LONDON -- COLT Telecom Group plc (COLT), a leading European provider of business communications said today that it continued to make progress in the implementation of its strategic plan, even though markets remain challenging.

Second quarter highlights

Compared with Q1 2005:

Compared with Q2 2004:

The Company's financial position continues to be strong, with cash and cash equivalents of GBP335.9 million at the end of the quarter.

COLT Chairman Barry Bateman said:

"Despite challenging markets, we have grown revenues and improved EBITDA. There is still much hard work to be done to fully implement the strategic initiatives we announced last October, but the foundations are laid and hopefully we should now begin to see a return on our efforts and continuing investment."

Commenting on the results for the quarter, Jean-Yves Charlier, Chief Executive, said:

"In the second quarter we saw COLT return to growth with improvement in turnover, earnings and cash flow. These results are an encouraging sign that our strategy is continuing to show early results.

"Compared with the first quarter, second quarter revenues grew in twelve out of thirteen COLT countries, led by a strong performance in voice revenues. Non-switched revenues grew more slowly than we would like to have seen but we remain confident that growth in these areas should accelerate as our sales initiatives and new value add products are introduced.

(1) EBITDA is earnings before interest, tax, depreciation, foreign exchange and debt settlement expense

"During the quarter we won a number of new and important contracts. We also enjoyed growing interest in our Ethernet product range, where we have already signed 25 customers, in VoIP for corporates and in COLT Total Plus, our LAN management offering for mid-sized businesses. We are also planning to introduce during the third quarter a converged voice and data offering for mid-sized businesses to continue expanding our product portfolio.

"Overall, we are pleased with the progress on all the strategic initiatives we announced last October. Whilst we are improving our operational results and driving down our cost base, we continue to make investments in new internal systems, in our transaction processing centre in India, where we now have almost 400 employees and the development of new products.

"We are on course to meet market expectations for revenue and EBITDA. We expect to be free cashflow positive in the second half of the year but not necessarily for the year as a whole. We are confident that we will be free cashflow positive on a sustainable annual basis going forward."

Colt Telecom Group plc