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Preliminary Announcement of KeyTech Six Month Interim Results

16 16 2004

Hamilton, Bermuda: 16th November 2004 - KeyTech consolidated net income for the six month period ended 30th September 2004 was $5,234,063. Operating expenses for the six month period included $1,299,516 in employee separation costs which were incurred as part of restructuring BTC to become a more efficient and customer focused organization. As at 30th September 2004, fourteen employees, many of whom are long-term employees, had chosen to leave either through voluntary separation or early retirement.

Net income for the same period last year of $3,836,065 included $1,950,180 in excess storm damage expenses incurred as a result of hurricane Fabian. After adjusting for employee separation costs in the current period and excess storm damage related to Hurricane Fabian in the prior period, consolidated net income increased $747,334 or 13%, reflecting growth in revenue and increased operational efficiencies.

Operating revenues for the period were $49,767,770 as compared to $48,500,165 for the same period last year, an increase of $1,267,605. Contributors to the increase include; asymmetric digital subscriber line ("ADSL") and data revenue on BTC's wire line network, international long distance voice revenue and sales of hardware and software by Logic, and directory revenue from Bermuda Yellow Pages. For the first time, Internet listing sales form part of Bermuda Yellow Pages revenue.

Operating expenses for the period, which include the $1,299,516 in separation costs noted above, were $34,577,183 as compared to $32,958,906 for the same period last year, an increase of $1,618,287. In addition to the separation costs, incremental costs were incurred in the provision of service in areas of revenue growth noted above.

Basic and fully diluted earnings per share for the six month period ended 30th September 2004 were $0.48 compared to $0.33 for the same period last year. There are no convertible securities in issue following the redemption of KeyTech preferred shares on 15th November 2003.

"Overall we are pleased with the Company's performance during the first half of the financial year. We thank the managers and staff for their commitment and hard work. During the months ahead we will continue to face challenges; however we remain focused on achieving our targets of exemplary service and profitable growth." says CEO Sheila Manderson.

During the six month period, KeyTech invested $7.3 million in capital assets. This was also the amount invested in capital assets in the prior period.

Equity losses from affiliates were $340,572 for the six month period as compared to earnings of $27,659 in the prior period. This is due to the inclusion in the current period of losses incurred by WestTel (KeyTech's affiliate in the Cayman Islands). These losses are in line with those anticipated during WestTel's startup phase of operations. WestTel commenced operations in 2004 and therefore the prior period does not include any losses from WestTel.

Investment income from marketable securities for the period was $354,124 compared to $217,974 for the same period last year.

Consolidated net income before discontinued operations for the current six month period is $5,234,063 as compared to $4,115,949 for the prior six month period. In the current six month period there was no loss from discontinued operations as Genespidernet, the international voice calling business in Curacao, ceased operations in the fiscal year to 31st March 2004. In the prior period the loss from discontinued operations was $279,884.

The Company declared a common share dividend of $0.15 per share for the quarters ended 30th June 2004 and 30th September 2004.