Reti Telematiche Italiane : Retelit plans the investments around its participation in the AAE-1 Consortium

PRESS RELEASE

With its entry into the consortium that will lay the AAE-1 undersea cable system, Retelit is set to become one of the leading telecommunication gateways for the Mediterranean.

145 million Euro in returns are envisaged over the first ten years of the "AAE-1 undersea cable" project, against an overall initial investment of 58 million Euro and a further 12 million Euro that will be spent during this time to develop the inherent business. Furthermore, thanks to the expected infrastructure investments, additional revenue could be generated with the increased capacity and extension of the network into Italy and Europe.

The project will be financed using its own resources with debt and equity resources procured following the strategic investment agreement signed with KBC Telco Infrastructure Pty Ltd, a company fully held by Keybridge Capital Limited (Australian company listed on the AMX).

Following on from its press releases on 12.9.2014 and 17.9.2014, and as required by the Italian Companies and Stock Exchange Commission, the Company advises of the following:
As noted in its press release dated 17.9.2014, on 16.9.2014 Retelit has finalised its entry into the consortium for the construction and management of the state-of-the-art undersea cable system called "AAE-1" that will connect Europe, Africa, the Middle East and Asia right up to Hong Kong.
The consortium was established on 27.1.2014 and currently numbers 19 International Carriers including: China Unicom, Djibouti Telecom, Etisalat, Mobily, Omantel, OTEGLOBE, Ooredoo, PCCW Global, Pakistan Telecommunication Company Limited (PTCL), Telecom Egypt, TOT, Viettel.
The Company's overall contribution to the consortium stands at USD 45 million: this will guarantee the
Company a portion of approximately 6% of the capacity available from the AAE-1 undersea cable.
The term for the consortium corresponds to the twenty year useful life span of the AAE-1 undersea cable, which will become effective from the completion of the project, expected at the end of 2016, with possible future extensions depending on the technical developments available on the market.
With the establishment of its technical and administrative committees, the consortium will be able to ensure the success of the entire implementation phase and subsequent operation of the AAE-1 undersea cable.
Once the undersea cable system becomes operational, the Company envisages that it will start generating returns from the sale of connectivity services on the undersea cable to the reference market of International Carriers, that already represent the Retelit Group's core business. It is expected specifically that most of the traffic that will be produced over the next few years will be channelled by the operator members of the consortium towards the major European destinations, in line with the Group's business strategies that are already in place. This will also create leverage on the Italian and European network that the Group will have available thanks to the appropriate upgrades that are being planned. Similarly, by leveraging the extensive portfolio of current Retelit customers, international connectivity services can be provided through the AAE-1 undersea cable towards the Middle East and Far East, which are both destinations that are becoming increasingly important for European operators and companies.
With regard to the project, 145 million Euro in returns are envisaged over the first ten years that the undersea cable is operational (2017-2026), in addition to the benefits resulting from increased capacity and the extended network into Italy and Europe, together with the consequent improved management efficiency.
At Group level, additional infrastructure synergy investments are expected in relation to the project, which will include both sections on land in Italy and on some of the European lines. Retelit will see to the connection to Italy and to Europe with the construction of a Landing Station in Bari and upgrading of its land network up to Frankfurt, Marseilles and London. The project also includes extending the Group's proprietary backbone infrastructure in Italy towards the main European cities. In this way, Retelit will become one of the most important gateways in the Mediterranean between Europe and Asia, Africa and the Middle East. The Group's total investment to implement the AAE-1 undersea cable project is estimated at around Euro 58

million, which includes the amount of USD 45 million referred to above. Additional investments estimated overall at Euro 12 million will also be needed to develop the relevant business over this period.
With reference to the relative methods of financing, according to the assessments made by the Company as of today's date, it is envisaged that the total estimated investment indicated above will be supported through financial resources obtained via:
a. Group liquidity: we note that at 30.9.2014, the Group had approximately Euro 15 million in liquid assets and that at said date, had already paid the first tranche of its stake to the consortium to implement the AAE-1 undersea cable system, equal to 10% of the same, or US$ 4.5 million. It is noted further that the Group also holds a credit with the sale of the business unit known as "WiMax" on 25.11.2013 for approximately Euro 22 million, which will be paid over 4 equal instalments of Euro 5.5 million each, between November 2014 and November 2017.
b. cash-flow generated by the Group's current business.
c. procuring resources through debt securities, totalling Euro 20 million, through the signing of convertible bonds to be issued by the Company and subscribed by KBC Telco Infrastructure Pty Ltd, a company fully held by Keybridge Capital Limited (Australian company listed on AMX), as per the investment agreement signed between said investor and the Company on 1.10.2014. We recall that pursuant to said agreement, KKBC Telco Infrastructure Pty Ltd has also indicated its willingness to disburse an advance (bridge loan) in respect of the issuing of the first series of convertible bonds and, therefore, in an amount equal to Euro 10 million, which will be repaid at the same time that the first series of convertible bonds are issued.
d. by procuring resources through equity, up to a maximum of Euro 30 million, through a combination of the following factors: the exercising of warrants by KBC Telco Infrastructure Pty Ltd (which will be assigned to the latter at the time of issuing the convertible bonds) and the conversion of the convertible bonds by KBC Telco Infrastructure Pty Ltd.
Kindly refer to the press release issued on 2.10.2014 regarding the contents of the investment agreement signed on 1.10.2014 with KBC Telco Infrastructure Pty Ltd.
The Group has begun implementing the first phase of its international expansion that it had announced with this highly strategic transaction. The Group's updated Industrial Plan that will reflect the effects of introducing the AAE-1 undersea cable project, will be approved during the last quarter of the year, as already stated in the press release published on 8.8.2014.

With the availability of over 7,600 kilometres of fibre optics, 8 metropolitan networks and 18 data centres, Retelit is one of the leading Italian providers of data transmission services and infrastructure for the telecommunications and ICT markets. Since 2013, thanks to significant investment in new technologies, Retelit's product range has widened with new-generation ultra-broadband VPN services, as well as cloud storage and data-centre services providing added value. Retelit has been listed on the electronic stock exchange (MTA) of the Milan Stock Exchange since 2000.

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