PRIMUS Telecommunications Reports Second Quarter 2008 Financial Results

MCLEAN, VA, Jul 31 (MARKET WIRE) --
PRIMUS Telecommunications Group, Incorporated (OTCBB: PRTL), a global,
facilities-based integrated communications services provider, today
announced its results for the quarter and six months ended June 30, 2008.

Second Quarter 2008 Highlights:

-- $236 Million Net Revenue, Up $10 Million or 5% From Prior Quarter

-- $15 Million Income from Operations, Up $5 Million From Prior Quarter

-- $24 Million Adjusted EBITDA, Up $9 Million From Prior Quarter

-- $64 Million of Debt Principal Reduction

-- Net Revenue and Adjusted EBITDA Guidance Adjusted Upward

PRIMUS reported second quarter 2008 net revenue of $236 million, up
$10 million from $226 million in both the prior and year-ago quarters. The
Company reported $44 million of net income for the quarter, compared to a
net loss of $3 million in the prior quarter and net income of $12 million
in the second quarter 2007. As a result, the Company reported basic and
diluted net income per common share of $0.31 and $0.24, respectively, in
the second quarter 2008, as compared to basic and diluted net loss per
common share of ($0.02) in the prior quarter and basic and diluted net
income per common share of $0.10 and $0.07, respectively, in the year-ago
quarter.

"We are encouraged by our second consecutive quarter of net revenue
growth. Based on this performance we are revising upward our 2008 revenue
guidance. We are now targeting positive year-over-year revenue growth
versus our earlier guidance of a 2% to 5% decline in 2008," said K. Paul
Singh, Chairman and Chief Executive Officer of PRIMUS. "We are also
pleased that continued increases in our growth products have again
eclipsed the decline in legacy services."

"Growth in net revenue, together with continued cost management, has
generated $24 million in Adjusted EBITDA, up sharply from $15 million in
the first quarter. Even after excluding the $6 million regulatory award
involving excessive pricing by Telstra, Adjusted EBITDA results represent
a sequential increase of 17%."

Also during the quarter, as previously announced, PRIMUS reduced
outstanding debt principal by $63 million through private exchange
transactions. The Company successfully issued $67 million principal amount
of new debt plus $4.7 million in cash in exchange for $130 million
principal amount of outstanding debt. This transaction reduced overall
debt principal levels by 10%, reduced debt maturing in the latter half of
2009 from $28.1 million to $22.8 million, and reduced debt maturing in the
latter half of 2010 from $133.6 million to $57.6 million.

Subsequent to the end of the second quarter, a Canadian affiliate, of
which the Company currently owns slightly less than 50% of the equity,
sold certain primarily rural WIMAX spectrum assets (representing
approximately 10% of its spectrum population coverage) for cash
consideration of $5 million. "While we continue to pursue other potential
sales of select assets to improve liquidity and to narrow geographical
focus to our major franchises, prevailing uncertainty in the capital
markets combined with a weak overall economic outlook is likely to extend
our time horizon to meet the goal of generating $50 million in cash
proceeds from assets sales, particularly if valuation parameters are not
at acceptable levels," Mr. Singh said.

"In light of our revised revenue guidance and operating performance, and
assuming currency exchange rates remain at current levels, we are
adjusting upward our full year 2008 Adjusted EBITDA target to the
vicinity of $75 million, versus a previous range of $65 million to $80
million. As in past quarters, that outcome will be influenced by the
success we achieve in our expanded sales and marketing efforts. We
continue to expect capital expenditures for the year to be in the $25
million to $30 million range, approximately $5 million lower than our
initial guidance," Mr. Singh concluded.

Second Quarter 2008 Financial Results

"Second quarter 2008 net revenue was $236 million, up 5% or $10 million
from both the prior and year-ago quarters. The $10 million revenue
increase as compared to the prior quarter was comprised of a $7 million
increase in wholesale services revenue, a $3 million increase from the
weakening of the United States dollar (primarily as compared to the
Australian dollar) and stable retail services revenue," said Thomas R.
Kloster, Chief Financial Officer. "Our retail services revenue reflects
continued increases from our growth products of broadband, VOIP, local,
wireless, data and hosting revenues which, for the second quarter in a
row, slightly exceeded the decline in legacy voice and dial-up Internet
services revenue. The continued favorable retail revenue results lend
validity to our strategy of making network investments and shifting
resources to sales and marketing to promote our growth products."

Net revenue from broadband, VOIP, local, wireless, data and hosting
services was $62 million (26% of net revenue) for the second quarter 2008,
up from $60 million (26% of net revenue) in the prior quarter -- a
sequential growth rate of 3%. The mix of net revenue was 79% retail (53%
residential and 26% business) and 21% wholesale. The second quarter retail
revenue mix of 79% compares to 82% and 81% in the prior and year-ago
quarters, respectively. Geographic retail revenue mix, as a percent of
total revenue, was comprised of 32% from Asia-Pacific, 29% from Canada, 7%
from Europe and 11% from the United States.

Net revenue less cost of revenue was $94 million or 39.6% of net revenue
in the second quarter as compared to $84 million and 37.3% in the prior
quarter and $85 million and 37.4% in the year-ago quarter. In April 2008,
the Australian Competition and Consumer Commission ("ACCC") issued a Final
Determination related to unconditional local loop services connection and
call diversion charges. As a result, the Company received a cash refund of
a portion of the previously paid excessive fees plus interest. The second
quarter 2008 results included a $6 million benefit to cost of revenue from
the refund mandated by the ACCC.

Selling, general and administrative (SG&A) expense in the second quarter
was $70 million (29.7% of net revenue), up $1 million from $69 million in
the prior quarter but down as a percentage of revenue from 30.6%, and up
$1 million from $69 million (30.3% of net revenue) in the year-ago
quarter. The sequential increase is partially attributable to a $1
million increase in advertising expense.

Income from operations was $15 million in the second quarter 2008
(including the $6 million regulatory award), an improvement of $5 million
from the prior quarter (which included a $3 million gain from the sale of
a minority equity investment) and an improvement of $7 million from the
second quarter 2007.

Second quarter 2008 Adjusted EBITDA, as calculated in the attached
schedule, was $24 million, an increase of $9 million from $15 million in
the prior quarter and an increase of $8 million from $16 million in the
year-ago quarter. The second quarter 2008 Adjusted EBITDA included the $6
million regulatory award.

Interest expense for the second quarter 2008 was $14 million, down $1
million from the prior quarter and down $2 million from the second quarter
2007. The sequential and year-over-year decrease is attributable to debt
reduction transactions.

Net income was $44 million in the second quarter 2008 (including a $32
million gain from early extinguishment or restructuring of debt and an $8
million gain on foreign currency transactions), as compared to a net loss
of ($3) million in the prior quarter (including a $2 million gain on early
extinguishment or restructuring of debt and a $2 million gain on foreign
currency transactions), and net income of $12 million in the second
quarter 2007 (including a $2 million loss on early extinguishment or
restructuring of debt and a $15 million gain on foreign currency
transactions).

Basic and diluted net income per common share was $0.31 and $0.24,
respectively, in the second quarter 2008, as compared to basic and diluted
net loss per common share of ($0.02) in the prior quarter and basic and
diluted net income per common share of $0.10 and $0.07, respectively, in
the year-ago quarter. Adjusted Diluted Net Income Per Common Share, as
calculated in the attached schedule, was $0.02 for the second quarter
2008, compared to a loss of ($0.07) for the first quarter 2008 and
break-even in the year-ago quarter.

The Company is currently assessing the impact on its results of various
matters that relate to income taxes. Therefore, certain figures presented
in this press release, may, depending on the outcome of the assessment,
differ from those that will be presented in the Company's Form 10-Q for
the periods ended June 30, 2008.

Liquidity and Capital Resources

PRIMUS ended the second quarter 2008 with an unrestricted cash balance of
$56 million, stable with the balance as of the end of the first quarter
2008. Cash transactions were comprised of $8 million for capital
expenditures, $14 million on debt coupon and other interest payments, $5
million to purchase and retire certain of the Company's outstanding debt,
and $1 million for scheduled debt principal reductions. These declines
were offset by $24 million of Adjusted EBITDA, $2 million of interest
income, $1 million released from restricted cash, and $1 million from
working capital movements.

Free Cash Flow for the second quarter 2008, as calculated in the attached
schedule, was $5 million (comprised of $13 million provided by operating
activities and $8 million utilized for capital expenditures) as compared
to negative ($14) million in the prior quarter and positive $1 million in
the year-ago quarter.

The principal amount of PRIMUS's long-term debt obligations as of June 30,
2008 was $585 million, as compared to $649 million at March 31, 2008.

The Company and/or its subsidiaries will evaluate and determine on a
continuing basis, depending upon market conditions and the outcome of
events and uncertainties described within any "forward-looking statement"
descriptions in this release and its SEC filings, the most efficient use
of the Company's capital and resources, including investment in the
Company's network, systems, and product initiatives, purchasing,
refinancing, exchanging, tendering for or retiring certain of the
Company's and/or its subsidiaries' outstanding debt securities in
privately negotiated transactions, open market transactions or by other
direct or indirect means, issuing debt or equity or purchasing its equity
in the open market to the extent permitted by existing covenants.

The management of PRIMUS Telecommunications Group, Incorporated will
conduct a conference call and Web cast for analysts and investors to
discuss second quarter 2008 results on July 31, 2008, at 5:00 PM Eastern.
Participants should dial 866-793-1343 (domestic) or 703-639-1314
(international) for telephone access or go to www.primustel.com for Web
cast access about ten minutes prior to the scheduled start-time. Replay
information will be available following the conclusion of the live
broadcasts on the Company's Web site.

PRIMUS Telecommunications Group, Incorporated (OTCBB: PRTL) is an
integrated communications services provider offering international and
domestic voice, voice-over-Internet protocol (VOIP), Internet, wireless,
data and hosting services to business and residential retail customers and
other carriers located primarily in the United States, Canada, Australia,
the United Kingdom and western Europe. PRIMUS provides services over its
global network of owned and leased transmission facilities, including
approximately 500 points-of-presence (POPs) throughout the world,
ownership interests in undersea fiber optic cable systems, 18
carrier-grade international gateway and domestic switches, and a variety
of operating relationships that allow it to deliver traffic worldwide.
Founded in 1994, PRIMUS is based in McLean, Virginia.

Statements in this press release concerning revenue levels, VOIP,
broadband, local, wireless, and data and hosting services prospects and
the impact of targeted investments on our prospects, rates of decline in
our legacy businesses, future revenue, Adjusted EBITDA and Free Cash Flow,
financing/deleveraging/debt restructuring plans, future results, the
telecommunications market environment, the effectiveness and profitability
of new initiatives, selling, general and administrative expense and
capital expenditures, changes in competitive circumstances (including
pricing actions and regulatory rulings) and anticipated asset sales and
liquidity constitute "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. Such statements are based on current
expectations, and are not strictly historical statements. Factors and
risks that could cause actual results or circumstances to differ
materially from those set forth or contemplated in forward-looking
statements include, without limitation: changes in business conditions;
failure to realize future growth, including future growth related to new
product and service initiatives; competitive market strategies including
product bundling by competitors; new product initiatives; fluctuations in
the exchange rates of currencies, particularly any strengthening of the
United States dollar relative to foreign currencies of the countries
where we conduct our foreign operations; adverse interest rate
developments; faster than expected declines in legacy long distance voice
and dial-up ISP businesses; fluctuations in prevailing trade credit terms
or revenues due to the adverse impact of, among other things,
telecommunications carrier bankruptcies or adverse bankruptcy related
developments affecting our large carrier customers; the possible
inability to raise additional capital or refinance indebtedness when
needed, or at all; changes in the telecommunications or Internet
industry; adverse tax rulings from applicable taxing authorities;
broadband, Internet, VOIP, local, wireless, data and hosting, and
telecommunications competition; a continuation or worsening of turbulent
or weak financial, capital market and economic conditions; changes in
service offerings or business strategies; difficulty in attracting and
retaining customers; difficulty in providing VOIP services or new local,
wireless, data and hosting or broadband services; adverse regulatory
rulings or changes in the regulatory schemes or requirements and
regulatory enforcement in the markets in which we operate and uncertainty
regarding the nature and degree of regulation relating to certain
services such as VOIP; restrictions on our ability to follow certain
strategies or complete certain transactions as a result of our capital
structure or debt covenants; adverse impacts arising out of or as a
consequence of the Company's external auditors issuing an adverse opinion
on the effectiveness of the Company's internal control over financial
reporting due to a material weakness concerning taxes; risks associated
with our limited DSL, Internet, VOIP, local, wireless and data and Web
hosting experience and expertise; risks associated with reliance on the
cooperation of incumbent carriers; risks and delays with deploying DSLAM
networks; risks associated with the need to maintain and upgrade networks;
entry into developing markets; the possible inability to hire and/or
retain qualified sales, technical and other personnel, and to manage
growth; risks associated with international operations; dependence on
third parties to enable us to expand and manage our global network and
operations and to provide local, wireless, data and hosting, and
broadband services as well as to migrate customers; and the outbreak or
escalation of hostilities or terrorist acts and adverse geopolitical
developments. As such, actual results or circumstances may vary
materially from such forward-looking statements or expectations. Readers
are also cautioned not to place undue reliance on these forward-looking
statements which speak only as of the date these statements were made. We
are not necessarily obligated to update or revise any forward-looking
statements, whether as a result of new information, future events or
otherwise. You are advised, however, to consult the discussion of risks
and uncertainties under "Management's Discussion and Analysis of
Financial Condition and Results of Operations-Liquidity and Capital
Resources-Short and Long-Term Liquidity Considerations and Risks"; and
"-Special Note Regarding Forward-Looking Statements" contained in our
annual report on Form 10-K and quarterly reports on Form 10-Q, as filed
with the Securities and Exchange Commission.

This release includes certain non-GAAP financial measures as defined under
SEC rules, which include Adjusted EBTIDA, Adjusted Diluted Income (Loss)
Per Common Share, and Free Cash Flow. As required by SEC rules, we have
provided a reconciliation of these measures to the most directly
comparable GAAP measures, which is contained in the tables to this
release and on our website at www.primustel.com. Additionally,
information regarding the purpose and use for these non-GAAP financial
measures is set forth with this press release in our Current Report on
Form 8-K filed with the SEC on July 31, 2008, and available on our
website.

PRIMUS TELECOMMUNICATIONS GROUP, INCORPORATED
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)

For the Three For the Six
Months Ended Months Ended
June 30, June 30,
-------------------- --------------------
2008 2007 2008 2007
--------- --------- --------- ---------

NET REVENUE $ 236,462 $ 226,430 $ 462,542 $ 452,433

OPERATING EXPENSES
Cost of revenue (exclusive
of depreciation shown
below) 142,739 141,643 284,518 285,659
Selling, general and
administrative 70,247 68,516 139,416 136,212
Depreciation and
amortization 8,095 7,343 16,056 13,900
(Gain) loss on sale or
disposal of assets 115 676 (2,465) 684
--------- --------- --------- ---------
Total operating expenses 221,196 218,178 437,525 436,455
--------- --------- --------- ---------

INCOME FROM OPERATIONS 15,266 8,252 25,017 15,978

INTEREST EXPENSE (13,554) (16,424) (28,747) (29,858)
ACCRETION ON DEBT PREMIUM
(DISCOUNT), NET 217 (76) 187 (374)
GAIN (LOSS) ON EARLY
EXTINGUISHMENT OR RESTRUCTURING
OF DEBT 32,177 (2,315) 34,487 (8,274)
INTEREST AND OTHER INCOME 1,992 1,058 2,957 2,554
FOREIGN CURRENCY TRANSACTION
GAIN 8,134 15,081 9,841 18,055
--------- --------- --------- ---------

INCOME (LOSS) FROM CONTINUING
OPERATIONS BEFORE INCOME TAXES 44,232 5,576 43,742 (1,919)
INCOME TAX BENEFIT (EXPENSE) 357 6,691 (2,063) 5,686
--------- --------- --------- ---------

INCOME FROM CONTINUING
OPERATIONS 44,589 12,267 41,679 3,767

LOSS FROM DISCONTINUED
OPERATIONS, net of tax (91) (166) (180) (266)
GAIN FROM SALE OF DISCONTINUED
OPERS., net of tax - - - 5,958
--------- --------- --------- ---------

NET INCOME $ 44,498 $ 12,101 $ 41,499 $ 9,459
========= ========= ========= =========

BASIC INCOME (LOSS) PER COMMON
SHARE:
Income from continuing
operations $ 0.31 $ 0.11 $ 0.29 $ 0.03
Loss from discontinued
operations (0.00) (0.01) (0.00) (0.00)
Gain from sale of
discontinued operations - - - 0.05
--------- --------- --------- ---------
Net income $ 0.31 $ 0.10 $ 0.29 $ 0.08
========= ========= ========= =========

DILUTED INCOME (LOSS) PER
COMMON SHARE:
Income from continuing
operations $ 0.24 $ 0.07 $ 0.22 $ 0.02
Loss from discontinued
operations (0.00) (0.00) (0.00) (0.00)
Gain from sale of
discontinued operations - - - 0.04
--------- --------- --------- ---------
Net income $ 0.24 $ 0.07 $ 0.22 $ 0.06
========= ========= ========= =========

WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING:
BASIC 142,633 115,715 142,633 114,928
========= ========= ========= =========
DILUTED 190,328 184,719 195,221 184,467
========= ========= ========= =========

PRIMUS TELECOMMUNICATIONS GROUP, INCORPORATED
CONSOLIDATED CONDENSED BALANCE SHEET
(in thousands)
(unaudited)

June 30,
2008
-----------

Cash and cash equivalents $ 55,550
Accounts receivable, net 118,412
Other current assets 19,470
-----------
TOTAL CURRENT ASSETS 193,432

Restricted cash 10,782
Property and equipment, net 147,753
Goodwill 40,539
Other intangible assets, net 989
Other assets 31,144
-----------
TOTAL ASSETS $ 424,639
===========

Accounts payable $ 60,334
Accrued interconnection costs 49,396
Deferred revenue 15,839
Accrued expenses and other current liabilities 53,518
Accrued income taxes 26,070
Accrued interest 11,191
Current portion of long-term obligations 9,301
-----------
TOTAL CURRENT LIABILITIES 225,649

Non-current portion of long-term obligations 608,876
Other liabilities 80
-----------
TOTAL LIABILITIES 834,605

Stockholders' deficit (409,966)
-----------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 424,639
===========

PRIMUS TELECOMMUNICATIONS GROUP, INCORPORATED
RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED EBITDA
(in thousands)
(unaudited)

Three Months Ended
-------------------------------
June 30, March 31, June 30,
2008 2008 2007
--------- --------- ---------

NET INCOME (LOSS) $ 44,498 $ (2,999) $ 12,101
Share-based compensation expense 70 62 67
Depreciation and amortization 8,095 7,961 7,343
(Gain) loss on sale or disposal of assets 115 (2,580) 676
Interest expense 13,554 15,193 16,424
Accretion on debt (premium) discount, net (217) 30 76
Income tax (benefit) expense (357) 2,420 (6,691)
(Gain) loss on early extinguishment or
restructuring of debt (32,177) (2,310) 2,315
Foreign currency transaction gain (8,134) (1,707) (15,081)
Interest and other income (1,992) (965) (1,058)
Loss from discontinued operations, net of
tax 91 89 166
--------- --------- ---------

ADJUSTED EBITDA $ 23,546 $ 15,194 $ 16,338
========= ========= =========

PRIMUS TELECOMMUNICATIONS GROUP, INCORPORATED
RECONCILIATION OF DILUTED NET INCOME (LOSS) PER COMMON SHARE TO
ADJUSTED DILUTED NET LOSS PER COMMON SHARE
(in thousands, except per share amounts)
(unaudited)

Three Months Ended
-------------------------------
June 30, March 31, June 30,
2008 2008 2007
--------- --------- ---------

NET INCOME (LOSS) ATTRIBUTABLE TO COMMON
STOCKHOLDERS - DILUTED $ 45,470 $ (2,999) $ 12,578
ADJUSTMENT FOR INTEREST EXPENSE ON DILUTIVE
SHARES (972) - (477)
--------- --------- ---------

NET INCOME (LOSS) 44,498 (2,999) 12,101
Add:
(Gain) loss on sale or disposal of assets 115 (2,580) 676
(Gain) loss on early extinguishment or
restructuring of debt (32,177) (2,310) 2,315
Foreign currency transaction gain (8,134) (1,707) (15,081)
Loss from discontinued operations, net of
tax 91 89 166
--------- --------- ---------
4,393 (9,507) 177
ADJUSTMENT FOR INTEREST EXPENSE ON DILUTIVE
SHARES - - -
--------- --------- ---------

ADJUSTED NET INCOME (LOSS) $ 4,393 $ (9,507) $ 177
========= ========= =========

DILUTED WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 190,328 142,633 184,719
ANTI-DILUTIVE WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING ADJUSTMENT (13,434) - (22,041)
--------- --------- ---------

ADJUSTED DILUTED WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 176,894 142,633 162,678
========= ========= =========

DILUTED NET INCOME (LOSS) PER COMMON SHARE $ 0.24 $ (0.02) $ 0.07
========= ========= =========
ADJUSTED DILUTED NET INCOME (LOSS) PER
COMMON SHARE $ 0.02 $ (0.07) $ 0.00
========= ========= =========

PRIMUS TELECOMMUNICATIONS GROUP, INCORPORATED
RECONCILIATION OF NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
TO FREE CASH FLOW
(in thousands)
(unaudited)

Three Months Ended
-------------------------------
June 30, March 31, June 30,
2008 2008 2007
--------- --------- ---------

NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES $ 12,832 $ (7,528) $ 12,127
Net cash used in purchase of property and
equipment (7,737) (6,858) (10,651)
--------- --------- ---------

FREE CASH FLOW $ 5,095 $ (14,386) $ 1,476
========= ========= =========

For more information:
John DePodesta
Executive Vice President
PRIMUS Telecommunications Group, Incorporated
703 748-8050
Email Contact

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