Wanadoo: Higher Than Forecast Net Income and Operating Income before Amortization and Depreciation.

Business Editors

PARIS--(BUSINESS WIRE)--Feb. 11, 2004

Wanadoo (NAD.PA)(WDOO F - NAD FP)(Sicovam:012415)

               --  Operating Income before Amortization
                   and Depreciation Almost Quadrupled

               --  Net Income of 159 Million Euros

               --  First Dividend Distribution Proposed

    - Consolidated revenues of 2.617 billion euros in 2003:

        --  42-percent revenue growth for Access, Portals and
            e-Merchant segment

        --  4-percent revenue growth for Directories segment

    - Broadband customer base up to 2.45 million at Dec. 31st, 2003
        (27% of total customer base)

    - Consolidated operating income before amortization and
        depreciation almost quadrupled to 347 million euros in 2003:

        --  Operating income before amortization and depreciation of
            45 million euros for Access, Portals and e-Merchant
            segment

        --  Operating income before amortization and depreciation for
            Directories segment up 16 percent

    - Operating income of 250 million euros in 2003, compared to an
        operating loss of 6 million euros in 2002

    - Net income: 159 million euros in 2003

    - Proposed dividend of 3 euro cents per share

    Wanadoo had consolidated revenues of 2.617 billion euros for
full-year 2003, up 26 percent over 2002. Revenues for 2003 were
impacted by a change in the accounting method for reporting revenues
from Minitel and Internet directories. This change consists in
spreading revenues generated by Minitel and Internet directories over
the duration of the period advertising is run. It reflects Wanadoo's
commitment to applying what is emerging as an international best
practice that may become the basis for a requisite standard for all
directory companies in Europe. The change in accounting methods had a
negative impact of 14 million euros on 2003 revenues, of 12 million
euros on operating income and of 8 million euros on net income in
2003.
    Wanadoo had net income of 159 million euros in 2003, up from 30
million euros in 2002. This significant improvement in net income can
be attributed mainly to better operating performance across the Group,
already apparent in the first half of the year. On a full-year basis,
Wanadoo's operating income before amortization and depreciation jumped
from 90 million euros in 2002 to 347 million euros in 2003. Operating
income was to 250 million euros in 2003, in contrast to a
6-million-euro loss in 2002.
    At the Annual General Meeting on March 31st, 2004, the Wanadoo
Board of Directors will be submitting a proposal to shareholders to
distribute a dividend of 3 euro cents per share, corresponding to a
payout ratio of 30% on net income.

    Commenting on these results, Olivier Sichel, Chairman and CEO of
Wanadoo, declared:

            "For the first time ever, at the Annual General
        Meeting for shareholders, Wanadoo will be proposing that
        we distribute a dividend of 3 euro cents per share. This
        dividend is the culmination of a year of profitable growth
        yielding net income of close to 160 million euros. In its
        Internet access and service business, Wanadoo has begun to
        generate positive operating income before amortization and
        depreciation. In France, operating income before
        amortization and depreciation increased more than
        fivefold, and the Group's foreign subsidiaries also made
        significant progress in this area. Wanadoo Spain and
        Wanadoo Netherlands broke even in operating income before
        amortization and depreciation, while Wanadoo U.K. exceeded
        its target, cutting its loss in operating income before
        amortization and depreciation by over two thirds. In the
        same period, our directory business in France outperformed
        even the most optimistic forecasts, with a 43-percent
        margin on operating income before amortization and
        depreciation. In light of these encouraging results,
        Wanadoo can confidently set ambitious targets for 2004:
        1 million additional broadband customers in Europe,
        10-15-percent growth in consolidated revenues, and
        operating income growing 2 times more than revenues. 2003
        saw the explosion of the broadband internet market in
        Europe: in 2004, Wanadoo aims to take an increasing share
        of this market."

    1. Consolidated Revenues and Income in 2003

    1.1 Revenues in 2003 (See press release of February 3rd, 2004)

    Wanadoo recorded revenues of 2.617 billion euros in full-year
2003, 26 percent higher than the 2002 figure of 2.075 billion euros.
Fourth-quarter revenues stood at 711 million euros, up 13 percent over
the 629 million euros booked in the fourth quarter of 2002.
    This growth was driven by both of Wanadoo's business segments. The
Access, Portals and e-Merchant segment grew by 42 percent from 2002 to
2003. The Directories segment also achieved 4 percent higher growth
between 2002 and 2003 (+6 percent on a comparable basis (1)).


               Consolidated Revenues for 12-Month Period
                       Ending Dec. 31, 2003/2002

----------------------------------------------------------------------
(in millions of euros)                  2002      2003     Change(a)
------------------------------------- --------- --------- ------------
Internet Access, Portals, e-Merchant   1,199     1,708        42%
of which international                   389       588        51%
------------------------------------- --------- --------- ------------
                       Access          1,031     1,514        47%
------------------------------------- --------- --------- ------------
                       Portals           117       138        18%
------------------------------------- --------- --------- ------------
                       e-Merchant         51        56        10%
------------------------------------- --------- --------- ------------
Directories                              880       918         4%
------------------------------------- --------- --------- ------------
                       France            841       885         5%
------------------------------------- --------- --------- ------------
                       International      39        33       -17%
------------------------------------- --------- --------- ------------
Other                                     -5        -9       n.m.
------------------------------------- --------- --------- ------------
Total Wanadoo revenues                 2,075     2,617        26%
of which international                   429       620        45%
----------------------------------------------------------------------
    (a) Calculated from non-rounded figures


            Consolidated Fourth-Quarter Revenues, 2003/2002

----------------------------------------------------------------------
(in millions of euros)                   Q4        Q4      Change(a)
                                        2002      2003
------------------------------------- --------- --------- ------------
Internet Access, Portals, e-Merchant    391       467         20%
of which international                  119       153         29%
------------------------------------- --------- --------- ------------
                       Access           316       402         27%
------------------------------------- --------- --------- ------------
                       Portals           56        41        -26%
------------------------------------- --------- --------- ------------
                       e-Merchant        18        23         27%
------------------------------------- --------- --------- ------------
Directories                             244       245          0%
------------------------------------- --------- --------- ------------
                       France           232       234         +1%
------------------------------------- --------- --------- ------------
                       International     12        11         -6%
------------------------------------- --------- --------- ------------
Other                                    -5        -1        n.m.
------------------------------------- --------- --------- ------------
Total Wanadoo revenues                  629       711         13%
of which international                  131       164         25%
----------------------------------------------------------------------
    (a) Calculated from non-rounded figures


    1.2 Income in 2003

    Consolidated gross margin increased by 2 percentage points to 53
percent in 2003 (from 51 percent in 2002), in large part due to
optimal cost control both in Internet access (platform, etc.) and
directory production (paper and printing), as well as to the
restructuring of our Portals business.
    Wanadoo's operating income before amortization and depreciation
increased from 90 million euros in 2002 to 347 million euros in 2003.
This achievement reflects enhanced control over expenses associated
with customer care and communications.
    Operating income rose sharply to 250 million euros in 2003,
following a loss of 6 million euros in 2002. Depreciation and
amortization expense remained stable at 97 million euros, reflecting
good control over expenditures.
    Non-operating expenses in 2003 (30 million euros) may be
attributed mainly to restructuring costs at Wanadoo Portals, Wanadoo
S.A. and QDQ Media as well as to the loss incurred on the disposal of
Wanadoo Edition.
    Wanadoo's interest income, net of changes in exchange rates, was
73 million euros in 2003. This was achieved through investment of
Group net cash, which amounted to 2 billion euros at Dec. 31st, 2003,
compared to 1.546 billion euros at Dec. 31st, 2002.
    Based on this new set of results and the prospects of recovering
the company's tax credit, Wanadoo recorded a net tax income of 214
million euros.
    Amortization of goodwill was 322 million euros in 2003, most of
which was due to the non-recurring charge of 245 million euros arising
on acquisition of QDQ Media.
    Net income was therefore 159 million euros in 2003, considerably
higher than in 2002.


              Consolidated Statement of Income, 2003/2002

----------------------------------------------------------------------
(in millions of euros)                              2002
                                        2003    pro forma(1)   2002
------------------------------------- --------- ------------ ---------
Revenues                               2,617       2,073      2,075
------------------------------------- --------- ------------ ---------
Operating expenses                    -2,270      -2,017     -1,985
------------------------------------- --------- ------------ ---------
Operating income before amortization
 and depreciation                        347          56         90
------------------------------------- --------- ------------ ---------
D & A                                    -97        -107        -96
------------------------------------- --------- ------------ ---------
Operating income                         250         -51         -6
------------------------------------- --------- ------------ ---------
Interest income, net, and
 changes in exchange rates, net           73         n.a.        56
------------------------------------- --------- ------------ ---------
Other non-operating income/(expense)     -30         n.a.        18
------------------------------------- --------- ------------ ---------
Employee profit-sharing                  -28         n.a.       -27
------------------------------------- --------- ------------ ---------
Tax Income                               215         n.a.        58
------------------------------------- --------- ------------ ---------
Net income of the consolidated
 companies                               480         n.a.        99
------------------------------------- --------- ------------ ---------
Equity in net income of affiliates         1         n.a.         1
------------------------------------- --------- ------------ ---------
Goodwill amortization                    322         n.a.       -71
------------------------------------- --------- ------------ ---------
Net income                               159         n.a.        30
----------------------------------------------------------------------


    2. Business Segment Breakdown

    2.1 Access, Portals and e-Merchant segment: operating income
        before amortization and depreciation of 45 million euros
        in 2003

    a) Access, Portals and e-Merchant segment: revenues in 2003

    The segment comprising Internet Access, Portals and e-Merchant
sites had revenues of 1.708 billion euros in 2003, an increase of 42
percent over 2002. Revenues for this segment were up 38 percent in
France and 51 percent in other countries for full year 2003.
    In the fourth quarter, the segment comprising Internet Access,
Portals and e-Merchant sites had revenues of 467 million euros, an
increase of 20 percent over the 2002 period (391 million euros).

    b) Access, Portals and e-Merchant segment: income in 2003

    Gross margin for the Access, Portals, e-Merchant segment improved
from 35 percent in 2002 to 41 percent in 2003. This increase resulted
mainly from optimal control of production costs relating to Internet
access (platform, etc.) and more efficient portal management.
    The ratio of selling costs to revenues on this segment decreased
by over 10 points in 2003 (38 percent, versus 49 percent in 2002),
reflecting better targeting of sales and marketing efforts.
    The combination of higher gross margin and enhanced control over
marketing and administrative costs in 2003 enabled Wanadoo to generate
45 million euros in operating income before amortization and
depreciation, in stark contrast to the 166-million-euro loss reported
in 2002.
    Operating income before amortization and depreciation from Access,
Portals, e-Merchant business in France increased in 2003 to 72 million
euros, following a mere 8 million euros in 2002.
    In the Access, Portals, e-Merchant segment outside of France,
Wanadoo sharply reduced its losses in operating income before
amortization and depreciation to -27 million euros in 2003, versus
-174 million euros in 2002. In 2003, Wanadoo Spain and Wanadoo
Netherlands broke even in operating income before amortization and
depreciation, in line with Group targets. Wanadoo U.K. (Freeserve) cut
its full-year loss in operating income before amortization and
depreciation to less than a third of its previous level, while
breaking even in the second half of 2003.
    The Access, Portals, e-Merchant segment thus recorded a loss of 38
million euros in 2003, down from -246 million euros in 2002.


            Statement of Income for the Access, Portals and
                     e-Merchant Segment, 2003/2002

----------------------------------------------------------------------
(in millions of euros)                        2003           2002
----------------------------------------- -------------  -------------
Revenues                                     1 708          1 199
----------------------------------------- -------------  -------------
COGs                                        -1 013           -782
----------------------------------------- -------------  -------------
Gross margin                                   695            417
----------------------------------------- -------------  -------------
SG&A and R&D                                  -650           -583
----------------------------------------- -------------  -------------
Operating income before amortization and
 depreciation                                   45           -166
----------------------------------------- -------------  -------------
D&A                                            -83            -80
----------------------------------------- -------------  -------------
Operating income                               -38           -246
----------------------------------------------------------------------


    2.2 Directories segment: 16 percent growth in operating income
        before amortization and depreciation

    a) Directories segment: revenues in 2003

    The Directories segment had 2003 revenues of 918 million euros, up
4 percent over 2002 (6 percent on a comparable basis (1)). Total
revenues from directories in France reached 885 million euros, up 5
percent over 2002. Revenues from online directories (Minitel and
Internet advertising) and website creation totaled 221 million euros,
an increase of 8 percent (15 percent excluding changes in accounting
method).

    b) Directories segment: income in 2003

    Gross margin on directory business gained close to 2 percentage
points (from 73 percent to 75 percent) in relation to the previous
year, chiefly as a result of lower paper and printing costs and of
optimized print runs for hardcopy directories.
    Selling costs were held down to 352 million euros in 2003, versus
350 million euros in 2002. This amounts to an increase of under 1
percent, whereas revenues went up 4 percent in the same period.
    Profitability on the Directories segment continued to improve in
2003, with operating income before amortization and depreciation
rising to 335 million euros, up 16 percent over the 289 million euros
booked in 2002. Margin on operating income before amortization and
depreciation from the Directories segment thus climbed from 33 percent
in 2002 to 36 percent in 2003.
    This performance was due in large part to the results achieved by
Pages Jaunes S.A. in France, which had operating income before
amortization and depreciation of 388 million euros in 2003, up from
317 million euros in the preceding year. Pages Jaunes S.A. pushed its
margin on operating income before amortization and depreciation up to
43 percent in 2003, versus 39 percent in 2002.
    In the generally unfavorable environment for advertising in Spain
today, QDQ Media recorded an operating loss before amortization and
depreciation of 37 million euros in 2003.
    Operating income on the Directories segment in 2003 stood at 322
million euros, up from 273 million euros in 2002.


      Statement of Income for the Directories Segment, 2003/2002

----------------------------------------------------------------------
(in millions of euros)                        2003           2002
----------------------------------------- -------------  -------------
Revenues                                      918            880
----------------------------------------- -------------  -------------
COGs                                         -231           -241
----------------------------------------- -------------  -------------
Gross margin                                  687            639
----------------------------------------- -------------  -------------
SG&A and R&D                                 -352           -350
----------------------------------------- -------------  -------------
Operating income before amortization
 and depreciation                             335            289
----------------------------------------- -------------  -------------
D&A                                           -13            -16
----------------------------------------- -------------  -------------
Operating income                              322            273
----------------------------------------------------------------------

    3. Outlook

    Wanadoo has set itself the following targets for 2004:

        --  At least 1 million additional broadband customers in
            Europe

        --  A 10-15 percent increase in consolidated revenues

        --  Operating income growing 2 times more than revenues

    About Wanadoo

    Wanadoo, a subsidiary of France Telecom, is one of Europe's
leading Internet and directories companies with, at December 31, 2003,
more than 9.1 million Internet Access customers and more than 641,000
advertisers in Directories. Wanadoo is a leading Internet media
services provider in France and the U.K., and the no. 2 in Spain and
in the Netherlands. Wanadoo has more than 2.4 million ADSL and cable
subscribers. Wanadoo recorded EUR 2.6 billion in revenues in 2003 and
has approximately 6,700 employees.
    Wanadoo is listed on Euronext Paris. Further information on
Wanadoo can be found on the company's web site at: www.wanadoo.com.

    Notes

    (1) Figures on a comparable basis are unaudited. The primary
        adjustments concern changes in the consolidated scope and
        variations between historical exchange rates (at December 31,
        2002) and constant exchange rates (December 31, 2003), and the
        change in the accounting method for recognizing revenues from
        the sale of advertising space on electronic directories.
        Changes in consolidated scope mainly concern Eresmas, which
        was fully consolidated as of November 1, 2002 (and rebranded
        Wanadoo Spain following the merger on January 1, 2003), with
        effect from January 1, 2002 for figures given on a comparable
        basis.

    (2) Total monthly audience for all Wanadoo properties
        / Source: Nielsen - Home.



         Condensed Consolidated Balance Sheet at Dec. 31, 2003

----------------------------------------------------------------------
(in millions of        Dec. 31,     (in millions of euros)   Dec. 31,
 euros)                  2003                                  2003
--------------------- ----------   ------------------------ ----------
Long-term assets         466       Shareholders' equity       1,943
--------------------- ----------   ------------------------ ----------
 Including goodwill,
   net                   126
--------------------- ----------   ------------------------ ----------
 Including intangible
   assets, net            17       Long-term liabilities         56
--------------------- ----------   ------------------------ ----------
 Including
   property, plant
   and equipment, net    137
--------------------- ----------   ------------------------ ----------
Current assets           948       Current liabilities        1,484
--------------------- ----------   ------------------------ ----------
 Including                          Including
   trade accounts                     trade accounts
   receivable, net       565          payable                   651
--------------------- ----------   ------------------------ ----------
Cash and cash                       Including deferred
 equivalents           2 069          income                    494
--------------------- ----------   ------------------------ ----------
TOTAL ASSETS           3,483       TOTAL LIABILITIES &
                                     SHAREHOLDERS' EQUITY     3,483
----------------------------------------------------------------------


         Statement of Cash Flows for 2003 (Euros, in millions)

----------------------------------------------------------------------
Net cash and cash equivalents at Dec. 31, 2002            1,546
-------------------------------------------------   ------------------
Net cash and cash equivalents at Dec. 31, 2003            2,005
-------------------------------------------------   ------------------
Increase in net cash and cash equivalents                  459
----------------------------------------------------------------------


                        Wanadoo Key Indicators

----------------------------------------------------------------------
   Division             Indicator          Dec. 31, Dec. 31,  Change
                                             2002     2003
-------------- --------------------------- -------- -------- ---------

   Internet         Active customers
    Access             (thousands)           8,535    9,153      +7%
-------------- --------------------------- -------- -------- ---------

  Portals(2)         Unique visitors
                  (thousands per month)     14,352   17,159     +20%
-------------- --------------------------- -------- -------- ---------

  e-Merchant      Cumulated orders on
                 alapage.com (thousands)     1,004    1,221     +22%
-------------- --------------------------- -------- -------- ---------

  Directories  Advertisers on the Internet
                       (thousands)             238      275     +16%
----------------------------------------------------------------------