Phonetime Inc.
TSX VENTURE : PHD

Phonetime Inc.

October 23, 2006 08:45 ET

Phonetime Raises US$4 Million

Private Placement to Fund International Long Distance Opportunities

MISSISSAUGA, ONTARIO--(CCNMatthews - Oct. 23, 2006) - Phonetime Inc. (TSX VENTURE:PHD), a leading Canadian supplier of long distance telecommunication services, today announced it has entered into an agreement to issue to Creslin Limited, by way of private placement, 40,000,000 Equity Units, each Unit consisting of one Common Share and one Common Share Purchase Warrant, at a purchase price of CDN$0.11 per Unit. The Common Share Purchase Warrants are exercisable at any time within two years of the closing of the transaction at a price of CDN$0.15 per Common Share. The private placement is scheduled to close on or about October 30th, 2006. Formal approval of the Private Placement is subject to all requisite corporate and regulatory approvals pursuant to applicable law.

A majority of the funds will be used to acquire equipment and facilities to support Phonetime's burgeoning wholesale long distance activities selling services to ILECs, CLECs, IPLECs, and PTT's world-wide. Funds will also be used to facilitate the rapid growth of Phonetime's Call Select subsidiary, which provides 1+ Equal Access and Dial Around long distance services with a specific focus on identifiable ethnic communities. This will include the acquisition of companies with subscriber bases of 1+ long Distance customers, similar to Phonetime's recent acquisition of Thomas Hook Communications (see Press Release of September 7, 2006). In addition funds will be used to retain an international Investor Relations firm to represent the Company to the US, Canadian and European investment communities. The balance of the funds will be used for general working capital purposes.

Concurrent with the execution of the agreement, Creslin has delivered to Phonetime an operational advance in the amount of US$250,000 to be utilized for funding prepayments and deposits in connection with certain of Phonetime's long distance activities. These funds are to be applied toward the private placement subscription price.

Wayne Silver, Phonetime's President and CEO, stated that, "we have been looking for the right type of investment and an investor that shares our vision for the Company. Creslin's investment will allow us to grow the company organically and through acquisitions, as well as to diversify and strengthen our portfolio of telecommunications products and services especially in the wholesale long distant market. We know there are many opportunities for growth in our industry and this investment will allow us to expand our business rapidly."

Rodney Franklin, Phonetime's Chairman and CFO, comments, "we are very excited with Creslin's investment in Phonetime's business and prospects. Creslin's confidence in Phonetime validates our operational philosophy and provides us the opportunity to significantly grow our business."

About Phonetime

Licensed as a Class A, International Carrier by the CRTC, Phonetime operates one of Canada's largest and most advanced private long-distance and VoIP telecommunications networks with points-of-presence in 39 major Canadian urban areas. Phonetime's wholesale network currently has the capacity to process over 3 billion minutes of traffic and is rapidly emerging as a cost effective wholesale backbone for VoIP service providers, including ILECs, CLECs, PTTs, and IPLECs world-wide.

Phonetime also markets its own competitively priced, branded calling cards (including Nuvo, Bravo, Lucky 888, Eureka, Hot and Call Value) across the country. These are distributed to consumer markets from more than 4,000 retail outlets, including Petro-Canada, Shell Canada, and Business Depot/Staples as well as through many Private Label distributors. With offices in Toronto, Montreal and Vancouver, Phonetime provides retail customers with multi-lingual customer service - an important competitive advantage.

Phonetime's Call Select subsidiary provides 1+ Equal Access and Dial Around long distance services to ethnic markets across Canada and serves as a platform for the Company's long-term diversification plan. Since its establishment, it has enabled Phonetime to deliver a wide range of new services in the higher margin and relatively stable post-paid market.

Note: This news release contains forward-looking information. Actual future results may differ materially. All figures are in Canadian dollars except as noted otherwise. The risks, uncertainties, and other factors that could influence actual results are described in the Company's annual report to shareholders.


The TSX Venture Exchange has neither approved nor disapproved the contents of the press release.

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