UPDATE ON PORTSMOUTH

Redstone Telecom announces that its first metropolitan area fibre optic network, located in Portsmouth, is now fully operational and connected to the local BT exchanges. Customers for its commercial pilot are currently being selected and connected.

This pilot follows BT’s agreement to allow Redstone to operate commercial services ahead of the industry scheduled date of 1 July 2001, for local loop unbundling, providing Redstone with a competitive timing advantage. Redstone’s pilot customers in Portsmouth will be the first in the UK to benefit from symmetric DSL services, which make high quality broadband access, previously only available through ISDN lines or leased lines, affordable for small and medium businesses.

In line with its distant location strategy, Redstone has installed street cabinets adjacent to Portsmouth’s four BT local exchanges. The street cabinets house Redstone’s SDSL equipment which will allow connections to customers to be made over BT’s copper wires which run from these exchanges.

Redstone’s distant location strategy means that it can roll out DSL services from any of BT’s exchanges, avoiding the restrictions faced by many of its competitors who have chosen to internally co-locate. This also provides a more cost-effective roll-out model. * (See notes to editors, below.)

Ian Stirrat, Head of Local Loop Unbundling for BT Wholesale

said:

BT Wholesale is pleased about the active role it is playing to enable Redstone to roll out its services in Portsmouth. These services are important for the success of businesses and the local economy.

Commenting, Graham Cove, CEO of Redstone , said:

Redstone has created the first non-BT SDSL network within the UK, with equipment not previously deployed in this configuration, or in street cabinets, anywhere else in the world. This is an enormous achievement.

UPDATE ON COST CUTTING INITIATIVES

In line with its stated objective to make it possible for the business to become EBITDA positive on a monthly basis during the year to 31 March 2002, Redstone is making 85 employees redundant, from its Borehamwood headquarters. The redundancies will occur broadly across all group functions and account for approximately 12% of total group employees. This will reduce its 2001/2 operating expenses by circa GBP6m per annum with immediate effect. Associated restructuring costs of approximately GBP2.5m will be included in the financial results for the year ended 31 March, 2001.

Commenting, Graham Cove, CEO of Redstone, said:

It is essential that our core businesses are self sufficient so that we can be single minded in the development and delivery of broadband services. I very much regret having to lose people. However, the cost savings we will achieve are an integral part of our strategy for the existing business to become EBITDA positive on a monthly basis in the financial year ending 31 March 2002 and will provide a sound foundation upon which we can build for the future.