Clearnet announces financial results (Part 1 of 2 - financial tables to follow) for three months ended July 31, 1995.

TORONTO--(BUSINESS WIRE)--Sept. 27, 1995--CLEARNET(NASDAQ:CLNTF; TSE, ME:NET.A) Clearnet Communications Inc. of Pickering, Ontario ("Clearnet" or "the Company" ), at its annual general meeting at the Hockey Hall of Fame in Toronto, Wednesday announced financial results for the three months ended July 31, 1995: -0-

                           3 Months                 3 Months
                              Ended                   Ended
                          July 31, 1995           July 31, 1994

Revenue                   $ 7,963,000             $ 5,065,000
Net Income (Loss)
 Before Income Taxes         (529,000)                (51,000)
Net Income (Loss)
    for the Period         (1,229,000)                 17,000
Earnings (Loss) per Share
        under Cdn. GAAP         (0.04)                   0.00
Earnings (Loss) per Share
        under U.S. GAAP         (0.09)                   0.00-0-

For the three months ended July 31, 1995, revenue increased 57.2 percent to $8.0 million from $5.1 million in the same period in the prior year. For the three months ended July 31, 1995, there was a net loss of $1.2 million from a net income of $17,000 in the same period in the prior year.

The increase in net loss in the three months ended July 31, 1995 resulted from a planned increase in selling, general, and administration expenses and an increase in the income tax provision.

Loss per share for the three months ended July 31, 1995 was $0.04 as compared to $0.00 per share for the same period one year earlier. The average number of Class A share equivalents outstanding in the three months ended July 31, 1995 was 30,729,000 versus 3,956,000 for the three months ended one year earlier.

CORPORATE DEVELOPMENTS

Bank Financing - On August 17, Clearnet announced that its wholly owned operating subsidiary, Clearnet Inc., entered into an approximate $125 million senior debt facility with the Canadian Imperial Bank of Commerce.

The new facility is primarily designed to bridge the Company's funding needs in respect of the Enhanced Specialized Mobile Radio ("ESMR") build-out in the Ontario-Quebec coverage region until a planned bond issue by late 1996.

The combination of the new bank facility and existing cash on hand is expected to provide adequate funding for the completion of the initial phase of the Ontario-Quebec ESMR build-out.

ESMR Build-out Update - The ESMR network build-out in the Ontario-Quebec coverage region has been Clearnet's main operational focus since October 1994. The preliminary engineering propagation plan for the Ontario-Quebec coverage region was completed in February 1995.

Build-out efforts since that time have concentrated on site acquisition, switch construction, as well as site shelter and tower construction in anticipation of future site installations of its ESMR networks.

Clearnet has secured approximately one-half of its total planned sites in the Ontario-Quebec coverage region and has ordered or received delivery of approximately $85.0 million of radio and switch equipment. Site acquisition and construction for the Ontario-Quebec region is expected to continue until early 1996.

Clearnet plans to initiate service on its ESMR network in spring 1996 in a continuous coverage area from Windsor, Ontario to Quebec City, Quebec including Ottawa, Montreal and the Golden Horseshoe vicinity in and surrounding Toronto.

Reconfigured iDEN - The foundation of the Company's proposed ESMR network is the Motorola Integrated Radio System (MIRS) technology. In connection with an announcement by Motorola to allow the licensing of MIRS technology with alternative manufacturers, MIRS has been renamed iDEN.

Nextel Communications, Inc., headquartered in Rutherford, New Jersey, has encountered certain system performance issues that have resulted in a significant postponement of Nextel's plan to commence aggressive marketing efforts in the United States with respect to its ESMR network services utilizing iDEN technology, and particularly its mobile telephone services.

In connection with the July 28, 1995 investment in Nextel by a company controlled by the family of Craig McCaw and the acquisition by Nextel of Motorola's SMR business in the United States, Motorola has agreed to use its best efforts to develop significant improvements in audio quality for telephone interconnect service which will incorporate a higher rate vocoder and will necessitate a reduction in the number of time slots per channel used for such service ("Reconfigured iDEN").

Reconfigured iDEN is intended to produce, among other desired outcomes, significant improvements in the voice quality of mobile telephone service beyond the level of improvements contemplated by Motorola's previous plans. Clearnet continues to be encouraged by the substantial effort and progress in improving iDEN and plans to launch its service with fully competitive Reconfigured iDEN technology.

Analog Transition - Clearnet's current 800 MHz channels are fully loaded with analog dispatch subscribers in the Golden Horseshoe area in and surrounding Toronto, Ontario. Clearnet must free-up a certain portion of its 800 MHz frequencies for conversion to digital technology in order to implement its ESMR network.

Accordingly, Clearnet has commenced marketing a transition program which has the objective of encouraging the voluntary migration of over 5,000 analog subscriber units to Clearnet's currently unutilized 900 MHz channels.

PCS DEVELOPMENTS

PCS Alliance with COM DEV and Research In Motion - On September 14, Clearnet announced that it had entered into a strategic alliance with COM DEV International Ltd. ("COM DEV") and Research in Motion Limited ("RIM") in support of Clearnet's application for a Canadian national 30 MHz Personal Communications Services ("PCS") licence in the 2 GHz range.

COM DEV and RIM had previously filed an expression of interest with Industry Canada to apply for a PCS licence through their special-purpose joint venture called Canadian Wireless Information Network Inc.

COM DEV and RIM agreed to discontinue their joint application for a PCS licence and to formally support Clearnet's PCS application. COM DEV and RIM actively participated in the preparation of Clearnet's comprehensive formal licence application. In the future, COM DEV, RIM and Clearnet will work to develop new and innovative PCS products and services to benefit all Canadians.

COM DEV and RIM are both leaders in their respective fields of satellite technology and wireless data communications. In the future, satellite technology will be important for extending the benefits of terrestrial mobile radio services to previously unserved remote and rural areas, while the future potential for wireless data applications is significant.

COM DEV and RIM will bring advanced expertise and product applications in these emerging areas to Clearnet's future PCS business.

As part of the alliance agreement, COM DEV and RIM have the right to make a total equity investment of up to $10 million in Clearnet. Pursuant to the agreement, Clearnet issued options having an exercise price of Cdn. $20.00 for 250,000 Class A Non-voting Shares to each of COM DEV and RIM.

At the time of the agreement on August 16, 1995, Clearnet's Class A Shares traded at approximately Cdn. $18.50. The options will be contingent on Clearnet PCS Inc., Clearnet's wholly owned PCS subsidiary, being awarded a 2 GHz PCS licence as announced by Industry Canada and in such event the options would have a term of 18 months commencing with such an announcement.

Friends of Clearnet Initiative - As part of its "Friends of Clearnet" initiative, Clearnet has entered into agreements with over 30 Canadian high technology firms from all regions of Canada for the express purpose of research, design and, if appropriate, manufacture of a variety of innovative, value-added PCS related products and services.

Application for Canadian National 30 MHz PCS Licence - On September 15, Clearnet through its wholly owned subsidiary, Clearnet PCS Inc., submitted its comprehensive application to Industry Canada for a Canadian national 30 MHz Personal Communications Services ("PCS") licence in the 2 GHz range.

Clearnet's application is over 1500 pages and includes detailed propagation plans of Canada's top 33 population centres for both CDMA and GSM technologies.

Clearnet has applied for one of up to three 30 MHz PCS licences which are expected to be awarded by the end of 1995 pursuant to Industry Canada's comparative licensing process. Industry Canada has indicated that six other applications were received for national 30 MHz PCS licences.

Clearnet's application outlined how its planned PCS offerings will focus on consumers and small office - home office clients, making wireless services more useable and more affordable for these markets.

Clearnet's PCS service portfolio will offer, amongst other things, local loop replacement services ultimately to bring competition and innovation to local loop products and services.

Clearnet's PCS service offerings will also include high speed mobility, messaging, information and data services, and a variety of other innovative, value-added services. Clearnet views PCS as complementary to its ESMR network, which is uniquely positioned to deliver services to the industrial and commercial segments.

Clearnet believes it is uniquely positioned to satisfy best the goals, principles and objectives set out in the Policy and Call for Applications issued by Industry Canada on June 15, 1995.

Clearnet recognizes that the award of 2 GHz PCS licences will have a profound impact on the competitive telecommunications landscape, not just in its wireless segment but across the full width and breadth of the entire industry.

Clearnet has carefully assessed each of these potential impacts and has planned accordingly. The decisions Industry Canada must make upon the review of each application received are many, varied and complex.

As such, Clearnet's comprehensive application submission includes a thorough and detailed analysis of the issues as it perceives them. In Clearnet's view, no other candidate eligible for 30 MHz can match: Clearnet's low costs; marketing, financial and wireless expertise; existing customer base, strategic partners, distribution strengths, job creation, and R&D commitments. For these reasons Clearnet believes it is the most qualified applicant for a 30 MHz licence.

George A. Cope, Clearnet's President and Chief Executive Officer, said "Clearnet's application is creative, informative and detailed. The quality of Clearnet's application is a testament to the capability and depth of the employee team we have assembled over the past twelve months."

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL RESULTS

The consolidated financial results of Clearnet Communications Inc. ("Clearnet" or the "Company") include the financial results of the business and assets acquired from Motorola Canada Limited in two transactions on October 20, 1994 and December 8, 1994.

Since inception, Clearnet's financial statements have primarily reflected the development, expansion and management of the Company's analog Specialized Mobile Radio ("SMR") business. Accordingly, Clearnet's financial statements are not necessarily indicative of future operational performance given the Company's present strategy which entails the design, implementation and operation of the proposed Enhanced SMR ("ESMR") networks.

On July 25, 1995 Clearnet's board of directors passed a resolution to change the Company's fiscal year end from April 30 to December 31. Accordingly, Clearnet will have an eight month fiscal period ending December 31, 1995. In order to effect the transition to the new fiscal year end, Clearnet intends to report on its interim results for the periods ending July 31, October 31 and December 31, 1995.

Clearnet has changed the Company's depreciation policies so that future accounts appropriately reflect the evolving nature of Clearnet's business and its significant ESMR network currently under construction.

The effect of this retroactive change in depreciation policy has been to reduce capital assets and to increase the deficit by $0.5 million at July 31, 1995, as well as to change net income for the periods ending July 31, 1995 and July 31, 1994 by a nominal amount.

During the three month period ended July 31, 1995, capital expenditures were $24.3 million and accounts payable and accrued liabilities increased by $17.7 million, primarily as the result of the continued build-out of the Company's ESMR networks.

For the quarter ended July 31, 1995, revenue increased 57.2% to $8.0 million from $5.1 million for the quarter ended July 31, 1994.

67.4% of the dollar increase in revenues, in the first three months of the year versus the same period a year earlier, is attributable to an increase in network subscribers and, consequently, airtime billings, with the balance due to equipment sales, rental and service.

The increase in network subscribers results principally from the acquisition of Motorola's SMR business and to a lesser extent as a result of internal loading. No price increase in the Company's average billing rate per unit has been implemented in either the current or prior fiscal year.

The total number of subscribers at July 31, 1995 was 54,048, as compared with 53,249 at April 30, 1995 and 22,697 at July 31, 1994. The increase in equipment sales, rental and service revenues reflects the inclusion of the results of two new dealerships which opened in fiscal 1995 as well as increased market demand for communications equipment.

The "churn rate" (number of subscriber units disconnected divided by the average number of units on the network) for the three months ended July 31, 1995 was 1.5 percent per month up from 1.3 percent per month for the comparable period one year earlier. The increase in churn is primarily a result of an increase in customer fleet downsizing.

Earnings before interest, taxes, depreciation, amortization and other ("EBITDA") decreased by $1.9 million to a negative EBITDA of $1.5 million, or negative 18.6 percent of revenue, for the three months ended July 31, 1995 from $0.4 million, or 8.6 percent of revenue, in the comparable period one year earlier.

The decrease in EBITDA in dollars and as a percentage of revenue resulted from a 171.0 percent increase in selling, general and administration expenses versus a 80.1 percent increase in gross profit for the three months ended July 31, 1995 as compared to the results for the comparable period one year earlier.

90.9 percent of the dollar increase in Clearnet's selling, general and administrative expenses is attributable to overhead increases in the network division and the balance in the equipment sales, rental and service division ("MOCO Canada").

Increases in network division overhead expenses are consistent with the corporation's business plan and consisted primarily of increased compensation expenses resulting from higher staffing levels and to a lesser extent from site rental, occupancy, Personal Communications Services ("PCS") application and public company costs.

Increases in MOCO Canada division overheads were primarily a result of the addition of newly opened dealerships in fiscal 1995 and costs associated with higher sales volumes. Since October 1994, Clearnet has significantly increased its staffing and is building the organizational depth and capability to properly execute its ESMR business plan.

Accordingly, overhead costs are expected to continue to increase at a faster rate than revenues and gross profit until after the initiation of commercial service of the proposed ESMR networks.

Clearnet plans to initiate ESMR service in the Windsor to Quebec City continuous coverage area by spring 1996. Consequently, future EBITDA is expected to be negative until some time after initiation of commercial ESMR service. -0- CONTINUED

CONTACT: Clearnet Communications Inc.

Robert McFarlane, VP/CFO, 905/837-3007

Internet - [e-mail]

INDUSTRY KEYWORD: COMPUTERS/ELECTRONICS COMED EARNINGS REPEATS: New York 212-575-8822 or 800-221-2462; Boston 617-236-4266 or

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