Cellular Technical Services responds to recent Barron's article.

SEATTLE--(BUSINESS WIRE)--Dec. 16, 1996--

Company Says It Is "Comfortable" With Analysts' 1997 Revenue and Earnings Projections of Approximately $75 Million and $0.75 Per Share

Cellular Technical Services Company, Inc. (Nasdaq/NM Symbol: CTSC) ("CTS"), a leading provider of real-time information management systems for the wireless communications industry, today responded to what the company described as "inaccuracies and misinformation" contained in a recent article on its anti-fraud technology in Barron's, a weekly financial tabloid.

Bob Dahut, CTS President, said the company was providing the following information in order to correct "certain mistaken perceptions in the marketplace, including those fostered by the Barron's article, that do not correspond to the realities of the wireless industry's battle against cellular fraud, the adoption of radio frequency (RF) fingerprinting, and the deployment of CTS's Blackbird(R) Platform." He noted that the Barron's article did correctly state that cellular carriers are enthusiastically embracing RF technology, and in particular, CTS's Blackbird(R) Platform and PreTect(TM) anti-fraud application, in their fight against cloning fraud.

Perception: The market for CTS's Blackbird(R) Platform will not support analysts' unit and revenue growth projections. Reality: Industry fraud losses continue to grow and are expected to reach more than $1 billion in 1996.

Carrier cell sites, on which the Blackbird Platform can potentially be deployed, total more than 25,000 in the U.S. with an estimated additional 40,000+ outside of the U.S., and are growing at approximately 10 percent per year. Through fraud prevention, the Blackbird(R) Platform provides carriers with a rapid rate of return on their investment (approximately 6-to-9 month payback). Based on the these facts, carriers have indicated publicly their intention to deploy the system broadly throughout their markets.

Perception: The RF systems installed to date have been so successful in stopping fraud that there is little need for further deployments. Reality: RF has been very successful in stopping fraud specifically in those cell sites where it has been deployed. However, as fraud is eliminated from one area, it rapidly moves to the nearest, unprotected area, often doubling or tripling losses in areas where fraud had not previously been a significant problem. Thus, extensive deployment is needed, and indeed has been contracted for by several carriers, in order to provide maximum fraud protection.

Perception: A-key authentication is the "nuclear weapon" against cloning fraud that, along with the advent of digital wireless systems, will make RF obsolete. Reality: Individual carriers and the Cellular Telephone Industry Association have publicly stated that RF and authentication are complementary technologies and that both should be rolled out as part of the industry's "arsenal" against fraud. In addition, while RF is available today as a proven, effective solution to the worldwide cloning fraud problem, A-key faces a number of deployment issues, including:

-- Dedicated authentication centers must be established posing security and cost issues. -- A-key requires the use of network capacity that would otherwise be used for revenue generating calls thereby impacting network performance. -- Standards conflict, i.e. digital technologies (GSM, TDMA and CDMA) are non-compatible requiring a default to the existing analog system for roaming calls. -- Digital roll-out is occurring at a much slower pace than anticipated. Industry sources and research analysts project the current analog system will retain as much as 50 percent of all wireless traffic for at least the next seven to ten years. -- A-key can not protect the more than 85 million cellular telephones currently in use worldwide (35+ million in the U.S.), a number that industry analysts say will take seven to ten years to roll over to newer, and more expensive, A-key enabled phones.

Perception: Digital phones are inherently impervious to fraud. Reality: Industry reports indicate digital phones, including those based on GSM and TDMA technologies, have already been compromised outside of the U.S.

Perception: RF fingerprinting can not protect digital phones. Reality: Some digital phones are currently being "fingerprinted" using RF technology and CTS is on record as saying it plans to offer expanded digital fingerprinting.

Perception: All wireless systems outside of the U.S. are digital. Reality: According to a recent study of global wireless penetration (Cellular Networking Perspectives, November 1996) more than 140 out of 195 nations included in the study currently use analog-based wireless technology. These include, among others: China, Taiwan, Malaysia, Italy, Spain, U.K., parts of Scandinavia and Latin America, Canada and Mexico - all of whom are potential Blackbird(R) Platform customers.

Perception: A-key authentication is a long-term, unbreakable solution to cloning fraud. Reality: A-key is based on encryption technology, which while formidable, is by no means "uncrackable" for sophisticated computer hackers. Furthermore, A-key is a single function technology for stopping cloning fraud while RF offers significant potential for add-on applications.

Dahut noted that, because of the valuable "real estate" that the Blackbird(R) Platform occupies at the carrier's cell site and switch, it provides previously unavailable data processing and management power at the carrier's system entry point. "This means that we can potentially offer additional, value-added applications for carriers, such as the Enhanced 911 location function that has been mandated by the Federal Communications Committee, and engineering applications for remote radio maintenance and cell-site capacity management, among others," he said. These potential new applications represent significant additional revenue opportunities for CTS. They also further improve the carrier's return on investment for the Blackbird(R) Platform thereby stimulating expanded installation throughout their markets.

Dahut said the company was "comfortable" with the projections for 1997 revenue and earnings growth that have been published by research analysts, notably the detailed work done by Genesis Merchant Group. These projections are based on the contracts the company has already announced with several major carriers, the current rate of deployment and reorders for the Blackbird(R) Platform from those carriers, and the status of negotiations for additional contracts, both domestic and international. Dahut noted that the analyst projections call for deployment of approximately 3,000 Blackbird(R) Platforms in 1997 and more than 5,500 in 1998. These estimates, he said, "are well within our internal expectations."

He also noted that the company anticipates "healthy revenue growth well past the year 2000, based on projected cell site deployments, both domestic and international, as well as additional, recurring revenues from service and maintenance agreements, carriers' participation in CTS's unique roaming fraud prevention service (the "No Clone Zone(TM)") and potential new applications for the Blackbird(R) Platform. Overall, based on the information listed above, we believe that the long-term growth prospects for the Blackbird(R) Platform and for CTS as a company are strong. We remain committed to providing the very best products and services for our customers and thereby contributing to our goal of maximizing long-term value for our shareowners."

CTS develops, markets and supports real-time information management systems for the wireless communications industry. The company's integrated data management platforms and software applications enable wireless communications service providers to more rapidly and cost effectively grow their businesses.

Special Note Regarding Forward-Looking Statements: A number of statements contained in this discussion and analysis are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties that could cause actual results to differ materially from those expressed or implied in the applicable statements. These risks and uncertainties include but are not limited to: the Company's dependence on the cellular communications market; its vulnerability to rapid industry change and technological obsolescence; the limited nature of its product life, and the uncertainty of market acceptance of its products; the unproved status of its products in widespread commercial use, including the risks that its current and future products may contain errors that would be difficult and costly to detect and correct and that technological difficulties may in general hinder or prevent commercialization of its present and future products; potential manufacturing difficulties; potential difficulties in managing growth; dependence on key personnel; the company's limited Company's limited customer base and reliance on a relatively small number of customers; the possible impact of competitive products and pricing; the uncertain level of actual purchases of its products by current and prospective customers under existing and future agreements; uncertainties in the Company's ability to implement these agreements sufficiently to permit it to recognize revenue under is accounting policies (including its ability to meet product performance criteria contained in such contracts); the results of financing efforts; uncertainties with respect to the Company's business strategy; general economic conditions; and other risks described in the Company's Securities and Exchange Commission filings.

CONTACT: Company Contact:

Joseph D. Pititto

Director, Investor Relations 

[phone]