Trading Statement

3 October 2013

Alternative Networks plc

Trading Statement

Alternative Networks plc, ("the Group"), the UK business communications service provider, today issues the following trading update for the year ended 30 September 2013. Trading in the second half of the year has returned to growth compared with H2 2011/12 and full year profits and cash flow for the full year are in line with management expectations. Highlights of the second half of the financial year are:

· Second half revenue expected to be up approximately 3% (H1: -4%) on the same period in the prior year

· Gains in market share in mobile - subscriber base up 5%

· Strong performance in Advanced Solutions following record third quarter order levels

· High levels of cash generation resulting in net cash balances of £17.1m

Trading performance

Performance in Advanced Solutions has improved through the year with a record order level signed in the third quarter and second half orders up 25% on the first half. Total revenues for the full year are expected to be up approximately 4% on the prior year. Growth has been seen across the portfolio but particularly in new IP data switch installations in the Enterprise market. The other parts of Advanced Solutions, Data and Billing services, have also shown growth on a full year basis.

Market share in Mobile Network Services increased in the second half, with 4,200 new connections resulting in mobile subscribers of over 81,400 at 30 September 2013. This represents full year growth in connections of 5% due to both lower subscriber churn and some significant customer wins in the third quarter. In addition, there were more than 2,200 subscribers awaiting connection as at 30 September 2013 that had been delayed by client led infrastructure requirements; these are expected to connect in the first quarter of the new financial year. Mobile revenues are expected to be up 3% on the prior year despite continued regulatory pressures.

Fixed Line Network Services has traded broadly in line with expectations. The transition to SIP, resulting in reduced line rental revenues, has continued to impact opportunities for revenue growth. However, improved margins have helped to offset some of the revenue decline, which for the 11 months to August was 9% below the prior year.

Cash flow and Dividends

Cash flow remains strong. Net cash balances at 30 September 2013 were approximately £17.1m. This is after paying the interim dividend of £2.1m and special dividend of £1.9m in the second half of the year. Underlying conversion of adjusted EBITDA into cash has remained strong and ahead of the level seen in the first half.

The Group has previously announced its intention to pay a dividend of not less than 12.65 pence per share for 2013 with growth of not less than 10% in 2014. Additional guidance on dividend progression will be provided at the preliminary results.

The Group continues to consider both further returns of surplus cash balances to shareholders and potential earnings accretive acquisitions.

Timetable

Full year results announcement date 9 December 2013

Proposed ex-dividend date for final dividend 18 December 2013

Proposed date for Annual Report dispatch to shareholders 23 December 2013

Proposed date of AGM 28 January 2014

Proposed date of Final dividend payment 30 January 2014

Enquiries:

Alternative Networks 0870 190 7444

Edward Spurrier, Chief Executive Officer

Gavin Griggs, Chief Financial Officer

Investec 0207 597 5970

Patrick Robb / Carlton Nelson / Andrew Pinder

Pelham Bell Pottinger 07802 442486

Archie Berens