DGAP-News: Drillisch AG

Drillisch AG on a Course of Growth in the First 9 Months of 2017

- MVNO subscribers increase by 96.6% to 8.06 million (9 months 2016: 4.10 million)

- Revenues rise by 9.9% to EUR1,965.2 million (9 months 2016: EUR1,788.4 million)

- EBITDA from ongoing activities grows by 24.7% to EUR352.7 million (9 months 2016: EUR282.9 million)

- Confirmation of forecasts for 2017

Maintal, 13 November 2017 - Drillisch AG (ISIN DE 0005545503) continued its course of growth in the first nine months of 2017 and was once again able to increase the number of MVNO subscribers, revenues and the EBITDA from ongoing activities. The third quarter was in particular marked by the successful conclusion of the step-by-step acquisition of 1&1 Telecommunication SE (1&1).

As of the successful completion of this transaction as a whole at the beginning of September 2017, Drillisch has become a new major power, the fourth, on the German telecommunications market. Since that date, 1&1 has been a wholly-owned subsidiary of Drillisch. A powerful full-service telecommunications provider has been created under the umbrella of United Internet, one that can exploit from a position of strength any and all opportunities for growth that present themselves.

In cooperation with the new subsidiary 1&1, Drillisch will in future be able to offer to its customers attractive product bundles comprising mobile and landline services, TV and other content from a single source as well as its mobile network-only and DSL-only products. By employing this marketing approach, we will develop new customer and product segments and will hold to our course of profitable growth.

The even more efficient exploitation of the MBA MVNO contract is the basis for Drillisch as it continues to set itself apart from its competitors in future. Within this new affiliation, we have access to the "internet factory" under the umbrella of United Internet, and we will enhance and develop further the successful SIM-only products by the addition of attractive devices, applications we have ourselves developed and services of the corporate group. Drillisch operates and will continue to operate exclusively in Germany, where its brands make it one of the leading integrated providers. Our products - the premium brand 1&1, the offline channel of the yourfone brand and the tried and proven market strategy of multiple brands from Drillisch Online AG - address specific target groups on the market. We can offer our mobile products at all times at the state-of-the-art level of the network technology of Telefónica Germany. Customers select the product that best suits their needs, including comprehensive services and the best value for money on Germany's largest network.

Before we go into the details of our operating business, we would like to give you an overview of the significant accounting effects that the successfully concluded transaction with United Internet AG has on our figures as this will help you to understand our remarks.

In the accounting, it is assumed that 1&1 as the economic acquiree has acquired the shares of Drillisch stock. The calculation of the goodwill and the hidden reserves as well as hidden liabilities that must be reversed in the process of the purchase price allocation and the accounting principles that are to be applied as of the point in the time of the acquisition are based on the perspective of the economic acquirer. The consequence is that there is no longer any comparability of the balance sheet and comprehensive income statement of previous Drillisch financial statements because, for one, the figures of 1&1 must be given as the comparable figures of the previous year and, for another, the comprehensive income statement must be prepared according to the cost-of-sales method and the accounting principles of 1&1 must be applied. The date of registration of the Capital Increase II in the Commercial Register is deemed the point in time of the acquisition, i.e. the time at which the economic acquirer obtains control over the acquired company; in the present case, that date is 8 September 2017. The inclusion of Drillisch as the acquired company in the consolidated financial statements is therefore only proportional for the time period from the moment control was gained. Drillisch is therefore considered only for about one month in the comprehensive income statement and the capital flow statement of the quarterly financial statements per 30 September 2017.

Growth of subscribers and revenues

Along with the generally positive development of our clientele for the current product lines, which rose in comparison with the closing date of the previous year across all customer groups by 4.09 million (49.3%) - 3.35 million from the initial inclusion of Drillisch - to 12.39 million subscribers (9 months 2016: 8.30 million), we increased revenues in the first nine months by EUR176.8 million (9.9%) to EUR1,965.2 million (9 months 2016: EUR1,788.4 million).

EBITDA increases parallel to simultaneous high investments in customer growth

Despite high investments in customer growth, the consolidated EBITDA from ongoing activities (earnings before interest, taxes, depreciation and amortisation from ongoing activities) increased by EUR69.8 million (24.7%) to EUR352.7 million during the first nine months (9 months 2016: EUR282.9 million). These figures are evidence that we are continuing along our course of growth during the year as well. The EBITDA margin from ongoing activities rose by 2.1% to 17.9% (9 months 2016: 15.8%).

Outlook

We are in an excellent position to take the next steps in our Company's development and we are looking ahead into the future with confidence. At the conclusion of the first nine months, we can confirm our forecast for growth and expect an increase in the adjusted EBITDA to between EUR160 million and EUR170 million for fiscal year 2017 (on a stand-alone basis, i.e. excluding 1&1). For the combined entity, which includes the Drillisch numbers from September 2017, we expect an adjusted EBITDA in 2017 in the amount of EUR520 million to EUR530 million. We are absolutely on schedule with already published adjusted EBITDA forecast of EUR630m-EUR640m based on aggregate adjusted EBITDA from the forecasts of Drillisch and 1&1 as well. We are anticipating a further increase in profitability for business year 2018. Furthermore, we intend to ensure that shareholders benefit appropriately from the success of the Company in future as well.

Performance indicators pursuant to IFRS - comparison 9 months 2017 v 9 months 2016

¹from ongoing activities
²In the previous year, calculated at the weighted average of the shares to be used per 30/09/2017 for better comparability

The complete quarterly report will be made available on the Company's home page on 14 November 2017.
https://www.drillisch.de/investor-relations/reports

Maintal, 13 November 2017

Drillisch AG
The Management Board

Disclaimer: This report contains statements regarding the future which are based on the current assumptions and projections of the Drillisch AG management. Various risks, uncertainties and other factors, both known and unknown, can cause actual developments, especially in the results, financial position, and the business of our Company, to deviate substantially from the projections about the future as they are shown here. The Company does not undertake any obligation to update such future-oriented statements and to adapt them to future events or developments.