Net2Phone Reports 1st Quarter Fiscal 2003 Results
$46.1 million net income, including $58.4 million gain from Cisco settlement. Gross Margins Strong at 42%

Newark, NJ - Dec 9, 2002 - Net2Phone Inc. (Nasdaq: NTOP), the leading provider of voice services over IP networks, today announced results for the first quarter of fiscal 2003 ended October 31, 2002.

Revenues for the first quarter totaled $23.9 million, a 10% decrease from last quarter, reflecting the company's focus on quality of revenues. Gross margins for the first quarter were above 40% for the sixth consecutive quarter, at 42%.

Income from operations for the quarter was $45.5 million, a $63.0 million increase over last quarter and a $96.1 million improvement over last year. EBITDA (earnings before interest, taxes, depreciation & amortization) for the quarter was $47.9 million, a $62.6 million quarterly improvement, and a $91.9 million year over year improvement. Both operating income and EBITDA results include restructuring, severance, impairment and other items totaling a net gain of $53.3 million. The primary factor causing these improvements and increases was a $58.4 million gain from the settlement of Net2Phone's litigation with Cisco Systems.

Excluding the aforementioned $53.3 million net gain and non-cash compensation of $1.4 million, Net2Phone's adjusted EBITDA loss for the quarter was ($3.9) million, a 28% quarterly improvement over adjusted EBITDA of ($5.4) million, and an 80% year over year improvement over adjusted EBITDA of ($19.3) million. The company reports adjusted EBITDA as it believes it accurately measures the company's operational and financial progress in its path to profitability, which management believes is an important measure to investors.

An additional highlight during the quarter is the continued growth of Net2Phone's International Communications Services division, as more markets become prepared for deregulation. ICS now comprises 47% of revenues, as compared to 21% in the first quarter of fiscal 2002.

Cash, cash equivalents and marketable securities as of October 31, 2002 stood at $119.5 million, up from $108.7 million at the end of the prior quarter.

"The continued growth in our core business - our ICS division - indicates that we've made the right decision to reorganize and deliver quality revenues with solid gross margins," said Stephen Greenberg, CEO of Net2Phone. "In terms of our cable telephony activities, the progress we've achieved with Liberty's affiliate in Puerto Rico speaks to the viability of our cable initiative, especially in light of the fact that it is now moving toward a revenue-producing model. Additionally, now that we are fully interoperable with both Arris and Motorola equipment, our possibilities for enabling cable operators with integrated flexible telecom solutions have expanded even further."

Capital expenditures during the first quarter were $2.1 million, primarily due to international hub expansion and cable telephony research and development. The company's new hubs in the UK and Hong Kong have helped improve voice quality significantly as more traffic now originates in the Eastern Hemisphere, primarily in the Indian subcontinent. This is clearly reflective of the company's strategy to generate an increasing proportion of its revenues from internationally originated minutes.

Last week, the company announced full interoperability with Arris, a world leader in broadband manufacturing. The company now supports interoperability with both Motorola and Arris residential and head-end equipment for cable telephony services, which was demonstrated last week at the Broadband Plus show in Anaheim, CA.

Earlier today, the company announced that it has signed a new agreement with Liberty Cablevision, Liberty Media's Puerto Rico affiliate. The agreement establishes a target of signing up to 4000 subscribers for telecom services powered by Net2Phone. (http://web.net2phone.com/about/press/releases/20021209.asp)

ABOUT NET2PHONE:
Founded in 1995, Net2Phone is a leading provider of voice services over IP networks to consumers, businesses and carriers worldwide. With millions of users around the world, Net2Phone enables toll-quality calls between computers, telephones, and broadband devices utilizing IP networks. Recognized as the first Company to bridge the Internet with the public switched telephone network, Net2Phone has routed billions of minutes of traffic over its award-winning network. Incorporated within the company is its Cable Technologies Division, which has developed a fully outsourced standards-compliant telephony solution for cable operators. Traded on the NASDAQ under the symbol NTOP, Net2Phone's strategic partners and investors include Liberty Media Corporation (NYSE: LMC.A; LMC.B), AT&T (NYSE: T), and IDT Corporation (NYSE: IDT; IDT.B). 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, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward- looking statements involve risks and uncertainties and actual results could differ materially from those discussed in the forward-looking statements. For this purpose, any statements contained in this press release that are not statements of historical fact may be deemed to be forward-looking statements. Factors which may affect the Company's results include, but are not limited to, the Company's ability to expand its customer base, the Company's ability to develop additional and leverage its existing distribution channels for its products and solutions, dependence on strategic and channel partners including their ability to distribute the Company's products and meet or renew their financial commitments, the Company's ability to address international markets, the effectiveness of the Company's sales and marketing activities, the acceptance of the Company's products in the marketplace, the timing and scope of deployments of the Company's products by customers, fluctuations in customer sales cycles, customers' ability to obtain additional funding, technical difficulties with respect to the Company's products or products in development, the need for ongoing product development in an environment of rapid technological change, the emergence of new competitors in the marketplace, the Company's ability to compete successfully against established competitors with greater resources, the uncertainty of future governmental regulation, the Company's ability to manage growth, obtain patent protection, and obtain additional funds, general economic conditions and other risks discussed in this Report and in the Company's other filings with the Securities and Exchange Commission. All forward-looking statements and risk factors included in this document are made as of the date hereof, based on information available to the Company as of the date thereof, and the Company assumes no obligation to update any forward-looking statement or risk factors.