10-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

FORM 10-K

FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

(Mark One)
ý	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2008
OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                                    to

Commission file number 1-32033

TNS, INC.
(Exact Name of Registrant as Specified in Its Charter)

DELAWARE (State or Other Jurisdiction of Incorporation or Organization)	36-4430020 (IRS Employer Identification No.)
11480 COMMERCE PARK DRIVE, SUITE 600, RESTON, VIRGINIA (Address of Principal Executive Offices)	20191 (Zip Code)

(703) 453-8300
Registrant's telephone number, including area code

          Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class	Name of Each Exchange on Which Registered
Common Stock	New York Stock Exchange

          Securities registered pursuant to Section 12(g) of the Act: None

          Indicate by check mark if registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o    No ý

          Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes o    No ý

          Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve (12) months (or such shorter period that the Registrant was required to file such report) and (2) has been subject to such filing requirements for the past ninety (90) days. Yes ý    No o

          Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant's knowledge in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

          Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer o Accelerated filer ý Non-accelerated filer o
(Do not check if a smaller reporting company) Smaller reporting company o

          Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o    No ý

          As of March 10, 2009, 25,141,010 shares of the Registrant's common stock were oustanding. As of June 30, 2008 (the last business day of the Registrant's most recently completed second fiscal quarter), the aggregate market value of such shares held by non-affiliates of the Registrant was approximately $598 million.

DOCUMENTS INCORPORATED BY REFERENCE

          Portions of the Registrant's definitive Proxy Statement relating to the 2009 Annual Meeting of Stockholders, filed with the Securities and Exchange Commission, are incorporated by reference in Part III, Items 10 - 14 of this Annual Report on Form 10-K as indicated herein.

TNS, INC.
FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 2008
INDEX

EXPLANATORY NOTE

PART I
	Item 1.	Business	3
	Item 1A.	Risk Factors	19
	Item 1B.	Unresolved Staff Comments	28
	Item 2.	Properties	28
	Item 3.	Legal Proceedings	28
	Item 4.	Submission of Matters to a Vote of Security Holders	29
PART II
	Item 5.	Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	30
	Item 6.	Selected Consolidated Financial Data	31
	Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	33
	Item 7A.	Qualitative and Quantitative Disclosures About Market Risk	46
	Item 8.	Financial Statements and Supplementary Data	47
	Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	88
	Item 9A.	Controls and Procedures	88
	Item 9B.	Other Information	89
PART III
	Item 10.	Directors, Executive Officers and Corporate Governance	90
	Item 11.	Executive Compensation	92
	Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	92
	Item 13.	Certain Relationships and Related Transactions and Director Independence	92
	Item 14.	Principal Accountant Fees and Services	92
PART IV
	Item 15.	Exhibits and Financial Statement Schedules	93
SIGNATURES			97

2

PART I

        Throughout this report, we refer to TNS, Inc., together with its subsidiaries, as "we," "us," "our," "TNS" or "the Company." TransXpress, LEConnect, CARD*TEL and the TNS logo are our registered trademarks, and Synapse, FusionPoint by TNS, Dialect Trader Voice and Secure Trading Extranet are our service marks. This report contains trade names, trademarks and service marks of other companies. We do not intend our use or display of other parties' trade names, trademarks or service marks to imply a relationship with, or endorsement or sponsorship of, these other parties.

Forward—Looking Statements

        We make forward-looking statements in this report based on the beliefs and assumptions of our management and on information currently available to us. Forward-looking statements include information about our possible or assumed future results of operations in "Business," "Management's Discussion and Analysis of Financial Condition and Results of Operations" under the headings "Overview," "Results of Operations," and "Liquidity and Capital Resources," and other sections throughout this report. The forward-looking statements are based on current expectations, forecasts and assumptions that are subject to risks and uncertainties that could cause actual results to differ materially from those set forth in, or implied by, the forward-looking statements. The Company has attempted, whenever possible, to identify these forward-looking statements using words such as "may," "will," "should," "projects," "estimates," "expects," "plans," "intends," "anticipates," "believes," and variations of these words and similar expressions. Similarly, statements herein that describe the Company's business strategy, prospects, opportunities, outlook, objectives, plans, intentions or goals are also forward-looking statements.

        Forward-looking statements involve risks, uncertainties and assumptions, including risks described below and other risks that we describe from time to time in our periodic filings with the SEC, and our actual results may differ materially from those expressed in our forward-looking statements. We therefore caution you not to rely unduly on any forward-looking statement. The forward-looking statements in this report speak only as of the date of the report, and we undertake no obligation to update or revise any forward-looking statement, whether as a result of new information, future developments or otherwise. The forward-looking statements should not be relied upon as representing the Company's views as of any date subsequent to the date of this filing. The forward-looking statements in this document are intended to be subject to the safe harbor protection provided by Sections 27A of the Securities Act and 21E of the Securities Exchange Act of 1934, as amended.

Item 1.    Business

Overview

        We are an international data communications company which provides networking, data communications and value added services to many of the world's leading retailers, banks and payment processors. We are also a leading provider of secure data and voice network services to the global financial services industry. We operate one of the largest unaffiliated Signaling System No. 7 networks in the United States capable of providing services nationwide, and we utilize this network to provide call signaling, database access, and other services to the domestic telecommunication industry. Our data communications services enable secure and reliable transmission of time-sensitive, transaction-related information critical to our customers' operations. Our customers outsource their data communications requirements to us because of our substantial expertise, comprehensive customer support and cost-effective services. We provide services to customers in the United States and increasingly to international customers in 28 countries including Canada, Mexico and countries in Europe, Latin America and the Asia-Pacific region.

        We provide services through our multiple data networks, each designed specifically for transaction applications. Our networks support a variety of widely accepted communications protocols and are designed to be scalable and accessible by multiple methods, including dial-up, dedicated, broadband

3

wireless and internet connections. In the year ended December 31, 2008, we transported approximately 5.3 billion dial-up transactions for more than 140 point-of-sale/point-of-service, or POS, processing customers in the United States and Canada, making us, on the basis of total transactions transmitted, a leading provider of data communications services to processors of credit card, debit card and ATM transactions. In addition, TNS connects over 1,500 financial community end-points located at over 600 distinct financial services companies, representing buy and sell-side institutions, market data and software vendors, exchanges and alternative trading venues. Based on this total number of connections and the total messages transmitted among them using our services, we are a leading service provider to the financial services industry. Our revenues are generally recurring in nature, as we typically enter into multi-year service contracts that require minimum transaction or revenue commitments from our customers.

        Our business began operations in 1991 to address the needs of the POS industry in the United States. The strong operating cash flows generated by our business have enabled us to invest in and deploy data networks designed to make our data communications services more rapid, secure, reliable and cost efficient. We have leveraged these investments and used our continued strong operating cash flows to expand our service offerings to related market opportunities in the telecommunications and financial services industries in the United States and abroad. By implementing and executing this strategy, we have grown our revenues every year, from $285,000 for the year ended December 31, 1991, to $344.0 million for the year ended December 31, 2008.

Business Overview

Point-of-Sale (POS) Opportunity

        POS and off-premise ATM (an automated teller machine at a location other than a branch office of a financial institution) transactions require the two-way transfer of information over a secure, reliable data network. Typically, at POS and off-premise ATM locations where a credit, debit or ATM card is accepted, the customer's account information and transaction amount must be electronically transmitted to a payment processor. The payment processor then electronically communicates with the financial institution that issued the card to determine whether to authorize the transaction. After this determination is made, the processor returns an authorization or rejection response to the POS or ATM terminal.

        According to the industry information source The Nilson Report, the four card-based systems of payments—credit, debit, prepaid, and electronic benefits transfer—generated 62.5 billion transactions or 44.01% of total payments in the U.S. in 2007, up 10.5% from the previous year. Growth in this segment of payments has been significant and in 2002, these payment types accounted for 30.4% of transaction volume, or 36.7 billion transactions. In 2007, card-based payments exceeded paper-based payments for the first time. Continued growth is forecasted—in 2012, card-based systems are projected to have a 53.6% share of overall payment transaction volume equating to over 84 billion transactions.

        Financial institutions in the United States and Canada typically outsource the processing of credit and debit card accounts to payment processors who are able to leverage technical expertise and capitalize on economies of scale. Payment processors, in turn, typically have outsourced to third party service providers such as TNS the data networking services used to transport transaction data between the processor's host computers and the POS or ATM terminal.

        POS or off-premise ATM terminals access data network connections to payment processors through a variety of methods, the most common of which are dial-up and dedicated, or leased line, services and increasingly include wireless and broadband connections. Dial-up access services allow merchants and off-premise ATMs to connect to payment processors by dialing a telephone number each time a transaction is initiated. Wireless access provides the same capability as dial-up access without a physical connection to the POS device or ATM. A leased line is a dedicated connection provided to a merchant or ATM location for the exclusive purpose of connecting the POS terminal or ATM to the payment processor. Dial-up services and wireless services are less expensive than leased

4

line services because leased line services impose greater fixed monthly communication service charges, making a leased line economically viable only in high-volume merchant or off-premise ATM locations.

        A broadband connection such as a digital subscriber line, or DSL, is an always-on connection utilized by a merchant or ATM location for various purposes including to connect a POS terminal or ATM to the payment processor. With the introduction of broadband services, merchants and other POS providers have begun to deploy integrated wide-area-network solutions. These solutions include POS services, inventory management and other back-office solutions utilized by merchants.

        In the United States, nearly 70% of the installed base of approximately 400,000 ATM machines are located off-premise (© 2008, Retail Banking Research—Global ATM Market and Forecast). Total annual transactions for ATM's was estimated to be over 10 billion in 2006 according to statistics published by the American Bankers Association.

        In addition to the payment processing industry, other industries, such as pre-paid card providers, kiosk operators, loyalty card providers and merchants situated in locations other than brick and mortar stores, such as mobile merchants and merchants on the internet, are expanding their use of electronic transaction processing in an attempt to reduce costs, increase sales through the acceptance of credit and debit cards and increase the reliability and efficiency of data transmission. We believe we will be able to increase the number of connections to our network and the number of transactions we transport as these and other industries look to outsource the data communications requirements necessary to transmit transactions electronically.

Our POS services

        Our POS division markets our data communications services directly to payment processors in the United States, Canada and Mexico. The following chart illustrates the route of a typical POS transaction using our data communications services. The route of a typical off-premise ATM transaction is similar except that the card associations are not involved.

        We also market our POS data communications services to entities responsible for the transmission of state lottery transactions, federal and state electronic benefits transfer and healthcare transactions as well as directly to select categories of merchants and retailers.

        Our private, secure data networks were designed specifically to address the data communications requirements of the payment processing industry. Our data communications services provide customized routing technology, built-in redundancy and geographic diversity and are configured to provide fast and reliable call connection and efficient network utilization. Our backbone data networks are Payment Card Industry Data Security Standard (PCI DSS) certified and are used to connect a merchant's POS terminal or an off-premise ATM securely to the payment processor's host computer.

        We provide multiple means for the POS terminal or ATM to access our data networks. Merchant POS terminals and off-premise ATMs can connect directly to our network using our dial-up service, which utilizes telephone services obtained from interexchange carriers and local exchange carriers. To complement this service, we offer TNS Connect, a leased line service that utilizes our secure Internet Protocol (IP) network. Leased line services are attractive to operators of off-premise ATMs and

5

merchants that either manage their own in-house networks or transmit large volumes of transactions. While our customers primarily choose to access our networks using our dial-up services, we are increasingly providing alternative methods of connecting to our networks, including wireless, broadband and internet connectivity via our TNSLink product line.

        Our wireless payment gateway platform platform, called Synapse, enables merchants and kiosk machine operators to process credit and other card transactions without the inconvenience and cost of having to connect to a telephone line. The mobile merchant market has been experiencing strong growth in the US and around the world. Our broadband service offerings enable merchants to utilize broadband connectivity in their store to transmit data from the POS terminal or ATM to the payment processor. TNS Online, a proprietary performance monitoring and management information reporting application, is used by our customers to centrally monitor and manage the TNS equipment at their locations.

        We configure and provide modems that enable off-premise ATM operators to convert leased line ATMs to ATMs that use dial-up connections, broadband or wireless service. This allows the ATM operators to avoid the costs associated with the need to replace or refit the ATM. Because our modems allow the ATM and the payment processor's system to operate as if they are connected by a leased line, off-premise ATM operators retain the functionality and speed of existing leased line ATMs while reducing monthly recurring telecommunications expenses.

        We have leveraged our existing network infrastructure to develop and provide additional services that enable legacy dial-up devices to utilize IP and broadband connectivity. These new services enable us to be a total solutions provider for merchants in a variety of sub-verticals within retail including convenience stores, gas stations, quick service restaurants and other retail services. For example, our FusionPoint by TNS product allows merchants to consolidate various in-store data applications, including secure payment, enterprise applications and IP services, like security monitoring, distance learning and video surveillance, over a single managed data access point, thereby reducing the merchant's costs and need to manage multiple data communications connections.

        We generally enter into multi-year contracts that usually have minimum transaction or revenue commitments from our POS customers. Our traditional business of providing dial service to POS and off-premise ATMs continues to generate the majority of the revenue of our POS division. For dial-up access services, we typically charge our customers a fixed fee per transaction plus a variable time-based charge for transactions that exceed a specified period of time. Generally, our contracts provide for a reduction in the fixed fee per transaction as our customers achieve higher monthly transaction volumes. We typically charge our customers fixed monthly fees for leased line and broadband services. We also generate POS revenue from usage charges, circuit charges, charges for access to real-time transaction monitoring and charges for ancillary services. For the year ended December 31, 2008, we transmitted approximately 5.3 billion dial POS transactions in North America and generated $74.5 million of revenue in the POS division, which represented 21.6% of our total revenues.

International Services Division (ISD)

        The network technology and services we have developed to serve our customers in the United States are applicable to the data communications needs of payment processing and financial services industries in other countries. Internationally, we also provide card-not-present payment services, payment processing services to ATM owners and data communications services to payment processors that are not used by payment processors in the United States, including settlement and offline polling services which enable merchants to store transaction data until the payment processor retrieves the data after business hours.

        Our international services division provides services to customers located in Australia, Austria, Belgium, Bermuda, Finland, France, Gibraltar, Germany, Greece, Hong Kong, India, Ireland, Italy, Japan, Malaysia, New Zealand, Norway, Poland, Romania, Singapore, South Korea, Spain, Sweden, Taiwan, Thailand, the Netherlands and the United Kingdom.

6

International POS opportunity

        Internationally there continues to be a growing need for fast, secure and reliable data communications services for transaction-oriented businesses. In markets outside of the United States, many financial institutions have historically performed their own processing services for ATM and credit and debit card transactions using outsourced data communications services. Financial institutions in Europe, however, have increasingly outsourced the processing of credit and debit card transactions to payment processors in an effort to leverage technical expertise, reduce costs and capitalize on economies of scale. As part of this trend, several of the largest domestic U.S. payment processors are increasing their international presence. As they expand into additional international markets, these payment processors will require providers of outsourced data communications services.

        While credit and debit card payments are growing in the United States, the international market for these payment methods is expanding at a greater rate. According to Mercator Advisory Group, between 2006 and 2007 the total number of general purpose credit and debit card transactions outside of the United States increased by 14.7%, to approximately 62 billion transactions. Outside of the United States, the regions with the highest transaction volumes in the world were Europe, Asia-Pacific and Latin America, while Middle East/Africa and Asia-Pacific experiencing the fastest growth in 2007. (© 2009, Mercator Advisory Group, Inc.)

        One of the key sectors of retail growth continues to be the eCommerce marketplace. Within the UK for example, it is expected that eCommerce transactions will account for 12% of all card transactions by 2013, growing from just over 8% in 2007. Transaction volume is expected to grow with a compound annual growth rate of around 23% (© 2008, Payment Systems Europe Limited). The growing needs of this class of merchant creates opportunities for payment gateway providers. Within the traditional retail market, opportunities exist to migrate merchants to high speed broadband connectivity for payment applications or to enable merchants to be able to accept payments via wireless point of sale terminals.

        In addition to the credit and debit card industry, various other international industries have developed services that require the rapid, secure and reliable transmission of business-critical transaction data. For example, in many markets wireless telephone operators process transactions in which customers increase the value of their prepaid wireless telephone account balances. The number of transactions associated with mobile prepaid services is expected to continue to grow substantially, with one analyst estimating such transactions will represent 5% of total European card transaction volumes by 2010. (© 2006 Payment Systems Europe Limited).

        Internationally, the growth, automation and globalization of financial markets have led to increased demand for outsourced, secure, reliable data communications services. Banks, mutual funds, pension funds, broker-dealers, alternative trading systems, electronic communications networks or ECNs, securities and commodities exchanges and other market participants increasingly use data communications services to exchange trading information, distribute research and review trading positions.

Our ISD services

        Our international services revenues are currently generated primarily through the sale of our POS services. We generate the majority of our international revenues in the United Kingdom, where we are one of the leading providers of data communications and value-added services to the POS industry. We provide services to substantially all of the financial institutions in the United Kingdom which acquire and process credit and debit transactions in the United Kingdom. We also provide services to financial institutions operating ATMs. In addition, we provide card present and card not present payment gateway services to multi-channel merchants as well as card associations which offer services over the internet. We also provide managed broadband solutions and dial to IP conversion devices to merchants who desire to migrate their payment infrastructure from dial to IP technology. TNS' international financial services business has experienced a steady level of revenue growth by expanding its presence

7

globally, with a focus on developing the business in the Asia Pacific region. By signing on exchanges and ECNs, and offering value-added services such as market-data offerings, we expand our financial community of interest brought together by our Secure Trading Extranet. Additionally, TNS has launched a suite of low latency services to capitalize on the opportunity to provide extremely high levels of system efficiency to the securities trading marketplace.

        We consider a number of factors when evaluating opportunities in international markets, including the regulatory environment of the telecommunications and payments market, consumer use of credit and debit cards, the competitive landscape and the rules applicable to foreign investment. Historically we typically provided our services internationally through a subsidiary located in the country identified for expansion. Recently we have decided to expand into new countries by providing services from nearby countries in which we have existing operations. In some instances, we have elected to enter new markets through strategic acquisitions. While we continue to look for opportunities to expand into international markets, we plan to focus our efforts to grow internationally in those countries in which we currently have operations, such as Australia, France, Italy, Spain and the United Kingdom. Continued expansion into international markets is an important part of our operating strategy. We plan to expand into additional targeted countries in the Asia-Pacific region. We also expect to expand into additional countries in Central Europe as opportunities arise.

        For the year ended December 31, 2008, we generated $156.5 million of revenue in the international services division, which represented 45.5% of our total revenues, of which $138.8 million was generated from the sale of our POS services and $17.7 million was generated from the sale of our financial service offerings. Our operations in the United Kingdom, France and Australia comprised 78.0% of our international revenues in 2008. Although we generate revenues in all 21 of the countries in which our international services division has operations, we have yet to generate positive operating cash flows in 4 of these countries.

        For financial information about geographic areas where we do business, please refer to Note 9 of the consolidated financial statements and related notes included in Item 8 of this annual report.

Telecommunication Services Division (TSD)

        Every wireline and wireless telephone call consists of the content of the call, such as the voice, data or video communication, and the signaling information necessary to establish and close the transmission path over which the call is carried. Substantially all telecommunications carriers in the United States and Canada use Signaling System No. 7, or SS7, as the signaling protocol to identify the network route to be used to connect individual telephone calls. SS7 networks are data networks that transport call signaling information separate from the public switched telecommunication network over which the call content is communicated. Telecommunication service providers require access to an SS7 network connected to the signaling networks of other carriers to be able to provide telecommunication services to their customers.

        SS7 networks are also used to retrieve information from centralized databases maintained by telecommunication services providers and other third parties. By accessing this information, telecommunication services providers are able to offer services that enable intelligent network services such as local number portability, line information database, caller identification and toll-free number services, and credit card, calling card, third-party billing and collect calling. Wireless carriers and cable companies which provide voice over IP (VoIP) services also use SS7 networks to exchange and maintain subscription and location data on subscribers to support voice and wireless roaming services. Competitive pressures are also encouraging telecommunication services providers to develop and offer additional services that utilize the signaling services provided by an SS7 network. For example, wireless carriers offer content delivery such as video and ring tones, short message service and internet browsing and commerce capabilities.

8

        The deployment, operation and maintenance of a nationwide SS7 network connected to all of the major signaling networks and database providers require significant capital and specific technical expertise. For these reasons, many telecommunication services providers have chosen not to build the networks necessary to satisfy all of their SS7 signaling requirements. Rather, they are increasingly turning to outsourced SS7 network service providers such as TNS to obtain the call signaling and database access services critical to their business, yet remain competitive on a cost-effective basis.

TSD Opportunity

        We continue to sell our core TSD services to both the competitive local exchange carriers and the regional Bell operating companies. The demand for signaling and database services continues to increase along with the growth in the telecommunications markets. In particular, IP based telephony has grown quickly in the United States. According to Datamonitor's 2007 Voice/Data Convergence: Global Market Forecast Model, US IP Telephone unit revenues are forecasted to grow to over 2 billion dollars by 2012 with a CAGR of 9%. The continued growth of the cable companies in traditional telephony services for both consumer and business users has also increased demand for our SS7 network and database services. Statistical data published by the National Cable & Telecommunications Association indicates that cable digital phone customers have grown from just 1.5 million in 2001 to over 15 million at the close of 2007. We believe our current infrastructure provides an opportunity to sell our services into the wireless and VoIP markets, as these providers require essentially the same signaling requirements as our other customers.

Our TSD Services

        We operate one of the largest unaffiliated SS7 networks in the United States capable of providing call signaling and database access services nationwide. Our SS7 network is connected with the signaling networks of all of the incumbent local exchange carriers and a significant number of wireless carriers, competitive local exchange carriers, interexchange carriers and voice over IP (VoIP) service providers. We believe that our independence and neutrality enhance our attractiveness as a provider of outsourced SS7 services.

        We offer the following data communications services to wireline and wireless telecommunication services providers:

•

SS7 network services.  We provide telecommunication services providers with SS7 connectivity, switching and transport services throughout the United States. Our SS7 network is connected to the SS7 networks of local exchanges and wireless carriers through more than 25 mated pairs of signal transfer points deployed throughout the country. By connecting to our SS7 network, our customers eliminate their need to implement, operate and maintain numerous, complex connections linking their SS7 switches to the signaling networks of other telecommunications carriers. We believe that our SS7 network enables us to offer our data communications services more cost-effectively and reliably than our competitors.

•

Database access services.  We offer our customers access to databases maintained internally and to those operated by telecommunications carriers and other third parties. These databases are used to provide subscribers with intelligent network services such as local number portability, line information database, caller identification and toll-free number services. Our SS7 network provides access in the United States to the following types of databases:

•

Local number portability databases.  Wireline and wireless telecommunications carriers are required to provide local number portability, a service that enables a subscriber to change wireline service providers within a particular location and keep the same phone number. Our SS7 network provides access to internally managed databases that host all wireline and wireless number portability data.

9

•

Line information databases.  Telecommunications service providers develop and maintain databases that store subscriber information, including names and addresses. This information is necessary to provide enhanced services such as validating subscriber and billing information.

•

Toll-free databases.  Each time a subscriber calls a toll-free number, the telecommunication services provider must access a national database of toll-free numbers in order to route the call.

•

Calling name delivery databases.  A telecommunication services provider must access a database containing the name and other information about the subscriber for the telephone number placing the call in order to offer caller identification services.

•

Validation and fraud control services.  Our CARD*TEL validation and fraud control services combine our access to line information databases with our proprietary fraud control technology to provide interexchange carriers, operator services providers and payphone service providers real-time telephone call billing validation and fraud control services for calling card, credit card, third-party billing and collect calls. Our services assist our customers in determining whether telephone company calling cards, credit cards, travel and entertainment cards and telephone numbers constitute valid accounts and billable telephone numbers.

•

ID Plus.  ID Plus gives users access to a telephone name and address database, which will increase service providers' ability to either discern the identity of a caller or to direct bill for services.

•

VoIP peering services.  Our managed VoIP peering services provide advanced routing capabilities, protocol technology and other services to enable VoIP network providers to interconnect their networks with traditional telecommunications networks. With a single interconnection, our VoIP peering services can connect VoIP networks and traditional telecommunications networks anywhere in the world. Domestically, we are able to combine our VoIP peering services with our database access services.

•

Other telecommunication services.  Our LEConnect data services provide telecommunication services providers with a fast and reliable method of transmitting billing and collection data to and from local exchange carrier data centers over our secure IP networks. Our LEConnect data service minimizes the data transmission errors and time lags associated with a traditional billing and collection system, which requires numerous interexchange carriers and information service providers to send billing data on magnetic data tapes to local exchange carriers. We also offer short message service offload services, which allow telecommunication services providers to avoid the incurrence of additional costs, relieve message congestion and preserve network capacity by offloading short message traffic from SS7 signaling networks to our IP networks.

        We generally enter into multi-year contracts with our telecommunication services customers, many of whom agree to minimum volume commitments. We charge fixed monthly fees for SS7 network services, LEConnect services, and VoIP peering services and per-query fees for our database access services. For the year ended December 31, 2008, we generated $67.1 million of revenue in the telecommunication services division, which represented 19.5% of our total revenues.

Financial Services Division (FSD)

        The securities trading and investment management industry is increasingly requiring high-speed, reliable, secure data communications services to communicate information among industry participants, including commercial banks, mutual funds, pension funds, broker-dealers, alternative trading systems (ATS), electronic communications networks (ECN) and securities and commodities exchanges. Transaction volume in the global equity markets has increased rapidly over the past decade. During the

10

same period, the emergence of new electronic trading venues such as ECN and ATS and regulatory requirements such as the shift to decimalization have placed increasing emphasis on trading and cost efficiencies. To meet these needs, market participants use outsourced data and wire communications services that provide industry participants with access to other participants through a single, managed access point on the service provider's network. These services allow participants to cost-effectively connect to each other to conduct time-sensitive transactions and communicate real-time information.

Our FSD Services

        Our fast, private, secure and reliable IP data networks are designed specifically to address the data and voice communications requirements of the financial services industry. TNS connects over 1,500 financial community end-points, representing buy and sell-side institutions, market data and software vendors, exchanges and alternative trading venues. Our IP network services allow our customers to access multiple financial services companies through a single network connection, thereby eliminating the need for costly dedicated institution-to-institution leased line connections. Additionally, these services facilitate secure and reliable communications between financial services companies by supporting multiple communications standards and protocols, including the Financial Information eXchange (FIX) protocol. Our network has over 105 points of presence and provides services to customers in 28 countries across the Americas, Europe and the Asia Pacific region, with its reach extending to many more. Our financial services customers may have one or more access points to our IP network, depending on the location of their offices and other factors.

        Our primary financial service offerings are:

•

Secure Trading Extranet.  Our Secure Trading Extranet service links financial services companies through our IP network. Through a single network connection, a customer can communicate with any other entity connected to our IP network. Given the large number of industry participants connected to our network, including commercial banks, mutual funds, pension funds, broker-dealers, alternative trading systems, electronic communications networks, multilateral trading facilities and securities and commodities exchanges, a single customer can use its connection to our IP network to conduct seamless, real-time electronic trading and access a variety of content, including news, research and market data.

•

Trader Voice.  Our specialized voice services provide secure, customized voice telecommunications between brokers, investment banking firms and securities and commodities exchanges. These services permit calls that originate over traditional phone lines to be connected over our secure, private IP network. The primary applications of our voice services are: a dedicated, always available voice link between specific domestic-to-domestic or domestic-to-international locations, which financial industry participants refer to as "hoot & holler"; an instant voice connection between two locations that is established as soon as a telephone receiver at either location is lifted, which financial industry participants refer to as "automatic ring down"; and a direct voice connection between two locations which requires a manual signal, usually the push of a button, from the telephone at either location to initiate the call, which financial industry participants refer to as "manual ring down."

        We generate financial services revenue primarily from monthly recurring fees based on the number of customer connections to and through our IP network. For the year ended December 31, 2008, we generated $45.9 million of revenue in the financial services division, which represented 13.3% of our total revenues.

        The growth of electronic trading continues to present opportunities for our financial services division. There is increasing demand for low latency market data feeds and higher bandwidth to improve the effectiveness of buy-side, sell-side, and exchange customers. Along with the increasing bandwidth demands, we continue to see opportunities to expand upon our global community of interest. This community consists of stock exchanges and other trading venues such as MTFs

11

(multilateral trading facilities) as well as buy-side and sell-side organizations that wish to connect with one another and also receive low latency market data.

Our Strengths

        We believe our competitive strengths include:

        Recurring revenues and strong operating cash flows.    Our established customer base enables us to generate high levels of recurring revenues and strong operating cash flows. Our business model is based upon the number of transactions we transport and the number of connections to our networks. We typically enter into multi-year service contracts that usually have minimum transaction or revenue commitments from our customers. We believe that our recurring revenues and strong operating cash flows will enable us to continue to invest in the development of new products and services and to continue to expand internationally.

        Established customer base.    We have an established customer base of leading industry participants in each division and have experienced limited customer turnover. For the year ended December 31, 2008, we provided our POS services to more than 140 customers. In addition, for the year ended December 31, 2008, we provided services to more than 90 telecommunication services providers and to more than 600 financial services companies. Our international services division generates revenues in 28 countries and provides services to some of the largest financial institutions and wireless and other services providers in these countries and neighboring countries. Through our established customer relationships, we have developed an extensive knowledge of each of our customer's industries. We believe that our knowledge and experience enhance our ability to deliver new and timely data communications services and solutions.

        Well-positioned to continue international growth.    The network technology and data communications products and services we have developed to serve customers in the United States and the United Kingdom and other key European countries are applicable to the data communications needs of the payment processing and financial services industries in other countries. We believe that our data communications services and technologies, our technical expertise and our customer relationships with the largest domestic payment processors and global financial institutions strategically position us to take advantage of the substantial international opportunities. We have grown our international revenues from $33.1 million for the year ended December 31, 2002 to $156.5 million for the year ended December 31, 2008.

        Highly customized data networks.    We operate highly customized networks designed and configured for the transmission of time-sensitive data. Our networks support multiple communications protocols and access methods and, as a result, are able to support a wide variety of applications. The flexibility and scalability of our networks and our technical expertise allow us to rapidly add new data communications services to our existing offerings in response to emerging technologies with limited service disruptions or capital expenditures. We also believe our ability to leverage our fixed cost base provides us with significant economies of scale, resulting in a significant competitive advantage.

        Substantial experience in our target markets.    The 11 members of our executive management team have on a combined basis more than 160 years experience in the transaction services and telecommunications industries as well as experience managing large, multinational corporations, and on average have been employees of the company for more than six years. We have focused on creating data communications services for developing and established markets. We believe this gives us an understanding of the unique needs and risks of our target markets and provides us with a competitive advantage over larger service providers that have a broader market perspective. We also believe our extensive experience provides us with a competitive advantage over service providers of similar or smaller size.

12

        Proven acquisition strategy.    Our management team has augmented the growth of our business by successfully identifying and integrating strategic acquisitions. We have made a number of acquisitions that have accelerated the growth of each of our service divisions. For example, we acquired Dialect Payment Technologies in 2007, to provide internet payment gateway services to our customers throughout the world, and we acquired JPG Telecom, SAS (JPG) in 2006 to increase our share of the French dial-up POS market in our international services division.

Our Strategy

        Our objective is to continue to grow our business and enhance our position as a leading provider of outsourced business-critical data communications services enabling secure and reliable transmission of time-sensitive information for our transaction processing, telecommunications and financial services customers. Key elements of our strategy include:

        Focus on key geographies.    While historically we have expanded our business into new geographic locations, we have decided to focus our efforts and resources to expand our business in six countries in which we already have operations. These countries are Australia, France, Italy, Spain, the United Kingdom and the United States. We believe concentrating our efforts in this way will enable us to grow our business in these geographic markets as well as in adjacent countries, enabling us to generate growth with less capital investment.

        Continue to expand our customer base.    We believe our experience, existing customer relationships and our ability to consistently deliver secure and reliable data communications services will enable us to expand our customer base in the domestic and international POS markets as well as in our telecommunication and financial services divisions. For example, in our POS division and international services division we intend to expand our service offerings to certain customer segments in the retail industry, to focus on selling our broadband solutions and to continue to offer complementary services to our existing payment processor and financial institution customer base. In our financial services division, we will continue to increase the scope of services and leverage our existing customer base of over 600 financial services companies to acquire new customers. We intend to continue to leverage our customer relationships and technical expertise to provide our POS and financial offerings internationally. In our telecommunication services division we intend to continue to offer our services to new customers in the cable and wireless markets.

        Develop new product and service offerings.    We will continue to expand our service offerings to address new markets for secure and reliable transmission of time-sensitive information. For example, we have established a product management and marketing group which is responsible for identifying and establishing new products for our domestic and international POS service offerings as well as our financial services division and telecommunication services division products and services. We will continue to develop and offer broadband services to payment processors, financial institutions and merchants in connection with the global POS industry's adoption of new technologies. We currently offer internet payment gateway services to POS customers in the Asia-Pacific region and the United Kingdom and we intend to begin to offer these services in other geographies. In our telecommunication services division we will continue to develop and offer data communications services to cable companies so they may deploy VoIP network services without incurring the capital expenses of building an SS7 network.

        Increase sales to existing customers.    We will continue our efforts to further expand our existing customer relationships to increase business domestically and abroad. For example, we intend to encourage: our domestic and international POS customers to increase their number of connections to our networks and to transmit a greater percentage of their transaction volume with us; our telecommunication services customers to increase the number of signaling routes they establish through our SS7 network; and our financial services customers to connect more endpoints and virtual connections to, and use greater bandwidth on, our data network. Our longstanding relationships with

13

our customers provide us a significant opportunity to increase the sales we make to these customers as they and we expand internationally. Within each of our divisions, we intend to continue our efforts to cross-sell our full range of services to our customers. For example, we believe we have an opportunity to sell broadband services to POS customers through customers of our telecommunication services division and to sell other components of our suite of telecommunication services, such as our VoIP peering, short messaging services and database access services, to customers already using our SS7 network services. We also intend to work closely with our customers to increase our knowledge of their businesses and technical requirements so that we may identify opportunities to provide them with additional services.

        Pursue strategic acquisitions.    We will continue to seek opportunities to acquire businesses that expand our range of services, provide opportunities to increase our customer base and enter into new domestic and international markets. We will need to use operating cash flows or additional financing to pursue our strategy. In March 2009 we entered into an agreement to purchase the communications services group of Verisign, Inc. for $230 million, subject to adjustment. The closing of the acquisition of the communications services group, which provides services to telecommunication services providers in the United States, is subject to customary closing conditions including the Company obtaining the necessary debt financing.

Our Networks

        We operate multiple, highly-customized data networks specifically designed and configured for the transmission of time-sensitive data. Our diverse data network architecture supports a variety of widely-accepted communications protocols and is accessible through a variety of methods, including dial-up, leased line, wireless and secure Internet connections. Our data networks also are designed to be scalable and to allow easy adoption of new access technologies. The hardware utilized in our networks is installed at 105 points of presence worldwide, 34 of which are in North America. We connect these points of presence with digital circuits leased from multiple telecommunication services providers. In addition, our network control centers allow us to administer our network and enable us to monitor our customers' transactions in real time.

        We believe that our networks provide the following important benefits to our customers:

        Our networks are designed specifically to address the data communications needs of our diverse customer base.    Our data networks support multiple communications protocols and include customized hardware, software and value-added features developed by us or by vendors to our specifications. The following is a description of the data networks we operate:

•

IP.  Internet protocol is a communications technology that routes outgoing data messages and recognizes incoming data messages. Our secure domestic and international IP networks provide the services offered by our financial services division, the broadband services offered by our POS division and the LEConnect data services offered by our telecommunication services division. We also use our IP networks for our internal processes, such as accounting functions and network monitoring and management. We have designed and implemented these networks with a high level of system redundancy, dynamic routing and sophisticated security and authorization technologies.

•

X.25.  X.25 is a communications protocol used to transmit packets of data. Our domestic and international X.25 networks transport our customers' POS transactions and are used to provide the validation services offered by our telecommunication services division. These networks are designed to provide fast call connection times, a high level of system redundancy, dynamic rerouting, wide geographic coverage and value-added features, at a low cost per transaction. Customers may access our X.25 networks using various methods, including dial-up services, leased line services, wireless services, satellite services and secure internet connections.

•

SS7.  SS7 is a communications protocol used to transmit signaling information to establish and close the transmission path over which a telephone call is routed. Our domestic SS7 data network sets up, routes and terminates the transactions transmitted through the services offered by our POS division. It also provides the call signaling services and database access services offered by our telecommunication services division. Our SS7 network is accessed using dedicated SS7 links provided by local exchange carriers and interexchange carriers.

14

        Our networks are reliable, redundant and secure.    We believe we have configured the major components of our networks to eliminate any single point of failure. The reliability of our data networks is enhanced significantly because we have deployed our networks with redundant hardware installed at geographically diverse facilities connected by multiple telecommunications carriers. Our facilities are deployed with battery back-up and emergency generator power systems. We coordinate the physical routing of the digital circuits connecting our facilities with multiple telecommunication service providers to ensure the availability of diverse paths for routing any transaction or data, thereby enhancing network reliability. Due to such physical diversity, minor outages or failures typically do not require the immediate intervention of our technicians. We are able to respond quickly to service problems because the network monitoring, management and troubleshooting systems we use permit our network control centers to correct problems remotely. Our data networks contain industry standard firewalls and protections, and their security is further enhanced by limiting access. In addition, TNS is a PCI DSS certified service provider. Compliance with PCI DSS is mandatory for any organization that stores, transmits or processes payment card transactions.

        Our IP and X.25 networks incorporate several customized, value-added features that distinguish our services and performance from our competitors.    We believe that various value-added features we have developed permit our POS customers accessing our data networks through dial-up services to process a greater volume of transactions than other dial-up service providers.

        These features include:

•

the use of equipment that supports and converts transaction data delivered to our data networks in multiple protocols and message formats into the protocols employed by our data networks, thereby eliminating the need for our customers to incur the high costs associated with reprogramming POS terminals and host computers and performing continuous network enhancements and software upgrades,

•

real-time call tracking, which enables us to quickly resolve host, terminal or network problems experienced by our customers and to recommend to our customers ways to improve their systems, and

•

the ability to convert message protocols within our network, allowing acquiring organizations to bring various transaction types with various message formats into their processing hosts without having to make costly changes within their own infrastructure, and

•

a secure Internet-based transaction monitoring system, which permits our customers to monitor the status of their transactions in real-time using the Internet.

        Our networks can accommodate growth in our business.    Our networks are deployed with sufficient capacity to accommodate significant growth in transaction volumes without incurring delays relating to the provisioning and deployment of additional hardware and telecommunications circuits. We have also designed the networks so that we may easily increase capacity as necessary.

        Our network operations centers continuously monitor and manage our networks.    We provide 24-hour, seven days a week network control coverage domestically through our network control center located in Reston, Virginia and internationally through our network control centers located in Sheffield, England and Sydney, Australia. Each of these network control centers serves as the backup network control center for the other control center. Our network control centers are staffed with skilled technicians experienced with the services we offer. Our network control centers remotely monitor the components of our data networks and manage our networks using sophisticated network management tools we have either developed internally or licensed from others.

15

Customers

        As of December 31, 2008, we provided our POS services to more than 140 customers. In addition, as of December 31, 2008, we provided services to more than 90 telecommunication services providers and more than 600 financial services companies. Historically we have experienced limited customer turnover. We believe this is a result of our strong relationships with our customers and is one of our strengths. Maintaining these relationships is critical to our long-term success.

        For the year ended December 31, 2008, we derived approximately 16.7% of our total revenues from our five largest customers. No customer accounted for more than 5% of our total revenues for the year ended December 31, 2008. We typically enter into multi-year service contracts with our customers with minimum commitments. Under some of our contracts, once the customer has met its minimum commitment on an annual or contract term basis, the customer is no longer obligated to purchase services from us. The contracts with our five largest customers contain minimum transaction or revenue commitments on an annual or contract term basis. The contracts with our five largest customers expire from 2009 to 2012.

Sales and Marketing

        We currently sell our services directly to customers through geographically dispersed sales teams. In North America, we have a specialized sales team for each of our POS and telecommunication service divisions, and globally we have a specialized sales team for our financial services division. In our international services division, our sales teams are organized geographically with each team responsible for selling all of our services in the country in which the team is based and, in some cases, proximate countries. Our international services division sales teams are based in Australia, France, Germany, Hong Kong, India, Ireland, Italy, Japan, Romania, Singapore, South Korea, Spain, Thailand and the United Kingdom. Generally, each sales team includes a managing director or sales manager, account representatives, business development personnel, sales engineers and customer service representatives experienced in the industries of our customers and the services we offer.

        Our business development groups based in North America and Europe are focused on selling large service-based solutions to our largest customers and prospects. They work closely with the in-country sales teams to provide in-depth industry and solution capabilities to our customers.

        Our sales teams work to establish and maintain relationships with customers by identifying a customer's need for our services and promoting our secure, reliable, efficient, competitively priced services. We also pursue opportunities to customize our solutions to meet the requirements of large customers.

        When a customer initially purchases services from us, the customer typically purchases some, but not all, of the services we offer. Our sales teams then strive to increase the services purchased by existing customers and to expand the range of services we provide to our customers. Our sales teams consult with customers in an attempt to identify new outsourced business-critical services we may provide to our customers.

        Our global marketing group works with our sales teams around the world and the product group to promote interest in our services and to generate new sales prospects. In addition they ensure that any news associated with the company is distributed in a timely manner to all of the company's stakeholders.

Suppliers

        The operation of our networks depends upon the capacity, reliability and security of services provided to us by a limited number of telecommunication service providers. We have no control over the operation, quality or maintenance of those services or whether the vendors will improve their

16

services or continue to provide services that are essential to our business. In addition, telecommunication service providers may increase the prices at which they provide services.

        Some key components we use in our networks are available only from a limited number of suppliers. The number of available suppliers of components for our X.25 networks is particularly limited. The Company has entered into long term contracts with two vendors for the provision of network equipment and the maintenance of hardware and software utilized on our network.

Competition

        POS division.    Our POS division competes on the basis of industry expertise, network service quality and reliability, transaction speed, value-added features, customer support and cost-efficiency. The primary competitors of our POS division's dial-up services are interexchange carriers such as Verizon Business Solutions, an operating unit of Verizon Communications, Inc., AT&T Corp, and Hypercom Corporation. The carriers typically do not aggressively pursue transaction-oriented business as a stand-alone service but rather offer it in conjunction with other products and services. The primary competitors of our POS division's counter-top integration and broadband connectivity services are Cybera, Inc. and broadband access providers such as MegaPath Networks, Inc. The primary competitor of our POS division's wireless services is APRIVA.

        Telecommunication services division.    Our telecommunication services division competes on the basis of industry expertise, network service quality and reliability, transaction speed, customer support, cost-efficiency and value-added services. The primary competitors of our telecommunication services division include AT&T Corp., Syniverse Technologies, Inc. and Verisign, Inc. and telecommunication carriers such as Verizon Communications, Inc.

        Financial services division.    Our financial services division competes on the basis of access to multiple financial services companies, security, support services, cost-efficiency and discrete service offerings. The primary competitors of our financial services division are other private communications networks and telecommunications carriers including AT&T Corp. and BT Group PLC, providers of quote terminals and market data services such as Bloomberg, Reuters and Thomson Financial, and other network service providers such as SAVVIS, Inc.

        International services division.    Our international services division competes on a similar basis as our POS and financial services divisions. Primary competitors of our international services division's POS services are incumbent telephone companies in the geographic location, such as BT Group PLC in the United Kingdom, France Telecom in France, Telecom Italia in Italy, Telefonica in Spain and Telstra in Australia. The primary competitor of our processing services in the United Kingdom is Avantra.

Government Regulation

        Although the FCC retains general regulatory jurisdiction over the sale of interstate telecommunications services, other than one of our subsidiaries, we, as a provider of information (or enhanced) services, are not required to maintain a certificate of public convenience and necessity with the FCC, to file tariffs with the FCC covering our services, or to comply with any of the other "common carrier" type FCC regulations. Further, the FCC has frequently found information (or enhanced) services to be interstate in nature. In addition, nearly all TNS services cross state boundaries and are thus interstate offerings. Consequently, our services are not subject to state public utility commission regulation.

        The only exception to this is our wholly-owned subsidiary, TNS Transline LLC. TNS Transline is subject to regulatory oversight by the FCC due to its provision of interstate telecommunications services. TNS Transline complies with all regulatory registration and payment obligations mandated by the FCC. As a "non-dominant" carrier, however, TNS Transline is not required to file tariffs or submit to other forms of "dominant" carrier regulation. Further, TNS Transline provides exclusively interstate

17

telecommunications services and thus is not subject to state public utility commission regulation of its services. State regulators may regulate purely intrastate telecommunications services and may regulate mixed intrastate/interstate telecommunications services to the extent their regulation does not impede federal policies. We do not believe that we currently are subject to state regulations for our existing services, and we believe that, even if we were subjected to state regulation, we could obtain all necessary approvals.

        Federal and state regulations can affect the costs of business for us and our competitors by changing the rate structure for access services purchased from local exchange carriers to originate and terminate calls. Under the Telecommunications Act of 1996 ("the 1996 Act"), the FCC implemented rules and regulations known as Access Charge Reform to reform the system of interstate access charges. The FCC's implementation of these rules increased some components of our costs for access while decreasing others. The FCC is currently considering additional rulemaking proceedings concerning this intercarrier compensation scheme, and we currently cannot predict whether any rule changes will be adopted or the impact these rule changes might have on our access charges if they are adopted. Recent and pending decisions of the FCC and state regulatory commissions may limit the availability and increase pricing used by our suppliers to provide telecommunication services to us. We cannot predict whether the rule changes will increase the cost or availability of services we purchase from our suppliers.

        In connection with some of our services, we are required to pay Federal Universal Service Fund surcharges. The monies generated by Federal Universal Service Fund surcharges are used to help provide affordable telecommunication services throughout the country, including to consumers in high-cost areas, low-income consumers, eligible schools and libraries and rural healthcare providers. Our telecommunications service suppliers are obligated to contribute directly to the Federal Universal Service Fund. Our telecommunications service suppliers, in turn, recover the cost of their contribution obligations by imposing surcharges on us and our competitors based upon a percentage of their interstate and international end-user telecommunications revenues. If the Federal Universal Service Fund surcharges increase, our telecommunications service suppliers will pass those increased surcharges on to us. We in turn will pass those potential increased Federal Universal Service Fund surcharges on to our customers to the extent permitted under our contracts with them. The United States Congress and the FCC is considering modifying the way in which Federal Universal Service Fund charges are calculated, including considering whether to assess universal service charges on a flat-fee basis, such as a per-line, per-telephone number or per-account charge. We currently cannot predict whether Congress will mandate or the FCC will adopt changes in the calculation of Federal Universal Service Fund contributions or whether these changes, if adopted, would increase our Federal Universal Service Fund surcharges. If the FCC implements any legislation, adopts any proposal or takes any administrative action that increases our Federal Universal Service Fund surcharges, our network operating costs will increase. In addition, if the FCC implements any legislation, adopts any proposal, or takes any administrative action that increases our supplier's Federal Universal Service Fund obligations, these telecommunications service suppliers may seek to pass through cost-recovery charges to us, which would result in an increase in our cost of network services an increased cost which the Company may or may not be able to pass on to our customers.

Intellectual Property

        Our success is dependent in part upon our proprietary technology. We rely principally upon trade secret and copyright law to protect our technology, including our software and network design. We enter into confidentiality or license agreements with our employees, distributors, customers and potential customers and limit access to and distribution of our software, documentation and other proprietary information. We believe, however, that because of the rapid pace of technological change in the data communications industry, the legal protections for our services are less significant factors in

18

our success than the knowledge, ability and experience of our employees and the timeliness and quality of services provided by us.

Employees

        As of December 31, 2008, we employed 783 persons worldwide, of whom 550 were engaged in systems operation, development and engineering, 126 of whom were engaged in sales and sales support, 98 of whom were engaged in finance and administration and 9 comprised executive management. Of our total employees as of December 31, 2008, 363 were employed domestically and the balance were in other countries, including 219 in the United Kingdom and 111 in Australia. None of our employees are currently represented by a labor union. We have not experienced any work stoppages and consider our relationship with our employees to be good.

Internet Address and Company SEC Filings

        Our internet address is www.tnsi.com. On the investor relations portion of our web site, we provide a link to our electronic SEC filings, including our annual report on Form 10-K, our quarterly reports on Form 10-Q, our current reports on Form 8-K and any amendments to these reports. All such filings are available free of charge and are available as soon as reasonably practicable after filing. The reference to our website address does not constitute incorporation by reference of the information contained in the website and such information should not be considered part of this report.

Executive Officers of the Registrant

        See Item 10 of this report for information about our executive officers.

Item 1A.    Risk Factors

        We are subject to various risks that could have a negative effect on the Company and its financial condition. You should understand that these risks could cause results to differ materially from those expressed in forward-looking statements contained in this report and in other Company communications. Because there is no way to determine in advance whether, or to what extent, any present uncertainty will ultimately impact our business, you should give equal weight to each of the following.

We derive a substantial portion of our revenue from a small number of customers. If one or more of our top five customers were to cease doing business with us, or to substantially reduce its dealings with us, our revenues and earnings could decline.

        For the year ended December 31, 2008, we derived approximately 16.7% of our total revenues from our five largest customers. We expect to continue to depend upon a relatively small number of customers for a significant percentage of our revenues. The loss of any of our largest customers or a decision by one of them to purchase our services at a reduced level could harm our revenues and earnings.

        The contracts with our five largest customers contain minimum transaction or revenue commitments on an annual or contract term basis. Upon meeting these commitments, the customers are no longer obligated to purchase services from us and may elect not to make further use of our services. In addition, our customers may elect not to renew their contracts when they expire. Even if contracts are renewed, the renewal terms may be less favorable to us than under the current contracts. The contracts with our five largest customers expire from 2009 to 2012.

19

We face significant pressure on the prices for our services from our competitors and customers. Our failure to sustain pricing could impair our ability to maintain profitability or positive cash flow.

        Our competitors and customers have caused and may continue to cause us to reduce the prices we charge for services. We may not be able to offset the effects of these price reductions by increasing the number of transactions we transport using our networks or by reducing our costs. The primary sources of pricing pressure include:

•

Competitors offering our customers services at reduced prices. For example, telecommunications carriers may reduce the overall cost of their services by bundling their data networking services with other services such as voice communications.

•

POS and telecommunication services customers seeking greater pricing discounts during contract negotiations in exchange for maintaining or increasing their minimum transaction or revenue commitments.

•

Consolidation of existing customers resulting in pricing reductions. For example, one of our customers with relatively lower contract prices may acquire another of our customers, enabling the acquired customer's transactions to receive the benefit of the lower prices. In addition, if an existing customer acquires another customer, the combined transaction volume may qualify for reduced pricing under our contract.

Our POS business is highly dependent upon our customers' transaction volumes and our ability to expand into new markets.

        We already serve most of the largest payment processors in the United States and the United Kingdom. Accordingly, our POS and international services divisions are highly dependent on the number of transactions transmitted by our existing customers through our networks in the United States and the United Kingdom. Factors which may reduce the number of credit and debit card and ATM transactions include economic downturns, acts of war or terrorism and other events that reduce consumer spending. Revenues from our POS division, which represented our largest division prior to the quarter ended June 30, 2005, have decreased primarily as a result of a decline in transaction volumes from a major customer, as well as a decrease in revenue per transaction as a result of negotiated price reductions upon renewal of certain contracts.

        We may be unable to increase our business from convenience stores, gas stations, quick service restaurants and other retail services that we have identified as potential sources of future growth for our POS business in the United States and abroad. Factors that may interfere with our ability to expand further into these areas include:

•

market participants' adoption of alternative technologies such as broadband; and

•

our potential inability to enter into commercial relationships with additional market participants.

Our strategy to expand internationally may fail, which may impede our growth and harm our operating results.

        As of December 31, 2008, we have yet to generate positive operating cash flows in 4 out of the 22 countries in which we have operations and provide services outside the United States, Mexico and Canada. In addition, we are planning expansion in our existing international markets and into additional international markets.

        Key challenges we will face in pursuing our international strategy include the need to:

•

secure commercial relationships to help establish our presence in international markets,

•

obtain telecommunications services from incumbent telecommunication service providers that may compete with us,

20

•

adapt our services to support varying telecommunications protocols that differ from those markets where we have established operations,

•

hire and train personnel capable of marketing, installing and integrating our data communications services, supporting customers and managing operations in foreign countries,

•

localize our products to target the specific needs and preferences of foreign customers, which may differ from our traditional customer base in the United States and United Kingdom,

•

build our brand name and awareness of our services among foreign customers, and

•

implement new systems, procedures and controls to monitor our operations in new markets.

        In addition, we are subject to risks associated with operating in foreign countries, including:

•

multiple, changing and often inconsistent enforcement of telecommunications, foreign ownership and other laws and regulations,

•

competition with existing market participants which have a longer history in and greater familiarity with the foreign markets we enter,

•

laws and business practices that favor local competitors,

•

fluctuations in currency exchange rates,

•

imposition of limitations on conversion of foreign currencies into U.S. dollars or remittance of dividends and other payments by foreign subsidiaries, and

•

changes in a specific country's or region's political or economic conditions.

        If we fail to address the challenges and risks associated with international expansion, we may encounter difficulties implementing our strategy, which could impede our growth or harm our operating results.

We conduct business in many international markets with complex and evolving tax rules, which subjects us to international tax compliance risks.

        In the year ended December 31, 2007, we updated our transfer pricing policy. While we obtain advice from tax and legal advisors as necessary to help ensure compliance with tax and regulatory matters, most tax jurisdictions in which we operate have complex and subjective rules regarding the valuation of inter-company services, cross-border payments between affiliated companies and the related effects on the taxes to which we are subject, including income tax, value-added tax and transfer tax. From time to time our foreign subsidiaries are subject to tax audits and may be required to pay additional taxes, interest or penalties should the taxing authority assert different interpretations, or different allocations or valuations of our services. There is a risk, if one or more taxing authorities significantly disagrees with our interpretations, allocations or valuations, that any additional taxes, interest or penalties which may result could be material and could reduce our income and cash flow from our international services division.

Our customers may develop in-house networks and divert part or all of their data communications from our networks to their networks.

        As a payment processor's business grows larger and generates a greater number of credit card and debit card transactions, it could become economically advantageous for the processor to develop its own network for transmitting transaction data, including credit card and debit card transactions. Currently, some of the largest processors and some very large merchants globally, such as supermarkets, department stores and major discount stores, operate their own networks to transmit some or all of their transactions. Also, as the number of outsourced providers of network services has decreased, payment processors and large merchants have developed, and may continue to seek to develop, their own networks in order to maintain multiple sources of supply. In addition, our telecommunication services division customers may elect to connect their call signaling networks directly to the call signaling networks of other telecommunications carriers. As a result of any of these events, we could experience lower revenues.

21

Our reliance on a limited number of telecommunication services providers exposes us to a number of risks over which we have no control, including risks with respect to increased prices and termination of essential services.

        The operation of our networks depends upon the capacity, reliability and security of services provided to us by a limited number of telecommunication services providers. We have no control over the operation, quality or maintenance of those services or whether the vendors will improve their services or continue to provide services that are essential to our business. In addition, telecommunication services providers have increased and in the future may increase the prices at which they provide services, which have increased and would increase our costs. If one or more of our telecommunication services providers were to cease to provide essential services or to significantly increase their prices, we could be required to find alternative vendors or to incur additional costs for these services. With a limited number of vendors, we could experience significant delays in obtaining new or replacement services, which could lead to slowdowns or failures of our networks. This could harm our reputation and could cause us to lose customers and revenues.

System failures or slowdowns, security breaches and other problems could harm our reputation and business, cause us to lose customers and revenue, and expose us to customer liability.

        Our business is based upon our ability to securely, rapidly and reliably receive and transmit data through our networks. One or more of our networks could slow down significantly or fail, or be breached, for a variety of reasons, including:

•

failure of third party equipment, software or services utilized by us,

•

undetected defects or errors in our software programs, especially when first integrated into a network,

•

unexpected problems encountered when integrating changes, enhancements or upgrades of third party equipment or software with our systems,

•

computer viruses,

•

natural or man-made disasters disrupting power or telecommunications systems generally, and

•

damage to, or failure of, our systems due to human error or intentional disruption such as physical or electronic break-in, sabotage, acts of vandalism and similar events.

        We may not have sufficient redundant systems or backup telecommunications facilities to allow us to receive and transmit data in the event of significant system failures. Any significant security breach degradation or failure of one or more of the networks on which we rely, including the networks of our vendors and customers could disrupt the operation of our network and cause our customers to suffer delays in transaction processing, which could damage our reputation, increase our service costs, or cause us to lose customers and revenues.

We depend on a limited number of network equipment suppliers and do not have supply contracts. Our inability to obtain necessary network equipment or technical support could harm our business.

        Some key components we use in our networks are available only from a limited number of suppliers. The number of available suppliers of components and technical support for our X.25 networks are particularly limited. We do not have long-term supply contracts with these or any other limited source vendors, and we purchase data network equipment on a purchase order basis. If we are unable to obtain sufficient quantities of limited source equipment and required technical support, or to develop alternate sources as required in the future, our ability to deploy equipment in our networks could be delayed or reduced, or we may be forced to pay higher prices for our network components. Delays or reductions in supplies could lead to slowdowns or failures of our networks.

22

We may experience fluctuations in quarterly results because of the seasonal nature of our business and other factors outside of our control, which could cause the market price of our common stock to decline.

        Credit card and debit card transactions account for a major percentage of the transaction volume processed by our customers. The volume of these transactions on our networks generally is greater in the fourth quarter holiday season than during the rest of the year. Consequently, revenues and earnings from credit card and debit card transactions in the first quarter generally are lower than revenues and earnings from credit card and debit card transactions in the fourth quarter of the immediately preceding year. We expect that our operating results in the foreseeable future will be significantly affected by seasonal trends in the credit card and debit card transaction market.

        In addition, a variety of other factors may cause our results to fluctuate from one quarter to the next, including:

•

varying costs incurred for network expansion,

•

the impact of quarterly variations in general economic conditions,

•

acquisitions made or customers acquired or lost during the quarter,

•

changes in pricing policy by us, our competitors and our third party supplier and service providers during a particular quarter, and

•

foreign currency translation rates, in particular the British pound, Euro and Australian dollar.

We may not be able to adapt to changing technology and our customers' technology needs.

        We face rapidly changing technology and frequent new service offerings by competitors that can render existing services obsolete or unmarketable. Our future success depends on our ability to enhance existing services and to develop, introduce and market, on a timely and cost effective basis, new services that keep pace with technological developments and customer requirements.

We may be unable to protect our proprietary technology, which would allow competitors to duplicate our services. This would make it more difficult for us to compete with them.

        We may not be able to protect sufficiently our proprietary technology, which could make it easier for competitors to develop services that compete with our services. We rely principally on copyright and trade secret laws and contractual provisions to protect our proprietary technology. The laws of some countries in which we sell our services and products may not protect software and intellectual property rights to the same extent as the laws of the United States. If these measures do not adequately prevent misappropriation of our technology, competitors may be able to use and adapt our technology. Our failure to protect our technology could diminish our competitive advantage and cause us to lose customers to competitors.

We may face claims of infringement of proprietary rights, which could harm our business and operating results.

        Third parties may assert claims that we are infringing their proprietary rights. If infringement claims are asserted against us, we could incur significant costs in defending those claims. We may be required to discontinue using and selling any infringing technology and services, to expend resources to develop non-infringing technology or to purchase licenses or pay royalties for other technology. We may be unable to acquire licenses for the other technology on reasonable commercial terms or at all. As a result, we may find that we are unable to continue to offer the services and products upon which our business depends.

23

Future acquisitions and investments could negatively affect our operating results and could dilute the interests of existing stockholders.

        We expect to continue to seek selective acquisitions and investments as an element of our growth strategy. Future acquisitions and investments, including our planned acquisition of the communications services group of Verisign, Inc., could subject us to risks including:

•

If we are not able to successfully integrate acquired businesses in a timely manner, our operating results may decline, particularly in the fiscal quarters immediately following the completion of such transactions while the operations of the acquired entities are being integrated into our operations. We also may incur substantial costs, delays or other operational or financial problems during the integration process.

•

Acquisitions could result in large, immediate write-offs and assumption of contingent liabilities, either of which could harm our operating results.

•

Acquisitions and investments may divert the attention of senior management from our existing business.

•

If we issue additional equity to finance our acquisitions or investments, it could result in dilution for our existing stockholders.

•

If we incur additional indebtedness to finance acquisitions or investments, our interest expense could increase and new debt agreements might involve new restrictive covenants that could reduce our flexibility in managing our business.

•

If we invest in companies before they are profitable, we may incur losses on these investments up to the amount invested.

We may not have adequate resources to meet demands resulting from growth.

        Growth may strain our management systems and resources. We may need to make additional investments in the following areas:

•

recruitment and training,

•

communications and information systems,

•

sales and marketing,

•

facilities and other infrastructure,

•

treasury and accounting functions,

•

licensing and acquisition of technology and rights, and

•

employee and customer relations and management.

        If we fail to develop systems, procedures and controls to handle current and future growth on a timely basis, we may be less efficient in the management of our business or encounter difficulties implementing our strategy, either of which could harm our results of operations.

We may lack the capital required to maintain our competitive position or to sustain our growth.

        We have historically relied on cash flow from operations and proceeds from equity and debt to fund our operations, capital expenditures and expansion. If we are unable to obtain sufficient capital in the future, we may face the following risks:

•

We may not be able to continue to meet customer demand for service quality, availability and competitive pricing.

24

•

We may not be able to expand rapidly internationally or to acquire complementary businesses.

•

We may not be able to develop new services or otherwise respond to changing business conditions or unanticipated competitive pressures.

Our substantial debt could adversely affect our financial health.

        As of December 31, 2008, we had $178.5 million in debt outstanding. In connection with our proposed acquisition of the communications services group of Verisign, Inc., we expect to amend our existing debt facility and to borrow up to an additional $250 million to finance the transaction. This level of debt could have important consequences. Below, we have identified some of the material potential consequences resulting from this debt:

•

A significant portion of our cash flow from operations must be dedicated to the repayment or servicing of indebtedness, thereby reducing the amount of cash we have available for other purposes, including reinvestment in the company.

•

We may be unable to obtain additional financing for working capital, capital expenditures, acquisitions and general corporate purposes.

•

Our ability to adjust to changing market conditions may be hampered.

•

We may be at a competitive disadvantage compared to our less leveraged competitors.

•

We may be vulnerable to the impact of adverse economic and industry conditions and, to the extent of our outstanding debt under our senior secured credit facility, the impact of increases in interest rates.

        We cannot assure you that we will continue to generate sufficient cash flow or that we will be able to borrow funds under our senior secured credit facility in amounts sufficient to enable us to service our debt, or meet our working capital and capital expenditure requirements. We must satisfy borrowing base restrictions in order to borrow additional amounts under our senior secured credit facility. If we are not able to generate sufficient cash flow from operations or to borrow sufficient funds to service our debt, due to borrowing base restrictions or otherwise, we may be required to sell assets, reduce capital expenditures, refinance all or a portion of our existing debt, or obtain additional financing. We cannot assure you that we will be able to refinance our debt, sell assets or borrow more money on terms acceptable to us, if at all.

If we do not compete effectively, we may lose market share to competitors and suffer a decline in revenues.

        Many of our competitors have greater financial, technical, marketing and other resources than us. As a result, they may be able to support lower pricing and margins and to devote greater resources to marketing their current and new products and services.

        We face competition in each of our four divisions as follows:

•

The primary competitors of our POS division are APRIVA, AT&T Corp., Cybera, Inc., Hypercom Corporation, and Verizon Business, an operating unit of Verizon Communications, Inc.

•

The primary competitors of our telecommunication services division include AT&T Corp., Syniverse Technologies, Inc., Verisign, Inc. and telecommunications carriers such as Verizon Communications, Inc.

•

The primary competitors of our financial services division include AT&T Corp., BT Group PLC, Bloomberg L.P., Reuters Group PLC and The Thomson Corporation (Thomson Financial).

25

•

The primary competitors of our international services division include BT Group PLC and Avantra in the United Kingdom, France Telecom in France, Telecom Italia in Italy, Telefonica S.A. in Spain and Telstra Corporation Limited in Australia.

We depend on key personnel.

        Our success depends largely on the ability and experience of a number of key employees, including Henry H. Graham, Jr., our Chief Executive Officer, Raymond Low, our President, and Michael Q. Keegan, our Chief Operating Officer. If we lose the services of any of our key employees, our business may be adversely affected.

Our stock price may be volatile.

        The trading price of our common stock could be subject to wide fluctuations in response to various factors, some of which are beyond our control, such as:

•

actual or anticipated variations in quarterly results of operations;

•

fluctuations in foreign exchange rates for the currencies of countries in which we have operations;

•

announcements of technological innovations;

•

pricing by us or our competitors;

•

changes in financial estimates by securities analysts;

•

announcements of significant acquisitions, strategic partnerships, joint ventures or capital commitments by us or our customers or competitors;

•

additions or departures of key personnel; and

•

generally adverse market conditions.

Regulatory changes may increase our costs or impair our growth.

        Federal and state regulations can affect the costs of business for us and our competitors by changing the rate structure for access services purchased from local exchange carriers to originate and terminate calls, by restricting access to dedicated connections available from local exchange carriers, by changing the basis for computation of other charges, such as universal service charges, or by revising the basis for taxing the services we purchase or provide. The Federal Communications Commission ("FCC") is currently considering changes to the rate structure for services provided by local exchange carriers, including the rate structure for access services, and we currently cannot predict whether these rule changes will be adopted or the impact these rule changes may have on our charges for access and other services if they are adopted.

        Recent and pending decisions of the FCC may limit the availability and increase pricing of network elements used by our suppliers to provide telecommunications services to us. We cannot predict whether these rule changes will increase the cost of services we purchase from our suppliers. Further, the United States Congress and the FCC is considering modifying the way in which Federal Universal Service Fund charges are calculated, including considering whether to assess universal service charges on a flat-fee basis, such as a per-line, per-telephone number or per-account charge. We currently cannot predict whether Congress will mandate or the FCC will adopt changes in the calculation of Federal Universal Service Fund contributions or whether these changes, if adopted, would increase our Federal Universal Service Fund surcharges. If the FCC implements any legislation, adopts any proposal or takes any administrative action that increases our Federal Universal Service Fund surcharges, our network operating costs will increase. In addition, if the FCC implements any legislation, adopts any

26

proposal, or takes any administrative action that increases our telecommunications service supplier's Universal Service Fund obligations, these suppliers may seek to pass through cost-recovery charges to us. We in turn will pass those potential increased Federal Universal Service Fund surcharges on to our customers to the extent permitted under our contracts with them. An increase in the Federal Universal Service Fund surcharges that we are required to pay would result in an increase in our cost of network services, a cost which the Company may or may not be able to pass on to our customers.

        The business of our telecommunication services division customers is or may become subject to regulation that indirectly affects our business. Many of our telecommunication services division customers are subject to federal and state regulations applicable to the telecommunications industry. Changes in these regulations could cause our customers to alter or decrease the services they purchase from us.

        In addition, the payment processing industry in which our POS and international services divisions operate may become subject to regulation as a result of recent data security breaches that have exposed consumer data to potential fraud. To the extent this occurs, our POS and international services division customers could impose on us additional technical, contractual or other requirements as a condition to continuing to do business with them. These requirements could cause us to incur additional costs, which could be significant, or to lose revenues to the extent we do not comply with these requirements.

        We cannot predict when, or upon what terms and conditions, further regulation or deregulation might occur or the effect future regulation or deregulation may have on our business. Our operating costs may be increased because our service providers and several services that we offer may be indirectly affected by federal and state regulations. In addition, future services we may provide could become subject to direct regulation.

We face risks related to securities litigation that could have a material adverse effect on our business, financial position and results of operations.

        In the past we have been named as a defendant in a securities class action lawsuit. We are generally obliged, to the extent permitted by law, to indemnify our current and former directors and officers who are named as defendants in lawsuits. Defending against existing and potential securities litigation may divert financial and management resources that would otherwise be used to benefit our operations. Regardless of the outcome, securities litigation can result in significant legal expenses. A materially adverse resolution of a securities lawsuit could have a material adverse affect on our business, financial position and results of operations

We face risks related to movements in foreign exchange rates which could have a material adverse effect on our business, financial position and results of operations

        Our revenues and earnings are affected by fluctuations in the value of the U.S. dollar as compared with foreign currencies, predominantly the Euro, the British Pound and the Australian dollar as the functional currency of each of our foreign subsidiaries is the local currency. To the extent that the U.S. dollar continues to appreciate in value against these currencies, the reported value of our revenues, earnings and financial position may be materially adversely affected.

The current national and world-wide financial crisis could adversely affect our operating results and stock price in a material manner.

        General world-wide economic conditions have recently deteriorated due to credit conditions resulting from the recent financial crisis affecting the banking system and financial markets, slower economic activity, concerns about inflation and deflation, volatility in energy costs, decreased consumer confidence, reduced corporate profits and capital spending, adverse business conditions and liquidity concerns in the wireless communications markets. These conditions make it difficult for our customers,

27

our vendors and us to accurately forecast and plan future business activities, and they could cause U.S. and foreign businesses to further slow spending on our services. Furthermore, during challenging economic times such as the current downturn, our customers may face issues gaining timely access to sufficient credit, which could impair their ability to make timely payments to us. If that were to occur, we may be required to increase our allowance for doubtful accounts and our accounts receivable outstanding would be negatively impacted. The current economic downturn and any future downturn may reduce our revenue or our percentage of revenue growth on a quarter-to-quarter basis. We cannot predict the timing, strength or duration of any economic slowdown or subsequent economic recovery, world-wide, or in the telecommunications industry or the wireless communications markets. If the economy or the markets in which we operate do not improve from their current condition or if they continue to deteriorate, our customers or potential customers could continue to reduce or further delay their use of our services, which would adversely impact our revenues and ultimately our profitability. In addition, we may record additional charges related to the restructuring of our business and the impairment of our goodwill and other long-lived assets, and our business, financial condition and results of operations will likely be materially and adversely affected.

Item 1B.    Unresolved Staff Comments

        None

Item 2.    Properties

        Our principal executive offices are located in Reston, Virginia and consist of approximately 40,980 square feet of office space under a lease expiring in February 2013. Our primary network control center is also located in Reston, Virginia and consists of approximately 44,500 square feet of separate office space under a lease expiring in June 2013. In addition, we lease the following additional principal facilities:

Use	Location	Approximate square footage		Lease expiration date
European technology and finance center	Dublin, Ireland		14,500	January 2022
United Kingdom headquarters and network control centre	Sheffield, England		16,000	April 2015
United Kingdom processing centre	Welwyn Garden City, England		21,680	June 2012

        We also lease and occupy regional sales offices in various cities. We house our remote network switching equipment in facilities owned and maintained by some of our digital telecommunications circuit providers and also in leased telecommunications point-of-presence facilities located in various cities. These leases total approximately 37,900 square feet and expire on dates ranging from January 2009 to October 2014. We believe that our existing facilities are adequate to meet current requirements and that suitable additional space will be available as needed to accommodate the expansion of our operations and development.

Item 3.    Legal Proceedings

        The Company, John J. McDonnell, Jr., the Company's former Chief Executive Officer, and Henry H. Graham, Jr., the Company's Chief Executive Officer, were defendants in a putative class action lawsuit filed in connection with the Company's public offering of common stock in September 2005 ("Secondary Offering"). The Cement Masons and Plasterers Joint Pension Trust, purportedly on behalf of itself and others similarly situated, filed the putative class action lawsuit captioned Cement Masons & Plasterers Joint Pension Trust v. TNS, Inc., et al., Case No. 1:06 CV 363, CMH/BRP, on April 4, 2006 in the United States District Court for the Eastern District of Virginia.

28

        The parties conducted a mediation in April 2007, and subsequently entered into a settlement agreement in February 2008. The settlement agreement provided for a cash settlement payment of $3.6 million to be paid by the Company's insurer and payment of expenses of plaintiff's lead counsel not to exceed $50,000. In exchange for the cash settlement payment and expense payment, the Company and all defendants were released from all claims of the lead plaintiff and class members relating to the action. The Court preliminarily approved the settlement agreement of the parties in March 2008, and finally approved the settlement agreement after a fairness hearing. On June 20, 2008, the Court entered a final judgment and dismissal order that dismissed the action and all claims of the lead plaintiff and class members, including the released claims. The final outcome of the lawsuit did not have a material adverse affect on our financial condition or operating results. During the year ended December 31, 2006, the Company accrued and paid legal costs of approximately $0.5 million, representing legal costs to defend itself in this matter not otherwise covered by its insurance carrier. These legal costs are included in selling, general and administrative expense in the accompanying consolidated statement of operations for the year ended December 31, 2006.

        Certain states in which the Company operates assess sales taxes on certain services provided by the Company. The Company believes it has no liability because its customer contracts contain terms that stipulate the customer, not the Company, is responsible for any sales tax liability. In jurisdictions where the customer may be liable for sales taxes, the Company either includes sales tax on its invoice or has obtained an exemption certificate from the customer. Certain states have audited the Company from 1996 to early 2001. On April 25, 2008, the Company entered into a settlement agreement with the remaining state's Commissioner of Revenue to settle the only state sales tax assessment remaining for the period from 1996 to early 2001. In the settlement, the Company agreed to settle the outstanding sales tax assessment in the amount of $942,000 for a settlement payment in the amount of $250,000. The Company's customer paid $212,500 of the settlement payment with the remaining $37,500 paid by the Company. Based on the final executed settlement, the Company reduced its net liability for this matter by $0.9 million. This $0.9 million benefit, or $0.03 per share, related to the legal settlement and reduced sales tax liability is shown in selling, general and administrative expenses and net income in the accompanying condensed consolidated statement of operations and statement of operations, respectively.

        We are from time to time a party to other legal proceedings, which arise in the normal course of business. Other than as stated above, we are not currently involved in any material litigation the outcome of which could, in management's judgment based on information currently available, have a material adverse effect on our results of operations or financial condition. Management is not aware of any material litigation threatened against us.

Item 4.    Submission of Matters to a Vote of Security Holders

        No matter was submitted during the fourth quarter of the fiscal year covered by this report to a vote of security holders.

29

PART II

Item 5.    Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

        Our common stock trades on The New York Stock Exchange ("NYSE") under the symbol "TNS". The following tables reflect the range of high and low sale prices for the period indicated as reported by the NYSE.

Fiscal Year Ended December 31, 2007	HIGH		LOW
First quarter ended March 31, 2007	$	20.03	$	15.31
Second quarter ended June 30, 2007	$	16.74	$	10.96
Third quarter ended September 30, 2007	$	16.48	$	12.00
Fourth quarter ended December 31, 2007	$	18.37	$	15.25

Fiscal Year Ended December 31, 2008	HIGH		LOW
First quarter ended March 31, 2008	$	21.79	$	14.98
Second quarter ended June 30, 2008	$	25.39	$	20.43
Third quarter ended September 30, 2008	$	24.98	$	18.80
Fourth quarter ended December 31, 2008	$	19.21	$	6.23

        As of March 1, 2008, there were 69 stockholders of record of our common stock, excluding shares held in street name by various brokerage firms. We estimate that there are approximately 2,300 beneficial owners of our common stock.

        On March 28, 2007, our board of directors declared a special cash dividend of $4.00 per common share which was paid on April 12, 2007. With the exception of this dividend, we have never declared or paid any cash dividends, regular or special, on our common stock. We do not anticipate paying any regular cash dividends in the foreseeable future. Under our senior secured credit agreement, we are subject to restrictions on paying dividends.

        During the period covered by this report, we did not sell any equity securities without registration under the Securities Act.

Issuer Purchases of Equity Securities

	Total Number of Shares Purchased(1)		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Number of Shares that May Yet be Purchased Under the Plans or Programs
Period:
1/1/08–1/31/08		652	$	17.29		—		—
2/1/08–2/28/08		27,065	$	16.32		—		—
3/1/08–3/31/08		42,139	$	18.46		—		—
4/1/08–4/30/08		309	$	23.26		—		—
5/1/08–5/31/08		13,621	$	23.59		—		—
7/1/08–7/31/08		1,104	$	22.59		—		—
8/1/08–8/31/08		14,683	$	22.81		—		—
10/1/08–10/31/08		14,098	$	17.24		—		—
		113,671	$	19.02		—		—

(1)

These shares represent shares surrendered by employees to satisfy payroll tax withholding obligations on the vesting of Restricted Stock Units. Neither we nor any affiliated purchaser (as that term is defined in Securities Exchange Rule 10b-18(a)(3)) made any other repurchases of our shares during the year ended December 31, 2008.

30

Item 6.    Selected Consolidated Financial Data

        The following selected consolidated financial data should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and related notes included elsewhere in this report. The consolidated statement of operations data for the years ended December 31, 2006, 2007 and 2008, and the consolidated balance sheet data as of December 31, 2007 and 2008, are derived from our consolidated financial statements, which are included elsewhere in this report. The consolidated statement of operations data for the years ended December 31, 2004 and 2005, and the balance sheet data as of December 31, 2004, 2005, and 2006 are derived from our consolidated financial statements, which are not included in this report.

        The historical results are not necessarily indicative of the results to be expected for any future period.

31

Selected Consolidated Financial Data
(In thousands, except per share and transaction data)

	Year ended December 31,
	2004			2005			2006			2007			2008
Consolidated Statements of Operations Data:
Revenues	$	249,112		$	258,940		$	286,160		$	325,564		$	343,991
Cost of network services		120,356			121,682			146,181			163,559			162,423
Engineering and development		14,688			15,521			22,187			27,626			29,149
Selling, general and administrative		49,264			55,245			71,757			75,287			78,104
Depreciation and amortization of property and equipment		20,205			18,972			22,208			23,114			25,286
Amortization of intangible assets		28,573			22,773			24,820			25,656			25,734
Total operating expenses(1)		233,086			234,193			287,153			315,242			320,696
Income (loss) from operations before income taxes, equity in net loss of unconsolidated affiliates and cumulative effect of a change in accounting principle		16,026			24,747			(993	)		10,322			23,295
Interest expense		(7,341	)		(9,052	)		(9,261	)		(16,655	)		(10,868	)
Interest income		261			674			598			1,105			707
Other (expense) income, net		1,340			(699	)		2,197			2,356			(241	)
Income tax (provision) benefit		(4,263	)		(7,218	)		2,665			(586	)		(9,213	)
Equity in net (loss) income of unconsolidated affiliates		(1,039	)		(2,686	)		(5,186	)		643			(202	)
Cumulative effect of a change in accounting principle, net of tax provision		—			—			84			—			—
Net income (loss)(1)		4,984			5,766			(9,896	)		(2,815	)		3,478
Dividends on preferred stock		(3,428	)		—			—			—			—
Net income (loss) attributable to common stockholders	$	1,556		$	5,766		$	(9,896	)		(2,815	)		3,478
Per Share Information:
Basic net income (loss) per common share	$	0.06		$	0.24		$	(0.41	)	$	(0.12	)	$	0.14
Diluted net income (loss) per common share	$	0.06		$	0.23		$	(0.41	)	$	(0.12	)	$	0.14
Basic weighted average common shares outstanding		24,114			24,519			24,076			24,204			24,763
Diluted weighted average common shares outstanding		24,449			24,767			24,076			24,204			25,196

	December 31,
	2004		2005		2006		2007		2008
Consolidated Balance Sheet Data:
Cash and cash equivalents	$	19,788	$	26,628	$	17,322	$	17,805	$	38,851
Working capital		10,086		33,114		31,829		32,844		44,689
Total assets		356,412		352,184		381,677		383,098		361,914
Total debt, including current portion		51,000		113,448		123,313		205,500		178,500
Total stockholders' equity		242,498		177,846		179,265		92,272		102,815

(1)

On January 1, 2006, we adopted Statement of Financial Accounting Standards, No. 123R, "Share-Based Payment". As a result, compensation expense is recorded for all share-based payments in our operating expenses.

32

Item 7.    Management's Discussion and Analysis of Financial Condition and Results of Operations

Overview

        We are an international data communications company which provides networking, data communications and value added services to many of the world's leading retailers, banks and payment processors. We are also a leading provider of secure data and voice network services to the global financial services industry. We operate one of the largest unaffiliated Signaling System No. 7 networks in the United States capable of providing services nationwide, and we utilize this network to provide call signaling and database access services to the domestic telecommunications industry. Our data communications services enable secure and reliable transmission of time-sensitive, transaction-related information critical to our customers' operations. Our customers outsource their data communications requirements to us because of our substantial expertise, comprehensive customer support and cost-effective services. We provide services to customers in the United States and increasingly to international customers in 30 countries, including Canada and Mexico and countries in Europe, Latin America and the Asia-Pacific region.

        We provide services through our multiple data networks, each designed specifically for transaction applications. Our networks support a variety of widely accepted communications protocols and are designed to be scalable and accessible by multiple methods, including dial-up, dedicated, wireless, broadband and internet connections.

        We generate revenues through four business divisions:

•

POS services.  We provide fast, secure and reliable data communications services primarily to payment processors in the United States and Canada. POS services revenue is derived primarily from per transaction fees paid by our customers for the transmission of transaction data through our networks between payment processors and POS or ATM terminals.

•

Telecommunication services.  We provide call signaling services that enable telecommunications service providers to establish and terminate telephone calls placed by their subscribers. We also provide database access services that enable our customers to provide intelligent network services, such as caller identification, toll-free call routing and local number portability, and validation services, such as credit card, calling card, third- party billing and collect calling. Our telecommunication services division generates revenues primarily from fixed monthly fees charged for our call signaling services and per-query fees charged for our database access and validation services.

•

Financial services.  We provide fast, secure and reliable private data networking services that enable seamless communications and facilitate electronic trading among commercial banks, mutual funds, pension funds, broker-dealers, alternative trading systems, electronic communications networks, securities and commodities exchanges and other market participants. Our networks support multiple communications protocols including the Financial Information eXchange, or FIX, protocol. Our financial services division generates revenues from monthly recurring fees based on the number of customer connections to and through our networks.

•

International services.  We sell our POS and financial services through our international services division. We are one of the leading providers of data communications services to the POS industry in the United Kingdom. Our international services division also provides POS and financial services in Australia, Austria, Belgium, Bermuda, Finland, France, Gibraltar, Germany, Greece, Hong Kong, India, Ireland, Italy, Japan, Malaysia, the Netherlands, New Zealand, Norway, Poland, Romania, Singapore, South Korea, Spain, Sweden, Taiwan and Thailand.

        Our most significant expense is cost of network services, which is comprised primarily of telecommunications charges, including data transmission and database access, leased digital capacity

33

charges, circuit installation charges and activation charges. The cost of data transmission is based on a contract or tariff rate per minute of usage in addition to a prescribed rate per transaction for some vendors. The costs of database access, circuits, installation charges and activation charges are based on fixed fee contracts with local exchange carriers and interexchange carriers. The cost of network services also includes salaries, equipment maintenance and other costs related to the ongoing operation of our data networks. Depreciation expense on our network equipment and amortization of developed technology are excluded from our cost of network services and included in depreciation and amortization of property and equipment and amortization of intangible assets in our consolidated statements of operations.

        Our engineering and development expenses include salaries and other costs related to product development, engineering, hardware maintenance and materials. The majority of these costs are expensed as incurred, including costs related to the development of internal use software in the preliminary project, the post-implementation and operation stages. Development costs we incur during the software application development stage are capitalized and amortized over the estimated useful life of the developed software.

        Our selling, general and administrative expenses include costs related to sales, marketing, administrative and management personnel, as well as external legal, accounting and consulting services.

Dividend and Recapitalization

        On March 28, 2007, our board of directors declared a special dividend of $4.00 per common share which was paid on April 12, 2007. Also, on March 28, 2007, we entered into a secured credit facility, which consists of two facilities: a senior secured term loan facility in an aggregate principal amount of $225 million (the "Term Facility") and a senior secured revolving credit facility in an aggregate principal amount of $15 million (the "Revolving Facility"). We used approximately $98.3 million of the proceeds from the Term Facility to pay the special dividend. The remainder of the proceeds from the Term Facility were used to refinance existing debt, to pay fees related to the senior secured credit facility and the special dividend and for general corporate purposes. No amount was drawn on the Revolving Facility at closing and the full principal amount of the Revolving Facility was available to us as of December 31, 2008.

34

Results of Operations

        The following tables set forth, for the periods indicated, the selected statements of operations data (in thousands):

	Year ended December 31,
	2006			2007			2008
Statements of Operations Data:
Revenues	$	286,160		$	325,564		$	343,991
Operating expenses:
Cost of network services, exclusive of the items shown separately below		146,181			163,559			162,423
Engineering and development		22,187			27,626			29,149
Selling, general and administrative		71,757			75,287			78,104
Depreciation and amortization of property and equipment		22,208			23,114			25,286
Amortization of intangible assets		24,820			25,656			25,734
Total operating expenses		287,153			315,242			320,696
Income (loss) from operations		(993	)		10,322			23,295
Interest expense		(9,261	)		(16,655	)		(10,868	)
Interest income		598			1,105			707
Other (expense) income, net		2,197			2,356			(241	)
Income (loss) before income taxes, equity in net loss of unconsolidated affiliates and cumulative effect of a change in accounting principle		(7,459	)		(2,872	)		12,893
Income tax benefit (provision)		2,665			(586	)		(9,213	)
Equity in net income (loss) of unconsolidated affiliates		(5,186	)		643			(202	)
Cumulative effect of a change in accounting principle, net of tax provision		84			—			—
Net income (loss)	$	(9,896	)	$	(2,815	)	$	3,478

Year ended December 31, 2008 compared to the year ended December 31, 2007

        Revenues.    Total revenues increased $18.4 million, or 5.7%, to $344.0 million for the year ended December 31, 2008, from $325.6 million for the year ended December 31, 2007. We generate revenues through four business divisions.

        International services division.    Revenues from the international services division increased $17.6 million, or 12.7%, to $156.5 million for the year ended December 31, 2008, from $138.9 million for the year ended December 31, 2007. On a constant dollar basis, revenue for the year ended December 31, 2008 would have increased $19.9 million, or 14.3% to $158.8 million. This increase was the result of $9.0 million from higher transaction volumes and increased broadband connections from POS customers in Europe and Asia Pacific, an incremental $6.3 million from sales of our card-not-present POS service offering in the Asia Pacific region and $4.6 million from additional connections from financial services customers. Revenues from our U.K. subsidiary increased $1.7 million, or 2.5%, to $72.0 million for the year ended December 31, 2008, from $70.3 million for the year ended December 31, 2007. On a constant dollar basis, revenue from our U.K. subsidiary for the year ended December 31, 2008 would have increased $7.8 million, or 11.1%, to $78.1 million. We have recently seen reductions in POS dial transaction growth rates in some of the countries in which we operate, in particular the U.K. and France. We attribute this recent trend to the overall weakness in the economy. Future revenue growth in the international services division depends on a number of factors including the success of our POS and financial service products in countries we have recently entered, the success of our new product offerings and the successful integration of our card-not-present service offerings through our acquisition of Dialect.

35

        In our international services division we enter into arrangements with our customers in the currency of the markets we operate in. As a result, our reported results are affected by fluctuations in the value of the U.S. dollar as compared to foreign currencies, predominantly the British Pound, the Euro and the Australian dollar. The following table shows the currency composition of our revenues in the international services division for the year ended December 31, 2008 and weighted average exchange rates used to translate our local currency results to the U.S. dollar:

	2008					2007
	% of ISD Revenue			Weighted Average Exchange Rates		% of ISD Revenue			Weighted Average Exchange Rates
British Pound		46	%		1.85		50	%		2.00
Euro		31	%		1.47		30	%		1.38
Australian Dollar		18	%		0.84		14	%		0.86

        For further details on the effects of foreign exchange on our reported revenues, please refer to the Outlook section below.

        POS division.    Revenues from the POS division decreased $6.7 million, or 8.3%, to $74.5 million for the year ended December 31, 2008, from $81.2 million for the year ended December 31, 2007. Included in POS revenue for the year ended December 31, 2008 is $1.9 million in pass-through revenues compared with $2.6 million for year ended December 31, 2007. POS dial-up transaction volumes decreased 9.7% to 5.3 billion transactions for the year ended December 31, 2008, from 5.8 billion transactions for the year ended December 31, 2007. Excluding the decrease in pass-through revenues, revenues for the year ended December 31, 2008 decreased 7.8% to $72.6 million from $78.7 million for the year ended December 31, 2007. This decrease in revenue was due primarily to lower transaction volumes which decreased primarily as a result of a customer moving a portion of their traffic off our network for the stated purpose of vendor diversification and to a lesser extent what we believe to be the negative effect on volumes due to weakness in the economy. To a lesser extent the decrease in revenue is due to price compression following the renewal of certain customer contracts. These decreases were partially offset by increased revenue from sales of our managed broadband products. Growth in the POS division depends on a number of factors including the success of our new broadband, wireless and vending service offerings as well as the total number of POS dial-up transactions we transport.

        Telecommunication services division.    Revenues from the telecommunication services division increased $2.6 million, or 4.0%, to $67.1 million for the year ended December 31, 2008, from $64.5 million for the year ended December 31, 2007. Included in TSD revenue for the year ended December 31, 2008 is $6.1 million in pass-through revenues compared with $5.4 million for the year ended December 31, 2007. Excluding the increase in pass-through revenues, revenues increased $1.9 million, or 3.2% to $61.0 million from $59.1 million for the year ended December 31, 2008 and 2007, respectively. This was due to an increase of $11.3 million in network and database access services provided to cable customers which was partially offset by a decrease of $9.7 million related to the loss of two customers' caller ID business to a competitor. Future revenue growth in the telecommunication services division depends on a number of factors including the number of database access queries we transport, the number of call signaling routes our customers purchase and the success of our new product offerings, which potentially may be offset by customers seeking pricing discounts due to industry consolidation or other reasons.

        Financial services division.    Revenues from the financial services division increased $5.0 million, or 12.2%, to $45.9 million for the year ended December 31, 2008, from $40.9 million for the year ended December 31, 2007. The increase in revenues was primarily due to increases in new customer endpoint installations and to a lesser extent increases in connectivity between existing customers. In addition, we have seen increased demand for greater bandwidth connectivity which results in higher average revenue per customer endpoint. Future revenue growth in the financial services division depends on a number

36

of factors including the number of connections to and through our networks as well as the success of our new product offerings. We have begun to see an increased demand from our customers for larger bandwidth connections to our network and while these connections create greater revenue per physical endpoint, they require longer sales and installation lead-times. We also expect that the current difficulties in the financial services sector may have a negative impact on our future growth rates in this division.

        Cost of network services.    Cost of network services decreased $1.1 million, or 0.7%, to $162.4 million for the year ended December 31, 2008, from $163.6 million for the year ended December 31, 2007. On a constant dollar basis, cost of network services would have decreased $0.6 million, or 0.4%, to $162.9 million. Cost of network services were 47.2% of revenues for the year ended December 31, 2008, compared to 50.2% of revenues for the year ended December 31, 2007. Excluding the effect of foreign exchange, the decrease in cost of network services resulted primarily from declines in transaction volumes in our POS division, as mentioned above, and to a lesser extent reductions in the cost of services provided to us through focus on cost control of key suppler contracts in our POS and telecommunication services divisions. This was partially offset by higher volumes in our international services and telecommunications services divisions and to a lesser extent our financial services division.

        Gross profit represented 52.8% of total revenues for the year ended December 31, 2008, compared to 49.8% for the year ended December 31, 2007. The improvement in gross margin from last year is primarily a result of increased contribution from our international services division, our highest gross margin division, and to a lesser extent improvement in the gross margins of our POS division as we worked to lower the cost of services provided to us and to a lesser extent from improvements in the gross margin of the telecom services division due to a change in the product mix towards our network based products.

        Future cost of network services depends on a number of factors including total transaction and query volumes, the relative growth and contribution to total transaction volume of each of our customers, the success of our new service offerings, the timing and extent of our network expansion and the timing and extent of any network cost increases or reductions.

        Engineering and development expense.    Engineering and development expense increased $1.5 million, or 5.4%, to $29.1 million for the year ended December 31, 2008, from $27.6 million for the year ended December 31, 2007. On a constant dollar basis, engineering and development expense would have increased $1.6 million, or 5.8% to $29.2 million. Engineering and development expense represented 8.5% of revenues for each of the years ended December 31, 2008 and 2007. Included in engineering and development expense for the year ended December 31, 2008 and 2007 is stock compensation expense of $1.6 million and $2.1 million, respectively. For the year ended December 31, 2007 stock compensation expense includes a $0.4 million charge related to the decision by the Board of Directors to allow for dividend equivalent payments on the outstanding restricted stock units. Excluding these items and the effects of foreign exchange, engineering and development expense increased $2.1 million for the year ended December 31, 2008. This increase is primarily due to increased headcount to support our IP financial services and POS division offerings, and to a lesser extent our investment in the development of our card-not-present payment gateway. This was partially offset by an increase of $2.0 million in the labor costs capitalized for software development projects, primarily related to our card-not-present applications and to a lesser extent from development of our back-office systems to enhance our internal reporting and network monitoring capabilities.

        Selling, general and administrative expense.    Selling, general and administrative expenses increased $2.8 million, or 3.7%, to $78.1 million for the year ended December 31, 2008, from $75.3 million for the year ended December 31, 2007. On a constant dollar basis, selling, general and administrative expenses would have increased $3.0 million, or 4.0%, to $78.3 million. Selling, general and administrative expenses represented 22.7% of revenues for the year ended December 31, 2008,

37

compared to 23.1% of revenues for the year ended December 31, 2007. Included in selling, general and administrative expenses for the year ended December 31, 2008 and 2007 is $8.5 million and $9.4 million of stock compensation expense, respectively. For the year ended December 31, 2007, stock compensation expense includes a $1.0 million charge related to the decision by the board of directors to allow for dividend equivalent payments on the outstanding restricted stock units. Included in selling, general and administrative expenses for the year ended December 31, 2008 is $0.9 million benefit associated with the settlement of a state sales tax liability. Included in selling, general and administrative expenses for the year ended December 31, 2008 and 2007 is $1.2 million and $3.0 million in severance expenses, respectively, associated with the departure of certain executives. Excluding these items and the effects of foreign exchange, selling, general and administrative expenses increased $6.6 million for the year ended December 31, 2008. This is due to headcount related increases of $4.4 million in connection with our business development group that is focused on driving revenue growth from our customers in our domestic and international POS business, an increase of $1.0 million in professional fees in connection with advice on our international tax planning strategy and an increase of $1.0 million in bad debts expense.

        Depreciation and amortization of property and equipment.    Depreciation and amortization of property and equipment increased $2.2 million, or 9.5%, to $25.3 million for the year ended December 31, 2008, from $23.1 million for the year ended December 31, 2007. On a constant dollar basis, depreciation and amortization of property and equipment would have increased $2.3 million, or 10.0% to $25.4 million. Depreciation and amortization of property and equipment represented 7.4% of revenues for the year ended December 31, 2008, compared to 7.1% of revenues for the year ended December 31, 2007. Included in depreciation expense for the year ended December 31, 2008 is a charge of $1.1 million related to the impairment of certain capitalized software assets, primarily related to our vending platform. Excluding this item and the effects of foreign exchange, depreciation expense increased $1.2 million for the year ended December 31, 2008. This increase was primarily due to capital expenditures made to support our revenue growth.

        Amortization of intangible assets.    Amortization of intangible assets remained constant at $25.7 million for the year ended December 31, 2008 and the year ended December 31, 2007 and relates solely to intangible assets resulting from acquisitions. In the years ended December 31, 2008 and 2007, we accelerated amortization on a portion of our customer relationship intangible assets in connection with the loss of certain customers by $2.2 million and $1.5 million, respectively. Excluding these items, amortization of intangible assets decreased $0.6 million as certain intangible assets reached the end of their useful lives, partially offset by a full year of amortization from our acquisition of Dialect Payment Technologies. For purposes of measuring and recognizing impairment of long-lived assets including intangibles, we assess whether separate cash flows can be attributed to an individual asset. For our customer relationship intangible assets, we recognize and measure impairment upon the significant loss of revenue from a customer. Beginning in 2005, the Company experienced revenue and transaction volume declines with a major customer. The intangible asset value attributable to this customer relationship was approximately $19.4 million as of December 31, 2008. We assessed the recoverability of this customer relationship asset based upon undiscounted anticipated future cash flows and concluded no impairment existed as of December 31, 2008.

        Interest expense.    Interest expense decreased $5.8 million, or 34.7%, to $10.9 million for the year ended December 31, 2008, from $16.7 million for the year ended December 31, 2007. Included in interest expense for the year ended December 31, 2007 is a charge of $1.4 million related to the acceleration of deferred financing costs as a result of the recapitalization in March 2007 supporting our special dividend. Excluding this charge, interest expense decreased $4.4 million primarily due to the lower effective interest rate associated with our 2007 credit facility and to a lesser extent the lower average debt balance outstanding during 2008.

38

        Interest income.    Interest income was $0.7 million for the year ended December 31, 2008 compared to $1.1 million for the year ended December 31, 2007. The decrease in interest income is due primarily to a lower effective interest rate partially offset by higher outstanding cash balances.

        Other income (expense), net.    Other income (expense), net was an expense of $0.2 million for the year ended December 31, 2008 compared to income of $2.4 million for the year ended December 31, 2007. Included in other income (expense), net for the year ended December 31, 2008 are foreign currency revaluation losses of approximately $0.1 million due to fluctuations in the value of the U.S. dollar, principally against the Euro and Pound Sterling, versus a gain on foreign currency revaluation of $2.2 million for the year ended December 31, 2007.

        We have recently seen the U. S. dollar strengthen against the Euro, Pound Sterling and Australian dollar, which are the primary currencies we do business in outside the U. S. To the extent that the U.S. dollar continues to strengthen against those currencies we may recognize further losses on the revaluation or settlement of assets and liabilities denominated in currencies other than the local currency in which our subsidiaries operate.

        Income tax expense.    For the year ended December 31, 2008, our income tax expense was approximately $9.2 million compared to $0.6 million for the year ended December 31, 2007. The increase in our income tax expense is related to higher income in the U.S. that cannot be offset against losses in other jurisdictions. Our effective tax rate for the year ended December 31, 2008 was 72.5% versus the the U.S. federal statutory rate of 34.0% due primarily to changes in uncertain tax positions and deductions for stock based compensation. Our effective tax rate for the year ended December 31, 2007 was (26.3%) versus the U.S. federal statutory rate of 34.0% due primarily to lower tax rates in certain international jurisdictions in which we have operations and nondeductible stock compensation expense.

        Equity in net income (loss) of unconsolidated affiliates.    Equity in net income (loss) of unconsolidated affiliates for the year ended December 31, 2008 was a loss of $0.2 million, compared to income of $0.6 million for the year ended December 31, 2007. The decrease was due primarily to the realized gain of $0.6 million on the sale of all our outstanding shares of our investment in WAY Systems, Inc. during the year ended December 31, 2007. The loss for the year ended December 31, 2008 relates to our investment in AK Jensen, Inc. As of December 31, 2008, the carrying value of our investment in AK Jensen, Inc. was $0.4 million.

Year ended December 31, 2007 compared to the year ended December 31, 2006

        Revenues.    Total revenues increased $39.4 million, or 13.8%, to $325.6 million for the year ended December 31, 2007, from $286.2 million for the year ended December 31, 2006. We generate revenues through four operating divisions.

        International services division.    Revenues from the international services division increased $32.7 million, or 30.8%, to $138.9 million for the year ended December 31, 2007, from $106.2 million for the year ended December 31, 2006. On a constant dollar basis, revenue for the year ended December 31, 2007 would have increased $21.1 million, or 19.9% to $127.4 million. Excluding the benefit of foreign exchange, international services division revenues increased primarily through higher transaction volumes from new and existing POS customers in Europe and Asia Pacific and our acquisition of Dialect in Australia which generated incremental revenue of $6.8 million from sales to the card-not-present POS market, and to a lesser extent, increases in the number of FSD customer connections in Europe and Asia Pacific. Revenues from our UK subsidiaries increased $11.0 million, or 18.5%, to $70.3 million for the year ended December 31, 2007, from $59.3 million for the year ended December 31, 2006. On a constant dollar basis, revenue for the UK subsidiaries for the year ended December 31, 2007 would have increased $5.5 million, or 9.3% to $64.8 million.

39

        POS division.    Revenues from the POS division decreased $1.5 million, or 1.8%, to $81.2 million for the year ended December 31, 2007, from $82.8 million for the year ended December 31, 2006. POS dial-up transaction volumes for the year ended December 31, 2007 were 5.8 billion transactions, a decrease of 2.4% compared to 6.0 billion for the year ended December 31, 2006. POS division revenue decreased due to lower POS dial-up transaction volumes and decreases in our average revenue per transaction from discounts given to customers in 2006 partially offset by increases in revenues from our new broadband service offerings.

        Telecommunication services division.    Revenues from the telecommunication services division increased $2.4 million, or 3.8%, to $64.5 million for the year ended December 31, 2007, from $62.1 million for the year ended December 31, 2006. Included in telecommunications services revenues for the year ended December 31, 2007 and 2006 were approximately $5.4 million and $6.4 million, respectively, of pass-through revenues. Excluding the decrease in pass-through revenues, revenues increased $3.4 million primarily through increases in volumes from our database access services from new and existing customers and to a lesser extent from the migration onto our network of new cable customer traffic, partially offset by pricing compression due to customer consolidation in our call signaling business.

        Financial services division.    Revenues from the financial services division increased $5.8 million, or 16.6%, to $40.9 million for the year ended December 31, 2007, from $35.1 million for the year ended December 31, 2006. The increase in revenues was due to increases in new customer endpoint installations as well as increases in connectivity between existing customers and increased demand for greater bandwidth connectivity.

        Cost of network services.    Cost of network services increased $17.4 million, or 11.9%, to $163.6 million for the year ended December 31, 2007, from $146.2 million for the year ended December 31, 2006. On a constant dollar basis, cost of network services would have increased $13.3 million, or 9.0%, to $159.5 million. Cost of network services were 50.2% of revenues for the year ended December 31, 2007, compared to 51.1% of revenues for the year ended December 31, 2006. The increase in cost of network services resulted from higher volumes in our international services division, increases in customer connections in our financial services division, and increases in telecommunication charges within our POS division, as discussed below.

        Due to an increase in December of 2006 of the rates charged for telecommunication services used by the POS division, the cost of network services associated with the POS division increased approximately $4.6 million for the year ended December 31, 2007 as compared to the year ended December 31, 2006. During the second and third quarters of 2007, we entered into agreements with alternate providers of telecommunication services for the POS division. As a result, we reduced the impact of the rate increase that would otherwise have occurred in those periods.

        Gross profit represented 49.8% of total revenues for the year ended December 31, 2007, compared to 48.9% for the year ended December 31, 2006. This margin expansion is primarily the result of increased contribution from our highest gross margin divisions, the international services and financial services divisions, partially offset by declines in the gross margin of our dial-up POS product from increases in telecommunication charges, as discussed above. Any significant loss or significant reduction in transaction or query volumes could lead to a decline in gross profit since significant portions of our network costs are fixed costs.

        Engineering and development expense.    Engineering and development expense increased $5.4 million, or 24.5%, to $27.6 million for the year ended December 31, 2007, from $22.2 million for the year ended December 31, 2006. On a constant dollar basis, engineering and development expense would have increased $4.6 million, or 20.7%, to $26.8 million. Engineering and development expense represented 8.5% of revenues for the year ended December 31, 2007 and 7.8% of revenues for the year ended December 31, 2006. Included in engineering and development expenses for the year ended December 31, 2007 and 2006 is approximately $2.1 million and $1.2 million of stock compensation

40

expense, respectively. Stock compensation expense has increased due to additional awards granted during the year and the modification of outstanding restricted stock units in March 2007. Also included in engineering and development expense is $0.3 million and $0.9 million in severance costs for the year ended December 31, 2007 and 2006, respectively. Excluding the increase in stock compensation expense, severance costs and the effects of foreign exchange, engineering and development expense increased $4.3 million primarily to support our revenue growth in the international services division, the addition of approximately 40 employees from our acquisition of Dialect in June 2007, decreases in the amount of internally developed software expenses capitalized and to a lesser extent from increased expenses related to our ongoing investment in product development.

        Selling, general and administrative expense.    Selling, general and administrative expenses increased $3.7 million, or 5.0%, to $75.3 million for the year ended December 31, 2007, from $71.8 million for the year ended December 31, 2006. On a constant dollar basis, selling, general and administrative expenses would have increased $1.0 million, or 1.4%, to $72.8 million. Selling, general and administrative expenses represented 23.1% of revenues for the year ended December 31, 2007, compared to 25.1% of revenues for the year ended December 31, 2006. Included in selling, general and administrative expenses for the year ended December 31, 2007 is $2.7 million related to severance as we continued to streamline our operations. Included in selling, general and administrative expenses for the year ended December 31, 2006 is a charge for severance of $4.3 million primarily associated with a corporate restructuring event, a charge for expenses incurred by the special committee of our board of directors of $1.5 million and a charge related to other legal costs of approximately $0.5 million. Included in selling, general and administrative expenses for the years ended December 31, 2007 and 2006 is stock compensation expense of $9.4 million and $5.4 million, respectively. The $4.0 million increase in stock compensation expense is primarily related to additional grants during the year and to a lesser extent from the modification of outstanding restricted stock units in March 2007. Included in selling general and administrative expenses for the year ended December 31, 2007 and 2006 is performance related compensation of $4.4 million and $1.2 million, respectively. The increase in performance related compensation is due to the achievement of specified targets related to revenue and profitability targets by management and executive employees. Excluding the above mentioned charges and the effects of foreign exchange, selling, general and administrative expenses decreased $2.6 million, primarily from the cost reduction measures implemented in 2006, partially offset by increases to support our growth in the international services division.

        Depreciation and amortization of property and equipment.    Depreciation and amortization of property and equipment increased $0.9 million, or 4.1% to $23.1 million for the year ended December 31, 2007, from $22.2 million for the year ended December 31, 2006. On a constant dollar basis, depreciation and amortization of property and equipment increased $0.4 million, or 1.8% to $22.6 million. Depreciation and amortization of property and equipment represented 7.1% of revenues for the year ended December 31, 2007, compared to 7.8% of revenues for the year ended December 31, 2006. Depreciation expense increased primarily due to capital expenditures made to support our revenue growth.

        Amortization of intangible assets.    Amortization of intangible assets increased $0.8 million, or 3.4%, to $25.7 million for the year ended December 31, 2007, from $24.8 million for the year ended December 31, 2006. On a constant dollar basis, amortization of intangible assets would have increased $0.1 million, or 0.6% to $25.0 million. In the years ended December 31, 2007 and 2006, we accelerated amortization on a portion of our customer relationship intangible assets in connection with the loss of certain customers by $1.5 million and $2.2 million, respectively. Included in amortization of intangible assets for the year ended December 31, 2006 is approximately $1.1 million of expense associated with the impairment of vending-related intangible assets. Excluding these charges, amortization of intangible assets increased $2.0 million primarily from the amortization of intangible assets from acquisitions that we completed in 2006 and 2007.

41

        Interest expense.    Interest expense increased $7.4 million to $16.7 million for the year ended December 31, 2007, from $9.3 million for the year ended December 31, 2006. Included in interest expense for the year ended December 31, 2007 is a $1.4 million charge related to the write-off of unamortized deferred financing fees due to the termination of the 2005 amended and restated senior secured credit facility. Excluding this charge, interest expense increased $6.0 million due to higher debt levels incurred as a result of our recapitalization supporting our special dividend.

        Interest income.    Interest income was $1.1 million for the year ended December 31, 2007 compared to $0.6 million for the year ended December 31, 2006. The increase of $0.5 million in interest income is primarily due to the restricted cash we had on hand for the payment of the special dividend and higher outstanding average cash balances during the year ended December 31, 2007.

        Other income, net.    Other income, net was $2.4 million for the year ended December 31, 2007 compared to $2.2 million for the year ended December 31, 2006. Included in other income, net for the year ended December 31, 2007 is a gain on foreign currency translation of approximately $2.2 million due to fluctuations in the value of the U.S. dollar as compared with foreign currencies, principally, the pound sterling, Euro and Australian dollar, versus a gain on foreign currency translation of $2.1 million for the year ended December 31, 2006.

        Income tax expense.    For the year ended December 31, 2007, our income tax expense was approximately $0.6 million compared to an income tax benefit of $2.7 million for the year ended December 31, 2006. The decrease in our income tax benefit is primarily related to higher income in foreign jurisdictions that cannot be offset by losses in other jurisdictions, an increase in nondeductible stock compensation expense, and U.S. tax expense on foreign earnings. Our effective tax rate for the year ended December 31, 2007 is (26.3%) versus the U.S. federal statutory tax rate of 34.0%, due primarily to lower tax rates in certain international jurisdictions in which we have operations and nondeductible stock compensation expense.

        Equity in net income (loss) of unconsolidated affiliates.    For the year ended December 31, 2007, our equity in net income of unconsolidated affiliates was $0.6 million compared to a loss of $5.2 million for the year ended December 31, 2006. The increase was due primarily to the realized gain of $0.6 million on the sale of all our outstanding shares of our investment in WAY Systems, Inc, which had a carrying value of zero resulting from the write downs we made in the fourth quarter of 2006, as well as a realized gain of $0.1 million from the sale of 10% of our holding in AK Jensen, Inc. in the third quarter of 2007 partially offset by losses recorded on our investment in AK Jensen, Inc. of $0.1 million. During the year ended December 31, 2006 we recorded losses on our investments in WAY Systems, Inc., IP Commerce Inc. and AK Jensen, Inc. of $3.4 million, $1.8 million and $15,000 respectively. As of December 31, 2007, the carrying value of our investment in AK Jensen, Inc. was $0.7 million. Our investments in IP Commerce, Inc. and WAY Systems, Inc. were written down to zero as of December 31, 2006.

Outlook

        In our foreign operations we conduct business in each of our foreign jurisdictions local currency. Due to the recent strengthening of the U.S. Dollar relative to several major foreign currencies, we expect revenues and operating income to be negatively impacted by foreign currency translation. As a point of reference, for the year ended December 31, 2008, the weighted average exchange rate used to translate the Company's Statement of Operations (U.S. Dollar rate for one unit of foreign currency) was $1.85 for the British Pound, $1.47 for the Euro, and $0.84 for the Australian dollar. For the year ended December 31, 2008, approximately 21%, 14% and 8% of our consolidated revenues were generated in the British Pound, Euro and Australian dollar, respectively. For the year ended December 31, 2008, approximately 16%, 11% and 6% of our consolidated operating expenses were generated in the British Pound, Euro and Australian dollar, respectively. A $0.01 change in exchange rates for each of the major foreign currencies we operate in would have the following impact on

42

revenue for the year ended December 31, 2008: British Pound, $0.4 million, Euro, $0.4 million and Australian Dollar $0.3 million. The foreign currency exchange rates which impact our revenues and operating income have been volatile recently and are beyond our control.

Seasonality

        Credit card and debit card transactions account for a major percentage of the transaction volume processed by our customers. The volume of these transactions on our networks generally is greater in the third and fourth quarter vacation and holiday seasons than during the rest of the year. Consequently, revenues and earnings from credit card and debit card transactions in the first and second quarter generally are lower than revenues and earnings from credit card and debit card transactions in the third and fourth quarters of the immediately preceding year. We expect that our operating results in the foreseeable future will be significantly affected by seasonal trends in the credit card and debit card transaction market.

Liquidity and Capital Resources

        Our primary liquidity and capital resource needs are to finance the costs of our operations, to make capital expenditures and to service our debt. Based upon our current level of operations, we expect that our cash flow from operations, together with the amounts we are able to borrow under our 2007 senior secured revolving credit facility, will be adequate to meet our anticipated needs for the foreseeable future. In March 2009, we entered into a definitive agreement to purchase the Communication Services Group assets from Verisign, Inc. for $230 million in cash. We expect to fund the acquisition through a combination of cash on hand and additional debt of up to $250 million.

        Our operations provided us cash of $73.7 million for the year ended December 31, 2008, which was attributable to net income of $3.5 million, adjusted by depreciation, amortization and other non-cash charges of $68.4 million and a decrease in working capital of $1.8 million. Our operations provided us cash of $42.0 million for the year ended December 31, 2007, which was attributable to a net loss of $2.8 million, adjusted by depreciation, amortization and other non-cash charges of $53.5 million and an increase in working capital of $8.7 million. Our operations provided us cash of $35.1 million for the year ended December 31, 2006, which was attributable to a net loss of $9.9 million, adjusted by depreciation, amortization and other non-cash charges of $54.2 million and an increase in working capital of $9.2 million.

        We used cash of $32.0 million to fund capital expenditures primarily to support our revenue growth for the year ended December 31, 2008. We used cash of $20.6 million in investing activities for the year ended December 31, 2007, which includes cash proceeds of $0.9 million from the sale of certain equity investments and $2.2 million from the sale of non-strategic property and equipment less $4.2 million for business acquisitions and $19.5 million in capital expenditures primarily to support our revenue growth. We used cash of $53.1 million in investing activities for the year ended December 31, 2006, which includes cash paid for business acquisitions of $28.1 million and capital expenditures of $25.0 million.

        We used cash of $19.7 million from financing activities for the year ended December 31, 2008 which included voluntary pre-payments of $27.0 million on our 2007 senior secured credit facility, and $2.2 million was used to repurchase stock to satisfy employees tax withholding requirements on the vesting of restricted stock units. In addition we received $9.6 million from the exercise of employee stock option. We used cash of $19.7 million from financing activities for the year ended December 31, 2007, which includes net proceeds of $222 million from our 2007 senior secured credit facility, of which $98.3 million was used for payment of a special dividend and $123.3 million was used to repay our 2005 amended and restated senior secured credit facility. In addition, we made $19.5 million of voluntary pre-payments on our 2007 senior secured credit facility. We received cash of $9.9 million from financing activities for the year ended December 31, 2006, which primarily consisted of $9.9 million of borrowings

43

under our 2005 amended and restated senior secured credit facility, the proceeds of which were used to partially finance business acquisitions.

Commitments

        The following table summarizes our contractual obligations as of December 31, 2008 that require us to make future cash payments (dollars in thousands):

			Year ending December 31,
	Total		2009		2010		2011		2012		2013		Thereafter
Contractual Cash Obligations by Period:
Long-term debt under the senior secured credit facility	$	178,500	$	—	$	—	$	—	$	—	$	—	$	178,500
Supplier commitments		6,316		4,718		1,598		—		—		—		—
Operating lease obligations		42,559		8,833		7,710		6,939		6,049		3,714		9,314
	$	227,375	$	13,551	$	9,308	$	6,939	$	6,049	$	3,714	$	187,814

        Due to uncertainty with respect to the timing of future cash flows associated with unrecognized tax benefits at December 31, 2008, the Company is unable to make reasonably reliable estimates of the period of cash settlement. Therefore $4.7 million of unrecognized tax benefits have been excluded from the contractual obligations table above. See Note 8 to the Consolidated Financial Statements for further discussion of income tax.

        Not included in the table above are commitments to make interest payments under the terms of our 2007 senior secured credit facility due to the variable nature of the interest rates. See note 5 to the consolidated financial statements for further details on interest rates and other terms and conditions of this facility.

        We expect that we will be able to fund our remaining obligations and commitments with cash flow from operations. To the extent we are unable to fund these obligations and commitments with cash flow from operations, we intend to fund these obligations and commitments with proceeds from borrowings under our 2007 senior secured credit facility or future debt or equity financings.

Critical Accounting Policies

        Our significant accounting policies are described in Note 2 to our consolidated financial statements included elsewhere in this report. We consider the accounting policies related to revenue and related cost recognition, valuation of goodwill and other intangible assets, stock based compensation and accounting for income taxes to be critical to the understanding of our results of operations. Critical accounting policies include the areas where we have made what we consider to be particularly subjective or complex judgments in making estimates and where these estimates can significantly impact our financial results under different assumptions and conditions. We prepare our financial statements in conformity with U.S. generally accepted accounting principles. As such, we are required to make certain estimates, judgments and assumptions that we believe are reasonable based upon the information available. These estimates, judgments and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the periods presented. Actual results could be different from these estimates.

        The following is a discussion on the most significant accounting estimates affecting the financial statements:

Goodwill and intangible assets

        We account for goodwill and intangible assets in accordance with Statement of Financial Accounting Standard (SFAS) No. 142, Goodwill and Other Intangible Assets. Under this standard,

44

goodwill and intangible assets deemed to have indefinite lives are not amortized and are subject to annual impairment tests. We have elected to perform the impairment test annually as of October 1 of each year. An interim goodwill impairment test is performed if an event occurs or circumstances change between annual tests that would more likely than not reduce the fair value of a reporting unit below its carrying amount. If facts and circumstances indicate goodwill may be impaired, we perform a recoverability evaluation based upon a determination of fair value.

        In accordance with SFAS, No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, we review our long-lived assets including property and equipment, capitalized software development costs and identifiable intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable. To determine the recoverability of our long-lived assets, we evaluate the probability that future estimated undiscounted net cash flows will be less than the carrying amount of the intangible assets. If we estimate that the assets are impaired, the assets are written down to their fair value. For purposes of measuring and recognizing impairment of long-lived assets, we assess whether separate cash flows can be attributed to the individual asset. We group our long-lived assets by business unit where separately identifiable cash flows are available. In the event that long-lived assets, including intangibles are abandoned or otherwise disposed of, we recognize an impairment charge upon disposition. For our customer relationship intangible assets, we evaluate impairment upon the significant loss of revenue from a customer. Beginning in 2005, the Company experienced revenue and transaction volume declines with a major customer. The intangible asset value attributable to this customer relationship was approximately $19.4 million as of December 31, 2008. We assessed the recoverability of this customer relationship asset based upon undiscounted anticipated future cash flows and concluded no impairment existed as of December 31, 2008.

        The calculation of fair value in accordance with SFAS Nos. 142 and 144 contains uncertainties due to judgment in estimates and assumptions, including projections of future income and cash flows, the identification of appropriate market multiples and the choice of an appropriate discount rate. Our estimates of anticipated future income and cash flows used in determining fair value contain uncertainties due to uncontrollable events that could positively or negatively impact the anticipated future economic and operating conditions. Therefore, those estimates could be reduced significantly in the future due to changes in technologies, regulation, available financing, competition or other circumstances. As a result, the carrying amount of our long-lived assets could be reduced through impairment charges in the future. Additionally, changes in estimated future cash flows could result in a shortening of estimated useful lives for long-lived assets including intangibles.

Income taxes

        We account for income taxes pursuant to the provisions of SFAS No. 109, Accounting for Income Taxes. Under this method, deferred tax assets or liabilities are computed based upon the difference between the financial statement and income tax bases of assets and liabilities using the enacted marginal tax rate. Deferred income tax expense or benefits are based upon the changes in the asset or liability from period to period. We provide a valuation allowance on net deferred tax assets when it is more likely than not that such assets will not be realized. The company must exercise significant judgment in evaluating the amount and timing of recognition of deferred tax liabilities and assets, and related valuation allowance, including projections of future taxable income. These judgments and estimates are reviewed on a continual basis as regulatory and business factors change. The company expects to realize the benefit of its deferred tax assets for which no valuation allowance is recorded through future reversals of its deferred tax liabilities, through the recognition of taxable income in the allowable carryback and carryforward periods, and through implementation of tax planning strategies. An additional valuation allowance for deferred tax assets may be required if the amount of taxes recoverable through loss carryback declines, if tax planning strategies are not available, or if the company projects lower levels of future taxable income.

45

        We record unrecognized tax benefit liabilities for known or anticipated tax issues based on our analysis of whether, and the extent to which, additional taxes will be due. This analysis is performed in accordance with the requirements of FIN 48. Our analysis of unrecognized tax benefits contain uncertainties based on judgment used to apply the more likely than not recognition and measurement thresholds of FIN 48.

        The Company has made no provision for U.S. income taxes or additional foreign taxes on the cumulative unremitted earnings of non-U.S. subsidiaries (approximately $70 million as of December 31, 2008) because the Company considers these earnings to be indefinitely reinvested in these foreign locations. These earnings could become subject to additional taxes if remitted as dividends, loaned to the Company or a U.S. affiliate or if it sold the Company's interests in the foreign affiliates. Determination of the amount of any unrecognized deferred U.S. income tax liability associated with these foreign earnings is not practicable due to complexities associated with this hypothetical calculation.

Effects of Inflation

        Our monetary assets, consisting primarily of cash and receivables, and our non-monetary assets, consisting primarily of intangible assets and goodwill, are not affected significantly by inflation. We believe that replacement costs of equipment, furniture and leasehold improvements will not materially affect our operations. However, the rate of inflation affects our expenses, such as those for employee compensation and costs of network services, which may not be readily recoverable in the price of services offered by us.

Item 7A.    Quantitative and Qualitative Disclosures about Market Risk

Interest rates

        Our principal exposure to market risk relates to changes in interest rates. As of December 31, 2008 we had $178.5 million outstanding under our 2007 senior secured credit facility with interest rates tied to changes in the lender's base rate or the LIBOR rate. Based upon the outstanding borrowings on December 31, 2008 and assuming repayment of the Term Loan in accordance with scheduled maturities, each 1.0% increase or decrease in these rates could affect our annual interest expense by $1.8 million.

        As of December 31, 2008, we did not hold derivative financial or commodity instruments and all of our cash and cash equivalents were held in money market or commercial accounts.

Foreign currency risk

        Our earnings are affected by fluctuations in the value of the U.S. dollar as compared with foreign currencies, predominately the Euro, the British Pound and the Australian dollar due to our operations in Europe and Australia.

        We have operations in 23 countries outside of the U.S., including the United Kingdom, Austria, Australia, Bermuda, Canada, France, Germany, Hong Kong, India, Ireland, Italy, Japan, Malaysia, Mexico, New Zealand, Poland, Romania, Singapore, South Korea, Spain, Sweden, Thailand and the Netherlands. We provide services in these countries using networks deployed in each country. We manage foreign exchange risk through the structure of our business. In the substantial majority of our transactions, we receive payments denominated in the U.S. dollar, British Pound, Euro or Australian dollar. Therefore, we do not rely on international currency markets to obtain and pay illiquid currencies. The foreign currency exposure that does exist is limited by the fact that the majority of transactions are paid according to our standard payment terms, which are generally short-term in nature. Our policy is not to speculate in foreign currencies, and we promptly buy and sell foreign currencies as necessary to cover our net payables and receivables, which are denominated in foreign currencies. For the year ended December 31, 2008, we recorded a loss on foreign currency revaluation of approximately $0.1 million.

46

Item 8.    Financial Statements and Supplementary Data

        The following financial information is included on the pages indicated:

REPORTS OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM	48
CONSOLIDATED BALANCE SHEETS As of December 31, 2007 and 2008	50
CONSOLIDATED STATEMENTS OF OPERATIONS For the years ended December 31, 2006, 2007 and 2008	51
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY For the years ended December 31, 2006, 2007 and 2008	52
CONSOLIDATED STATEMENTS OF CASH FLOWS For the years ended December 31, 2006, 2007 and 2008	53
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS	54
FINANCIAL STATEMENT SCHEDULE:
SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS For the years ended December 31, 2006, 2007 and 2008	96

47

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and shareholders of TNS, Inc.:

        We have audited the accompanying consolidated balance sheets of TNS, Inc. as of December 31, 2007 and 2008, and the related consolidated statements of operations, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 2008. Our audits also included the financial statement schedule listed in item 15(b). These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

        We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

        In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of TNS, Inc. at December 31, 2007 and 2008, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2008, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

        We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of TNS, Inc.'s internal control over financial reporting as of December 31, 2008, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 12, 2009 expressed an unqualified opinion thereon.

/s/  Ernst & Young LLP

McLean, Virginia
March 12, 2009

48

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
ON INTERNAL CONTROL OVER FINANCIAL REPORTING

The Board of Directors and shareholders of TNS, Inc.:

        We have audited TNS, Inc.'s internal control over financial reporting as of December 31, 2008, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). TNS, Inc.'s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying management report located in Item 9A. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit.

        We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

        A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

        Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

        In our opinion, TNS, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2008, based on the COSO criteria.

        We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of TNS, Inc. as of December 31, 2007 and 2008, and the related consolidated statements of operations, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 2008 of TNS, Inc. and our report dated March 12, 2009 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

McLean, Virginia
March 12, 2009

49

TNS, INC.

CONSOLIDATED BALANCE SHEETS

		December 31,
		2007			2008
		(in thousands, except per share and share amounts)
ASSETS
Current assets:
Cash and cash equivalents		$	17,805		$	38,851
Accounts receivable, net of allowance for doubtful accounts of $3,093 and $3,631, respectively			75,112			69,501
Prepaid expenses			6,765			5,351
Deferred tax assets			2,800			1,805
Income taxes receivable			433			454
Inventory			1,464			1,774
Other current assets			4,055			2,737
	Total current assets		108,434			120,473
Property and equipment, net			55,376			58,795
Identifiable intangible assets, net			180,330			151,811
Goodwill			13,513			10,954
Deferred tax assets, net			21,110			16,141
Other assets			4,335			3,740
	Total assets	$	383,098		$	361,914
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable, accrued expensed and other current liabilities		$	57,069		$	59,424
Deferred revenue			18,521			16,360
	Total current liabilities		75,590			75,784
Long-term debt, net of current portion			205,500			178,500
Deferred tax liabilities			5,537			2,420
Other liabilities			4,199			2,395
	Total liabilities		290,826			259,099
Commitments and contingencies (see Note 10)
Stockholders' equity:
Common stock, $0.001 par value; 130,000,000 shares authorized; 24,274,195 shares issued and 24,258,942 shares outstanding and 25,082,007 shares issued and 25,053,226 shares outstanding, respectively			24			25
Treasury stock, 15,253 shares and 28,781 shares, respectively			(239	)		(578	)
Additional paid-in capital			131,485			150,839
Accumulated deficit			(44,278	)		(40,800	)
Accumulated other comprehensive income (loss)			5,280			(6,671	)
	Total stockholders' equity		92,272			102,815
	Total liabilities and stockholders' equity	$	383,098		$	361,914

See accompanying notes.

50

TNS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

		Year ended December 31,
		2006			2007			2008
		(in thousands, except per share and share amounts)
Revenues		$	286,160		$	325,564		$	343,991
Operating expenses:
	Cost of network services, exclusive of the items shown separately below		146,181			163,559			162,423
	Engineering and development		22,187			27,626			29,149
	Selling, general, and administrative		71,757			75,287			78,104
	Depreciation and amortization of property and equipment		22,208			23,114			25,286
	Amortization of intangible assets		24,820			25,656			25,734
	Total operating expenses		287,153			315,242			320,696
(Loss) income from operations			(993	)		10,322			23,295
Interest expense			(9,261	)		(16,655	)		(10,868	)
Interest income			598			1,105			707
Other (expense) income, net			2,197			2,356			(241	)
Income (loss) before income tax provision, equity in net loss of unconsolidated affiliates and cumulative effect of a change in accounting principle			(7,459	)		(2,872	)		12,893
Income tax (provision) benefit			2,665			(586	)		(9,213	)
Equity in net (loss) income of unconsolidated affiliates			(5,186	)		643			(202	)
Income (loss) before cumulative effect of a change in accounting principle			(9,980	)		(2,815	)		3,478
Cumulative effect of a change in accounting principle, net of tax provision			84			—			—
Net income (loss) attributable to common stockholders		$	(9,896	)		(2,815	)		3,478
Basic and diluted net income (loss) per common share:
	Income (loss) before cumulative effect of a change in accounting principle	$	(0.41	)	$	(0.12	)	$	0.14
	Cumulative effect of a change in accounting principle, net of tax provision		—			—			—
	Net income (loss)	$	(0.41	)	$	(0.12	)	$	0.14
Basic weighted average common shares outstanding			24,075,710			24,203,735			24,763,299
Diluted weighted average common shares outstanding			24,075,710			24,203,735			25,195,521
Dividends declared per common share		$	—		$	4.00		$	—

See accompanying notes.

51

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

	Common Stock																	Accumulated other comprehensive (loss) income
						Treasury Stock			Additional paid-in capital			Accumulated deficit			Deferred stock compensation						Total stockholders' equity			Comprehensive income (loss)
	Shares			Amount
	(in thousands, except per share and share amounts)
Balance, December 31, 2005		23,998,715			24		(517	)		217,434			(31,567	)		(7,150	)		(378	)		177,846
Reclassification of deferred stock compensation upon adoption of SFAS No. 123R		—			—		—			(7,150	)		—			7,150			—			—
Exercise of employee stock options		16,758			—		—			350			—			—			—			350
Issuance of common stock upon vesting of restricted stock units		130,331			—		—			—			—			—			—			—
Purchase of treasury stock							(88	)		—			—			—			—			(88	)
Stock compensation expense		—			—		—			7,465			—			—			—			7,465
Foreign currency translation		—			—		—			—			—			—			3,588			3,588		$	3,588
Net loss		—			—		—			—			(9,896	)		—			—			(9,896	)		(9,896	)
Balance, December 31, 2006		24,145,804			24		(605	)		218,099			(41,463	)		—			3,210			179,265
Total, December 31, 2006																								$	(6,308	)
Exercise of employee stock options		5,545			—		—			78			—			—			—			78
Issuance of common stock upon vesting of restricted stock units		196,724			—		—			—			—			—			—			—
Tax benefit of share based payments		—			—		—			277			—			—			—			277
Purchase of treasury stock							(929	)		—			—			—			—			(929	)
Stock compensation expense		—			—		—			12,620			—			—			—			12,620
Foreign currency translation		—			—		—			—			—			—			2,070			2,070		$	2,070
Special cash dividend declared, $4 per common share		—			—		—			(98,294	)		—			—			—			(98,294	)
Retirement of treasury shares		(73,878	)		—		1,295			(1,295	)		—			—			—			—
Net loss		—			—		—			—			(2,815	)		—			—			(2,815	)		(2,815	)
Balance, December 31, 2007		24,274,195		$	24	$	(239	)	$	131,485		$	(44,278	)	$	—		$	5,280		$	92,272
Total, December 31, 2007																								$	(745	)
Exercise of employee stock options		543,328			1		—			9,588			—			—			—			9,589
Issuance of common stock upon vesting of restricted stock units		364,627			—		—			—			—			—			—			—
Tax benefit of share based payments		—			—		—			284			—			—			—			284
Purchase of treasury stock		—			—		(2,162	)		—			—			—			—			(2,162	)
Stock compensation expense		—			—		—			11,305			—			—			—			11,305
Foreign currency translation		—			—		—			—			—			—			(11,951	)		(11,951	)	$	(11,951	)
Retirement of treasury shares		(100,143	)		—		1,823			(1,823	)		—			—			—			—
Net income		—			—		—			—			3,478			—			—			3,478			3,478
Balance, December 31, 2008		25,082,007		$	25	$	(578	)	$	150,839		$	(40,800	)	$	—		$	(6,671	)	$	102,815
Total, December 31, 2008																								$	(8,473	)

See accompanying notes.

52

TNS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

				Year ended December 31,
				2006			2007			2008
				(in thousands)
Cash flows from operating activities:
Net income (loss)				$	(9,896	)	$	(2,815	)	$	3,478
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
		Depreciation and amortization of property and equipment			22,208			23,114			25,286
		Amortization of intangible assets			24,820			25,656			25,734
		Deferred income tax provision (benefit)			(5,993	)		(10,136	)		4,960
		Loss on disposal of property and equipment			—			60			165
		Amortization and write-off of deferred financing costs			485			2,090			722
		Equity in net loss of unconsolidated affiliates			5,186			118			202
		Stock compensation			7,465			12,620			11,305
Changes in operating assets and liabilities, net of effect of acquisitions:
		Accounts receivable, net			(12,001	)		(7,227	)		(174	)
		Other current and noncurrent assets			(4,045	)		3,549			1,002
		Accounts payable and accrued expenses			1,397			290			6,964
		Deferred revenue			2,881			(3,648	)		(4,115	)
		Other current and noncurrent liabilities			2,614			(1,709	)		(1,804	)
			Net cash provided by operating activities		35,121			41,962			73,725
Cash flows from investing activities:
	Purchases of property and equipment				(25,005	)		(19,526	)		(32,047	)
	Proceeds from sale of property and equipment				—			2,164			—
	Cash paid for business acquisitions, net of cash acquired				(28,086	)		(4,166	)		—
	Proceeds from sale of unconsolidated affiliates				—			888			—
			Net cash used in investing activities		(53,091	)		(20,640	)		(32,047	)
Cash flows from financing activities:
	Proceeds from issuance of long-term debt, net of financing costs of $—, $3,501and $—, respectively				—			221,949			—
	Borrowings on revolving credit facility				9,866			—			—
	Repayment of long-term debt				—			(142,813	)		(27,000	)
	Payment of long-term debt financing costs				(225	)		—			(75	)
	Proceeds from stock option exercises				320			78			9,589
	Excess tax benefits from share based payments				30			277			284
	Payment of special cash dividend, $4 per common share				—			(98,294	)		—
	Purchase of treasury stock				(88	)		(929	)		(2,162	)
			Net cash (used in) provided by financing activities		9,903			(19,732	)		(19,364	)
Effect of exchange rates on cash and cash equivalents					(1,239	)		(1,107	)		(1,268	)
Net increase (decrease) in cash and cash equivalents					(9,306	)		483			21,046
Cash and cash equivalents, beginning of year					26,628			17,322			17,805
Cash and cash equivalents, end of year				$	17,322		$	17,805		$	38,851
Supplemental disclosures of cash flow information:
	Cash paid for interest			$	8,619		$	15,636		$	10,835
	Cash paid for income taxes			$	10,244		$	13,863		$	2,547

See accompanying notes.

53

TNS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2008

1. The Company:

Business Description

        TNS, Inc. (TNS or the Company) is a Delaware corporation. TNS is a leading provider of business-critical data communications services to processors of credit card, debit card and automated teller machine (ATM) transactions. TNS is also a leading provider of call signaling and database access services to the domestic telecommunications industry and of secure data and voice network services to the global financial services industry. TNS' data communication services enable secure and reliable transmission of time-sensitive, transaction-related information critical to its customers' operations. The Company's customers outsource their data communication requirements to TNS because of the Company's expertise, comprehensive customer support, and cost-effective services. TNS provides services to customers in the United States and increasingly to customers in 29 countries, including Canada, Mexico and countries in Europe, Latin America and the Asia-Pacific region.

        The Company provides its services through its multiple data networks, each designed specifically for transaction applications. These networks support a variety of widely accepted communications protocols, are designed to be scalable and are accessible by multiple methods, including dial-up, dedicated, wireless and Internet connections.

        The Company has four business divisions: (1) the point-of-sale/point-of-service (POS) division, which provides data communications services to payment processors in the U.S., Canada and Mexico, (2) the telecommunication services division (TSD), which provides call signaling services and database access services targeting primarily the telecommunications industry, (3) the financial services division (FSD), which provides data and voice communications services to the financial services community in support of the Financial Information eXchange (FIX) messaging protocol and other transaction-oriented trading applications, and (4) the international services division (ISD), which markets the Company's POS and financial services in countries outside of the United States, Canada and Mexico.

Dividend and Recapitalization

        On March 28, 2007, the Company's board of directors declared a special dividend of $4.00 per common share, which was paid on April 12, 2007. Also, on March 28, 2007, the Company entered into a secured credit facility, which consists of two facilities: a senior secured term loan facility in an aggregate principal amount of $225 million (the Term Facility) and a senior secured revolving credit facility in an aggregate principal amount of $15 million (the Revolving Facility). The Company used approximately $98.3 million of the proceeds from the Term Facility to pay the special dividend. The remainder of the proceeds from the Term Facility were used to refinance existing debt, to pay fees related to the senior secured credit facility and the special dividend and for general corporate purposes.

2. Summary of Significant Accounting Policies:

Principles of Consolidation

        The consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany accounts and transactions are eliminated upon consolidation. The Company consolidates investments where it has a controlling financial interest as defined by Accounting Research Bulletin (ARB) No. 51, "Consolidated Financial Statements" as amended by Statement of Financial Accounting Standards (SFAS) No. 94, "Consolidation of all Majority-Owned Subsidiaries." The usual condition for controlling financial interest is ownership of a majority of the voting interest and,

54

TNS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2008

2. Summary of Significant Accounting Policies: (Continued)

therefore, as a general rule ownership, directly or indirectly, of over fifty percent of the outstanding voting shares is a condition pointing towards consolidation. For investments in variable interest entities, as defined by Financial Statement Accounting Board (FASB) Interpretation No. 46 (revised December 2003), "Consolidation of Variable Interest Entities," (FIN 46R) the Company consolidates when it is determined to be the primary beneficiary of the variable interest entity. For those investments in entities where the Company has significant influence over operations, but where the Company neither has a controlling financial interest nor is the primary beneficiary of a variable interest entity, the Company follows the equity-method of accounting pursuant to Accounting Principles Bulletin (APB) Opinion No. 18, "The Equity Method of Accounting for Investments in Common Stock."

Use of Estimates

        The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of certain assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. Significant estimates affecting the consolidated financial statements include management's judgments regarding the allowance for doubtful accounts, future cash flows from long-lived assets, accrued expenses for probable losses, and estimates related to the fair value of the Company's employee stock options, including volatility and expected life. Actual results could differ from those estimates.

Revenue Recognition

        The Company recognizes revenue when persuasive evidence of an agreement exists, the terms are fixed and determinable, services are performed, and collection is probable. Cash received in advance of revenue recognition is recorded as deferred revenue. POS services revenue is derived primarily from per transaction fees paid by the Company's customers for the transmission of transaction data, through the Company's networks, between payment processors and POS or ATM terminals and monthly recurring fees for broadband and wireless offerings. TSD revenue is derived primarily from fixed monthly fees for call signaling services and per query fees charged for database access and call validation services. FSD revenue is derived primarily from monthly recurring fees based on the number of customer connections to and through the Company's networks.

        Incentives granted to new customers or upon contract renewals are deferred and recognized ratably as a reduction of revenue over the contract period to the extent that the incentives are recoverable against the customer's minimum purchase commitments under the contract. Deferred customer incentives were approximately $0.9 million and $0.2 million as of December 31, 2007 and 2008, respectively, of which approximately $0.9 million and $0.1 million was classified in other current assets as of December 31, 2007 and 2008, respectively, and the remaining balance was classified in other assets in the accompanying consolidated balance sheets.

        In addition, the Company receives installation fees related to the configuration of the customers' systems. Revenue from installation fees is being deferred and recognized ratably over the customer's contractual service period, generally three years. Installation fees were approximately $2.6 million, $2.9 million, and $4.1 million for the years ended December 31, 2006, 2007 and 2008, respectively. Approximately $4.6 million and $4.3 million of installation fees are included in deferred revenue as of December 31, 2007 and 2008, respectively.

55

TNS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2008

2. Summary of Significant Accounting Policies: (Continued)

Cost of Network Services

        Cost of network services is comprised primarily of telecommunications charges, which include data transmission and database access charges, leased digital capacity charges, circuit installation charges and activation charges. The cost of data transmission is based on a contract or tariff rate per minute of usage in addition to a prescribed rate per transaction for certain vendors. The costs of database access, circuits, installation and activation charges are based on fixed fee contracts with local exchange carriers and interexchange carriers. The cost of network services also includes salaries, equipment maintenance and other costs related to the ongoing operation of the Company's data networks. These costs are expensed by the Company as incurred. Direct costs of installations are deferred and amortized over the customers contracted service period, generally three years. Deferred installation costs as of December 31, 2007 and 2008 were approximately $2.3 million and $2.4 million, respectively, and are classified as other current assets and other assets in the accompanying consolidated balance sheets. Depreciation expense on network equipment was approximately $13.4 million, $15.4 million, and $16.3 million for the years ended December 31, 2006, 2007 and 2008, respectively, and is included in depreciation and amortization of property and equipment in the accompanying consolidated statements of operations. Amortization expense on developed technology, an intangible asset recorded in the acquisitions of Transaction Network Services, Inc., CommsXL Limited, Sonic and Dialect Payment Technologies Pty Limited., and the Synapse, vending and InfiniRoute assets was approximately $5.1 million, $4.0 million, and $4.6 million for the years ended December 31, 2006, 2007 and 2008, respectively and is included in amortization of intangible assets in the accompanying consolidated statements of operations.

Cash and Cash Equivalents

        The Company considers all highly liquid investments with an original maturity of three months or less to be cash and cash equivalents.

Concentrations of Credit Risk

        Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash and cash equivalents and accounts receivable. The Company does not, as a matter of policy, require collateral on credit granted to customers. The Company performs periodic evaluations of its customer base and establishes allowances for estimated credit losses.

Fair Value of Financial Instruments

        In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements". SFAS No. 157 defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles, and expands disclosures about fair value measurements. In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities." SFAS No. 159 permits entities to choose to measure many financial assets and financial liabilities at fair value. For financial assets and financial liabilities, SFAS 157 was effective for the Company on January 1, 2008. The adoption of SFAS 157 to the Company's financial assets and financial liabilities did not have a material effect on the Company's consolidated financial statements. As we did not elect to fair value any of our financial instruments under the provisions of SFAS 159, the adoption of this statement did not have any impact on our financial position or results of operations.

56

TNS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2008

2. Summary of Significant Accounting Policies: (Continued)

        The fair value of the Company's long-term debt is based upon quoted market prices for the same and similar issues giving consideration to quality, interest rates, maturity and other characteristics. As of December 31, 2008, the Company believes the carrying amount of its long-term debt approximates its fair value since the variable interest rate of the debt approximates a market rate.

Allowance for doubtful accounts

        The allowance for doubtful accounts reflects the company's estimate of credit exposure, determined principally on the basis of its collection experience, aging of its receivables and significant individual account credit risks.

Inventory

        Inventory is stated at the lower of cost or market, using the average cost method. Inventory consists primarily of network and computer parts and equipment. The Company's products are subject to technological change and changes in the Company's respective competitive markets. It is possible that new product launches or changes in customer demand could result in unforeseen changes in inventory requirements for which no write-down has been recorded. During the year ended December 31, 2006, the Company recorded an impairment charge of $0.9 million on its obsolete vending inventory which is included in cost of network services in the accompanying consolidated statement of operations.

Long-Lived Assets

        In accordance with SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," the Company reviews its long-lived assets, including property and equipment, capitalized software development costs and identifiable intangibles, for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable. To determine recoverability of its long-lived assets, the Company evaluates the probability that future undiscounted net cash flows will be less than the carrying amount of the assets. If future estimated undiscounted cash flows are less than the carrying amount of long-lived assets, then such assets are written down to their estimated fair value.

        For purposes of measuring and recognizing impairment of long-lived assets, including intangibles, the Company assesses whether separate cash flows can be attributed to the individual asset. Included in amortization of intangibles expense for the year ended December 31, 2006 is $1.1 million related to the impairment of our vending developed technology intangible assets. For the Company's customer relationship assets, the Company recognizes and measures impairment upon the significant loss of revenue from a customer. Included in amortization of intangibles expense for the year ended December 31, 2006, 2007 and 2008 is approximately $2.2 million, $1.5 million and $2.2 million, respectively, in accelerated amortization on a portion of the Company's customer relationship assets in connection with the loss of certain customers, primarily POS customers, during those respective periods. The Company experienced revenue and transaction volume declines with a major customer during 2006, 2007 and 2008. The customer relationship intangible asset assigned to this customer is approximately $19.4 million as of December 31, 2008. The Company assessed the recoverability of this customer relationship intangible asset based upon anticipated undiscounted future cash flows and concluded that no impairment existed as of December 31, 2008. Included in depreciation and

57

TNS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2008

2. Summary of Significant Accounting Policies: (Continued)

amortization of property and equipment expense for the year ended December 31, 2008, is approximately $1.1 million related to the impairment of capitalized software costs primarily in connection with the decision to discontinue further development of the Company's vending platform.

        The Company's estimates of anticipated cash flows could be reduced significantly in the future due to changes in technologies, regulation, available financing, competition or other circumstances. As a result, the carrying amount of long-lived assets could be reduced through impairment charges in the future. Additionally, changes in estimated future cash flows could result in the method of amortization or a shortening of estimated useful lives for long-lived assets including intangibles.

Property and Equipment

        Property and equipment is recorded at acquisition date cost or fair value, net of accumulated depreciation and amortization. Replacements and improvements that extend the useful life of property and equipment are capitalized. In accordance with AICPA Statement of Position No. 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use," costs for internal use software that are incurred in the preliminary project stage and the post-implementation and operation stage are expensed as incurred. Costs incurred during the application development stage are capitalized and amortized over the estimated useful life of the software.

        Depreciation and amortization of property and equipment is computed using the straight-line method over the estimated useful lives of the assets as follows:

Network equipment and purchased software	3 – 7 years
Office furniture and equipment	3 – 5 years
Leasehold improvements	Shorter of the useful life or the lease term, generally 5 – 15 years
Capitalized software development	3 – 5 years

Goodwill and Identifiable Intangible Assets

        The Company accounts for goodwill and identifiable intangible assets in accordance with SFAS No. 142, "Goodwill and Other Intangible Assets". Under this standard, goodwill and intangible assets deemed to have indefinite lives are not amortized and are subject to annual impairment tests. Other intangible assets are amortized over their useful lives. The Company performs its annual SFAS No. 142 impairment testing of its goodwill as of October 1 of each year, which could have an adverse effect on the Company's future results of operations if an impairment is deemed to have occurred. To date, the Company's testing has indicated that there is no impairment of its goodwill.

        Goodwill decreased from 2007 to 2008 primarily due to the finalization of purchase accounting in relation to the acquisition of Dialect (See Note 3) and foreign currency translation.

58

TNS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2008

2. Summary of Significant Accounting Policies: (Continued)

        Amortization of intangible assets is recorded on a straight-line or accelerated basis over their expected useful lives. The Company evaluates the useful lives assigned to intangible assets on a regular basis. Amortization periods are as follows:

Developed technology	4 – 15 years
Trade names	20 years
Customer relationships	3 – 20 years
Non-compete agreements	2 or 3 years

        Developed technology represents the Company's proprietary knowledge, including processes and procedures, used to configure its networks. Network equipment and software, both purchased and internally developed, are components used to build the networks and are separately identified assets classified within property and equipment.

Income Taxes

        The Company accounts for income taxes in accordance with SFAS No. 109, "Accounting for Income Taxes." Under SFAS No. 109, deferred tax assets or liabilities are computed based upon the difference between financial statement and income tax bases of assets and liabilities using the enacted marginal tax rate. The Company provides a valuation allowance on its net deferred tax assets when it is more likely than not that such assets will not be realized. Deferred income tax expense or benefits are based upon the changes in the asset or liability from period to period. The Company recognizes interest and penalties related to uncertain tax positions in income tax expense.

        Effective January 1, 2007, the Company adopted FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109" (FIN 48), which prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken, or expected to be taken, in a tax return, and provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. The adoption of FIN 48 did not result in a cumulative adjustment to the Company's accumulated deficit.

Net Income (Loss) Per Common Share

        SFAS No. 128, "Earnings Per Share", requires the presentation of basic and diluted earnings per share. Basic earnings (loss) per common share is computed by dividing income (loss) attributable to common stockholders by the weighted average number of common shares outstanding for the period. The diluted earnings (loss) per common share data is computed using the weighted average number of common shares outstanding plus the dilutive effect of common stock equivalents, unless the common stock equivalents are anti-dilutive. The treasury stock effect of options to purchase 1,885,657 shares of common stock and 393,521 restricted stock units that were outstanding as of December 31, 2006, options to purchase 2,385,656 shares of common stock and 983,446 restricted stock units that were outstanding as of December 31, 2007 and options to purchase 885,323 shares of common stock that were outstanding as of December 31, 2008 were excluded from the computation of diluted net loss per common share for the years ended December 31, 2006, 2007 and 2008 as their effect would have been anti-dilutive.

59

TNS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2008

2. Summary of Significant Accounting Policies: (Continued)

        The following details the computation of the net income (loss) per common share (dollars in thousands, except share and per share data):

			Year ended December 31,
			2006			2007			2008
Net income (loss) from continuing operations before cumulative effect of a change in accounting principle			$	(9,980	)	$	(2,815	)	$	3,478
Cumulative effect of a change in accounting principle, net of tax				84			—			—
Net income (loss) attributable to common stockholders			$	(9,896	)		(2,815	)		3,478
Weighted average common share calculation:
	Basic weighted average common shares outstanding			24,075,710			24,203,735			24,763,299
		Treasury stock effect of unvested common stock		—			—			288,671
		Treasury stock effect of options		—			—			143,551
	Diluted weighted average common shares outstanding			24,075,710			24,203,735			25,195,521
Net income (loss) per common share:
		Basic and diluted income (loss) per common share:
	Income (loss) before cumulative effect of a change in accounting principle		$	(0.41	)	$	(0.12	)	$	0.14
	Cumulative effect of a change in accounting principle, net of tax provision			—			—			—
	Net income (loss)		$	(0.41	)	$	(0.12	)	$	0.14

Stock-Based Compensation

        Effective January 1, 2006, the Company adopted SFAS No. 123R "Share Based Payment", using the modified prospective transition method. SFAS No. 123R requires all stock-based compensation to employees be measured at fair value and expensed over the requisite service period and also requires an estimate of forfeitures when calculating compensation expense. In accordance with the Company's chosen method of adoption, results for prior periods have not been restated. Share-based expenses for all non-vested awards outstanding as of January 1, 2006, are being recognized based on the grant date fair value estimated in accordance with the provisions of SFAS No. 123 "Accounting for Stock-Based Compensation" and in accordance with SFAS No. 123R for all awards granted or modified after January 1, 2006. Prior to the adoption of SFAS No. 123R, the Company followed Accounting Principles Board (APB) Opinion No. 25, "Accounting for Stock Issued to Employees", which accounts for share-based payments to employees using the intrinsic value method and, as such, the Company generally recognized no compensation cost for employee stock options. Refer to Note 6 for additional discussion regarding details of the Company's stock-based compensation plans and the adoption of SFAS No. 123R.

60

TNS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2008

2. Summary of Significant Accounting Policies: (Continued)

Foreign Currency Translation and Revaluation

        The Company has operations in 23 countries outside the United States including the United Kingdom, Austria, Australia, Bermuda, Canada, France, Germany, Hong Kong, India, Ireland, Italy, Japan, Malaysia, Mexico, New Zealand, Poland, Romania, Singapore, South Korea, Spain, Sweden, Thailand and the Netherlands. The Company has determined that the functional currency of its non-U.S. operations is the local currency. Assets and liabilities denominated in foreign currencies are translated into U.S. dollars at current exchange rates. Operating results are translated into U.S. dollars using the average rates of exchange prevailing during the period. The Company's results of operations are affected by fluctuations in the value of the U.S. dollar as compared with foreign currencies, predominately the euro, the British pound and the Australian dollar. Gains or losses resulting from the translation of assets and liabilities are included as a component of accumulated other comprehensive income (loss) in stockholders' equity, except for the translation effect of intercompany balances that are anticipated to be settled in the foreseeable future. For the years ended December 31, 2006, 2007 and 2008, the Company recorded foreign exchange gain (losses) of $2.1 million, $2.2 million and $(0.1) million, respectively, which are included in other (expense) income, net in the accompanying consolidated statements of operations. Foreign exchange risk is managed through the structure of the business.

Comprehensive Income

        Comprehensive income is the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. Other comprehensive income refers to revenue, expenses, gains and losses that under accounting principles generally accepted in the United States are included in comprehensive income, but excluded from the determination of net income. Comprehensive income, net of tax, consists of foreign currency translation adjustments. The cumulative foreign currency translation adjustment as of December 31, 2007 and 2008 was approximately $5.3 million and $(6.6) million increase (decrease) to equity, respectively. As of December 31, 2007 and 2008, accumulated other comprehensive income consisted solely of foreign exchange translation gains.

Segment Reporting

        The Company provides segment information in accordance with SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information." The Company classifies its business into two segments: North America and ISD. In addition, the Company's management evaluates revenues for its four business divisions: POS, TSD, FSD and ISD. A significant portion of the Company's North American operating expenses are shared between the POS, TSD and FSD divisions, and, therefore, management analyzes operating results for these three divisions on a combined basis. SFAS No. 131 designates the internal information used by management for allocating resources and assessing performance as the source of the Company's reportable segments and requires disclosure about products and services, geographical areas and major customers.

61

TNS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2008

2. Summary of Significant Accounting Policies: (Continued)

Recent Accounting Pronouncements

        In October 2008, the FASB issued FASB Staff Position FAS 157-3 (FSP FAS 157-3), "Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active." FSP FAS 157-3 clarifies the application of Statement of Financial Accounting Standards No. 157 in a market that is not active and provides an example to illustrate key considerations in determining the fair value of a financial asset when the market for that financial asset is not active. FSP FAS 157-3 is effective upon issuance, including prior periods for which financial statement have not been issued. The company adopted FSP FAS 157-3 for the period ended September 30, 2008. The adoption did not have a significant impact on the Company's consolidated financial statements.

        In June 2008, the FASB issued FSP EITF No. 03-6-1, "Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities." This FSP provides that unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall be included in the computation of earnings per share pursuant to the two-class method. The FSP is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those years. The adoption of FSP No. EITF 03-6-1 will not have a material effect on the Company's consolidated financial statements.

        In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, "Fair Value Measurements" (SFAS No. 157) which is effective for fiscal years beginning after November 15, 2007. The Company adopted SFAS No. 157 on January 1, 2008. SFAS No. 157 defines fair value, establishes a framework for measuring fair value in GAAP, and expands disclosures about fair value measurements. The adoption of SFAS 157 to the Company's financial assets and liabilities did not have a material effect on the Company's consolidated financial statements. In November 2007, the FASB agreed to a one-year deferral of the effective date for nonfinancial assets and liabilities that are recognized or disclosed at fair value on a nonrecurring basis. The Company is currently assessing the impact of adopting the deferred portion of the pronouncement.

        In December 2007, the FASB issued SFAS No. 141 (R), "Business Combinations, a revision of SFAS No. 141". SFAS No. 141 (R) establishes principles and requirements for how the acquirer of a business recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree. The statement also provides guidance for recognizing and measuring the goodwill acquired in the business combination and determines what information to disclose to enable users of the financial statement to evaluate the nature and financial effects of the business combination. SFAS No. 141 (R) is effective for financial statements issued for fiscal years beginning after December 15, 2008. Accordingly, any business combinations we engage in beginning January 1, 2009 will be recorded and disclosed following SFAS No. 141 (R). The Company expects SFAS No. 141 (R) will have an impact on its consolidated financial statements when effective, but the nature and magnitude of the specific effects will depend upon the nature, terms and size of the acquisitions the Company consummates after the effective date. The Company is still assessing the full impact of this standard on its future consolidated financial statements.

62

TNS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2008

3. Acquisitions and Long-Term Investments:

Acquisition of CommsXL

        On January 6, 2006, the Company completed the acquisition of two companies in the United Kingdom, CommsXL Services and CommsXL Limited (collectively, CommsXL). Pursuant to two separate purchase agreements, the Company paid approximately $11.7 million, plus direct acquisition costs of approximately $0.3 million, for CommsXL. The Company accounted for the transaction as a purchase under the provisions of SFAS No. 141. The Company purchased CommsXL to advance its end-to-end POS service offerings in the United Kingdom as well as to penetrate new vertical markets.

        The purchase price for CommsXL was allocated as follows (in thousands):

Current assets		$	2,328
Property and equipment			70
Other assets			130
Customer relationships			6,578
Developed technology			1,835
Non-compete agreements			1,167
Goodwill			4,966
Deferred revenue			(993	)
Accounts payable, accrued expenses and other liabilities			(1,221	)
Deferred tax liability			(2,874	)
	Net assets acquired	$	11,986

        The amounts allocated to the customer relationships, developed technology and to the non-compete agreements are being amortized on a straight-line basis over their estimated useful life of seven years, seven years and three years, respectively. Unaudited pro forma results of operations are not provided because the historical operating results were not significant and pro forma results would not be significantly different from reported results for the periods presented. The Company's results of operations include the operating results of these acquisitions beginning January 6, 2006.

Acquisition of InfiniRoute Assets

        On February 28, 2006, the Company acquired certain tangible and intangible assets from InfiniRoute Networks, Inc. (InfiniRoute) for a purchase price of approximately $2.5 million. The assets acquired include the right to provide TSD services under customer contracts, developed technology, certain fixed assets and a non-compete agreement. The Company accounted for the transaction as a purchase under the provisions of SFAS No. 141. The Company purchased these assets to advance its TSD service offerings to enable traditional telecommunications carriers and next-generation service providers to interconnect directly over Internet Protocol (IP) packet networks, reducing the cost and complexity associated with these interconnections.

63

TNS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2008

3. Acquisitions and Long-Term Investments: (Continued)

        The purchase price for the InfiniRoute assets was allocated as follows (in thousands):

Current assets		$	272
Property and equipment			764
Customer relationships			696
Developed technology			695
Non-compete agreements			109
	Net assets acquired	$	2,536

        The amounts allocated to the customer relationships, developed technology and to the non-compete agreements are being amortized on a straight-line basis over their estimated useful lives of three years. Unaudited pro forma results of operations are not provided because the historical operating results were not significant and pro forma results would not be significantly different from reported results for the periods presented. The Company's results of operations for include the operating results of this acquisition beginning March 1, 2006.

Acquisition of Sonic Assets

        On March 13, 2006, the Company acquired certain tangible and intangible assets from Sonic Global PTY Ltd. (Sonic) and all of the capital stock of a subsidiary of Sonic for a purchase price of approximately $6.0 million, plus direct acquisition costs of approximately $0.1 million. The Company accounted for the transaction as a purchase under the provisions of SFAS No. 141. The assets acquired include the right to provide POS services under customer contracts, developed technology, certain fixed assets and non-compete agreements. The Company purchased these assets to enhance its end-to-end POS service offerings.

        The purchase price for the Sonic assets was allocated as follows (in thousands):

Current assets		$	251
Property and equipment			41
Customer relationships			3,257
Developed technology			1,334
Non-compete agreements			634
Goodwill			1,111
Deferred revenue			(430	)
Accounts payable, accrued expenses and other liabilities			(128	)
	Net assets acquired	$	6,070

        The amounts allocated to the customer relationships, developed technology and to the non-compete agreements are being amortized on an accelerated basis over their estimated useful life of seven years, seven years and three years, respectively. Unaudited pro forma results of operations are not provided because the historical operating results were not significant and pro forma results would not be significantly different from reported results for the periods presented. The Company's results of operations include the operating results of this acquisition beginning March 13, 2006.

64

TNS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2008

3. Acquisitions and Long-Term Investments: (Continued)

JPG Telecom, SAS Acquisition

        On September 8, 2006, the Company acquired all of the outstanding shares of JPG Telecom, SAS (JPG), a French telecommunications provider to the POS market, for a purchase price of $8.3 million, plus direct acquisition costs of approximately $0.2 million. The Company accounted for the transaction as a purchase under the provisions of SFAS No. 141. The Company purchased JPG primarily to increase its market share of the French dial-up POS market.

        The purchase price for JPG was allocated as follows (in thousands):

Current assets		$	231
Accounts receivable			2,850
Customer relationships			11,166
Non-compete agreements			717
Deferred tax liability			(3,921	)
Accounts payable, accrued expenses and other liabilities			(2,530	)
	Net assets acquired	$	8,513

        The amounts allocated to the customer relationships and to the non-compete agreements are being amortized on a straight-line basis over their estimated useful life of five years and three years, respectively. Unaudited pro forma results of operations are not provided because the historical operating results were not significant and pro forma results would not be significantly different from reported results for the periods presented. The Company's results of operations for the year ended December 31, 2006 include the operating results of this acquisition beginning September 1, 2006.

Dialect Payment Technologies, Pty Limited

        On June 8, 2007, the Company acquired all of the outstanding shares of Dialect Payment Technologies Pty Limited (Dialect), an Australian provider of internet payment gateway services to the card-not-present transaction market, for a purchase price of $4.2 million, plus direct acquisition costs of approximately $0.4 million. The purchase price included approximately $0.9 million which was held in escrow and was subsequently refunded to the Company under the terms of the Asset Purchase Agreement. The Company accounted for the transaction as a purchase under the provisions of SFAS No. 141. The Company purchased Dialect primarily to expand its current suite of POS product

65

TNS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2008

3. Acquisitions and Long-Term Investments: (Continued)

offerings. During 2008, the Company finalized the purchase accounting for Dialect and the purchase price was allocated as follows (in thousands):

Current assets		$	580
Accounts receivable			964
Property and equipment			866
Developed technology			6,315
Customer relationships			5,132
Tradename			168
Non-compete agreements			946
Deferred tax asset			206
Accounts payable, accrued expenses and other liabilities			(1,983	)
Deferred revenue			(8,608	)
	Net assets acquired	$	4,586

        The amounts allocated to the customer relationships and developed technology are being amortized over their estimated useful life of seven years. The amounts allocated to the non-compete agreements and tradename are being amortized over their estimated useful life of three years and two years, respectively. Unaudited pro forma results of operations are not provided because the historical operating results were not significant and pro forma results would not be significantly different from reported results for the periods presented. The Company's results of operations include the operating results of this acquisition beginning June 8, 2007.

Long-Term Investments

        In September 2004, the Company made an investment in AK Jensen Group, Limited (AKJ), a company that provides order routing systems and integrated electronic trading solutions to financial software companies and end clients. The Company purchased 94,429 common shares for $1.0 million and obtained representation on AKJ's board of directors. The Company is accounting for this investment under the equity method of accounting as the Company has significant influence over AKJ's operating and financing activities through its representation on the board of directors. Due to timing of the receipt of AKJ's financial statements, the Company is accounting for the income or loss in this equity method investment on a one month lag. For the years ended December 31, 2006, 2007 and 2008 the Company recognized a net loss in the equity of an unconsolidated affiliate of approximately, $15,000, $118,000 and $201,000 respectively. In August 2007, the Company sold 10% of its holding in AKJ for a gain of $135,000. This amount is included in equity in net (loss) income of unconsolidated affiliates for the year ended December 31, 2007. As of December 31, 2008, the carrying value of the Company's AKJ investment was approximately $0.4 million.

        In August 2004, the Company made an investment in WAY Systems, Inc. (WAY), which provides mobile POS transaction infrastructure and solutions for mobile merchants. The Company purchased 5,952,381 shares or 38.5 percent of WAY's Series B convertible preferred stock for $2.5 million and became entitled to representation on WAY's board of directors. The Company accounted for its investment under the equity method of accounting as the Company had significant influence over the

66

TNS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2008

3. Acquisitions and Long-Term Investments: (Continued)

financing and operating activities of WAY through its representation on the board of directors. In March 2005, the Company made an additional investment of $0.8 million to purchase 1,910,401 shares of WAY's Series B convertible preferred stock representing an additional 1.9 percent of WAY's outstanding shares. In July 2005, the Company made an additional investment of $0.7 million in exchange for a convertible note bearing interest at a rate of 8 percent per annum and due January 1, 2009. In September 2005, the Company exercised its option on the convertible note to convert the outstanding principal and accrued interest of approximately $0.8 million to 1,185,085 shares of WAY's Series C convertible preferred stock and made an additional investment of $1.1 million to purchase 1,676,429 shares of WAY's Series C convertible preferred stock. During December 2006, in conjunction with management's decision to not advance additional capital to WAY and continuing and projected operating losses from WAY, the Company determined its WAY investment was impaired and recorded a $1.3 million charge to reduce the carrying value of its WAY investment to zero. This is included in equity in net (loss) income of unconsolidated affiliates for the year ended December 31, 2006. In June 2007, the Company sold all of its WAY shares for $625,000, and vacated its seat on the board of directors of WAY Systems, Inc. This gain of $625,000 is included in equity in net (loss) income of unconsolidated affiliates for the year ended December 31, 2007 in the accompanying consolidated statement of operations.

        In January 2005, the Company made an investment in IP Commerce, Inc., a company that is developing operating software to facilitate the authorization of IP-based retail payment transactions. The Company purchased 2,368,545 Series A preferred shares or 39.7 percent of IP Commerce's total outstanding shares for $2.0 million and became entitled to representation on IP Commerce's board of directors. In September 2005, the Company made an additional investment of $0.9 million in exchange for a convertible note bearing interest at a rate of 8 percent per annum which was payable on demand, no earlier than February 1, 2007. In March 2006, the Company exercised its right on the convertible note to convert the outstanding principal and accrued interest of approximately $0.9 million to 675,901 shares of IP Commerce's Series B convertible preferred stock. The Company accounted for its investment under the equity method of accounting. For the years ended December 31, 2005 and 2006, the Company recognized a net loss in the equity of an unconsolidated affiliate of approximately $1.1 million and $1.8 million, respectively. In December 2006, the Company had fully written down its investment in IP Commerce, Inc. The carrying value of the IP Commerce investment was zero at December 31, 2007 and 2008.

67

TNS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2008

4. Balance Sheet Details:

Property and Equipment, Net

        Property and equipment consists of the following (in thousands):

	December 31,
	2007			2008
Network equipment and software	$	97,344		$	104,922
Office furniture and equipment		15,109			16,126
Capitalized software development costs		35,652			40,720
Leasehold improvements		14,644			14,521
		162,749			176,289
Accumulated depreciation and amortization		(107,373	)		(117,494	)
Property and equipment, net	$	55,376		$	58,795

        In March 2007, the Company sold its fractional share in an aircraft for approximately $2.2 million and realized a gain of approximately $192,000. This gain is included in other (expense) income, net in the accompanying consolidated statement of operations for the year ended December 31, 2007.

Identifiable Intangible Assets, Net

        Identifiable intangible assets consist of the following (in thousands):

		December 31,
		2007			2008
Customer relationships		$	180,466		$	175,644
Accumulated amortization			(75,660	)		(89,559	)
	Customer relationships, net		104,806			86,085
Developed technology			87,787			86,142
Accumulated amortization			(59,567	)		(62,473	)
	Developed technology, net		28,220			23,669
Trade names			68,685			68,644
Accumulated amortization			(23,528	)		(27,155	)
	Trade names, net		45,157			41,489
Non-compete agreements			10,770			9,955
Accumulated amortization			(8,623	)		(9,387	)
	Non-compete agreements, net		2,147			568
Identifiable intangible assets, net		$	180,330		$	151,811

68

TNS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2008

4. Balance Sheet Details: (Continued)

        Future scheduled amortization of intangible assets is as follows as of December 31, 2008 (in thousands):

2009	$	19,577
2010		18,086
2011		14,781
2012		13,006
2013		13,006
Thereafter		73,355
	$	151,811

Accounts Payable, Accrued Expenses and Other Current Liabilities

        Accounts payable, accrued expenses and other current liabilities consist of the following (in thousands):

	December 31,
	2007		2008
Accounts payable and accrued network costs	$	31,163	$	37,354
Accrued sales and use tax		1,876		1,554
Income taxes payable		2,105		3,379
Accrued legal and professional fees		2,454		2,341
Accrued compensation and benefits		7,499		7,754
Accrued severance and benefits		4,216		953
Other accrued expenses		4,581		4,233
Other current liabilities		3,175		1,856
Accounts payable, accrued expenses and other current liabilities	$	57,069	$	59,424

5. Long-Term Debt:

        Debt consists of the following (in thousands):

	December 31,
	2007		2008
Revolving credit facility	$	—	$	—
Term B Loan		205,500		178,500
		205,500		178,500
Less: Current portion		—		—
Long-term portion	$	205,500	$	178,500

        On March 28, 2007, the Company entered into a $240.0 million senior secured credit facility (2007 Credit Facility) to finance the special cash dividend and to refinance its 2005 amended and restated senior secured credit facility (2005 Credit Facility). The 2007 Credit Facility consists of a senior secured term loan facility in an aggregate principal amount of $225.0 million (Term Facility) and a senior secured revolving credit facility in an aggregate principal amount of $15.0 million (Revolving Facility),

69

TNS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2008

5. Long-Term Debt: (Continued)

under which there were no borrowings as of December 31, 2007 or 2008. The Revolving Facility matures March 27, 2013. The 2007 Credit Facility is secured by substantially all of the assets of the Company. Payments on the Term Facility are due in quarterly installments over the seven year term beginning June 30, 2007, with the remainder payable on March 28, 2014. Voluntary prepayments on the Term Facility are applied as directed by the Company. The Company made voluntary prepayments on the Term Facility totaling $27.0 million during the year ended December 31, 2008. As of December 31, 2008, based on the level of voluntary prepayments made to date, there are no quarterly installment payments required over the remaining term.

        As of December 31, 2008, the total scheduled remaining payments on the Term Facility are as follows (in thousands):

2009	$	—
2010		—
2011		—
2012		—
2013		—
Thereafter		178,500
	$	178,500

        Interest on the outstanding balances under the Revolving Facility is payable, at the Company's option, at a rate equal to the higher of the Wall Street Journal published "base rate on corporate loans posted by at least 75% of the nation's largest banks" or the federal funds rate plus 50 basis points (the "Base Rate"), in each case, plus a margin of 0.75% or at the London Interbank Offered Rate ("LIBOR"), plus a margin of 1.75%. Interest on the outstanding balances under the Term Facility are payable, at the Company's option, at the Base Rate plus a margin of 1.0%, or at LIBOR plus a margin of 2.0%. For the year ended December 31, 2008, borrowings on the Term Facility bore interest at the rate of 2.0% over the LIBOR rate (3.9% as of December 31, 2008). The weighted average interest rates for the years ended December 31, 2006, 2007 and 2008 were 7.75%, 7.71% and 5.74%, respectively. The Revolving Credit Facility is subject to an annual commitment fee in an amount equal to 0.5% per annum multiplied by the amount of funds available for borrowing under the Revolving Facility. Interest payments on the 2007 Credit Facility are due biweekly, monthly, bimonthly or quarterly at the Company's option.

        The terms of the 2007 Credit Facility require the Company to make an annual prepayment in an amount that may range from 0% to 50% of the Company's "excess cash flow" (as such term is defined in the Credit Agreement) depending on the Company's Leverage Ratio for any fiscal year. Prepayments are also required to be made in other circumstances, including upon asset sales.

        The terms of the 2007 Credit Facility require the Company to comply with financial and non-financial covenants, including maintaining a specified leverage ratio at the end of each fiscal quarter and complying with specified annual limits on capital expenditures. As of December 31, 2008, the Company was required to maintain a leverage ratio of less than 2.9 to 1.0. The leverage ratio continues to decline over the term of the 2007 Credit Facility. The Company's leverage ratio as of December 31, 2008 was 2.0 to 1.0. The 2007 Credit Facility also contains non-financial covenants that restrict some of the Company's corporate activities, including its ability to dispose of assets, incur additional debt, pay dividends, create liens, make investments, make capital expenditures and engage in

70

TNS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2008

5. Long-Term Debt: (Continued)

specified transactions with affiliates. Noncompliance with any of the financial or non-financial covenants without cure or waiver would constitute an event of default under the 2007 Credit Facility. An event of default resulting from a breach of a financial or non-financial covenant may result, at the option of the lenders, in an acceleration of the principal and interest outstanding, and a termination of the Revolving Facility. The 2007 Credit Facility also contains other customary events of default (subject to specified grace periods), including defaults based on events of bankruptcy and insolvency, nonpayment of principal, interest or fees when due, breach of specified covenants, change in control and material inaccuracy of representations and warranties. The Company was in compliance with the financial and non-financial covenants of the 2007 Credit Facility as of December 31, 2008.

        In connection with the closing of the 2007 Credit Facility, the Company incurred approximately $3.1 million in financing costs. These financing costs were deferred and are being amortized using the effective interest method over the life of the 2007 Credit Facility. In connection with the repayment of the 2005 Credit Facility in March 2007, the Company wrote-off approximately $1.4 million in unamortized deferred financing costs related to the 2005 Credit Facility. Such write-off has been included in interest expense in the accompanying consolidated statement of operations for the year ended December 31, 2007.

6. Stock Compensation and Retirement Plans:

Stock-Based Compensation

        During 2001, the Board of Directors of the Company adopted the TNS Holdings, Inc. 2001 Founders' Stock Option Plan (the 2001 Plan) whereby employees, nonemployee directors, and certain other individuals are granted the opportunity to acquire an equity interest in the Company. Either incentive stock options or nonqualified options may be granted under the 2001 Plan. Options granted under the 2001 Plan have an exercise price equal to or greater than the estimated fair value of the underlying common stock at the date of grant and become exercisable based on a vesting schedule determined at the date of grant, generally over four years. The options expire 10 years from the date of grant.

        In February 2004, the Board of Directors of the Company adopted the TNS, Inc. 2004 Long-Term Incentive Plan (the Plan) and the Company's stockholders approved the Plan in March 2004. The Plan reserves 3,847,384 shares of common stock for grants of incentive stock options, nonqualified stock options, restricted stock awards and performance shares to employees, non-employee directors and consultants performing services for the Company. Options granted under the Plan have an exercise price equal to or greater than the fair market value of the underlying common stock at the date of grant and become exercisable based on a vesting schedule determined at the date of grant, generally in equal monthly installments over three or four years. The options expire 10 years from the date of grant. Restricted stock awards and performance shares granted under the Plan are subject to a vesting period determined at the date of grant, generally in equal annual installments over three or four years.

        As discussed in Note 2, effective January 1, 2006, the Company adopted SFAS No. 123R using the modified prospective transition method. Prior to the adoption of SFAS No. 123R, the Company did not estimate forfeitures and recognized compensation cost assuming all awards would vest and reversed recognized compensation cost for forfeited awards when the awards were actually forfeited. Upon adoption of SFAS No. 123R on January 1, 2006, the Company recorded a cumulative effect of a change

71

TNS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2008

6. Stock Compensation and Retirement Plans: (Continued)

in accounting principle, net of tax, of approximately $0.1 million related to estimated forfeitures of unvested restricted stock awards for which stock-based compensation was recorded in the Company's financial statements prior to January 1, 2006. During the years ended December 31, 2006, 2007 and 2008, the Company capitalized approximately $0.3 million of stock-based compensation costs for employees working on software developed for internal use during the application and development stage.

        The Company's stock-based compensation expense is included in the following areas in the consolidated statement of operations for the periods indicated (in thousands):

	Year ended December 31,
	2006(1)		2007(2)		2008
Cost of network services	$	814	$	1,146	$	1,190
Engineering and development		1,232		2,095		1,618
Selling, general and administrative		5,558		9,379		8,497
	$	7,604	$	12,620	$	11,305

(1)

The amounts for 2006 exclude the cumulative effect of a change in accounting principle, net of tax of ($84,000) which was recorded upon adoption of SFAS No. 123R on January 1, 2006.

(2)

On March 28, 2007, in connection with the special dividend, the Company's Board of Directors decided to allow the outstanding restricted stock units to receive dividend equivalent payments. As a result of this decision, the Company recorded $1.5 million of additional stock-based compensation, which is included in the total $12.6 million of stock-based compensation. The $1.5 million charge related to this decision is reported as follows: $0.1 million is included in cost of network services, $0.4 million is included in engineering and development and $1.0 million is included in selling, general and administrative expenses.

        Details of the Company's stock-based compensation plans are discussed below.

        The fair value for stock options granted during the periods were estimated at the grant date using a Black-Scholes option pricing model with the following weighted average assumptions:

	Year ended December 31,
	2006			2007			2008
Expected term (in years)		5.5			5.5			5.5
Risk-free interest rate		4.8	%		4.7	%		3.3	%
Volatility		48.6	%		48.6	%		40.5	%
Dividend yield		0.0	%		0.0	%		0.0	%

        Expected volatility—The expected volatility is based on the results of a study of similar guideline companies in the Company's peer group and the historical volatility of the Company's stock.

        Expected dividend yield—The dividend yield is based on actual dividends expected to be paid over the expected term of the option. In April of 2007, the Company paid a special cash dividend of $4.00 per share. With the exception of this special dividend, the Company has paid no regular dividends and as of this date has no plans to issue regular dividends.

72

TNS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2008

6. Stock Compensation and Retirement Plans: (Continued)

        Expected term—The expected term is based on historical exercise patterns of the Company's stock options and on the results of a study performed of guideline companies in the Company's peer group to the extent that sufficient historical information relating to the exercise patterns of the Company's stock has not yet been established. In future periods, the expected term will be calculated with greater reference to the Company's stock exercise patterns as that data becomes available. The Company accounts for stock options with graded vesting as a single award with the expected term equal to the average of the expected term of the component vesting tranches and recognizes the related compensation cost on a straight-line basis over the vesting period of the award for awards with only time-vesting requirements and on an accelerated basis for awards with performance vesting requirements.

        Risk-free interest rate—The risk-free rate for stock options granted during the period is determined by using U.S. treasury rates of the same period as the expected option term of each option.

Time-Vested Stock Options

        A summary of time-vested option activity under the Plan as of December 31, 2008, and changes during the year then ended, is presented below (in thousands, except share and per share amounts):

	Number of shares			Exercise price per share	Weighted average exercise price		Aggregate Intrinsic Value		Weighted Average Remaining Contractual Term
Outstanding, January 1, 2008		1,787,290		$11.88 – $39.20	$	18.63
Granted		48,020		13.24 –   23.30		19.62
Exercised		(502,288	)	12.39 –   22.88		18.57
Canceled		(157,836	)	12.39 –   39.20		18.69
Outstanding, December 31, 2008		1,175,186		$11.88 –   39.20	$	18.69	$	—		6.38
Exercisable, December 31, 2008		919,123		$11.88 – $39.20	$	19.22	$	—		5.93

        The following table summarizes the weighted-average option information as of December 31, 2008:

Range of Exercise Prices	Number Outstanding		Weighted Average Remaining Life		Weighted Average Exercise Price		Number Exercisable		Weighted Average Exercise Price
$11.88 – $15.68		220,926		8.31	$	12.42		103,744	$	12.36
$15.69 – $19.60		399,191		4.83	$	18.48		375,238	$	18.58
$19.61 – $23.52		536,351		6.67	$	20.92		423,017	$	20.87
$23.53 – $27.44		7,600		6.81	$	24.45		6,006	$	24.45
$39.20		11,118		4.04	$	39.20		11,118	$	39.20
$11.88 – $39.20		1,175,186		6.38	$	18.69		919,123	$	19.22

        The Company expects 1,121,127 of the 1,175,186 options outstanding as of December 31, 2008 to ultimately vest. The weighted average grant date fair value of options granted during the years ended

73

TNS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2008

6. Stock Compensation and Retirement Plans: (Continued)

December 31, 2006, 2007 and 2008 was $10.35, $6.31, and $8.32 respectively. The total intrinsic value of stock options exercised during the years ended December 31, 2006, 2007 and 2008 was approximately $25,000, $16,000 and $2.4 million, respectively. As of December 31, 2008, there was a total of $2.7 million of deferred compensation cost related to time-vested stock options, which is expected to be recognized over a weighted average period of approximately two years.

        During the year ended December 31, 2008, the Company received approximately $9.6 million in cash proceeds related to the exercise of stock options. The adoption of SFAS No. 123R also resulted in reflecting the excess tax benefit from the exercise of stock based compensation awards in cash flows from financing activities.

Performance-Based Stock Options

        Performance-based stock options are tied to the Company's annual performance against pre-established internal targets. Under the Company's long-term incentive program, the actual payout under these awards may vary from zero to 200% of an employee's target payout, based upon the Company's actual performance during the fiscal year. The performance-based stock options are also subject to vesting requirements, and generally vest in equal annual installments over three years. The fair value for stock options granted during the period was estimated at the grant date using the Black-Scholes option pricing model, as described above. Compensation cost is based on the expected payout level that will be achieved and is adjusted in subsequent periods as changes in the estimates occur until the performance criteria have been satisfied.

        A summary of performance-based stock options outstanding as of December 31, 2008, and changes during the year then ended is presented below (in thousands, except share and per share amounts):

	Number of shares			Weighted- average exercise price		Aggregate Intrinsic Value		Weighted- average remaining contractual term
Outstanding, January 1, 2008		598,366		$	12.69
Granted(1)		121,269			16.15
Exercised		(20,998	)		12.39
Outstanding at December 31, 2008		698,637		$	13.30	$	—		8.5
Exercisable at December 31, 2008		214,902		$	12.81	$	—		8.3

(1)

Represents 50% of the targeted payout for the 2008 long-term incentive plan, the results of which were approved by the Company's board of directors in February 2009.

74

TNS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2008

6. Stock Compensation and Retirement Plans: (Continued)

        The following table summarizes the weighted-average option information as of December 31, 2008:

Range of Exercise Prices	Number Outstanding		Weighted Average Remaining Life		Weighted Average Exercise Price		Number Exercisable		Weighted Average Exercise Price
$12.39		555,078		8.3	$	12.39		203,756	$	12.39
$16.15		121,269		9.1	$	16.15		—		—
$20.56		22,290		8.1	$	20.56		11,146	$	20.56
$12.39 – $20.56		698, 637		8.5	$	13.30		214,902	$	12.81

        The Company expects all of the outstanding performance-based options as of December 31, 2008 to ultimately vest. The weighted average grant date fair value of performance-based options granted during the years ended December 31, 2006, 2007 and 2008 was $9.16, $6.23 and $6.78, respectively.

        As of December 31, 2008, there was a total of $0.8 million of deferred compensation cost related to performance-based stock options, which is expected to be recognized over a period of approximately three years.

Time-Vested Restricted Stock Units

        The fair value of restricted stock units is determined based on the closing price of the Company's shares at the date of grant. A summary of the status of the Company's time-vested restricted stock units as of December 31, 2008, and changes during the year then ended is presented below:

	Number of shares			Weighted-average grant-date fair value
Non-vested at January 1, 2008		741,492		$	15.44
Granted		142,326			21.86
Vested		(304,805	)		16.16
Forfeited		(21,851	)		9.95
Non-vested at December 31, 2008		557,162		$	16.74

        The Company expects 531,533 of the 557,162 restricted stock units outstanding as of December 31, 2008 to ultimately vest. The total fair value of shares vested (measured as of the vesting date) during the years ended December 31, 2006, 2007 and 2008 was $2.6 million, $2.9 million and $6.0 million, respectively. As of December 31, 2008, there was $7.6 million of deferred compensation cost related to restricted stock units, which is expected to be recognized over a weighted average period of approximately two years.

Performance-Based Restricted Stock Units

        Performance-based restricted stock units are tied to the Company's annual performance against pre-established internal targets. Under the Company's long-term incentive program, the actual payout under these awards may vary from zero to 200% of an employee's target payout, based upon the

75

TNS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2008

6. Stock Compensation and Retirement Plans: (Continued)

Company's actual performance over the fiscal year. The fair value is based on the market price of the Company's stock on the date of grant. The performance-based restricted stock units are also subject to vesting requirements, and generally vest in equal annual installments over three years. Compensation cost is based on the expected payout level that will be achieved and is adjusted in subsequent periods as changes in the estimates occur until the performance criteria have been satisfied.

        A summary of performance-based restricted stock units outstanding as of December 31, 2008, and changes during the year then ended is presented below:

	Number of shares			Weighted-average grant-date fair value
Balance at January 1, 2008		241,954		$	12.58
Granted(1)		127,757			16.15
Vested		(79,864	)		16.61
Balance at December 31, 2008		289,847		$	16.41

(1)

Represents 50% of the targeted payout for the 2008 long-term incentive plan, the results of which were approved by the Company's board of directors in February 2009.

        The Company expects all of the outstanding performance-based restricted stock units as of December 31, 2008 to ultimately vest. The total value of shares vested (measured as of the vesting date) during the years ended December 31, 2006, 2007 and 2008 was $0, $0.4 million and $1.3 million, respectively. As of December 31, 2008, there was a total of $1.2 million of deferred compensation cost related to performance-based restricted stock units, which is expected to be recognized over a period of approximately two years.

Retirement Savings Plan

        During 2001, the Company established a 401(k) and profit-sharing plan (the 401(k) Plan). Employees are eligible for the 401(k) Plan on the first payroll of the month following their date of hire. Participants may elect to defer up to 20.0 percent of their salary, and the Company may match up to a maximum of the amount contributed by the employee during the 401(k) Plan year. Profit-sharing contributions are entirely discretionary. Participants are 100 percent vested in all contributions made to the 401(k) Plan. For the year ended December 31, 2006, 2007 and 2008, the Board of Directors approved contributions of approximately $0.3 million, $0.6 million and $0.4 million, respectively, to the 401(k) Plan.

7. Restructuring Costs

        In August 2006, the Company implemented a plan to reduce its cost structure and improve operating efficiencies by reducing its workforce and implementing productivity improvement initiatives and expense reduction measures (2006 Restructuring Plan). In connection with the 2006 Restructuring Plan, the Company incurred approximately $5.6 million of severance associated with its workforce reduction, of which $4.2 million was included in selling, general and administrative expense,

76

TNS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2008

7. Restructuring Costs (Continued)

$0.8 million was included in engineering and development expense and $0.6 million was included in cost of network services in the accompanying consolidated statement of operations for the year ended December 31, 2006. Of the total $5.6 million in severance, $5.0 million related to the Company's U.S. operations and $0.6 million related to its International Services Division operations.

        During 2007 the Company incurred an additional $3.0 million in severance and benefits. Of the total, $3.0 million in severance and benefits, $2.7 million is included in selling, general and administrative expense and $0.3 million is included in engineering and development expense in the accompanying consolidated statement of operations for the year ended December 31, 2007.

        During 2008 the Company incurred an additional $1.2 million in severance and benefits, which is included in selling, general and administrative expense and in the accompanying consolidated statement of operations for the year ended December 31, 2008.

        A summary of the liability for the Company's severance and benefits obligation is as follows (in thousands):

	2006			2007			2008
Balance as of January 1	$	—		$	4,778		$	4,216
Severance and benefits from executive departures		5,534			3,004			1,209
Accretion of liability due to the passage of time		36			169			59
Total restructuring costs		5,570			7,951			5,484
Effects of foreign currency translation		—			142			25
Cash paid		(792	)		(3,877	)		(4,556	)
Balance as of December 31	$	4,778		$	4,216		$	953

        The above severance and benefits expenses are based on estimates that are subject to change. The remaining cash expenditures relating to the severance and benefits will be paid through 2009. As of December 31, 2008, $0.9 million of the liability for severance and benefits was classified as accounts payable, accrued expenses and other liabilities in the accompanying consolidated balance sheet.

77

TNS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2008

8. Income Taxes:

        The components of income (loss) before income tax (provision) benefit, equity in net loss of unconsolidated affiliate and cumulative effect of a change in accounting principle are as follows (in thousands):

	Year ended December 31,
	2006			2007			2008
U.S.	$	(29,770	)	$	(33,274	)	$	7,164
Non-U.S.		22,311			30,402			5,729
Income (loss) before income tax (provision) benefit, equity in net loss of unconsolidated affiliate and cumulative effect of a change in accounting principle	$	(7,459	)	$	(2,872	)	$	12,893

        The components of the Company's income tax provision (benefit) consisted of the following (in thousands):

	Year ended December 31,
	2006			2007			2008
Current provision (benefit):
U.S.	$	(2,161	)	$	143		$	883
Non-U.S.		5,489			10,579			3,370
		3,328			10,722			4,253
Deferred provision (benefit):
U.S.		(6,014	)		(7,921	)		5,221
Non-U.S.		21			(2,215	)		(261	)
		(5,993	)		(10,136	)		4,960
Total income tax provision (benefit)	$	(2,665	)	$	586		$	9,213

78

TNS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2008

8. Income Taxes: (Continued)

        The components of the Company's net deferred tax assets (liabilities) as of December 31, 2007 consisted of the following (in thousands):

	U.S.			Non-U.S.			Total
Deferred tax assets:
Allowance for doubtful accounts	$	857		$	51		$	908
Accrued expenses		2,374			727			3,101
Deferred revenue		3,941			191			4,132
Intangible assets		4,673			—			4,673
Depreciation and amortization of property and equipment		6,931			1,869			8,800
Stock-based compensation		2,044			—			2,044
Equity in net loss of unconsolidated affiliates		1,407			—			1,407
Foreign tax credits		2,541			—			2,541
Other assets		122			—			122
Net operating loss carryforwards		15,712			4,942			20,654
		40,602			7,780			48,382
Less—valuation allowance		(5,671	)		(4,942	)		(10,613	)
		34,931			2,838			37,769
Deferred tax liabilities:
Prepaid expenses		(1,317	)		—			(1,317	)
Unrealized foreign exchange gains/losses		—			(436	)		(436	)
Capitalized software development costs		(9,744	)		—			(9,744	)
Intangible assets		—			(7,899	)		(7,899	)
		(11,061	)		(8,335	)		(19,396	)
Net deferred tax assets	$	23,870		$	(5,497	)	$	18,373

79

TNS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2008

8. Income Taxes: (Continued)

        The components of the Company's net deferred tax assets (liabilities) as of December 31, 2008, consisted of the following (in thousands):

	U.S.			Non-U.S.			Total
Deferred tax assets:
Allowance for doubtful accounts	$	781		$	47		$	828
Accrued expenses		1,556			179			1,735
Deferred revenue		2,495			566			3,061
Intangible assets		3,788			—			3,788
Depreciation and amortization of property and equipment		5,787			954			6,741
Stock-based compensation		2,328			—			2,328
Equity in net loss of unconsolidated affiliates		1,407			—			1,407
Foreign tax credits		2,541			—			2,541
Other assets		128			293			421
Net operating loss carryforwards		16,629			4,264			20,893
		37,440			6,303			43,743
Less—valuation allowance		(5,671	)		(4,264	)		(9,935	)
		31,769			2,039			33,808
Deferred tax liabilities:
Prepaid expenses		(1,267	)		—			(1,267	)
Unrealized foreign exchange gains/losses
Capitalized software development costs		(11,570	)		—			(11,570	)
Intangible assets		—			(5,445	)		(5,445	)
		(12,837	)		(5,445	)		(18,282	)
Net deferred tax assets	$	18,932		$	(3,406	)	$	15,526

        The Company has foreign net operating loss carryforwards for tax purposes in jurisdictions outside the U.S. amounting to $13.3 million as of December 31, 2008. Some of the non-U.S. loss carryforwards will expire in varying amounts in five to ten years. The majority of the non-U.S. loss carryforwards will never expire under local country tax rules. In addition, the Company has a U.S. loss carryforward of approximately $43.4 million, which will expire between 2025 and 2027, and a foreign tax credit carryforward of $2.5 million, which will expire between 2015 and 2016. The Company has provided a valuation allowance against its deferred tax asset related to certain of its net operating loss carryforwards and all of its foreign tax credit carryforwards since, in management's judgment, realization of these tax benefits through future taxable income is not more likely than not.

80

TNS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2008

8. Income Taxes: (Continued)

        Taxes computed at the U.S. statutory federal income tax rate of 34.0 percent are reconciled to the Company's effective income tax rate as follows:

	Year ended December 31,
	2006			2007			2008
U.S. federal taxes at statutory rate		34.0	%		34.0	%		34.0	%
U.S. state taxes (net of federal tax benefit)		4.3			6.0			4.3
Non-U.S. taxes		24.0			255.8			1.4
Valuation allowance		(22.6	)		7.6			0.9
Changes in uncertain tax positions		—			(114.7	)		12.7
U.S. tax on undistributed foreign earnings		—			(95.6	)		—
Stock based compensation expense		(12.3	)		(100.2	)		10.2
Nondeductible items		(6.3	)		(19.2	)		9.0
Effective tax rate		21.1	%		(26.3	)%		72.5	%

        The Company has made no provision for U.S. income taxes or additional foreign taxes on the cumulative unremitted earnings of non-U.S. subsidiaries (approximately $70 million as of December 31, 2008) because the Company considers these earnings to be indefinitely reinvested in these foreign locations. These earnings could become subject to additional taxes if remitted as dividends, loaned to the Company or a U.S. affiliate or if it sold the Company's interests in the foreign affiliates. Determination of the amount of any unrecognized deferred U.S. income tax liability associated with these foreign earnings is not practicable due to complexities associated with this hypothetical calculation.

        On January 1, 2007 the Company adopted the provisions of FIN 48. The adoption and implementation of FIN 48 resulted in a $0.6 million increase in the liability for unrecognized income tax benefits, which was accounted for as an increase to goodwill as the amounts related to pre-acquisition income tax exposures. A reconciliation of the beginning and ending balance for liabilities associated with unrecognized tax benefits is as follows (in thousands):

	Year ended December 31,
	2007			2008
Balance as of January 1	$	1,989		$	3,863
Additions for tax positions related to the current year		2,717			1,584
Reductions for settlements		(379	)		(77	)
Lapses of applicable statutes of limitation		(468	)		(285	)
Effects of foreign currency translation		4			(336	)
Balance as of December 31	$	3,863		$	4,749

        The Company recognizes interest and penalties accrued related to unrecognized tax benefits as income tax expense. During the years ended December 31, 2006, 2007 and 2008 the Company recognized approximately $43,000, $79,000 and $299,000 respectively in interest and penalties relating to its liability for unrecognized income tax benefits. The Company had approximately $122,000 and

81

TNS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2008

8. Income Taxes: (Continued)

$420,000 accrued for the payment of interest and penalties at December 31, 2007 and 2008, respectively. The entire balance of unrecognized tax benefits as of December 31, 2008 would impact the effective tax rate if recognized. The Company and its subsidiaries are subject to taxation in the U.S. and in various state, local and foreign jurisdictions. The Company remains subject to examination by U.S. Federal, state, local and foreign tax authorities for tax years 2005 through 2007. With few exceptions, the Company is no longer subject to US Federal, state, local or foreign tax examinations for the tax years prior to 2005.

        It is reasonably possible that the Company's liability for unrecognized tax benefits will decrease in the next 12 months by $0.6 million as a result of the expiration of certain statutes of limitation in the U.S.

9. Segment Information:

        The Company classifies its business into two segments: North America and ISD. In addition, the Company's management evaluates revenues for its four business divisions: POS, TSD, FSD and ISD. A significant portion of the Company's North American operating expenses are shared between POS, TSD and FSD divisions, and, therefore, management analyzes operating results for these three divisions on a combined basis.

        Management evaluates the North American and ISD performance on EBITDA before stock compensation expense because operating expenses are distinguishable between North American and ISD operations. The Company defines EBITDA before stock compensation expense as income from operations before depreciation, amortization and stock compensation expense. EBITDA before stock compensation expense is not a generally accepted accounting principle measure, but rather a measure employed by management to view operating results adjusted for major noncash items. The Company's definition of EBITDA before stock compensation expense may not be comparable to similarly titled measures used by other entities.

        Revenue for the Company's two segments is presented below (in thousands):

	Year ended December 31,
	2006		2007		2008
Revenues:
POS	$	82,754	$	81,231	$	74,450
TSD		62,112		64,484		67,131
FSD		35,102		40,915		45,874
Total North America		179,968		186,630		187,455
ISD		106,192		138,934		156,536
Total revenues	$	286,160	$	325,564	$	343,991

82

TNS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2008

9. Segment Information: (Continued)

        EBITDA before stock compensation expense for North American and ISD operations are reflected below (in thousands):

	Year ended December 31,
	2006		2007		2008
EBITDA before stock compensation expense(i):
North America	$	17,678	$	21,200	$	26,072
ISD		35,961		50,512		59,548
Total EBITDA before stock compensation expense	$	53,639	$	71,712	$	85,620

(i)

Management evaluates the performance of its segments before consideration of certain intercompany transactions. Accordingly these transactions are not reflected in EBITDA by segment. In addition, certain corporate expenses are reflected in the North American segment, consistent with information reviewed by our chief operating decision maker.

        EBITDA before stock compensation expense differs from income (loss) before income taxes and equity in net loss of unconsolidated affiliates reported in the consolidated statements of operations as follows (in thousands):

	Year ended December 31,
	2006			2007			2008
EBITDA before stock compensation expense	$	53,639		$	71,712		$	85,620
Reconciling items:
Stock compensation expense		(7,604	)		(12,620	)		(11,305	)
Depreciation and amortization of property and equipment		(22,208	)		(23,114	)		(25,286	)
Amortization of intangible assets		(24,820	)		(25,656	)		(25,734	)
Interest expense		(9,261	)		(16,655	)		(10,868	)
Interest income		598			1,105			707
Other (expense) income, net		2,197			2,356			(241	)
Income (loss) before income tax provision and equity in net loss of unconsolidated affiliates	$	(7,459	)	$	(2,872	)	$	12,893

Geographic Information

        The Company sells its services through foreign subsidiaries in Australia, Austria, Bermuda, Canada, France, Germany, Hong Kong, India, Ireland, Italy, Japan, Malaysia, Mexico, the Netherlands, New Zealand, Poland, Romania, Singapore, South Korea, Spain, Sweden, Thailand and the United Kingdom. Information regarding revenues and long-lived tangible assets attributable to each geographic region is stated below.

83

TNS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2008

9. Segment Information: (Continued)

        The Company's revenues were generated in the following geographic regions (in thousands):

	Year ended December 31,
	2006		2007		2008
North America	$	179,968	$	186,630	$	187,455
Europe		93,941		115,244		123,825
Asia-Pacific		12,251		23,690		32,711
Total revenues	$	286,160	$	325,564	$	343,991

        Revenues from the Company's United Kingdom subsidiaries were $59.3 million, $70.3 million and $72.0 million for the years ended December 31, 2006, 2007 and 2008, respectively.

        The Company's long-lived assets, including goodwill and intangible assets, were located as follows (in thousands):

	December 31,
	2007		2008
North America	$	180,535	$	182,990
Europe		52,170		23,408
Asia-Pacific		16,514		15,162
Total long-lived assets	$	249,219	$	221,560

        Total assets are located in the following reporting segments (in thousands):

	December 31,
	2007		2008
North America		254,123		260,213
ISD		128,975		101,701
Total assets		383,098		361,914

        Goodwill and intangible assets are located in the following reporting segments (in thousands):

	December 31,
	2007		2008
North America		139,413		123,668
ISD		54,430		39,097
Total goodwill and intangible assets	$	193,843	$	162,765

10. Commitments and Contingencies:

Operating Leases

        The Company leases office space and certain office equipment under various non-cancelable operating leases that expire through September 2017. Rental expense is recognized on a straight-line basis over the term of the lease, regardless of when payments are due. Rental expense was

84

TNS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2008

10. Commitments and Contingencies: (Continued)

approximately $7.5 million, $8.5 million and $8.1 million for the years ended December 31, 2006, 2007 and 2008, respectively.

        Future minimum commitments under the Company's operating leases are as follows for each of the years ended December 31 (in thousands):

2009	$	8,833
2010		7,710
2011		6,939
2012		6,049
2013		3,714
Thereafter		9,314
	$	42,559

        On September 21, 2005, the Company entered into a lease to rent office space in the United Kingdom with a company that is majority owned by the Company's President. Prior to entering into this lease, the Company obtained an independent evaluation confirming that the terms of the lease were consistent with market standards. The lease provides for quarterly payments in equal installments of approximately £26,350 and expires on September 20, 2017. During the years ended December 31, 2006, 2007 and 2008, the Company made payments of £59,000, £105,400 and £105,400, respectively, related to this operating lease.

        The following is a schedule by year of future minimum rental payments due under this operating lease agreement (in thousands):

2009	£105
2010	105
2011	105
2012	105
2013	105
Thereafter	394
	£919

Litigation and Claims

        The Company is periodically involved in disputes arising from normal business activities. In the opinion of management, resolution of these matters will not have a material adverse effect upon the financial position or future operating results of the Company, and adequate provision for any potential losses has been made in the accompanying consolidated financial statements.

        The Company, John J. McDonnell, Jr., the Company's former Chief Executive Officer, and Henry H. Graham, Jr., the Company's Chief Executive Officer, were defendants in a putative class action lawsuit filed in connection with the Company's public offering of common stock in September 2005 ("Secondary Offering"). The Cement Masons and Plasterers Joint Pension Trust, purportedly on behalf of itself and others similarly situated, filed the putative class action lawsuit captioned Cement Masons & Plasterers Joint Pension Trust v. TNS, Inc., et al., Case No. 1:06 CV 363, CMH/BRP, on April 4, 2006 in the United States District Court for the Eastern District of Virginia.

85

TNS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2008

10. Commitments and Contingencies: (Continued)

        The parties conducted a mediation in April 2007, and subsequently entered into a settlement agreement in February 2008. The settlement agreement provided for a cash settlement payment of $3.6 million to be paid by the Company's insurer and payment of expenses of plaintiff's lead counsel not to exceed $50,000. In exchange for the cash settlement payment and expense payment, the Company and all defendants were released from all claims of the lead plaintiff and class members relating to the action. The Court preliminarily approved the settlement agreement of the parties in March 2008, and finally approved the settlement agreement after a fairness hearing. On June 20, 2008, the Court entered a final judgment and dismissal order that dismissed the action and all claims of the lead plaintiff and class members, including the released claims. The final outcome of the lawsuit did not have a material adverse affect on our financial condition or operating results. During the year ended December 31, 2006, the Company accrued and paid legal costs of approximately $0.5 million, representing legal costs to defend itself in this matter not otherwise covered by its insurance carrier. These legal costs are included in selling, general and administrative expense in the accompanying consolidated statement of operations for the year ended December 31, 2006.

        Certain states in which the Company operates assess sales taxes on certain services provided by the Company. The Company believes it has no liability because its customer contracts contain terms that stipulate the customer, not the Company, is responsible for any sales tax liability. In jurisdictions where the customer may be liable for sales taxes, the Company either includes sales tax on its invoice or has obtained an exemption certificate from the customer. Certain states have audited the Company from 1996 to early 2001. On April 25, 2008, the Company entered into a settlement agreement with the remaining state's Commissioner of Revenue to settle the only state sales tax assessment remaining for the period from 1996 to early 2000. In the settlement, the Company agreed to settle the outstanding sales tax assessment in the amount of $942,000 for a settlement payment in the amount of $250,000. The Company's customer has paid $212,500 of the settlement payment with the remaining $37,500 paid by the Company. Based on the final executed settlement, the Company reduced its net liability for this matter by $0.9 million. This $0.9 million benefit, related to the reduction in the sales tax liability, is included in selling, general and administrative expenses in the accompanying consolidated statement of operations for the year ended December 31, 2008.

Significant Customers and Suppliers

        A substantial portion of the revenues recognized by the Company is related to a limited number of customers. For the years ended December 31, 2006, 2007 and 2008, there were no customers that accounted for more than 10 percent of the Company's consolidated revenues. For the years ended December 31, 2006, 2007 and 2008, the Company derived approximately 23.0%, 22.2% and 16.7% respectively, of its consolidated revenues from its five largest customers.

        Certain key components used in the Company's network are currently available only from limited sources. The Company has entered into long term contracts with two vendors for the provision of

86

TNS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2008

10. Commitments and Contingencies: (Continued)

network equipment and the maintenance of hardware and software utilized on our network. The future minimum commitment relating to these contracts is as follows (in thousands):

2009	$	4,718
2010		1,598
2011		—
2012		—
2013		—
Thereafter		—
	$	6,316

11. Subsequent events

        On March 2, 2009, we entered into a binding agreement with Verisign, Inc. to purchase its Communications Services Group business for $230.0 million subject to certain adjustments to reflect normal fluctuations in working capital. The transaction is subject to Hart-Scott-Rodino Act review, and the agreement contains customary closing conditions. The parties anticipate that the transaction will close within 60 days.

12. Unaudited Quarterly Financial Data (in thousands, except per share amounts):

	March 31, 2007			June 30, 2007		September 30, 2007		December 31, 2007
Revenues	$	72,661		$	79,361	$	84,542	$	89,000
Cost of network services		38,871			40,174		42,109		42,405
Net (loss) income		(3,227	)		537		394		(519	)
Basic and diluted net (loss) income per common share	$	(0.13	)	$	0.02	$	0.02	$	(0.02	)

	March 31, 2008		June 30, 2008		September 30, 2008		December 31, 2008
Revenues	$	84,125	$	90,148	$	88,629	$	81,089
Cost of network services		40,707		42,225		41,274		38,217
Net (loss) income		1,601		1,026		1,887		(1,036	)
Basic net (loss) income per common share	$	0.07	$	0.04	$	0.08	$	(0.04	)
Diluted net (loss) income per common share	$	0.06	$	0.04	$	0.07	$	(0.04	)

        Included in net loss for the three months ended March 31, 2007, is a $1.7 million net charge, or $0.07 per share, related to severance expense, the accelerated amortization of customer relationship intangibles and the modification of outstanding restricted stock units to allow for the right to receive a dividend equivalent payment. Included in net income for the three months ended June 30, 2007, is a net gain of approximately $0.4 million or $0.02 per share, related to the sale of the Company's investment in WAY Systems, Inc. Included in net loss for the three months ended September 30, 2007, is a $0.07 million net charge, or $0.03 per share, related to severance expense. Included in net loss for the three months ended December 31, 2007, is a $1.3 million net charge, or $0.05 per share, related to severance expense and the accelerated amortization of customer relationship intangibles.

        Included in net gain for the three months ended March 31, 2008, is a $0.9 million net gain, or $0.03 per share, related to a tax settlement. Included in net income for the three months ended September 30, 2008, is a $0.7 million net charge, or $0.02 per share, related to severance expense. Included in net loss for the three months ended December 31, 2008, is a $0.5 million net charge, or $0.01 per share, related to severance expense.

87

Item 9.    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

        None.

Item 9A.    Controls and Procedures

Internal Controls

        Management is responsible for establishing and maintaining adequate internal control over financial reporting and for the assessment of the effectiveness of internal controls over financial reporting. The Company's internal control system over financial reporting is a process designed under the supervision of the Company's chief executive officer and chief financial officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the consolidated financial statements in accordance with U.S. generally accepted accounting principles.

        All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions.

        In connection with the preparation of the Company's annual consolidated financial statements, management has undertaken an assessment of the effectiveness of the Company's internal control over financial reporting as of December 31, 2008, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO Framework). Management's assessment included an evaluation of the design of the Company's internal control over financial reporting and testing of the operational effectiveness of those controls.

        Based on this assessment, management has concluded that as of December 31, 2008, the Company's internal control over financial reporting was effective to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles.

        Ernst & Young LLP, the independent registered public accounting firm that audited the Company's consolidated financial statements included in this report, has issued its report on the effectiveness of our internal control over financial reporting, a copy of which appears on page 49 of this annual report.

        There have been no changes during the most recently completed fiscal quarter that materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

Disclosure Controls

        The Company also maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include controls and procedures designed to ensure that such information is accumulated and communicated to our management, including our Chief Executive Officer (CEO), President, Chief Operating Officer (COO), Chief Financial Officer (CFO), and Chief Accounting Officer (CAO), as appropriate, to allow timely decisions regarding required financial disclosure.

        Our management, under the supervision and with the participation of our CEO, President, COO, CFO and CAO, has completed an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of the end of the fiscal year ended December 31, 2008. Based on our evaluation of the effectiveness of the

88

design and operation of our disclosure controls and procedures, our management, including our CEO, President, COO, CFO and CAO, concluded that as of December 31, 2008, the Company's disclosure controls and procedures were effective.

Audit Committee Pre-Approval

        Our audit committee has resolved to pre-approve all audit and non-audit services to be performed for us by our independent registered public accounting firm, Ernst & Young LLP. Non-audit services that have received pre-approval include tax preparation and related tax consultation and advice, review and support for securities issuances and acquisition assistance.

Item 9B.    Other Information

        None.

89

PART III

        Certain information required by Part III is omitted from this report in that we will file a definitive proxy statement pursuant to Regulation 14A with respect to our 2008 Annual Meeting (the "Proxy Statement") no later than 120 days after the end of the fiscal year covered by this report, and certain information included therein is incorporated herein by reference. Only those sections of the Proxy Statement which specifically address the items set forth herein are incorporated by reference.

Item 10.    Directors, Executive Officers and Corporate Governance

        Except as set forth below, the information required by this Item is hereby incorporated herein by reference to the Proxy Statement.

        Set forth below is certain information about our executive officers:

Name	Age	Title
Henry H. Graham, Jr.	58	Chief Executive Officer and Director
Raymond Low	52	President
Michael Q. Keegan	42	Chief Operating Officer
Dennis L. Randolph, Jr.	29	Executive Vice President, Chief Financial Officer and Treasurer
James T. McLaughlin	42	Executive Vice President, General Counsel and Secretary
Mark G. Cole	43	Executive Vice President, Network Operations
Alan R. Schwartz	47	Executive Vice President, North American Sales
Steve F. Smith	52	Executive Vice President and General Manager, ISD Division
Charles A. Leppert	38	Executive Vice President and General Manager, TSD Division
Alex N. Walker	43	Senior Vice President and General Manager, FSD Division
David A. Neal	36	Vice President and Corporate Controller

Henry H. Graham, Jr. has served as our Chief Executive Officer and been a director since October 2006. From April 2001 to September 2006, Mr. Graham was our Executive Vice President, Chief Financial Officer and Treasurer. From January 2000 to September 2000, Mr. Graham was Senior Vice President, Chief Financial Officer and Treasurer of PaylinX Corporation. From April 1999 to January 2000, Mr. Graham was Senior Vice President, Chief Financial Officer and Treasurer of Transaction Network Services, Inc. From July 1998 to April 1999, Mr. Graham was Senior Vice President and General Manager of the OmniLink Communications division of Transaction Network Services, Inc. after the acquisition of substantially all of the assets of OmniLink Communications Corporation. Before that, Mr. Graham served as OmniLink's Chief Financial Officer and Vice President of Administration from December 1996 to July 1998. Mr. Graham has a B.S. in Business Administration from The Citadel.

Raymond Low has served as our President since October 2006. Mr. Low was our President of the International Services Division from January 2006 to September 2006. From April 2001 to December 2005, Mr. Low was Senior Vice President and Managing Director of Transaction Network Services (UK) Ltd. From March 2000 to March 2001, Mr. Low was Senior Vice President and Managing Director of eBusiness International Operations of PSINet, Inc. From September 1998 to February 2000, Mr. Low was Managing Director of Transaction Network Services (UK) Ltd. Before that Mr. Low held several management positions with Imminus Ltd. and HSBC (formerly Midland Bank).

90

Michael Q. Keegan has served as our Chief Operating Officer since January 2007. Mr. Keegan was our Chief Administrative Officer, General Counsel and Secretary from October 2006 to December 2006. From September 2003 to September 2006, Mr. Keegan was our Executive Vice President, General Counsel and Secretary. From April 2001 to September 2003, Mr. Keegan was our Senior Vice President, General Counsel and Secretary. From November 2000 to April 2001, Mr. Keegan was the Executive Vice President, General Counsel and Secretary of Internet Partnership Group (US), Inc. From February 2000 to November 2000, Mr. Keegan was the Vice President and Assistant General Counsel of Internet Partnership Group. From May 1998 to February 2000, Mr. Keegan was an independent consultant. From September 1992 to May 1998, Mr. Keegan was a corporate associate at the law firm of LeBoeuf, Lamb, Greene and MacRae, L.L.P. Mr. Keegan has a B.A. from the University of Notre Dame and a J.D. from the University of Virginia School of Law.

Dennis L. Randolph, Jr. has served as our Executive Vice President, Chief Financial Officer and Treasurer since March 2007. From September 2006 to February 2007, Mr. Randolph was our Senior Vice President and Corporate Controller. From October 2005 to August 2006, Mr. Randolph was our Vice President and Assistant Corporate Controller. From July 2003 to September 2005, Mr. Randolph was our Director of Accounting and Assistant Controller. Prior to that, Mr. Randolph worked for Ernst & Young, LLP and Arthur Andersen, LLP. Mr. Randolph is a certified public accountant in the state of Virginia. Mr. Randolph has a B.S. in Accounting from Virginia Polytechnic Institute and State University.

James T. McLaughlin has served as our Executive Vice President, General Counsel and Secretary since January 2007. Mr. McLaughlin was the Senior Vice President, General Counsel of Motricity, Inc. from July 2005 to January 2007. From February 2002 to June 2005, Mr. McLaughlin was our Senior Vice President, Associate General Counsel and Assistant Secretary. Prior to that, Mr. McLaughlin was Senior Counsel to the Chairman of the U.S. International Trade Commission from August 2001 to February 2002. From February 2000 to July 2001, Mr. McLaughlin was Senior Vice President, General Counsel and Secretary of Media Centers, Inc. Mr. McLaughlin was Vice President and Assistant General Counsel to Transaction Network Services, Inc. from April 1997 to February 2000. Mr. McLaughlin has a B.A. from the University of Pennsylvania and a J.D. from the University of Virginia School of Law.

Mark G. Cole has served as our Executive Vice President, Network Operations since October 2006. Mr. Cole was previously our Senior Vice President of Network Operations from April 2001 to October 2006. From March 2000 to April 2001, Mr. Cole was the Senior Vice President—Operations of Transaction Network Services, Inc. From July 1999 to March 2000, Mr. Cole was the Vice President, Network Control Center of Transaction Network Services, Inc. From February 1999 to July 1999, Mr. Cole was the Senior Director, Network Control Center of Transaction Network Services, Inc. From March 1996 to February 1999, Mr. Cole was the Director, Network Control Center of Transaction Network Services, Inc. Before that, Mr. Cole served Transaction Network Services, Inc. in various positions since April 1992. Mr. Cole's communication training originated with the U.S. Army, where he held several supervisory and technical positions.

Alan R. Schwartz has served as our Executive Vice President of North American Sales since November 2007. From December 2005 to October 2007, Mr. Schwartz was our Executive Vice President and General Manager of the Financial Services Division. From April 2001 to November 2005, Mr. Schwartz was our Senior Vice President of the Financial Services Division. From November 1999 to April 2001, Mr. Schwartz was the Senior Vice President and General Manager of the Financial Services Division of Transaction Network Services, Inc. From July 1998 to November 1999, Mr. Schwartz was Director of Sales of the Financial Services Division of Transaction Network Services, Inc. Before that, Mr. Schwartz worked in various positions at Datastream International where he was the Vice President and Country Manager (North America) when he left in July 1998. Mr. Schwartz has a M.B.A. from the Leonard N. Stern School of Business at New York University and a B.S. in Business Administration from Boston University.

91

Steve F. Smith has served as our Executive Vice President and General Manager of the ISD Division since September 2007. From 2004 to 2007, Mr. Smith was Managing Director with Avantra (the outsourcing division of Link Interchange Network Ltd.). From 2001 to 2004, Mr. Smith was Director of Sales at Thales e-Transactions Ltd. Prior to that, Mr. Smith held various management positions within the payments industry.

Charles A. Leppert has served as our Executive Vice President and General Manager of the TSD Division since April 2007. From August 2003 to March 2007, Mr. Leppert was a Vice President, Sales with Broadwing Corporation, now Level 3 Communications, Inc. From May 2001 to December 2002, Mr. Leppert was Managing Director, Internet Sales, Asia Pacific for MCI, Inc., now Verizon Business. And from March 2000 to May 2001, Mr. Leppert was Vice President Sales and Marketing, Australia & New Zealand for UUNET Technologies, Inc., now Verizon Business. From July 1995 to February 2000, Mr. Leppert held several sales and management positions in the United States with UUNET. Mr. Leppert has a B.A. from Denison University.

Alex N. Walker has served as our Senior Vice President and General Manager of the FSD Division since July 2007. From November 2004 to June 2007, Mr. Walker was our Vice President of FSD. From August 1999 to October 2004, Mr. Walker held senior management positions at Global Crossing, SAVVIS, Inc., and Cicada. Prior to that Mr. Walker was Managing Director of Sales for Thompson Financial Services.

David A. Neal has served as our Vice President and Corporate Controller since March 2007. From February 2005 to February 2007 Mr. Neal was our Financial Controller for the International Services Division. From October 2000 to January 2005, Mr. Neal was a Director with KPMG, Chartered Accountants in Dublin, Ireland. Mr. Neal qualified as a Chartered Accountant in Australia and has a business degree from the University of Technology, Sydney and a Master of Taxation degree from the University of New South Wales, Australia.

Item 11.    Executive Compensation

        The information required by this Item is hereby incorporated herein by reference to the Proxy Statement.

Item 12.    Security Ownership of Certain Beneficial Owners and Managers and Related Stockholder Matters

        The information required by this Item is hereby incorporated herein by reference to the Proxy Statement.

Item 13.    Certain Relationships and Related Transactions and Director Independence.

        The information required by this Item is hereby incorporated herein by reference to the Proxy Statement.

Item 14.    Principal Accountant Fees and Services.

        The information required by this Item is hereby incorporated herein by reference to the Proxy Statement.

92

PART IV

Item 15.    Exhibits and Financial Statement Schedules

(a)

The following documents are filed as part of this Report:

1.

Financial Statements

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets

Consolidated Statements of Operations

Consolidated Statements of Changes in Stockholders' Equity

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements

2.

Financial Statement Schedules

Schedule II—Valuation of Qualifying Accounts

All other schedules are omitted because they not applicable

3.

Exhibits:

3.1	Form of Amended and Restated Certificate of Incorporation of the Registrant.(1)
3.2	Form of Amended and Restated Bylaws of the Registrant.(2)
4.2	Form of Amended and Restated Registration Rights Agreement.(1)
4.6	Amended and Restated Credit Agreement, dated as of May 4, 2005, by and among Transaction Network Services, Inc., Registrant, the several financial institutions from time to time party thereto as Lenders and General Electric Capital Corporation, as Agent, L/C Issuer and a Lender, with GECC Capital Markets Group, as lead arranger.(3)
4.7	Credit Agreement, dated as of March 28, 2007, by and among Transaction Network Services, Inc., Registrant,, the several financial institutions from time to time party thereto as Lenders and General Electric Capital Corporation, as Agent, L/C Issuer and a Lender, with GECC Capital Markets Group, as sole lead arranger.(4)
4.8	First Amendment to Credit Agreement dated as of March 28, 2007 entered on June 6, 2007.(5) We are a party to a number of other instruments defining the rights of holders of long-term debt. No such instrument authorizes an amount of securities in excess of 10 percent of the total assets of TNS, Inc. and its subsidiaries on a consolidated basis. We agree to furnish a copy of each such instrument to the Commission on request.
Materials Contracts
10.1	Deed of Lease dated September 21, 1995 between Transaction Network Services, Inc. and Pond Building, L.L.C., as amended.(1)
10.2	Gross Lease dated December 31, 2002 by and between The Multi-Employer Property Trust and Transaction Network Services, Inc.(1)
10.3	Lease dated April 17, 2000 by and between Tinsley Park Limited, Transaction Network Services, Inc. and Transaction Network Services (UK) Ltd.(1)

93

10.4	Lease dated September 21, 2005 by and between AJ Bell (PP) Trustees Limited, Raymond Low, Martin Peter Milner, Carolyn Joy MacMillan and Transaction Network Services (UK) Limited.(6)
Management Contracts and Compensatory Plans
10.8	TNS Holdings, Inc. 2001 Founders' Stock Option Plan.(1)
10.9	Form of TNS, Inc. Amended and Restated 2004 Long-Term Incentive Plan.(7)
10.10	2006 Annual Incentive Plan.(8)
10.11	2006 Executive Long-Term Incentive Plan.(8)
10.15	Management Agreement between Transaction Network Services, Inc. and Alan R. Schwartz.(1)
10.17	Management Agreement between Transaction Network Services, Inc. and Scott E. Ziegler.(1)
10.18	Form of Indemnification Agreement between the Registrant and its directors and executive officers.(1)
10.21	Employment Agreement, dated as of March 10, 2006, by and among the Registrant, Transaction Network Services, Inc. and Henry H. Graham, Jr.(9)
10.23	Employment Agreement, dated as of March 10, 2006, by and among the Registrant, Transaction Network Services, Inc. and Matthew M. Mudd.(9)
10.24	Employment Agreement, dated as of March 10, 2006, by and among the Registrant, Transaction Network Services, Inc. and Edward J. O'Brien.(9)
10.25	Employment Agreement, dated as of March 10, 2006, by and among the Registrant, Transaction Network Services, Inc. and Michael Q. Keegan.(9)
10.26	Service Agreement, dated May 9, 2006, by and between Transaction Network Services (UK) Limited and Raymond Low.(9)
10.28	Employment Agreement, dated as of August 2, 2007, by and among the Registrant, Transaction Network Services, Inc. and Dennis L. Randolph, Jr.(10)
10.29	Employment Agreement, dated as of January 8, 2007, by and among the Registrant, Transaction Network Services, Inc., and James McLaughlin(11)
10.31	Employment Agreement, dated as of August 2, 2007, by and among the Registrant, Transaction Network Services, Inc. and Mark G. Cole(12)
10.32	2007 Annual Incentive Plan(13)
10.33	2007 Executive Long-Term Incentive Plan(13)
21.1	Subsidiaries of the Registrant.(1)
23.1	Consent of Independent Registered Public Accounting Firm.
31.1	Certification—Chief Executive Officer.
31.2	Certification—Chief Financial Officer.
32.1	Written Statement of Chief Executive Officer and Chief Financial Officer.

(1)

Incorporated by reference to the exhibit of the same designation in the Registrant's registration statement on Form S-1 filed November 3, 2003, as amended (file no. 333-110188).

(2)

Incorporated by reference to exhibit 3.1 to the Registrant's current report on Form 8-K filed August 15, 2006.

94

(3)

Incorporated by reference to exhibit 10.1 to the Registrant's current report on Form 8-K filed May 5, 2005.

(4)

Incorporated by reference to exhibit 99.1 to the Registrant's current report on Form 8-K filed March 29, 2007.

(5)

Incorporated by reference to exhibit 99.1 to the Registrant's current report on Form 8-K filed June 8, 2007.

(6)

Incorporated by reference to corresponding exhibit 10.4 to the Registrant's annual report on Form 10-K filed March 16, 2007.

(7)

Incorporated by reference to Appendix B to the Registrant's annual meeting proxy statement filed April 18, 2005.

(8)

Incorporated by reference to corresponding exhibit to the Registrant's quarterly report on Form 10-Q filed August 9, 2006.

(9)

Incorporated by reference to corresponding exhibit to the Registrant's quarterly report on Form 10-Q filed May 10, 2006.

(10)

Incorporated by reference to Exhibit 99.3 to Registrant's current report filed August 8, 2007.

(11)

Incorporated by reference to corresponding Exhibit 10.29 to the Registrant's quarterly report on Form 10-Q filed May 10, 2007.

(12)

Incorporated by reference to corresponding Exhibit 10.31 to the Registrant's quarterly report on Form 10-Q filed August 9, 2007.

(13)

Incorporated by reference to corresponding exhibit to the Registrant's current report filed August 8, 2007.

(b)

Financial Statement Schedules.

95

TNS, INC.

Schedule II—Valuation and Qualifying Accounts

	Additions
	Balance at beginning of period		Charged to costs and expenses		Reserves related to purchased entities		Deductions(1)			Balance at end of period
					(in thousands)
For the year ended December 31, 2008:
Allowance for doubtful accounts	$	3,093	$	1,417	$	—	$	(879	)	$	3,631
For the year ended December 31, 2007:
Allowance for doubtful accounts	$	6,435	$	1,074	$	184	$	(4,600	)	$	3,093
For the year ended December 31, 2006:
Allowance for doubtful accounts	$	5,260	$	805	$	486	$	(115	)	$	6,435

(1)

Represents write-offs of amounts deemed uncollectible.

96

SIGNATURES

        Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Form 10-K to be signed on its behalf by the undersigned thereunto duly authorized.

	TNS, Inc. (Registrant)
Date: March 13, 2009	By:	/s/ HENRY H. GRAHAM, JR. Henry H. Graham, Jr. Chief Executive Officer

        Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on March 13, 2009:

Signature	Title
/s/ HENRY H. GRAHAM, JR. Henry H. Graham, Jr.	Chief Executive Officer and Director
/s/ JOHN B. BENTON John B. Benton	Director
/s/ STEPHEN X. GRAHAM Stephen X. Graham	Director
/s/ JAY E. RICKS Jay E. Ricks	Director
/s/ JOHN V. SPONYOE John V. Sponyoe	Director
/s/ DENNIS L. RANDOLPH, JR. Dennis L. Randolph, Jr.	Chief Financial Officer (Principal Financial Officer)
/s/ DAVID A. NEAL David A. Neal	Controller (Principal Accounting Officer)

97

REQUIRED CERTIFICATIONS

        The Company has included as Exhibits 31.1 and 31.2 to its Annual Report on Form 10-K for fiscal year 2008 filed with the Securities and Exchange Commission certificates of the Chief Executive Officer and Chief Financial Officer of the Company certifying the quality of the Company's public disclosure, and the Company has submitted to the New York Stock Exchange a certificate of the Chief Executive Officer of the Company certifying that he is not aware of any violation by the Company of New York Stock Exchange corporate governance listing standards.

EX-23.1

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the Registration Statements (Form S-8 No. 333-133459 and No. 333-113762) pertaining to the 2001 Founders’ Stock Option Plan and the 2004 Long-term Incentive Plan of TNS, Inc. of our reports dated March 12, 2009, with respect to the consolidated financial statements and schedule of TNS, Inc., and the effectiveness of internal control over financial reporting of TNS, Inc., included in this Annual Report (Form 10-K) for the year ended December 31, 2008.

/s/ Ernst & Young LLP

McLean, Virginia

March 12, 2009

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Henry H. Graham, Jr., certify that:

1.I have reviewed this report on Form 10-K of TNS, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.  Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.  Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financing reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.  Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.  Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonable likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a.  All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonable likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.  Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

DATE: March 13, 2009

/s/ HENRY H. GRAHAM, JR.

Henry H. Graham, Jr.

Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Dennis L. Randolph, Jr., certify that:

1.I have reviewed this report on Form 10-K of TNS, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financing reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonable likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonable likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

DATE: March 13, 2009

/s/ DENNIS L. RANDOLPH, JR.

Dennis L. Randolph, Jr.

Chief Financial Officer

EX-32.1

Exhibit 32.1

WRITTEN STATEMENT

OF

CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER

The undersigned hereby certify that the Form 10-K for the year ended December 31, 2008 filed by TNS, Inc. with the Securities and Exchange Commission fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in the report fairly presents, in all material respects, the financial condition and results of operations of the issuer.

Dated: March 13, 2009

/s/ HENRY H. GRAHAM, JR.

Henry H. Graham, Jr.

Chief Executive Officer

Dated: March 13, 2009

/s/ DENNIS L. RANDOLPH, JR.

Dennis L. Randolph, Jr.

Chief Financial Officer