Phonetime reports strong first quarter 2009 results

                           - Revenue grows by 17% -

    MISSISSAUGA, ON, May 15 /CNW/ - Phonetime Inc. (TSX: PHD), a leading
global supplier of international long distance telecommunication services,
today reported its financial results for the three-month period ended March
31, 2009. All figures are in Canadian currency.

    Q1 2009 Financial and Operational Highlights

      -  Consolidated revenue was $42.6 million, up 17% from $36.5 million
         for Q1 2008.
      -  On a segmented basis each operating division generated record
         revenue with $42.8 million for the Wholesale Division and
         $8.0 million for the Consumer Division(1), representing growth of
         27% and 15% respectively over Q1 2008.
      -  Generated $1.2 million in cash flow from operations.
      -  Operating income(2) was $1.0 million once foreign exchange and
         allowance for bad debt were deducted.
      -  Net income before taxes was $0.6 million.
      -  Paid down $0.8 million of long-term debt and other loans payable
         related to its acquisition of Symphony, a South Africa-based
         telecommunications company.
      -  Net income after taxes was $0.2 million.
      -  Processed approximately 1.5 billion minutes of long-distance calls.
      -  Increased the number of Wholesale Division customers and suppliers
         to more than 500.
      -  Grew the number of Consumer Division customers to more than 110,000.

    Highlights subsequent to quarter end

      -  Announced a private placement offering of units that will generate
         up to $1.9 million in gross proceeds.


    "Our organic revenue growth of 17% in the first quarter provides further
proof of the success of our blended sales model as well the strength of our
call-trading platform in extracting improved margins from our international
wholesale services," said Wayne Silver, President and CEO, Phonetime Inc.
"Although our Q1 profitability was impacted by the decline of the Canadian
dollar, we are very encouraged by our positive operating cash flow of $1.2
million, the continued growth in number of wholesale customers and suppliers,
and the 5.0% monthly growth rate of our Consumer Division revenue."

    Financial Results

    Consolidated revenue for the first quarter ended March 31, 2009 was $42.6
million, representing an increase of 17% when compared to $36.5 million for
the first quarter of 2008. The growth is chiefly due to higher sales volumes
of the Company's Wholesale Division, which buys and resells telecommunications
long-distance services to telephone carriers around the world using
Phonetime's proprietary call trading platform. Phonetime also generates
revenues through its Consumer Division, which provides pre-paid calling cards
and long-distance services to targeted ethnic consumer groups across Canada.
Phonetime currently has more than 120,000 customers using its long-distance
retail services.
    Gross profit for the first quarter of 2009 was $5.8 million or 13% of
sales compared to $5.0 million or 13% of sales for the first quarter of 2008.
Despite a year-over-year depreciation of the Canadian dollar by approximately
25%, Phonetime improved its gross margins due to the effectiveness of its
call-trading platform that enables its team of wholesale buyers and sellers to
generate higher profit margins and improve the number of calls completed.
    Phonetime generated operating income of $1.0 million for the first
quarter of 2009, down from $1.7 million for the first quarter of 2008. The
decrease was attributable to a provision of $0.2 million for bad debt,
increased salaries due to a growth in the number of sales representatives and
increased marketing expenses relating to promotional and trade show events.
    Income before taxes for the first quarter of 2009 was $0.6 million
compared to $1.0 million for the first quarter of 2008. Net income after taxes
was $0.2 million for Q1 2009 or $0.01 per basic share compared to $0.6 million
or $0.01 per basic share for the same period in 2008. The year-over-year
decline was due principally to higher foreign exchange costs involved in the
buying and selling of international long-distance minutes as well as a higher
provision for taxes.
    As at March 31, 2009, Phonetime held cash and short-term investments of
$0.03 million as well as accounts receivable of $13.6 million. Subsequent to
quarter end, Phonetime announced that it plans to raise gross proceeds of $1.9
million through a private placement of units. The funds will be use primarily
for working capital purposes.


    "While a number of our competitors are retreating, we expanded our
international sales team with experienced professionals who have strong local
relationships in emerging markets, made significant investments in marketing
activities in the first quarter and added new capabilities to our call-trading
platform," Mr. Silver also said. "Although these efforts resulted in higher
expenses compared to 2008, they will allow us to further add to our growing
international reputation, better serve our customers and help to sustain our
organic growth throughout 2009."

    Financial Highlights
    (000's except share data)

                                                         Three Months Ended
                                                         March 31,  March 31,
                                                            2009       2008

    Revenue                                              $ 42,577   $ 36,496

    Gross profit                                         $  5,836   $  4,917

    Gross profit as a percentage of revenue                 13.7%      13.5%

    Operating income                                     $  1,038   $  1,734

    Net income before income taxes                       $    620   $  1,112

    Net income after income taxes                        $    236   $    619

    Cash and cash equivalents                            $     29   $     29

    Total long-term liabilities                          $    967   $  4,611

    Weighted average number of common shares basic          108.0      108.0

    Phonetime will file its consolidated financial statements for the first
quarter 2009 and related management's discussion and analysis with securities
regulatory authorities within the applicable timelines. The material will be
available through SEDAR at and the Company's website,
    Phonetime will host a conference call to discuss its 2009 first quarter
financial results on Tuesday, May 19 at 11:00 a.m. (ET).
    To access the conference call by telephone, dial 416-644-3414 or
1-800-732-9303. Please connect approximately 15 minutes prior to the beginning
of the call to ensure participation. The conference call will be archived for
replay until Tuesday, May 26, 2009 at midnight. To access the archived
conference call, dial 416-640-1917 or 1-877-289-8525 and enter the reservation
number 21305775N followed by the number sign.
    A live audio webcast of the conference call will be available at Please connect at least 15 minutes prior to the conference
call to ensure adequate time for any software download that may be required to
join the webcast. The webcast will be archived at the above web site for 30

    About Phonetime Inc.

    Established in 1994, Phonetime is a leading supplier of international
wholesale and retail long distance telecommunications services with network
facilities in Canada, the U.S., Europe, Africa and Asia. Through its Wholesale
Division, Phonetime buys and resells long-distance services to major telephone
carriers around the world using its proprietary call trading platform. Through
its Consumer Division, Phonetime competitively markets a range of pre-paid and
subscription-based long distance services to targeted ethnic consumers across
Canada. Phonetime's common shares trade on the Toronto Stock Exchange under
the symbol PHD. More information can be found at the Company's website,

    Caution Regarding Forward Looking Information:

    This press release contains forward-looking statements, which may be
identified by words like "expects", "anticipates", "plans", "intends",
"indicates" or similar expressions. These statements are not a guarantee of
future performance and are inherently subject to risks and uncertainties.
Phonetime's actual results could differ materially from those currently
anticipated due to a number of factors set forth in reports and other
documents filed by the Company with Canadian securities regulatory authorities
from time to time.

    (1) Before inter-segment eliminations of $8.2 million.

    (2) Operating income is income before loss on foreign exchange,
        misappropriation of assets, stock compensation costs, interest, taxes
        and depreciation and amortization. However, operating income is not a
        term that has specific meaning in accordance with generally accepted
        accounting principles, and may be calculated differently by other
        companies. Phonetime reconciles operating income to its net earnings.

For further information:

For further information: Contacts: Wayne Silver, Phonetime, President &
CEO, (905) 361-8304,; Rodney Franklin, Phonetime, Chairman
& CFO, (905) 361-8305,; Joe Racanelli, Equicom Group,
(416) 815-0700 x 243,

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