Acquisition of Control Circle Limited

23rd January 2014

ALTERNATIVE NETWORKS PLC

("Alternative" or "the Company")

ACQUISITION OF CONTROL CIRCLE LIMITED

Alternative Networks, the business communications service provider, today announces the acquisition of Control Circle Limited ("Control Circle"), a well-established UK based provider of complex managed hosting and cloud-based services to enterprises and on-line businesses, for £39.4m in cash (the "Acquisition").

Highlights:

· Alternative is acquiring the entire issued share capital of Control Circle for £39.4m in cash on completion from the founders, and Scottish Equity Partners.

· The acquisition is expected to be earnings enhancing from completion.

· Joint bank facilities of £43m have been provided by Barclays and Lloyds, replacing existing facilities of £6m

· Control Circle reported £21.1m of revenue in year ended 30 September 2013 and EBITDA of £1.9m.

· The strategic rationale for the deal is as follows :

o Highly complementary product set providing a cornerstone in complex managed hosting and cloud based services

o Well matched customer bases allowing for significant cross selling opportunities

o Asset light, high level of technical expertise

o Strong management team to continue with business

· Progressive dividend policy of the group is expected to remain unchanged

Strategic rationale for the Acquisition

The acquisition of Control Circle is a core strategic investment. Control Circle offers the delivery of complex managed hosting, cloud and datacentre services, which is an increasing requisite for the Company's existing and targeted UK enterprise clients. Control Circle's skills set will complement and bolster Alternative's existing services in networking and datacentre together the recently acquired virtualisation skills of Intercept IT, such that the enlarged group will now have a comprehensive and compelling data and IT services portfolio including managed and cloud based services, such as managed hosting, datacentre virtualisation and application management. Furthermore, the enlarged group offering will allow clients to choose private or public hosted cloud services.

Alternative and Control Circle have both adopted asset light and customer rich strategies, dedicated to offering flexible data and communications services.

Financial Information

In the audited results for the year ended 30 September 2013, Control Circle reported revenue of £21.1m (78% recurring revenue), a pre-tax profit of £0.9m and an EBITDA of £1.9m. Notwithstanding an investment in senior management capability in 2012, Control Circle has focussed on improving profitability in 2013, and in the six months ended 31 December 2013 the company delivered underlying EBITDA of £1.1m.

In 2013, total revenue grew 1% on the previous financial year, as growth was constrained by an exceptional reduction in revenues from one customer that underwent a significant financial restructuring. In the previous three years, the compound annual growth rate of revenue was 32%. Annualised contracted recurring revenue at September 2013 was up 10% on the previous year.

Capital expenditure in the year ended 30 September 2013 was £1.1m and net assets and gross assets at that date were £3.9m and £10.5m respectively.

Management

The existing, strong management team of Control Circle will continue to run the day to day operations of the business. The CFO, being one of the founders, will leave the business after a short transition period, with the other founder and CEO remaining to focus on the exciting cross selling opportunities between the top customers of Alternative and Control Circle and winning new business.

Edward Spurrier, Chief Executive of Alternative Networks, commented:

"We are delighted to have acquired such a complementary business in the managed hosting arena. Control Circle is an excellent fit not least because, like Alternative, it is asset light, skills rich, and has a focus on premium service and technical excellence to the Enterprise market. Like Alternative, it has developed a dynamic online service portal. Control Circle's customers are highly complementary with Alternative's and have a higher penetration in similar industry verticals, principally in the private sector. Given the aligned strategic emphasis and strong growth profiles, the combination of Control Circle and Alternative at this time has highly compelling logic.

We intend to invest in the growth of Control Circle and are confident that combining their services with those of Alternative will provide the Group with new and enhanced offerings to its customers.

We have spent the past three years evaluating numerous hosting opportunities, very few of which fulfilled our stringent acquisition criteria. Control Circle and Intercept are the only companies that have done so, and we are delighted to include them in the Alternative Networks Group."

Enquiries:Alternative Networks 0870 190 7444Edward Spurrier, Chief Executive OfficerGavin Griggs, Chief Financial Officer

Investec Bank PLC - Nominated Adviser and Joint Broker 020 7597 5970

Patrick Robb / Carlton Nelson/Andrew Pinder

finnCap Limited - Joint Broker 020 7220 0565

Stuart Andrews/Charlotte Stranner

Pelham Bell Pottinger 07802 442486

Archie Berens

Information about Control Circle

Control Circle is a UK-based provider of complex managed hosting and cloud-based services to enterprises and on-line businesses, including Saga, Rightmove and RR Donnelley. Its expertise is in designing, deploying and managing mission critical IT services that are of strategic importance to its customers underpinned by a comprehensive Service Level Agreement.

An extensive portfolio of capabilities enables Control Circle to align solutions to its customers' requirements:

· Managed hosting and colocation: a comprehensive portfolio of managed services (basic hosting to fully managed services), leveraging Control Circle's state-of-the-art Max3000™ monitoring platform which includes a feature rich customer portal to enable customers to have full visibility into their IT estate.

· Applications and business continuity: end-to-end support of application platforms including back-up, disaster recovery and data protection solutions.

· Cloud and utility services: Enterprise grade Hybrix™ platform enabling public IaaS, private and hybrid cloud and utility services models, including storage on demand.

· Infrastructure and virtualization: managed virtualisation with fully managed hypervisor and virtual server guest environment, available with server management services (OS updates, patching and licensing).

· Network and security: high bandwidth, low latency connectivity services through global MPLS network enhanced by an Intelligent Border Gateway Protocol framework secured by a broad range of proactive and response based security services designed to protect customer infrastructure.

The focus on service excellence and a positive customer experience means that Control Circle delivers:

· Straightforward commitments underpinning service delivery; transparency, visibility, security and a single-comprehensive SLA.

· Services designed to the highest levels of security, availability, quality and performance.

· Leading edge technical skills ensure Control Circle remains relevant to deliver customer's evolving IT requirements.

· A comprehensive portfolio of services, from colocation to cloud, including key areas such as storage, DR, and security. Control Circle also acts as a trusted gateway to the help customers source the best options for services that are not in their core offering.

Control Circle was established in 2001.

The market has recognised Control Circle's growth, service quality and innovation through various awards and accolades, including two successive International Datacentre and Cloud managed services provider awards showcasing Max3000 and Hybrix.

Control Circle is committed to maintaining industry standard accreditations and holds ISO/IEC 20000 (IT Service Management System) and ISO/IEC 27001 (Information Security Management) certifications. Its project management, support and customer management processes are ITIL V3 framework aligned.