AVN.L Regulatory News (AVN)

Date: 6 February 2012

On behalf of: Avanti Communications Group plc ("Avanti" or "the Company")

Embargoed until: 0700hrs

Avanti Communications Group plc

Placing of £75m to fund proposed HYLAS 3 satellite

Avanti, the satellite operator, has today announced a conditional placing of 26,785,714 Ordinary Shares with new and existing institutional investors to raise approximately £73.8 million (net of expenses). The Placing is to enable Avanti to fully fund the cost of the design, construction and launch of HYLAS 3. HYLAS 3 will be a "hosted payload", flown on a new European Space Agency ("ESA") satellite which will also have a scientific purpose. HYLAS 3 would provide Ka band services, as with HYLAS 1 and 2. Under the terms of the programme, Avanti would retain ownership and operational control of the HYLAS 3 hosted payload.

Avanti has been selected by ESA to be the hosted payload partner after a competitive tendering process which was conducted by ESA in 2011. Final contractual terms with ESA are expected to be agreed and contracts signed in March 2012. Avanti and ESA have worked together successfully in the past on projects: in particular ESA and Avanti collaborated on ESA's first Public Private Partnership which led to the successful launch of HYLAS 1.

The Placing is conditional, inter alia, upon the passing by Shareholders of resolutions to give the directors power to allot additional Ordinary Shares, and to allot the Placing Shares on a non-pre-emptive basis.

Background to and reasons for the Placing

Avanti has established an advantage in the fast developing market for Ka band satellite services by financing the build, launch, insurance and operation of two satellites which, together, will serve Europe, the Middle East and Africa. Avanti's first satellite, HYLAS 1, launched in November 2010. HYLAS 2 is currently on track for a June 2012 delivery date and Avanti has notified Arianespace, its launch service provider, of its intention to launch within a one month window from 30 June 2012. HYLAS 1 launched on the first day of its launch window.

The sales of capacity on HYLAS 1 and pre-sales on HYLAS 2 to date, demonstrate that demand for Ka band satellite capacity is evident at the expected prices. Recent trends in market development, including the sale of £8.7 million of Ka band capacity in December 2011 and £14.0 million in January 2012 encourage the Company to expect that it will sell-out the capacity on HYLAS 1 within three years of service launch. In the light of the demand the Company is experiencing, it has also accelerated the guidance previously provided for the sell-out of HYLAS 2, from five years after service launch to four years (HYLAS 2 is three times the size of HYLAS 1 in terms of bandwidth capacity). Presently, the backlog of firm orders for each satellite, together with the weighted pipeline of customer contracts in negotiation and (for HYLAS 2) government options, is already equivalent to more than 50 per cent. of the capacity on each satellite at the time of its target fill date (April 2014 for HYLAS 1 and September 2016 for HYLAS 2). It is therefore expected that the level of new business to be identified and signed in the intervening period will meet the Company's objectives. In the Board's opinion, the highly flexibly nature of Avanti's satellite technology and coverage design, its unique patented products and its focus on resilience, encryption, security and quality is enabling Avanti to find application markets and customers who are buying on the basis of quality and technology features and benefits and not merely by reference to price. Therefore, the Company is confident that its capacity can be filled at the expected prices.

The Company sees strong demand for further Ka band capacity across the globe but in the current climate does not intend to pursue further equity fund raisings for satellites in addition to HYLAS 3. Subject to suitable market conditions the Company intends to seek a premium listing on the Official List of the London Stock Exchange in 2013.

The Placing, which will provide the Company with the resources necessary to fund the cost of HYLAS 3, is conditional, inter alia, upon the passing by Shareholders of resolutions to give the directors power to allot additional Ordinary Shares and to allot the Placing Shares on a non-pre-emptive basis. Accordingly, the General Meeting is being convened for the purpose of considering the Resolutions which will give the directors the necessary authorities.

The HYLAS 3 Project

HYLAS 3 will have up to 4GHz of Ka band capacity. This will be configured across eight beams within a single steerable antenna that can provide coverage of an area equivalent to a region the size of Southern Africa and can be moved throughout the life of the satellite. The satellite will be positioned in one of Avanti's orbital locations with an earth view covering Africa and the Middle East. Delivery into orbit is expected in 2015.

Avanti expects to experience strong demand for the capacity on HYLAS 3 for the following reasons:

·; the flexibility of coverage provided by the steerable beam will be of interest to some institutional and international customers who would see benefits from being able to move the coverage across a large geographic area depending on their needs;

·; the Company's existing customer relationships, developed through the sale of capacity on HYLAS 2, have given it insight into the business plans that underpin demand in certain countries for this amount of capacity;

·; the additional capacity would provide greater credibility to Avanti's existing offering and a path to growth for existing customers; and

·; as demand develops in different markets, Avanti would have the ability to move the capacity between regions so as to maximise price and also to manage fleet efficiency in future.

Following the launch of HYLAS 3, 80 per cent. of Avanti's capacity will address the emerging telecommunications markets of Africa and the Middle East.

The advantage of entering into a joint venture agreement with ESA is that Avanti reduces costs relating to the satellite platform, launch vehicle, insurance and project management. These savings would mean that Avanti would benefit from a satellite project cost per GHz that is over 40 per cent. cheaper than HYLAS 2. In addition, under the terms of ESA's proposals, Avanti would not be liable for any potential cost over-runs relating to the construction of the satellite bus (chassis). Given the overlapping geographic coverage of HYLAS 2 and HYLAS 3, there would be no additional operating expenditure relating to its HYLAS 3 hosted payload.

The advantage of pursuing the development of HYLAS 3 in this manner is that it would provide additional capacity at a lower risk and considerably lower price than the capacity derived from both HYLAS 1 and HYLAS 2 and that no further debt would be required for HYLAS 3.

The availability of finance had the highest level of weighting factor for ESA in its final selection criteria. As part of its successful final submission, and based on confidence from the experience of working with ESA on many projects, Avanti committed to raise the capital required in advance of final contract signature. Following the Placing, it is expected that final terms will be agreed and contracts signed in March 2012.

Current trading and prospects

Avanti has today announced its interim results for the six months ended 31 December 2011. These are available separately but key highlights are set out in this section.

Revenue recognised in the 6 months to December 2011 of £5.1 m (December 2010: £ 1.2 million) shows a steady acceleration over the £5.5 million recognised in the 12 months to June 2011. With a significant proportion of operational costs being non cash in nature the loss from operations of £6.8 million (December 2010: loss £6.3 million) shows only a £1.2 million outflow of cash from operations before working capital movements (December 2010: outflow £5.8 million).

The balance sheet remains strong, even though there is no carrying value for our orbital slots and frequency assignments. At 31 December 2011 the Company had drawn $227 million (June 2011: $190 million) of the HYLAS 2 debt facility. The full facility is $328 million which can be drawn over the next 12 months. The launch vehicle is fully paid and only one milestone remains on the satellite. The balance of expenditure on the HYLAS 2 project is the ground stations and the final instalment of the launch insurance premium.

Sales momentum for HYLAS 1 and 2 is building strongly, with £8.7m of sales booked in December 2011 and £14.0m in January 2012. This gives the Company confidence that it will fill both satellites within the timescale announced: three years from service launch for HYLAS 1 and the reduced term of four years for HYLAS 2. The Company expects HYLAS 3 to launch as it enters the final year of HYLAS 2's approach to full utilisation, providing the Company with the means to continue to serve the growing demand of its customers.

For the year ended 30th June 2012, the Company has clear visibility on revenues of £17 million for the year. It is bidding on contracts or they are under negotiation which could increase revenues materially.

Avanti is well positioned to benefit from demand growth and market adoption of new satellite technology and it is particularly fortunate to have over 80 per cent. of its fleet capacity now dedicated to emerging markets which are experiencing high underlying economic growth.

Details of the Placing

The Company has conditionally raised approximately £73.8 million (net of expenses) through the issue of the New Ordinary Shares at the Placing Price, which represents a discount of approximately 2 per cent. to the closing middle market price of 285.5p per Existing Ordinary Share on 3 February 2012, being the last practicable date prior to the publication of the circular. The New Ordinary Shares would represent approximately 24.0 per cent. of the Company's issued ordinary share capital immediately following Admission. Application will be made to the London Stock Exchange for the Placing Shares to be admitted to trading on AIM. It is expected that Admission will become effective and that dealings in the Placing Shares will commence on AIM at 8.00 a.m. on 23 February 2012.

The following Directors have committed to subscribe for New Ordinary Shares under the placing:

M&G Limited ("M&G") and Caledonia Investments plc ("Caledonia"), which own Existing Ordinary Shares representing approximately 14.72 and 14.99 per cent. respectively of the existing issued share capital of the Company, have committed to subscribe for 9,282,833 and 2,425,000 New Ordinary Shares respectively under the Placing. The commitment in relation to the Placing by M&G and Caledonia constitutes a related party transaction under the AIM Rules. The Directors of the Company consider, having consulted with Cenkos, that the terms of the transactions with both M&G and Caledonia are fair and reasonable insofar as the Company's shareholders are concerned.

Definitions used in this announcement have the same meaning as those used in the circular posted to shareholders today which can be found on the Company's website www.avantiplc.com.

---ENDS---

For further information please contact:

Avanti Communications Group Plc Tel: +44 (0)20 7749 1600

David Williams / Sean Watherston

Cenkos Securities plc Tel: +44 (0) 20 7397 8900

Nicholas Wells (Nomad) / Julian Morse (Sales)

Jefferies International Limited Tel: +44 (0) 20 7029 8000

Julian Smith / Thomas Rider

Redleaf Polhill Tel: +44 (0) 20 7566 6700

Emma Kane / Paul Dulieu

About Avanti

·; Avanti sells satellite data communications services to telecoms companies which use them to supply residential, enterprise and institutional users.

·; Avanti's first satellite called HYLAS 1, launched on November 26th 2010 and is the first superfast broadband satellite launched in Europe.

·; Avanti's second satellite, called HYLAS 2, is on target for launch in Q2 2012. It will extend Avanti's coverage to Africa and the Middle East.

·; Avanti's third satellite HYLAS 3, to be launched in partnership with ESA in 2015, will provide further capacity in the EMEA region

·; 80% of Avanti's fleet capacity will address the Emerging telecommunications markets of Africa and the Middle East.

Legal Notice

Cenkos Securities plc ("Cenkos"), which is authorised and regulated in the United Kingdom by the FSA, is acting for the Company as Nominated Adviser and Broker for the purposes of the AIM Rules in connection with the Placing and will not be responsible to anyone other than the Company for providing the protections afforded to customers of Cenkos or for providing advice in relation to the Placing and the other arrangements described in this announcement.

The release, publication or distribution of this announcement in certain jurisdictions may be restricted by law and therefore persons in such jurisdictions into which this announcement is released, published or distributed should inform themselves about and observe such restrictions.

This announcement is not an invitation nor is it intended to be an inducement to engage in investment activity for the purpose of section 21 of FSMA. The Placing Shares are in any event being placed only with (i) persons who have professional experience in matters relating to investments and who are investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 of the United Kingdom (the "Financial Promotion Order") or (ii) persons who fall within Article 49(2)(a) to (d) ("high net worth companies, unincorporated associations etc.") of the Financial Promotion Order (all such persons together being referred to as "relevant persons"). Any investment or investment activity to which this announcement relates is available only to relevant persons and will be engaged in only with relevant persons. Anyone other than a relevant person must not rely on this announcement.

The Placing Shares have not been, and nor will they be, registered under the United States Securities Act of 1933 as amended (the "Securities Act") or qualified for sale under the laws of any state of the United States or under the applicable laws of any of Canada, Australia, the Republic of South Africa or Japan and, subject to certain exceptions, may not be offered or sold in the United States or to, or for the account or benefit of, US persons (as such term is defined in Regulation S under the Securities Act) or to any national or resident of Canada, Australia, the Republic of South Africa or Japan.