Clearnet and Lucent Technologies sign PCS supply contract and $475 million credit facility.

TORONTO--(BUSINESS WIRE)--Dec. 20, 1996--Clearnet Communications Inc. (NASDAQ/TSE, ME:CLNTF;NET.A) Friday announced that its wholly owned subsidiary Clearnet PCS Inc. (collectively "Clearnet" or "the Company") has entered into binding contracts for the purchase and financing of CDMA (Code Division Multiple Access) PCS (Personal Communications Services) infrastructure and subscriber equipment from Lucent Technologies Canada Inc. ("Lucent").

Clearnet's credit facility with a Lucent affiliate provides for Cdn. $475 million in financing (the "Lucent Credit Facility"). It is believed to be the largest wireless equipment supply arrangement and financing ever in Canada.

These arrangements follow the announcement in July of the signing of a non-binding memorandum of understanding between Lucent and Clearnet.

Lucent and CDMA - The Best Choice

Recently, major CDMA PCS systems have successfully commenced service in the United States.

Both PrimeCo Personal Communications L.P. (a consortium whose shareholders are affiliates of the regional Bell operating companies Bell-Atlantic Nynex, Airtouch Communications and U.S. West) as well as Sprint PCS launched CDMA PCS service utilizing Lucent infrastructure equipment in numerous major urban markets in the United States.

According to George A. Cope, Clearnet's president and chief executive officer, "We have no doubt that Clearnet has chosen the best possible PCS partner. Lucent is a world-class leader in communications technologies and, as their Canadian PCS partner,

"Clearnet is eager to bring the benefits of their products and expertise to Canadian wireless users. Recent developments in the United States confirm that Clearnet was correct in selecting CDMA as its technology choice and Lucent as its main supplier."

"The signing of these agreements is a major milestone for Lucent as it represents the largest contract ever for Lucent in Canada," said Jim Schram, president and CEO of Lucent Technologies Canada.

Gerald Butters, Lucent's president for North America, commented that, "CDMA technology not only has an outstanding long term future but is now fully operational with over 1,000 cell-sites now active in the United States. Preliminary performance metrics from our CDMA carrier customers indicate voice quality approaching landline quality and very competitive dropped call rates.

"Clearnet has made the right decision in choosing CDMA and Lucent looks forward to contributing to the growth of Clearnet as it develops into becoming a major Canadian wireless service provider."

Clearnet PCS Build-out Update

Clearnet has already installed the first of two 5ESS-2000 Lucent digital switches in Clearnet's national network operations centre in Markham, Ontario. Testing of live CDMA network functionality is expected to commence in January.

In addition, Clearnet has commenced the process of constructing new switch and operations facilities in Vancouver, Montreal and Calgary. Clearnet continues to be very active in its site acquisition program through-out major urban centres in Canada. Clearnet is also pleased with progress on its microwave clearing process.

To secure a sufficient amount of unencumbered spectrum to operate its PCS system efficiently in certain population areas, Clearnet has been negotiating with incumbent microwave operators for the relocation of their systems.

Based on the considerable progress to date, Clearnet expects that the re-location of all third party microwave links necessary in order to launch the Company's PCS service will be completed on schedule and on budget. Clearnet expects to commence PCS service in certain of the largest cities in 1997.

The Lucent Credit Facility

Pursuant to the Lucent Credit Facility, Lucent will extend to Clearnet up to $475 million in financing for the purchase of PCS equipment and services from Lucent and other secondary suppliers as well as the accrual of interest. Borrowings will be availed by way of three annual tranches commencing in 1997.

Each tranche will have an eight year term, accrue interest for two years, commence interest payments in year three and commence principal payments in year four. 75 percent of the principal is required to be repaid in years 6 to 8.

The Lucent Credit Facility will be secured by the assets of CPI subject to certain permitted encumbrances, including a contemplated bank credit facility in the amount of $50 million.

Clearnet intends to utilize existing cash on hand for approximately the next six months and therefore does not anticipate borrowing under the Lucent Credit Facility until mid-1997. In any event, Clearnet believes that it will satisfy all conditions precedent to borrowing funds under the Lucent Credit Facility in early 1997.

Vendor Financing Lowers Clearnet's Cost of Capital

According to Robert G. McFarlane, Clearnet's vice president and chief financial officer, "The Lucent Facility has a covenant and amortization structure which is perfectly tailored to the nature of Clearnet's growth business which entails the investment of significant capital into its network and operations over the next few years.

"Moreover, the Lucent Credit Facility, which represents approximately 40 percent of our aggregate sources of funds raised to date, is denominated in Canadian currency which eliminates any currency risk and significantly lowers Clearnet's cost of capital thereby enhancing the Company's competitive position. The interest rate on the Lucent Credit Facility is equivalent to the Government of Canada Rate plus 3.5 percent."

Aggregate Capital Raised Now Exceeds $1.1 Billion

Including the Lucent Credit Facility, Clearnet has now raised over $1.1 billion in financing for the build-out and implementation of the Company's MiKE(TM) and PCS networks since completing its initial public offering in October 1994.

Clearnet does not expect any material cash interest payments on any debt obligations to be required until after the completion of the build-out and commercialization of both its MiKE(TM) and PCS digital networks.

Lucent Technologies (formerly the systems and technology arm of AT&T) designs, builds and delivers a wide range of public and private networks, communications systems and software and consumer and business telephone systems. The company employs 125,000 people worldwide and had 1995 revenues of U.S. $21.4 billion.

Clearnet Communications Inc. (TSE, ME - NET.A - NASDAQ - CLNTF) is a Canadian wireless communications company which operates the MiKE digital network in Ontario and Quebec as well as analog dispatch communication services in over 40 cities across Canada.

Awarded a national 30 MHz PCS (Personal Communications Services) licence last year, Clearnet also plans to launch PCS service in Canada's largest urban centres in mid-1997.

CONTACT: Clearnet Communications Inc.

Robert McFarlane, 905/837-3007

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