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0912 EST Thursday February 23 2006

Good Morning: Last weekend, Forbes Magazine featured 10 themes that will change the way we live. At the top of their list are VOIP and WI-MAX which promise to become the communications combination that will eventually bring what will likely be a near seamless Internet and Telecommunications capability Worldwide perhaps reaching even the remotest of regions in due time. VOIP is like a modern day Gold rush. It is the Internet in its infancy all over again. And just as the early comers to the Internet started popping like champagne corks early in the boom, many went on to experience staggering gains as the Internet's pioneers became the biggest winners of the entire decade.

Today those early birds are few and far between but they are in their own right establishing niche markets for themselves or have a unique lock on one or more potentially highly lucrative sectors of the business or another. Just as investors who did not participate in the earliest of emerging Internet issues back in the Nineties, it is our view that those who miss the early opportunities to invest in the emerging VOIP boom and the Telecommunications and Videocommunications bonanza it may bring, will likely deeply regret not participating in the future.

Forbes Magazine's Article explains succinctly how VOIP works and why it is destined to revolutionize the future of Telecommunications.

10 Things That Will Change The Way We Live
VoIP

Voice-over-Internet Protocol lets people make telephone calls over the Internet or any other IP-based network. Because the voice data flows over a general-purpose packet-switched network, instead of dedicated, circuit-switched voice transmission lines, the cost of making telephone calls for both business and residential users is much less than with traditional telcos. The reason it is so cheap is that the high-speed Internet providers essentially bundle VoIP free with Internet access. Another advantage is that it is mobile: All one needs is an Internet connection to make a phone call from anywhere. But there are a few drawbacks--although these are being smoothed over--such as quality and reliability.

The drawbacks Forbes is alluding to are fast disappearing. Services are becoming close to 100% reliable and voice quality is beginning to be as good as or better than conventional land lines or mobile. A few days ago a call from France was so clear it was indistinguishable. What this means is megagrowth lies ahead. The cost saving versus conventional charges, especially for international calls are staggeringly compelling and is clearly the way of the future. Like Email and the Internet, VOIP is going to make Global communication like local calls of the past. It is going to stimulate business through greater and more far-reaching communications capabilities than at any time past and the synergies and future possibilities of merging technologies have yet to be recognized. Whether the current Global business usage lies somewhere between 50,000 and 500,000 VOIP subscribers, that number is slated to grow to 5 Million and ultimately to 50 Million. In other words phenomenal growth lies ahead and just as the Internet is growing as fast as ever, VOIP growth rates are expected to be very steep.

•From the Yankee Group on January 12, 2006:
–US business VoIP will grow from $840M now to $3.3B by 2010
US Hosted business VoIP will grow from $233M now to $1.2B by 2010
–US Business VoIP over VPN will grow from $268M to $1.25B by 2010

ATSI Communications Inc ATSX.OB

ATSI is an established provider of international telecommunication services. The company is serving the rapidly growing market between the United States and specific niche markets within Latin America , with an emphasis on Mexico . This market is considered one of the largest international corridors in the world in terms of telecommunications services dollars, with current estimates of $65 billion reaching $113 billion in 2005 and expected to continue to expand exponentially into 2010. More specifically, Mexico is the top producer of long distance traffic with the U.S. based on revenues. Some of the catalysts fueling this growth include the rapid expansion of the Hispanic population in the U.S., the increase in travel between Latin American countries and the U.S., the build-out of local telecommunications networks resulting in an increase in teledensity in Latin countries, and the proliferation of communication devices throughout the region.
In addition to its core carrier and network telecommunication services, ATSI recently launched a strong and unified retail brand for the Hispanic markets in the U.S. and Mexico. After successfully implementing its retail strategy, this brand will then be used as a pipeline through which additional services such as wireless telecommunication services and utilities could be marketed.

ATSI's initial focus is on telecommunications services that includes local phone service, and international VoIP services. U.S. Mexicans spend more than $2 billion a year in long distance phone calls, making U.S./Mexico the world's largest long-distance corridor in terms of yearly revenue. ATSI believes that it has clear advantages over its competition through its strategic partnerships with established foreign carriers and network operators, interconnection and service agreements, and its unique concession license in Mexico.

ATSX represents a stunning turnaround story in recent years and has experienced explosive growth with six sequential quarters of record growth approximating to 20% per quarter, with potential to exceed 100% annual growth. Revenues are approaching a million a month which projects out at between $12 and $18 Million over the coming year, with the distinct possibility of some upside surprises. Versus its peers, ATSX appears to be extremely undervalued with a Price to Sales Ratio of only 0.82 versus some industry measures of between 2 to 5, potentially rendering ATSX, which compared to some of its peers has earnings, in a true value price range of between $1.00 and $2.35. With trailing twelve months earnings per share of 0.36 and a PE Ratio of 1.30. What's not to like about ATSX as a stock with real promise.

In Conclusion

When the Bastion of Capitalism that is Forbes Magazine comes out with such a profoundly strong endorsement of what it sees as the next big thing and the opportunity is presented to leverage up on this theme through such emergents as IElement and ATSI Communications, it seems like a reasonable bet on a future that potentially knows no bounds at this juncture especially given their perceived undervaluedness. Considering VOIP is still only in its infancy opportunities like this should be vigorously embraced. The chance to get in on the ground floor of the next generation of communications, is akin to buying Cellular stocks back in the early to mid 1980's...

Market Commentary

Equities put in an impressive performance Wednesday following the re-grouping for a rally we described yesterday and we also alluded to the fact that we felt the currencies were marking time and that a move could have positive repercussions for both Equities and Precious Metals. Overnight Currencies have begun to move higher and Equity indices are maintaining their price levels which is a good development.

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