XFN Xfone Common Stock

XFONE, Inc. (NYSE Amex and TASE: XFN) (“Xfone” or “the Company”) announces results for the three and six months ended June 30, 2011. As a consequence of the Company’s sale of its UK and Israeli Divisions, the results from those subsidiaries are reflected as discontinued operations for all periods presented.

Revenue

Revenue from the Company’s Fiber-To-The-Premise (FTTP) business grew 24.8% to $3 million in the quarter ended June 30, 2011 as compared to approximately $2.4 million in the second quarter of 2010. Sequentially, FTTP revenues increased 3.3% as compared to the first quarter of 2011. FTTP revenues represented 21.6% of total revenues for the first quarter of 2011 as compared to 16.9% of total revenues for the second quarter of 2010.

Consolidated revenues for the quarter ended June 30, 2011 were $14.1 million, a decrease of 2.3% compared to $14.4 million in the quarter ended June 30, 2010. The revenue decline is related to attrition in the residential customers and wholesale business of Xfone’s legacy non-FTTP business.

For the first six months of 2011, revenue from the Company’s Fiber-To-The-Premise (FTTP) business grew 28.6% to $6 million from $4.7 million in the first six months of 2010. Consolidated revenues for the six months ended June 30, 2011 were $28.4 million, a decrease of 2.2% compared to consolidated revenues of $29 million in the six months ended June 30, 2010.

Customer Expansion

The Company’s total number of FTTP customers as of June 30, 2011 was 6,111 compared to 4,920 FTTP customers as of June 30, 2010.

The acquisition of Cobridge Telecom’s approximately 2,400 cable customers as well as equipment in Levelland, Littlefield, Morton and Colorado City, Texas was closed on July 1, 2011. In these markets, the Company is currently the only provider of subscription video, excluding satellite.

Xfone continues the construction of its PRIDE Network in northwestern Texas. This project is almost entirely financed by $63.7 million in funds from the Federal Broadband Stimulus Program, of which 44.2% is in the form of grants and 55.8% is in the form of low cost loans. During the quarter, the Company began its marketing efforts in several PRIDE Network communities and signed on its first PRIDE Network customer in Littlefield, Texas. Just after the close of the quarter, Xfone signed on its first customer in Burkburnett, Texas another community in the PRIDE Network.

Xfone was also selected to receive an additional $36.2 million in Federal funding that will be used to further expand the PRIDE Network to communities in southern Louisiana, of which 49% is in the form of a grant and 51% is in the form of a low cost loan.

EBITDAS

EBITDAS (earnings before interest, taxes, depreciation, amortization and stock-based compensation) for the second quarter of 2011 was $2.1 million, a slight increase sequentially from the first quarter of 2011 and up 27.4% from the second quarter of 2010. EBITDAS margin in the quarter ended June 30, 2011 was 14.9% compared to EBITDAS margin of 11.4% for the quarter ended June 30, 2010.

Net Income

The Company had a net loss from continued operations of $817,767 or $0.04 loss per diluted share assuming 21,119,488 shares outstanding for the quarter ended June 30, 2011 compared to net income from continued operations of $328,890 or $0.01 per diluted share assuming 21,387,872 shares outstanding for the quarter ended June 30, 2010.

For the six months ended June 30, 2011, the Company reported a net loss of $1.5 million or a loss of $0.07 per diluted share, assuming 21,119,488 shares outstanding compared to a net loss of $725,368 or a loss of $0.04 per diluted share, assuming 19,877,000 shares outstanding for the six months ended June 30, 2010.

Net financing expense was $1.7 million in the three months ended June 30, 2011 compared to $162,390 in the three months ended June 30, 2010. Xfone recorded net financing expense of $3.3 million for the first six months of 2011 compared to net financing expense of $1.3 million for the first six months of 2010. The increase in financing expenses is primarily attributed to the effect of inflation in Israel and the devaluation of the US Dollar against the New Israeli Shekel.

Mr. Guy Nissenson, Xfone’s President and CEO, commented, “We continue to see solid growth from our fiber business and a steadily increasing customer base, so that FTTP revenue now represents 22% of overall revenues. Our consolidated revenues for the quarter were impacted by attrition in our legacy residential copper network, but to a lesser extent than we have seen in the past because of increased fiber revenues.

“Our recent purchase of select cable subscribers from Cobridge Telecom positions us as the only provider of subscription video in these markets, excluding satellite. This gives us a unique opportunity to introduce new customers to our entire range of service offerings and to encourage them to expand their service package to include high speed Internet and Voice as well as enhanced video.”

Average Revenue Per User (ARPU) for all of the Company’s fiber markets is approximately $365 per month for business customers and $90 per month for residential customers.

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Levelland Market Progress

Levelland is an important market for Xfone because management believes that it provides a template for the larger, PRIDE network roll-out that commenced in 2010. Total revenues in Levelland grew 5.8% sequentially to $736,672 for the second quarter of 2011.

Conference Call:

The Company will host a conference call today, August 16, 2011 at 10:00 a.m. Eastern Time to discuss its financial results. The conference call may be accessed in the U.S. and Canada by dialing toll-free 1-877-407-8035. International callers may access the call by dialing 1-201-689-8035.

A replay of the teleconference will be available for 30 days after the call and may be accessed domestically by dialing 1-877-660-6853 and international callers may dial 1-201-612-7415. Callers must enter account number 286 and conference number 377597.

To access the live webcast, log onto the Xfone website at http://www.xfone.com. The webcast can also be accessed at http://www.InvestorCalendar.com. An online replay will be available shortly after the call.

About XFONE, Inc.

Xfone is a provider of high speed broadband services, including Internet access, digital cable TV programming and local and long distance telephone service to residential and business customers in northern Texas and southeastern Louisiana. Xfone's Fiber-To-The-Premise (FTTP) network provides one of the fastest internet connections available. The Company currently has operations in Texas, Mississippi and Louisiana and also serves customers in Arizona, Colorado, Kansas, New Mexico and Oklahoma. For the company's website, please visit: www.xfone.com.

In addition to disclosing financial measures prepared in accordance with Accounting Principles Generally Accepted in the US (GAAP), this press release and the accompanying tables contain the following non-GAAP financial measures: non-GAAP EBITDAS (non-GAAP earnings before interest, taxes, depreciation, amortization and stock-based compensation, other expenses and non-recurring loss). The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP.

There are a number of limitations related to the use of non-GAAP EBITDAS. First, these non-GAAP financial measures exclude depreciation and amortization expenses that are recurring and significant non-recurring expenses. First, Depreciation and amortization have been, and will continue to be for the foreseeable future, a significant recurring expense with an impact upon our company notwithstanding the lack of immediate impact upon cash. Second, there is no assurance the components of the costs that we exclude in our calculation of non-GAAP operating loss do not differ from the components that our peer companies exclude when they report their results of operations. Third, there is no assurance we will avoid further non-recurring costs associated with other balance sheet items. Our management compensates for these limitations by providing specific reconciliation of GAAP amounts to these non-GAAP financial EBITDAS and evaluating these non-GAAP financial measures together with their most directly comparable financial measures calculated in accordance with GAAP. Readers should note the chart at the end of this release which sets forth how we calculate the non-GAAP EBITDAS.

This press release contains forward-looking statements. The words or phrases "would be," "will allow," "intends to," "will likely result," "are expected to," "will continue," "is anticipated," "estimate," "project," or similar expressions are intended to identify "forward-looking statements." XFONE's financial and operational results reflected above should not be construed by any means as representative of the current or future value of its common stock. All information set forth in this news release, except historical and factual information, represents forward-looking statements. This includes all statements about the Company's plans, beliefs, estimates and expectations. These statements are based on current estimates and projections, which involve certain risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. These risks and uncertainties include issues related to: rapidly changing technology and evolving standards in the industries in which the Company and its subsidiaries operate; the ability to obtain sufficient funding to continue operations, maintain adequate cash flow, profitably exploit new business, license and sign new agreements; the unpredictable nature of consumer preferences; and other factors set forth in the Company's most recently filed annual report and registration statement. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management's analysis only as of the date hereof. The Company undertakes no obligation to publicly revise these forward-looking statements to reflect events or circumstances that arise after the date hereof. Readers should carefully review the risks and uncertainties described in other documents that the Company files from time to time with the U.S. Securities and Exchange Commission.

  Xfone, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)      

Three months ended

  Six months ended

June 30,

June 30,

2011   2010 2011   2010 Revenues Services on Fiber-To-The-Premise network $ 3,041,161 $ 2,437,351 $ 5,986,561 $ 4,653,968 Leased local loop services and other   11,057,995   11,992,208   22,369,813   24,333,029 Total Revenues   14,099,156   14,429,559   28,356,374   28,986,997   Expenses

Cost of services (excluding depreciation andamortization shown below)

6,849,829 7,016,520 13,861,304 14,184,867 Selling, general and administrative 5,210,519 5,822,272 10,527,967 11,922,170 Depreciation and amortization 1,227,181 1,077,822 2,396,463 2,053,634 Financing expenses, net 1,728,264 162,390 3,252,694 1,257,116 Other expenses   143,114   148,091   289,846   293,336 Total Expenses   15,158,907   14,227,095   30,328,274   29,711,123  

Income(loss) from continued operations before taxesand non-controlling interest

(1,059,751 ) 202,464 (1,971,900 ) (724,126 )   Income tax benefit (expense)   241,984   (69,613 )   520,519   252,616   Net Income (loss) from continued operations (817,767 ) 132,851 (1,451,381 ) (471,510 )  

Income (loss) from discontinued operations in theUnited Kingdom and Israel, before taxes

- 354,539 - 94,876  

Income tax expense on discontinued operations in theUnited Kingdom and Israel

  -   (92,161 )   -   (185,255 )   Net income (loss) (817,767 ) 395,229 (1,451,381 ) (561,889 )  

Less: Net income (loss) attributed to non-controllinginterest (related to discontinued operations)

  -   (66,339 )   -   (163,479 )   Net income (loss) attributed to shareholders $ (817,767 ) $ 328,890 $ (1,451,381 ) $ (725,368 )   Basic and diluted income (loss) per share: Income (loss) from continued operations $ (0.04 ) $ 0.01 $ (0.07 ) $ (0.02 ) Income (loss) from discontinued operations   -   0.01       (0.02 ) Basic and diluted income (loss) per share $ (0.04 ) $ 0.02 $ (0.07 ) $ (0.04 )   Basic weighted average number of shares outstanding:   21,119,488   21,119,488   21,119,488   19,877,000   Diluted weighted average number of shares outstanding:   21,119,488   21,387,872   21,119,488   19,877,000    

Reconciliation of EBITDAS to Net income (loss) applicable to

common stockholders as it is presented on the Condensed Consolidated

Statements of Operations for Xfone, Inc.       Three months ended   Six months ended June 30,

June 30,

2011   2010 2011   2010           Net income (loss) attributed to shareholders $ (817,767 ) $ 328,890 $ (1,451,381 ) $ (725,368 )   Depreciation and amortization 1,227,181 1,077,822 2,396,463 2,053,634

Compensation in connection with theissuance of warrants and options

58,631 55,968 141,627 451,383 Financing expense (income), net 1,728,264 162,390 3,252,694 1,257,116 Other expenses 143,114 148,091 289,846 293,336 Net income attributed to non-controlling interest - 66,339 - 163,479 Income tax benefit (241,984 ) 69,613 (520,519 ) (252,616 )

Loss (income) from discontinued operations,after taxes

  -   (262,378 )   -   90,379   EBITDAS $ 2,097,439 $ 1,646,735 $ 4,108,730 $ 3,331,343