iBasis Reports Record Revenue, Margin and Traffic Volume for Second Quarter 2004

Company Achieves Goal of Positive Cash Flow; Continues Rapid Growth in Retail Prepaid Business; Completes Debt Refinancing

BURLINGTON, MA— July 21, 2004 — iBasis, Inc. (OTCBB: IBAS), a leader in international long distance, VoIP, and prepaid calling cards, today announced results for the second quarter ended June 30, 2004.

Revenue for the second quarter of 2004 was $61.2 million, compared to $39.1 million for the second quarter of 2003. Net loss for the second quarter of 2004 was $5.9 million, or $(0.13) per share, compared to net loss for the second quarter of 2003 of $5.5 million, or $(0.12) per share.

Excluding debt refinancing charges and gains on debt exchanges, net loss for the second quarter of 2004 was $3.5 million, or $(0.08) per share, compared to net loss for the second quarter of 2003 of $9.2 million, or $(0.21) per share.

Highlights of the second quarter include:

• Completed refinancing of $62.5 million in debt;
• Increased cash and achieved positive cash flow from operations;
• Achieved fourth consecutive quarter of revenue growth;
• Increased revenue 56% over Q2 2003 revenue and 7% over Q1 2004; and
• Increased Prepaid and Enhanced Services (PES) revenue 100% over Q1 2004.

"We achieved two of our three all-important goals: positive cash flow by mid-2004, and debt refinancing. We expect to achieve the third goal, profitability, by year-end.

"The debt refinancing is the culmination of a three-year effort to strengthen our balance sheet, during which we have reduced our debt by almost $147 million through bond exchanges and repurchases," said Ofer Gneezy, president and CEO of iBasis. "We extended the maturity dates significantly and created the very real potential to convert all of our debt to equity, which would eliminate the debt and interest payments entirely."

"Once again, we achieved tremendous sequential growth in the PES business, more than doubling the Q1 revenue. We continue to have a substantial competitive advantage as a result of our international network and our superior quality of service. By leveraging The iBasis Network™ and our sophisticated back office systems, the PES business is driving a transformation towards a balance between PES and our wholesale business in margin contribution.

($ in millions)	Wholesale VoIP	PES	Total
Revenue	$53.5	$7.7	$61.2
Gross Margin*	$7.7	$1.4	$9.1
Gross Margin %	14.5%	17.8%	14.9%
* Net revenue less Data Communications and Telecommunications costs.

Key Indicators

Minutes of use on The iBasis Network™ in the second quarter 2004 rose to 1.1 billion minutes, a 30% increase over the 854 million minutes carried in the second quarter 2003, and an 8% increase over the 1 billion minutes in the first quarter 2004. Average revenue per minute continued to be relatively stable at 5.5 cents per minute in the second quarter 2004, down from 5.6 cents per minutes in the first quarter 2004. Average revenue per minute is based on our reported net revenue divided by the minutes of traffic for the applicable period.

Operational Milestones

In the second quarter 2004, Tier One carrier customers generated approximately 44% of iBasis Wholesale VoIP revenue, compared to 52% of Wholesale VoIP revenue in Q1 2004. Five of the top ten iBasis customers during the quarter were Tier One carriers. Overseas-originated calls accounted for 42% of revenue in the second quarter of 2004, compared to 45% of revenue in the first quarter 2004.

iBasis ended the second quarter with 277 customers, up from 263 at the end of the first quarter. New customers announced during the quarter included Golden Telecom, a leading alternative provider of integrated telecommunications and Internet services in major cities of Russia and other countries of the Commonwealth of Independent States (CIS), and Telekom Malaysia, the national carrier of Malaysia. Both of these customers benefited from the iBasis DirectVoIP™ service, which enables cost-efficient direct VoIP interconnections with The iBasis Network for the exchange of international phone calls using VoIP equipment from a large selection of vendors.

Also, during the quarter iBasis announced that for the third year in a row it has been ranked by carriers as the world's best international wholesale carrier in the 2004 International Wholesale Report Card, the industry reference survey published annually by independent telecommunications research and advisory firm ATLANTIC-ACM.

Debt Refinancing

In June, iBasis completed a refinancing of $62.5 million in debt. As a result of an exchange offer, $37.3 million of the Company's 5¾% Convertible Subordinated Notes due in March 2005, representing approximately 98% of the total amount outstanding, were tendered for the same principal amount of new 6¾% Convertible Subordinated Notes due in June 2009. The new notes are convertible into the Company's Common Stock at $1.85 per share. Approximately $0.9 million of the original notes was not tendered for exchange and remains outstanding.

Simultaneous with the exchange offer, the Company prepaid all $25.2 million of its 11½% Senior Secured Notes due in January 2005 for cash equal to the principal amount plus accrued but unpaid interest and warrants exercisable for 5,176,065 shares of the Company's Common Stock at $1.85 per share. The Company issued $29.0 million of new 8% Secured Convertible Notes due in June 2007, of which $25.2 million was used to finance the prepayment of the 11½% Senior Secured Notes. The new notes are convertible into shares of the Company's Common Stock at $1.85 per share.

As a result of a debt exchange in 2003, all of the interest on the $25.2 million of 11½% Senior Secured Notes due in January 2005 was accounted for as a reduction of the gain on the debt exchange and not charged to the statement of operations as interest expense over the term of the debt. The interest on the $29.0 million of new 8% Secured Convertible Notes due in June 2007 will be recorded as a charge to the statement of operations. Although the refinancing resulted in a reduction in the Company's annual cash interest payments, it will result in an increase in interest expense on the statement of operations in the future.

Guidance

The following statements are forward-looking and actual results may differ materially due to factors noted below, among others. The information provided in this financial outlook is as of July 21, 2004, and supersedes all previous guidance.

The Company believes it will continue to be cash flow positive for the balance of 2004, it will achieve positive cash flow for the year, and, partially as a result of the increased interest expense resulting from the debt refinancing, it will now achieve positive net income in Q4 2004.

About iBasis

Founded in 1996, iBasis (OTCBB: IBAS) is a leading provider of wholesale international telecommunications services. For the past two years the company has been named by service providers as the best international wholesale carrier in Atlantic-ACM's annual International Wholesale Carrier Report Card¹. iBasis is a preferred provider for many of the largest carriers in the world, including AT&T, Cable & Wireless, China Mobile, China Unicom, MCI, Sprint, Telefonica, Telenor, and Telstra. iBasis has carried more than six billion minutes of international voice traffic over its global Cisco Powered Network™, and is one of the ten largest carriers of international voice traffic in the world². In addition to its wholesale international telecommunications services, iBasis provides retail prepaid calling cards to major distributors, utilizing the international iBasis Network. Based on its revenue growth from 1997 through 2001, iBasis was ranked the #8 fastest-growing technology company in North America and the #1 fastest-growing technology company in New England in the Technology Fast 500 national program sponsored by Deloitte & Touche. The company can be reached at its worldwide headquarters in Burlington, Massachusetts, USA at 781-505-7500 or on the Internet at www.ibasis.com.

The New England Technology Fast 50 program is presented by Deloitte & Touche and Hale and Dorr, in association with the sponsor, Mazonson Inc. In addition, Mass High Tech and Trinity Communications are associated with the program.