Preliminary Announcement Of KeyTech Results For The Financial Year Ended 31st March 2007

Hamilton, Bermuda, June 27, 2007 - Opportunity, investment in the future and change summarized 2006/7 for KeyTech. These three principal factors impacted KeyTech's 2006/7 net income which was $9.1M.  While this was a decrease from $11.7M in the prior year the prospects for the future are promising. Below is a detailed review of what impacted the 2006/7 earnings.

First, KeyTech now has a controlling majority interest in WestTel - adding WestTel as the fifth subsidiary in the KeyTech Group.  WestTel, which provides data and voice services in Cayman, has achieved significant revenue growth since inception.  To fund expansion of the network to reach more customers and support further revenue growth, KeyTech subscribed for additional equity in WestTel during the year.  "We are excited by both the revenue growth to date and the potential future for WestTel" said KeyTech CEO Sheila Lines.  "The controlling interest will enable fast implementation of synergies between WestTel and our Bermuda based operations."

However, the acquisition of a controlling interest has resulted in an accounting treatment change and KeyTech now accounts for losses of WestTel in excess of its percentage equity holding.  The impact of this accounting change versus the prior year is a $1.3M negative impact on net income.  Under the same accounting treatment KeyTech will report future profits in excess of its percentage equity holding.  

Second, important investments were made which reduced current net income but will position KeyTech positively for future gains. These investments include the launch of M3 Wireless's easyConnect service and the development of technical and business plans to build a new submarine cable to Bermuda.  Combined, these investments resulted in a net increase in expense of $1.5M in the year.

"Wireless technology is evolving rapidly, and both business and residential customers increasingly rely on fixed and mobile wireless services to meet their communications requirements. Our investment in new wireless services is essential to the medium and long term competitive positioning of KeyTech" said CEO Sheila Lines. "We also know that robust and affordable international connectivity is critical to Bermuda's business and residential customers.  Thus, when the government announced a tender process to award licenses to build an additional cable in Bermuda, we pursued, and continue to purse, that opportunity aggressively." 

Third, a government-imposed reduction in BTC's local access charge (the per minute fee paid by international carriers to BTC for originating and terminating long distance calls) reduced net income by $1.8M.  BTC is preparing a legal appeal of this reduction.

"I am, however, pleased to note that the robustness of KeyTech's earnings after the impact of these significant factors underlines the diversity and strategic health of our operations.  KeyTech continues to be financially strong and dividend returns for shareholders are secure." Said CEO Sheila Lines.

Income from continuing operations for the prior year was $13.3M.  Income from continuing operations for the current year on a comparable basis after adjusting for the accounting treatment change for WestTel, the investments in easyConnect and the international cable project, and the reduction in the local access charge, was $13.7M.

KeyTech total operating revenues for fiscal year 2006/07 were up $6.5M over 2005/06 to $105.4M.  Of the increase, $5.3M is due to WestTel's inclusion as a subsidiary in the current year and $1.2M is driven by growth in wireless and directory revenues.

"Because excellent customer service is critical to our ability to keep and grow our customer base and advance our businesses, our companies continued to focus on improving customer service this past year," said CEO Sheila Lines. "BTC's efforts resulted in an increase in satisfaction among customers with a recent service experience to 90% in the last quarter as measured by independent research. M3 Wireless's improvements in on-island coverage and international roaming have also paid off with greater customer satisfaction."

Total expenses grew $11.2M to $97.4M, with the consolidation of WestTel accounting for $8.1M of the growth. In addition to expenses associated with easyConnect and the international cable project, increased operational costs resulted from increased volumes of long distance voice and data traffic on Logic's network and rising maintenance costs tied to higher fuel prices for electricity.

Contribution to net income from affiliates improved by $1.7M in 2006/07 primarily as a result of consolidating WestTel's results in the current year.  Bermuda CableVision settled a long-running copyright dispute with the Performing Rights Society which resulted in a one-time charge to earnings from affiliates of $0.3M in the year.  Excluding the one-time charge, both Bermuda CableVision and QuoVadis results improved significantly compared to the prior year.

During the financial year KeyTech invested $21 M in capital assets, to maintain existing plant and improve its networks, and also support provision of new services.  During the prior year KeyTech invested $16.7 M in capital assets. 

"Technological innovation is key to maintaining market leadership in telecommunications, and during this past year we completed a comprehensive review of our network resources. As a result, we developed a multi-year plan to migrate to a next generation network platform, which is packet (or Internet protocol) based.  Not only will this investment increase our competitive positioning and enable us to offer new and enhanced products and services in the short term, but a more advanced network will also result in simplified network operations and increased cost efficiencies in the medium term," said KeyTech CEO Sheila Lines.

Total cash dividends paid to common shareholders for the year was $0.60 per common share, the same level as in the prior year.  A 1 for 10 share dividend for the holders of the common shares was issued fully paid on 24th July 2006.  At the end of the year net assets per common share were $10.39, increased from $10.29 in the prior year.

The dividend for the common shareholders of KeyTech Limited for the quarter ending 30th June 2007 will be 15 cents per share. 

Operating revenues for the year were $105,382,940 as compared to $98,899,022 for prior year. 

Total equity earnings in affiliates for the year were $29,544 as compared to equity losses in affiliates of $1,651,636 for the prior year. 

Investment income for the year was $739,841.  Investment income for the prior year was $629,355.

Other expense in the current year was $58,000.  Other income for the prior year was $1,677,275 and includes the gain realized in April 2005 from the sale of KeyTech's interest in PacketExchange (Ireland) Limited. 

Net income before discontinued operations was $9,086,453.  Net income before discontinued items for the prior year was $13,309,165.

Losses attributable to discontinued operations were $Nil for the year and $1,631,962 for the prior year.

Net income after discontinued operations for the year was $9,086,453 as compared to $11,677,203 for the prior year.

KeyTech's basic and fully diluted earnings per common share for the year were $0.662 after discontinued operations.  KeyTech's basic and fully diluted[1] earnings per common share for the prior year after discontinued operations were $0.882. 

KeyTech's basic and fully diluted earnings per common share for the year were $0.686 before discontinued operations.  KeyTech's basic and fully diluted earnings per common share for the prior year before discontinued operations were $1.005.