NEWARK, NJ - December 12, 2000 - Net2Phone Inc. (NASDAQ: NTOP) today reported revenues totaling $30.8 million for the first quarter fiscal year 2001 ended October 31, 2000, a 135% increase over revenues of $13.1 million for the first quarter FY2000 and a 24% increase over the prior quarter revenues of $24.9 million.

Net loss before non-cash compensation expense for issuance of stock options, amortization related to the acquisition of Aplio, and other income for the first quarter of 2001 was ($14.7) million or ($0.25) per share, as compared to a net loss of ($5.4) million or ($0.11) per share for the first quarter of fiscal 2000 and ($15.9) million or ($0.29) per share excluding the effects of the one time charge in the prior quarter. Net loss including other income and charges for the quarter was ($5.2) million or ($0.09) per share.

"This quarter's results indicate that Net2Phone's business is healthy and growing," said Howie Balter, CEO of Net2Phone. "Our business model is strong, our margins are strong, and both revenues and minutes continue to increase. By delivering quality valuable services to both consumers and businesses using IP, whether it's from a PC, a telephone, an IP device, a broadband connection, or even wireless, we are servicing a converging marketplace with both voice and enhanced services."

Gross margins in the quarter were 39% as compared to 41% in the prior quarter and 48% in the same quarter year-ago. Depreciation and amortization for the first quarter was $5.7 million, which includes approximately $2.6 million related to the acquisition of Aplio S.A., which was completed in July 2000. This compares to $0.9 million in the same quarter year-ago, and $3.3 million for the prior quarter.

"With approximately $480 million in cash, equivalents, marketable securities, and no debt, we have more than sufficient resources to continue to aggressively fund our network expansion plans as well as continue to grow the company," said Ilan Slasky, Chief Financial Officer of Net2Phone. "Our stock buyback plan is a clear indication of our firm commitment toward building shareholder value, and at $8 per share in cash value alone, we feel it is prudent to continue repurchasing stock, as permitted."

MINUTES OF USE
Total Net2Phone paid minutes of use grew to 214 million minutes for the quarter, a 151% increase over 85.3 million minutes for the same quarter year-ago and a 28% increase over the prior quarter's 167 million minutes. As of October 31, 2000, Net2Phone had over 1.8 million active customers (not including customers using Net2Phone via MSN Messenger or Yahoo! Messenger services) who had used Net2Phone's services during the past three months, a 362% increase over 390,000 customers in the same quarter year-ago and a 50% increase over the prior quarter's 1.2 million.

CONSUMER SERVICES
Through the launch of Net2Phone's integration with MSN Messenger, AOL's ICQ, and Yahoo!'s Messenger, Net2Phone's PC-based services have become more widely distributed than ever before. Additionally, Net2Phone rolled out its aggressive consumer growth plan designed to rapidly increase its customer base by offering free PC-to-phone calling domestically. Over the coming quarters, the company expects to roll out additional enhanced services, including voice activated dialing capabilities and phone-to-PC calling, providing a single number that can track users on a PC, telephone, or IP-enabled device.

ENTERPRISE SOLUTIONS
In just a few months of operation, interest and sales of Net2Phone's enterprise solutions has been strong. As of October 31, 2000, 25 businesses have signed up to plug into Net2Phone's Voice over IP network. Net2Phone has expanded the enterprise division to multiple U.S. markets to more aggressively sign on large companies to migrate their voice traffic to IP networks.

BROADBAND
As more consumers gain access to broadband networks, Net2Phone is linking up with the largest providers of broadband equipment and services to deliver phone service to the home utilizing existing broadband infrastructure. Through relationships with Scientific-Atlanta, Motorola, and Broadcom, Net2Phone can offer consumers and businesses turn-key solutions that will add voice to their broadband lines, providing users with an additional phone line into the home. As Net2Phone continues to roll out more enhanced services, broadband providers can in turn offer them to their customers, delivering on its strategy of embedding Net2Phone's core technology into every access point on a broadband network, whether it be an equipment provider or cable operator. To further this goal, the company Tony Werner, former CTO of AT&T Broadband, has recently joined Net2Phone's board of directors to guide the company in becoming the most widely used standard for voice on broadband networks.

IP DEVICES
The successful deployment and distribution of Yap's products in the U.S. prompted the company to expand internationally. This past quarter, Net2Phone began distributing Yap products in the U.K., and was met with great response and interest. Yap products are now sold through VARs and directly to computer and electronics stores in 12 countries around the world. Last month, Net2Phone introduced a new line of Yap products designed for small-to-mid sized businesses. New products in development include Yap Solutions for Broadband as well as a new plug-and-play device where businesses can connect up to 24 lines to a LAN connection and make clear calls using Net2Phone's leading technology.

CARRIER
Net2Phone's carrier division continues to grow with 19 Tier-1 telecommunications providers plugging into Net2Phone's VoIP network. Through the company's reseller network, Net2Phone now offers services in over 40 countries. The company is expanding its IP network to accommodate the increases in wholesale and retail traffic through the recent provisioning of an OC-48 backbone, giving the company the ability to route more than 50 times its current traffic.

ABOUT NET2PHONE
Net2Phone, Inc delivers voice and enhanced services to IP networks 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. Net2Phone's strategic investors include Softbank, America Online, GE/NBC, and Yahoo!. Additionally, AT&T has acquired a 39 percent voting stake in Net2Phone. 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 for the three months ending January 31, 2001 and thereafter. 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.

Net2Phone, Inc. Comparative Statement of Operations
For The Three Months Ended October 31, 2000 & 1999, and July 31, 2000