VERSATEL : keeps up core business growth

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PRESS RELEASEVersatel keeps up core business growth

• Takeover by KKR strengthens Versatel’s financial base

• Business segment maintains growth in second quarter

• transform restructuring programme on schedule

Düsseldorf, 12 August 2011: Versatel generated revenues of €157.9 million in the second quarter of 2011. This reflects a decrease of €23.4 million as expected on the basis of the trends in the Mass Market and Wholesale segments. The Business segment showed 2.5% growth in the second quarter 2011 compared with the same period a year earlier, thus bearing out the onward development of the corporate strategy. As in the first quarter 2011, Versatel’s Mass Market segment recorded a decline in revenues and Wholesale segment revenues were heavily impacted by the reduction of mobile termination fees by the Federal Network Agency.

Versatel generated adjusted EBITDA of €37.4 million from April to June 2011. A sharp decline in revenues in the Mass Market segment, which it was not possible to offset through cost savings in the same amount, meant that adjusted EBITDA was €5.3 million down on the figure for the same quarter a year earlier.

As expected, earnings for the first half of 2011 show initial positive effects from the transform restructuring programme. Implementation of this project is running according to plan and Versatel anticipates that the programme will have a clearly visible positive effect on the company’s results in the second half of 2011.

Free cash flow in the second quarter of 2011 was a negative €12.5 million, down on the previous year’s figure. The sharp decline is partly explained by the reduction in payables and a release of provisions relating to the restructuring programme. Net debt amounted to €334.3 million at 30 June 2011. The €15.2 million reduction compared with the 31 December 2010 balance sheet date is primarily due to the positive free cash flow in the first half of the year.

The consolidated loss in the second quarter of 2011 was €16.7 million, a €1.7 million larger loss than in the previous year’s period.

A key outcome of the second quarter of 2011 for Versatel was the takeover offer from VictorianFibre Holding GmbH, a subsidiary of Kohlberg Kravis Roberts & Co. L.P. (KKR). The Management Board expressly welcomes the submitted offer, above all because KKR has communicated its intention to support the implementation of the current corporate strategy and build Versatel into an infrastructure-based market leader and preferred network partner focusing on the German wholesale and B2B telecommunications market.

Segment performance

The Business segment recorded a 2.5% increase in revenues compared with the previous year’s period to €50.3 million in the second quarter of 2011. This bears out the action taken

and the onward development of the corporate strategy. While revenues from traditional voice business declined as expected by €1.5 million compared with the second quarter of the previous year, Versatel was able to lift broadband and VPN product revenues in the second quarter of 2011 by 5.1% to €27.7 million.

Alain D. Bandle, CEO of Versatel AG, says: “Versatel’s high-performance and – especially in cities – tightly meshed network infrastructure provides the basis for the positive trend in the Business segment. Based on this infrastructure, Versatel will profit from current and also future growth in demand for high bandwidth.”

Revenues in the Wholesale segment fell in the second quarter of 2011 by 18.7% to €46.7 million. The decrease was mainly driven by the voice business, where the reduction in mobile termination fees by the Federal Network Agency and ongoing telecoms market consolidation led to a negative business trend.

The Mass Market segment generated revenues of €60.8 million in the second quarter of

2011. The €13.8 million year-on-year decrease was mainly driven by three factors: The cable business sold by Versatel as of 31 July 2010 contributed revenues of €7.2 million in the first

half of the previous year. In addition, the number of customers in the new Mass Market segment dropped by roughly 74,900 compared with the adjusted figure for the previous year.

On top of this, revenues continued to fall as a result of the ongoing slight decline in monthly average revenue per user (ARPU) compared with the previous year’s quarter.

“In the Mass Market segment, we are making good progress with a view to efficiency gains. This is an important segment for the company as a whole, which we will continue to develop and improve in terms of efficiency and effectiveness”, says Alain D. Bandle.

The report for the second quarter 2011 is available from the Investor Relations section of the

Versatel AG website, www.versatel.de.

Your contact:Press

Jana Wessel

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Investor Relations

Andrea Winzen

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The results at a glance

	Q2	Q2 2010	Change
	2011	Q2 2010	Change
Revenues Business	(€m)	157.9	181.2	-12.9 %
Revenues Business	(€m)	50.3	49.1	2.5 %
Wholesale (€m)	46.7	57.5	-18.7 %
mass market (€m)	60.8	74.7	-18.5 %
Gross profit (adjusted) (€m)	81.6	91.1	-10.4 %
EBITDA (adjusted) (€m)	37.4	42.7	-12.4 %
EBITDA magin (adjusted)	23.7 %	23.6 %	-0.1 %-pp
Depreciation, amortisation and impairment (€m)	-32.6	-40.7	-19.8 %
EBIT (€m)	-1.5	-2.1	27.5 %
Net profit/(loss) (€m)	-16.7	-15.0	-11.1 %
Earnings per share (€)	-0.38	-0.34	-19.1 %
Capital expentiture (€m)	15.8	19.6	---
Free cash flow (€m)	-12.5	1.5	-924.1 %
Number of employees at reporting date	1,139	1,276	-10.7 %
broadband contracts (k)	602.6	677.5	-11.1 %

About Versatel

Versatel AG is a listed company (ffm: VTW) and one of the leading providers of telephone, Internet and data services for private and business customers on the German market. In the financial year 2010, the company achieved an overall turnover of 725 million euros. Thus, Versatel is the third largest alternative, infrastructure-based telecommunications provider in Germany. The company has a state-of-the-art, high-capacity optical fibre network of more than 45,000 kilometres.

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