Hackensack, NJ.- December 13, 1999 - Net2Phone Inc. (NASDAQ: NTOP) today reported net revenues totaling $13.1 million for the first quarter fiscal year 2000 ended October 31, 1999, more than double the net revenues of $5.7 million for the first quarter FY1999 and a 19% increase over the prior quarter revenues of $11.1 million.

Net loss before non-cash compensation expense for issuance of stock options for the first quarter of 2000 was ($5.4) million or ($0.11) per share, as compared to a net loss of ($1.2) million or ($0.04) per share for the first quarter of 1999 and ($3.9) million or ($0.12) per share in the prior quarter.

EBITDA for the first quarter was ($5.7) million or ($0.12) per share as compared to EBITDA of ($0.9) million or ($0.03) per share for the same quarter year-ago, and ($2.5) million or ($0.08) per share in the fourth quarter of fiscal year 1999.

Gross margins in the quarter expanded to 48.0% as compared to 40.8% in the same quarter year-ago and up from 46.0% in the prior quarter. Depreciation for the first quarter was $0.9 million as compared to $0.3 million in the same quarter year-ago, and $1.1 million for the prior quarter.

"The past few months have been filled with good news both on the distribution end and the product end," said Howie Balter, CEO of Net2Phone. "We received great reviews of our new multifunctional software, plus we've signed up new distribution agreements with the best Internet companies on the market today, such as America Online, CompuServe, Priceline.com, and Go2Net. We expect that our new software, combined with the strong distribution agreements, will make voice the new standard on the Net."

MINUTES OF USE
Total Net2Phone minutes of use grew to 85.3 million minutes for the quarter, a 11% increase over the prior quarter's 77 million minutes and a 147% increase over 34.6 million minutes for the same quarter year-ago. International Data Corp. recently rated Net2Phone #1 in Internet telephony minutes with a 39.4% market share. As of October 31, 1999, Net2Phone had over 390,000 active customers who had used Net2Phone's services during the past three months, a 20% increase over the prior quarter.

FINANCING
The Company recently completed a secondary offering of 6.3 million shares of equity, 3.4 million shares of which were sold by the Company. Net proceeds to the Company were approximately $187 million. The Company has approximately $250 million in cash and cash equivalents. The Company expects to continue to aggressively expand its distribution channels and believes its resources provide a competitive advantage over recent entrants to the industry.

DISTRIBUTION

PC-to-phone
Recently, Net2Phone entered into an agreement with America Online to integrate Net2Phone's Internet telephony services into AOL's (NYSE: AOL) Instant Messenger ("AIM") service, reaching AIM's 37 million registered users. AIM will incorporate Net2Phone's PC-to-phone, PC-to-fax, phone-to-PC, fax-to-PC, and conference calling into their software.

"Net2Phone is now dominating the Instant Messaging space with integration into the two most popular Instant Messaging services around," said Cliff Sobel, Chairman of Net2Phone. "With over 87 million users combined from AIM and ICQ, we expect the obvious synergies between these services and Net2Phone to provide Instant Messaging users with a more enjoyable chat experience."

This quarter, Net2Phone also signed an agreement with Go2Net (NASDAQ: GNET) to exclusively integrate Net2Phone's PC-to-phone technology and other communications services throughout the Go2Net Network. The companies will create a new unified messaging and communications center on the Go2Net Network, where users and online businesses will have the ability to send and receive voice mail, faxes, e-mail, and telephone calls from a single, integrated Web-based environment. Net2Phone's e-commerce solution, Click2Talk, will be offered to the more than 560,000 small business members of HyperMart and Virtual Avenue, enabling users to click on a merchant's listing and be connected to a live sales representative using Internet telephony.

Phone-to-phone
Net2Phone also recently signed a three-year agreement with priceline.com (NASDAQ: PCLN) whereby Net2Phone will provide long distance services to priceline.com customers. Users will be able to call in or type in an offer for telecommunications services.

Net2Phone has entered into an exclusive multi-year agreement with CompuServe where CompuServe will market Net2Phone's phone-to-phone service to their customer base of approximately 2,000,000 adults across all CompuServe properties. Net2Phone and CompuServe will co-brand a prepaid phone-to-phone calling card for CompuServe customers, allowing users to place calls and send faxes over Net2Phone's IP network to virtually anywhere in the world at reduced rates.

PRODUCT REDESIGN WITH ADDED FUNCTIONALITY
Last month, Net2Phone unveiled the beta version of Net2Phone's new v.10 software, which adds new functionality as well as improved sound quality and firewall penetration to allow greater enterprise usage. New features include free VoicEmail, free PC-to-PC calling, ICQ integration with buddy PC-to-PC calling and PC-to-Fax solutions, in addition to the company's flagship PC-to-phone service. The new software is free and can be downloaded at www.net2phone.com. Live release is scheduled for next month.

VOICE ENABLING THE WEB
To further the Company's goal of voice enabling the web, Net2Phone signed agreements with three web hosting companies, webhosting.com, 9Net Avenue, and Advanced Internet Technologies (AIT), to resell its Click2Talk and Click2CallMe interactive voice enabled e-commerce solutions to over 100,000 web sites.

DIRECTORY SERVICES
The Company recently expanded its relationship with Infospace.com (NASDAQ: INSP) to exclusively integrate Net2Phone's PC-to-phone technology and new unified messaging service in InfoSpace.com's services that are distributed to its affiliate network. InfoSpace.com's affiliate network consists of over 1,800 Web sites including Disney/InfoSeek's GO.com, America Online (NYSE: AOL), Microsoft (NASDAQ: MSFT), and Lycos (NASDAQ: LCOS) reaching 86% of all Internet users.

Net2Phone also will integrated its Click2Talk functionality into InfoUSA's (NASDAQ: IUSA) entire proprietary directory of 195 million consumers and 12 million businesses.

Over the past 18 months, Net2Phone has voice-enabled more than 90% of online white and yellow pages through agreements with Infospace.com (NASDAQ: INSP), Netscape's Netcenter, WorldPages, Yahoo (NASDAQ: YHOO) and Bigfoot.

Net2Phone is a leading provider of voice-enhanced Internet communications services to individuals and businesses worldwide. Net2Phone enables people to place low-cost high quality calls from their computer, telephone, or fax machine to any telephone or fax machine in the world. Net2Phone develops and markets technology and services for IP voice and e-commerce solutions for the web and other IP networks. For more information about Net2Phone's products and services, please visit www.net2phone.com.

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements include, among other things, Net2Phone's expected operating performance in the future. Actual results could differ from those projected in any forward-looking statements due to numerous factors. Such factors include, among others, the inherent uncertainty of financial estimates and projections, the competitive environment for Internet telephony, changes of rates of all related telco rates and services, legislation that may affect the Internet telephony industry, and Net2Phone's ability to operate the services described on a large scale commercial level.The forward-looking statements are made as of the date of this press release, and Net2Phone assumes no obligation to update the forward-looking statements, or to update the reasons why actual results could differ from those projected in the forward-looking statements.

Investors should consult all of the information set forth herein and the other information set forth from time to time in Net2Phone's reports filed with the Securities and Exchange Commission pursuant to the Securities Act of 1933 and the Securities Exchange Act of 1934.

Sarah Hofstetter
Vice President, Corporate Communications
Net2Phone
201-928-2882
sarah@net2phone.com