Preliminary Announcement of KeyTech results for the financial year ended 31st March 2005

.  This is a return similar to the prior year's return and yields diluted earnings per share of $0.835.  These results do not include a $1.7M gain arising on the sale of KeyTech's interest in PacketExchange as the sale was concluded in April 2005.  As at March 31st, 2005 the interest in PacketExchange continues to be carried at a nil value in accordance with generally accepted accounting principles in both Bermuda and Canada.

Overall KeyTech produced another solid operating performance with revenues increasing by $3.4M for a total of $97.3M.  Total expenses increased by $7.8M for a total of $90.2M in the same period.  However, included in that total are two unusual and significant items:  $3.6M in voluntary separation and retirement payments as part of The Bermuda Telephone Company's restructuring and a one-time amortization adjustment of $1.8M to the carrying value of Mobility's TDMA cellular system due to the successful migration of customers to the GSM cellular system.  Excluding these two items, total expenses increased by $2.4M

"Our challenge this past year was to better position our companies to compete successfully." Said CEO Sheila Manderson "This past year we embarked on the challenging task of restructuring The Bermuda Telephone Company to achieve operational efficiencies and improved service to its customers. We invested in a new billing system for Mobility and provided additional cell sites for improved signal coverage. We responded to consumers' demand for lower residential Internet costs and lowered our pricing plans at Logic. We invested in QuoVadis (a provider of Information Security and Digital Certificate Technologies) as a synergistic partner to complement our core businesses.  And, we continued to invest in WestTel, our affiliate in the Cayman Islands, in the aftermath of Hurricane Ivan".  

Consolidated net income for the prior year was $10,430,265.

KeyTech's basic and fully diluted earnings per common share for the year were $0.835 after discontinued operations.  KeyTech's basic and fully diluted[1] earnings per common share for the prior year after discontinued operations were $0.863 and &0.855 respectively. 

KeyTech's basic and fully diluted earnings per common share for the year were $0.858 before discontinued operations.  KeyTech's basic and fully diluted earnings per common share for the prior year before discontinued operations were $0.932 and &0.921 respectively.

Total cash dividends paid to common shareholders for the year was $0.60 per common share, increased from $0.59 per common share in the prior year.  At the end of the year net assets per common share were $10.95.

Operating revenues for the year were $97,292,392 as compared to $93,845,513 for prior year.  This reflects significant increases in revenues from domestic wireline, directory and consulting services. [2]

Total equity losses in affiliates for the year were $1,335,602.  Total equity earnings in affiliates for the prior year were $165,814.  The increase in losses from affiliates was due to the inclusion of the first full year of WestTel's start-up operations which were severely affected by the impact of Hurricane Ivan on the Cayman Islands. 

Investment income for the year was $489,699.  Investment income for the prior year was $2,740,217 and included a gain of sale of Bank of Bermuda shares of $2,201,185.

Other income for the year was $4,096,903 and includes a return of surplus assets from The Bermuda Telephone Company defined benefit pension fund which is in run-off. 

Net income before discontinued operations was $10,326,334.  Net income before discontinued items for the prior year was $11,233,282.

Losses attributable to discontinued operations were $273,057 for the year and $803,017 for the prior year.

Net income after discontinued operations for the year was $10,053,277 as compared to $10,430,265 for the prior year.

During the financial year KeyTech invested $16.2 million in capital assets, to maintain existing plant and improve its networks, and also support provision of new services.  KeyTech continues to recognize the value in continuing to invest in Bermuda's telecommunications infrastructure where an adequate return for its shareholders will likely be achieved.

"The Telecommunications Industry continues to be one of change and challenge, yet we look forward to the continued success of the KeyTech Group of Companies.

We have spent the last year reevaluating our operations and restructuring to better align and utilize the resources available to us, and in some cases we have added additional resources to maximize our opportunities to successfully compete in this marketplace for the long-term. I believe that we have an effective strategy and a "winning" team in place and will remain focused on our initiatives for enhancing shareholder value, growing revenues and providing high levels of customer service." Said KeyTech CEO Sheila Manderson.

The dividend for the common shareholders of KeyTech Limited for the quarter ending 30th June 2005 will be 15 cents per share.  It will be payable to the common shareholders of record on 5th July 2005 and the payment date will be 15th July 2005. 

The KeyTech Annual General Meeting will be held at 4pm on Friday, 22^nd July 2005.  The record date for Members entitled to receive notice of and to vote at this Annual General Meeting will be 5^th July 2005.