F.T.S. - FORMULA TELECOM SOLUTIONS LTD.

AND ITS SUBSIDIARIES

(An Israeli Corporation)

CONSOLIDATED INTERIM FINANCIAL STATEMENTS 

AS OF JUNE 30, 2008

F.T.S FORMULA TELECOM SOLUTIONS LTD. AND ITS SUBSIDIARIES

(An Israeli Corporation)

Formula Telecom Solutions Ltd. (FTS) Announces Interim Results

For the Six Months Ended June 30, 2008

London, UK | August 21, 2008: FTS (LSE: FTS), a global provider of Billing, CRM and Business Control solutions for communications and content service providers, today announced it's results for the six months ending June 30, 2008.

Highlights: 

"In the first six months of 2008 the growth in our operations exceeded the expectations of our Board of Directors," said Amos Sivan, FTS' Chief Executive Officer. "FTS has focused its efforts on the implementation of new contracts and succeeded in meeting the challenges of the competitive telecommunications market. We are extremely confident in our strong pipeline, breadth of products and roadmap and are currently negotiating several new projects, which we expect will materialize in the second half of the year. We are very pleased with our results, which would not have been possible without the commitment of our experienced management team and the dedication of our excellent employees. In line with our consistent track record of successful M&As, we will continue to examine potential fusions that will allow us to further increase our profitability and revenues."

Commenting on recent share movements, CEO Sivan added: "FTS has noted the recent decline in its share price, which was due to a forced sale, unrelated to FTS, by a shareholder who experienced difficulties and was forced to dispose of all his FTS holdings, amongst other holdings in his portfolio. FTS has an extensive pipeline and we expect to continue on the path of strong, stable growth."

About Formula Telecom Solutions (FTS):

FTS (LSE: FTS) is a leading provider of Billing, CRM and Business Control solutions for communications and content service providers. By analyzing events from a business standpoint rather than just billing them, FTS allows providers to better understand their customer base and leverage business value from every event and interaction. FTS deploys its full range of end-to-end, stand-alone and add-on solutions to customers in over 40 countries and has implemented solutions in wireless, wireline, cable, content and broadband markets including multiple cross-network installations. Serving the evolving needs of both traditional and next generation service providers, the company's operations comprise of four international R&D locations and strategically-located sales support offices worldwide. In 2007, FTS was voted the 'Most Promising Company' at the prestigious TeleStrategies Billing and OSS World industry event.  

Chairman's Statement

I am pleased to report FTS' 2008 interim results for the six months to 30 June 2008.

FTS sells Next Generation Business Control and infrastructure software solutions for communications service providers. Our solutions enable providers to address the key issues of today's communication market: customer retention and revenue growth. By analyzing events from a business standpoint rather than just billing them, FTS allows providers to better understand their customer base and leverage business value from every event and interaction. FTS deploys its full range of solutions to customers worldwide and has implemented solutions in wireless, wire line, cable, content and broadband markets. The Company targets Tier-1 operators in developed markets with its business control solutions, as well as operators in emerging markets.

The telecoms market is evolving with the growth in IP based communication and continuing consolidation in the market. In response to market changes, providers are restructuring their businesses and aligning vendors to their future needs. This is both a challenge and long-term opportunity for FTS. FTS predicted these transformations in the industry and has been working aggressively to adapt the Company to the new market environment, as well as developing new products and services that meet the customers' ever changing requirements.

In the course of repositioning and re-branding its product line FTS recently announced the launch of Leap™ Billing & CRM - the next generation of its converged billing & CRM solutions.

The product suite has been designed to inherently unify billing and CRM information, providing a holistic view of all customer events and billing events and enabling in-depth service personalization. Based upon a process-driven design, the solution offers unparalleled flexibility, empowering service providers to quickly launch and easily manage multi-service offerings in-house in real time without vendor intervention.

Leap Billing & CRM is an end-to-end converged solution based on telecom-specific business processes that reflect the industry's best practices. The solution allows new business practices to be instantly implemented and new services, bundles and promotions to be rolled out immediately, without involving costly billing and CRM integration projects. In this way, Leap Billing & CRM offers a long-term, viable solution to the ever-evolving needs of telecom providers.

Initial market response is highly positive with strong feedback from industry analysts, industry press, potential partners and customers, stressing the real market need the Company is addressing and the superiority of the solutions it presents. FTS expects to continue its marketing efforts during the second half of 2008 to leverage this new momentum with a marketing and sales campaign to launch the new strategy and products. The Company anticipates this new positioning and the associated marketing campaign will result in market interest in its products and lead to new bid proposals. It is expected that some of these will materialize into contracts in the second half of 2008, although it is difficult to predict the exact timing.

Results

In the six months to 30 June 2008 total revenue increased by 6.5% to $16.351m (2007: $15.351m).  

Gross profit for the six months was $7.750m (2007: $7.450m), an increase of 4.0%.

Research and development expenditure in the six months to 30 June 2008 was $2.007m (2007: $2.635m), a decrease of 24%. This decrease was mainly due to diversion of R&D efforts towards delivery of projects. 

Sales and marketing costs in the six months to 30 June 2008 were $1.715m (2007: $2.300m), a decrease of 25%.  

General and administrative costs in the six months to 30 June 2008 were $2.294m (2007: $2.396m), a decrease of 4%. 

The Company's operating income in the six months to 30 June 2008 was $1.734m (2007: $0.119m). 

The financial income, net for the six months to 30 June 2008 was $0.236m (2007: financial income of $0.088m) which resulted from gains on securities and bonds, less interest paid on bank loans.

Net income for the six months to 30 June 2008 was $1.857m (2007: net income of $0.334m). 

Outlook

We believe that due to management's extensive efforts, this positive momentum will continue in the forthcoming years and will increase the Company's revenues and profitability as well.  

The board continues to believe that FTS is ideally placed to exploit the opportunities offered in both developed and emerging markets. We have a number of reasons to be confident that FTS can develop its business further in the future: the very positive response we have received from the repositioning and re-branding of our product line; our world-wide reach; and the multiple successful deployments of the full range of FTS solutions to our multi-player operator customers around the globe.

The Company is involved in a number of bid proposals which are at various stages of the sales cycle. We expect some of these to crystallize into contracts in the near future although it is difficult to predict the exact timing.

We also believe that our business control solutions based on our Leap BCE product will enable us to penetrate Tier-1 service providers in developed markets. We expect to continue on the path of strong, stable growth in the future, as we have an extensive pipeline and a consolidated roadmap of products and solutions.

Dan Goldstein

Chairman

To the shareholders of F.T.S - Formula Telecom Solutions Limited

We have reviewed the accompanying consolidated financial statements of F.T.S - Formula Telecom Solutions Limited (hereafter- "the company"), which comprise of the balance sheet as of 30 June 2008, and the consolidated income statement, statement of changes in equity and consolidated cash flow statement for the period then ended, in accordance with International Financial Reporting Standards. All information included in these financial statements is the representation of the management of the company.

A review consists principally of inquiries of company personnel and analytical procedures applied to financial data. It is substantially less in scope than an audit in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our reviews, we are not aware of any material modifications that should be made to the accompanying financial statements in order for them to be in conformity with International Financial Reporting Standards.

Tel-Aviv, Israel    August 21, 2008

Consolidated income statement for the period ended June 30, 2008