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Revenue Growth Continues During MDU Communications' Second Fiscal Quarter 2012; Commercial Property and Broadband Expansion

(May 15, 2012)

TOTOWA, NEW JERSEY -- (Marketwire) -- 05/15/12 -- MDU Communications International, Inc. (OTCBB:MDTV) -

-- Second fiscal quarter 2012 revenue up 5% over second fiscal quarter 2011 to $7.02M -- Continued roll out of tiered bandwidth services to additional properties; up to 100 Mbps per user offered at certain properties -- New focus on commercial property deployments as diversified source of revenue

MDU Communications International, Inc. today reports recent events and financial results for the period ended March 31, 2012.

As one of the nation's largest providers to the multi-family market of DIRECTV?? bulk services bundled with its own broadband offering, the Company's focus during fiscal 2012 has been to (i) increase its customer care experience to its existing 790 property base encompassing 170,000 residences, (ii) expand its wired and wireless broadband services within its regional markets, (iii) launch and promote new revenue generating services to its base, such as new digital voice and monitored security products, (iv) continue to deploy services to bulk and certain choice and exclusive multi-family properties, and (v) launch new business segments that leverage existing infrastructure and investment, such as commercial property deployments, all in furtherance of balancing and guaranteeing long-term recurring revenue streams. The results of these initiatives will be measured not only in greater customer satisfaction, but in new subscribers and multi-revenue streams from existing subscribers, as well as lower ongoing operating costs.

Total revenue for the quarter ended March 31, 2012 increased 5% over the same period in fiscal 2011 from $6,714,132 to $7,019,902. Total revenue for the six months ended March 31, 2012 increased 4% over the same period in the prior fiscal year from $13,438,860 to $13,968,199. EBITDA (as adjusted) increased 36% for the quarter ended March 31, 2012 to $791,650, compared to EBITDA (as adjusted) for the prior quarter ended December 31, 2011 of $583,011, but decreased 21% compared to the previous fiscal quarter ended March 31, 2011 of $1,002,596. The quarterly improvement in EBITDA from December 31, 2011 to March 31, 2012 is primarily due to the elimination of costs associated with (i) the transition of customer care initiatives, (ii) the planned transfer of properties to the discontinued DIRECTV Connected Properties program, and (iii) the Company's preparation and participation in the discontinued Connected Properties dealer network. The Company anticipates continued improvement in EBITDA (as adjusted) for the quarter ending June 30, 2012, as compared to the quarter ended March 31, 2012.

The Company's sales expense and general and administrative expense both decreased in dollars, and decreased (from 6% to 5%) and remained constant (at 16%), respectively, as a percent of revenue, for the quarter ended March 31, 2012, compared to the quarter ended March 31, 2011. Customer care and operating expenses, for the reasons mentioned above, increased in dollars, but remained constant (at 22%) as a percentage of revenue, for the quarter ended March 31, 2012 compared to the quarter ended March 31, 2011. Direct costs increased in dollars and as a percent of revenue (from 45% to 48%) for the quarter ended March 31, 2012, compared to the quarter ended March 31, 2011, due to certain DTH subscribers acquired between the periods for which the Company bears the entire programming cost. Depreciation and amortization expense decreased in dollars and as a percentage of revenue (from 28% to 24%), between the periods.

The following table provides supplemental financial information for the three months ended March 31, 2012, as compared to the three months ended March 31, 2011:

Three Months Three Months Ended March 31, Ended March 31, 2012 2011 ---------------------------------- Revenue $7,019,902 $6,714,132 Direct costs 3,377,333 48% 2,996,035 45% ---------------------------------- Gross margin 3,642,569 52% 3,718,097 55% ---------------------------------- Expenses (sales, operations, G&A) 3,048,046 43% 2,952,914 44% Operating profit, before depreciation $ 594,523 9% $ 765,183 11% ----------------------------------

The Company continued in the second fiscal quarter of 2012 a number of previously announced initiatives designed to improve EBITDA (as adjusted) on a recurring basis and reduce reliance on debt financing. In particular, the Company (i) initiated additional price increases, (ii) continued to roll out additional premium priced broadband services and tiers to several other of its broadband properties, (iii) negotiated further reductions/replacements for broadband circuits, and (iv) began using the outside call center as a direct marketing tool to increase penetrations rates and sell additional services. These initiatives, in addition to (i) the elimination of one-time charges related to the call center outsourcing and the discontinued DIRECTV Connected Properties program, and (ii) actions to increase the margins in the recently acquired properties, should continue to return the Company to higher levels of EBITDA (as adjusted).

The Company's average revenue per unit ("ARPU") at March 31, 2012 was $30.25, a 1% increase from the year ended September 30, 2011. ARPU is calculated by dividing average monthly revenues for the period (total revenues during the period divided by the number of months in the period) by average subscribers for the period. The average subscribers for the period is calculated by adding the number of subscribers as of the beginning of the period and for each quarter end in the current year or period and dividing by the sum of the number of quarters in the period plus one. The Company believes that its recurring revenue and ARPU will be positively impacted by (i) an increasing DIRECTV ARPU (the average revenue generated by a DIRECTV subscriber was up 3.6% in DIRECTV's first fiscal quarter ending March 31, 2012 to $91.99, as disclosed in DIRECTV's public filings), (ii) an increasing ARPU generated from the sale of tiered bandwidth to the Company's broadband subscribers, and (iii) a general increase in recurring revenue realized from the upgrade of properties to the new DIRECTV HD platform and the associated advanced services and programming.

The Company reports 75,859 subscribers to its services as of March 31, 2012, a 1% decrease in its subscriber base from March 31, 2011, and less than 1% decrease from the previous quarter ended December 31, 2011. The decrease is due to the transfer of six properties to DIRECTV under the Connected Properties program and the non-renewal of certain properties the Company chose not to upgrade to digital and HD services for economic reasons. The Company continued its focus on conversion of properties from private cable to digital bulk DTH services during the quarter, resulting in a conversion of four properties and 812 subscribers to these higher margin services. During the quarter ended March 31, 2012, the Company had 18 properties and 4,635 units in work-in-process, which will contribute to organic growth in the upcoming quarters. The Company's breakdown of total subscribers by type and kind as of March 31, 2012 is outlined below:

Subscri- Subscri- Subscri- Subscri- Subscri- bers bers bers bers bers as of as of as of as of as of Mar. 31, June 30, Sep. 30, Dec. 31, Mar. 31, Service Type 2011 2011 2011 2011 2012 --------------------------------------------------------------------------- --------------------------------------------------------------------------- Bulk DTH 16,943 20,328 20,272 20,491 21,136 Bulk BCA 10,621 10,403 9,880 9,880 9,106 DTH-Choice/Exclusive 21,246 22,577 22,541 20,527 20,320 Bulk Private Cable 13,174 13,125 13,125 12,188 12,188 Private Cable Choice/Exclusive 3,665 2,669 2,351 2,782 2,740 Bulk ISP 5,887 5,887 5,576 5,363 5,363 ISP Choice or Exclusive 5,356 4,818 4,966 5,034 4,986 Voice 22 18 14 19 20 ------------------------------------------- Total Subscribers 76,914 79,825 78,725 76,284 75,859 ------------------------------------------- -------------------------------------------

The Company continues to focus on enhancing its broadband service offering to be a lead product, not just a secondary bundled product, and rolling out and marketing upgraded broadband services to residents within existing properties. Residents are now subscribing to robust tiers of the Company's broadband services with speeds of up to 100Mbps in certain properties. The Company is in the process of negotiating the conversion of a number of current properties from "choice" broadband services to property-wide "bulk" broadband services. Further, on a selective basis the Company continues to solicit new DTH choice and exclusive access agreements, and, as has been the case for some time now, the Company will continue to charge these property owners for installation services to offset the capital costs of deployments.

To further diversify its portfolio and revenue streams, the Company has become active in delivering services, primarily video, to the commercial property market, which encompasses office complexes, administrative offices, stadiums/arenas, libraries, etc. The commercial market offers several revenue streams, (i) installation revenue, (ii) monthly residuals from DIRECTV, and (ii) potential maintenance agreements. The Company has recently been selected to provide certain infrastructure and DIRECTV programming for the new BBVA Compass Stadium in Houston, Texas, home of the Houston Dynamo and other international soccer events, and the new American Airlines Center?? in Dallas, Texas, home of the Dallas Mavericks and Dallas Stars. The Company is also in negotiations with other administrative offices, a racetrack and a high profile library.

To assist the Company in assessing its future strategic plans and capital needs, the Company previously retained the investment advisory firm of Berkery, Noyes & Co. Berkery Noyes has significantly advanced certain discussions that the Company had initiated with companies it deemed significant strategic merger prospects. A sale or merger with appropriate synergies would create the scale necessary to generate significant growth. In addition, Berkery Noyes has prepared and selectively distributed an executive overview of certain asset clusters that the Company would entertain purchase offers at per subscriber prices equivalent to those previously received by the Company. Negotiations are ongoing with three such entities interested in asset clusters. The Company makes no representations that these merger and/or sale negotiations will result in any closed transactions.

The Company expects to file its quarterly report on Form 10-Q for the three months ended March 31, 2012 with the Securities and Exchange Commission on May 15, 2012. The Company will be hosting a conference call today at 10:00 am EST to discuss these results. Specific information will be provided via the Company's web site at

The following table reconciles the comparative EBITDA (as adjusted) of the Company to its consolidated net loss as computed under accounting principles generally accepted in the United States of America:

For the Six Months Ended For the Three Months Ended March 31, March 31, ------------------------------------------------------ 2012 2011 2012 2011 ------------------------------------------------------ EBITDA $ 1,374,662 $ 2,031,318 $ 791,650 $ 1,002,596 Interest expense (1,576,747) (1,272,864) (799,100) (634,606) Deferred finance costs and debt discount amortization (interest expense) (193,631) (168,630) (96,815) (84,315) Provision for doubtful accounts (222,874) (208,959) (77,868) (73,782) Depreciation and amortization (3,224,386) (3,742,174) (1,673,614) (1,876,902) Share-based compensation expense - employees (26,717) (22,687) (11,370) (10,498) Compensation expense for issuance of common stock through Employee Stock Purchase Plan - (18,322) - (17,576) Compensation expense for issuance of common stock for employee bonuses (10,625) - (10,625) - Compensation expense for issuance of common stock for employee wages - (30,820) - (30,820) Compensation expense accrued to be settled through the issuance of common stock - (60,737) - (60,737) Compensation expense through the issuance of restricted common stock for services rendered (47,045) - (12,181) - ------------------------------------------------------ Net Loss $ (3,927,363) $ (3,493,875) $ (1,889,923) $ (1,786,640) ------------------------------------------------------ ------------------------------------------------------ MDU COMMUNICATIONS INTERNATIONAL, INC. Condensed Consolidated Balance Sheets March 31, 2012 (Unaudited) and September 30, 2011 March 31, September 30, 2012 2011 -------------------------- ASSETS CURRENT ASSETS Cash and cash equivalents $ 47,089 $ 84,747 Accounts and other receivables, net of an allowance of $1,611,889 and $1,390,686 1,378,892 1,780,362 Prepaid expenses and deposits 131,347 613,314 -------------------------- TOTAL CURRENT ASSETS 1,557,328 2,478,423 Telecommunications equipment inventory 712,524 554,515 Property and equipment, net of accumulated depreciation of $35,426,447 and $32,941,454 18,315,434 19,867,246 Intangible assets, net of accumulated amortization of $8,620,545 and $8,212,000 1,573,986 2,024,451 Deposits, net of current portion 69,338 67,214 Deferred finance costs, net of accumulated amortization of $1,419,737 and $1,248,252 253,712 275,197 -------------------------- TOTAL ASSETS $ 22,482,322 $ 25,267,046 -------------------------- -------------------------- LIABILITIES AND STOCKHOLDERS' DEFICIENCY CURRENT LIABILITIES Accounts payable $ 2,225,580 $ 2,511,776 Other accrued liabilities 652,026 1,240,756 Current portion of deferred revenue 820,354 815,514 -------------------------- TOTAL CURRENT LIABILITIES 3,697,960 4,568,046 Deferred revenue, net of current portion 33,707 87,788 Credit line borrowing, net of debt discount 29,106,296 27,138,457 -------------------------- TOTAL LIABILITIES 32,837,963 31,794,291 -------------------------- COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' DEFICIENCY Preferred stock, par value $0.001; 5,000,000 shares authorized, none issued - - Common stock, par value $0.001; 35,000,000 shares authorized, 5,542,958 and 5,503,111 shares issued and 5,525,516 and 5,485,669 outstanding 5,544 5,504 Additional paid-in capital 61,942,616 61,843,689 Accumulated deficit (72,235,477) (68,308,114) Less: Treasury stock; 17,442 shares (68,324) (68,324) -------------------------- TOTAL STOCKHOLDERS' DEFICIENCY (10,355,641) (6,527,245) -------------------------- TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY $ 22,482,322 $ 25,267,046 -------------------------- -------------------------- See notes to the unaudited condensed consolidated financial statements contained in the Company's Quarterly Report on Form 10-Q for the period ended March 31, 2012. MDU COMMUNICATIONS INTERNATIONAL, INC. Condensed Consolidated Statements of Operations Six and Three Months Ended March 31, 2012 and 2011 (Unaudited) Six Months Ended Three Months Ended March 31, March 31, ------------------------------------------------------ 2012 2011 2012 2011 ------------------------------------------------------ REVENUE $ 13,968,199 $ 13,438,860 $ 7,019,902 $ 6,714,132 ------------------------------------------------------ OPERATING EXPENSES Direct costs 6,814,134 5,969,320 3,377,333 2,996,035 Sales expenses 760,298 720,898 368,640 376,675 Customer service and operating expenses 3,218,747 2,953,385 1,580,108 1,474,013 General and administrative expenses 2,198,388 2,165,899 1,099,298 1,102,226 Depreciation and amortization 3,224,386 3,742,174 1,673,614 1,876,902 Gain on sale of customers and plant and equipment (90,769) (60,416) (85,084) (44,000) ------------------------------------------------------ TOTALS 16,125,184 15,491,260 8,013,909 7,781,851 ------------------------------------------------------ OPERATING LOSS (2,156,985) (2,052,400) (994,007) (1,067,719) Other income (expense) Interest income - 19 - - Interest expense (1,770,378) (1,441,494) (895,916) (718,921) ------------------------------------------------------ NET LOSS $ (3,927,363) $ (3,493,875) $ (1,889,923) $ (1,786,640) ------------------------------------------------------ ------------------------------------------------------ BASIC AND DILUTED LOSS PER COMMON SHARE $ (0.71) $ (0.65) $ (0.34) $ (0.33) ------------------------------------------------------ ------------------------------------------------------ WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 5,508,027 5,390,250 5,515,764 5,400,833 ------------------------------------------------------ ------------------------------------------------------ See notes to the unaudited condensed consolidated financial statements contained in the Company's Quarterly Report on Form 10-Q for the period ended March 31, 2012.

About MDU: MDU Communications International, Inc. (OTCBB:MDTV) is a leading provider of premium communication/information services, including digital satellite television and high-speed (broadband) Internet services, exclusively to the United States multi-dwelling unit (MDU) marketplace - estimated to include 26 million residences. Through its wholly owned subsidiary, MDU Communications (USA) Inc., MDU Communications delivers DIRECTV?? digital satellite television services and high-speed (broadband) Internet systems and is committed to delivering the next generation of interactive communication services to MDU residents. For additional information, please see or contact Investor Relations.

"Safe Harbor" statement under the Private Securities Litigation Reform Act of 1995: This release contains forward-looking statements relating to financial information, strategic partner relationships, subscriber sales, mergers, acquisitions, divestitures, subscriber and revenue growth, implementation of new programs and other developments of the Company. Such statements involve risks and uncertainties which may cause results to differ materially from those set forth in these statements, including, but not limited to, changes in financial condition, available capital, efforts on behalf of the Company to finalize and deploy certain programs and close certain acquisitions, sales or mergers, fluctuations in operating results and operating plans, deployment and funding of new subscriber growth plans, market forces, supplier negotiations, implementation of cost-saving plans, Credit Facility availability and other risks detailed from time to time in the Company's filings with the Securities and Exchange Commission, including, but not limited to, the Company's 10-K for the year ended September 30, 2011, filed on or about December 23, 2011.

MDU Communications International, Inc.
Sheldon Nelson
[email protected]

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