MTS Announces Second Quarter 2011 Financial Results

Ra’anana, Israel –August 11, 2011 – MTS – Mer Telemanagement Solutions Ltd. (Nasdaq Capital Market: MTSL), a global provider of business support systems (BSS) for comprehensive telecommunication management, telecommunications expense management (TEM) solutions and customer care & billing (CC&B) solutions, today announced its financial results for the second quarter of 2011.

Revenues for the second quarter of 2011 were $3.0 million, compared with $3.1 million in revenues during the same quarter last year and revenues of $2.8 million in the first quarter of 2011. The Company’s operating profit was $191,000 in the second quarter of 2011 compared to an operating profit of $42,000 for the second quarter of 2010. Net income for the second quarter was $229,000 or $0.05 per diluted share, compared with net income of $47,000 or $0.01 per diluted share in the second quarter of 2010. Revenues for the six month period ended June 30, 2011 were $5.8 million, compared with $5.9 million for the comparable period in 2010. Net income for the six months ended June 30, 2010 was $362,000 or $0.08 per diluted share, compared with net income of $45,000 or $0.01 per diluted share in the comparable period in 2010.

“Our second quarter results were in line with our expectations for improved operating results. They reflect the focus we placed on improving our implementation processes while closely monitoring our overall costs,” said Alon Mualem, CFO of MTS. “We had cash and marketable securities of $2.8 million at June 30, 2011, which reflects our improved operating cash flow of $535,000 during the six month period ended June 30, 2011.”

About MTS

Mer Telemanagement Solutions Ltd. (MTS) is a worldwide provider of innovative solutions for comprehensive telecommunications expense management (TEM) used by enterprises, and for business support systems (BSS) used by information and telecommunication service providers.

Since 1984, MTS Telecommunications’ expense management solutions have been used by thousands of enterprises and organizations to ensure that their telecommunication services are acquired, provisioned, and invoiced correctly. In addition, the MTS’s Application Suite has provided customers with a unified view of telecommunication usage, proactive budget control, personal call management, employee cost awareness and more.

AnchorPoint TEM solutions enable enterprises to gain visibility and control of strategic assets that drive key business processes and crucial competitive advantage. The AnchorPoint’s software, consulting and managed services solutions -- including integrated Invoice, Asset, and Usage Management and Business Analytics tools -- provide professionals at every level of the organization with rapid access to concise, actionable data.

MTS's solutions for Information and Telecommunication Service Providers are used worldwide by wireless and wireline service providers for interconnect billing, partner revenue management and for charging and invoicing their customers. MTS has pre-configured solutions to support emerging carriers of focused solutions (e.g. IPTV, VoIP, WiMAX, MVNO) to rapidly install a full-featured and scaleable solution.

Headquartered in Israel, MTS markets its solutions through wholly owned subsidiaries in the United States, Hong Kong and The Netherlands as well as through OEM partnerships with Siemens, Phillips, NEC and other vendors.  MTS shares are traded on the NASDAQ Capital Market (symbol MTSL).  For more information please visit the MTS web site: www.mtsint.com.

Certain matters discussed in this news release are forward-looking statements that involve a number of risks and uncertainties including, but not limited to, risks in product development plans and schedules, rapid technological change, changes and delays in product approval and introduction, customer acceptance of new products, the impact of competitive products and pricing, market acceptance, the lengthy sales cycle, proprietary rights of the Company and its competitors, risk of operations in Israel, government regulations, dependence on third parties to manufacture products, general economic conditions and other risk factors detailed in the Company’s filings with the United States Securities and Exchange Commission.

Contacts:

Company:

Alon Mualem

CFO

Tel: +972-9-7777-540

Email: Alon.Mualem@mtsint.com

CONSOLIDATED BALANCE SHEETS

U.S. dollars in thousands

	June 30,		December 31,
	2011		2010
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	2,664	$	2,124
Restricted marketable securities		149		147
Trade receivables, net		893		1,251
Other accounts receivable and prepaid expenses		190		174
Inventories		9		17
Total current assets		3,905		3,713
LONG-TERM ASSETS:
Severance pay fund		890		798
Other investments		9		4
Deferred income taxes		33		33
Total long-term assets		932		835
PROPERTY AND EQUIPMENT, NET		196		165
OTHER ASSETS:
Goodwill		3,479		3,479
Other intangible assets, net		1,232		1,415
Total other assets		4,711		4,894
Total assets	$	9,744	$	9,607

CONSOLIDATED BALANCE SHEETS

U.S. dollars in thousands (except share and per share data)

	June 30,			December 31,
	2011			2010
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Trade payables	$	226		$	305
Accrued expenses and other liabilities		2,065			2,085
Deferred revenues		2,176			2,452
Liabilities of discontinued operations		351			351
Total current liabilities		4,818			5,193
LONG-TERM LIABILITIES -
Accrued severance pay		1,165			1,051
COMMITMENTS AND CONTINGENT LIABILITIES
SHAREHOLDERS' EQUITY:
Share capital		13			13
Additional paid-in capital		19,721			19,676
Treasury shares		(29	)		(29	)
Accumulated other comprehensive income		(13	)		(4	)
Accumulated deficit		(15,931	)		(16,293	)
Total shareholders' equity		3,761			3,363
Total liabilities and shareholders' equity	$	9,744		$	9,607

CONSOLIDATED STATEMENTS OF OPERATIONS

U.S. dollars in thousands (except share and per share data)

	Six months ended June 30,					Three months ended June 30,
	2011		2010			2011			2010
Revenues:
Product sales	$	2,007	$	2,387		$	994		$	1,270
Services		3,828		3,546			2,044			1,785
Total revenues		5,835		5,933			3,038			3,055
Cost of revenues:
Product sales		581		930			268			526
Services		1,320		1,279			719			631
Total cost of revenues		1,901		(*)       2,209			987			(*)       1,157
Gross profit		3,934		3,724			2,051			1,898
Operating expenses:
Research and development, net of grants from the OCS		945		671			470			346
Selling and marketing		1,026		(*)       1,281			518			(*)       648
General and administrative		1,768		1,697			872			862
Total operating expenses		3,739		3,649			1,860			1,856
Operating profit		195		75			191			42
Financial income (expenses), net		90		(18	)		31			15
Capital gain on sale of  investment		78		-			1			-
Income before taxes on income		363		57			223			57
Tax on income (benefit), net		1		12			(6	)		10
Net income	$	362	$	45		$	229		$	47
Net Income per share:
Basic and diluted net income per Ordinary share	$	0.08	$	0.01		$	0.05		$	0.01
Weighted average number of Ordinary shares used in computing basic and diluted net income per share		4,459,057		4,459,043			4,459,057			4,459,030

(*) reclassified