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16 April 2009

Agreement with Townes Tele-Communications, Inc.

xG Technology, Inc. (LSE-AIM: XGT, "xG" or the "Company"), which has developed an innovative, low-cost, mobile VoIP and data communications system, is pleased to announce that it has signed a binding agreement with Townes Tele-Communications, Inc. ("Townes"), a prominent U.S. Independent Local Exchange Carrier ("ILEC"). Under the agreement, Townes has a limited exclusivity period within which to complete its due diligence into xG's xMax technologies and product family (including field testing) and evaluate the business opportunity offered by the deployment of xMax across the US market.

The xMax family of products, which will include the BSN250 base station, TX60 handset, xMSC mobile switching center and MX20 USB Dongle, will allow carriers to deliver mobile Internet Protocol voice (VoIP) and data broadband services directly to consumers without using the incumbent circuit switched or coaxial cable networks, and without the prohibitive cost of buying spectrum licenses.

Townes will also invite other ILECs to participate in a new intermediary entity ("NewCo") to be established initially by Townes with the expectation that among the over one thousand ILECs existing across the United States the level of participation in NewCo will be such that a national network based exclusively upon xMax technologies will be deployed.

Following the satisfactory completion of due diligence and approval by xG of the number of participants in, and structure of, NewCo, Townes intends to enter into a definitive agreement to deploy xMax across the United States market.

Townes is a widely diversified holding company having seven local exchange telephone operating companies in the U.S. and interests in cellular communications, banking, ranching and oil exploration and production.

Larry Townes, Chairman and CEO of Townes, commented: "We are extremely excited about the prospect of a successful business relationship with xG and the 'last mile' solution utilizing mobile VOIP and mobile Broadband. xG's technology promises to be the wireless solution needed by us and other ILECs in the U.S. and we are confident that we will present a formidable marketplace force with this innovative technology."

Rick Mooers, Chairman and CEO of xG, commented:
"We are delighted to announce the signing of this agreement. As a leading Independent Local Exchange Carrier, Townes Tele-Communications, Inc. is well-placed to take advantage of our xMax technologies along with its other ILEC partners. The interest shown by Townes and the prospect of participation by other ILECs to deploy a national xMax network across the United States highlights how commercially attractive it can be to carriers to utilize xMax technologies, which offer the potential to significantly reduce the required capital investment and operating costs of wireless voice and data communications services."

ENDS

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ABOUT XG TECHNOLOGY

Based in Florida, United States, xG Technology, Inc. has developed innovative, patented wireless communications technologies which offer the potential to significantly reduce the required capital investment and operating costs of wireless voice and data communications services. Its mobile VoIP (Voice over Internet Protocol) base station and handset product line - branded as xMax - is intended for use by regional carrier partners which seek to deliver mobile Internet Protocol voice and data services directly to consumers without using the incumbent circuit switched or coaxial cable networks. The xMax system provides an extended range of operation and is expected to provide superior handset battery performance and double the call capacity of mobile WiMAX networks. Planned future releases of the xMax product line include integrated video and data applications.