso lidat e d f i n a n cial s t at e m en t s

| n otes totheconsolidated financialstatements N 721731,409 810,399 1,753 783,884 17.2 17.1 ote 31.12.2019 31.12.2019 31.12.2019 ,0,5 2,167,735 2,509,358 3,483,613 3,743,934 1.1.2019 ,2,5 1,074,318 1,670,241 1,126,357 1,697,054 1,393,244 1,663,404 1,453,968 1,932,064 1,855,191 2,682,475 1,953,974 3,111,071 - 8,3 811,808 785,637 - - 427,075 2,6 533,574 528,966 445,103 504,331 487,767 577,294 373,944 801,138 184,903 632,863 11,426 44,622 850454,717 48,560

–

31.12.2018 31.12.2018 31.12.2018 1.1.2018 - - - 385,672 25,062 47,230

–

Other comprehensive income Income taxes Other comprehensive income/not tobereclassified totheincome statement in future periods Carrying amountasof 31 DecemberCarrying Dividend paidtofreenet Other comprehensive income Carrying amountasof 31 December Carrying Other effects of reconciliation1 Fair valueadjustmentsonnet Sunrise assetsfrom PPA at freenet Subsequent accounting from purchase price allocation Current profit share amountasof 1January,Carrying restated Effects of thetransitiontoIFRS 15/IFRS 9 amountasof 1January,Carrying asreported In EURmillions acc. toIAS 19(2011) Recognition of actuarialgainsandlossesarisingfrom theaccounting for pensionplans Consolidated profit after tax In EUR’000s Elimination of PPA effects at Sunrise tofreenetNet Sunriseassetsattributable asof 31 December Net asof Sunrise assets 31 December In EURmillions is as follows: amount reconciliation carrying to the The 1 accounted investments, thereof from subsequent accounting from purchase price allocation”. price purchase accounting from subsequent from thereof investments, accounted equity- loss of or “Profit the in effects these shows freenet as twice, not recognised are effects tax deferred these and downs write- Thisthese thatensures Sunrise. of part the on price allocation purchase in relation to effects tax as well as deferred write-downs as profit thisin consolidated included amount the Sunrise by by disclosed tax after profit consolidated adjusts initially thatfreenet in mind borne be it has to Sunrise, of tax after profit consolidated in shares to the the regard With – year: (previous allocation price purchase euros)sand – and thou 44,260 year: (previous tax after Sunrise of profit relates consolidated to euros of the shares thousand 34,252 ure, of this in interest fig to Sunrise; the attributable euros) 25,027 investments equity-accounted year: for thousand (previous euros thousand 14,286 share of aprofit shows 2019, 2019 statement to income 31 the December 1January period the For 1 RECONCILIATION TOCARRYINGAMOUNT THE OTHER COMPREHENSIVE INCOME RECONCILIATION OF THE NET ASSETS OF SUNRISE TO THE CARRYING AMOUNT Conso

The average exchange rate for financial year 2019 was 0,8995 EUR 0,8995 was 2019 year financial for rate exchange average The The other reconciliation effects for 2019 result mainly from translating CHF to euros. to CHF translating from mainly result 2019 for effects reconciliation other The lidat e d f i

9,9 n a 66 thousand euros relates to the subsequent write-down recognised in connection with the shadow shadow the with in connection recognised write-down relates subsequent to euros the thousand 66 n cial s t at e 1 m en t s

19 n ,233 thousand euros). thousand ,233

otes totheconsolidated financialstatements

CH F. Annual Report 2019 31.12. 2019 1.1.2019 – 1.1.2019 – ,3. 1,315.9 1,234.5 - 34895,939 43,418 85092,644 48,560 - - ,4 3,295 5,142 8. 810.4 783.9 8. 810.4 783.9 1. 816.8 809.7 810.4 810.4 - - - ,7 4,135 5,272 299.1 9. 810.1 790.1 0. 323.2 303.2 2019 2019 10.3 41.5 20.0 34.3 130 0.7 0

31.12. 2018 freenet AG 1.1.2018 – 1.1.2018 – - - - 321.4 - 2018 2018 - 19.2 36.9 44.3 840 5.4 1.5 7.1 149 - -

Consolidated financial statements Consolidated financial statements 10 April 2019. This inflow boosted the cash flows from operating activities. operating from flows cash the 2019.boosted 10 April This inflow on of Sunrise Meeting General Annual by the share adopted per CHF of 4.20 payment euros) dividend as of aresult the thousand 36,912 year: (previous euros thousand of payment 41,462 In financial year 2019, a dividend AG received freenet income. of comprehensive statement consolidated in the income comprehensive of other euros) as elements shown were thousand 809 year: (previous plans accounting pension for Total Deferred assets income tax – ofaccounting income wellas comprehensive as other to subsequent with regard differences translation currency ing from euros) result thousand 4,604 year: (previous euros thousand of 1,924 income comprehensive other toIn relation Sunrise, 150 carryforwards. carryforwards. million euros) loss 114.4 of tax anticipated use as of aresult the year: (95.2 million previous euros) euros; non-current and million euros) 158.1 year: million(35.1 as current previous is classified euros; 43.7 year: previous million euros; million (130.3 AG are which recognised of freenet group tax trade and tax corporation the for assets tax of deferred overhang The In EUR’000s sheet: balance consolidated in the are shown amounts following The cent). per 30.40 year: cent (previous per at of an 30.30 rate overall taxed were liability method, accordancein the differences with liabilities, account taking temporary of the tax deferred and assets tax deferred The 18 million 0.5 euros). year: (previous millionto 0.5 euros amounted GmbH Jestoro of year 2019, profit/loss net the million1.4 euros). financial In 2018: million1.8 (31December euros of amount jointinsignificant carrying venture a with as an Hamburg, GmbH, Jestoro 2019 include December ending 31 period the for statements financial consolidated The 17.2 previously. as 11,051,578 shares, held Group 2019, freenet of 31 the December As Bloomberg). –source: 76.04 euros (31.12.2018: to 70.01 euros amounted of Sunrise share price date the euros). sheet balance At the thousand 810,399 2018: (31 December euros thousand to 783,884 amounted in interest Sunrise equity Group’s of the amount 2019, carrying of 31 the December As f reenet AG

29 t

housand euros resulting from recognised income taxes and – and taxes income recognised resulting euros from housand JOINT VENTURES DEFERRED INCOME TAX ASSETS AND DEFERRED TAX LIABILITIES

Annual Report 2019 Conso lidat e d f i n a n cial s t at e

1, m 263 thousand euros in actuarial gains arising in the euros actuarial from 263 thousand en t s

| n otes totheconsolidated financialstatements 31.12.2019 3,2 158,094 130,226 3,2 158,094 130,226 31.12.2018 - T assets Trade accounts receivable, other Borrowings liabilities Trade accounts payable, other Other financialliabilities Other pro P L L C Other financialassets L Trade accounts receivable, otherassets Trade accounts payable, otherliabilities Pension provisions Intangible assets Intangible Borrowings Other financialliabilities Other provisions Other financialassets assets Intangible Contract acquisition costs Total Loss carryforwards Financial assets Property, plantandequipment Property, plantandequipment In EUR’000s in financial year as follows 2018: liabilities tax developed deferred and assets tax deferred The p in the As to continuing operations. discontinued and attributable taxes income deferred sum to of the the correspond cally “Taxes basi income”. on under They taxes income as deferred euros) statement income consolidated sand in the are shown of 27,968 year: toexpense amounting (previous euros a net tax income from thousand income and expenses The In EUR’000s table: following liabilities financial tax in year income the the2019 in are shown deferred and assets tax income deferred in the Changes Conso ease liabilities oss carryforwards ease assets otal ension provisions ontract acquisitionontract costs r evious year, income tax expenses and income in financial year 2019 were attributable solely to solely continuingoperations. in financial income year and 2019 were attributable year,evious expenses tax income lidat visions e d f i n a n cial s t at e m – 1.1.2019 158,094 – –

170,616 292,717 175,937 en

– 57,257 92,488

1,131 7,949 7,767 9,537 7,543 1,602 t s

191,724 0 0 | n otes totheconsolidated financialstatements Transition to – –

157,288 I –

29,919 F -

1.1.2018 3,689 R – 153,508 288,168 171,474 S 338

490 18,414 16 9,625 4,931 2,038 0 0 0 0 0 0 0 0 849 958 - 0 0 0 1 dation/decon- initial consoli- E ffec Transition to solidation – – - - ts from 158,169

- 2,597 I 2,593 - - – 75,798 88,035 F

,0 ,8 ,0 158,094 7,706 2,086 5,206 I 7,488 1,581 5,449 R 593 524 F – S 66 R 15,

0 0 0 0 1 0 0 0 0 S 9 0 0 0 0 0 0

comprehensive S et o prehensive other com- ff in other ff inother S et o income income – 2,359

3,497 1,128 1,935 - – 233 ff in ff in

Annual Report 2019 11 82 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 248170,616 12,448 0 0 0 0

inc E E income taxes ome from in- inc xpenses and xpenses and xpenses and xpenses and come taxes ome from ome from – – – –

27,968 - - -

–

– 10,633 36,321 46728,867 24,607 24,035 17,118 ,1 7,767 4,417

- 2,753 9,610 2,464 3,449 6,786 ,4 292,717 4,549 ,3 2,739 1,137 4,453 4,029 4,463 - - –

6 7,949 461 2 9,537 321 261 439 8 1,131 282 209 3 1,602 958 436

31.12.2018 31.12.2019 7, freenet AG - 706 thou – – 167,096 130,226 - - – – –

134,295 283,107 139,646 171,744 175,937 -

67,901 12,595 90,024 35,076 57,257 92,488 1,392 4,524 7,543 151 0 - -

Consolidated financial statements Consolidated financial statements Transition toIFRS 15,IFRS 9 As of 31.12. Tax income) expense (previous year: tax Set off inother comprehensive income Effects from initial consolidation anddeconsolidation Transition toIFRS16 As of 1.1. In EUR’000s below: is shown taxes change in deferred net summarised The 152 in 2019 was attributable to contract acquisition costs with an amortisation period of 24 months. period an amortisation with acquisition costs to contract in attributable 2019 was amount amortisation cent of the per 94 all segments, and business entire Group the initial Across imputed over the term. are amortised assets business, Inprepaid exclusively is 24 almost months. period amortisation the business, In postpaid financial inyear. the recognised were acquisition costs year,contract on ous losses impairment no previ in the case the was euros). As thousand 321,973 year: (previous euros thousand to 313,054 euros) amortisation and thousand 336,622 year: (previous euros thousand 306,315 to amounted In financial as assets year 2019, recognised costs commissions. to employee extent, to commissions alesser to euros). dealer and, relate predominantly They thousand 304,238 2018: 2019 to (31 297,240 amounted December as acquisition of 31 euros costs December thousand contract Capitalised 19 period. planning fiscal in the to reverse expected are not they because differences these with in connection recognised have been taxes million euros). deferred approximately No 48.3 year: ous million of approximately (previ 54.7 euros purposes) tax for shown of investments amounts carrying corresponding the than is accordancehigher IFRSs in with equity basis differences (net outside 2019, are temporary at 31 there December As Tax (Einkommensteuergesetz–EStG). Income Act German the (1) 4h 2of sentence section as per carryforwards interest unrecognised no were there date, sheet balance year’s previous the on case the was As tax). billion trade 0.4 euros and tax billion corporation euros 1.2 year: (previous tax relate to trade 0.1 billion and euros tax billion 0.8 relate euros to corporation sheet, balance consolidated in the recognised been had assets tax deferred no which for carryforwards, loss other for shown figure the Of carryforwards. loss tax to trade is attributable 149,793 euros) year: thousand (previous euros thousand 138,813 and carryforwards loss tax to corporation is attributable euros) 142,924 thousand year: (previous euros thousand 144,294 euros). this figure, Of 292,717 thousand year: (previous in carryforwards to relation loss recognised been had euros to amounting 283,107 thousand assets tax 2019,ber deferred at 31 Decem date. As sheet balance as at the applicable taxes before earnings for forecast company’s the on are based its prof expected The realised. be will this that indeed asset as probable it that is regarded extent to the sheet balance dated theconsoli recognised in only was asset tax Accordingly,financial deferred four years. a next the for cumulative profits forecast sum of the the exceed any restrictions without forward carried be can that carryforwards loss tax existing The freenet AG

CONTRACT ACQUISITION COSTS ACQUISITION CONTRACT | annualReport 2019 Consolidated financial statements

| n otes totheconsolidated financialstatements 130,226 158,094 - - 27,968 2,359 2,597 2019 338 0 158,094 153,508 - 2,086 5,206 7,706 2018 0 0 - - - - - Total Other Bundles andvouchers SIM cards Computers/IT products Mobile phones/Accessories Receivables, other assets and other financial assets are comprised as follows: are comprised financial assets other and assets other Receivables, 21 inventories. in to relation the euros) recognised has been thousand 4,915 year: (previous euros of 3,726Impairment thousand In EUR’000s VENTORIES as follows: inventories are comprised The 20 Total receivables, andotherfinancialassets otherassets Non-financial assets Prepayments made Other assets Financial assets Other equity instruments Other financialassets Lease receivables Other non-derivative financialassets Trade accounts receivable In EUR’000s Conso

RECEIVABLES, AND OTHER FINANCIAL ASSETS OTHER ASSETS IN lidat e d f i n a n cial s t at e m en t s

| n otes totheconsolidated financialstatements 3,5 6,7 473,674 201,734 460,079 122,921 933,753 271,940 324,655 337,158 240,431 609,098 77,402 317,833 1,9 2,3 196,454 122,736 180,115 319,190 180,115 225,753 68,678 294,431 8921,8 17,585 13,924 11,387 14,678 68,254 28,972 8,724 82,178 23,402 5,465 Total Annual Report 2019 31.12.2019 N 31.12.2019 on-current 589105,965 75,819 65219,820 66,858 16,592 46,888 ,6 11,726 7,492 5,561 6,727 8 5,280 185 51

freenet AG 31.12.2018 ye Current ar-end 153 69 0

Consolidated financial statements Consolidated financial statements Equity investment in 154 carried out by DTAG out carried days. of 30 term has apayment The receipt. upon immediately due are mostly they itself, Group by the invoices customers to end are issued When Telekom AG (DTAG) of Deutsche services are utilised. collection the services, narrowband for itself; Group by the are issued invoices some Other/Holding segment Inthe itself. Group by the are issued segment Communications Invoices Mobile in the 2019. as at December euros)31 assets consist thousand of354,418 non-financial year: of 324,655 (previous made euros thousand prepayments and assets Other partners. sales and dealers customers, corporate customers, end from proportions equal due arein almost These item significant thisin category. most are the receivable accounts trade Group, freenet the In in note 33, financial on instruments. Information statements torefer the please euros). information, more For thousand 317,833 328,447 year: 2019 (previous as at 31 euros December thousand to amounted allowances, loss less financial assets, non-derivative other and receivable accounts sum total of trade The services. Internet and landline and sales, equipment consist arising and mainly charges, from of receivables third from are parties Trade due receivable accounts S date (closing Frankfurt the on price reporting the on market price as the value fair the reports Group The hensive income. accountingcompre other through fair value is at Subsequent of 178.8 million amount euros. carrying at a financial assets other under of 277.4 aprice for 2019, in interest is CECONOMY reported of equity 31 the December As million euros. July 201812 from (32,633,555) shares acquired9.1 ordinary cent of the Group effect per with of CECONOMY freenet The Total Other Miscellaneous otherequity investments In EUR’000s as follows: are comprised instruments equity other These Prepayments made Other assets Financial assets Other equity instruments Other financialassets Other non-derivative financialassets Trade accounts receivable In EUR’000s Total receivables, andotherfinancialassets otherassets Non-financial assets f reenet AG t ock Exchange). ock

Annual Report 2019 CECONOMY Conso lidat e d f i n a n cial s t at e m en t s

| n otes totheconsolidated financialstatements 6,1 7,9 288,818 178,698 267,647 467,516 60,800 328,447 2,3 0,2 515,213 226,395 306,721 128,023 821,934 354,418 4,6 2,7 219,985 127,675 105,608 347,660 253,914 105,608 52,480 306,394 3411,9 21,171 13,733 12,290 8,320 33,461 22,053 6,758 Total 31.12.2018 N 31.12.2019 on-current 8,1 105,608 180,115 7,6 104,427 178,767 542 806 4 6,410 348 31.12.2018 in Current voicing 547 634 0 - Other assets Other assets Other financialassets Other non-derivative financialassets(Stage 1) past duefor >180days Receivables from endcustomers – past duefor <90days Receivables from endcustomers – Receivables from businesspartners 1 past duefor 90to180days Receivables from endcustomers – Receivables from endcustomers –notpastdue In EUR’000s 9 IFRS pursuant to financial assets other and assets other receivables, on recognised allowances Loss 2019 31 December as follows: 2019 determined were as at 31 December assets other and receivables other and financial assets other receivable, accounts trade for allowances loss the this basis, On below. presented assets and of to categories the 2019 date attributable were of 31 December reporting as at the recognised allowances loss The amounts. carrying their to corresponds instruments equity other and financialwith assets risk 259.5 in connection year: default maximum million The euros)(previous to insurances. commercial credit due existing million to 282.5 euros date amounts sheet balance as at the receivable accounts trade risk of the default maximum The Conso

The impairment loss identified for the lease receivables was insignificant in financial year 2019 and was not recognised. not was and 2019 year financial in insignificant was receivables lease the for identified loss impairment The customers (MobileCommunications) Thereof contractassetsfrom contractswith thereof leasereceivables1 phone IFRS 15 (MobileCommunications/mobile Ther customers (TV) Thereof financial assets from with contracts (Level 1) IFRS 15 (MobileCommunications/tariff) Thereof consideration payable under eof consideration payable under lidat upgrade option)(Sta e d f i n a n cial ge 1) s t at e m en t s

| n assets Other financial receivable Trade accounts receivable Trade accounts receivable Trade accounts item Balance sheet receivable Trade accounts receivable Trade accounts and otherassets Other receivables assets Other financial assets Other financial and otherassets Other receivables and otherassets Other receivables otes totheconsolidated financialstatements Gross carrying Gross carrying 137,943 108,346 157,606 159,943 135,178 amount 23,943 20,702 14,798 29,565 82,178 35,918 Loss - al lowance 2,0 14,041 123,902 ------,4 152,662 4,945 ,6 129,014 6,164 153,632 6,311 105,250 3,096 7,256 15,222 7,542 5,480 - - 9 28,972 593 23,402 541 Annual Report 2019 35,918 0 N et carr amount 82,178 ying ying

| E

rate (mathe- xpec freenet AG re ceivables ceivables matical) ted loss ted loss in 51.0 26.5 89.8 3.1 4.6 3.9 2.9 155 %

Consolidated financial statements Consolidated financial statements Other financial assets Other financialassets Other non-derivative financialassets(Stage 1) past duefor >180days Receivables from endcustomers – past duefor <90days Receivables from endcustomers – Other assets Other assets Receivables from businesspartners o hc pcfcls loacsws291 e olwn al)14951141,7 158,574 12,475 1,134 144,965 (of which specificlossallowances see was 2,971, following table) Loss allowance underIFRS 9 asat31.12.2018 –calculated In EUR’000s 9 IFRS pursuant to financial assets other and assets other receivables, on recognised allowances Loss 2018 31 December 156 o hc pcfcls loacsws321 e olwn al)16072301,6 168,868 10,461 2,320 156,087 in2019 Net changeinlossallowances (of which specificlossallowances see was 3,281, following table) Loss allowance underIFRS 9 asat31.12.2018 –calculated In EUR’000s 2019 in financial the year: allowances loss development the on information following the We provide past duefor 90to180days Receivables from endcustomers – Receivables from endcustomers –notpastdue f reenet AG phone IFRS 15 (MobileCommunications/mobile Thereof consideration payable under (Level 1) IFRS 15 (MobileCommunications/tariff) Thereof consideration payable under customers (MobileCommunications) Thereof contract assetsfrom contracts with customers (TV) Thereof financialassets from with contracts upgrade option)(Sta

Annual Report 2019 ge 1) Conso lidat Other financial receivable Trade accounts receivable Trade accounts assets receivable Trade accounts item Balance sheet receivable Trade accounts receivable Trade accounts assets Other financial and otherassets Other receivables and otherassets Other receivables and otherassets Other receivables e d f i n a n cial s t at Gross carrying Gross carrying e (simplified (simplified m r eceivable eceivable 137,655 ac - 149,620 155,699 120,076 151,741 en amount model) 20,941 22,773 16,144 11,122 35,061 40,603 counts counts Trade t s

| n Loss otes totheconsolidated financialstatements - al ( financial lowance 3,2 15,999 133,621 S ------ta ,0 132,747 4,908 assets O ,9 152,106 3,593 7,929 14,311 8,215 116,049 6,630 4,028 ,8 2,014 1,186 146,188 5,553 33,461 1,600 - ge 1) ther 2 22,053 720 40,603 0

N r et carr eceivables eceivables and other and other (c amount ontract ontract assets) assets O ying ying ther

E rate (mathe- xpec - matical) ted loss ted loss 10,294 T in 50.9 31.7 89.3 otal 3.6 2.3 3.4 3.7 % Net change in loss allowances in2018 Net changeinlossallowances underIFRS 9 2018 –calculated on 1January Opening lossallowance of theconsolidated balance sheetresult Amounts restated retrospectively throughtheopeningbalance o hc pcfcls loacsws321 e olwn al)16072301,6 168,868 10,461 2,320 156,087 (of which specificlossallowances see was 3,281, following table) Loss allowance underIFRS 9 asat31.12.2018 –calculated Total Other Lease receivables (Mobile Communications/mobile phoneupgrade option) Consideration payable underIFRS 15 Total Other (Mobile Communications/mobile phoneupgradeoption) Consideration payable underIFRS 15 Lease receivables Interest inCECONOMY For more information on lease receivables, we refer to our comments in note Leases. 2.5, to comments refer we our receivables, lease on information more For In EUR’000s Current other financialassets in note Leases. 2.5, to comments refer we our receivables, lease on information more For In EUR’000s of breakdown The Loss allowance underIAS 39 asat31.12.2017 –calculated In EUR’000s 2018 financial inyear: the allowances loss development the on information following the We provide Conso lidat e d f i non-current other financialassets n a n cial s t at are comprised as follows: as comprised are e m en t s

| n otes totheconsolidated financialstatements is follows: as (simplified (simplified r eceivable eceivable 6,8 ,7 003173,221 10,063 2,670 160,488 134,071 ac - model) 6472051,6 38,535 10,063 2,055 26,417 counts counts 4,401 Trade ( financial S ta assets O - ge 1) ther 615 350 Annual Report 2019

31.12.2019 31.12.2019 r eceivables eceivables 6,8 126,218 268,480 and other and other (c 7,6 104,427 178,767 13,924 12,290 11,387 61734,904 46,187 46813,733 21,171 14,678 17,585 10,072 68,254 ontract ontract assets) assets O ther 398 134,686 0

| freenet AG 31.12.2018 31.12.2018 - 4,353 9,501 T otal 157 0 0

Consolidated financial statements Consolidated financial statements Total Total Other Receivables from andMedia,Other/Holding) endcustomers(TV (Mobile Communications) Receivables from endcustomersfrom mobilephoneupgradeoption Receivables from endcustomers(MobileCommunications), withoutmobilephoneupgradeoption (Mobile Communications) Receivables from operators, dealers, distributors,hardware manufacturers network Other (Mobile Communications) Receivables from endcustomersfrom mobilephoneupgrade option Total Other Other assetsfrom contractswithcustomers(TV) Consideration payable underIFRS 15 (MobileCommunications/tariff) Contract assetsfrom contracts withcustomers(MobileCommunications) Total Other Consideration payable underIFRS 15(MobileCommunications/tariff) Other assetsfrom contractswithcustomers(TV) Contract assetsfrom contracts withcustomers(MobileCommunications) In EUR’000s Current trade accounts receivables In EUR’000s tradeNon-current accounts receivables In EUR’000s Current other receivables and other assets In EUR’000s The breakdown of non-current other breakdown receivablesThe and other assets 158 f reenet AG

Annual Report 2019 Conso are comprised as follows: as comprised are lidat are comprised as follows: as comprised are e are comprised as follows: as comprised are d f i n a n cial s t at e m en is follows: as t s

| n otes totheconsolidated financialstatements 31.12.2019 31.12.2019 31.12.2019 31.12.2019 2,5 253,914 225,753 226,395 201,734 128,023 122,921 0,1 95,148 100,112 86852,480 68,678 74930,945 30,054 27,439 68,538 51,364 121,009 64,929 77,670 52,328 68,535 97,876 92,887 37,014 34,871 51,040 32,462 36,127 53,520 4,351 29,782 5,279 3,456 143 812 31.12.2018 31.12.2018 31.12.2018 31.12.2018 5,098 3,368 3,589 152 Total Cash at bank,cheques inhand andcash of the minority interest in the former freenet.de AG (134.7 million AG euros). (134.7 freenet.de former in interest the minority of the acquisition related the and in 2007 effective AG became which AG freenet to form AG freenet.de and mobilcom between (349.8 million acquisition Group to debitel due the euros) of the merger in as well increase as 2008 the capital the from 2019 originate as at 31 December reported reserve capital of the year, previous in the case components major the was As 24.2 alternative to acquire another shares. own provides it only purchased; to be is which of shares permitted volume maximum in result in not an increase the This does to acquire shares. own derivatives equity use may additionally Board Executive the 71(1) 8AktG, no. to section pursuant authorisation to the In addition B Infinancial is year 2021. until 2019, May Executive valid 11 authorisation the The restrictions. legal within the purpose ble accordingly, is exercised this time authorisation at the existing any for share capital permissi –the isthis lower amount –if or Board Supervisory of the 2016 approval May the with 12 on resolution of the time at the existing share capital the cent to of amounting 2016 shares atotal May of own 10 per to purchase 12 on Meeting General Annual by the authorised has been Board Executive the –AktG), (Aktiengesetz Act Stock Corporation German 71(1) 8of the no. toPursuant section euros. acquisitiontheir thousand of 50 cost at reserve capital the from year, deducted were shares previous in the year. case treasury the the previous was the with As company, by the compared in which owned unchanged turn is wholly Schleswig, GmbH, Logistik by mobilcom-debitel held are shares of these year 50,000 previous in the As rights. have same shares All is the up. entire fully paid share capital The euro. of 1.00 value nominal atheoretical with each no-par-value shares, registered of 128,061,016 consists share capital The euros. thousand to 128,061 amounts year and previous the with compared is unchanged share capital issued company’s The 24.1 in of changes equity. statement to refer also the we notes following to the In regard 24 from acquisitions. clauses tax with in connection shareholders former from due mainly relate to receivables assets tax income current The 23 In EUR’000s as follows: are comprised Liquid assets 22 Conso o ard made no use of this use authorisation. no ard made

LIQUID ASSETS CAPITAL RESERVE SHARE CAPITAL CURRENT INCOME TAX ASSETS INCOME CURRENT EQUITY lidat e d f i n a n cial s t at e m en t s

| n otes totheconsolidated financialstatements Annual Report 2019 31.12.2019 3,9 126,332 133,692 3,9 126,332 133,692

| freenet AG 31.12.2018 159 -

Consolidated financial statements Consolidated financial statements sand euros). sand Net assets Total liabilities Current liabilities Non-current liabilities Total assets Current assets Non-current assets In EUR’000s t refer we income, comprehensive in other netted taxes income on information For investments. ing equity-accounted for account relating subsequent the to differences translation as well as19 currency in accordance IAS with schemes pension of relating recognition to the losses gains and of actuarial consists essentially income comprehensive cumulative other The 24.3 160 made no use of this use authorisation. no made Board Infinancial year Executive 2019, the Meeting. 2016 to General invitation item the Annual 7of the agenda under Gazette Federal in the published was authorisation Board’s Executive full wording of the The 2021. untillion euros 1June mil up to kind or in sum an by overall maximum of issuing 12.8 cash contributions against shares new times, several or once capital share the to increase is authorised Board, Supervisory the of approval the with Board, Accordingly, Executive the 2016). Capital 2016 May (Authorised 12 on held Meeting General Annual created at the was capital authorised New Meeting. General 2018 Annual invitation to item 6of the the agenda under Gazette Federal in the published was authorisation Board’s Executive full 2023. wording until of the lion euros 3June The mil up to kind or in sum an by overall maximum of issuing 12.8 cash contributions against shares new times, several or once capital share the to increase is authorised Board, Supervisory the of approval the with Board, Accordingly, Executive the 2018). Capital 17 on 2018 May (Authorised held Meeting General created Annual was at the capital authorised New 24.6 to – amounted EXARING of profit/loss net The allocation: price purchase accounting the for subsequent the of inclusive also effects and of the expenses and income of liabilities, consolidation 2019, the as of 31 before December liabilities and of EXARING assets the regarding information following the We provide in shareholders 49.99 2018: cent) by non-controlling cent interest held per (31 per 41.37 to December the utable million 16.1 of 9.3 2018: an amount euros) million in equity (31 euros attrib was interests December non-controlling the Of 24.5 financial year the 2018. for out paid was million euros, making atotal of share, 211.2 value no-par- 2019per financial1.65 Inthe year, euros of a dividend payments. dividend the less AG shareholders, freenet the to attributable profit the cumulativefinancial for consolidated year comprise 2019 profits retained net consolidated The 24.4 f EXARING AG o n reenet AG Thereof: non-controlling interests inequity ote 18.

AUTHORISED CAPITALAUTHORISED INTERESTS NON-CONTROLLING PROFITS RETAINED NET CONSOLIDATED INCOME COMPREHENSIVE OTHER CUMULATIVE

Annual Report 2019 Conso lidat e

10 d f ,098 thousand euros in financial year 2019 (previous year: – year: in euros (previous financial year 2019 thousand ,098 i n a n cial s t at e m en t s

| n otes totheconsolidated financialstatements 31.12.2019 19342,023 26,141 51,923 29,022 68,164 80,944 05210,775 15,366 10,532 18,490 66,200 72,398 ,5 16,113 9,255 ,4 1,964 8,546

17 31.12.2018 EX ,917 thou ARING. ARING. - - - - - the target is attained, nothing is credited to the virtual account for the financial year in question. If Group EBITDA fails to EBITDA Group If financial year account the for in question. nothingvirtual to is the credited is attained, target the cent of per 90 if only account; a linear on basis isvirtual which tois reduced credited the basic amount of the a percentage per cent, 100 and target per cent 90 fixed the between is EBITDA Group defined the for attainment target the If account. virtual to the credited may be basic amount cent of the per in of 300 mind amaximum that bearing attainment, target for level ahigher may set also Board Supervisory the terms, in arithmetical exceeded cent being per of 120 attainment target t is entitled Board Supervisory the determined, is being attainment target respective the When account. virtual toited the is cred basic amount cent of the per 200 than more no is exceeded, cent target per Even120 ifthe account. virtual to the basicis credited amount per the of cent 200 achieved, is attainment target per cent 120 for defined EBITDA Group the If account. virtual inbasicthe afinancialto is credited amount year,per the of cent is attained target EBITDA 100 Group the If beneficiaries. financialthe each yearfor for specified were in case euros each thousand totalling 1,050 amounts Basic balance. acredit account that shows provided futureon depending in financial each year, attainment out in annualpaid target with dance instalments and a this amountbasic entered ina is virtual component; for this remuneration contract employment beneficiary’s in each fied speci was amount basic A new shares are the issued. date which on on effect dilution net effective to the proportionately adjusted are targets earnings the parameter.get event of acquisitions the shares, issuing Inthe new by areof which financed intar Esch) financialto 2015 2019 years Mr designatedPreisig EBITDA Mr the wasas to and (for 2018 (for Vilanek) and Mr financialin whichwas in years EBITDA signed 2014 agreement target afive-year agreement, annual to target the In addition time. at the Board Executive of the into members entered were the with 2”) as “Programme to referred LTIPs new grant that (hereinafter of employment contracts concerning the agreements 2014, 26On February 25.2 beneficiaries. to the out paid terminated was when in 2015 in 2011, Board Executive of the to members granted been had which 1, Programme 25.1 25 this of no use authorisation. made Board Infinancial year 2019,Executive increase. capital the conditional the out carrying for details further the to determine is authorised Board Executive The are created. they which beginningfinancial the year of the from in profits in the no-par-value participate shares registered new The settlement. acash provide not company does ifthe or settlement for used are shares not iftreasury and obligation option conversion or their meet obligation option aconversion or with creditors or to are of shares utilised or holders which aright toor delivery rights to option conversion or which extent to only the out is carried increase to be capital conditional The of association. articles of the 4(7) in section out to set regulations is shares subject registered value no-par new the for issue amount The shares. in to relation these obligation option conversion or a establishes company which or no-par-value of the shares in ofregistered shares to relation the right to delivery the or right option aconversion or provides which A) and item 10, agenda letter 2016 May under of 12 Meeting General Annual by the as adopted basis authorisation of the the on are which issued warrants with and/or bonds of convertible creditors or holders to the granted to shares be value no-par is registered increase to enable capital conditional of the purpose The 2016). Capital (Conditional capital share the of euro 1.00 accounting share for no-par-value individual each with shares, registered value no-par new million by issuing euros of up to increase up to 12.8 12,800,000 to capital aconditional subject is share capital company’s 2016, May the 12 on held Meeting General Annual by the resolution the accordanceIn with 24.7 Conso o r c count for the Executive Board member in question as a positive or negative amount as described below and in accor and below as described amount negative or as apositive in question member Board Executive the count for

eward exceptional performance and success by setting a notional Group EBITDA amount. If such a step results in the results astep such If amount. EBITDA Group anotional success by and setting performance exceptional eward

PROGRAMME 2 PROGRAMME 1 PROGRAMME CONDITIONAL CAPITAL EMPLOYEE INCENTIVE PROGRAMMES INCENTIVE EMPLOYEE lidat e d f i n a n cial s t at e m en t s

| n otes totheconsolidated financialstatements Annual Report 2019

pe |

freenet AG rformance rformance 161 - - - -

Consolidated financial statements Consolidated financial statements Total Stephan Esch Joachim Preisig Christoph Vilanek fo statements financial consolidated day the which on the days after exchange trading 20 stock the closing on price age Xetra aver the i.e. share price, areference on is based This calculation into multiplier)basic amount shares. phantom is converted the and basic amount of the product as the amount” “allotment as the account (known virtual the on shown amount The y LTIP in financial are the maintained of the designation sub-accounts the account bearing account, virtual tom in shares the of phan negative) or number (positive the of posting purpose the For account. less) or virtual to target is the of the debited cent per is 80 EBITDA (if Group basic amount cent of the per of up to 200 amount anegative cent target, per 90 the meet 162 the following table: following the in 2is shown Programme for member Board Executive each for accounts virtual in the holdings of the development The 2014. 26 as in from this February case i.e. is granted, programme date the which on the from are incurred members Board all for Executive expenses personnel the according to this method, a in remaining estimate of oftarget volatility shareline prices the the with the date, LTIPlife of the ance sheet programme, AG bal as of the of freenet share price are the model in this measurement main parameters The 2. to IFRS pursuant model measurement of arecognised help the with at value fair determined arising LTIP was the obligation from The programme year years. or subsequent the for parameters target by relevant success inout the attaining cancelled has been amount negative the when only payment will a(further) receive in question member Board Executive the made, isto due be at apayment which point at the balance anegative account shows virtual the If calculations. in the be included must value, share the on dependent financial instruments of marketable case in the are applicable stipulations which dilution for as well as circumstances payments, dividend of conversion into shares, phantom purpose the For o per cent 500 per of cent 25 to financial year corresponds per out paid to be amount gross maximum the cial year as follows: in finan each additionally is restricted amount payout gross the of that, (cap). euros up to ofonly 50.00 aprice Irrespective price theincrease share The taken in is into financialaccount relevant published. yearthe are for statements financialidated consol day the which on the days after exchange trading 20 stock the on closing price Xetra average basis of the the on cash into converted in turn, is, shares of phantom balance respective the this For purpose, balance. acredit account shows the i day which the from months of three annually within out account frame paid cent to atime balance of the have per tled 25 enti is beneficiary respective the financial yearended, the negative) for or amount account of a(positive ing virtual to the the credit after financial case andthe year each infrom 2017), starting PreisigEsch Messrs financial yearand the 2016, for from starting therefore Vilanek Mr (for programme the from financialbenefit year to second of the end the from Starting culation of the allotment amount when the respective post was made in the sub-account was based. was sub-account in the made was post respective the when amount allotment ofculation the f PROGRAMME 2 s reenet AG e t f t tainment for the respective financial year as well as the estimate of the discount rate. The graded vesting method is used; is used; method vesting graded The rate. discountestimate financialthe of yearwell the as as respective the for tainment r 20 ar for which the number posted was ascertained. was posted number the which ar for the relevant financial year are published. published. year are financial relevant the he number of phantom shares in the respective sub-account, multiplied by the applicable share price on which the cal the which on share price applicable by the multiplied sub-account, respective in shares of phantom the number he stock market trading days after the day on which the consolidated financial statements were published, provided that provided published, were statements financial consolidated day the which on the days after market trading stock

Annual Report 2019 Conso lidat phantom e d 11.08Additions 31.12.2018 N f umber of 6,8 0,2 7,7 5202,548 95,240 274,275 107,426 262,089 i 6,5 625218,732 56,275 162,457 n 5533,9 55330,691 55,543 20,460 30,691 44,089 55,543 shares shares a n cial

s t at e m en t s

| n otes totheconsolidated financialstatements Disposal by Disposal by payout 64,549 0 31.12.2019 Number of Number of phantom phantom shares shares 0 in EUR ’000s 31.12.2019 31.12.2019 pr Provision otection otection 1,870 678 0

------m Board Executive target all (for EBT Group cent of adefined cial per year covered by 90 this than LTIP ifmore programme Ir period. target relevant of the months twelve closing in price age the Xetra aver the i.e. share price, areference on is based This calculation into multiplier)basic amount shares. phantom is converted the and basic amount of the product as the amount” “allotment as the account (known virtual the on shown amount The ascertained. was posted number the LTIP in are the financial maintained which year of the for designation sub-accounts the account bearing account, virtual the in shares of phantom number the of posting purpose the For is used. linear interpolation cent, per 70 125 and is between a of target level the If account. virtual to is the credited basic amount cent of the per cent above), or per 150 is 125 ment attain of target level (if the At most account. (as virtual to is multiplier) the credited basic amount basic amount of the the per cent 100 per cent, afinancial for year is 100 agreement target annual variable of the attainment of target level the If fulleach financialfor year.beneficiaries the for specified were Arnold) Mr Fromme and Mr Platen, von Mr Esch, Mr for in case euros each thousand 250 and Vilanek Mr for euros (of euros 650 thousand which thousand ling 1,650 total amounts Basic future performance. on depending below, text in the in described termsof payout accordance the with in financial each year, attainment inout accordance and paid target with and below as described amount as apositive tion in ques member Board Executive account the for thisis in entered a basicvirtual amount component; this remuneration for contract employment beneficiary’s each in was specified basic A amount financial2019 years to 2021Arnold). Mr (for to 2021 Fromme) Platen (for von Mr and Mr Board) and Executive to the date as of of the appointment 2018 (prorated years financial2019 for Vilanek), financialyears 2020 to years 2023 Esch),Mr to 2024 remuneration (for Mr financialvariable (for annual respective the from attainment target metric into, entered target designating was as the Arnold) (in to relation Mr agreement Fromme) target Platen von (in Mr to relation and Mr athree-year and agreement target seven-month year and Esch),Mr three- a and Vilanek Mr (in relation to agreement target afive-year agreement, annual to target the In addition 3”). “Programme as to referred (hereinafter Board Executive the of members aforementioned LTIPs into the new with entered granting were contracts employment the to agreements 2019), supplemental January 1 from effect with Arnold Mr for 2018; 1June from Fromme effect with Platen von Mr and Mr (for both made Board Executive to the 2019) March appointment 19 the and on granted Esch, Mr with and 2018, 4 April on granted (with Vilanek, Mr extended was contract employment the When 25.3 Preisig). to Mr euros sand - thou 1,326 and 2in of 6,747 2019 Vilanek (of to euros Mr Programme from ments euros 5,421 which thousand thousand 2019, 7,376provision from as of pay 31 euros and December thousand (as euros 2018) to 2,548 of 31 thousand December the in due 2, to a reduction Programme from euros resulted 1,919thousand of expenses In financial year 2019,personnel in paid 2019, 2018. LTIP provision for in the 2as at 31 is which thousand included 80 December Programme of EUR award financial for shares phantom year 2019. Mr Preisigseverance a received any for resultingTo disadvantage, compensate any more Preisig Mr that awarded will states be not agreement severance The 2018. terminated 31 on December Board the on his which into Preisig, employment entered under year, Mr was with previous agreement In the aseverance per cent. 120 be 2019will Target financial yearended the for attainment members. Board Executive of the tual accounts o into financialbased for shares year phantom 2018 converted was this amount approved, been 2018 had for cial statements finan consolidated the After Esch. Mr for euros thousand Preisig Mr 400 for euros and thousand 600 Vilanek, Mr for euros thousand to 1,100 This is equivalent Preisig Esch. Mr Mr and Vilanek, account Mr for into virtual payment the for used be would amount base per the cent of Thismeansthat 200 per cent. 120 2018 for is defined attainment target actual The Conso t n a r e tainment is less than 70 per cent, no phantom shares are credited for the financial year in question. If target attainment attainment target If financial year the for in question. are shares credited phantom no cent, 70 than is per less tainment espective of the level of target attainment calculated above, phantom shares are only entered for the most recent finan recent most the for entered are shares only phantom above, calculated attainment of target level of the espective mbers except for Mr Esch, this relates to Group EBT achieved in financial year 2022; for Mr Esch this Esch relates 2023 the Mr to in financial this achieved for EBT year relates2022; to Group Esch, Mr except for mbers n average share price of 19.55 euros, with the result that atotal that of result 19.55 share ofn average 107,426 price the with euros, vir to the credited was shares phantom

PROGRAMME 3 PROGRAMME lidat e d f i n a n cial s t at e m en t s

| n otes totheconsolidated financialstatements Annual Report 2019

freenet AG Ex ecutive ecutive 163 ------

Consolidated financial statements Consolidated financial statements t precisely,attained target is EBT Group the If Esch. Mr financial for yearfor EBT Group 2023 3, and of Programme ficiaries bene are who Esch Mr except for members Board Executive financial all for year thisfor EBT for 2022 is value Group ence o beginning at Esch) the Mr is except for determined members Board (for all target EBT Executive of the attainment when est A b target. EBT of the of levels attainment aforementioned the between lated is linearly interpo avalue to case, zero. Ineach is reduced entry for number the is attained, target EBT of the cent less or per 90 If is doubled. above calculated entry for number the is attained, target EBT of the cent more or per if105 as follows: reduced or is entered increased to shares of phantom be number the missed, or is exceeded target EBT the If is retained. above described of calculation precisely, method the is attained target EBT ifthe as follows: is calculated programme the financial recent year thisby covered for most entered to shares of phantom be number actual The is attained. EBT) Group 164 the programme is granted. programme the date which on the from are incurred members Board all for Executive expenses personnel the according to this method, a in remaining estimate of oftarget volatility shareline prices the the with the date, LTIPlife of the ance sheet programme, AG bal as of the of freenet share price are the model in this measurement main parameters The 2. to IFRS pursuant model measurement of arecognised help the with at value fair determined arising LTIP was the obligation from The programme accordingly. adjusted LTIP in shares of phantom the number account the is example, for are shares issued, new where earnings retained from S Esch).percent Mr (for 1.5 financial for year EBT dated 2023 least by at financial for year EBT 2024 consolidated that consoli exceeds extent Esch) to ifand the Mr or except for members Board per cent Executive 1.5 (for all financial for yearleast byEBT at Group 2022 financial for exceeds year EBT 2023 Group that LTIP the from to extent to account payouts ifand the is entitled only member Board Executive the is attained, target EBT the if entered phantomonly whichare shares for contract, employment the financial year under scheduled last cap). the For (dividend exceeded may be not share however, phantom payable per of 20 euros an amount this calculating dividend, When payable. shares of phantom number by the multiplied is payout requested, date the which on the and entered number the for period holding of beginning the the between period in the share disbursed per dividend gross of the amounts of the sum is total the dividend The euros. at 50 capped multiplier is payout in case the each performance, of share price spective Irre is payout requested. date the which on the before months twelve days during the all on trading closing prices Xetra the of multiplier average is payout the The multiplier, payout by the multiplied dividend. the plus principles, aforementioned in accordance the as calculated with payable shares of phantom number is the in case each payable amount maximum The expire. phantom shares concerned the period, specified within the requested is ifapayout not or is payout requested no If amounts. in partial requested may payout be also The disbursed. be payout the that to request period holding of the end as of the years of two during aperiod is entitled member Board Executive the is determined, target EBT of the attainment before not but period, holding of the end at the exercise period: the About term. contract of the end the after six months i.e. term, contract during the period target penultimate the after months 18 latest at the instead ends period holding the term, contract regular of the end at the is extended not contract LTIP is in shares of phantom the entered employment ifthe year number in of the the account; which of 1January as years three for member Board Executive by the held be must entered number the as arule, period: holding the About a of levels aforementioned the between is linearly interpolated avalue cent less). or case, Ineach per is 90 attainment get cent of more) to is 0(tar per set 105 or, (target scenario, attainment at most worst-case in the is shares phantom doubled f reenet AG h t t t f 2 tainment for the respective financial year as well as the estimate of the discount rate. The graded vesting method is used; is used; method vesting graded The rate. discountestimate financialthe of yearwell the as as respective the for tainment earli at the disbursed resulting be payout the that may request member Board Executive The target. EBT of the tainment andard market anti-dilution provisions apply, i.e. in the event of a share split, a share consolidation or a capital increase increase capital a or consolidation share a split, share a of event in the apply, provisions i.e. anti-dilution market andard e number of phantom shares described above remains unchanged. If the EBT target is exceeded or missed, the number of number the missed, or is exceeded target EBT the If remains above unchanged. described shares of phantom e number e 023 (and for Mr Esch at the beginning of 2024), but not before the end of the holding period for the number entered. entered. number the for period holding of the end the of beginning 2024), at the before not 023 (and but Esch Mr for neficiary is entitled to payouts from the LTIP if and to the extent that the EBT target is attained. The applicable refer applicable The target is attained. EBT the thatthe from extent payouts the if and to to entitled is LTIP neficiary

Annual Report 2019 Conso lidat e d f i n a n cial s t at e m en t s

| n otes totheconsolidated financialstatements ------Trade accounts payable, other liabilities and deferrals and other financial as follows: other liabilities and are comprised liabilities other deferrals and Trade payable, accounts 26 value. enterprise rata pro of the amount in the out paid will shares 2020, phantom be the in is concluded programme the up to 2020. When in annual tranches are which earned shares phantom granted were ees employ the programme, of terms the the euros). Under thousand 1,307 year: 2019 (previous as at 31 euros sand December thou of 2,006 as amount aprovision in the recognised was which incentive programme, employee has afurther Group The 2019. for euros thousand of 507 expenses in personnel results 2019. therefore as at 31 This programme December this for programme recognised was euros A provision of 501 thousand euros. to in thousand 2019 280 amounted disbursed financial year, during the level 2019.The December payments phantom as shares at resulting15,477 balance of final in a 31 Board Executive the below executives senior for programme the under expired shares phantom 1,466 and disbursements through exercised were shares phantom 8,879 2018, From an initial as at shares 31 phantom of 25,822 balance December incentive programmes. employee further has two Group The 25.4 v Mr to euros thousand 485 Arnold, to euros Mr 419 thousand Vilanek, to Mr is euros attributable thousand euros),sand 1,305 988 thou 2018: (31 euros December of 2,921 thousand 2019 amount in the as at 31 provision recognised the December Of Esch. to euros Mr thousand 227 Fromme to and euros Mr thousand 250 Platen, von to euros Mr thousand 250 Arnold, to euros Mr 419 thousand Vilanek, to Mr iseuros attributable euros), 787 thousand thousand 988 year: in 2019 (previous recognised euros thousand of 1,933 expenses personnel the Of 3. Programme of beneficiaries are who members Board 2019, LTIP in shares phantom the Executive no were at of the 31 there accounts December As and otherfinancialliabilities Total trade accounts payable, otherliabilitiesanddeferrals, Non-financial liabilities Prepayments received Other liabilitiesanddeferrals Financial liabilities Other financialliabilities Other non-derivative financialliabilities Trade accounts payable In EUR’000s Conso

. Platen, 485 thousand euros to Mr Fromme and 227 thousand euros to Mr Esch. to euros Mr thousand 227 Fromme to and euros Mr thousand 485 . Platen,

TRADE ACCOUNTSTRADE PAYABLE, OTHER LIABILITIES AND OTHER AND DEFERRALS F lidat INANCIAL LIABILITIES INANCIAL OTHER EMPLOYEE INCENTIVE PROGRAMMES e d f i n a n cial s t at e m en t s

| n otes totheconsolidated financialstatements ,7,7 3,2 931,951 138,426 1,070,377 0,5 0,7 402,175 107,378 529,776 509,553 31,048 529,776 31,048 560,824 560,824 8,7 0,4 380,232 100,945 481,177 465,230 83664321,943 6,433 64,546 28,376 31,048 95,594 Total Annual Report 2019 0 31.12.2019 N on-current 465,230 0 0

| freenet AG Current 165 0 - - -

Consolidated financial statements Consolidated financial statements 166 2018 amounted to 248,065 thousand euros. thousand to 248,065 2018 amounted as of December 31 machinery and equipment for technical assets lease finance non-current of the amounts carrying The cent. per 50 than less to be assumed 2037.31 has been exercised December being option of this extension probability The by ten until years extended be agreement the that right to has demand the 2027. Group 31 December Broadcast Media The tountil run due sites, other and locations masts) (such at radio and as towers infrastructures of radio use the regarding vider pro with an infrastructure agreement lease master a 2018 concern lease liabilities as financeof December shown The 31 date. sheet balance the after years fivethan more euros) after falldue thousand 144,767 year: (previous and euros years five and 355 one thousand between euros) due fall thousand 161,871 574,341 euros) year: year, within due one fall thousand (previous euros 30,693 thousand year: (previous financial 529,776 liabilities, which under euros is liabilities, the combined for thousand shown figure the Of years. five than in more euros) thousand dueare 144,767 year: (previous euros thousand 688 liabilities years; five yearof and one of between rity Liabilities 277,793 to amounting 137,738 year: months. twelve (previous euros euros)next thousand have thousand amatu euros) within thethousand due are 1,010,684 year: (previous euros 931,951 for liabilities, thousand shown figure the Of transactions. party Related to refer note 34, 2019, please liabilities are no at 31 there vis-à-vis December As parties; related and otherfinancialliabilities Total trade accounts payable, otherliabilitiesanddeferrals, Non-financial liabilities Prepayments received Other liabilitiesanddeferrals Financial liabilities Other financialliabilities Other non-derivative financialliabilities Trade accounts payable In EUR’000s f reenet AG

Annual Report 2019 Conso lidat e d f i n a n cial s t at e m en t s

| n otes totheconsolidated financialstatements ,3,2 2,6 1,010,684 422,560 1,433,224 5,4 1,2 436,343 115,922 574,341 552,245 574,341 306,638 69,462 880,979 643,803 2,1 1,4 417,068 110,046 527,114 51,167 237,176 69,462 237,176 120,629 523,174 51158619,275 5,876 25,131 Total 31.12.2018 N on-current 523,174 0 Current 0 - - Present values of totalfinanceliabilities lease More thanfive years Between oneandfive years Total Other Obligations from distributionrights Finance leasecommitments (DFMG) fromLiabilities partners tosales contracts withcustomers (Mobile Communications) operators,Liabilities dealers,distributors,hardware manufacturers tonetwork Total More thanfive years Between oneandfive years Within oneyear More thanfive years Between oneandfive years Within oneyear In EUR’000s Current trade accounts per cent. basis lease recognisingliabilities as for the finance this resulting the from used rate 4.12 interest is The payments. minimum lease the contractual of value present the to corresponds balance sheet the in disclosed figure The In EUR’000s total finance maturities of the The lease Within oneyear Interest of future portion instalments lease In EUR’000s as follows: down lease liabilities of totalbreak finance values present the and instalments of future lease portions interest The Conso lidat e d f i n a n cial payable break down as follows: down break payable s t at e m en t s liabilities are shown below: liabilities shown are

| n otes totheconsolidated financialstatements Annual Report 2019 31.12.2019 31.12.2019 31.12.2019 6,3 523,174 465,230 9,0 307,359 297,105 47678,499 29,750 64,706 84,541 29,750 73,669 23,025 0 260,201 0 260,201 0 317,602 0 0 0 131,223 105,953 23,025 0 0 0 145,072 138,786 33,744 0 0 0 0

| freenet AG 31.12.2018 31.12.2018 31.12.2018 - - - 13,849 32,833 10,719 167

Consolidated financial statements Consolidated financial statements Total Liabilities tocustomers from contracts withcustomers Total Other Liabilities tocustomersfrom contracts withcustomers Deferred income from customercredit balances, MobileCommunications Total Total Other Refund liabilities Personnel obligations Other Obligations from earn-outs Obligations from putoptions fromLiabilities partners tosales contracts withcustomers Obligations from distributionrights Finance leasecommitments (DFMG) In EUR’000s Currentliabilities financial other 168 financial years. financial previous for payments tax trade and tax liabilities tax consist income corporation mainlyCurrent of anticipated additional 27 Deferred income from bonusesandcommissions received fromoperators network In EUR’000s otherNon-current liabilities and deferrals Deferred income from bonusesandcommissions received fromoperators network In EUR’000s Current other liabilities and deferrals In EUR’000s otherNon-current financial liabilities f reenet AG

CURRENT INCOME TAX LIABILITIES INCOME CURRENT

Annual Report 2019 Conso are comprised as follows: as comprised are lidat are comprised as follows: as comprised are are comprised as follows: as comprised are are comprised as follows: as comprised are e d f i n a n cial s t at e m en t s

| n otes totheconsolidated financialstatements 31.12.2019 31.12.2019 31.12.2019 31.12.2019 0,7 115,922 107,378 436,343 402,175 0,4 110,046 100,945 344,885 322,057 108306,638 31,048 51,167 64,546 77324,468 15,903 51,087 27,743 16,280 36,095 13910,902 22,225 18,040 11,399 39,041 14,106 14626,148 21,436 7,173 6,433 2,439 13,543 29,750 0 237,176 0 0 31.12.2018 31.12.2018 31.12.2018 31.12.2018 5,876 21 0 Total Current Liabilities tobanks Liabilities from notes promissory Non-current Liabilities tobanks Liabilities from notes promissory reporting date. Net debt is a non-GAAP measure. is anon-GAAP debt date. Net reporting s as was redefined debt financial for year net 2019. this refocused In and context, revised were indicators performance ious var Group, freenet of the management and focus strategic the with closely more to system align management In order the million euros). 1,856.8 2018 restated: 2019 (31 to million 2,031.1 December as amounted at 31 euros debt December Net note loans. 2016 the promissory from of schedule ahead of 31.0 million repaid was euros n million in euros of 1,083.6 liabilities an amount with promissory from million fees, euros) 1,110.0 less 2018: ber are shown, 2015, of 1,079.0 2016 years atotal 2018 with amount nominal the and from notes million (31 euros Decem promissory The million euros). 1.0 current: thereof million euros, 609.0 non-current: (thereof of 610.0in an amount liabilities million euros under banks to fees, less maturity is finalshown, isupon which due loan The date. reporting the as at down drawn been not had which million euros, of 300.0 610.0 for amount million facility a credit revolving and euros to 910.0 anominal increased with million was to which continues loan in consist 2018, euros of abullet loan, bank The In EURmillions follows: as structured are Borrowings 28 Conso h o ort- and long-term borrowings, plus net lease liabilities (lease liabilities less lease receivables), less liquid assets as at the liquid assets receivables), less liabilities lease liabilities lease less (lease net plus borrowings, long-term ort- and tes (thereof non-current: 819.1 million euros, thereof current: 264.5 million euros). 264.5 Infinancial year 2019, current: 819.1 a thereof amount total million euros, tes non-current: (thereof

BORROWINGS AND LEASE LIABILITIES LEASE AND BORROWINGS lidat e d f i n a n cial s t at e m en t s

| n otes totheconsolidated financialstatements Annual Report 2019 31.12.2019 ,9. 1,722.9 1,693.6 1,699.4 1,428.0 6. 23.5 265.6 264.5 607.7 1,091.8 608.9 819.1 1.1

| freenet AG 31.12.2018 22.4 1.1 169 - -

Consolidated financial statements Consolidated financial statements Site leases Non-current Other Motor vehicles infrastructureNetwork Co-location leases Shops/stores Site leases Co-location leases Shops/stores Total Current Other infrastructureNetwork Motor vehicles Provision recognised Fair valueof planassets Present value of obligations Present valueof unfunded obligations Present valueof funded obligations In EURmillions follows: as categories lease corresponding into the liabilities down broken are lease Group’s The 170 In EUR’000s as follows: is calculated sheet balance consolidated provision in the The euros). thousand 12,387 year: (previous euros totallingvalue thousand 14,851 afair with liability policies insurance pension as well as pledged scheme by areinsured pension are secured They funded. are fully commitments Board company. at the Executive The of service length the and amount salary by the determined alwaysare pension commitments All scheme. pension bya reinsured financed partly are benefits pension The dependants. to surviving of benefits payment 65 the or and age of reaching 60 the upon pension of alifetime retirement payment the case each is in provided benefit pension The plans. andcontribution benefit defined on are based obligations pension The 29 in note Leases. 2.5, 16 is provided IFRS with in connection information More f reenet AG

PENSION PROVISIONS AND SIMILAR OBLIGATIONS SIMILAR AND PROVISIONS PENSION

Annual Report 2019 Conso lidat e d f i n a n cial s t at e m en t s

| n otes totheconsolidated financialstatements 31.12.2019 31.12.2019 1,3 101,560 113,638 - 87789,173 98,787 14,851 48378,845 22,715 84,843 28,795 7. 550.2 473.3 5. 630.7 553.3 290.4 0080.5 80.0 3675.1 105.1 73.6 92.4 9719.3 10.0 19.7 38.9 3.0 6.6 1.9 4.1 7.3 5.4 pursuant to 31.12.2018 1.1.2019 O - balanc I pening F 12,387 346.5 R sheet 12.2 40.3 S 3.0 8.3 8.3 5.2 4.2 3.2 16 e

Fair valueof planassets Present valueof unfunded obligation Experience adjustmentsof planliabilities Present valueof funded obligation Experience adjustmentsof planassets Actuarial losses/gains Payments made Actuarial losses/gains, subtotal Plan deficit As of 31.12. Settlement of pensionobligations Employe contributions Gross interest expense Past cost service Current cost service As of 1.1. In EUR’000s obligations: unfunded and funded of the value present the in development the out sets table following The long term. the in fulfilled will be obligations these that It is expected reporting periods: reporting previous the and period reporting the current for plans benefit defined the for shown have been amounts following The 9.9 year: years). (previous Group Broadcast Media the years), 24.8 year: 17.7 (previous 17.0plan year: (previous plans debitel the for years of plans years) the for years 10.2 and freenet the to for years 24.8 2019 amounted as of 31 remaining weighted average obligations of the term December The In EUR’000s Conso Thereof duetofinancialparameter adjustments Thereof duetodemographicparameter adjustments Thereof duetoexperience adjustments lidat e d f i n a n cial s t at e m en t s

| n otes totheconsolidated financialstatements - 8778,7 7999,3 51,191 92,638 87,909 89,173 98,787 - 4837,4 8097,4 41,604 79,541 78,069 78,845 84,843 8752,1 1262,2 16,162 21,026 21,266 22,715 28,795 14,851 1,226 2019 53 - 12,387 - 0821 062015 2016 2017 2018 667 766 - 11,426 - Annual Report 2019 - 320 67 1,3 101,560 113,638 0,6 99,335 101,560 11,593 - - - 12,819 ,9 1,972 2,092 1,226 7,929 3,652 ,4 2,208 1,841 - 2019 - 112 222 45 27 1,017 0 9

| freenet AG - - - 1,682 6,575 1,864 - - 2018 284 667 106 226 171 13 2 0

Consolidated financial statements Consolidated financial statements Subtotal: remeasurements recognised through other comprehensive income Payments made Gains(–)/losses(+)duetofinancialparameter adjustments Gains(–)/losses(+)duetodemographicparameter adjustments Reclassification tootherfinancialassets Employer contributions toplanassets Experience-based gains(–)/losses(+) Remeasurement: Subtotal: amountrecognised intheconsolidated income statement As of 31.12. As of 31.12. Reclassification tootherfinancialassets Employees’ contributions Employer contributions toplanassets Return on(–)/costs (+)of planassetsnotalready includedinnetinterest expense (recognised throughothercomprehensive income) Differences the between expectedandactualincome from plan assets Interest withinterest onplanassets(throughincome statement, inaccordance withIAS19) As of 1.1 In EUR’000s m is active no There market. in are that an shares quoted active or funds in equity assets plan invest the policies insurance ity liabil euros). pension - The thousand 12,387 year: (previous euros thousand of 14,851 value fair an aggregate with purpose this up for set scheme into entered pension by liability the policies insurance pension consist of several assets plan The 172 Gains onthesettlementof pensionobligations Net interest expense Past cost service Current cost service As of 1.1. In EUR’000s as follows: developed sheet as provisions balance in the recognised amounts The pensions. for assets plan of the out euros thousand of 3,240 payments and assets into euros plan the thousand of 1,073 year 2019 payments financial for expected had freenet year 2018, previous Inthe pensions. for assets plan of the out euros 2,806 thousand of payments and eurosplan assets into the 1,626thousand of payments financial expecting For yearis 2020,freenet losses. gains or actuarial the and assets plan the from income or expenses calculated sum of the as the are calculated and euros), thousand of 508 expenses year: (previous euros to 419 amount thousand assets plan the from income actual The f reenet AG a rket for the pension liability insurance policies. The development of fair value is set out in the table below: table in the out is set value of fair development The liability policies. insurance pension the rket for

Annual Report 2019 Conso lidat e d f i n a n cial s t at e m en t s

| n otes totheconsolidated financialstatements 11,539 48112,387 14,851 87789,173 98,787 23711,426 12,387 91387,909 89,173 - - - 12,819 ,8 3,883 3,784 ,2 1,713 1,725 2,045 3,673 1,226 ,4 5,025 2,045 ,4 2,208 1,841 2019 2019 - 366 222 - 53 53 4 1,017 0 0 3,557 0 9 - - - - 3,557 5,025 1,932 1,682 - 2018 2018 - 768 766 667 766 259 38 13 0 Future pensionincreasesGroup (MediaBroadcast plans) Future pensionincreases (freenet plan) Future pensionincreases (debitel plan) Future increasesGroup (MediaBroadcast plans) salary Future increases (debitel plan) salary Discount rate Group (MediaBroadcast plans) Discount rate (freenet, debitel plans) Life +2 years expectancy: Decrease infuture pensionincreases by 0.25percentage points Increase infuture pensionincreases by 0.25percentage points Decr Increase infuture increases by 0.5percentage points salary Decrease indiscount rate by 1.0percentage points Increase indiscount rate by 1.0percentage points Life +2 years expectancy: Decrease infuture pensionincreases by 0.25percentage points Increase infuture pensionincreases by 0.25percentage points Decrease infuture increases by 0.5percentage points salary Increase infuture increases by 0.5percentage points salary Decrease indiscount rate by 1.0percentage points Increase indiscount rate by 1.0percentage points parameters were left unchanged. Any interdependencies between individual parameters occurring in practise are disregarded. in practise occurring parameters individual between interdependencies Any unchanged. left were parameters other the and varied was parameter one 2019. as of 31 this For obligation purpose, of the December extent determining the for as used that method valuation using same and the holdings basis same of the the on calculated were sensitivities The In EUR’000s 31.12.2018 In EUR’000s 31.12.2019 in this information following respect: the We provide reports. basis of the on calculated have obligations been unfunded and funded of the value present of the sensitivities The basis. biometric as the used have been Heubeck Klaus created by Dr tables mortality 2018G RT The In made: were assumptions actuarial significant following The Conso % ease infuture increases by 0.5percentage points salary lidat e d f i n a n cial s t at e m en t s

| n otes totheconsolidated financialstatements Annual Report 2019 31.12.2019 Increase Increase 18,668 22,167 4,745 1,566 6,077 1,940 Change in present value Change inpresent value Change inpresent value – 255

42 1.70 1.75 1.75 2.25 1.75 1.01 1.49 14,461

| of obligations of obligations

freenet AG 31.12.2018 Decrease Decrease ac 17,033 tuarial 1,545 1,839 1.70 1.75 1.75 2.25 1.75 1.73 2.22 173 20 13

Consolidated financial statements Consolidated financial statements Other biain ,6 2 0 0 0 0 324 0 0 0 3,266 obligations ment Reimburse- Other ies ot ,5 8 ,7 3,572 0 3,572 0 0 0 0 0 480 0 0 0 4,052 License costs Restructuring obliga r Asset trg ot 6 0 5 106 0 5 0 466 Storage costs versaries anni- Service iiain15402 6 7 0 271 265 20 0 1,504 Litigation guarantee Warranty/ programmes centive Employee in- Personnel losses Contingent Other Total o the agreements, rental underlying of the expiry probable the Following Group. of the locations administration and nology tech various at to tenant remove dismantle obligations fittings and 2021 from are years further to ineuros the 2030. There euros thousand in 2020 4,335and 32,261 be thousand to expected funds is of outflow the agreements, rental underlying of the expiry probable the Following locations. at numerous infrastructure dismantling of radio the for removal gations and obli mainly comprises Group Broadcast acquisition Media resulting the from of obligations the provision make for good The at this information juncture. giving further from shall we refrain position, negotiation and legal the endangering, therefore and in 2020. is outflow anticipating law. asset Group To acomplete prematurely, avoid disclosing ofwell The competition as issues as customers and partners provisions trade relate to of these litigation former with Most disputes third with parties. solved as as companies wellyet unre as other Group against actions legal of various costs Litigation provisions relate toprobable the fullin 2020. amount the in expected is of assets outflow expected the which for euros, thousand of 230 margin amount the negative in a with tariffs from losses expected others, among concern, Provisions contingent for losses In EUR’000s The following overview gives a breakdown of the development of the provisions’ carrying amounts: carrying provisions’ of the development of the gives abreakdown overview following The 30 174 f etirement reenet AG u tflow of funds is expected to be 1,207 thousand euros in 2020 and 3,997 thousand euros in the years from 2021from years euros the in to 2029. euros thousand in 2020 and 3,997 thousand 1,207 be to expected funds is of tflow

tions OTHER PROVISIONS OTHER

Annual Report 2019 3760072399151100 0 5,151 1 909 7,243 0 0 13,706 60,154 73,860 40500411,600 451 0 0 44,015 1,828 9,945 ,6 6110 131 66 0 0 4,763 2,043 2019 952 1.1. 8 7 1 0 273 0 0 981 5002000 0 0 2 0 0 45

1.1.2019 - - - I F E tion to tion to transi ,3 58033,886 8,073 25 1,932 ,3 5802,977 830 25 1,932 o ,3 66 0 65 46 0 1,932 R ffects as of as of f the f the S 16 0 0 0 0 0 0 -

consoli- Conso dation) (Initial (Initial Addi tions -

lidat 5,790 9 659 996 8 241 184 U s e e d f i n Rever a n sal 0 9 cial - count - - on Addition count s ing of ing of wind - ing/ 7 ,6 0 0 104 6,163 674 675 Dis 680 t U dis at n 0 0 0 0 0 0 - - - - -

e m ,1 104 1,012 3,830 en 314 414 907 5 030 30 259 230 192 t 73 42 31 17 s

| n (Dec Dispos solida otes totheconsolidated financialstatements tion) on- 43 als als 0 0 0 0 0 0 0 0 0 3 230 0 230 0 0 0 0 - - Reclassi- fication - 324 396 0 0 0 0 0 0 Transfer - – Reclas- – –

,3 7964,0 16,740 41,206 57,946 7,433 7,113 sifica- -

- 2,942 4,171 tion 2 0364505,836 4,550 10,386 320 320 9 9 0 398 398 0 ,4 1,247 0 1,247 0 1803,5 5,542 36,258 41,800 0 47,560 31.12. ,3 ,7 164 1,270 1,434 ,7 ,7 4,805 3,171 7,976 2019 173 0 0 694 109 803 313 0

66610,904 36,656 urn current current non- 0 0 0 313 0

- - - 173 Plan asof assets 31.12. Payments from planassets Fair valueof planassetsasof 1.1. Obligation asof 31.12.before netting Interest expense Loss onplanassets Plan asof assets 31.12. Loss onplanassets Personnel expenses Payments from planassets Fair valueof planassetsasof 1.1. Obligation asof 31.12.before netting Interest expense Personnel expenses “Personnel”. “Personnel”. under “Other” in of changes provisions under statement in is the remaining euros shown provisionThe of 285 thousand Payments from semi-retirement accounts Obligation asat 1.1. Semi-retirement In EUR’000s Payments from long-term accounts work Obligation asat 1.1. Long-term work accounts In EUR’000s 2,076euros). year: thousand (previous euros to 1,068 thousand amounted semi-retirement provisions for euros), corresponding the 5,575 and thousand year: (previous euros to 5,201 thousand amounted accounts work long-term for 2019, netting provisions of 31 before the December date. As sheet balance every as of assets plan corresponding of the values fair the with are netted obligations These accounts. work long-term and semi-retirement for company acquired obligations also the Group, Broadcast acquisition a result of Media the of the As 2020. for provisions is expected these for of assets full outflow The payments. severance for expenses mainly personnel comprise provisions restructuring for The calculation. basis for the as assumed have been payment actual date the and sheet balance the between years of seven of 0.74 per period an cent average and rate A discount euros. thousand 1,270 be to 2021 years the for to 2039 expected is of assets outflow the and euros sand thou be 164 to 2020 for expected is of assets outflow the recognised; have been anniversaries Provisions service for 25, incentive programmes. Employee note under are documented incentive programmes of provisions employee recognition for concerning the details Further Conso lidat e d f i n a n cial s t at e m en t s

| n otes totheconsolidated financialstatements Annual Report 2019

| freenet AG - - 1,040 1,068 6,225 5,201 1,744 1,012 6,149 1,000 2,076 5,575 - - 2019 2019 700 576 500 285 341 175 - - 5 4 1 -

Consolidated financial statements Consolidated financial statements Due after more thanfive years Due withinoneandfive years Due withinoneyear Rental obligations andlease amounts: following in the commitments as well as order obligations other and maintenance, support agreements, lease and rental from be terminated) cannot (which financial year,lease ofcommitments the end at the operating are there As 31 176 well as broadband connections within the context of media networks (audio and video broadcasts). (audio video and networks media of context within the connections broadband as well as locations rental various at the production for are relating mainly of power sourcing to euros). obligations the sand These 132,749 thou year: (previous euros thousand - to amounting 80,043 commitments purchase are other There assets. non-current of procurement to euros) the 2,701 is year: thousand attributable (previous euros thousand 754 euros). this sum, sand Of 135,450 thou year: (previous euros 80,797 thousand to financial year amounted of the end as at the commitments order The service. in customer of business outsourcing the and infrastructure network building services, databases, and tenance hardware of IT main the regarding consist mainly of agreements agreements other and maintenance, support under obligations in 2018, As as lessee. freenet note 2.5.1, under 16 are shown IFRS 2019 in accordance million with euros) asliabilities of 1 January lease recognised the 17 with (440.5 IAS with dance 2018 in accor as of 31 December reported leases operating from reconciliation of future minimum payments The lease Thereof already recognised asaprovision for contingent losses In EUR’000s Regarding assets intangible Order commitments Due after more thanfive years Due withinoneandfive years Due withinoneyear Maintenance, andotherobligations support Total Regarding inventories, expenses andservices Regarding property, plantandequipment f reenet AG

OTHER FINANCIAL OBLIGATIONS, LIABILITIES CONTINGENT AND CREDIT E NHANCEMENTS

Annual Report 2019 Conso lidat e d f i n a n cial s t at e m en t s

| n otes totheconsolidated financialstatements 31.12.2019 1,0 154,273 110,005 9,0 730,178 190,802 077135,450 80,797 440105,734 44,519 74,460 35,520 003132,749 80,043 5 2,701 754 54,020 25 444,021 0 440,455 0 129,859 240,349 73,813 0 0 0 3,566 0 0 31.12.2018 pr ocesses ocesses 0 - - -

are included in the calculation of free cash flow. cash of free calculation in the are included financing from flows liabilities cash of (as lease of component a repayments cash and activities operating from flows cash in are included leases under assets financial of repayment cash the from proceeds and received interest paid, est Accordingly, example. for inter repay borrowings, or to pay dividends used be can that generated of cash amount the clearly beginning more even financial of shows the yearat flow 2019, cash free redefined measure an alternative performance As toactivities. investing financing or liabilities and attributable not assets in other provisions”, financial changeliabilities”,the and “Other liabilities “Other deferrals”, and payable”, “Other accounts “Trade “Inventories”, financial assets”, “Other assets”, other and receivables “Other receivable”, accounts items “Trade ance sheet bal change the in the contains activities” to financing investing or attributable not capital working in net item “Increase The activities. operating from flows cash to present used has been method tation presen indirect The activities. financing and activities investing activities, intooperating down broken are flows cash The operations. discontinued from any liquid include not assets do funds year,previous As the in cash originalmonths. with an financial each atof up any current three liabilities, term to and time liquidated be can that market instruments short-term money cheques, in hand, cash consist at banks, of cash funds Cash operations. tosolely continuingations). Infinancial year 2019,attributable year,were previous flows as the cashin the Groupthe for oper (continuing and discontinued figures arereported the flows, of cash statement consolidated In the 32 authorities. tax to the tax input of its have AG some to would refund ifthis freenet risk materialises, conclusively; audited have that been not periods f for effects negative will above haveno significant likely ruling specified the that it as very company regards 2015, the ary 1Janu before reported revenue company. the for the for risks As involve not any reportable does 2015 1January from as of this rule customer. application by the The made to be payment of any amount additional of the irrespective applies A German 10 VAT(1)sentencethe 3 of section by as defined athird from party company, astions remuneration rather but vis-à-vis communica role brokering mobile the an intermediary for as remuneration a commission regarded shall be not of acommission such part or above, the on of acommission dependent part or agreement, basis of the acontractual on articles electronic other or device communications mobile of the supply the on acommission dependent intermediary the w name own intermediary’s in the customer the supplies contract communications in a mobile intermediary the If ing ruling: follow the issued VAT financial to authority the the addendum decree, asimultaneous 2014 and application 4 December of Finance dated Ministry Federal the from Inaletter 2019: as at 31 contingent following December liability exists The b will agreements rental corresponding the that and agreements invoices contractual in paid line the will with responding be cor the that it is expected because guarantees rent and of comfort letters of terms the the under claims submitted will be any that euros). 37,174 date being Itis sheet balance expected not thousand the 34,013 year: (previous euros thousand total as at aggregate their guarantees, rent and of comfort contingent liabilities have of as letters aresult arisen Other Conso r e p c eenet AG under VAT law. However, a low risk remains for the revenue reported before 1 January 2015 for assessment assessment for 2015 VAT AG 1January under eenet before law. However, reported revenue risk remains alow the for i th a mobile communications device or some other electronic article, and if the mobile communications company grants company communications grants mobile ifthe and article, electronic other some or device communications amobile th t (Umsatzsteuergestz–UStG) for the supply of the mobile communications device or the other electronic article. This article. electronic other the or device communications mobile of the supply the for t (Umsatzsteuergestz–UStG)

aid regularly. NOTES TO THE CONSOLIDATED STATEMENT OF CASH FLOWS CASH STATEMENT OF CONSOLIDATED THE TO NOTES lidat e d f i n a n cial s t at e m en t s

| n otes totheconsolidated financialstatements Annual Report 2019

freenet AG ac tivities) 177 ------

Consolidated financial statements Consolidated financial statements o payment million the from of 14.9 euros proceeds (mainly the and commissions as assets paid) sales recognised sition costs A at the share decided 4.6 million per was that (41.5higher CHF euros ment million ofeuros) 4.20 dividend as a result of the c infrastructure), radio analogue of sale year: (previous assets non-current of disposal the from income non-cash for ment year. ayear-on-year million previous adjust of 25.2 in the with euros the million compared Besides decrease euros by 14.4 declined by EBITDA increased 35.4million millioneuros. euros year-on-year activities operating 364.2 from to flows Cash 32.1 178 EBIT Financial result Earnings before taxes In EUR’000s statement. income the consolidated from derived figure way inis this which the EBIT shows lowing fol The operations. by continuing and generated discontinued EBIT isflows cash of statement the for figure underlying The 32.4 in 2019. May million distributed was euros of 211.2 dividend unchanged An leases. operating relating to payments includes now it also lease; finance as a classified agreement lease master the included liabilities toof lease 74.6 amounted year. million million past year euros), in (21.8 euros the previous Inthe this item only portion principal the for payments 2016. from Cash note loan promissory of two of aportion relate repayment early to the of million amount euros the financialin 31.0 in year borrowings 2019 of Repayments effect. lion euros) opposite the had (277.8 raised loan bridge note of loan the repayment to the able million of apromissory euros) repayment the and attribut prior-year two of 376.3 effects amount in Inaddition, the note loan million euros. raising from apromissory and acquisition the shares in for the loan of changebridge is prior-year mainlyresult of the the the from inflows – from changed activities financing from flows Cash 32.3 earnings. retained the company’s of out entirely financed were investments cash The million toeuros 40.6 euros. yearfrom previous 43.3 in 2019million2.7 the by with milliondecreased euros compared assets, such from inflows cash the against out netted equipment, and plant property, and in assets fixed in intangible for investments outflows cash The t refer also please of Inthis 3.1 connection, million amount in the euros. funds cash received Group 2019, freenet the uary as of 1Jan Group Cloud initial of the of The consolidation context the Within million euros. of 12.4 amount in the Group of 277.4 Cloud amount in inin the shares The CECONOMY cent of the per acquisition the of 100 for million and euros to – – from developed activities In financial from yearinvesting 2019,flows cash the 32.2 effect. opposite accounting the lease had new the with in connection payments interest higher the f o n reenet AG a f l n sh flows from operating activities were also positively impacted by the reduction of 21.6 million euros in contract acqui million of euros in 21.6 contract reduction the by positively impacted were also activities operating from sh flows nual General Meeting of Sunrise on 10 April 2019. The 10.5 million euro increase in the rise in net working capital and capital 2019. working million in 1010.5 rise April net on in increase of the euro Sunrise The Meeting nual General ease receivables reported for the first time in connection with IFRS 16. In addition, freenet AG received a dividend pay a dividend AG received freenet addition, In 16. IFRS with time in connection first the for reported receivables ease

ote 35, Acquisitions. 38.

CALCULATING THE UNDERLYING FIGURE FOR THE CONSOLIDATED STATEMENT OF CASH FLOWS CASH OF STATEMENT CONSOLIDATED THE FOR FIGURE UNDERLYING THE CALCULATING FLOWS FROM ACTIVITIES CASH FINANCING FLOWS ACTIVITIES FROMCASH INVESTING ACTIVITIES OPERATING FROM FLOWS CASH 8 million euros. This was primarily due to the payments made in the previous year for the acquisition shares year the for of the previous in the made payments to due the primarily This was 8 million euros.

Annual Report 2019 Conso lidat e d f i

n 19 a 2.3 million2.3 prior-year in euros the to – period n cial s t at e m en t s

| n otes totheconsolidated financialstatements

33 3.1 million euros in the previous year3.1 million previous in euros the 31.12.2019 1.1.2019–

31 6,5 311,988 269,954 3,7 234,002 238,078 18677,986 31,876 8.0 million euros. 8.0 million euros. CE 31.12.2018 CONOMY 1.1.2018– (5 4.5 mil Th e ------Liabilities from finance leases interest accruals Current financialborrowings from Non-current borrowings Non-current borrowings interest accruals Current financialborrowings from activities Total liabilitiesfrom financing Current borrowings activities Total liabilitiesfrom financing Liabilities from finance leases Current borrowings 4 3 information on balance sheet items containing sheet financial balance on instruments. information additional providing while also Group, the for financialof significance instruments of the an overview provides This section 33.1 33 3 2 1 In EUR’000s as follows: down break 2018 2018 to December 31 January 1 from period the for Liabilitiesactivities financing from 1 In EUR’000s 2019. ber 2019 to January 1 from period the for liabilitiesactivities the financing from reconciliation following shows The 32.5 2 Conso

Th Th Th (– Th borrowings of repayments cash as well as euros) million (376.3 borrowings new from proceeds include borrowings within changes cash The TM ( MOTION of deconsolidation the and euros) million (0.6 Group Cloud The of consolidation initial the from effects includes This Th

is includes non-cash changes due to reclassifications and interest accruals. and interest to due changes non-cash is reclassifications includes method. interest effective the with accordance in discounts of unwinding non-cash the includes is is includes non-cash changes due to reclassifications and interest accruals. and interest to due changes non-cash is reclassifications includes method. interest effective the with accordance in discounts of unwinding non-cash the includes is e cash changes within borrowings include cash repayments of borrowings ( borrowings of repayments cash include borrowings within changes e cash

DISCLOSURES IN ACCORDANCE WITH IFRS 7 IFRS WITH ACCORDANCE IN DISCLOSURES RECONCILIATION LIABILITIES OF ACTIVITIES FROM FINANCING INFORMATION FINANCIAL INSTRUMENTS ON lidat e d f i n a n cial s t at e m en t 2,353,572 s 1,699,424

1.1.2019 | 630,672 n 14,985 8,491 otes totheconsolidated financialstatements the basisof ,5,0 2273402331,983,101 2,343 3,410 22,247 1,955,101 changes in consolida- ,6,0 4013,410 44,001 1,666,001 E 1.1.2018 ffec 281,955 - - - 31.0 million euros) as well as cash repayments of lease liabilities ( liabilities lease of repayments cash as well as euros) million 31.0 1,371 1,371 7,145 tion1 ts of 0 0 0 0 - 0,0 1,288 105,603 chang chang - - - 74,603 31,000 21,754 Cash Cash Cash Cash es2 es1 0 1,288 0 0 0 Changes in Changes in Changes in Changes in fair value2 fair value3 Annual Report 2019 ,4 8,491 1,346 0 0 49514,985 14,985 0 7,1 258,198 0 274,213 0 0 - 2.0 million euros). million 2.0 - chang chang - 7,0 1,428,009 272,703 - - 3981,699,424 13,988 - O O ,2 553,276 7,412 1,422 1,079

33 ther ther 9 2,246,895 991 - 2.3 million euros). million 2.3 es4 es3 74.6 million euros). 74.6 million 260,201 0

31.12.2019 freenet AG 31.12.2018 31 D ecem 179 -

Consolidated financial statements Consolidated financial statements Lease liabilities Equity andliabilities Other financialliabilities Borrowings Trade accounts payable Other financialassets Trade ac Assets 1 Cash/liquid assets In EUR’000s F 2018: 31 2019 and December 31 December as atGroup the in financial instruments the of presenting purpose the for information following the out We are setting 180 Continued on the next page. next the on Continued f reenet AG inancial according instruments to categories as at 31 2019 December No fair value has been determined for the items; however, the carrying amount is a reasonable approximation of the fair value. This means that the aggregate fair fair aggregate the that means v This value. fair the of approximation areasonable is amount carrying the however, items; the for determined been has value fair No income other comprehensive Fair valuethrough Non-derivative financial Other borrowings notes promissory Borrowings from liabilities assets Non-derivative financial or loss At cost amortised Lease r Fair valuethroughpro Other equity instruments Other financialassets alue for the measurement categories AC and FVTPL are considerably lower than the corresponding aggregate carrying amounts in the balance sheet. balance the in amounts carrying aggregate corresponding the than lower considerably are FVTPL and AC categories measurement the for alue income other comprehensive Fair valuethrough profit orloss Fair valuethrough income profit orloss Fair valuethrough other c Fair valuethrough At cost amortised counts receivable eceivables

| omprehensive

Annual Report 2019 fit measur category Conso VOI179,289 FVTOCI ement ement VP 26,713 FVTPL VP 826 FVTPL 22,765 FVTPL VP 107,148 FVTPL I F R n/a n/a AC AC AC AC AC AC AC AC S 9

lidat 31.12.2019 ,7,6 1,077,261 1,077,261 1,693,619 1,693,619 Carrying Carrying e 1,5 616,358 616,358 465,230 465,230 553,276 8,8 187,283 187,283 133,692 294,431 133,692 314,667 amount d 95,594 68,881 34223,402 23,402 82,178 ,0 6,207 6,207 f i n a n cial Amortised Amortised s 68,881 t at cost e m en t s

Measurement Measurement | n Cost otes totheconsolidated financialstatements F air value 107,148 through through 26,713 22,765 or loss pr 826 ofit ofit

prehensive other F air value air value 7,8 179,289 179,289 thr income ough ough com - 31.12.2019 instruments F air value o 1,087,259 financial financial — — — — — —1 —1

f f 1 1 1 1 1 te opeesv noeFTL26,713 FVTPL other comprehensive income Fair valuethrough profit orloss Fair valuethrough Equity andliabilities Fair valuethroughother or loss Fair valuethroughprofit At cost amortised Assets category IFRS 9 measurement Thereof aggregated by c

1 In EUR’000s Conso

mrhnie income omprehensive No fair value has been determined for the items; however, the carrying amount is a reasonable approximation of the fair value. This means that the aggregate fair fair aggregate the that means v This value. fair the of approximation areasonable is amount carrying the however, items; the for determined been has value fair No alue for the measurement categories AC and FVTPL are considerably lower than the corresponding aggregate carrying amounts in the balance sheet. balance the in amounts carrying aggregate corresponding the than lower considerably are FVTPL and AC categories measurement the for alue lidat e d f i n a n cial s measur t at category e VOI179,289 FVTOCI m ement ement VP 130,739 FVTPL I F en R AC AC S 9 t

| n 31.12.2019 ,2,3 2,227,730 2,227,730 otes totheconsolidated financialstatements Carrying Carrying 5,8 350,584 350,584 amount Amortised Amortised cost Measurement Measurement Cost F air value 130,739 through through 26,713 or loss Annual Report 2019 pr ofit ofit

prehensive other F air value air value 7,8 179,289 179,289 thr income ough ough com -

31.12.2019 instruments F freenet AG air value o 1,087,2591 financial financial 181 —1 —1 —1 f f

Consolidated financial statements Consolidated financial statements Trade accounts payable Equity andliabilities Other financialliabilities Borrowings Other financialassets Trade ac Assets 1 Cash/liquid assets In EUR’000s F 182 Continued on the next page. next the on Continued f reenet AG inancial according instruments to categories as at 31 2018 December No fair value has been determined for the items; however, the carrying amount is a reasonable approximation of the fair value. This means that the aggregate fair fair aggregate the that means v This value. fair the of approximation areasonable is amount carrying the however, items; the for determined been has value fair No Non-derivative financial Other borrowings notes promissory Borrowings from able Other tradeaccounts pay- liabilities loss At cost amortised assets Non-derivativ Fair valuethroughpro Other equity instruments Other financialassets alue for the measurement categories AC and FVTPL are considerably lower than the corresponding aggregate carrying amounts in the balance sheet. balance the in amounts carrying aggregate corresponding the than lower considerably are FVTPL and AC categories measurement the for alue income other comprehensive Fair valuethrough profit orloss Fair valuethrough At cost amortised pro Fair valuethrough At cost amortised counts receivable fit orloss

Annual Report 2019 e financial fit or measur category Conso VOI104,954 FVTOCI ement ement VP 654 FVTPL 24,273 FVTPL VP 76,008 FVTPL I F R AC AC AC AC AC AC AC AC S 9

lidat 31.12.2018 ,0,5 1,106,751 1,106,751 1,722,900 1,722,900 Carrying Carrying e 2,7 523,174 523,174 1,4 616,149 357,805 616,149 500,149 500,149 120,629 3,8 230,386 230,386 126,332 306,394 126,332 161,122 amount d 20322,053 22,053 ,8 9,188 9,188 f i n a n cial Amortised Amortised 120,629 s t at cost e m en t s

Measurement Measurement | n Cost otes totheconsolidated financialstatements F air value through through 24,273 76,008 or loss pr 654 ofit ofit

prehensive other F air value air value 0,5 104,954 104,954 thr income ough ough com - 31.12.2018 instruments F air value o 1,112,651 financial financial — — — — — — —1

f f 1 1 1 1 1 1 At cost amortised Equity andliabilities Fair valuethroughother or loss Fair valuethroughprofit At cost amortised Assets category IFRS 9 measurement Thereof aggregated by c

and the interest rate level. rate interest the and risk credit own company’s of the estimates date using measurement as up-to-date at the this ascertained was value; fair note atloan promissory the of measurement the from euros). results This difference thousand 5,900 year: 2019 (previous as at 31 euros December by 9,998 amount thousand carrying their exceeds borrowings non-current of the value fair The amount. carrying to the corresponds borrowings current of the value fair the involved, maturity of the Because values. fair thecorresponding and financial the of instruments amounts carrying the between differences minor are only there rates, A million euros). 104.4 2018: as of 31 amount December (carrying lion euro of 74.4 mil amount in the OCI through reversed in was CECONOMY interests of the value fair the on loss impairment the 2019, of 31 December As 178.8 obligations. million 2019: pension to euros) back as at 31amount securities and December relate in CECONOMY to investment the instruments equity other The market. in market an value active as the value fair the recognises Group the income, comprehensive other through at value fair measured instruments equity other For higher, or are are lower recognised. values fair that these are indications there If them. market for is active no there shares; notlisted do include loss or profit through at value fair measured instruments equity other The interest parameters. relevant given to being the consideration due with assets, the with associated payments of the values present to the year correspond with remainingone than more of financialterms assets other and receivable accounts trade non-current of the values fair The remaining of terms these short This isto due the amount. carrying toliabilities the is equivalent roughly financial current other and financial assets current other receivable, accounts trade equivalents, cash and of cash value fair The 7. of IFRS scope whichdeferrals”, not liabilities theis by covered and “Other item liabilitiesbalance non-financial sheet the constitute The 7. of IFRS scope covered by the which not is assets” other and receivables “Other item balance sheet the of part thatconstitute assets non-financial The 1 In EUR’000s Conso

mrhnie income omprehensive s ar No fair value has been determined for the items; however, the carrying amount is a reasonable approximation of the fair value. This means that the aggregate fair fair aggregate the that means v This value. fair the of approximation areasonable is amount carrying the however, items; the for determined been has value fair No alue for the measurement categories AC and FVTPL are considerably lower than the corresponding aggregate carrying amounts in the balance sheet. balance the in amounts carrying aggregate corresponding the than lower considerably are FVTPL and AC categories measurement the for alue esult of the discounting carried out using the effective interest rate method and based on the current level of interest current the on based and ratemethod interest using effective out the discounting of the esult carried lidat e d f i n a n cial s measur t at category e VOI104,954 FVTOCI m ement ement VP 100,935 FVTPL I F en R AC AC S 9 t

| n 31.12.2018 ,4,7 2,343,378 2,343,678 otes totheconsolidated financialstatements Carrying Carrying 8,5 387,959 387,959 amount Amortised Amortised cost Measurement Measurement Cost F air value 100,935 through through or loss Annual Report 2019 pr ofit ofit

prehensive other F air value air value 0,5 104,954 104,954 thr fina income ough ough com ncial instruments. -

31.12.2018 instruments F freenet AG air value o 1,112,6511 (c financial financial arrying arrying 183 —1 —1 f f -

Consolidated financial statements Consolidated financial statements Other equity instruments,at fair valuethroughprofit orloss Other financialassets, at fair valuethroughprofit orloss Other financialliabilities, at fair valuethroughprofit orloss Trade accounts receivable, at fair valuethroughprofit orloss Assets ity, either directly (i.e. as prices) or indirectly (i.e. derived from prices. from derived (i.e. as prices) indirectly (i.e. or ity, directly either exchange). stock furt Borrowings fromnotes promissory Equity andliabilities are defined in accordance with IFRS 13 as follows: accordanceIFRS in with are defined levels individual The based. 7 are fair accordancevalue IFRS in with at shown financial ofinstruments the assessment the and of financial value instruments, fair of the assessment the which on parameters major the shows overview following The 3 as at financial instruments derivative no had Group The market values. internally the determined with compared odically peri are partners external the from received confirmations market value closing date. The discounted as of the are then and curves forward and structure rate interest basis relevant the the of on calculated are financial instrument the from flows cashfuture expected The models). price option or method (discounted flow cash methods actuarial of recognised basis the on Group by the an exchange is on determined traded are that not instruments equity other of the value fair The 184 comprehensive income Other equity instruments,at fair valuethroughother In EUR’000s F f ■ ■ ■ (unobservable inputs). As was the case in the previous year, there were no transfers between the individual levels in levels 2019. individual the between year, previous in transfers the no were case there the was inputs). As (unobservable market data observable on financialor based thatnot are financialliability asset of the measurement the for of inputs Use financialor financialliabil asset the for within are 1that Level observable included prices quoted than other of inputs Use AG,Frank Börse financialor (Deutsche liabilities financial assets identical for markets active from of prices use Unchanged reenet AG

1 D air value hierarchy as of 31 2019 December Level 3 Level 2 Level 1 Level ecember 2019.ecember

Annual Report 2019 Conso lidat e d f i n a n cial s t at e m en 1,087,259 107,148 7,8 179,289 179,289 t 22,765 26,713 s Total

826 | n otes totheconsolidated financialstatements ee ee Level 3 Level 2 Level 1 0 0 0 0 0 0 22,765 0 26,713 0 107,148 0 1,087,259 0 0 826 0 - - - Other equity instruments,at fair valuethroughprofit orloss Other equity instruments,at fair valuethroughprofit orloss Other financialassets, at fair valuethroughprofit orloss Other financialliabilities, at fair valuethroughprofit orloss Trade accounts receivable, at fair valuethroughprofit orloss Assets Trade accounts receivable, at fair valuethroughprofit orloss Assets Borrowings fromnotes promissory Equity andliabilities Borrowings fromnotes promissory Equity andliabilities in the previous year: previous in the financialin shown yearwere and gains/losses 2019 net following the of financial instruments, categories individual the For loss. or profit through at value fair measured receivable accounts trade for euros thousand 2018 of 82,382 as in at 31 balance an ending at 97,608 This results December stood euros. disposals and euros thousand thousand 108,929 financial inyear. inthe changes value fair totalled additions no were There Instead, euros. thousand 71,061 2018 was uary on balance opening The 2018. January as at 1 category FVTPL the to category the AC from reclassified were receivable accounts 9, trade to transition IFRS some of aresult the year As 2018: previous in the made were disclosures following The comprehensive income Other equity instruments,at fair valuethroughother In EUR’000s financial for year 2019: to changes 3instruments Level the shows table following The comprehensive income Other equity instruments,at fair valuethroughother In EUR’000s F Conso air value hierarchy as of 31 2018 December lidat e d f i n a n cial s t at e m en t s

| n otes totheconsolidated financialstatements 1,112,651 1,112,651 1.1.2019 0,5 104,954 104,954 24,273 24,273 60831,140 76,008 76,008 Total 654 654 0 diin Disposals Additions 26,713 ee ee Level 3 Level 2 Level 1 Annual Report 2019 172 0 0 0 0 5321,087,259 25,392 0 0 ,0 22,765 1,508 0 0 0 107,148 0 76,008 0 1,112,651 0 0 0

31.12.2019 freenet AG 24,273 26,713 1 Ja 654 826 185 0 n -

Consolidated financial statements Consolidated financial statements Liabilities measuredcost at(AC) amortised comprehensive income (FVTOCI) Assets measured at fair valuethroughother Total loss (FVTPL) Assets measured at fair valuethroughprofit or Total comprehensive income (FVTOCI) Assets measured at fair valuethroughother loss (FVTPL) Assets measured at fair valuethroughprofit or Liabilities measuredcost at(AC) amortised Assets measuredcost at(AC) amortised In EUR’000s 2019 N 186 at fair value through profit or loss are based on the application of the effective interest rate method. rate interest effective the of application the on based are loss or profit through at value fair financial and measuredliabilities not financial assets the from expense interest and concerning income interest Disclosures similar and income”. “Interest under presented euros of 6,256 thousand resulting compensation), in (in at income line 7,000 euros the with valued was euros thousand sand 13,256 thou at measured untilthen option put financialthe from other liability the TM, MOTION from withdrawal Group’s the on the due to signing the agreement of Beforehand, loss. or profit affecting without profits) retained net consolidated (line item: equity as an in increase which recognised were financial liabilities euros, of non-current of other thousand 7,000 also disposed Group the a result, acquisition As the for remaining of the then company 49 cent in shares lapsed. the of the per A TM. of MOTION idation deconsol the with in option put connection financialthe from other liability of the arising remeasurement income the on and banks due to consistmainly expense cost of interest financial on liabilitiesat amortised measured losses gains and Net receivables. written-off previously on losses of impairment reversals and received as well as payments derecognition from losses gains and allowances, loss in changes the include cost at amortised measured assets from losses gains and Net Assets measuredcost at(AC) amortised In EUR’000s 2018 N f reenet AG s ac et gains/losseset by 2019 measurement category et gains/losseset by 2018 measurement category onsequence of the deconsolidation of MOTION TM with effect from 31 December 2019, the put option in place 2019,untilin option put December the from 31 TM effect with of MOTION deconsolidation of the onsequence

Annual Report 2019 Conso lidat F F e rom int rom int d f - - - - i 39973,206 23,929 48,044 - - n 26,115 47,068 1,130 1,140 3,316 a erest erest 164 n cial 73,206 0 0 comprehensive comprehensive s through other through other through other through other t F F At fair value At fair value rom subseq rom subseq at - - 125,353 e 125,353 m income income en t 0 0 0 0 0 0 s uent measurement uent measurement

| Loss Loss n otes totheconsolidated financialstatements r r al al eceivables eceivables - - lowance/ lowance/ losses on losses on losses on losses on - - 3143629,795 3,632 43,114 9332,727 49,393 - - 35,256 43,517 7,858 5,876 0 0 0 0 F F rom dispos rom dispos 3,632 2,727 als als 0 0 0 0 0 73,206 0 N N et gain et gain - - 220,063 - - - - 125,353 - - 26,115 31,940 47,068 43,353 5,356 4,289 /loss /loss - - Total Other provisions Trade accounts payable Financial liabilities Total Other financialassets Trade accounts receivable Total Other provisions Trade accounts payable Financial liabilities Total Other financialassets Trade accounts receivable note 30, Other provisions. Other 30, note in euros). to explanations refer our Please thousand 546 (31.12.2018: euros to 285 amounted thousand semi-retirement provisions for netted the date, sheet balance of the date. As sheet balance as of every assets plan corresponding of the s the in settled date and balance sheet the on are offset These in question. operator network by the rendered services tions - communica mobile the for are made payments advance monthly of terms payment, the to adjust operator anetwork with on an Based operators. network those balance with credit large one basically is there exceptions, insignificant some with that, result the with remeasured, were operators liabilities and network from to two receivables various the text, thisin as, met con are offsetting for euros). conditions The thousand 165,266 2018: (31 euros December 173,354 thousand was 2019 as at December off set 31 amount The operators. liabilities network other and same to the payable accounts trade commissions) against offset were bonuses, (e.g. from operators network from receivable In 2019, accounts trade Financial assets In EUR’000s 31.12.2018 O Financial assets In EUR’000s 31.12.2019 O t in company 2016, has also the Group Broadcast acquisition Media of aresult the of the As euros. of thousand 4,020 ment Conso ak u ffsetting of financialandffsetting liabilitiesassets 2018 of financialandffsetting liabilitiesassets 2019 bsequent month. In addition to the offsetting amount of 5,400 thousand euros, there long-termpay a is there also collateral euros, thousand of amount 5,400 offsetting to the Inaddition month. bsequent en on obligations for semi-retirement and long-term work accounts. These obligations are netted with the fair fair the with are netted obligations These accounts. work long-term and semi-retirement for obligations on en lidat e d f i n a n cial s t at e m en t s

| n before offsetting before offsetting Gross amount Gross amount otes totheconsolidated financialstatements 6,4 7,7 9,7 ,2 593,554 4,020 597,574 172,372 467,516 769,946 172,372 519,156 639,888 4,020 523,176 179,338 609,098 702,514 179,338 788,436 8,8 6,6 523,714 165,266 306,394 688,980 165,266 168,228 471,660 465,230 173,354 294,431 638,584 173,354 320,651 467,785 80,966 63,930

O O amounts amounts ff ff setting setting ,0 73,860 7,106 161,122 7,106 57,946 5,984 314,667 5,984

balanc balanc shown in the shown inthe shown in the shown inthe N N et amount et amount e sheet e sheet

Annual Report 2019 o o f financial f financial F F collateral collateral air value air value ,2 519,694 4,020 461,210 4,020 467,516 0 609,098 0 73,860 0 161,122 306,394 0 0 57,946 0 314,667 294,431 0 0

net amount net amount freenet AG agr eement eement va Total Total lues 187

- -

Consolidated financial statements Consolidated financial statements T shares. issuing as such new measures ment to and imple debt, to reduce to assets sell is permitted management the structure, capital manage the to actively In order debt. and equity Group’s the relation in to maindefined financialare date. The covenants sheet balance as of the met also were agreement loan in covenants the and undertakings agreed other All 2019, of 31 all met. were covenants December As closing price) (32,633,555 CECONOMY and date. closing price) by the multiplied shares reporting as at the by the multiplied shares (11,051,578 of Sunrise market capitalisation share of the the less liquid assets, less sheet, balance the in borrowings as defined were borrowings Net months. twelve last in the generated to EBITDA borrowings of net ratio In t liabilities. lease net plus and liquid assets less sheet, balance inings the n 4.2) is year 2018 restated: previous 4.8; 2019: (31 ratio December debt The changed. was purposes management for vant ratio rele debt the of definition the time, same At the management. structure to to cent 25.0 improve in capital order per 27.6 year: per cent50.0 previous from was reduced ratio cent). of beginning financial equity year At the 2019, per target the 27.3 2019: cent of 2019, 25.0 (31 target per as at the December 31 above it was cent; to December total assets; per of equity ratio is the ratio equity The ratio. debt the and ratio basis equity of the the on risk management capital its conducts Group in freenet called immediately.The being loans the financial failurelead to such might to covenants fulfil where agreements, loan the in is financialspecified risk to management the covenants monitor capital Group’s of the objective foremost The therefrom. derived to and ratios sheet balance consolidated in the as shown is equity to related risk the management capital Group’s The partners. sales and customers end from due of receivables impairment or default to the attributable costs is to minimise the objectives primary department’s of the One department. Management Receivables in the are monitored customers end from due Receivables risks. these for as well asinternal regular reporting B2B partners) other and dealers distributors, (in particular debtors of major risks default the monitoring for is responsible Treasury Group department The lines. of credit form in the maintainingby status and reserves financial adequate the monitoring by constantly are reduced risks Liquidity positions. market possibility of open closing the and line credit way of obtainingcommitments, adequate finance by of possibility the of reserve an adequate involves holding Treasury Group department by the controlled management liquidity Prudent is expense. to interest optimise net objective of minimising important principle is the another risk; department Treasury Group the for priority overriding The scale. and in degree of terms their risks the analyses which nal risk reporting by way of inter regular units business Group’s the with associated risks liquidity market and the manages and monitors also It coordinates access financial tomarkets. and the units business to the services renders Treasury Group department The approval. prior Board’s Executive the require financialtransactions certain In addition, Board. Executive the by below,determined are explained are components policy,whose of financial basic characteristics The activities. finance-oriented and operational to and with limitrisks them monitorthese risk of financialis management to constantly objective The risks. default and risks liquidity to market risks, in particular is exposed Group freenet the transactions, liabilities planned and assets, to its regard With 33.2 188 f reenet AG h o e following information concerning the specific risks is based on information presented to the Executive Board. Executive the to presented on information based is risks specific concerning the information e following - borrow as is defined debt Net months. twelve last over the generated to EBITDA debt of net ratio as the w determined h e previous year 2018, the debt ratio relevant for management purposes (31 December 2018: 1.3) was calculated as the calculated was 1.3) 2018: (31 December purposes management for relevant ratio debt the year 2018, e previous

PRINCIPLES OF FINANCIAL AND AND CAPITAL OBJECTIVES RISK MANAGEMENT RISK MANAGEMENT

Annual Report 2019 Conso lidat e d f i n a n cial s t at e m en t s

| n otes totheconsolidated financialstatements li quid assets, quid assets, - - - The risk of interest rate changes is negligible for the other interest-bearing assets and liabilities. and interest-bearing other risk is the changes assets rate of for interest negligible The shift of 5 per cent would have an impact of – have cent an impact would of 5per shift euros) 26 equity, adownward while on thousand year: (previous euros of 26 thousand have an impact would shares acquired pricethe of per cent the in of 5 shift an upward financial assets, other and assets, other and receivables other under sheet a instrument pricethe of with returns changes the comingin from dates, adjustment datesor interest maturity ally defined no are contractu There short-termbasis. on a very funds in invested been however, has risk, money is significant the no as There losses. price possibility of a is there always so to marginal fluctuations, rate interest are subject market funds Money million 0.3 euros). year: (previous tax before earnings on euros – of – have an impact would curve rate interest in the basis50 points of shift upward a parallel liabilities at and value, fair measured assets of variable-interest position net the on Based euros. to 29.8 amount in 2020would borrowings millionentire the for outflows in cash 2020. the that This means portion variable cent the for per 1.9 and 1.3 of between a corridor are we predicting basis the of market estimates, On percent. to 1.9 1.1 of within interest a bears corridor loans the of portion 2019, of financial variable liabilities As of December the in 2020.31 million repayment for is euros earmarked 258.2 and interest, of accrued 7.4 payments expected million is euros deferred 2019, this amount, as at 31 265.6 Of December as current. borrowings million for are shown euros shown amount aggregate the Of cent. per of 1.7 interest closing liabilities date as at the carried to banks variable-interest The rates. interest variable 1,059.1 million year: million euros) euros), million (previous euros 1,722.9 have of which 1,030.5 year: 2019 (previous ber as at 31 Decem liabilities borrowings long-term short-term and of 1,693.6 under million are shown sheet, euros balance In the date. sheet balance as at the instruments financialof portfolio the to riskvariables changes the in by relatingthe hypothetical determined are effects periodic The equity. on and earnings on rates of changes in interest effects the analysis shows that asensitivity uses Group the market risks, to present In order fi originally from variable-interest expense interest net on have could in rates an market impact interest Changes rowings. bor scheduling for available options various as well as the disposal planning at its basis liquidity day-to-day of the the on liquid investing assets for available the opportunities various the monitors continuously Treasury Group department The borrowings. variable-interest arising the from risks rate accordingly mitigate interest and as anatural hedge (which rates) interest mainly are invested holdings at variable cash serve the hedged, explicitly are not risks rate interest the Although to risks. rate interest is exposed Group the 1,059.1 million year: ous euros). Inthis respect, (previ million1,030.5 financialeuros liabilities to amounting variable-interest 2019, reported Group at 31 the December As o drawn millionbeen euros)not 300.0 again had and year: years of has five aterm which millioning (previous to euros 300.0 millionline has also a credit revolving amount euros). Group 608.6 The year: 2019) as of lion31 euros (previous December ofamount 610.0net final asamaturity total mil (shown which upon due loan is bank afloating-rate tranches)ing-rate and million euros) –including 420.5 million in float 1,114.2 to euros relation the year: 2019 (previous as of 31euros December million of 1,083.5 (disclosed amount note as atotal loan net relate to promissory four borrowings liabilities under The shown 33.3.1 rates. exchange to ratesresulting currency financialchanges from risks and in interest are exposed primarily activities Group’s Our 33.3 Conso n

n b na 2. d any dividend payments. Based on the financial investments in money market funds and bonds shown in the the in shown bonds and funds market money in financial investments the on Based payments. d any dividend 0 million euros), while a downward shift of 50 basis points in the interest rate curve would have an impact of 0.3 million of 0.3 have an impact would curve rate interest in the basis0 million of 50 points euros), shift adownward while ncial instruments and are included in the calculation process for earnings-related sensitivities. earnings-related for process calculation in the are included and ncial instruments y the end of the year. of the end y the

Interest rate risk rate Interest MARKET RISK MARKET lidat e d f i n a n cial s t at e m en t s

| n

26 t otes totheconsolidated financialstatements housand euros (previous year: – year: (previous euros housand

1. 6 million euros on earnings before tax (previous year: year: (previous tax 6 million before earnings on euros

26 t housand euros) equity. housand on Annual Report 2019

| freenet AG ba lance 189 ------

Consolidated financial statements Consolidated financial statements t of elements determining on both has an impact Swiss and euro franc the exchange risk rate between The cial statements. finan consolidated its preparing for currency reporting as the (CHF) Swiss franc the uses Sunrise of Sunrise. share capital cent in the per of an 24.56 interest company in holds mind the that borne be it must exchange risks, to rate the regard With 33.3.3 risknegligible. as currency foreign the regards Group the in all, All currency. foreign in denominated or, holdings by way of cash ifnecessary, exchange contracts, by entering into forward hedged generally Co 33.3.2 cost. at amortised are they recognised ratebecause riskto an interest exposed not financial therefore are liabilitiesfreenet of The value. fair at recognised they are if only financial instruments fixed-income on have in rates interest Changes an impact 190 payment on the Group’s original financialand financial of Group’s liabilities end years 2018: 2019 the the on at payment principal and interest undiscounted agreed contractually the show tables following The interests. equity especially assets, company law, any provision and acquisitions under of of collateral, the disposals or structure to measures change its Group of internal implementation the operations, business Group’s in company, changes the regarding the on tions example for restric impose These agreements. loan provisions the of by certain is restricted scope operational financial and Group’s The interests. these for market capital organised no there is because difficult more be notice might possibly at short sale their investments, equity to these sell necessary it If became investments. to any plans equity sell no of the S example. for toinvestments, strategic future finance in order ments agree loan the of outside years of five aperiod for company may the borrow euros). limits, narrow Within 300.0 million year: million linerevolving credit of (previous 300.0 euros utilised not its had Group date, the sheet balance at the As of maturing financial assets. proceeds the and flows cash arising operating obligations from other its to anticipates meet able it that will Group be The participate. Group freenet the in significant companies in the which agreements pooling cash Group internal existing basis ofthe several on centrally is controlled Group in the of liquid assets investment and for need The risk. reduceliquidity to financing instruments of different range awide uses Group The liabilities. and assets financialthe of profiles maturity the for performed Reconciliations are also flows. cash actual and forecast the continuously by monitoring and lines at banks, credit and balances bank appropriate risk by holding liquidity controls also its Group The basis data. of the current on Accounting liaison Controllingfollowing the departments and with Treasury daily Group This planning department by is the updated months. three subsequent the for each adailyon basis, out are control carried planning and liquidity Short-term this. with inhorizons year of connection up to are considered one planning Different liquidity. control and monitor to Group the throughout used are planning instruments financial Extensive leases. from obligations the and purchasingobligations of fulfilment the of borrowings, repayment the example for obligations, financial its to meet unable be company might the that possibly possibility in the risk resides liquidity general Group’s The 33.4 ever, at minor present. this to is be considered how Group; freenet the of operations Accordingly, of ing Sunrise. results the on this has exchange an also influence rate regard price allocation purchase shadow the resultingfrom write-downs the also Sunrise and of loss or profit current the f reenet AG h e e position of our consolidated income statement “Profit or loss of equity-accounted investments”, namely the share the in namely equity-accounted investments”, of loss or “Profit statement income consolidated of our e position curities (money market funds and bonds in the securities deposit account) can be liquidated at short notice. There are There notice. liquidated at account)short be can deposit securities in the bonds (money and curities market funds mmercial transactions in foreign currencies are conducted to a limited extent in the Group. The foreign currency risk is foreign currency The Group. to in alimited the extent are conducted in foreign currencies mmercial transactions

LIQUIDITY RISK LIQUIDITY

Foreign currency risk currency Foreign Ex

| change rate risk rate change

Annual Report 2019 Conso lidat e d f i n a n cial s t at e m en t s

| n otes totheconsolidated financialstatements - - - - - financial liabilities Other es iblte 5,7 35706,3 18706,4 7470364,953 0 37,487 67,848 0 11,827 69,437 0 13,517 553,276 Lease liabilities iaca iblte 3,7 971 4303,1 0212,826 36,911 024,350 09,771 0 0 237,176 financial liabilities Other non-derivative Other financial financial non-derivative Other laiiist ak)163699372,3 6,1 ,4 59747561,8 5291,000,413 45,249 10,285 427,596 15,967 7,141 265,610 20,436 9,377 1,693,619 (liabilities tobanks) Borrowings laiiist ak)172901,7 8992,7 1001,6 7,0 1323,5 1,425,618 37,454 21,312 273,806 18,465 11,070 23,476 18,979 10,572 1,722,900 (liabilities tobanks) Borrowings able Trade accounts pay- payable Trade accounts F In EUR’000s In EUR’000s F carried out for the customers before the contract is signed. contract the before customers the for out carried are assessments credit sectors, customer contract important For activities. business large-scale in Group’s our partners sales and customers of standing devoted credit the is to attention particular Here, financial assets. other and assets other Receivables, note 21, under to comments refer our please information, further For receivables. lease on and customers by end owed receivable accounts trade on primarily is focused Group freenet in the risk of default of the assessment The financial assets. other and assets other Receivables, note and 21, of financial assets, Impairment in note 2.7.7, model 9impairment IFRS the on notes explanatory to refer the please Inthis context, available. information o occurring risk of date a default the with is compared reporting as at the asset the on occurring cantly, risk of a default the risksignifi has increased default the whether To assess periods. riskreporting the during default in of asignificant increase existence the and date at of the initial of assets of default recognition probability the into takes consideration Group The 33.5 Conso n t inancial liabilities 31.12.2019 liabilities inancial inancial liabilities 31.12.2018 liabilities inancial he asset as at the date of initial recognition, giving consideration to the reasonable and supportable forward-looking forward-looking supportable and reasonable to date as the at of giving the initial consideration asset he recognition,

DEFAULT RISK lidat liabilities liabilities e d f i n a Carrying Carrying Carrying Carrying 2,2 1170 5990013,543 0 0 55,919 0 0 51,167 0 0 120,629 6,3 6,3 0 0 0 0 0 0 465,230 0 0 465,230 2,7 0790 2,7 0 0 0 0 0 0 0 0 523,174 0 10,719 523,174 amount amount n 554006,4 227008,761 0 0 22,287 0 0 64,546 0 0 95,594 31.12. 31.12. 31.12. 31.12. cial 2019 2018 0 0 0 0 0 0 0 0 0 0 s t at Interest Interest Interest Interest e fixed fixed m en Cash flows2020 Cash flows2019 t s

variable variable Interest Interest | n otes totheconsolidated financialstatements ments of ments of ments of ments of principal principal P P a a y y - - Interest Interest Interest Interest fixed fixed Cash flows2021 Cash flows2020 variable variable Interest Interest ments of ments of ments of ments of principal principal P P a a y y Annual Report 2019 - - Interest Interest Interest Interest Cash flows2022andlater Cash flows2021andlater fixed fixed variable variable Interest Interest

| freenet AG ments of ments of ments of ments of principal principal P P 191 a a y y - - -

Consolidated financial statements Consolidated financial statements Credit limits are also established and monitored. Where appropriate, a delivery block is imposed when the limit the is when reached. is imposed block a delivery appropriate, Where monitored. and are established limits also Credit A minimising for measures are risk essential Group. in our monitoring, default high-spender toring and moni collection debt long-term with together area, benchmarking in companies the collection of debt involving anumber process collection debt and reminder regular and of a swift implementation relationship, the ongoing contractual In the 192 the purchaser.the to transferred were receivables of these ownership with associated risks and euros). opportunities major All 2.7 million In as “servicing”). (known sold receivables of the administration and collection the for ble responsi being as well as risk late of payment, the to bear continues Group freenet entirety. inThe their derecognised are sold receivables the that result the with bank, to the are transferred opportunities and in particular) losses debt risk of bad risks the as (such relevant The fees. and for interest bills it discountalso and freenet credere del adefined with receivables the purchases bank The basis. on aquarterly possible is receivables option phone mobile of sale The terms. indefinite with in agreements 2019. are master 2014 and banks These two with signed were agreements factoring this backdrop, Against customer. end the with contract of the 24 months the over are spread option upgrade phone mobile the from customer, end inflows cash is the with signed acontract when or before occur devices acquireto these outflows cash while and past, of the phones mobile the than to purchase expensive are more higher-value today’s increasing years: for smartphones has been up in assets tied this capital that means Group, continuously. freenet has climbed the For receivable accounts trade current and non-current under recognised option upgrade phone mobile relating the to receivables deferred for figure Thismeansthe that also financial few years. past the over steadily has risen option upgrade phone this mobile selecting customers of postpaid number the has increased, phones t when contract of the term over higher-value the the for phone customer mobile by the paid to be amounts monthly tional addi of the value present of the amount in the areceivable records freenet option. upgrade phone mobile of the as part phone mobile the receiving customer the from right to payment has an unconditional freenet as follows: accounted for to be continue option upgrade phone this with mobile Contracts option. upgrade phone mobile its with fee monthly an additional higher-value devices forto choose opportunity the customers its offering has been Group freenet now, time the some For 33.6 yields. future expected and current investments’ the monitors constantly Treasury department Group The banks. over various spread risk being the of result limited as significantly a risk has been default The banks. mainly are invested German at major liquid assets and Securities as irrecoverable. receivable the regards Group ifthe derecognised are assets other and into Receivables risks account. default the takes allowances of loss recognition appropriate The correlations. are no there because and is broad base customer the risk because default of credit centration is significant con no date. There sheet balance the and granted were of terms payment at the which point the between ness account is due taken of any change in creditworthi receivable, accounts intrinsic of trade the to value determine In order hedged. have been vis-à-vis not risks customers relationship end business will materialise. the not or Default in advance pay cash must standing credit apoor with by an internal –generally, limit customers system are restricted customers sured with unin associated risks The be insured. calculate revenue volume to to the insurer this uses notification key The account. of each revenue current the insurerthe of notifies Treasury Group department the month, Every of this revenue. percentage has insured acertain Group the Communications). to risk, minimise Inorder in Mobile default credit distributors and ers vis-à-vis risks (deal customers major default moreover, significant us against insurance, credit safeguards Commercial f reenet AG h n o e contract is signed and the mobile phone is handed over. As customers’ willingness higher-value to for over. pay more iscustomers’ handed smart As phone mobile the is and signed e contract t he course of the financial year, income of 3.6 million euros was incurred from the sale of receivables (previous year: year: (previous financial year, of the of receivables sale course he the of from 3.6income millionwas incurred euros ngoing reminder and debt collection process is likewise used for receivables owed by dealers and franchise partners. partners. franchise and by dealers owed is receivables likewise for process used collection debt and ngoing reminder

TRANSFER OF FINANCIAL ASSETS TRANSFER

Annual Report 2019 Conso lidat e d f i n a n cial s t at e m en t s

| n otes totheconsolidated financialstatements ------Expenses from thepurchase of services In EUR’000s Total Revenue attributabletobillingof services In EUR’000s VERVIEW parties: related and Group the between place took transactions significant following The 34.1 34 liquidity.Group’s freenet the or losses debt riskbad of the of apportionment the on either effect has no buyback The month. price each fixed at a freenet to ended period financial the from receivables defaulted automatically bank assigns newly The the million 0.8 euros). year: million is (previous euros 1.0 Group the for (6 risk loss maximum months). receivables The of residual the term over realised the will be servicing the risk and payment euros) late the anticipated from 10 to thousand be year: (previous euros of 20 thousand for. paid yet not expenses but The million derecognised 82.5 and euros) to amounting year: sold 99.8 million have date, receivables (previous been euros sheet balance at the As risk. late the payment from million 0.8 euros) year: expenses interest million concern (previous euros 1.2 fees) discount (del and bank and credere the million risk from taken on euros) default 1.4 the concerns of thisyear: amount million (previous euros 1.6 million106.7 million euros) 2.5 euros),year: expensed. was million atotal (previous of 2.8 euros year (nominal year: 129.6 previous volume basis million reporting in the euros, aquarterly on out carried sales the Of Total Conso

Funview GmbH, Hamburg (Tochterunternehmen derJestoroGmbH) Jestoro GmbH, Hamburg Joint ventures Jestoro GmbH, Hamburg Joint ventures Hessen DigitalRadioGmbH Bayern Digital RadioGmbH Unconsolidated companies Check Tech GmbH, Service Hamburg (Tochterunternehmen derJestoroGmbH) Hessen DigitalRadioGmbH Digital RadioSüdwest GmbH Bayern DigitalRadioGmbH Unconsolidated companies

O RELATED PARTY TRANSACTIONS lidat e d f i n a n cial s t at e m en t s

| n otes totheconsolidated financialstatements Annual Report 2019 ,1 1,686 2,112 2019 2019 235 451 337 379 104 946 70 52 0 8

| freenet AG 2018 2018 304 413 104 335 337 601 193 92 24 84 0

Consolidated financial statements Consolidated financial statements Total Antonius Fromme Rickmann v. Platen Stephan Esch Ingo Arnold Christoph Vilanek Total Total Receivables from transactions current service Liabilities from transactions current service In EUR’000s 2019: as at December existed 31 liabilities and from parties to related receivables significant following The 194 In EUR’000s E year: previous in the year and reporting in the as follows comprised was Board Executive company’s of the members the for remuneration The 3. 25.3,2 and Programme Programme notes 25.2, in in relation the to made explanations programmes the refer to LTIP please incentiveterm effect, long- a with benefits regard to With targets. individual as defined are indicators performance non-financial financial and significant Group’s freenet the indicating figures determined regularly in which agreement target annual an from result each benefits Thevariable annual pension commitments. There are also long-termeffect. a with incentive benefits and benefits, variable annualsalary, of an annual fixed consists Board Executive of the members to paid the remuneration The 34.2 A in financial year 2019. Board Supervisory the on tives representa euros) employees’ to the granted 385 was thousand year: (previous euros Total of 420 thousand remuneration In EUR’000s f reenet AG xecutive Board benefits for 2019 for benefits xecutive Board l l transactions were based on market prices. No collateral has been provided. collateral has been No market prices. on based were l transactions Jestoro GmbH, Hamburg Joint ventures Check Tech GmbH, of Service Hamburg JestoroGmbH) (subsidiary Joint ventures

EXECUTIVE BOARD REMUNERATION

Annual Report 2019 Conso lidat F e ixed bene d f i n ,3 ,7 ,1 ,2 8,445 3,629 4,816 1,778 3,038 1,015 a 509 510 494 510 n fits fits cial s O t ther v at e benefits m ariable ariable en 287 287 229 287 688 t s

| n otes totheconsolidated financialstatements S ubtotal 1,703 796 797 723 797 inc nie effect1 entive bene 31.12.2019 31.12.2019 long-term long-term Variable fits with with fits 2,099 250 250 611 419 21 54 54 21 Total2 benefits 31.12.2018 31.12.2018 1,046 1,047 1,334 1,216 3,802 16 59 59 16 - Total Antonius Fromme Rickmann v. Platen Stephan Esch Ingo Arnold Total Antonius Fromme3 Joachim Preisig Rickmann v. Platen3 Stephan Esch Christoph Vilanek Total Antonius Fromme as “Programme 2”, please refer to note 25.2 of these notes to the financial statements. financial to notes the to of 2”, these refer note 25.2 please as “Programme this For LTIP is which also Board. programme (LTIPs) Executive of the nents into members entered were the with compo salary variable long-term new grant that of employment contracts concerning the agreements 2014, 26On February R St Joachim P Christoph Vilanek In EUR’000s Variablewith long-term benefits incentive effect 2018 Christoph Vilanek In EUR’000s Variablewith long-term benefits incentive effect 2019 follows: was as effect long-term with incentive benefits variable of the composition The 1 In EUR’000s E 3 2 Conso

ickmann v. Platen xecutive Board benefits for 2018 for benefits xecutive Board ephan Esch Be explanations. following the to refer se year. financial the in IFRS 2 with Th accordance in measured payments and benefits non-cash including programme, LTIP the under remuneration variable to relates This verance payments due to the premature termination of Mr Preisig’s work on the Executive Board in the amount of 930 thousand euros (previous year: EUR 0). Please Please 0). EUR year: (previous 930 thousand euros of amount the in Board Executive the on work Preisig’s Mr of termination premature the to due payments verance e amount of total benefits in the above table does not include pension expenses of 1,262 thousand euros (previous year: 1,177 thousand euros) and expenses for for expenses and 1,177 thousand euros) year: (previous 1,262 thousand euros of expenses pension include not does table above the in benefits total of e amount nefits in each case for the period from appointment as a member of the Executive Board, i. Board, Executive the of member as a appointment from period the for case each in nefits lidat reisig e d f i n a n cial s t at e m en t s

| n F otes totheconsolidated financialstatements ixed bene ,9 ,9 3,990 1,592 2,398 544 494 297 298 765 fits fits O ther v benefits ariable ariable

e. f e. 5 1,001 457 229 167 167 572 rom 1.6.2018 to 31.12.2018. to 1.6.2018 rom LTI LTI P P Benefits from Benefits from Benefits from

P P (non-c (non-c changes in changes in changes in rogramme rogramme pr pr S - - ubtotal ovision ovision ovision ,9 ,2 3,629 5,421 1,792 – 3,322 1,337 – – –

ash) ash)

319 723 250 250 611 419 464 465 235 235 123 285 381 Annual Report 2019

inc Bene Bene nie effect1 entive bene P P rogramme rogramme payments payments payments long-term long-term r r fits from from fits from fits Variable fits with with fits eceived eceived - - - 5,421 - LTI LTI 1 3,671 319 123 285 235 235 381 P P 0 0 0 0 0 0 0 0 0 0

inc inc Total2 benefits |

Total variable Total variable bene bene nie effect entive effect entive freenet AG de long-term long-term long-term signated fits with with fits with fits – 2,099 – – –

319 600 716 250 250 611 419 699 700 956 235 235 123 285 381 195 -

Consolidated financial statements Consolidated financial statements financial statements. statements. financial consolidated to notes 3”,to the refer note in 25.3 these please is which “Programme designated also LTIP programme, this on information For Board. Executive of the members LTIPs new granting into aforementioned entered were the with contracts employment the to agreements 2019), supplemental January 1 from effect with Arnold Mr for 2018; 1June from Fromme effect with Platen von Mr and Mr (for both made Board Executive to the 2019) appointment the and 19 March on granted Esch, Mr with and 2018, 4 April on granted (with Vilanek, Mr extended was contract employment the When 196 270 thousand euros), Mr von Platen for 100 thousand euros (previous year: 58 thousand euros), Mr Fromme for for euros), Fromme Mr thousand 58 year: (previous euros thousand 100 Platen for euros), von Mr 270 thousand year: (previous euros 272 thousand for euros) Esch Mr thousand of this amount, 463 year: (previous euros thousand 468 for In 2019, accounted Vilanek Mr commitments. pension as of a result the Board Executive of the members the for expenses euros) in total in recognised personnel were thousand 1,177 year: (previous euros thousand of 1,040 costs service Current Arnold. Messrs and v. Platen,for obligations Fromme benefit defined are no there commitment, euros). nature to selected the of the Due thousand 14,079 year: 2019 (previous 31 December f euros). DBOs The 4,024 thousand year: (previous euros to thousand 5,522 euros) Esch Mr for and thousand 4,612 year: ous (previ euros thousand 6,219 to amounted Vilanek Mr for (DBO) obligation benefit 2019, defined at 31 the December As a life policy. insurance being reinsured by benefits pension the with Arnold), 2019 Mr for v. 1January Mr 2018 for on Fromme and Platen Mr and g each were Arnold v. Mr Fromme Mr and Mr Platen, report. management Group within the report remuneration tive Board Execu in the event of atermination in of employment” the arrangements “Remuneration section the see details, further For Preisig Esch. Mr Mr and Vilanek, to Mr made commitments to pension made were adjustments 2014, InFebruary 2008. AG debitel as of 1 September Preisig to former Mr granted the commitment from pension AG the taken on had freenet as of 1 May 2009. Board Executive as chairman of the of his occasion appointment the on commitment pension an indirect was granted Vilanek Mr financial year Inthe 2009, commitment. pension an indirect granted was Esch Mr 2004, In November 2019.cashpaid January in in were euros 1,010thousand of payments severance 2018”.The for benefits Board “Executive entitled table the in remuneration of effect long-term a with incentive benefits variable in the included isand therefore P under LTIP entitlements of loss the for was euros to compensate thousand 80 of 2018”. An for amount benefits tive Board - “Execu above entitled table the in not theseincluded are 2019; for financial year benefits cash variable and benefits fixed of the year, previous in in were euros euros settlement the totalling of which 930 thousand thousand 1,010 payments erance Preisig sev Mr granted 2018, was 31 on December Board Executive the on termination early of his to the employment Due Fromme). Platen von Mr and Mr for in case euros each 432 and Vilanek thousand Mr for euros euros 1,776thousand which (of thousand 2,640 of amount the in effect long-term a with incentive benefits includes this 2018, For Arnold). Mr for euros thousand 606 and Esch Mr for euros 785 (thereof euros thousand 1,391 thousand grant ofamount theof the 3 in from Programme LTIP effect long-term a with incentive 2019,For benefits this includes euros). thousand 6,630 year: (previous euros thousand to atotal of 6,207 amounted 17) 17 (GAS Accounting no. Standard Code/German Commercial German the 6a of (1)314 no. section accordancein with benefits 2019,In Board Executive euros). sand 1,781 thou year: 2019 (previous as at 31 euros Preisig to December Mr 678 amounted thousand member Board Executive 4 235) v. year: Mr for Platen and (previous euros thousand 485 euros) Esch, Mr for thousand 1,486 year: (previous euros sand - thou 2,097 euros) Arnold, Mr for 0thousand year: (previous euros 419 thousand euros) Vilanek, Mr for 4,627 thousand year: (previous euros thousand to 1,305 2019, amounted LTIP the provision at for 31 the December programmes As Vilanek. to related Mr members Board 3) Executive 2and present for (Programmes current the from programmes 0) year: LTIP (previous euros of financial In thousand 5,421year 2019,payments cash f o reenet AG r r 8 r Messrs Preisig, Spoerr, Krieger and Berger, as former Executive Board members, totalled 17,054 totalled as at euros thousand members, Board Executive Berger, and as former Preisig, Krieger Spoerr, r Messrs anted defined contribution benefits on the occasion of their appointment as members of the Executive Board (on 1 June Executive the of members as theirappointment of occasion the on benefits contribution defined anted ogramme 2 for the tranche relating to financial the year 2019. tranche the Mr Preisig 2for provisionThisincreased had for amount LTIP ogramme 5 thousand euros (previous year: 235 thousand euros) for Mr Fromme. The provision for LTIP programmes for former former for LTIP provision for euros) The 235 Fromme. Mr programmes year: for thousand (previous euros 5 thousand

Annual Report 2019 Conso lidat e d f i n a n cial s t at e m en t s

| n otes totheconsolidated financialstatements 10 0 thousand - - - - cial year of their Supervisory Board membership. Board cial Supervisory year their of for the Supervisory Board members. Board Supervisory the for provided were warranties other or guarantees no and members Board Supervisory to any the of extended were loans No tax. added value wellfor as as duties, official their F euros. to thousand 892 amounted thus activities Board sory Supervi for expenses financial the yearaggregate for 2019.The resolution appropriation profit the on depends out paid will be remuneration to this which performance-related extent The expensed. also was euros thousand of 405 neration remu performance-related Inaddition, euros. to amounting thousand 82 fees attendance plus euros thousand of 405 tion remunera fixed received Board Supervisory the company’s of during financial year 2019,members activities their the For this amount. times one-and-a-half vice chairperson the this amount, double receives Board Supervisory the of chairperson The remuneration. as fixed owed is limited amount remuneration the to the of amount The financial yearended. the for to is shareholders which distributed no-par-value company share in in the excess per of 0.10 euros 0.01 each for euros dividend euros of 500 amount intion the remunera performance-related variable, receive also members Board’s financial ofyear, each end Supervisory the the After attendance. requiring physical in meetings by participation for or committees its or Board Supervisory of the meetings in telephone participation for payable shall be remuneration no that has decided Board Supervisory the activities, own its on imposed restriction In avoluntary t that committee respective of the meeting each for euros of 1,000 fee attendance an –receive additional MitbestG) gesetz (Mitbestimmungs Act Co-determination 27 (3) German of the inconstituted accordance committee section with of the exception the –with committee Board of aSupervisory are members who members Board Supervisory he/shethat attends. meeting Board Supervisory each for euros of 1,000 fee an attendance receives member Board Supervisory every In addition, this times amount. one-and-a-half vice chairperson the this amount, double receives Board Supervisory of the chairperson The components: of three consists and of association articles by the is governed remuneration Board’s Supervisory The 34.3 members. Board Executive the for provided were warranties other or guarantees no and members Board to Executive any the of extended were loans No Board. Executive of the members the for recognised were commitments pension to related the costs year, previous service Inthe past no euros. 222 thousand of costs service past included commitments to in relation pension Esch Mr for recognised expenses 2019,In personnel for 2018”. benefits Board “Executive and 2019” for benefits Board "Executive tables above the in not included are benefits These granted. benefits contribution defined the for into scheme apension paid relate to amounts Arnold Fromme Platen, and von Messrs for euros). expenses 328 The thousand year: (previous euros 0euros) Preisig year: Mr 0 and for (previous euros thousand 100 for euros), Arnold Mr thousand 58 year: (previous euros ■ ■ ■ The Supervisory Board’s members receive from the company fixed basic remuneration of 30,000 euros for each full finan each euros for 30,000 of basic remuneration company fixed the from receive members Board’s Supervisory The Conso h

u ey attend. The committee chairperson receives double this amount. double receives chairperson committee The ey attend. rthermore, Supervisory Board members are reimbursed for expenses incurred in connection with the performance of performance the with in connection incurred expenses for reimbursed are members Board Supervisory rthermore, Performance-related remuneration Performance-related fees Attendance remuneration Basic

SUPERVISORY BOARD REMUNERATION lidat e d f i n a n cial s t at e m en t s

| n otes totheconsolidated financialstatements Annual Report 2019

freenet AG te lephone lephone 197 ------

Consolidated financial statements Consolidated financial statements Total Gesine Thomas1 Total Michael Stephan1 Huck1Gerhard Ronny Minak1 Former members Gerhard Huck1Gerhard Bente Brandt1 Bente Brandt1 Theo-Benneke Bretsch1 Theo-Benneke Bretsch1 Fränzi Kühne Fränzi Kühne Thomas Reimann1 Thomas Reimann1 Sabine Christiansen Sabine Christiansen Robert Weidinger Robert Weidinger Marc Tüngler Marc Tüngler Thorsten Kraemer Thorsten Kraemer Claudia Anderleit1 2019year financial for Remuneration point. decimal the after position one to rounded been have figures the subtotals sum totals; this and is presenting for because used format may the from result differences noterounding that Please tables. following the in shown financial two are years last the for figures Individualised 198 Claudia Anderleit1 Knut Mackeprang1 Prof. Dr. HelmutThoma Active members Knut Mackeprang1 Prof. DrHelmutThoma Active members In EUR’000s In EUR’000s 2018 year financial for Remuneration 1 1 f

reenet AG Employee representative in accordance with section 7 (1) clause 1 no. 1 MitbestG of 4 May 1976. 4May of 1MitbestG 1no. clause 7(1) section with accordance in representative Employee Employee representative in accordance with section 7 (1) clause 1 no. 1 MitbestG of 4 May 1976. 4May of 1MitbestG 1no. clause 7(1) section with accordance in representative Employee

Annual Report 2019 Conso lidat e d f i n a n cial s r r t emuneration emuneration at e m 0. 1. 0. 925.6 405.3 115.0 405.3 405.0 7. 0. 7. 849.5 371.4 107.0 371.1 en Basic Basic Basic Basic 34.2 11.4 11.4 30.0 11.4 18.7 30.0 18.7 30.0 18.7 30.0 30.0 30.0 30.0 30.0 30.0 30.0 30.0 30.0 30.0 30.0 30.0 30.0 30.0 45.0 60.0 45.0 60.0 t s

| n otes totheconsolidated financialstatements Attendance Attendance 20450892.0 405.0 82.0 13.0 14.0 12.0 24.0 12.0 fees fees 8.0 2.0 3.0 5.0 3.0 5.0 8.0 6.0 4.0 3.0 4.0 4.0 8.0 7.0 5.0 7.0 7.0 9.0 5.0 8.0 5.0 8.0 6.0 remuneration remuneration P P erf erf ormance- ormance- rela rela 33.9 11.3 11.3 30.0 11.3 18.8 30.0 18.8 30.0 18.8 30.0 30.0 30.0 30.0 30.0 30.0 30.0 30.0 30.0 30.0 30.0 30.0 30.0 30.0 45.0 60.0 45.0 60.0 ted ted 102.0 144.0 132.0 76.1 Total Total 24.7 25.7 65.0 25.7 42.5 68.0 43.5 64.0 40.5 64.0 64.0 68.0 67.0 65.0 67.0 73.0 74.0 67.0 69.0 65.0 68.0 65.0 68.0 96.0 In EUR’000s as of 1 January 2019as of 1January amounts at carrying according Group” Cloud Balance of “The to sheet initial of time consolidation: at the at acquired value fair Group liabilities Cloud and of The assets the on information provides overview following The 3is final. in accordance IFRS with Group Cloud acquisition the Theto with regard of statements financial consolidated in these out carried allocation price purchase The t financial other liability for as anon-current recognised was euros thousand of 6,570 (after discounting) an amount cation, price allo purchase the of part As financial for years 2019Group to 2021. Cloud The in indicators performance financial for targets of defined attainment to by the reference measured will of which be amount exact the euros, thousand 10,000 0 and between of maypay Group also an earn-out The was agreed. euros 12,439thousand price of purchase cash A fixed spaces. and buildings public other and outlets catering airports, stations, petrol in hotels, access points Internet are primarily far so intoput operation hotspots The hotspots. of WiFi anetwork operating up consistand mainly of setting activities business Group’s Cloud The f initial date in of this control of its the consolidation subsidiary. The obtained thus Group the 2019 and 1January on pleted com was takeover the authorities, antitrust by the approved Once Group”). Cloud as “The to together referred hereinafter are companies (these Sweden Stockholm, AB, Nordic Networks Cloud The and Munich, GmbH, Germany Networks Cloud to acquire in voting The all into agreement and entered shares rights had apurchase Group the 2018, December 19 On 35 Inventories Current assets Intangible assets Intangible Non-current assets Current assets income tax Lease assets Trade accounts receivable Goodwill Liquid assets and otherfinancialassets Other receivables andotherassets, Total Other receivables andotherassets Fixed assets Other financialassets ASSETS Conso re h e earn-out. e enet Group is therefore 1 January 2019. January 1 is therefore Group enet

ACQUISITIONS lidat e d f i n a n cial s t at e m en t s

| n otes totheconsolidated financialstatements 01.01.2019 18,655 403 Total 24,053 5,398 8,817 ,2 Otherprovisions 1,621 ,2 Otherprovisions 5,428 3,052 2,467 579 3 Otherfinancialliabilities 532 647 717 94 94 9 Current liabilities income tax 99 H GB Lease liabilities Other liabilitiesanddeferrals Trade accounts payable In EUR’000s Non-current liabilities Lease liabilities Deferred liabilities income tax Current liabilities EQUITY ANDEQUITY LIABILITIES

Annual Report 2019

01.01.2019 freenet AG 2,047 2,997 5,044 2,593 180 197 965 450 399 235 199 20 5 - -

Consolidated financial statements Consolidated financial statements identified during purchase price allocation. Customer relationships with a useful life of between ten- and twenty-years and ten- between life of relationships a with useful Customer price allocation. purchase during identified were euros thousand to amounting 8,568 assets intangible goodwill, to the In addition segment. Communications Mobile to the allocated was Group Cloud The reporting, segment In our unit. cash-generating Communications” "Mobile to the e mainly to future is that euros attributable of 5,428 thousand in goodwill results allocation price euros). purchase sand The thou of 6,570 earn-out plus euros thousand of initial time at the of (cash 12,439 price consolidation purchase determined price purchase the total euros represents thousand 19,009 of liabilities and amount the in assets between difference The 200 portion of the compensation received in 2019). received compensation of the portion the TM less of MOTION (cash equivalents euros cash and thousand of 1,108 Group the for disposal in resulted anet Group the from TM’s item as inwithdrawal acash financial year recognised half 2020willfinancialin and MOTION year be 2021. euros thousand item as in acash financial year recognised 2019. were euros 1,000 remainingthe Half of thousand 6,000 this, Of adjustments. to any subsequent is and subject not as compensation of 7,000 agreed amount was euros An thousand met. not therefore 5were IFRS c this reporting, segment Inthe dealers. to specialist support sales to provide of online platforms operation the and vices M 2019. as at 31ance sheet December financial for year 2019,bal not statement the consolidated but in income in the fully included as it of aresult which was 2019, 31 on December deconsolidated This company was TM. of MOTION control lost Group the this transaction, Through b TM MOTION and in of compensation shares for return basis of the awithdrawal on TM as ashareholder MOTION ing from retir GmbH mobilcom-debitel by effected This was TM. of MOTION share cent capital in interest 51 the per of its itself 2019, divested Group 31 on the December performance its through 2019 and December 18 dated agreement the Under 2019. as at 31sale December for held assets non-current or operations discontinued no had Group the date, prior-year at the case the was reporting As 36 insignificant. was EBITDA Group’s to the contribution The third parties. from revenue million Group’s to euros the 11.9 contributed Group 2019), Cloud initialFrom date The (1 of the its January consolidation basis. take as the would market participant ahypothetical that forecast flow acash on is technique based This valuation 13. inputs) in accordance IFRS with (unobservable 3inputs Level and technique flow cash using discounted a measured were contracts favourable and software relationships, customer the of values fair The allocation. price purchase preliminary of the as part recognised assets intangible aforementioned of the valuefair the determine to used was method flow cash direct The years. of five period covered which adetailed method, DCF the on in turn, based, purposes measurement for relevant aforecast on based was allocation price purchase The assu N euros). thousand of 122 allowances loss less euros of 4,951 thousand receivables 2019 (gross as at 1January euros sand thou 4,829 was financial assets) as well as other assets other and receivables (including acquired other receivables of the financial year.fair per value euros The thousand of 922 charges will in result amortisation assets intangible of these tisation amor subsequent The euros. life of ten with a useful 267 for years thousand contracts favourable and euros thousand 2,398 six for and years three life of between auseful with software assets, intangible of the euros thousand account 5,903 for f reenet AG o a ei o c O rnings opportunities in connection with the expansion of the freenet Group’s offering. This goodwill has been allocated allocated been has This goodwill offering. Group’s freenet of the expansion the with in connection opportunities rnings mpany forms part of the “Mobile Communications” segment. The requirements for a discontinued operation codified in codified operation adiscontinued for requirements The segment. Communications” “Mobile of the part mpany forms

ng continued by its former shareholders. former by its continued ng TION TM’s main activities relate to the sale/distribution of mobile communications devices, the rendering of sales ser of sales rendering the devices, communications relate sale/distribution to of mobile the TM’s main activities TION mption of the liabilities identified. were the of mption ontingent liabilities and no transactions required to be presented separately from the acquisition of the assets and acquisition assets the of from the separately presented to be required ontingent liabilities transactions no and NON-CURRENT ASSETS HELD FOR SALE, DISCONTINUED OPERATIONS AND D ISPOSAL OF SUBSIDIARIES OF ISPOSAL

Annual Report 2019 Conso lidat e d f i n a n cial s t at e m en t s

| n otes totheconsolidated financialstatements

------“I In EUR’000s 2019: 31 December at at valued was euros thousand 13,256 at measured untilthen option put financialthe from other liability the TM, MOTION from withdrawal Group’s the on the due to signing the agreement of Beforehand, loss. or profit affecting without profits) retained net item: consolidated (line in as an equity increase recognised were which liabilities of 7,000 euros, thousand financial non-current of other disposed also Group the a result, As TM lapsed. ing in shares cent 49 MOTION of the per acquisition remain the for in of the until place then option put the described, transaction of the as aconsequence Also income. operating in other presented euros thousand 66 of 37,752 in equity) interests (including non-controlling of resulting in euros in total, deconsolidation again on thousand of 37,686 disposing of assets liabilities Group to and euros the led therefore thousand TM’s deconsolidation MOTION Other receivables andotherassets as at liabilities and to deconsolidation due assets of other disposal the on information provides overview following The and EBITDA in a small amount of insignificance for the Group. the in of insignificance for asmall amount EBITDA and 11.0 million euros of profit of gross revenue 323.5 millionexternal euros, In financial year 2019, TM generated MOTION Sonstige finanzielle Sonstige finanzielle Vermögenswerte Intangible assets Intangible Non-current assets Liquid assets Total Lease assets Goodwill Fixed assets Other financialassets ASSETS Conso Inventories Current assets Current assets income tax Trade accounts receivable nter 7,000 thousand euros (in line with the compensation), resulting in income of 6,256 thousand euros presented under presented euros thousand compensation), (in resulting euros of line 6,256 in the with income 7,000 thousand est and similar and est income”. lidat e d f i n a n cial s t at e m en t s

| n otes totheconsolidated financialstatements 31.12.2019 33,673 766 Total 37,686 776 Otherfinancialliabilities 27,756 ,1 Current liabilities 4,013 1,725 2,010 1,108 ,3 Trade accounts payable 4,533 242 6 Otherprovisions 163 0 Current liabilities income tax 30 27 Non-controlling interests Non-controlling inequity 27 88 Other liabilitiesanddeferrals 4 In EUR’000s Non-current liabilities Other provisions Lease liabilities Other financialliabilities EQUITY ANDEQUITY LIABILITIES Lease liabilities Annual Report 2019

31.12.2019 freenet AG 30,846 37,752 26,574 4,731 2,175 1,431 1,644 1,314 1,148 500 306 201 73 31 -

Consolidated financial statements Consolidated financial statements investor/corporate-governance/index.html. https://www.freenet-group.de/ address: following at the Internet the on to available shareholders permanently made been 2019. Ithas 3December on Board Supervisory and Board Executive company’s by the submitted was 161 AktG section in accordance with of Conformity Declaration the that declare hereby we 314 (1) 8HGB, no. In accordance section with transactions. party Related to refer note 34, please 314 (1) 6HGB), (section 1no. bodies executive company’s of the concerning remuneration disclosures to the regard With notes. in these expenses, in Personnel note 8, shown has been 314 (1) 4HGB) (section no. Group in the of employees number average The 37 202 financial statements (see table on the following page): following the on table (see statements financial in the included companies of the overview following the 313 (2) provide we to (3)In accordance section with HGB, tax. added value on advice tax and audits during tax consist mainly of support These services. consultancy to tax is euros thousand 80 and (in to security) relation IT services to other is euros attributable 6thousand ended), year financial the for Board Executive the of targets of attainment the and agreements loan the for covenants the regarding ,plausibility assessments reporting (e.g. reading of quarterly services assurance to other is euros attributable thousand 25 16), of IFRS introduction the with in connection audits project-related for euros 2019 audit for current as well as 3thousand the euros for thousand 1,102 (thereof services to auditing euros is attributable thousand 1,105 year 2019. this figure, Of during 314 (1) 9 HGB auditor to in no. paid the accordance was insection with euros fees thousand A total of 1,216 f reenet AG

DISCLOSURES PURSUANT TO SECTION 315A HGB SECTION TO PURSUANT DISCLOSURES

Annual Report 2019 Conso lidat e d f i n a n cial s t at e m en t s

| n otes totheconsolidated financialstatements co at nsolidated nsolidated tributable tributable fina ncial 1 Sure Yield IncLimited, HongKong (China) Seedling ProductionsLLC, Los Angeles(USA) Aldine ProductionsLLC, Wilmington (USA) Seedline Studios, LLC, Wilmington (USA) Wilmington (USA) Inc., freenet America North digital freenet LLC, digital Wilmington (USA) freenet Wilmington (USA) HoldingsInc., digital Vene International GmbH, Berlin freenet Entretentimendo digital doBrasilLtda., SaoPaulo (Brazil) freenet Barcelona EspanaS.L., (Spain) digital Ojom International GmbH, Berlin Lorena Medienagentur GmbH, Berlin Ilove GmbH, Berlin freenet GmbH, Berlin digital MOTION TM Vertriebs GmbH, Troisdorf1 Gravis-Computervertriebsgesellschaft mbH,Berlin NordicAB,Stockholm(Sweden)The CloudNetworks Germany GmbH, MunichThe CloudNetworks freenet ShoppingGmbH, Hamburg GmbH, Hamburgcallmobile mobilcom-debitel ShopGmbH, Oberkrämer GmbH fürStanniol IT freenet Energy GmbH, Berlin freenet Direkt GmbH, Hamburg vitrado GmbH, Hamburg (formerly newdirectionsGmbH) klarmobil GmbH, Hamburg MobilCom Multimedia GmbH, Schleswig mobilcom-debitel Logistik GmbH, Schleswig mobilcom-debitel GmbH, Büdelsdorf freenet Datenkommunikations GmbH, Hamburg 01050.com GmbH, Hamburg 01024 Telefondienste GmbH, Hamburg 01019 Telefondienste GmbH, Hamburg freenet.de GmbH, Hamburg freenet Cityline GmbH, Hamburg Fully-consolidated companies Consolidated companies Sunrise Communications Group AG, Zurich (Switzerland) Jestoro GmbH, Hamburg (formerly FunDorado GmbH) Companies accounted for usingtheequity method GmbH, Services Cologne TV Media Broadcast MEDIA BROADCAST GmbH, Cologne Taunus Beteiligungs GmbH, Cologne Synergy GmbH, Leipzig Networks EXARING MEDIA BROADCAST Consolid Deconsolidation AG, Munich a ted financil st as of 31.12.2019 of as & GMBH,Services PR, Oberkrämer a tements Cologne

| n otes totheconsolidated financialstatements Annual Report 2019 | freenet AG Share in 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 capital capital 51.00 58.63 24.56 50.00 58.63 in 203 %

Consolidated financial statements Consolidated financial statements as at 31 2019 December 39 date. balance sheet the after occurred haveGroup freenet the for significance of major events No 38 204 D f Total construction assets under made and Prepayments equipment and office Other operating machinery equipment and Technical networks Switches and buildings facilities and Land, property and equipment Property, plant Goodwill 113,520 Goodwill relationships Customer Trademarks assets right-of-use licenses and Software, software generated Internally assets Intangible In EUR’000s reenet AG evelopment of goodwill intangible plant equipment and property, and assets,

DEVELOPMENT OF INTANGIBLE ASSETS AND PROPERTY, PLANT AND EQUIPMENT AND PLANT PROPERTY, AND ASSETS INTANGIBLE OF DEVELOPMENT OF MATERIALEVENTS IMPORTANCE DATE THE REPORTING AFTER

Annual Report 2019 1,380,056 2,801,098 1,380,056 1.1.2019 663,855 757,187 101,016 521,322 346,352 176,064 121,251 38,120 2,471 926 Reclassifica- tion toI Conso - - the transi- tions from - 1.1.2019 2,0 4924,8 ,6 26,255 3,868 0 46,981 24,813 14,962 717 324,900 324,900 2,0 8 0731,702 10,713 588 324,900 16 aso F R lidat ,1 218251351,0 773,229 0 13,803 1,365 225 22,168 8,817 0 ,2 ,1 0 0 2,010 0 0 5,428 0 21,4 1 9 ,6 0 7,561 493 2,155 37 410 11,944 0 92 0 0 0 ,2 ,1 0 0 2,010 0 0 5,428 0 ,6 ,4 2 6 3 0 635 0 260 0 225 5,903 3,249 0 0 2,665 0 18,919 0 249 0 S f

consolida- e Additions d f basis basis i inAdditions tion n a of 0 0 0 0 1 0 ,0 0 0 1,105 0 0 0 n

cial s t at e Reclassi fica - m Cost - 2,337 en tions 2 9 12,452 493 225 t s

| n consolida- Disposals otes totheconsolidated financialstatements tions basis basis of 4,876 0 0 3 0 0 40 14 0 2190 12,189 0 0 979 0

Dispos - als 0 2 -

currency F oreign - - - 92,507,929 351,226 89 89 9204,460 89

1,383,474 31.12.2019 1,383,474 105,408 107,234 139,440 345,247 181,308 38,107 2,323 928 1.1.2019 496,863 265,031 231,832 184,033 66,889 13,183 26,475 44,925 76,333 84,099 926 0 0 0 tions from the IFRS 16asof transition to Reclassifica- - - 1.1.2019 - 6858,4 ,6 25,676 1,668 86,140 31,483 76,835 76,835 68516,434 76,835 Depreciation, amortisation andimpairment Depreciation, amortisation 0 46713713,801 1,337 54,657 0 0 0 0 13,896 0 1,153 0 7 1,105 5,120 673 0 37,128 0 0 11,736 0 Additions 0 0 0 0 consolida- Disposals in Disposals tions basis basis 3 11,875 331 331 232 of 0 0 0 0 0 0 0 0

12,189 7,089 4,774 635 977 - 14 0 0 0 0 2 currency F oreign oreign - - - 727361380398,824 2,304,235 2,029,182 143,830 478,747 207,396 77 77 77 0 7,5 0,7 525,355 501,878 271,351 0 0 0 3353,4 34,127 32,043 73,365 24,937 0 23,785 14,322 0 9468,2 87,045 87,828 99,731 19,406 68,714 37,152 0 112,594 44,582 0 94,858 0 4433074301,427 300,754 44,493 0 0

11.093.221 1.1.2019 31.12.2019 31.12.2019 1,8 569337,289 85,679 118,781 928 ,8,7 1,380,056 1,383,474 0 ,2 2,471 2,323 0 ,8,7 1,380,056 1,383,474 0 Carrying amounts Carrying 0 0 39 date. balance sheet the after occurred haveGroup freenet the for significance of major events No 38 as at 31 2019 December Development of goodwill intangible plant equipment and property, and assets, Total construction assets under made and Prepayments equipment and office Other operating machinery equipment and Technical networks Switches and buildings facilities and Land, property and equipment Property, plant Goodwill 113,520 Goodwill relationships Customer Trademarks assets right-of-use licenses and Software, software generated Internally assets Intangible In EUR’000s

EVENTS OF MATERIALEVENTS IMPORTANCE DATE THE REPORTING AFTER DEVELOPMENT OF INTANGIBLE ASSETS AND PROPERTY, PLANT AND EQUIPMENT AND PLANT PROPERTY, AND ASSETS INTANGIBLE OF DEVELOPMENT 1,380,056 2,801,098 1,380,056 1.1.2019 663,855 757,187 101,016 521,322 346,352 176,064 121,251 38,120 2,471 926 Reclassifica- tion toIFRS - - the transi- tions from - 1.1.2019 2,0 4924,8 ,6 26,255 3,868 0 46,981 24,813 14,962 717 324,900 324,900 2,0 8 0731,702 10,713 588 324,900 16 asof ,1 218251351,0 773,229 0 13,803 1,365 225 22,168 8,817 0 ,2 ,1 0 0 2,010 0 0 5,428 0 72,155 37 0 21,4 1 9 ,6 0 7,561 493 410 11,944 92 0 ,2 ,1 0 0 2,010 0 0 5,428 0 ,6 ,4 2 6 3 0 0 0 635 0 260 0 225 5,903 3,249 0 0 2,665 0 18,919 0 249 0 consolida- Additions basis basis inAdditions tion of 0 0 0 0 1 0 0 0 1,105 0 0 0

Reclassi fications - Cost - 2,337 2 9 12,452 493 225 consolida- Disposals tions basis basis of 4,876 0 0 3 0 40 14 0 0 0 12,189 0 0 979 0

Dispos - als 0 2 -

currency F oreign oreign - - - 92,507,929 351,226 89 89 9204,460 89 1,383,474 31.12.2019 1,383,474 105,408 107,234 345,247 181,308 139,440 38,107 2,323 928 Conso 1.1.2019 496,863 265,031 231,832 184,033 26,475 44,925 76,333 84,099 66,889 13,183 lidat 926 0 0 0 e tions from the d I transition to Reclassifica- F f R i S - - n 1.1.2019 - 16aso 6858,4 ,6 25,676 1,668 86,140 31,483 76,835 76,835 a 68516,434 76,835 n Depreciation, amortisation andimpairment Depreciation, amortisation cial 0 46713713,801 1,337 54,657 0 0 0 0 7 1,105 5,120 673 0 37,128 0 0 11,736 0 13,896 0 1,153 0 f s t at Additions e m en 0 0 0 0 t s

| n consolida- Disposals otes totheconsolidated financialstatements in Disposals tions basis basis 3 11,875 331 232 331 of 0 0 0 0 0 0 0 0

12,189 7,089 4,774 635 977 - 14 0 0 0 0 2 currency F oreign - - - 727361380398,824 2,304,235 2,029,182 143,830 478,747 207,396 77 77 77 0 7,5 0,7 525,355 501,878 271,351 0 0 0 4433074301,427 300,754 44,493 0 9468,2 87,045 87,828 99,731 19,406 68,714 37,152 0 112,594 44,582 0 94,858 0 3353,4 34,127 32,043 73,365 24,937 0 23,785 14,322 0 0

11.093.221 1.1.2019 31.12.2019 31.12.2019 1,8 569337,289 85,679 118,781 Annual Report 2019 928 ,8,7 1,380,056 1,383,474 0 ,2 2,471 2,323 0 1,380,056 1,383,474 0 Carrying amounts Carrying 0

| freenet AG 205 0

Consolidated financial statements Consolidated financial statements T Switches andnetworks Land, property facilitiesLand, property andbuildings Property, plantandequipment Goodwill Goodwill Customer relationships Trademarks Total otae iessadrgto-s ses171,817 Software, licenses andright-of-use assets Internally generatedInternally software Intangible assets In EUR’000s Development of intangible plant equipment and property, and as at 31 assets 2018 December 206 assets underconstruction Prepayments madeand Other operating andoffice equipment f reenet AG echnical equipmentechnical andmachinery

Annual Report 2019 Conso lidat 1,379,919 2,762,188 1,379,919 738,125 644,144 1.1.2018 513,595 113,520 346,352 106,436 37,983 90,494 e 1,143 d 929 f i n a n Change in the Change inthe c onsolidation cial s basis basis t 137 3 59,988 137 137 at of of 19,992 0 39,996 0 20,099 0 0 0 0 0 4,897 0 15,095 0 2,277 17,482 0 0 e m en t Additions s

| n 138 otes totheconsolidated financialstatements 0 0 0 0 0 Cost Reclassi fica – tions –

6 302521,322 13,032 660 6 ,2 101,016 7,224 264 945

– 24 24 24

0 1252,801,098 21,215 0 3 0 0 0 0 0 ipsl 31.12.2018 Disposals 20,261 5 757,187 954 7 176,064 674 8 121,251 280 1,380,056 0 0 38,120 1 1,380,056 0 113,520 0 346,352 0 4 663,855 2,471 926 Technical equipment andmachinery Switches andnetworks Land, property facilitiesLand, property andbuildings Property, plantandequipment Goodwill Goodwill Customer relationships Trademarks Total otae iessadrgto-s ses171,817 Software, licenses andright-of-use assets Internally generatedInternally software Intangible assets assets underconstruction Prepayments madeand Other operating andoffice equipment In EUR’000s Development of intangible plant equipment and property, and as at 31 assets 2018 December 1,379,919 2,762,188 1,379,919 738,125 644,144 1.1.2018 513,595 113,520 346,352 106,436 37,983 90,494 1,143 929 Change in the Change inthe consolidation basis basis 137 3 59,988 137 137 of of 19,992 0 39,996 0 20,099 0 0 0 0 0 4,897 0 15,095 0 2,277 17,482 0 0 Additions 138 0 0 0 0 0 Cost Reclassi fications – 945 – 24 6 302521,322 13,032 660 6 ,2 101,016 7,224 264 – 3 24 24 0 1252,801,098 21,215 0 0 0 0 0 0 ipsl 31.12.2018 Disposals 021663,855 20,261 5 757,187 954 7 176,064 674 8 121,251 280 1,380,056 0 0 38,120 1 1,380,056 0 113,520 0 346,352 0 2,471 4 926 Conso 174,618 382,944 208,326 1.1.2018 136,177 12,022 19,461 44,124 37,792 59,221 73,241 lidat 906 0 0 0

e companies in- osldto Additions consolidation d Depreciation, amortisation andimpairment Depreciation, amortisation f Change in Change in i cluded in cluded in n a n cial 0 58,160 0 129,196 0 71,036 0 55,668 0 0 1,161 0 7,014 0 801 0 0 39,207 0 14,187 0 11,138 0

s t at e m en 20 0 0 t s

| n Reclassi fica otes totheconsolidated financialstatements tions - 0 4 3,3 2,5 563,507 525,355 231,832 946 0 5274683234252,379,244 2,304,235 496,863 15,277 0 43125013884435,818 398,824 265,031 14,331 0 0 0 0 0 0 0 3 0 3 ipsl 11.0831.12.2018 31.12.2018 Disposals 6,522 7,809 666 280 0 926 0 3132,3 25,961 24,937 13,183 0 6458,4 94,059 87,045 26,475 0 4953147302,228 301,427 44,925 0 0 8,3 3,8 377,418 337,289 184,033 6339,3 134,025 99,731 76,333 6893,2 31,273 34,127 66,889 4093,5 33,195 37,152 84,099 ,8,5 1,379,919 1,380,056 0 ,8,5 1,379,919 1,380,056 0 ,7 1,143 2,471 0 Carrying amounts Carrying Annual Report 2019 0 01.01.2018 23

freenet AG 207

Consolidated financial statements Consolidated financial statements 208 Christoph Vilanek Ingo Arnold Stephan Esch Antonius Fromme Rickmann v. Fromme Rickmann Esch Antonius Platen Arnold Stephan Vilanek Ingo Christoph Board Executive The AGfreenet 2020 9March Büdelsdorf, Group. of the development expected the with associated risks and material ofopportunities the adescription with together Group, of the position the and business of the performance and development of the review afair includes report Group the and Group, the loss of or profit position liabilities,and financial assets, of the fairview and give a true financial consolidated the principles, reporting in applicable and accordance the with To knowledge, of our best the freenet AG STATEMENT RESPONSIBILITY

| a nnual Report 2019 Consolidated finan c ial statements

| esponsibility R m anagement s S tatements tatements t atement the requirements of European law and German commercial and professional law, and we have fulfilled our other German our other law, professional have commercial we and and fulfilled German law and of European requirements the in with accordance entities group the of We independent are report. auditor’s our of section Report” Management Group of the and Financial Statements Consolidated of the Audit “Auditor’s the in for Responsibilities the described further are principles and requirements those under responsibilities Our in Germany] [Institute (IDW). of Auditors Public prüfer Wirtschafts Institutder by the promulgated Financial Audits for Statement Accepted Standards Generally German with § accordancein with report management group the of and statements financial consolidated of the audit our We conducted audit, in the obtained basis knowledge of the the on opinion, In our report. auditor’s our of section Information” listed “Other in the report management group of the parts have we content the audited not of those requirements, 2019.31, December accordance In 1 the with to January financial AG yearfrom the for of freenet report group we have the audited addition, In accountingpolicies. of significant including asummary statements, 31, 2019,December notesthe and to 1 to January financial the from year for flows of cash statement consolidated and in of changes equity statement consolidated in-come, of comprehensive statement consolidated loss, or profit 2019,of statement 31, December the consolidated position and as ofat financial statement consolidated the comprise Group), subsidiaries which (the its and Büdelsdorf, AG, freenet of statements financial We consolidated have the audited Büdelsdorf To AG, freenet ■ ■ legal compliance of the consolidated financial statements and of the group management report. management group the of and statements financial consolidated compliance of the legal relating to the to any led reservations has not audit our that [sentence] declare we 3Satz 1HGB, toPursuant §322 Abs. Conso BASIS FOR THE AUDIT OPINIONS OPINIONS AUDIT THE FOR BASIS OPINIONS AUDIT AND OF THE GROUP MANAGEMENT REPORT MANAGEMENT GROUP THE OF AND STATEMENTS FINANCIAL CONSOLIDATED THE OF AUDIT THE ON REPORT AUDITOR’S REPORT INDEPENDENT

31 listed in the “Other Information” section of our auditor’s report. auditor’s of our section Information” “Other listed in the report management group of the parts cover content not the of those does report management group the on opinion audit Our development. future of risks and opportunities the presents appropriately and requirements legal German with complies statements, financial is consolidated consistent the with report this management group material respects, In all position. Group’s of the view an appropriate provides as a whole report accompanying management the group 2019,31, December and 1 to January financial yearfrom the for performance 2019,financial 31, of December its and as at Group the position of financial and liabilities, assets, of the view fair and give atrue requirements, in compliance these with Code] and, Commercial German [Handelsgesetzbuch: 1HGB [paragraph] to Abs. 315e commercial §[Article] law pursuant of German requirements additional the EU, and the by adopted as IFRSs the with comply, in allstatements accompanyingmaterial financial the consolidated respects, 7 HGB and the EU Audit Regulation (No. 537/2014, referred to subsequently as “EU Audit Regulation”) in compliance Regulation”) 537/2014, Audit (No. as “EU EU Regulation Audit the and to subsequently 7 HGB referred lidat e d f i n a n cial s t at e m en t s

Independent Auditor’s Report Annual Report 2019

co nsolidated financialnsolidated

Ge ma |

freenet AG rman legal legal rman nagement nagement 209 -

Consolidated financial statements Consolidated financial statements 2. for our audit opinions on the consolidated financial statements and on the group management report. management group the on and statements financial consolidated the on opinions audit our for basis a provide to appropriate and is sufficient have we obtained evidence audit the that We believe EU Regulation. Audit 5(1) of the Article under prohibited services non-audit have we that provided not declare we EU Regulation, Audit of the 10 (2) (f) point in accordance Article with Inaddition, requirements. in responsibilities accordanceprofessional these with 210 1. 1. key the matters: audit present we Hereinafter 3. 1. as follows: in case each structured has been key matters audit of these presentation Our 4. 3. 2. 1. as were follows: our audit in significance of most matters view,In our the matters. these on opinion audit aseparate provide not do we i addressed were 31, matters 2019.These December 1 to January financial the from year for statements financial solidated the con our of audit in significance of most were judgment, in professional our that, matters are those Key matters audit f KEY AUDIT MATTERS IN THE AUDIT OF THE CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL CONSOLIDATED THE OF AUDIT THE IN MATTERS AUDIT KEY n t reenet AG

Reve Reve Re Au Ma Impa Rec Rec Reve In the case of mobile communications contracts with terminal equipment sold in the postpaid segment, the transaction transaction the segment, postpaid in the sold terminal with equipment contracts communications of mobile case In the statements. tion is based to a large extent on estimates and assumptions made by the executive directors. Against this background this background Against directors. executive by the made assumptions and estimates on to extent alarge istion based recogni revenue incentives). addition, In discounts, customer structures, tariff (including models tariff and price ness, of everchanging busi impact the and revenue identifying and recording properly for necessary systems of the plexity com to risk due the to considerable subject is accounting and of revenue material treatment amount inThe of terms the business. communications mobile the for primarily processes, and tive systems respec has implemented Group the 15), (IFRS recognition revenue on accounting standard the apply to correctly In order sales. to reduce contract of the term a straight-line on basis are amortized over and the assets to as other capitalization are subject sales in indirect partner sales by the customers to end provided acquisition services customer other or hardware Any provided. services other or hardware over control the of actual lack to due the have position not aprincipal does Group freenet ifthe Group freenet the for revenue constitute not sales this does to acquire in order customers, customers to end services other or hardware provide sales in indirect partners sales If astraight-line on contract. basis of the term over the as expenses d of materials cost therefore in and the commissions are recognized as reductions received operator Network term. tract con underlying over the amortized are and capitalized acquisition costs Contract obligation. service respective of the recognized insatisfaction as revenue and accordance the with prices sales basis relative individual of the the on gations obli communications service mobile and delivery to hardware term is the allocated entire over the contract agreed price he context of our audit of the consolidated financial statements as a whole and in forming our audit opinion thereon; thereon; opinion our audit in forming and whole as a statements financial consolidated of the audit of our context he o n ference to further information to further ference dit approach and findings and dit approach tter and issue issue and tter overability of deferred tax assets on loss carryforwards loss on assets tax of deferred overability assets intangible and of goodwill overability ot represent revenue. To the extent that these relate to the term of the contract, they are deferred and recognized and are deferred they contract, relate of the term to To the these that revenue. extent ot represent the nue totaling EUR 2.9 billion is reported in the consolidated income statement in freenet AG’s in consolidated freenet statement income consolidated in the totalingnue billion 2.9 EUR is reported recognition nue recognition nue ct of the initial application of IFRS 16 on lease accounting lease 16 on initialof IFRS of the application ct

Annual Report 2019 Conso lidat e d f i n a n cial s t at e m en t s

Independent Auditor’s Report fina ncial ------2 3. 2 1. 2. Conso . .

In li audit. our during cance signifi of particular was recognition revenue uncertainties, considerable associated the into taking and consideration by us to be reasonable. by us to be considered ranges are within also and the are in expectations line our with directors executive by the used assumptions and parameters valuation the Overall, flows. cash future discounted by the covered adequately were assets intangible and goodwill respective the that determined into available, taking information account the and, units cash-generating analysis the for sensitivity additional the assessed we Furthermore, model. measurement the evaluated and applied, discount rate the to determine used parameters the on in in testing this particular our calculated way, focused also we amounts recoverable the on have can a material even that smallrelatively impact discount in applied rate changes the knowledge the With expectations. market sector-specific and reconciling general it and against board, supervisory the by approved and directors executive by the prepared plan in the budgets current bythings this the comparing with data other among measurement, the in used inflows future cash of the appropriateness We the evaluated things. other among tests, impairment the of performing purposes the for employed methodology the assessed we audit, of our part As our audit. during significance particular of was this matter models, measurement the of ity complex underlying to due the and this background Against uncertainty. to considerable subject is and therefore used, t on to extent alarge depends of result this measurement The unit. cash-generating relevant the for of capital age cost weighted aver is the discount used rate The rates. growth long-term basis about of the assumptions on is extrapolated up to 2023,period which the for executive directors planningthe by on approved based are models flow discounted cash The units. cash-generating individual the for available not aregenerally values sincemarket flows of future cash value present the on This is to based sell. costs less basis value of the fair on is calculated amount recoverable The amounts. recoverable respective their with assets intangible or units cash-generating of the amounts carrying by the comparing out carried are tests impairment The of impairment. are there indications if for impairment finite are lives tested useful with assets Intangible of impairment. are there indications annuallyor if for impairment are lives tested useful indefinite 38.0 and total assets of consolidated lion (10.4% r that ensure to substantiated and documented sufficiently are directors executive by the made assumptions and mates esti the that and controls in are appropriate and place processes systems, the that ourselves toWe satisfy able were risk in area. this audit audit inherent to the appropriately responded we to that ensure statements financial consolidated in the subsidiaries included of audit the the for consistentWe applied procedures audit confirmations. balance basis obtained atest and on of payment receipts and contracts customer associated the and invoicescustomer examined We also deferral. the or periods the correct to allocation the verified and accurately and recognized completely been had revenue whether we assessed this, of part As point in time. or at a over time satisfied are obligations performance these whether evaluated and contracts, to customer respect with obligations formance per of identification the ledger. We general assessed in also up to the entries invoicing systems the measurement and as well as controls, implemented the including revenue, of accounting treatment the supporting systems relevant other and invoicing measurement for and environment system IT the We assessed also revenue. recognizing deferring for and controls and processes Group’s freenet the assessing included audit our risk accounting of misstatements, increased Go Rec Th pany allocates goodwill to the cash-generating units within the freenet AG Group. Goodwill and intangible assets with assets intangible and Goodwill AG Group. freenet within the units cash-generating to the goodwill pany allocates mil 501.9 amounting to EUR Assets statements. financial consolidated item Company’s in the sheet balance "Goodwill" AG. freenet e h venue is appropriately accounted for. accounted appropriately is venue e executive directors’ assessment of future cash inflows of the respective cash-generating unit and the discount rate discount the unit and cash-generating respective the of inflows cash future of assessment directors’ executive e e Company’s disclosures on revenue are contained in note 4 of the notes to the consolidated financial statements of statements financial consolidated in to notes note the are 4of the contained revenue on disclosures e Company’s odwill of EUR 1,383.5 million% (28.5 1,383.5 of EUR odwill overability of goodwill and intangible assets intangible and of goodwill overability ght of the knowledge that the complexity and the estimates and assumptions that have to be made give to rise an have that assumptions made and to estimates be the and complexity the that knowledge ght of the lidat e d f i n a n cial s t at e m en t s

| of consolidated total assets and 104.7 and total assets of consolidated

Independent Auditor’s Report % o f G roup equity) are reported under "Intangible assets". The Com The assets". "Intangible under are reported equity) roup % of Group equity) is reported under the the under is equity) reported of Group Annual Report 2019

| freenet AG 211 ------

Consolidated financial statements Consolidated financial statements 3. 212 f 2. 3. 3. 4. 1. 1. reenet AG

tion of the incremental borrowing rate and estimates regarding the exercise of options impacting the term of the lease. lease. of the term the impacting exercise of options the regarding estimates and rate borrowing incremental of the tion t deferred of the recoverability the We assessed also recognized in carryforwards. to relation loss assets tax on testing ity recoverabil out to carry process methodological the things, other among assessed, we support, their With team. audit to ahigh of uncertainty. level are subject and directors executive of the assumptions and estimates the on are highly dependent carryforwards loss on assets tax of deferred recoverability basis the as for the serving multi-year the projections as 2020 for to significance, 2023. of view, From point is this our of matter particular multi-year the plan from are derived planning, tax for point starting as the serve which in accordance IFRSs, with results projected likely utilized can The believe be future. in the directors executive 283.1 Company’s EUR the million, which amounting to carryforwards loss on assets tax deferred include AG’sstatements financial consolidated freenet cial statements. finan 16 consolidated to and the in 15 notes are contained assets intangible and goodwill on disclosures Company’s The significance in the context of our audit. of the context in significance accounting of lease 16, was of IFRS requirements new of the complexity to due the and thisAgainst background a certain for judgments make and estimates directors executive the that 16 requires IFRS new The leases. tems to report centralized sys IT of two implementation the necessitated also Initial application of leases. recognition correct full and the controls for and processes in Group-wide place has put Company the resulting transactions, the and of leases ber num large the Due to notprior-year wasrestated. for information The periods comparative approach. retrospective fied ex by the made assumptions as of the ourselves to We satisfy able were calculations. of the accuracy mathematical the and 12 IAS with taxes to deferred calculate used method compliance of the result, tax to the results projected of the reconciliation of the correctness covered also the assessment Our used. planning premises of the appropriateness the assessed we and subsidiaries, group tax income consolidated of that its and income AG’s future taxable freenet respect p As b opening the in amounts carrying the on material had 16) effects (IFRS leases on accounting new standard of the cation In th Th Rec to the consolidated financial statements. financial consolidated to the lease liabilitieslease 553.3 of EUR million (11.4 Impa a r a eas, which were assessed for appropriateness in the context of our audit. This applies in particular to the determina to the in particular This applies audit. of our context in the appropriateness for assessed were which eas, x assets on loss carryforwards, as described above, on the basis of the plan prepared by the executive directors with directors executive by the prepared basis plan of the the on above, as described carryforwards, loss on x assets ecutive directors and the method applied. method the and directors ecutive lance sheet and subsequent measurement in the financial year. The Company transitioned to IFRS 16 using the modi 16 using the financial IFRS inyear.to the measurement transitioned Company The subsequent and lance sheet e Company’s disclosures pertaining to deferred tax assets on loss carryforwards are contained in notes 2.14 and 18 18 and in 2.14 notes are contained carryforwards loss on assets tax to deferred pertaining disclosures e Company’s overability of deferred tax assets on loss carryforwards loss on assets tax of deferred overability art of our audit of the recoverability of deferred tax assets, we included specialists from our Tax department in our Tax our from department specialists included we assets, tax of deferred recoverability of the audit of our art e Company’s consolidated financial statements right-of-use of EUR 452.0 millionstatements financial assets consolidated (9.3e Company’s ct of the initial application of IFRS 16 on lease accounting lease 16 on initialof IFRS of the application ct

Annual Report 2019 % of total assets) are reported as of the balance sheet date. The initial date. The appli sheet balance as of the of total assets) are reported Conso lidat e d f i n a n cial s t at e m en t s

Independent Auditor’s Report % of total assets) and and totalassets) of pa rticular rticular ------

audited parts of the group management report: management group the of parts audited non- following the comprises information other The information. other the for are responsible directors executive The 2. ■ ■ ■ ■ other information other the to whether consider doing, in so and, information is other to the responsibility read our audit, our with In connection conclusion thereon. of assurance any form or opinion an other audit express not do we consequently and information, not do other coverthe report management group the on and statements financial consolidated the on opinions audit Our report. auditor’s our and report management group audited the statements, financial consolidated audited of the exception the –with information to –excluding external cross-references annual report of the remaining the parts further comprises information other The 3. Conso OTHER INFORMATION INFORMATION OTHER

As part of our audit and with the assistance of our internal specialists, we assessed, among other things, the appropri the things, other among assessed, we internal of our specialists, assistance the with and audit of our part As a lease of identification the verified basis, atest on agreements lease the We inspected requirements. new of the tation In a transactions. the totems process in order otherwise appears to be materially to misstated. be appears otherwise or audit, in the obtained our or report management group the with is materiallystatements, inconsistent financial consolidated the with report. management group the of Statement" "Non-Financial h section in included HGB 1 pursuant Abs. to § statement 315b group non-financial the report, management group of the Governance" i"Corporate in section included HGB §315d and HGB to §289f pursuant governance corporate on statement the time. first the for as applied IFRS 16 are directors executive the by made assumptions estimates and the that verified we Furthermore, are appropriate. trols, con the and 16, to IFRS adapted in and place put processes and systems the that ourselves toWe satisfy able were o exercise the regarding estimates the and rate borrowing incremental of the determination the to assess priate evidence appro the inspected and employees Company Inparticular, interviewed we leases. to report implemented tems newly a t Th s processes of design the the evaluated and work implementation the Together 16. assessed we of IFRS tial application in sections 2.5, 9 and 28 of the notes to the consolidated financial statements. financial consolidated to notes 28 the of 9and the 2.5, in sections h e teness and effectiveness of the processes and controls established by the Group to record leases. This also applies Thisto applies also leases. Group to record the by established controls and processes the of effectiveness and teness n f o e implementation of the two centralized IT systems to report leases and to the required modifications of existing sys existing of modifications required to and the leases to report centralized systems IT two of the e implementation t up to report the transactions in accordance with IFRS 16 and of the IT systems in place to support the implemen the in to place support systems IT of the 16 and in accordance IFRS with transactions the t up to report d non-lease components and assessed whether these were completely and accurately recorded in the centralized in sys the recorded accurately and completely were these whether assessed and components d non-lease e Company’s disclosures on lease accounting as well as the impact of the initial application of IFRS 16 are contained initialof IFRS of the application accounting impact lease as well as on the disclosures e Company’s suffi d ptions impacting the lease term. term. lease the impacting ptions lidat dition, as part of our audit and with the assistance of our internal specialists we assessed the impact of the ini of the impact the assessed we internal of our specialists assistance the with and audit of our as part dition, ciently documented and substantiated to ensure that leases are appropriately accounted for in with accordance for accounted appropriately are leases to that ensure substantiated and documented ciently e d f i n a n cial s t at e m en t s

Independent Auditor’s Report Annual Report 2019

freenet AG kn owledge owledge 213 ------

Consolidated financial statements Consolidated financial statements In error.or fraud due to whether material from misstatement, that free are statements financial idated of consol preparation the to enable necessary have internal as such they control determined for are responsible directors the executive addition, In Group. the of performance financial and position, financial liabilities, assets, of the view fair and true give a requirements, in these with compliance statements, financial consolidated the that and 1HGB to Abs. §315e commercial law pursuant of German requirements additional EU the by and the as adopted IFRSs with material respects, that comply, in allstatements financial consolidated of the preparation the for are responsible directors executive The 214 this group management report. management this group and statements financial basisconsolidated takenthe these on of decisions of users economic the to influence expected be reasonably could they material if, are considered aggregate, and in or the individually error or fraud from arise can ments Misstate amaterial misstatement. will detect always (IDW) Wirtschaftsprüfer der Institut by the promulgated Audits Financial for Statement Accepted Standards Generally in compliance and German with EU Regulation, Audit the and HGB in accordance §317 with conducted an that audit is aguarantee not but is ahigh assurance of assurance, level Reasonable report. management group the on and statements financial consolidated the on t presents appropriately and requirements legal German the with complies audit, in the obtained knowledge the and ments state is financial consistent consolidated the with in all material respects, and, position Group’s of the view an appropriate provides as awhole report management group the error, or to whether due fraud and whether materialfrom misstatement, free are whole as a statements financial consolidated the whether about assurance are to reasonable obtain objectives Our report. management group the of and statements financial consolidated the of preparation the for process reporting financial Group’s the overseeing for is responsible board supervisory The m the group in assertions the for evidence appropriate sufficient to provide able to and be requirements, legal German cable isthat appli in accordance the with report management of agroup preparation the to enable necessary have considered (systems) measures and they as arrangements such for responsible are directors executive the addition, In development. of future risks and opportunities the presents appropriately and requirements, legal German with complies cial statements, finan consistent consolidated the with in all is, material and respects, position Group’s of the view an appropriate provides as awhole, that, report management group of the preparation the for are responsible directors executive the Furthermore, i basis goingaccounting the of thereon concern unless based financial for reporting are responsible they Inaddition, cern. to related going con matters as applicable, disclosing, for have responsibility also the They to continue as a going concern. f AND OF THE GROUP MANAGEMENT REPORT MANAGEMENT GROUP THE OF AND STATEMENTS FINANCIAL CONSOLIDATED THE OF AUDIT THE FOR RESPONSIBILITIES AUDITOR’S CONSOLIDATED FINANCIAL STATEMENTS REPORT AND THE GROUP MANAGEMENT THE FOR BOARD SUPERVISORY THE AND DIRECTORS EXECUTIVE THE OF RESPONSIBILITIES s a reenet AG h a e opportunities and risks of future development, as well as to issue an auditor’s report that includes our audit opinions audit our includes that report as well as to issue an auditor’s of future development, risks and e opportunities p nagement report. nagement n intention to liquidate the Group or to cease operations, or there is realistic so. to no alternative there do but or n intention to or to cease operations, liquidate Group the reparing the consolidated financial statements, the executive directors are responsible for assessing the Group’s ability Group’s the assessing for are responsible directors executive the statements, financial consolidated the reparing

Annual Report 2019 Conso lidat e d f i n a n cial s t at e m en t s

Independent Auditor’s Report

- - - - - We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter. the about disclosure public precludes regulation law or unless report in auditor’s our matters these We describe the audit key therefore and are period the current of statements financial the audit ofconsolidated significance the in of most were that matters those determine we governance, with charged those with communicated From matters the safeguards. related the applicable, where and independence, our on to bear thought be may that reasonably matters all other communicate relationships and them and with requirements, independence relevant the have with we that complied astatement with governance with charged those We provide also audit. our during deficiencies identify in includingwe that internalcontrol any findings, significant audit significant audit and timing and of the scope planned the matters, other among regarding, governance with charged We communicate those with We also: audit. the skepticism throughout maintain professional and judgment We professional exercise ■ ■ ■ ■ ■ ■ ■ ■ Conso

forgery, intentional omissions, misrepresentations, or the override of internal controls. controls. internal of override the or misrepresentations, omissions, intentional forgery, error,resulting from mayis one for than involvehigher as fraud resultingfraud collusion,material from misstatement a detecting The not risk of opinions. audit basis our a for provide to appropriate and is that sufficient evidence audit obtain and risks, to those responsive procedures audit error, or to perform due and fraud design whether report, ment manage group the of and statements financial consolidated of the of material misstatement risks the assess and Identify materially from the prospective information. prospective the materially from will differ risk future unavoidable that events is asubstantial There as abasis. used assumptions the on and information prospective the on opinion audit aseparate express not We do assumptions. these from information prospective the of derivation proper evaluate and the information, prospective as abasis the for directors executive by the used tions assump evaluate,the particular, we in significant auditevidence appropriate basis of sufficient the On report. ment manage group in the directors executive by the presented information prospective the on procedures audit Perform it provides. position Group’s of the law, view the and German with conformity its statements, financial consolidated the with report management group of the Evaluate consistency the opinions. audit our for sible respon We remain solely audit. group the of performance and supervision direction, the for We responsible are report. management group the on and statements consolidated financial the audit opinions on to express within Group the activities business or entities the of financial the information regarding auditevidence appropriate sufficient Obtain 1HGB. to Abs. commercial §315e law pursuant of requirements additional EU the by the and as in adopted compliance Group IFRSs with of the cial performance t mannerin a events and transactions underlying the present statements financial consolidated the whether and sures, disclo the including statements, financial content consolidated and of the structure Evaluate presentation, overall the to continue to able as agoing cease concern. to Group be the mayconditions cause However, or future events report. date up to auditor’s of the our obtained evidence audit the on conclusions are based audit respective our or, to modify are inadequate, disclosures ifsuch report management group in the and statements financial consolidated in the disclosures related to the report auditor’s in the attention to draw required are we exists, amaterial that uncertainty conclude we If to ability continue as agoing concern. Group’s the on doubt may that conditions cast or to related events exists amaterial uncertainty whether obtained, evidence audit the on based basis going concern of accounting of the use and, directors’ executive of the appropriateness the on Conclude disclosures. related and directors executive by the made of reasonableness the and directors executive by the used of accounting policies Evaluate appropriateness the systems. these of effectiveness the on opinion an audit of expressing purpose the for not but circumstances, in the arethat appropriate audit to design in order report management group the of audit (systems) to the measures relevant and ments of arrange and statements financial consolidated of internal to audit of the control relevant the an understanding Obtain ha t the consolidated financial statements give a true and fair view of the assets, liabilities, financial position and finanand position financial liabilities, assets, fairthe of view and true give a statements financial consolidated t the lidat e d f i n a n cial s t at e m en t s

Independent Auditor’s Report Annual Report 2019

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inions. Our Our inions. pro freenet AG si es gnificant gnificant ma Ge cedures cedures timates tters. tters. rman 215 ------

Consolidated financial statements Consolidated financial statements committee pursuant to Article 11 of the EU Audit Regulation (long-form audit report). audit (long-form EU Regulation Audit of the 11 to Article pursuant committee audit to the report are consistent additional the with report in this auditor’s expressed opinions audit the that We declare year 2014. financial since interruption the without Büdelsdorf, AG, 24, 2019. auditor of freenet group the We September on have been board 2019. 16, May supervisory on by the meeting We engaged were annual general auditor by as group the We elected were 216 (German Public Auditor) Public (German Wirtschaftsprüfer WilkeNiklas signed: Wirtschaftsprüfungsgesellschaft GmbH PricewaterhouseCoopers 2020 March 10 Hamburg, is Wilke. Niklas engagement the for responsible Auditor Public German The f FURTHER INFORMATION PURSUANT TO ARTICLE 10 OF THE EU AUDIT REGULATION AUDIT EU THE 10 OF ARTICLE TO PURSUANT INFORMATION FURTHER GERMAN PUBLIC AUDITOR RESPONSIBLE FOR THE ENGAGEMENT THE FOR RESPONSIBLE AUDITOR PUBLIC GERMAN REQUIREMENTS REGULATORY AND LEGAL OTHER reenet AG

Annual Report 2019

Conso si W (G pp gned: irtschaftsprüfer erman Public Auditor) Public erman a. Benjamin Röhe Benjamin a. lidat e d f i n a n cial s t at e m en t s

Independent Auditor’s Report M INFOR FURTHER ATION F Independent Imprint andc Glossar Multi- GRI Inde FU I inancial calendar inancial calendar NF year over RT y x andmainmemberships

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Further information Further information 218 national Auditing and Assurance Standards Board (IAASB). (IAASB). Board Standards Assurance and Auditing national Inter by the 1issued 1)), Control QS (IDW Quality on are which consistent Standard International the with prüferpraxis Wirtschafts in der an die Qualitätssicherung Anforderungen Qualitätssicherungsstandard: (IDW Firms in Audit Control Quality for Requirements 1: Control Quality on Standard IDW as well as the Buchprüfer) vereidigte und Wirtschaftsprüfer für (Berufssatzung profession their of exercise in the auditors sworn German and auditors public German of duties and rights governing by-laws the the in particular control, quality on pronouncements profession’s German the and ments require national legal applies Steuerberatungsgesellschaft KG &Co. Wirtschaftsprüfungsgesellschaft GmbH Mazars requirements. those provisions within in relevant responsibilities accordance the ethical with other our have we and fulfilled requirements, professional commercial law and German provisions in under accordance the with entity of the We are independent error. or todue fraud a control internal such for responsible also are directors executive The circumstances. in the appropriate are that closures dis to sustainability related estimates individual as well as and making assumptions reporting of sustainability methods T “CSR-RUG”). ter: (hereinaf Reports Management Group and Management their in by Companies Disclosures Non-financial to Strengthen Act German of the requirements the and criteria”) “GRI Initiative (hereinafter: Standards Reporting Global in the stated principles in accordance the with report of the preparation the for AG are responsible of freenet directors executive The to alimited engagement. assurance "Report") 2019 (hereinafter to December 31 January 1 from period the for Büdelsdorf, AG, freenet of statement non-financial the We have subjected freenet AG PUBLIC AUDITOR’S DECLARATION RELATING TO INDEPENDENCE AND QUALITY QUALITY AND INDEPENDENCE TO RELATING DECLARATION AUDITOR’S PUBLIC DIRECTORS EXECUTIVE THE OF RESPONSIBILITIES TO FREENET AG, BÜDELSDORF ON A LIMITED ASSURANCE ENGAGEMENT ON NON-FINANCIAL GROUP STATEMENT GROUP ON NON-FINANCIAL ENGAGEMENT ON A LIMITED ASSURANCE FURTHER INFORMATION REPORT REPORT PRACTITIONER’S INDEPENDENT s t h is responsibility on the part of the company’s executive directors includes the selection and application of appropriate of appropriate application and selection the includes directors executive company’s of the part the on is responsibility hey have determined necessary to enable the preparation of a report that is free from material misstatement, whether whether material from misstatement, is that free of areport preparation the to enable necessary havehey determined

Annual Report 2019 F u rt he r

i nf o rma ti on

Independent P ractitioner ’s Report - - - - - German Public Auditor Public German Driesch Dirk Steuerberatungsgesellschaft Wirtschaftsprüfungsgesellschaft Mazars GmbH 2020 March 10 Hamburg, third parties. towards any responsibility assume not We do AG. freenet towards solely is Our responsibility decisions. in making (financial) support with third to parties provide is intended not report The engagement. assurance of the AG results as to the to freenet inform intended is solely report AG the and of freenet purposes the for performed was engagement assurance The AG. freenet with agreed basis engagement of the the on We issue this report criteria. GRI and CSR-RUG of the requirements legal in accordance the with in all material respects, prepared, not 2019 were to 31 December 1 January from period the for report company’s in the disclosures us the that to believe causes that to nothing attention has come our obtained, evidence assurance and performed procedures assurance the on Based others: among activities, other and procedures assurance following the performed we audit, of our course In the judgement. professional auditor’s public the on depend selected procedures assurance The is obtained. assurance of level lower substantially a therefore and engagement In al criteria. GRI the and CSR-RUG of the ments require in accordance the with in all material respects, 2019 prepared, not were to 31 December 1January from period the for report company’s in disclosures the us the that to believe cause that have to attention come our matters no that limited to with us allow to assurance conclude engagement assurance the perform and plan we that requires This Standard IAASB. by the issued Financial Information, of Historical Reviews or Audits than other Engagements Assurance (Revised), 3000 (ISAE) Engagements in Assurance accordance International on Standard engagement the with assurance our conducted We have we performed. engagement assurance the on alimited is conclusion based assurance to responsibility express Our ■ ■ ■ ■ ■ Fu LIMITATION OF LIABILITY LIABILITY OF LIMITATION REPORT ASSURANCE THE OF USE INTENDED ASSURANCECONCLUSION RESPONSIBILITY AUDITOR’S PUBLIC

r Evaluation of the presentation of the selected disclosures regarding CSR performance CSR regarding disclosures selected the of presentation the of Evaluation statement non-financial in the disclosures of selected evaluation Analytical data of consolidation the including disclosures, of the control and processing collection, the for processes and of systems implementation and design Evaluation of the relating to internal this process control process the and process preparation the regarding statement non-financial of the preparation in involved the of personnel Inquiries engagement stakeholder of the and organisation CSR of the structure of the an understanding Obtaining the imited assurance engagement, the assurance procedures performed are less in extent than for a reasonable assurance areasonable for than in extent are less performed procedures assurance the engagement, imited assurance r in f

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Further information Further information 102 102 102 220 disclosure GRI statement: non-financial the beyond –also disclosures GRI of the overview asummary provides Index GRI following The ing Initiative (GRI) standards. Report Global the of option “Core” accordancein the with was reported Group freenet the of statement non-financial The 102 freenet AG 102 102 102 102 102 102 102 102 102 GRI INDEX GRI FURTHER INFORMATION MAIN MEMBERSHIPS GRI INDEX AND INDEX GRI ------13 12 11 10 9 8 7 6 5 4 3 2 1 | Membership of associations External initiatives or approach principle Precautionary organisation anditssupplychain changes tothe Significant Supply chain other workers Information on employees and ofScale theorganisation Markets served Ownership andlegalform Location of operations Location of headquarters services and Activities, brands,products Name of theorganisation GRI Standard 1. Organisational profile annualR eport 2019 eport (Key figures for thefirsttimecollected for2019) Further information (GRIIndex andmainmemberships) Further information (GRIIndex andmainmemberships) Non-financial statement(Non-financialrisks) Reporting andrisks(riskmanagement onopportunities system) Business modelandorganisation of (Overview thefreenet Group) chain); (supply statement Non-financial Non-financial statement(supplychain); Part time:25.4 further information onemployment: (employees); statement Non-financial Key financials(overview) Notes (Note 3,Segmentreporting) Non-financial statement(supplychain); The freenet share (changesinshareholder structure) Notes (Note 3,Segmentreporting) Further information (Financial calendar, publishinginformation andcontact) Notes (Note 3,Segmentreporting) organisation; and model Business Business modelandorganisation of (Overview thefreenet Group) notes/ disclosures Reference andothersources/ Fixed-term employment contracts: 19.8 % of women/6.9 Further inf

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Page(s) 75 220 220 58 88 88 U1f 88 33 136 217ff 38 38 75 38 136 136 ------70/ 89/ 89 89/ 40 80 40/ 40 224 224 139 139 139 - 102 102 102 102 102 102 102 102 102 102 102 102 102 102 102 disclosure GRI 102 102 102 102 102 F u rt ------14 6External assurance 56 GRIcontent index 55 notappliedat thetime) 31.12.2018(GRIstandards 54 53 Reporting cycle Date of mostrecent report 52 Reporting period 51 Newpresentations are indicated at therespective places. Changesinreporting 50 49 Restatements of information List of material topics 48 47 46 Non-financialstatement (materiality analysis) 45 Key topicsandconcerns raised 44 43 42 Collective bargaining agreements 41 List of stakeholder groups 40 Governance structure 18 he 16 r

i nf 3. Ethics andintegrity decision-maker Statement from senior with GRI Standards with GRIStandards Claims ofinaccordance reporting ing thisreport point forContact questions regard- topic boundaries Notes (Note 37,disclosures in accordance 315aHGB) withSection contentDefining report andthe consolidated financialstatements Entities includedinthe engagement Approach tostakeholder stakeholders andselecting Identifying norms of behaviour Values, and principles,standards 6. Reporting practice GRI Standard 2. Strategy 5. Stak 4. Gov o rma ernance eholder engagement ti on

GRI Index andmainmemberships All of theseareAll employees of MediaBroadcast. agreements. bargaining collective with accordance in paid were To action) ourshareholders (sustainable Non-financial statement(generalinformation) To ourshareholders (IRcontact) Non-financial statement(materiality analysis) customer matters) Non-financial statement(materiality analysis,employees, Non-financial statement(materiality analysis) assurance engagement onnon-financialgroupstatement) Further information (Independentpractitioner’s onalimited report Further information (GRIIndex andmainmemberships) 12 months Non-financial statement(generalinformation) preparation didnotresult inany change. for thefirsttime;CheckingmaterialityGRI standards inthe context of NFS Key topicsof thenon-financialstatement were inaccordancereported with Non-financial statement(materiality analysis) As of 31.12.2019,14.9 Other disclosures: Non-financial statement(materiality analysis) action); (sustainable shareholders our To Corporate Governance To Board); ourshareholders (Report of theSupervisory notes/ disclosures Reference andothersources/ Corporate Governance (Corporate Governance Statement) (anti-corruption); statement Non-financial diversity); (employees: statement Non-financial % (31.12.2018:15.8

% ) ofemployees thesalaried Annual Report 2019

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Further information Further information R 0 Energy 103 GRI 302 GRI 300 205 Anti-Corruption 103 GRI 205 201 disclosure GRI 222 R 0 Economic Performance 103 GRI 201 GRI 200 f 302 201 403 403 403 403 403 Occupational Health and Safety 103 GRI 403 401 401 Employment 103 GRI 401 GRI 400 307 GHGemissionsintensity 103 GRI 307 305-4 305 305 Emissions 103 GRI 305 reenet AG ------// Management approach 1/2/3 Work-related injuries 9 Non-financialstatement(employees) 5 4 Occupational healthservices 3 1 statement Non-financial (employees) Management approach 1/2/3 Benefitsprovided toemployees 2 1 Management approach 1/2/3 1 Management approach 1/2/3 Non-financialstatement(corporate protection) environmental Direct (Scope 1)GHGemissions 2 1 Management approach 1/2/3 1 Management approach 1/2/3 3 Management approach 1/2/3 3 1

| health andsafety Worker trainingonoccupational management system Occupational health andsafety turnover New employee hires andemployee Non-financialstatement(corporate protection) environmental lawsandregulations environmental Non-compliance with emissions Energy indirect(Scope 2)GHG organisation Energy consumption withinthe Environmental Topics taken and actions Confirmed Notes incidents (Noteof 2.11,Pensioncorruption provisions) and otherretirement plans planobligations benefit Defined and distributed Direct economic valuegenerated GRI Standard Economic Topics Social Topics Environmental Compliance health andsafety and communication onoccupational Worker consultation, participation,

Annual Report 2019 Non-financial statement(employees) Non-financial statement(employees) Non-financial statement(employees) Non-financial statement(employees) Non-financial statement(employees) Non-financial statement(employees) Non-financial statement(corporate protection) environmental Non-financial statement(corporate protection) environmental Non-financial statement(corporate protection) environmental Non-financial statement(corporate protection) environmental Non-financial statement(corporate protection) environmental Non-financial statement(anti-corruption) Non-financial statement(anti-corruption) To action) ourshareholders (sustainable Corporate management notes/ disclosures Reference andothersources/ Non-financial statement(corporate protection) environmental Non-financial statement(employees) F u rt he r

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disclosure specific R 1 Marketing andLabelling 103 GRI 417 Supplier SocialAssessment 103 GRI 414 418 414 405 R 0 Training andEducation 103 GRI 404 disclosure GRI R 1 Customer Privacy 103 GRI 418 freenet 417 103 GRI 405 404 404 F u rt ------// Management approach 1/2/3 1 Management approach 1/2/3 1 Management approach 1/2/3 1 Management approach 1/2/3 1 Management approach 1/2/3 3 1 he - r

i nf customer satisfaction R and losses of customer data Non-financial statement (digital responsibility) Non-financialstatement(digital and lossesof customerdata ing breaches of customerprivacy Substantiated complaints concern- Non-financialstatement(customermatters) informationservice andlabelling Requirements for and product using socialcriteria New suppliersthat were screened employees Diversity of governance bodiesand development reviews regular performanceandcareer Percentage of employees receiving per employee Average hoursof trainingperyear GRI Standard Opportunity Diversity andEqual o esults oftomeasure surveys rma ti on

GRI Index andmainmemberships Non-financial statement(customermatters) Non-financial statement(employees) Non-financial statement(supplychain); Non-financial statement(employees) Corporate Governance (Corporate Governance Statement); Non-financial statement(employees) Non-financial statement(employees) Non-financial statement (digital responsibility) Non-financial statement(digital Non-financial statement(customermatters) Non-financial statement(supplychain); Non-financial statement(employees) Corporate Governance (Corporate Governance Statement); notes/ disclosures Reference andothersources/

Annual Report 2019

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Further information Further information memberships: ourmain excerpt following of internationalis national an The and topics. industry-specific and economic on of information exchange the for aframework provide and Group freenet of the activities business the to support are intended Memberships 224 f ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ INTERNATIONAL MEMBERSHIPS NATIONAL MEMBERSHIPS MAIN MEMBERSHIPS reenet AG

WorldDAB Forum WorldDAB (CEPT) Telecommunications Administrations and Postal of Conference European (ITU-R) sector TelecommunicationsInternational -Radio Union MVNO Europe Dialog trusted e.V.JusProg e.V. Medien Verband privater (VAUNET) Verband e.V. Relations Investor Deutscher (DIRK) (BME) Logistik Einkauf und Materialwirtschaft, Bundesverband infrastructure critical to protect Informationstechnik) Katastrophen und Bevölkerungsschutz für (Bundesamt Assistance and Disaster Civil of Protection Office Initiative Federal of the groups working BNetzA and BMVI e.V. Datensicherung und Datenschutz für (GDD) Gesellschaft e.V. Nord) Schleswig/Holstein und (UV in Hamburg Vereinigung Unternehmensverbände der e.V. Internetwirtschaft –Verband der eco V. e. Telekommunikation (Bitkom) Medien neue und Informationswirtschaft, Bundesverband Der e.V. Telekommunikations- von Anbieter (VATM)Verband der Mehrwertdiensten und

Annual Report 2019 hi lfe) and also of the Federal Office for Information Security (Bundesamt für Sicherheit in der in Sicherheit für (Bundesamt Security Information for Office lfe) Federal of the also and F u rt he r

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GRI Index andmainmemberships Equity ratio in Equity Total equity andliabilities Balance Sheet waipu.tv subscribers(inmillion)5 waipu.tv Dividend pershare (inEUR)3 freenet subscribers(RGU) TV (inmillion)5 Earnings pershare (inEUR)2 Postpaid customers(inmillion)5 Consolidated profit Postpaid ARPUwithouthardware (IFRS15)(inEUR) EBT Postpaid ARPU(inEUR) EBIT (olddefinition)1 Customer-related key figures EBIT (newdefinition)1 Adjusted debtratio EBITDA (olddefinition)1 Debt ratio EBITDA (newdefinition)1 Free flow(olddefinition) cash Adjusted netdebt Gross profit Free flow(newdefinition)1 cash Net debt Revenue Operations Finances andinvestments Net investments (CAPEX)4 5 4 3 2 1 In EURmillions/as indicated F MULTI-YEAR OVERVIEW FURTHER INFORMATION VIEW AND QUAR AND VIEW MULTI-YEAR OVER MULTI-YEAR FIGURES 2019FIGURES

u plant and equipment. At t At In Th Di restated were figures comparative The d report. management Group the in management" "Corporate section the in defined are financials key otherwise, indicated Unless rt ue to the refocusing of the internal management system effective from 2019 and the associated redefinition of various performance measures. performance various of redefinition associated the and 2019 from effective system management internal the of refocusing the to ue vestments in property, plant and equipment and intangible assets, less the proceeds from the disposal of intangible assets and property, property, and assets intangible of disposal the from proceeds the less assets, intangible and equipment and plant property, in vestments luted and basic. and luted e dividend will be paid subject to a resolution at the Annual General Meeting. Meeting. General Annual the at aresolution to subject paid be will e dividend he end of the period. the of end he he r

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Multi-year over view andquar terly fig ,2. ,8. ,6. ,0. 1,379.0 1,402.3 1,462.9 1,280.8 1,321.6 ,3. ,3. ,1. ,8. 2,724.0 4,284.8 4,314.1 4,634.7 4,839.6 ,7. 0. 1. 2. 369.2 725.8 510.0 904.3 1,078.0 ,3. ,5. ,5. ,1. 369.2 1,416.0 1,350.3 1,856.8 2,031.1 ,3. ,9. ,0. ,6. 3,117.9 3,362.4 3,507.3 2,897.5 2,932.5 .0 .5 0.102 0.252 0.408 .2 .1 0.902 1.014 1.021 .0 .9 .1 .1 6.310 6.513 6.711 6.896 6.903 8. 1. 7. 1. 221.5 216.4 275.6 212.2 184.7 3. 3. 2. 4. 254.7 244.0 322.7 234.0 238.1 7. 312.0 270.0 2. 441.2 426.8 9. 0. 4. 9. 790.4 898.7 949.8 903.7 896.2 4. 263.8 249.0 2019 .516 .516 1.55 1.60 1.65 1.65 1.65 .917 .417 1.73 1.78 2.24 1.74 1.49 8719.0 18.7 162. 142. 21.4 21.4 21.4 21.6 21.6 064. 254. 30.4 48.1 42.5 43.3 40.6 732. 393. 50.6 32.7 33.9 27.6 27.3 ures 2019 . 4.2 4.8 2.5 — 8. 4. 3. 370.2 438.8 541.2 485.5 — - 3. 7. 9. 298.8 298.8 373.0 337.1 2. 4. 4. 284.5 341.5 342.8 326.1 0821 062015 2016 2017 2018 2.0

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Further information Further information Earnings pershare (inEUR)1 Consolidated profit EBT EBIT EBITDA Gross profit R In EURmillions/as indicated 226 1 freenet AG QUARTERLY FIGURES FOR 2019 FOR QUARTERLY FIGURES

evenue Diluted and basic. and Diluted

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2019 reference date. reference the on of customers average number by the divided fee usage group-specific user. customer per revenue The ARPU (Mobile Communications segment) games. computer or browsers web Image editing, ples: exam Application phone. mobile onto the Internet the from App date. ence (32,633,555 refer shares) relevant no-par-value the of as Group freenet by the AG of CECONOMY held shares ber num exchange by the stock Frankfurt OMY the share on CECON closing of the price by multiplying the is calculated AG of CECONOMY market value The of Bloomberg. data on based reference rate date defined using euros an officially into translated are Swiss francs date. reference relevant as of the (11,051,578) Group freenet by the held shares of number exchange by the Swiss stock the share on rise Sun AG closing of by the is price multiplying the calculated Group Communications of Sunrise market value date. The reporting AG AG CECONOMY the and on Group cations investments Equity poration Act. AktG months. twelve last in the generated (see “EBITDA”) EBITDA and “Adjusted debt”) net ratio debt Adjusted investments"). “Equity (see investments equity less debt") (see "Net debt Net debt net Adjusted effects. time Adjusted EBITDA "LTE"). (see LTE standard communications mobile existing the on based be 5G F FURTHER INFORMATION GLOSSARY u rt Fifth generation mobile communications, which is to communications, mobile generation Fifth Add-on program for smartphones that is downloaded is that downloaded smartphones for program Add-on he German: Aktiengesetz; English: German Stock Cor English: German Aktiengesetz; German: r

i nf o rma EBITDA (see “EBITDA”) adjusted for one- for adjusted EBITDA (see “EBITDA”) ti Ratio between adjusted net debt (see debt net adjusted Ratio between on Market value of Sunrise Communi of Sunrise value Market

Glossary abbr. A re verage levant levant ------CGU hardware dised) (subsi includes also that enteringmeans into a contract bilities. ratio Equity EBT impairment and EBITDA E phones. and/or Internet the smart on based life tools via technical of everyday simplification the Describes lifestyle Digital a account billing own as well particularly i.e. operators; work net of the all material services handles Group freenet the group, this For customer agreement. no-frills or a postpaid form of the in operators network the of tariff or a tariffs own of one use who segment Communications Mobile Customer ownership culture aimrate of the preventing with damage. corpo and of management as an integral part pany policies Compliance etc. software, ture and (e.g. space), power, computing storage platforms provision of infrastruc including the technology mation of infor entire spectrum covers the computing of cloud part as offered of services range The to demand. adapted that is dynamically over a network billing services of IT Cloud Bundle s c B IT ustomer service. ustomer Earnings before taxes before Earnings Cash generating unit generating Cash Earnings before interest and taxes. taxes. and interest before Earnings Cloud computing refers to the provisioning, use and use provisioning, to the Cloud refers computing In the context of mobile phone contracts, bundle bundle contracts, phone of mobile context the In EBIT (see “EBIT”) plus depreciation, amortisation amortisation depreciation, plus “EBIT”) (see EBIT Compliance with laws, regulations and com and regulations laws, with Compliance Ratio between equity to total equity and lia and to total equity equity between Ratio Aggregation of customers in the of customers Aggregation Annual Report 2019

freenet AG fr eenet’s eenet’s 227 ------

Further information Further information fr Earnings per share 228 Standards Board. Standards Accounting International by the issued companies traded) by (publicly reporting external for standards of Collection IFRSs standards. existing the taken into sufficiently account have been not in stances new circum where or or incorrectly, differently preted inter be can standard the that apparent it becomes where cases in standards reporting financial international the for interpretations IAS and is to IFRS publish IFRIC of the task The Foundation. Accountingtional Committee Standards is Interna within agroup the IFRIC The Committee. tions IFRIC mercial Code. HGB assets. to identifiable able Goodwill expenses operating other and expenses personnel capitalised, work own other income, Overhead subscribers. TV freenet to active it refers unit”; erating gen RGU “revenue (RGU) means subscribers TV freenet liabilities. lease of repayments cash and investments") (see "Net CAPEX less activities operating from flows Cash flow Free cash lessee. to the ferred Finance lease liabilities. or Fair value a weighted the by profit/loss bylated dividing consolidated Itis to share. calcu an individual is which attributable loss v eenet AG erage number of issued shares. shares. of issued number erage Abbreviation of Handelsgesetzbuch, the German Com German the Abbreviation of Handelsgesetzbuch, abbr. International Financial Reporting Interpreta International Financial Reporting abbr. abbr. International Financial Reporting Standards. Standards. Financial Reporting International abbr. Value of a business entity not directly attribut directly not entity of abusiness Value A value concept for the measurement of assets assets of measurement the for concept value A Overhead includes items the other operating Overhead

Inrisk trans is investment the lease, afinance Annual Report 2019 The portion of consolidated portion profit or The ------standard enabling very high transfer speeds of up to 300 of up to 300 speeds high transfer enabling very standard LTE account incentive term Long ISIN online) and not via specialist outlets. online) outlets. via specialist not and ally, distribution are by marketed way they of direct Tradition device. asubsidised include not do in general and No-frills receivables. lease current and non-current less sheet, liabilities balance in the shown lease current and Non-current liabilities lease Net equipment. and plant property, and assets intangible of disposal the from proceeds less assets, intangible and equipment and plant in property, Investments (CAPEX) investments Net investments”). “Equity (see investments equity less liquid assets, less sheet, balance the Net debt account. own their for and name in own their as text, such services, added well as value as phones mobile and cards SIM minutes, telephony mobile sell they network; mobile own their without services tions communica of mobile Provider provider service Mobile Act. Co-determination German MitbestG incentive long-term with effect. programme LTIP second. per megabits s channels broadcasting to other Protocol –as opposed net films and using Inter the mission of television programmes IPTV u ch as cable television, DVB-T2 or satellite. or DVB-T2 television, ch as cable abbr. Long term evolution. A mobile communications Amobile evolution. term Long abbr. abbr. Long term incentive programme. remuneration remuneration incentive term programme. Long abbr. abbr. International securities identification number. identification abbr. securities International abbr. trans to the television; protocol refers Internet No-frills tariffs deliberately have No-frillsdeliberately a simple tariffs Long-term and short-term borrowings shown in shown short-term and borrowings Long-term Abbreviation of Mitbestimmungsgesetz, the of Mitbestimmungsgesetz, Abbreviation F u rt he r See "LTIP". See

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st Glossary ructure, ructure, (e .g. .g. - - - - SIM revenue. plete transmission and storage, but during the transmission. during the but transmission storage, plete and com to after only not listened or viewed be can data the Streaming transfer. access and/or Internet easy feature for e-mail and set board Smartphone etc.). system audio and radio (TV, electronics entertainment and etc.) fridges (washing appliances machines, electric etc.), shutters (light, electricity inhouse of interconnection home Smart network. mobile in the user the also identifies card SIM the operator; network by the allocated number user including the of information, pieces various storing devices, mobile for memory and a processor Gross profit margin profit Gross (international roaming). operators to (national and international network roaming) operators of networks to refer domestic Roaming can home their than other anetwork on services mobile access or other receive data, and send calls, Roaming Prepaid 24-month contracts). Postpaid Portal Point sale. of (PoS) Sale of Point tent and additional services, such as e-mail. such services, additional tent and con aggregated of functions, navigation range prehensive F u rt card he Central web site which generally comprises acom comprises site web generally which Central r Mobile services billed in advance. billed services Mobile

The ability of a mobile customer to make or receive The customer of a mobile ability abbr. Subscriber identity module. Chip card with Chip card module. identity abbr. Subscriber i Mobile services billed subsequently (usually subsequently billed services Mobile nf Refers to a data transmission method in which to transmission method adata Refers Revenue less cost of materials. cost less Revenue o Mobile device with touch and/or qwerty key- and/or Mobile touch with device qwerty Smart home refers to the automation and automation to the refers home Smart rma ti on Ratio between gross profit and profit gross between Ratio

Glossary va rious rious ne ne ne twork. twork. twork twork twork twork - - - ference between the potential ordinary shares attributable attributable shares ordinary potential the between ference dif of potentially as dilutive the is shares calculated number The shares. dilutive by potentially increased outstanding of shares weighted averagenumber by the shareholders theto attributable profit by dividingare the calculated share per earnings Diluted share per earnings Diluted subscribers"). (see "waipu.tv ers subscrib waipu.tv or (RGU)”) subscribers TV (see "freenet (RGU) subscribers TV freenet are who segment Media and TV in the Group freenet of the Customers customers TV waipu.tv subscribers subscribers). “waipu.tv (see offered tariffs fee-based the of one with in or connection free-of-charge of waipu.tv service the use who Customers customers registered waipu.tv WACC months. twelve last in the generated (see “EBITDA”) EBITDA ratio Debt value. at fair issuable shares ordinary the and price scription sub at the measured incentiveto programmes employee interest and similar income. similar and interest Net interest expense or Perfect). Comfort offered (e.g. tariffs fee-based of the one with in connection waipu.tv abbr. Weighted of capital cost average Ratio between net debt (see “Net debt”) and debt”) (see “Net debt net between Ratio Customers who use the service of service the use who Customers Interest and similar expenses less less similar and expenses Interest Annual Report 2019

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Further information Further information 6 November 20201 13 August 20201 27 May 20201 14 May 20201 1 Date freenet AG 230 www.freenet-group.de/en at: homepage is our shares on available freenet the and freenet AG regarding information Current binding. is legally of this version annual report German The report. annual of the version German is of aconvenience the translation English annual report of the The version www.freenet-group.de/investor/publications at: download for are available also interim our and reports annual report The FURTHER INFORMATION FINANCIAL CALENDAR CALENDAR

All dates are subject to change. to subject are dates All

Annual Report 2019 directed to the freenet Group homepage by scanning this by scanning code. homepage Group freenet to the directed I f y ou have installed a QR-Code recognition software on your smartphone, you will you be smartphone, your on software recognition aQR-Code haveou installed Quarterly StatementasofQuarterly 30September 2020 –Thirdquarter 2020 Interim Report asof 30June2020 –Second quarter 2020 Annual GeneralMeetingof freenet AG StatementasofQuarterly 31March 2020 –First quarter 2020 Event

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