DTS reports record revenues for third quarter 1997; SKYPLEX products add to third quarter momentum.

ATLANTA--(BUSINESS WIRE)--May 6, 1997--Digital Transmission Systems, Inc. (DTS) (NASDAQ: DTSX; BSE & PHLX: DTS), a leading telecommunications equipment manufacturer, today announced financial results for the third fiscal quarter ended March 31, 1997.

Net sales for the third fiscal quarter of 1997 increased 28 percent to $4.1 million, compared to $3.2 million for the third quarter of fiscal 1996. The Company has reported record quarterly sales volume in each of the three quarters of fiscal 1997.

Due to the continued expansion of the Company's product line and increased international sales activities during the quarter, DTS posted a net loss of $187,000, or $0.05 per share, compared to a net loss a year ago of $217,000, or $0.08 per share. International sales is comprised primarily of the SKYPLEX product line which carries lower gross margins relative to other DTS product lines.

For the nine months ended March 31, 1997, net sales increased 37 percent to $10.8 million from $7.9 million reported for the same period in fiscal 1996. The Company posted a net loss of $1.5 million, or $0.39 per share, versus a net loss of $1.4 million, or $0.44 per share for the nine months last year.

Andres Salazar, DTS president and chief executive officer, commented, "The third quarter has been highly productive in terms of product development and customer acceptance of new products, and we are extremely pleased with the results. We began to ship our new SKYPLEX I radio on schedule at the end of March. This next generation spread spectrum digital microwave radio, which has been internally developed and manufactured, should carry substantially improved product margins compared to the older SKYPLEX product. We expect this to benefit product margins going forward as sales of this product increase."

"Also during the quarter, we strengthened our relationship with PrimeCo Personal Communications L.P. by signing an agreement for DTS to provide FlexSentry. This network management control product will work in concert with the FlexT1 network access equipment already installed in the PrimeCo network last year. This is especially significant as we become less dependent upon sales of the traditional network control products, which include sales of that product type to MCI. Sales to MCI during the quarter were 30 percent of total revenues compared to 62 percent for the third quarter in the last fiscal year," Salazar continued.

The DTS Flex product line, which provides high-speed access to telecommunications networks, grew to 29 percent from 24 percent of sales, up almost 50 percent from the third quarter last year and up nearly 132 percent over the same nine-month period in fiscal 1996. International sales continued to be strong with sales being registered in 24 countries. For the quarter, international sales comprised 27 percent of sales compared to only nine percent last year, a significant increase of 289 percent year over year.

As a result of investments in key growth markets, international sales, primarily consisting of the Company's SKYPLEX spread spectrum radio products, substantially increased during the third quarter. DTS reported record growth for the quarter in all three international regions -- Latin America, Asia Pacific and EMEA (Europe, Middle East and Africa).

"As we approach the end of our fiscal year, our plan is to work on improved product margins and profitability as a result of increased sales volumes of newer products, particularly the latest SKYPLEX I radio," Salazar concluded.

Note: This news release, other than the historical financial information, may consist of forward-looking statements that involve risks and uncertainties, including, but not limited to, the timely availability of new products, the impact of competitive products and pricing and delays in the receipt of orders or in the shipment of products, perhaps resulting in quarterly fluctuations in results, and the other risks detailed in the Company's Securities and Exchange Commission reports and filings, including the report 10-KSB for the year ended June 30, 1996 and the SB-2 registration statement of the Company that became effective March 4, 1996. Actual results may vary materially.

Founded in 1990 and headquartered near Atlanta, DTS designs, manufactures and markets a broad range of telecommunications products worldwide. The Company's primary customers include long distance carriers and wireless service providers. The Company's products include the FlexT1(R) (domestic) and FlexE1(TM) (international) integrated network access product lines, centralized network control systems, the FlexAir(TM) spread spectrum digital transport systems and SKYPLEX(R) spread spectrum digital microwave radios.

For more information about DTS and its products, phone 1-800-FLEX-DTS (1-800-353-9387) or visit the DTS Web site at http://www.dtsx.com. -0-

                   Digital Transmission Systems, Inc.
                     Unaudited Financial Highlights
                 (in thousands, except per share data)

                              Three Months Ended   Nine Months Ended
                                    March 31            March 31

                                1997      1996       1997     1996
                                ----      ----       ----     ----

Net sales                    $ 4,095   $ 3,210    $10,773  $ 7,851
Gross profit                   1,762     1,331      4,528    3,384
Operating expenses:
  Product development            419       642      1,795    1,791
  Selling, general and
   administrative              1,551       926      4,346    2,852
Net income (loss)               (187)     (217)    (1,532)  (1,383)
                             =======   =======    =======  =======

Net income (loss) per common
  and common equivalent
  shares for 1997 and per
  pro forma common shares
  for 1996 (see note)        $ (0.05)  $ (0.08)   $ (0.39) $ (0.44)
                             =======   =======    =======  =======

Weighted average common and
  common equivalent shares
  outstanding for 1997 and
  pro forma common shares
  outstanding for 1996
  (see note)                   4,024     2,723      3,968    2,790

Note: Net income (loss) per share and weighted average shares are shown on a pro forma basis for the quarter and nine months ended March 31, 1996, giving effect to the conversion of preferred stock and associated dividends into common stock on March 4, 1996. Refer to the Company's 10-QSB report for information regarding both historical and pro forma presentations of the Company's earnings per share.

CONTACT: Digital Transmission Systems, Inc.

Kathleen J. Howard (Shareholders)

770-798-1300 ext. 226

[e-mail]

or

Bonnie Bajorek (Media Contact)

770-798-1300 ext. 265

[e-mail]