CTC Communications Corp Reports Second Quarter Earnings.

WALTHAM, Mass.--(BUSINESS WIRE)--Nov. 5, 1998--CTC Communications Corp. (NASDAQ:CPTL) today reported results for the second quarter ended September 30, 1998 of its fiscal year ending March 31, 1999.

CTC Communications ("CTC" or "the Company") reported record revenues for the quarter ended September 30, 1998 of $14.5 million, a 22.5% increase over the $11.8 million reported for the comparable quarter of fiscal 98. Access line equivalents (1) sold as well as provisioned during the quarter continued to exceed expectations. New lines sold of 33,183 during the quarter represented a 26% sequential increase over lines sold during 1Q99. Lines provisioned during the quarter increased to 25,553, bringing the total lines in service as of September 30, 1998 to 64,394.

Robert J. Fabbricatore, Chairman and Chief Executive Officer of CTC, stated, "The Company is continuing its dramatic growth in the sale and provisioning of access lines on a sequential quarter basis, and during this last quarter the momentum really accelerated in the last 30 days. In September alone, the Company booked a record 16,000 new access lines and provisioned approximately 13,500. The September bookings exceeded CTC's previous sales record set in June by over 6,000 lines and equate to approximately $12 million of new annualized revenue which CTC is in the process of adding to its base. CTC attributes this accelerating growth to several factors including an overall increase in salesforce productivity and increased sales to larger accounts by our seasoned account executives."

Revenue and EBITDA Analysis:

During the quarter ended September 30, 1998, CTC increased its local service revenues from $4.8 million in 1Q99 to $7.7 million in 2Q99 for a 62% sequential increase. The growth in local revenue was primarily due to the increase of local lines in service for the quarter.

Long distance revenues for the quarter decreased from $6.9 million in 1Q99 to $5.2 million for 2Q99 or 24% sequentially. This decrease in long distance revenue was the result of CTC's strategic decision to exit the business of serving outbound call center customers in July. This decision was made as a result of the low margin, high risk nature of this type of customer as well as the fact that these customers generally do not purchase local or data services offered by the Company and are generally not interested in the value-added account management services of CTC. As a policy matter, the Company is not in the business of selling a single commodity service such as long distance based solely on price, which is usually what drives these types of customers.

Data revenues for the quarter increased 45% sequentially from $0.75 million in 1Q99 to $1.1 million in 2Q99. This increase was primarily due to the continued strong demand for CTC's Internet and Frame Relay services.

Gross Margins for the quarter increased by more than 5.2 percentage points from 9.5% in 1Q99 to 14.7% in Q299 primarily as a result of significant improvements made in local service gross margins, the implementation of the lower long distance wholesale costs previously negotiated with CTC's primary long distance supplier and the elimination of the lower margin call center business from long distance gross margins.

Selling, general and administrative expenses (SG&A) increased by $3.5 million over 1Q99 primarily as a result of non-recurring legal and regulatory expenses, increased depreciation expense, the addition of over 50 people to the payroll and the addition of five new branch offices. Legal and regulatory expenses increased $1.3 million for the quarter, bringing the total amount of non-recurring expenses associated with the Bell Atlantic lawsuit and other regulatory matters to $2.0 million for the quarter. Depreciation and amortization expense increased by approximately $0.6 million reflecting the increase in capitalized costs of placing the company's Integrated Communications Network into service. Payroll and related and facilities expense increased by approximately $1.5 million as a result of increased commission expense due to increased revenues as well as new hires and branch openings for the quarter. As of September 30, 1998, CTC employed 392 people including 197 Account Executives and 85 Network Coordinators in 25 branch locations throughout New England and New York.

EBITDA losses increased by $2.0 million from 1Q99 to ($9.7) million for 2Q99 primarily as a result of the increase in non-recurring legal and regulatory fees and the expenses associated with faster growth and expansion. Steven P. Milton, CTC's President and Chief Operating Officer, commented that "We have refined our strategy over the next year and will be focusing on increasing the productivity of the 25 branches we have in place before we start adding significant numbers of new account executives or more new branches. This will allow us to turn EBITDA positive on a company-wide basis sooner than we had previously planned. Indeed, given the momentum we are beginning to see, by June of next year we expect the first 6-8 branches to turn EBITDA positive before the allocation of corporate expense. Then, as we deploy our network and begin to realize increased gross margins, other branches should quickly begin to reach this critically important milestone."

In assessing CTC's progress since becoming a CLEC in January 1998, Robert Fabbricatore commented, "As we approach the end of our first full year of operations as a CLEC and close in on 100,000 lines in service, I am gratified by the accomplishments of our staff. On a comparative basis, our revenue/employee and sales force productivity has been significantly higher than any other CLEC we are aware of during their first year of operation. More importantly, the Company has accomplished this while aggressively containing our cost structure. Based upon CTC's financial results to date as compared to the published figures of other CLECs during comparable periods in their operating histories, CTC's cost of provisioning access lines as measured by the cumulative EBITDA loss for the first nine months of CLEC operations is significantly less than that of other CLECs."

Fabbricatore added, "The CTC story gets even more exciting when you consider that we are just beginning to sell into our base of 280,000 lines which we managed as an agent. Once the contract termination fee issue with Bell Atlantic is finally adjudicated in each of our states, we expect to be able to bring over significant numbers of incremental lines, many of which are associated with high margin data services. Recently we have won landmark victories on this issue in the state public utility commissions ("PUCs") of New York, Massachusetts and New Hampshire, and although Bell Atlantic has either appealed or stated their intentions to appeal two of these decisions, time is running out on their monopolistic, anti-competitive practices. CTC feels strongly that despite Bell Atlantic's delay tactics, the PUCs of all of the former NYNEX states will have resolved this issue by June of next year. If Bell Atlantic would spend as much time trying to please their customers as it does spend trying to thwart competition, perhaps they wouldn't be as afraid to compete with us head to head in the market."

Fabbricatore concluded, "Its important for the investment community to understand the impact that we expect our Integrated Communications Network will have on our business. The Company plans to begin deploying this network next month and is scheduled to have the first 22 sites operational by April of next year. At that point, CTC expects to begin transitioning selected customers as well as its own branch offices on-net for comprehensive testing. By next summer, just 8-10 months from now, the Company's network is scheduled to be generally available to customers and CTC should begin to see the margin improvements associated with on-net services."

(1) Access line equivalents defined as the sum of single POTS lines, 24 lines per broadband voice T1 circuit, and the appropriate number of DS-0 equivalents per data circuit.

CTC is a rapidly growing provider of integrated communications solutions to small and medium-sized business customers in the Northeastern U.S. It provides an extensive array of voice and data services including local, long distance, frame relay, Internet access, and other advanced data services. The Company markets its services through its 190 member direct sales force located in 25 branch offices throughout Massachusetts, New York, Connecticut, New Hampshire, Vermont, Rhode Island, and Maine. CTC's headquarters is in Waltham, Massachusetts and CTC can be found on the worldwide web at http://.ctcnet.com.

The statements in this press release that relate to future plans, events or performance are forward-looking statements including statements relating to operations, the timing of legal/regulatory developments including the resolution of the contract termination fee issue at the state PUCs, the ability of the Company to provision a significant number of access lines from its 280,000 access line base that it managed as an agent, the timing of both the network deployment and the transition of CTC customers to the network, and the financial effect of the ICN on the Company's gross margins. These statements involve risk and uncertainties that could cause actual results to differ materially from those reflected or implied in the forward-looking statements. Readers are, accordingly, cautioned not to place undue reliance on these forward-looking statements, which speak only as to the date hereof. Additional information about these risks and uncertainties is set forth in the Company's most recent report on Form 10-Q. CTC undertakes no obligation to release publicly the results of any revisions to these forward-looking statements that may be made to reflect results, events or circumstances after the date hereof. -0-

                       CTC COMMUNICATIONS CORP.
                    CONDENSED STATEMENTS OF INCOME


                                     Three Months Ended
                                 Sept.30,           Sept. 30,
                                  1998                 1997


Telecommunications revenues     $ 14,516,189    $  3,488,684
Commission revenues                     --         8,356,413
                                  ----------      ----------
                                  14,516,189      11,845,097
Costs and expenses
   Cost of telecommunications
     revenues                     12,383,432       2,712,249
   Selling, general and
     administrative expenses      13,001,503       7,503,701
                                  ----------       ---------
                                  25,384,935       9,765,950

Income (loss) from
  operations                     (10,868,746)      2,079,147

Other
   Interest income                    38,437          39,352
   Interest expense                 (983,466)         (5,772)
   Other                               3,149           1,273
                                     -------          ------
                                    (941,880)         34,853

Income (loss) before
 income taxes                    (11,810,626)      2,114,000

Provision (benefit) for
 income taxes                       (827,000)        870,000

Net income (loss)               $(10,983,626)   $  1,244,000

Net income (loss) per
 share available to
 common shareholder(1)

   Diluted                      $      (1.13)   $       0.12

Weighted average number
 of common shares:
   Diluted                        10,002,370      10,694,319

(1) Net income/(Loss) per share available to common stockholders
includes the effect of accretion of amounts due to redeemable
preferred stockholders.


                       CTC COMMUNICATIONS CORP.
                    CONDENSED STATEMENTS OF INCOME


                                        Six Months Ended
                                   Sept. 30,          Sept. 30,
                                    1998                1997


Telecommunications revenues     $ 27,351,874    $   6,542,785
Commission revenues                     --         16,961,264
                                  ----------      ----------
                                $ 27,351,874    $ 23,504,049
Costs and expenses
   Cost of telecommunications
    revenues                      23,996,900       5,156,085
   Selling, general and
    administrative expenses       22,496,457      13,987,801
                                  ----------      ----------
                                  46,493,357      19,143,886

Income (loss) from
 operations                      (19,141,483)      4,360,163

Other
   Interest income                   170,832          96,938
   Interest expense               (1,400,976)        (10,227)
   Other                              33,001           5,127
                                   ---------          ------
                                  (1,197,143)         91,838

Income (loss) before
 income taxes                    (20,338,626)      4,452,001

Provision (benefit) for
income taxes(1)                   (1,424,000)      1,834,000

Net income (loss)(1)            $(18,914,626)   $  2,618,001

Net income (loss) per share
available to common
stockholders(2)

   Diluted                      $      (1.92)   $       0.24

  Weighted average number
   of common shares:

   Diluted                         9,993,281      10,696,616


(1)The tax benefit for the six months ended September 30, 1998
includes the effect of (adjusting) the tax benefit for the three
months ended June 30, 1998 to properly recognize the estimated annual
tax benefit ratably throughout the year ending March 31, 1999.

(2)Net income/(Loss) per share available to common stockholders
includes the effect of accretion of amounts due to redeemable
preferred stockholders.