Phonetime Inc.
TSX VENTURE : PHD

Phonetime Inc.

November 28, 2006 08:00 ET

Phonetime Releases Q3 2006 Results with $262,000 Profit

Q3 Revenue Increases by 23.5%-YTD Revenue Exceeds $15 Million

MISSISSAUGA, ONTARIO--(CCNMatthews - Nov. 28, 2006) - Phonetime Inc. (TSX VENTURE:PHD), a leading Canadian supplier of long distance telecommunication services, today released its consolidated financial results for the third fiscal quarter ending September 30, 2006 along with Management's Discussion and Analysis of these results.

In the 3rd Quarter of 2006, Phonetime generated a 23.5% increase in revenue to $5.7 million, compared to $4.6 million during the same period of 2005 - an increase of nearly $1,085,000. Included in these figures is the revenue from the Company's Call Select subsidiary which saw revenues increase by nearly 90% in the first nine months of 2006 compared to the same period of the prior year. Most important, the Company generated a Net Profit for the period of $262,000. Gross profit increased 28.9% to $2.25 million from $1.74 million, an increase of more than $500,000. The Company's gross margin improved to 39.5% up 1.7% from 37.8% the previous year. Late in this quarter, the Company also acquired the assets of Thomas Hook Communications Inc. - a 1+ long distance company with approximately 9,000 subscribers and which contributed revenue from the outset (see release dated September 7, 2006 for more information).

Phonetime's revenue in the first nine months of 2006 was $15.1 million, an increase of $2.4 million over the first nine months of 2005, a 19.1% improvement. At the same time, gross profits increased by 27.1% or $1.25 million to $5.8 million from $4.6 million. The Company's operating expenses increased by just 20.5% in the first nine months of 2006 to $5.7 million up from $4.7 million in the same period of the prior year. As a percentage of revenue, these expenses stayed virtually the same. As a result of Phonetime's gross margin improvement and stable operating expenses relative to revenue, the Company's net earnings over the first three quarters of 2006 improved by $272,000 to $126,000 compared to a loss of $146,000 for the same period of 2005. Phonetime's Balance Sheet continued its trend of quarterly improvement with the Company's current ratio (current assets/current liabilities) improving to 1.35:1 from 1.30:1. This is direct a result of Management's efforts to realign the business into a diversified telecommunications company through internal growth and acquisitions as well as its attention to fiscal controls.

In reviewing the Company's third quarter results, Rodney Franklin, Phonetime's Chairman and CFO stated, "We are pleased that Phonetime has been able to substantially grow its business without sacrificing profits. In fact, we actually improved our gross profit margin, which we believe is an impressive achievement in the highly competitive global telecommunications sector. Indeed, I believe we are only now beginning to benefit from the extensive network and diversified marketing channels we have built over the past two years."

Wayne Silver, Phonetime's President and C.E.O. noted that "this was a strong quarter for us in many respects with revenue and profits demonstrating continued improvement. We are well positioned for continued growth of our international wholesale operations and our Call Select subsidiary."

The Company's complete financial report along with Management's Discussion and Analysis of its results for the third quarter of 2006 may be found at www.sedar.com.

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 40 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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