LecStar Telecom Inc., a wholly owned subsidiary of Fonix(R) Corp. (OTCBB: FNIX) offering a full array of fixed wire-line voice, data, Internet and operator services to business and residential customers in the Southeast, has entered into a management agreement with Lightyear Network Solutions, LLC (“Lightyear”) in order to decrease LecStar operating and related costs.

“Outsourcing LecStar Telecom’s telecommunications and customer service functions to Lightyear significantly reduces the company’s operating costs in the wake of recent regulatory actions that have negatively impacted small CLECs,” explained Thomas A. Murdock, chairman and CEO, Fonix Corp. “This change further enhances the company’s financial and competitive positions, while better enabling us to focus on developing and deploying integrated communication technologies.”

Under the terms of the agreement, effective July 1, 2006, Lightyear will manage all operating support services for LecStar including billing, provisioning, customer relationship management systems and telecommunications services under the terms of LecStar’s commercial agreements with wholesale telecom providers. Lightyear will receive specified fees from LecStar for these services.

Immediate results of implementing the management agreement include a reduction of LecStar personnel by 53 percent and reduced monthly selling, general and administrative expenses (SG&A) of $200,000. Fonix anticipates additional headcount reductions continuing through mid-August. In total, headcount will be reduced to 16 employees, a 72 percent decrease, with total monthly SG&A savings of $300,000.

About Lightyear
Lightyear Network Solutions, LLC, based in Louisville, Ky., was founded in 1993 by J. Sherman Henderson, III as a national sales and marketing organization providing telecommunications services and solutions to both commercial and residential customers. Lightyear provides a full suite of business and residential communications services including local, long distance, data, VoIP and Internet, and offers one bill and complete customer care for services over a number of national and regional carriers including MCI, Level 3, Sprint, Qwest, BellSouth, Verizon, SBC and others. Lightyear serves more than 200,000 customers nationwide, generating annual revenue of $80 million through an independent national sales force of Lightyear Agent Partners and Representatives. For more information, call 800-805-8383 or go to www.lightyear.net.

About LecStar Telecom Inc.
LecStar Telecom Inc, a wholly owned subsidiary of Fonix Corp., is based in Atlanta and offers a full array of fixed wire-line voice, data, Internet and operator services to business and residential customers throughout BellSouth’s southeastern operating territory. Visit www.lecstar.com for more information, or call 866-486-4733.

About Fonix
Based in Salt Lake City, Fonix Corp. is an innovative communications and technology company that provides integrated telecommunications services and value-added speech technologies through Fonix Telecom Inc., LecStar Telecom Inc. and Fonix Speech Inc. The combination of interactive speech technology and integrated telecommunications services allows Fonix to provide customers with comprehensive cost-effective solutions to enhance and expand their communications needs. Visit www.fonix.com for more information, or call 801-553-6600 and say “Sales.”