IDT Europe - Corporate - Press Releases

NEWARK, N.J. & SANTA BARBARA, Calif., Jan 29, 2001 (BUSINESS WIRE) - IDT Corp. (Nasdaq:IDTC) and STAR Telecommunications Inc. (Nasdaq:STRX) today announced that the companies have entered into binding agreements with respect to the following transactions:

-- IDT Corp. will acquire the debit card division of STAR's PT-1 Communications business unit;

-- IDT Investments Inc., a wholly owned subsidiary of IDT Corporation, will acquire 5% of STAR's common stock and warrants to acquire an additional 10% of STAR's outstanding common shares;

-- IDT and STAR will enter into a two-year, $100 million traffic agreement for which IDT will make a $5 million prepayment to be made on the closing of IDT's purchase of the PT-1 debit card division.

"We believe that Brett Messing and his new management team are revitalizing STAR and have demonstrated our support for them with a cash investment," stated Howard Jonas, chairman and chief executive officer of IDT. "We look forward to sharing as a STAR stockholder in their success."

"Today, we take a meaningful step forward in our turn around of STAR," stated Brett Messing, chairman and chief executive officer of STAR. "The involvement of a market leader such as IDT as an investor and business partner of STAR validates the steps that we have taken to improve our balance sheet and return the company to profitability."

Purchase of Debit Card Division: Pursuant to a binding contractual agreement, IDT has agreed to acquire substantially all of the assets of the PT-1 debit card division and to assume PT-1's obligations with respect to unused minutes on cards in distribution. Additionally, IDT has agreed to indemnify PT-1 for certain litigation liabilities or, under certain circumstances, to make an agreed amount of cash available to PT-1 to pay claims of other creditors. The PT-1 debit card division is projected to lose approximately $40.8 million on $240 million of revenues in 2000.

"We look forward to growing the PT-1 brand name and strengthening one of the leading names in the debit card business," stated Jonas.

The obligation to close this transaction is subject to the prior consent of WorldCom Inc. and to certain customary conditions. The transaction is scheduled to close on Feb. 1, 2001.

Equity Investment in STAR: Separately, IDT Investments Inc., a wholly owned subsidiary of IDT Corporation, agreed to acquire 5% of STAR's common stock (i.e., approximately 2,900,000 shares) directly from STAR in a primary issuance at the price of $0.417 per share. This transaction, which is subject to satisfaction of various conditions, including receipt of any necessary regulatory approvals, the absence of a material adverse change in STAR and the prior consent of WorldCom, is expected to close on Feb. 1, 2001.

STAR also granted to IDT Investments warrants to purchase up to 10% more of STAR's common stock, with 50% of such warrants being exercisable during the 30-day period following the closing of the debit card acquisition and the remaining 50% being exercisable at any time between Feb. 1, 2001, and Jan. 31, 2004. The 30-day warrants are exercisable at a price equal to the lesser of $0.417 per share and 95% of the closing price on the date that such warrants are exercised and the remaining warrants are exercisable at a price equal to $0.833 per share (subject to adjustment for dilutive transactions).

The shares of STAR to be acquired by IDT Investments under this agreement are additional to IDT Investments' existing holdings of approximately 4.9% of STAR's common stock, which was acquired by IDT in open market purchases shortly after the appointment of the new STAR management team. IDT has agreed to enter into a standstill agreement which restricts it from obtaining more than 19.9% of STAR's outstanding common stock without the prior approval of STAR and has agreed to grant a voting proxy to Brett Messing for its shares.

$100 Million Traffic Agreement: IDT and STAR also have agreed to enter into a traffic agreement providing, among other things, for the exchange of minutes totaling $100 million over the next two years. IDT and STAR have identified a number of routes which will enable the two companies to reduce their respective cost of goods sold. IDT and STAR will meet monthly to review routes and to maximize the effectiveness of this agreement. On the signing of the traffic agreement, which is scheduled to occur simultaneously with the two transactions noted above, IDT will prepay $5 million toward the traffic agreement. IDT has deposited $4 million of this prepaid amount in escrow pending the closing of its transactions with STAR.

"We are extremely grateful for IDT's support, and we look forward to forging a strong partnership with Howard Jonas and his management team in the future," stated Messing.

About IDT Corp.

IDT is an emerging facilities-based multinational carrier that offers a broad range of telecommunications services to wholesale and retail consumers worldwide. Through its own telecommunications backbone and network infrastructure, IDT provides its customers with integrated and competitively priced international and domestic long distance, pre-paid calling cards, Internet access and Digital Subscriber Line (DSL) service.

About STAR Telecommunications

STAR Telecommunications provides global telecommunications services to consumers, long distance carriers, multinational corporations and Internet service providers worldwide. STAR provides international and national long distance services, international private line, prepaid calling cards, calling cards, dial around services and international toll-free services. Visit STAR at www.startel.com.

Except for historical information, all of the expectations and assumptions contained in the foregoing are forward-looking statements, within the meaning of Section 27A of the Securities Act of 1933 and the Securities Exchange Act of 1934, involving risks and uncertainties. These statements refer to our plans to implement our growth strategy, improve our financial performance, expand our infrastructure, develop new products and services, expand our customer base and enter international markets. The forward-looking statements also include our expectations concerning factors affecting the markets for our products, including the demand for long distance telecommunications, and Internet access services. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from the results that we anticipate. These risks and uncertainties include, but are not limited to, those risks discussed in this release. In addition to the factors specifically noted in the forward looking statements, other important factors that could result in those differences include (a) general economic conditions in the telecommunications and Internet markets, including inflation, recession, interest rates and other economic factors; (b) casualty to or other disruption of our facilities and operations; (c) those discussed in our Annual Report on Form 10-K for the period ended July 31, 2000; and (d) other factors that generally affect the business of telecommunications, Internet and other communications companies. We assume no obligation to update these forward-looking statements or to update the reasons actual results could differ materially from the results anticipated in the forward-looking statements.
Except for the historical information contained herein, this news release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21B of the Securities Exchange Act of 1934, as amended, and are subject to the safe harbors created thereby. STAR's future actual results could differ materially from the forward-looking statements discussed herein. A list of the factors that could cause actual results to differ materially can be found in the documents that STAR files with the SEC including those contained in STAR's prospectus and the Form 10-K for the period ended Dec. 31, 1999.