MCLEAN, Va.--(BUSINESS WIRE)--PRIMUS Telecommunications Group, Incorporated (OTCBB:PRTL), an integrated communications services provider, today announced its results for the fourth quarter and year ended December 31, 2006.

Recent Business Highlights:

Continued Sequential Quarterly Improvement in Operating Results:

Year Over Year Improvement in Operating Results:

PRIMUS reported fourth quarter 2006 net revenue of $242 million, down from $248 million in the prior quarter and $285 million in the fourth quarter 2005. The Company reported a net loss for the quarter of ($2) million, compared to net income of $0.1 million in the prior quarter and a net loss of ($25) million in the fourth quarter 2005. As a result, the Company reported basic and diluted loss per common share of ($0.02) in the fourth quarter 2006, as compared to basic and diluted loss per common share of $0.00 and ($0.24) in the prior and year-ago quarters, respectively.

Fiscal year 2006 was a critical transition year for PRIMUS in which it had to demonstrate its ability dramatically to improve Adjusted EBITDA in the face of challenging circumstances: (1) an unavoidable decline in high margin legacy long distance voice and dial-up Internet revenues; (2) the need to prune or turn around unprofitable business units or revenue streams; (3) the requirement to improve liquidity to fund fully the 2006 plan and also meet a $23 million debt maturity in February 2007; and (4) the need to increase investment, despite existing cash constraints, in high-margin growth initiatives in broadband, VOIP, mobile and local services bundled with traditional services.

"I am pleased to report that PRIMUS management met and exceeded most of these and the other goals it set in 2006," stated K. Paul Singh, Chairman and Chief Executive Officer. "Despite expected revenue declines, Adjusted EBITDA grew to $61 million – up more than 240% over the prior year – through continued focus on our strategy of maximizing cash flow from operations by driving down costs and devoting available resources to high-margin products and services.

"We successfully turned around our United States and European businesses in 2006 through a combination of "right-sizing," shedding unprofitable business lines, and increasing marketing investment in higher margin services. As a consequence, those businesses demonstrated excellent year-over-year improvement in Adjusted EBITDA performance, and both are positioned to improve their performance in 2007. The Canada business performed in line with our expectations in 2006 and, with its DSLAM network in place and a full product portfolio, is poised for improved profitability in 2007. The revenue and Adjusted EBITDA performance of our Australia franchise fell well short of expectations in 2006 largely due to reduced margin on select services caused by Telstra’s anti-competitive wholesale pricing actions, delays in regulatory enforcement actions to curb such excesses, as well as less effective marketing campaigns in the second half. Our global carrier business, while a smaller contributor to overall operating margin, also fell short of expectations in 2006. PRIMUS management is committed to improving the performance of the Australia and wholesale business units in 2007."

PRIMUS successfully executed a number of liquidity-enhancing initiatives that enabled it to fund both its 2006 and 2007 business plans and to meet its debt maturity obligations in February 2007. These initiatives included the following transactions: (1) the sale of Primus India for $13 million in net cash proceeds; (2) private debt exchanges and issuances involving new 5% Exchangeable Notes in 2006 that raised $20 million in cash without materially increasing the amount of total debt; (3) raising $5 million in equity; (4) a private sale of $24 million principal amount of new Second Lien Notes for cash, and the accompanying private exchange of an additional $33 million principal amount of Second Lien Notes for $41 million principal amount of existing 12.75% Senior Notes; (5) financing and refinancing arrangements with fiber and equipment vendors; and (6) the sale of a business unit in Australia for approximately $6 million in net cash proceeds.

"Our high-margin broadband, VOIP, mobile and local service initiatives are performing well. They have reached an annualized revenue run-rate of approximately $140 million, having experienced a 52% year-over-year increase in revenue in 2006. We are pleased with that performance, but I believe that our potential for growth is much higher in these services with greater investment than is currently available to PRIMUS," Mr. Singh stated. "Tapping that full potential will require a greater investment in sales and marketing over the next two years. Such an investment seems fully justified given our clear need for revenue and profitability growth from these services to compensate for the corresponding revenue and margin decline from our high-margin legacy long distance voice and dial-up Internet businesses. This remains management’s primary challenge, and improvements in this area are closely linked to our ability to enhance operating performance in order to access growth capital needed to realize our full potential.

"With the substantial progress made in 2006, we are now positioned to embark on a two-year ‘Transformation Strategy’ to strengthen significantly our balance sheet, resume top line revenue growth before the end of 2008, re-list on NASDAQ, and generate double-digit annual growth in Adjusted EBITDA. While this is an admittedly aggressive set of goals, given the successful execution on multiple operational and financial initiatives over the past year with constrained resources, I have full confidence in PRIMUS management’s and its employees’ abilities to execute this two-year Transformation Strategy."

Primus Telecommunications Group Inc. (Nasdaq: PRTL)