ECI Telecom Announces Finalization of Purchase Of IP Telephony Manufacturing and Development Division Of NKO Inc.

PETAH TIKVA, Israel--(BUSINESS WIRE)--Sept. 15, 1998--ECI Telecom Ltd. (NASDAQ/NM symbol: ECILF) and NKO Inc. announced today that they have finalized the purchase of NKO's R&D division, including the assets technology and patents relating to voice and Fax over IP as well as transfer of all R&D personnel.

This announcement follows a previous announcement made on July 21, 1998, on the signing of an MOU agreement for this purchase.

The new R&D division will be integrated into ECI Telecom's existing Hi-PNet(TM) next generation, carrier class Voice over IP solutions development division.

ECI Telecom is expected to record a one time write off of approximately $14.3 million, reflecting the goodwill of the purchase, in its financial results of Q3, 1998.

Mr. David Rubner, President and CEO, ECI Telecom said: "The acquisition of NKO's R&D division and its technology is an additional step towards realizing ECI Telecom's IP Telephony strategy. NKO's world class team of experts will further enhance ECI Telecom's offerings in the area of managed IP networks, customer support, customer provisioning, billing and quality of service."

Mr. Doron Nevo, President of NKO Inc. said: "ECI Telecom is a world class telecommunications vendor and together with NKO's Systems Division will make a significant contribution to the Voice over IP (VoIP) marketplace, offering carrier class, high quality IP telephony."

Mr. Tzvika Friedman, ECI Telecom's Corporate Vice President and General Manager, Compression Technology, commented: "Numerous service providers have approached ECI Telecom as an experienced provider of reliable carrier class toll-quality DSP-based compression solutions, to provide a quality IP telephony solution for wide scale deployment. ECI Telecom is a world leader in toll quality compression equipment (DCME), providing full performance gateway solutions and compression of all types of signals. ECI Telecom has patented a variety of these solutions, amongst them facsimile detection and compression in different networks including IP networks. To respond to this market need, ECI Telecom chose to acquire NKO's Systems Division with its vast experience in marketing, developing and operating a full scale of carrier class IP networks with live traffic. NKO's patented technology supports the integration of voice, fax, data and video as well as customer support and billing support, call record processing, network directory and provisioning management. These capabilities enable service providers to offer voice and fax over IP services immediately. This complete offering of Voice over IP (VoIP) solutions leverages ECI Telecom's applications and gateway solutions to provide end to end Voice over IP service and support."

Currently providing VoIP services to over a 1,000 international customers over its managed bandwidth Global backbone, NKO's systems integrate regional networks into managed IP networks providing customers with global connectivity.

This new acquisition enhances the existing strategic joint development and marketing alliance agreements that ECI Telecom has in this field. With the addition of NKO's technology to these strategic alliances, ECI Telecom now offers its customers a comprehensive end to end solution package for Multimedia and Telephony over IP.

ECI Telecom is currently developing a high density carrier class Gateway in cooperation with VocalTec. In addition, ECI Telecom will port the relevant voice compression and Fax demodulation capabilities from the DTX range of products to the Hi-Gate range of products that will enable true toll quality voice and fax to be offered by future versions of the Hi-Gate product range.

About ECI Telecom's IP Telephony capabilities:

The ECI Telecom Hi-PNet(TM) architecture is ECI Telecom's vision of the future of IP Telephony. It is a fully standards compliant (H.323, SIP) approach to the implementation of IP Telephony in the rapidly changing telecommunications industry. This implementation consists of a range of carrier-class IP Telephony gateways; Hi-Gate(TM), as well as a family of servers to provide value added IP Telephony services such as: EGK (ECI Telecom Gate Keeper), ECS (ECI Telecom Conference Server), EFS (ECI Telecom Forum Server) and ECCS (ECI Telecom Call Center Server).

ECI Telecom's new Gateway (Hi-Gate 1000) will provide high density carrier class solutions to the incumbent, next generation Telcos and ISPs enabling high grade Voice, Fax and multimedia services over the Internet/Intranet infrastructure.

A provider of integrated network solutions, ECI Telecom designs, develops, manufactures and markets digital telecommunications and data transmission systems, enabling network operators to deliver cost-effective services. ECI Telecom's systems provide capacity expansion, flexibility and management functions to more effectively utilize existing networks for voice, data, wide area and integrated networks.

About NKO:

Located in Florida, USA, NKO is an innovator in the converging telecommunications and interworking industry. Founded in 1995, NKO is composed of highly trained engineers and experts in telecommunications systems, distributed database management, international network operations and advanced software design.

This press release and additional information about the Company, is now available on ECI Telecom's site on the World Wide Web: http://www.ecitele.com.

Certain statements contained in this release, may contain forward-looking information with respect to plans, projections or future performance of the Company, the occurrence of which involves certain risks and uncertainties, including but not limited to product and market acceptance risks, the impact of competitive pricing, product development, commercialization and technological difficulties and other risks detailed in the Company's filings with the Securities and Exchange Commission.

CONTACT: ECI Telecom Ltd.

Doron Inbar

30 Hasivim Street,

Petah Tikva, 49133

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or

ECI Telecom Ltd

Leo Hinkley

1201 W Cypress Creek Rd

Fort Lauderdale, FL 33309

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