NNG Newport Network

RNS Number:1766W
Newport Networks Group PLC
23 December 2005


23 December 2005


            Newport Networks Group PLC ("Newport" or the "Company")

   Proposed placing of 103,333,333 new Ordinary Shares to raise #15.5 million


Summary of the Placing:

*    Placing of 103,333,333 new Ordinary Shares at a placing price of 15p
     (the "Placing") to raise #15.5 million (before expenses).

*    Funds raised to be used to strengthen Newport's balance sheet and
     provide additional working capital for the Group.

*    Newport is achieving market traction and has supplied to 13 customers in
     2005.

*    Newport is in negotiations on a significant contract to supply a tier-1
     Operator via a tier-1 Network Equipment Vendor.

*    Newport has a gross prospect pipeline in 2006 of #40 million including
     18 of the top 50 Operators in the world.

Sir Terence Matthews, Chairman of Newport, comments: "Newport continues to gain
market traction. We are currently concluding negotiations on a significant
contract to supply a tier-1 Operator via a tier-1 Network Equipment Vendor. In
addition, we have a 2006 gross prospect pipeline in excess of #40 million with
the majority of the business prospects derived from the tier-1 carrier
community. We believe today's Placing gives Newport the financial resources to
exploit this fast growing market."

A circular containing a notice of extraordinary general meeting convened for
10.00 a.m. on 23 January 2006 has today been sent to shareholders of the Company
outlining the terms of the Placing and seeking Shareholder approval to, inter
alia, enable the Directors to allot the Placing Shares in connection with the
Placing.

This summary should be read in conjunction with, and is subject to, the full
text of the attached announcement.


Enquiries:

John Everard, Chief Executive                Simon Hudson
Newport Networks Group PLC                   Tavistock Communications
Tel: 01291 635830                            Tel: 020 7920 3150 or 07966 477256



            Newport Networks Group PLC ("Newport" or "the Company")

    Proposed placing of 103,333,333 new Ordinary Shares to raise #15.5 million

1. Introduction
The Board of Newport announces today that it proposes to raise #15.5 million
(before expenses) by way of a placing of 103,333,333 new Ordinary Shares at a
price of 15 pence per share. The net proceeds of the Placing will strengthen the
Company's balance sheet, enabling the Group to complete its current business
plan, and provide general working capital for the Group. The Placing is
conditional, inter alia, upon the Company obtaining approval from its
Shareholders to increase its authorised share capital, to grant the Board
authority to allot the Placing Shares and to disapply statutory pre-emption
rights which would otherwise apply to, inter alia, the allotment of the Placing
Shares. The Placing, which has been arranged and fully underwritten by Evolution
Securities pursuant to the terms of the Placing Agreement, is also conditional
upon Admission.


2. Background to and reasons for the Placing
Since its admission to AIM, the Company has progressed well in all areas of
operations, including the development of a broad range of sales opportunities
across North and South America, Europe and Asia. However, major projects in the
Company's primary target markets have experienced delays of approximately 6 to 9
months, resulting in the delay in larger orders for the 1460 Session Border
Controller.

As a result, the Company needs to raise new finance to enable it to complete its
current business plan. The net proceeds of the Placing will strengthen the
Company's balance sheet, reassure potential tier-1 customers and provide working
capital for the anticipated multi-million pound orders during 2006.

In the event that Shareholders do not approve the Resolutions and the Placing
does not proceed, the Board will need to consider alternative sources of
funding, which may or may not be forthcoming.


3. Market and Strategy
The VoIP market is forecast to continue on its steep growth curve with the
analyst company iLocus estimating that there will be approximately 130 million
VoIP subscribers by 2009. According to analyst firm Infonetics, the market for
carrier VoIP equipment will be $5.67 billion by 2008. Of this $5.67 billion, the
market for session border controllers is expected to be in excess of $516
million by 2008 (Source: Infonetics) up from approximately $100 million in 2005.
The Directors believe that market growth will be driven by three main factors:

1.    the continued growth of broadband voice services;

2.    the replacement of ageing voice network equipment with new VoIP systems by
      both fixed line and mobile Operators; and

3.    the use of VoIP equipment by Operators looking to deliver converged fixed
      line and mobile services.

The early VoIP and session border controller market has been primarily driven by
the development of broadband voice products. Contracts in the broadband voice
market are usually small, but from late 2005, it is expected that major
Operators will begin to replace their existing voice networks with IP/VoIP
technology. These Operators require high performance session border controllers
as part of that replacement program, which is the primary value proposition of
the 1460 Session Border Controller. Newport will continue to focus its sales and
marketing on the larger Operators in developed markets. Almost without
exception, such large Operators require that Newport products are procured via
large NEVs responsible for implementing Next Generation Network projects.
Consequently, the Company is expanding its range of large NEV partners to target
the network replacement market, convergence market and broadband voice markets.


4. Competition
The market for session border controllers remains buoyant with two NEVs (Jasomi
Networks and Kagoor Networks) being acquired during the first half of 2005. ACME
Packet claimed to have led the early market in mid-2005 (Source: ACME press
release 7 March 2005). Nextone recently received an additional $35 million
injection of venture capital to fund their commercial expansion and Netrake
continues to compete in specific markets. Newport believes that it has a clear
lead in high end session border controllers that positions the Company
favourably, especially for the PSTN replacement market.


5. Current trading and prospects
As detailed in the un-audited interim results of the Company announced on 27
September 2005, trading conditions for the Company remain encouraging.  Newport
has signed four regional channels during Q4 2005 to address specific markets. As
of 22 December 2005, the Company has received orders amounting to approximately
#1.5 million. Orders to date have been received from 13 customers (4 in the
Americas, 4 in Europe and 5 in Asia-Pacific). Further orders are anticipated
before year end. The final timing and acceptance terms of some of the 2005
orders are likely to result in some of the corresponding revenues being
recognized in 2006.

The Directors are pleased to report that a tier-1 operator intends to use the
Newport 1460 to provide the session border controller components of its next
generation network rollout that the Directors anticipate will commence in early
2006. The Newport 1460 is expected to be supplied via an OEM agreement with a
tier-1 NEV and is conditional on the tier-1 NEV being formally appointed by the
tier-1 Operator as the prime contractor. Non disclosure agreements prohibit the
Company from disclosing further information at this stage. There can be no
guarantee that the tier-1 NEV will be formally appointed by the tier-1 Operator
or that Newport will receive its anticipated order.

In addition, principally due to the delay of the tier-1 NEV contract described
above, the Board expects revenue for 2005 to be approximately #1 million and
therefore below market expectations.

Looking forward into 2006, the Company has current visibility of a 2006 gross
prospect pipeline in excess of #40 million, including potential business with 18
of the world's top 50 Operators. The Directors believe the Company has the
infrastructure in place to address 2006 opportunities with the objective of
becoming cash flow positive in early 2007.


6. The Placing
The Company proposes to raise approximately #14.6 million (net of expenses)
through the issue of the Placing Shares at the Placing Price. The Placing Price
represents a discount of 43.40 per cent. to the closing middle market price of
26.5 pence on 22 December 2005, being the last practicable date prior to this
announcement. The Placing Shares will represent 62.03 per cent. of the Company's
issued share capital immediately following Admission.

The Placing Agreement

Pursuant to the terms of the Placing Agreement, Evolution Securities has
conditionally agreed to use its reasonable endeavours, as agent for the Company,
to place the Placing Shares at the Placing Price with certain institutional and
other investors. The Placing has been fully underwritten by Evolution
Securities. The Placing Agreement is conditional upon, inter alia, the
Resolutions being duly passed at the EGM and Admission becoming effective on or
before 8.00 a.m. on 25 January 2006 (or such later time and/or date as the
Company and Evolution Securities may agree, but in any event by no later than
8.00 a.m. on 31 January 2006).

The Placing Agreement contains warranties from the Company in favour of
Evolution Securities in relation to, inter alia, the accuracy of the information
contained in the Circular and certain other matters relating to the Group and
its business. In addition, the Company has agreed to indemnify Evolution
Securities in relation to certain liabilities it may incur in respect of the
Placing. Evolution Securities has the right to terminate the Placing Agreement
in certain circumstances prior to Admission, in particular, for force majeure or
in the event of a material breach of the warranties set out in the Placing
Agreement.

Under the Placing Agreement and subject to it becoming unconditional in all
respects and not being terminated in accordance with its terms, the Company has
agreed to pay Evolution Securities a commission of 5 per cent. on the value at
the Placing Price of the Placing Shares, together with all reasonable expenses
and any applicable value added tax.

Settlement and dealings

Application will be made to the London Stock Exchange for the Placing Shares to
be admitted to trading on AIM. It is expected that such Admission will become
effective and that dealings will commence on 25 January 2006.

The Placing Shares will, when issued, rank pari passu in all respects with the
Existing Shares, including the right to receive dividends and other
distributions declared following Admission. It is expected that CREST accounts
will be credited on the day of Admission and that share certificates (where
applicable) will be dispatched by first class post by 9 February 2006.

Directors' participation in the Placing

Sir Terence Matthews, John Everard and John Ackroyd have agreed to subscribe for
6,666,667, 666,667 and 666,667 Placing Shares respectively at the Placing Price.
This represents a total of 7.74 per cent. of the Placing Shares. None of the
other Directors will participate in the Placing.


7. Use of Proceeds
The net proceeds of the Placing will be approximately #14.6 million. The
proceeds will be used to strengthen the Group's balance sheet and to satisfy the
general working capital requirements of the Group following Admission.


8. Extraordinary General Meeting
The circular to be sent out to Shareholders today contains a notice convening
the EGM to be held on 23 January 2006 at the offices of Speechly Bircham at 6 St
Andrew Street, London EC4A 3LX at 10.00 a.m. at which the Resolutions, all of
which are inter-conditional, will be proposed for the purposes of implementing
the Placing.


                                PLACING STATISTICS

Placing Price                                                               15p

Number of Existing Shares                                            63,249,500

Number of Placing Shares being placed 
on behalf of the Company                                            103,333,333

Estimated proceeds receivable by the 
Company, net of expenses                                          #14.6 million

Number of Ordinary Shares in 
issue following Admission                                           166,582,833

Number of Placing Shares as a percentage
of the enlarged issued share capital                             62.03 per cent



                      EXPECTED TIMETABLE OF PRINCIPAL EVENTS

Latest time and date for receipt of Forms of 
Proxy                                             10.00 a.m. on 21 January 2006

Extraordinary General Meeting                     10.00 a.m. on 23 January 2006

Admission and dealings in the Placing
Shares expected to commence on AIM                 8.00 a.m. on 25 January 2006

Expected date for CREST stock accounts
to be credited for Placing Shares in
uncertificated form                                             25 January 2006

Expected date for posting of share
certificates for Placing Shares                              by 9 February 2006



                                   DEFINITIONS

The following definitions apply throughout this announcement unless the context
otherwise requires:

"Admission"    admission of the Placing Shares to trading on AIM becoming
               effective in accordance with Rule 6 of the AIM Rules

"AIM"          the AIM market operated by the London Stock Exchange

"AIM Rules"    the AIM rules for companies published by the London Stock
               Exchange from time to time

"Company" or   Newport Networks Group PLC
"Newport"

"CREST"        the relevant system (as defined in the Uncertificated Securities
               Regulations 2001) in respect of which CRESTCo Limited is the
               operator (as defined in those regulations)

"Directors"    the directors of the Company or any duly authorised committee
or "Board"     thereof

"EGM"          the extraordinary general meeting of the Company to be held at
               the offices of Speechly Bircham at 6 St Andrew Street, London
               EC4A 3LX at 10.00 a.m. on 23 January 2006 (or any adjournment
               thereof)

"EGM Notice"   the notice convening the EGM

"Evolution     Evolution Securities Limited, the Company's nominated adviser
Securities"    and broker

"Existing      the Ordinary Shares in issue at the date of this announcment, all
Shares"        of which are admitted to trading on AIM

"Group"        the Company, its existing subsidiaries and subsidiary
               undertakings

"London Stock  London Stock Exchange plc
Exchange"

"Ordinary      ordinary shares of 5 pence each in the capital of the Company
Shares"

"Placing"      the conditional placing of the Placing Shares by Evolution
               Securities, as agent on behalf of the Company, pursuant to the
               Placing Agreement

"Placing       the conditional agreement dated 23 December 2005 and made between
Agreement"     Evolution Securities and the Company in relation to the Placing

"Placing       15 pence per Placing Share, being the price at which each Placing
Price"         Share is to be issued under the Placing

"Placing       the 103,333,333 Ordinary Shares to be issued pursuant to the
Shares"        Placing

"Resolutions"  the resolutions to be proposed at the EGM as set out in the EGM
               Notice

"Shareholders" holders of Ordinary Shares

"UK"           the United Kingdom of Great Britain and Northern Ireland

"US" or        the United States of America, each State thereof, its territories
"United        and possessions (including the District of Columbia) and all
States"        other areas subject to its jurisdiction

"$"            US Dollars, the lawful currency of the United States



                                    GLOSSARY

Bandwidth        used to describe the rated throughput capacity of a given
                 network medium or protocol.

broadband        a type of data transmission in which a single medium (wire) can
                 carry several channels at once.

Circuit-Switch   the means by which a dedicated communications path is
                 established between the sender and receiver along which all
                 Packets travel. The connection is referred to as a circuit
                 because two points are connected in both directions.

1460 Session     the Newport Networks Group PLC 1460 Session Border Controller
Border           product.
Controller or
Newport 1460

IMS              IP Multi-media Subsystem.

IP               internet protocol. A specification that defines a method by
                 which information is sent over data networks.

NEV              network equipment vendor.

Operator         an organisation that provides a service via the Internet or any
                 other public communications network.

Packets          a logical grouping of information that includes a header
                 containing control information (e.g. receipient address, etc.)
                 and (usually) data. Typically, a large number of Packets are
                 required to transfer the user data relating to a telephone call
                 or file transfer.

Packet-Switching a means of routing individual Packets, containing units of
                 data, to their destination, though a network based on a
                 destination address contained within each Packet. Multiple
                 streams of data share resources within the network, which
                 maximises the efficient use of the resources.

PSTN             public switched telephone network.

session border   session boarder controllers provide security, quality and call
controller       accounting in public, internet-based communications. They are
                 intelligent agents that sit within the edges of carrier
                 networks and carry out the following functions: (i) ensure
                 control of the movement of traffic between networks
                 ("peering"); (ii) provide intelligent transportation of data
                 within carrier networks; (iii) allow traffic to flow securely
                 across the internet and through firewalls at the local level
                 ("access"); and (iv) monitor traffic flows for charging
                 purposes.

tier 1           a tier 1 internet service provider is a telephone company or
                 internet service provider IP network which connects to the rest
                 of the internet only via a practice known as "peering". Tier 1
                 refers to the position at the top level of the hierarchy of
                 network providers; i.e. the tier 1 providers own the physical
                 medium over which information is carried, as well as the
                 network equipment which manages that information.

VoIP             voice over IP. A general term for the technologies that use the
                 IP's Packet-Switched connections to send voice information that
                 would have traditionally been carried over the dedicated
                 Circuit-Switched connections of the PSTN.








                      This information is provided by RNS
            The company news service from the London Stock Exchange

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