NEW YORK -- FiberNet Telecom Group, Inc. (Nasdaq: FTGX), a leadingprovider of managed network services, today announced its results for the second quarter of 2004.FiberNet reported its seventh consecutive quarter of sequential revenue growth, and EBITDA (asdefined) increased over the comparable periods of last year and the first quarter of 2004, as well.

Revenues for the second quarter of 2004 were $7.9 million, up 23.1% from $6.5 million for thesecond quarter of 2003. Revenues for the first quarter of 2004 were $10.3 million, which included$2.7 million of revenues recognized in connection with an arbitration award received by theCompany. Excluding the impact of this award, revenues for the second quarter of 2004 were up5.0% from $7.6 million for the first quarter of 2004.

FiberNet generated positive cash flow from operations of $3.3 million in the first half of 2004.Capital expenditures for the first six months of 2004 were $1.3 million. As a result, cash flowfrom operations less capital expenditures, also known as free cash flow, was also positive by $2.0million.

Transport services remain the most significant component of FiberNet’s revenues, accounting for72.2% of the total revenues generated in the second quarter of 2004. Colocation services andaccess management services represented 20.4% and 7.4% of revenues, respectively.

EBITDA (as defined) for the second quarter of 2004 was $0.9 million, up 16.5% from $0.8million in the second quarter of last year. Excluding the impact of the arbitration award,EBITDA (as defined) for the second quarter of 2004 was 43.9% higher than the $0.6 millionreported in first quarter of 2004.

Cost of services for the second quarter of 2004 was $3.3 million, compared to $3.0 million for thefirst quarter of 2003 and $2.0 million for the second quarter of 2003. These increases were due, inpart, to higher license fees, as a greater proportion of the Company’s revenues were generated infacilities that require revenue sharing payments to the building owners. Increased off-netconnectivity charges from the Company’s Network Solutions initiative also contributed to theincrease. The cost of services related to the Company’s acquisition of Gateway Colocation wasalso consolidated beginning in the first quarter of 2004.

Selling, general and administrative expenses for the second quarter of 2004 were $4.1 million,compared to $3.7 million in the first quarter of 2004 and $3.7 million in the second quarter of2003. Included in the results for the second quarter of 2004, the Company recorded a nonrecurringcharge in selling, general and administrative expenses of $0.4 million related to thetermination of a long-term lease for unutilized space at a carrier hotel. This cancellation willreduce FiberNet’s cost of services by approximately $20,000 per month, prospectively.

On May 17, 2004 the Company settled a dispute with a dark fiber provider that had filed forbankruptcy, which resulted in the impairment of previously purchased dark fiber miles. TheCompany agreed to concede its claim to 364 unutilized dark fiber miles, or 36.4% of the totaldark fiber acquired from this provider, which was purchased in December 1999 for $34.8 million.

The Company also agreed to pay $750,000 to settle a trade payable dispute with this provider, forwhich the Company had accrued $1.1 million as a liability. As a result, the Company recorded animpairment of $9.5 million due to the write-off of $12.7 million of dark fiber included in networkinfrastructure and $2.8 million of related accumulated depreciation and a $0.4 million reductionin accrued liabilities from this settlement for charges for network infrastructure that werepreviously capitalized and impaired. This asset impairment triggered a requirement for theCompany to test its goodwill for recoverability. As such, the Company determined that thegoodwill from the acquisition of Gateway Colocation was impaired and recorded a $2.3 millionimpairment.

The net loss for the second quarter of 2004 was $(14.3) million, or $(0.28) per share, compared tonet income of $0.7 million, or $0.01 per share, for the first quarter of 2004. The net loss for thesecond quarter of 2003 was $(2.0) million, or $(0.06) per share.

Excluding the network infrastructure and goodwill impairments, the net loss for the secondquarter of 2004 was $(2.5) million, or $(0.05) per share. Excluding the impact of the arbitrationaward, the net loss for the first quarter of 2004 was $(2.3) million, or $(0.05) per share.

Capital expenditures for the second quarter of 2004 were $0.7 million, up from the prior quarterof $0.6 million and down from $0.8 million for the second quarter of 2003. Capital expendituresfor the most recent quarter were once again primarily related to the implementation of customerspecific orders. In 2004, FiberNet expects to invest $3.0 million to $4.0 million in capitalexpenditures, also primarily for customer order activity.

As of June 30, 2004, FiberNet had total assets of $91.5 million and total stockholders’ equity of$63.7 million. As of August 10, 2004, the Company had approximately 51.0 million shares ofcommon stock outstanding, or 58.0 million shares of common stock outstanding on a fullydilutedbasis, assuming the exercise of all outstanding options and warrants. Of theapproximately 7.0 million outstanding options and warrants, 6.9 million are out-of-the-money asof August 10, 2004.

FiberNet Telecom Group Inc.