Citel plc - First Day Dealings on AIM

This announcement is not for release, publication or distribution, in whole or in part, in or into the United States, Canada, Japan, the Republic of Ireland, South Africa, New Zealand or Australia or to any national, resident or citizen of the United States, Canada, Japan, the Republic of Ireland, South Africa, New Zealand or Australia.

July 7, 2006 – Citel plc ("Citel" or the "Company"), which designs, develops and markets a range of Voice over Internet Protocol (VoIP) solutions for the business telephony market, is pleased to announce its flotation today on the Alternative Investment Market (AIM) under the ticker symbol CITE.L.

The placing has raised £8.2 million (before expenses) for the Company. The net proceeds of £7.4 million enable the group to:

• Provide additional working capital to meet the needs of expansion driven by the anticipated upturn in product demand following the supply agreement with Sprint, and the expected demand from similar supply agreements with other Carriers which the Directors expect to sign.
• Meet increased marketing expenditures.
• Extinguish debt.
• Leverage intellectual property and exploit further product opportunities through research and development expenditure, such as extending PBX services to the wireless mobile telephone, wireless notebook and PDA markets.

Placing Statistics

Placing Price	95 pence
Number of new Ordinary Shares being placed on behalf of the Company	8,631,579
Estimated net proceeds receivable by the Company	£7.4 million
Number of Ordinary Shares in issue immediately following Admission	21,689,593
Gross Proceeds of Placing Shares	£8.2 million
Market capitalisation at the Placing Price	£20.6 million

Background

• Citel products enable enterprises to migrate their telephone systems from the traditional voice network to an IP-based data network, without replacing existing handsets and wiring infrastructure, thereby enabling enterprises to obtain the benefits of VoIP at significantly lower levels of capital expenditure compared to other solutions.
• The Directors are not aware of any significant direct competitor for Citel's Handset Gateway product.
• Sprint Nextel Corporation ("Sprin"'), the third largest telecommunications carrier in North America, in March 2006 signed a contract with the Company, which will involve Sprint offering Citel's Handset Gateway product to end-users as part of its VoIP service.
• The Company expects to enter into further supply agreements with a number of major telecom carriers, similar to the Sprint contract, as these carriers continue to roll out their hosted VoIP services. Citel also has established contractual relationships with several top-tier telephony equipment distributors including Catalyst, Westcon/VodaOne, Anixter and  GBH, and OEMs including 3Com, Avaya, Lucent, Mitel, NEC and Panasonic.
• Citel's products are in use by a number of blue chip customers including United Airlines, American Express, Deloitte and TD Waterhouse, Wachovia and Metlife.
• The market for VoIP services in 2004 in the United States, where Citel currently derives most of its revenues, was estimated to be worth US$1.2 billion* and is expected to grow to US$23.4 billion by 2009*, a compound annual growth rate of 79 percent. (*source Infonetics Research Inc.)
• The Company has generated revenues of £4.02 million for the year ended 31 March 2006, which represents a 265% increase against the previous year.

Market Opportunity and Strategy

Citel's technology enables legacy digital telephones to communicate using IP technology. As a result, a key metric for understanding the Company's core market opportunity is the installed base of digital telephones worldwide. According to Access Intelligence LLC (formerly PBI Media LLC), publishers of the InfoTrack for Enterprise Communications, there are currently 375 million digital business telephones installed world-wide. The Directors believe that these represent a total enterprise investment of well over US $100 billion.

Furthermore, the majority of new business telephones sold globally are still traditional non-IP digital telephones, and the Directors expect this to remain true for the next few years. Since new business telephones are typically placed into service for 10 to 15 years, the Directors estimate that the full migration to VoIP in the enterprise market will take up to 20 years to complete.

Citel's goal is to be a leader in the market for VoIP migratory solutions, through:

• Securing supply contracts for the provision of the Handset Gateway product with major telecoms carriers in the United States and overseas thereby capitalising on the growth in their hosted IP service and migration of their legacy circuit switched voice services to VoIP.
• Securing supply contracts for the provision of the Handset Gateway product with major data service providers, such as Covad, Earthlink and Speakeasy, as they roll out new VoIP services. Citel expects these providers to aggressively market their new VoIP services, as these provide incremental  revenue streams as well as offering an opportunity to enlarge their customer base and bundle voice and data offerings.
• Maintaining and expanding OEM and co-marketing relationships with major IP PBX manufacturers such as 3Com, Avaya, NEC and Panasonic.
• Building on Citel's leading market position and proprietary intellectual property to take the business into related markets such as fixed-mobile convergence.

Michael Robinson, CEO of Citel, said: "We are delighted by the response from institutional investors to the fund raising which reflects the strength of Citel's position in the rapidly expanding VoIP services marketplace. We now have the opportunity and the funds to increase production to meet current demand and agree further supply agreements with other major carriers, similar to our agreement with Sprint, as well as to expand our relationships with our important OEM and distribution partners."

About Citel plc

Citel enables SMBs, large enterprises and service providers to realize the cost and productivity benefits of IP telephony while at the same time leveraging their existing PBX infrastructure. Businesses with single or distributed locations and PBX vendors can now deploy next-generation IP applications and services at their own pace, with little business disruption. Service providers can deploy hosted IP telephony services quickly, without having to rip-and-replace existing enterprise PBX handsets and LAN cabling. Citel is a publicly traded company with corporate headquarters in Seattle, and development offices in Calgary, Alberta (Canada) and Nottingham, England (UK). For more information, visit www.citel.com.

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The contents of this announcement have been approved for the purposes of section 21 of the Financial Services and Markets Act 2000 as amended ('FSMA') by Panmure Gordon (Broking) Limited. Panmure Gordon (Broking) Limited is authorised and regulated in the United Kingdom by the Financial Services Authority in respect of regulated activities, is acting for Citel and for no-one else in connection with the matters described in this announcement and will not be responsible to anyone other than Citel for providing the protections afforded to customers of Panmure Gordon (Broking) Limited or for advising them on the contents of this announcement or any matter referred to herein.

This announcement does not constitute or form part of any offer or invitation to sell or issue or any solicitation of any offer to purchase or subscribe for any securities in any jurisdiction, nor shall it (or any part of it) or the fact of its distribution form the basis of, or be relied upon in connection with, or act as any inducement to enter into, any contract or commitment therefore.

Recipients of this announcement who intend to purchase or subscribe for shares in Citel following publication of the final admission document are reminded that any such purchase or subscription must only be made solely on the basis of the information contained in the admission document relating to Citel in its final form.

The securities to be offered in the proposed placing must not and will not be offered to the public in the United Kingdom (within the meaning of section 102B FSMA) save in circumstances where it is lawful to do so without an approved prospectus (within the meaning of section 85 FSMA) being made available to the public before the offer is made.

Shares 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 of 1933, as amended ('Securities Act')) absent registration or an exemption from registration; and any public offering of shares to be made in the United States will be by means of a prospectus that may be obtained from the issuer or the selling security holder and that will contain detailed information about Citel and management, as well as financial statements. Citel does not presently intend to register any securities under the Securities Act or under the securities legislation of any province or territory of Canada, Japan, the Republic of Ireland, South Africa, Australia or New Zealand. Securities may not, subject to certain exceptions, be offered or sold directly or indirectly into Canada, Japan, the Republic of Ireland, South Africa, Australia or New Zealand, or to any national citizen or resident of Canada, Japan, the Republic of Ireland, South Africa, New Zealand or Australia.

Copyright 2007, Citel plc. All Rights Reserved.

Citel and The VoIP Migration Company are trademarks of Citel Technologies, Inc. All other product and company names mentioned herein may be trademarks of their respective owners.