Smart Telecom plc
31 October 2006
Smart Telecom plc ("Smart" or the "Company")
Statement by Ciaran Casey, Acting CEO,
at the Extraordinary General Meeting ("EGM")
held today at 12.00pm
Ciaran Casey, acting Chief Executive Officer of Smart Telecom plc, will make the
following statement:

Ladies and Gentlemen, in the circumstances I think it is important to clearly
address the various issues for Smart Telecom and today's EGM and I propose to
deal with these in turn through a detailed statement.

I would like to start by reviewing the events since the AGM on the 8th of
September last, which have resulted in today's proposal to dispose of the entire
assets, undertakings and liabilities of Smart Telecom to Calally Limited and to
address our response to how these events impacted on our stakeholders - our
customers, creditors, shareholders and employees.

Smart Telecom was founded in 2000. The Company's history to date has been built
on rapid growth. To take on the incumbent and to open up what had been a very
stagnant market, an aggressive strategy was adopted by the company.

This was not without some success and resulted in a number of innovations which
yielded significant benefits for consumer and corporate users alike. Smart was

? the first alternative operator to launch a "single bill" line+calls
telephony service in 2004

? the first company to light the government's MAN fibre and bring real
competition to business customers across the country.

? the first to launch a real choice for residential broadband + voice - at
prices based on European prices, based on local loop unbundling (LLU).

We built a strong voice customer base of 40,000 voice customers; over 17,000
broadband customers and provided data and voice services to 160 corporate
customers.

Our strategy of entering the low margin voice market was to provide us with a
customer base which we could go on to migrate onto our more profitable broadband
service. This was a strategy which would have worked for us, but we did not
fully appreciate the restrictions which would be put in our path.

Let me be clear here. We are not seeking to blame anyone else for our current
difficulties. The board and management take full responsibility for the
situation which we find ourselves in today. For my part I personally want to
express my regret at what has happened.

But there is no doubt that customers are slow to move to another operator when
they are told that they must change their number to do so; or worse, in the case
of customers who already have a broadband service, that they must be without
service for up to four weeks if they want to change their provider.

These restrictions impacted on our ambitious targets to grow our share of the
broadband market both in attracting new customers and migrating voice customers
to our broadband service.

With the benefit of hindsight, it is clear that we tried to do too much too
quickly, seeking to gain footholds in all areas of the market including mobile
rather than focusing on a core area of the market and building our base from
there.

Our rapid growth came at a heavy price. As a company we were burning cash at an
unsustainable rate and it came to a head this Summer.

At our AGM in early September we announced that we were dependent on our largest
shareholder, Brendan Murtagh, for continued financing and announced that a
strategic review of our business was underway.

The aim of the review was to re-configure the Company to focus on profitable and
high-growth market segments. A key deliverable was the reduction of cash burn
through the achievement of the appropriate cost base, reflecting existing
underlying revenues.

The outcome of the strategic review was to see a reduction in headcount in the
Company to approximately 100 - down from 348, a substantial reduction in other
costs, the exiting of the Company from low margin businesses and a consequent
reduction of the cash burn.

Coming out of the strategic review we believed the Company was in a difficult
situation but we were cautiously optimistic that the implementation of the
various measures in the review could get Smart back on track.

Unfortunately, we were not to have that opportunity.

As has been well publicised already, the termination of some services by eircom,
on 2 October, plunged Smart into a crisis which threatened the very future of
the Company.
Shareholders
To be honest the week of October 2nd was a nightmare for the company. We had
lost service to voice customers; we had no cash resources and we were facing
liquidation if we could not identify alternative sources of funding.

The Board, advised by NCB Stockbrokers and BDO Simpson Xavier worked to consider
all available funding alternatives to allow the Company to continue to trade as
a going concern. Given our operational and financial position, and the
termination of our service agreements with eircom we knew it would be difficult
to secure this funding.

We therefore began to prepare for the liquidation of the company while our
advisors continued to seek fresh investment.

The only proposal received by Smart during the week of the 2nd to the 6th of
October was that from Calally Limited.

We accept that the proposed disposal represents a very disappointing outcome for
all shareholders who have supported the Company over many years, and we share
that disappointment. But it is the only option to ensure that shareholders have
an opportunity to get some value for their shareholding.

The Directors of the company, excluding the conflicted Directors, having taken
advice from our corporate advisors NCB, our legal advisors BMC Hanby Wallace and
our corporate finance advisors BDO Simpson Xavier, consider the terms of the
disposal to be fair and reasonable in so far as shareholders are concerned and
we are recommending the motion to our shareholders.

Some may feel that we should have been more proactive in explaining the
situation to our stakeholders over recent weeks. To those who felt we were
ignoring them, or not being open with them, I am sorry. I can assure you there
was no such intent on our part. It was simply that the situation was very fluid
and changing almost daily. It was unclear what could be said at any point in
time while we were trying to resolve our issues with eircom, get service
restored to our customers, secure an investor to enable us to continue operating
and at the same time beginning to plan for a possible liquidation of the
company.
Customers
I also want to apologise to our customers who suffered a loss of service from
us. We value our customers and very much regret the disruption that has been
caused to them.

Let me recap on where the problem arose.

As part of our strategic review we engaged Hugh Cooney of BDO Simpson Xavier to
negotiate a schedule of repayment with our major suppliers of key services to the
company. All had agreed with the exception of one and we were still in advanced
discussions with senior management in eircom on Monday 2nd October when the company
informed Smart that it was terminating service.

This action was implemented in the following hours. We did not expect the termination
to proceed, given that negotiations between BDO and eircom were ongoing, and we
were as shocked as our customers when service was terminated.

Following the signature of new supply contracts with eircom on Friday 6 October,
Smart worked to get broadband customers, who had lost service, re-connected as
quickly as possible.

As of today, some 3% to 5% of the residential broadband customer base has been
lost - that is 500/800 customers out of a customer base of over 17,000. The
final outcome is still not totally clear.

In general, corporate customers have remained with Smart and some customers have
taken additional services from us over the last few weeks.

While the overall prognosis is positive, it is still too early to say what the
longer term impact on Smart's relationship with its customers will be or what
long term damage our brand reputation has sustained.
Creditors
As I have said, since Smart's AGM in early September, Hugh Cooney has been engaged
by the Board to assist with the financial restructuring of the business. A detailed
payment plan will now be formulated by Mr Cooney and presented to all creditors.
The full liabilities of the company are being assumed by the new entity, Calally
Limited and all agreed debts will be discharged in full and in a reasonable timeframe.
We appreciate the patience shown by suppliers in supporting Smart through this
difficult period.
Staff
Since the strategic review was announced in early September, Smart has confirmed
plans to reduce headcount, through the divestment of certain business units, from
348 in August to about 100. At present 130 are employed by Smart.

The dedication and professionalism of staff in recent weeks cannot be praised
highly enough.

Going forward, I believe that the experience, commitment and industry knowledge
of our staff will be a huge asset to the Company.
3G Mobile
This afternoon we expect the High Court to deliver it judgement in respect of
our legal action with regard to the granting of the 3G mobile licence to Smart
Telecom. We shall review our options after the judgement has been delivered.

In the circumstances there is a limit to what I can say here this morning,
however, it is clear that given the changed circumstances of the company, and
the fact that there are now a number of operators in the 3G market, that we need
to consider carefully our future strategy with regard to this market sector.

It is worth noting that the costs associated with the acquiring the licence and
rolling out the 3G network would be in excess of 300 million euro.
The Future
In looking to the future it must be emphasised that the Company is still in a
very difficult situation.

On the positive side it has retained nearly 17,000 broadband customers and our
160 corporate customers. We have experienced and dedicated staff. It also has a
residential broadband product which is the best in the market.

As identified in our strategic review Smart is exiting from low margin
businesses. As a company it will be more tightly focused on our core sectors,
with a significantly reduced cost base more appropriate to the size and nature
of our business.

We have learned significant lessons and we now have what I consider to be
realistic ambitions reflecting our current position and the realities of the
marketplace.

But we cannot underestimate the impact of the last few weeks. The longer term
impact on our customers and on our brand has yet to be ascertained. We still
face an uphill battle in trying to get the restrictions which customers wanting
to switch broadband providers face removed.

We have challenging times ahead. It will take time. But I do believe that, if
shareholders give their approval to the proposed disposal to Calally Limited
then we have a good chance of rebuilding a viable business from our current
base.

Depsite the fact that it is a disappointment for shareholders, it is for this
reason that we strongly recommend approval to shareholders of the proposed
disposal to Calally Limited.

Thank you.
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