DTS reports third quarter 1996 results and announces major contract.

ATLANTA--(BUSINESS WIRE)--May 8, 1996--Digital Transmission Systems, Inc. (NASDAQ:DTSXU), a leading telecommunications equipment manufacturer, today announced financial results for the third fiscal quarter ended March 31, 1996 and a multi-year contract with a PCS wireless service provider.

Revenues for the third quarter were $3.2 million compared to $3.0 million for the same period a year ago. This represents the highest quarterly revenues in the Company's history. The Company posted a net loss for the quarter of $217,000, or $0.08 per share--reflecting the Company's increased investment in new product development and a shift in product mix to newer products with lower initial gross margins. This compared to net income of $256,000, or $0.09 per share, for the third quarter last year.

For the nine-month period ended March 31, 1996, revenues increased to $7.9 million from $7.3 million reported for the same period a year ago. For this period, the Company posted a net loss of $1.2 million, or $0.44 per share. This compared to net income of $193,000, or $0.07 per share, for the first nine months of fiscal 1995.

"We are pleased with the Company's sales growth," said Andy Salazar, the Company's president and chief executive officer. "The Company experienced a significant increase in sales of newer products, including the FlexT1/E1 network access product, from the same quarter last year as well as from the second fiscal quarter of 1996. However, the FlexT1/E1 product line's lower gross margins, relative to our more established products, are reflected in our results. In our industry, economies of scale are realized as a product line grows."

During the third quarter of fiscal 1996, DTS entered into a multi-year contract with a major PCS (Personal Communications Services) service provider to furnish equipment for several of its largest MTAs (Major Trading Areas) in the United States. The contract provides for cell site network access and interconnect equipment, as well as the Company's CNCS (Communications Network Control System) for the provider's local and nationwide network control and surveillance.

"Our international business began to see increased sales during the third quarter," Salazar added. "We signed three major international reseller agreements, expanding our distribution channels in South America and Asia. We also received a sizable order from a cellular provider in Latin America for the FlexAir and SKYPLEX product lines."

Additionally, the Company completed its initial public offering of its securities which was declared effective on March 4. The Offering consisted of 1,070,000 units at an offering price of $7.50 per unit, each of which included one share of common stock and one warrant to purchase one share of common stock at $9.00 per share. Including units exercised from the underwriter's overallotment option, the Company sold 1,220,700 units in the Offering. The funds from the Offering will be used primarily to fund product development, sales and marketing efforts and for general corporate purposes.

Founded in 1990 and headquartered in Atlanta, DTS designs, manufactures, markets and services a broad range of telecommunications products worldwide. The Company's primary customers include long distance carriers and cellular service providers. The Company's products include the FlexT1(R) (domestic) and FlexE1(TM) (international) integrated network access product lines, as well as centralized network control systems and the FlexAir(TM) and SKYPLEX(R) wireless spread-spectrum digital transport systems. For more information about DTS and its products, phone 1-800-FLEX-DTS (1-800-353-9387). -0-

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

                              Three months ended    Nine months ended
                                   March 31             March 31
                                1996      1995       1996     1995
                                ----      ----       ----     ----

Net sales                      $3,210    $2,976     $7,851   $7,264
Gross profit                    1,331     1,627      3,384    3,886
Operating expenses:
 Product development              642       504      1,791    1,387
 Selling, general and
  administrative                  909       826      2,812    2,201
Net income (loss)               ($217)   $  256    ($1,214)  $  193
                               -------   ------    --------  ------
Net income (loss) per share    ($0.08)     $.09     ($0.44)    $.07
                               -------   ------    --------  ------
Pro forma weighted average
 shares outstanding
 (See Note Below)               2,723     2,955      2,790    2,935

-0-

Note to Editors: Due to the material difference between historical earnings per share and pro forma earnings per share, management has elected not to report historical earnings per share.

CONTACT: DTS, Atlanta

Kathy Howard, Investor Relations, 770/798-1300

Ext. 226

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