XFN Xfone Common Stock

XFONE, Inc. (NYSE Amex and TASE: XFN) (“Xfone” or “the Company”) announces results for the three and nine months ended September 30, 2011.

Revenue

Revenue from the Company’s Fiber-To-The-Premise (FTTP) business grew 30% to $3.4 million in the quarter ended September 30, 2011, as compared to approximately $2.6 million in the third quarter of 2010. Sequentially, FTTP revenues increased 12.4% as compared to the second quarter of 2011. FTTP revenues represented 23.4% of total revenues for the third quarter of 2011 as compared to 17.6% of total revenues for the third quarter of 2010.

Consolidated revenues for the quarter ended September 30, 2011 were $14.6 million, a decrease of 2.5%, compared to $15.0 million in the quarter ended September 30, 2010 but up 3.6% from $14.1 million in the second quarter of 2011. The year over year revenue decline is related to attrition in non-FTTP residential customers and legacy wholesale business.

For the first nine months of 2011, revenue from the Company’s FTTP business grew 29% to $9.4 million from $7.3 million in the first nine months of 2010. Consolidated revenues for the nine months ended September 30, 2011 were $43 million, a decrease of 2.3% compared to consolidated revenues of $44.0 million in the nine months ended September 30, 2010.

Customer Expansion

The Company’s total number of FTTP customers as of September 30, 2011 was 6,620 compared to 5,433 FTTP customers as of September 30, 2010 with sequential growth of 8% from 6,111 FTTP customers as of June 30, 2011.

Average Revenue Per User (ARPU) for all of the Company’s fiber markets is approximately $392 per month for business customers and approximately $95 per month for residential customers.

Xfone has continued to make progress on construction of its PRIDE Network, a project almost entirely financed by $99.9 million in funds from the Federal Broadband Stimulus Program, of which 45.9% is in the form of grants and 54.1% is in the form of low cost long-term loans. Following the end of the quarter, the Company signed its first PRIDE Network customers in Brownfield and Whitharel, Texas.

During the quarter, Xfone announced the acquisition of Reach Broadband’s approximately 1,800 cable customers and equipment in Brownfield, Anton, Abernathy, Hale Center, Idalou, O’Donnell, Olton and Tahoka, Texas. The transaction is expected to close, pending various approvals, on December 1, 2011. This transaction complements the acquisition of Cobridge Telecom which included approximately 2,400 cable customers and was closed on July 1, 2011. Cobridge contributed revenues to the Company’s non-FTTP results in the third quarter of 2011. Xfone plans to offer these non-FTTP customers the opportunity to upgrade their service to include high speed internet, voice and enhanced video services.

New Market Progress

During the quarter, Xfone brought its FTTP network to two new markets, Burkburnett and Brownfield, Texas and has seen robust customer acceptance of the Company’s triple play offering. Likewise, Xfone continued to make excellent progress in the Littlefield, Texas market where it established its FTTP network during the second quarter and has sold to more than 30% of that market as of the end of the third quarter.

Click Here to View FTTP Trendline Charts

EBITDAS

EBITDAS (earnings before interest, taxes, depreciation, amortization and stock-based compensation) for the third quarter of 2011 was $2.4 million, a 23.9% increase over the same quarter last year and a 12.5% increase sequentially when compared to the second quarter of 2011. EBITDAS margin in the quarter ended September 30, 2011 was 16.2% compared to EBITDAS margin of 12.7% for the quarter ended September 30, 2010.

Net Income

The Company had net income of $871,000 or $0.04 per diluted share assuming 21,119,488 shares outstanding for the quarter ended September 30, 2011 compared to a net loss from continued operations of $1.5 million or a loss of $0.07 per diluted share assuming 21,169,288 shares outstanding for the quarter ended September 30, 2010.

For the nine months ended September 30, 2011, the Company reported a net loss from continued operations of $443,000 or a loss of $0.02 per diluted share, assuming 21,119,488 shares outstanding compared to a net loss of $2 million or a loss of $0.10 per diluted share, assuming 20,295,714 shares outstanding for the nine months ended September 30, 2010.

The Company recorded a net financing income of $421,000 for the three months ended September 30, 2011 compared to net financing expense of $2.3 million in the three months ended September 30, 2010. The net financing benefit is related to the valuation of the U.S. Dollar to the New Israeli Shekel.

Balance Sheet

Following the close of the third quarter, Xfone announced that it had raised $6 million in a successful rights offering to shareholders. Taking into account the oversubscription privileges, there was a demand for 95% of the offered shares. In connection with the consummation of the rights offering, on November 2, 2011, the Company issued 20,067,108 shares of its common stock at a purchase price of $0.30 per share.

In addition, also subsequent to the close of the quarter, Xfone received long-term funding of $7.5 million related to its loan agreement with ICON Agent LLC. This financing will be used in part to pay off the Company’s short term debt.

Mr. Guy Nissenson, Xfone’s President and CEO, commented, “The build out of our high margin fiber network is proceeding on schedule and below budget. We are particularly pleased by the acceptance rate for our services in our new market, Littlefield, Texas where we’ve sold to more than 30% of that market since we launched in June. Likewise, we have made strategic customer base acquisitions to further augment our organic growth through the addition of the cable customers of Cobridge Telecommunications last quarter and through the anticipated close of Reach Broadband next month.

“We are very pleased to have recently completed our rights offering, which resulted in raising approximately $6 million for our Company. The successful completion of the rights offering and the funding of our $7.5 million loan agreement with ICON, significantly strengthens our capital structure and enhances our liquidity. This funding has dramatically fortified our working capital and we intend to use the additional resources to pay down our debt and to expand our FTTP sales and marketing efforts with the goal of increasing our presence in new and existing markets.”

Conference Call:

The Company will host a conference call today, November 15, 2011 at 10:00 a.m. Eastern Time to discuss its financial results. The conference call may be accessed in the U.S. and Canada by dialing toll-free 1-877-407-8035. International callers may access the call by dialing 1-201-689-8035.

A replay of the teleconference will be available for 30 days after the call and may be accessed domestically by dialing 1-877-660-6853 and international callers may dial 1-201-612-7415. Callers must enter account number 286 and conference number 383174.

To access the live webcast, log onto the Xfone website at http://www.xfone.com. The webcast can also be accessed at http://www.InvestorCalendar.com. An online replay will be available shortly after the call.

About XFONE, Inc.

Xfone is a provider of high speed broadband services, including Internet access, digital cable TV programming and local and long distance telephone service to residential and business customers in northern Texas and southeastern Louisiana. Xfone's Fiber-To-The-Premise (FTTP) network provides one of the fastest internet connections available. The Company currently has operations in Texas, Mississippi and Louisiana and also serves customers in Arizona, Colorado, Kansas, New Mexico and Oklahoma. For the company's website, please visit: www.xfone.com.

In addition to disclosing financial measures prepared in accordance with Accounting Principles Generally Accepted in the US (GAAP), this press release and the accompanying tables contain the following non-GAAP financial measures: non-GAAP EBITDAS (non-GAAP earnings before interest, taxes, depreciation, amortization and stock-based compensation, other expenses and non-recurring loss). The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP.

There are a number of limitations related to the use of non-GAAP EBITDAS. First, these non-GAAP financial measures exclude depreciation and amortization expenses that are recurring and significant non-recurring expenses. First, Depreciation and amortization have been, and will continue to be for the foreseeable future, a significant recurring expense with an impact upon our company notwithstanding the lack of immediate impact upon cash. Second, there is no assurance the components of the costs that we exclude in our calculation of non-GAAP operating loss do not differ from the components that our peer companies exclude when they report their results of operations. Third, there is no assurance we will avoid further non-recurring costs associated with other balance sheet items. Our management compensates for these limitations by providing specific reconciliation of GAAP amounts to these non-GAAP financial EBITDAS and evaluating these non-GAAP financial measures together with their most directly comparable financial measures calculated in accordance with GAAP. Readers should note the chart at the end of this release which sets forth how we calculate the non-GAAP EBITDAS.

This press release contains forward-looking statements. The words or phrases "would be," "will allow," "intends to," "will likely result," "are expected to," "will continue," "is anticipated," "estimate," "project," or similar expressions are intended to identify "forward-looking statements." XFONE's financial and operational results reflected above should not be construed by any means as representative of the current or future value of its common stock. All information set forth in this news release, except historical and factual information, represents forward-looking statements. This includes all statements about the Company's plans, beliefs, estimates and expectations. These statements are based on current estimates and projections, which involve certain risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. These risks and uncertainties include issues related to: rapidly changing technology and evolving standards in the industries in which the Company and its subsidiaries operate; the ability to obtain sufficient funding to continue operations, maintain adequate cash flow, profitably exploit new business, license and sign new agreements; the unpredictable nature of consumer preferences; and other factors set forth in the Company's most recently filed annual report and registration statement. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management's analysis only as of the date hereof. The Company undertakes no obligation to publicly revise these forward-looking statements to reflect events or circumstances that arise after the date hereof. Readers should carefully review the risks and uncertainties described in other documents that the Company files from time to time with the U.S. Securities and Exchange Commission.

Xfone, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

    Three months ended   Nine months ended

September 30,

September 30,

2011   2010 2011   2010 Revenues Services on Fiber-To-The-Premise network $ 3,417,271 $ 2,634,074 $ 9,403,832 $ 7,288,042 Leased local loop services and other   11,184,371   12,344,483   33,554,184   36,677,512 Total Revenues   14,601,642   14,978,557   42,958,016   43,965,554   Expenses Cost of services (excluding depreciation and amortization shown below) 7,063,847 7,169,583 20,925,151 21,354,450 Selling, general and administrative 5,202,866 5,988,544 15,730,833 17,910,714 Depreciation and amortization 1,453,983 1,091,206 3,850,446 3,144,840 Financing expenses (income), net (421,121 ) 2,340,159 2,831,573 3,597,274 Other expenses   115,453   159,712   405,299   453,048 Total Expenses   13,415,028   16,749,204   43,743,302   46,460,326   Income(loss) from continued operations before taxes and non-controlling interest

1,186,614

(1,770,647

)

(785,286 ) (2,494,772 )   Income tax benefit (expense)   (177,952 )   250,690   342,567   503,306   Net Income (loss) from continued operations 1,008,662 (1,519,957 ) (442,719 ) (1,991,466 )   Income (loss) from discontinued operations in the United Kingdom and Israel, before taxes (137,535 ) (957,320 ) (137,535 ) (862,444 )   Capital gain from the disposal of the discontinued operations in the United Kingdom and Israel - 1,217,374 - 1,217,374   Income tax expense on discontinued operations in the United Kingdom and Israel   -   (4,040 )   -   (189,295 )   Net income (loss) 871,127 (1,263,943 ) (580,254 ) (1,825,831 )   Less: Net income (loss) attributed to non-controlling interest (related to discontinued operations)   -   26,693   -   (136,786 )   Net income (loss) attributed to shareholders $ 871,127 $ (1,237,250 ) $ (580,254 ) $ (1,962,617 )   Basic and diluted income (loss) per share: Income (loss) from continued operations $ 0.05 $ (0.07 ) $ (0.02 ) $ (0.10 ) Income (loss) from discontinued operations   (0.01 )   0.01   (0.01 )   - Basic and diluted income (loss) per share $ 0.04 $ (0.06 ) $ (0.03 ) $ $ (0.10 )   Basic weighted average number of shares outstanding:   21,119,488   21,119,488   21,119,488   20,295,714   Diluted weighted average number of shares outstanding:   21,119,488   21,169,288   21,119,488   20,295,714

Reconciliation of EBITDAS to Net income (loss) applicable to

common stockholders as it is presented on the Condensed Consolidated

Statements of Operations for Xfone, Inc.

    Three months ended   Nine months ended

September 30,

September 30,

2011   2010 2011   2010           Net income (loss) attributed to shareholders $ 871,127 $ (1,237,250 ) $ (580,254 ) $ (1,962,617 )   Depreciation and amortization 1,453,983 1,091,206 3,850,446 3,144,840 Compensation in connection with the issuance of warrants and options 24,567 84,129 166,194 535,512 Financing expense (income), net (421,121 ) 2,340,159 2,831,573 3,597,274 Other expenses 115,453 159,712 405,299 453,048 Net income attributed to non-controlling interest - (26,693 ) - 136,786 Income tax benefit 177,952 (250,690 ) (342,567 ) (503,306 ) Loss (income) from discontinued operations, after taxes   137,535   (256,014 )   137,535   (165,635

)

  EBITDAS $ 2,359,496 $ 1,904,559 $ 6,468,226 $ 5,235,902